-----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, KRr5Gcx3sC2HlusQ6N4l1iKH3iLIXhN5JsUnV2U5BCUS9f+ORgEjLE4Zi+XltEpb dwe7LmM+cywp6bnFfMuL3w== 0000899681-01-000038.txt : 20010207 0000899681-01-000038.hdr.sgml : 20010207 ACCESSION NUMBER: 0000899681-01-000038 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 20010206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACE SECURITIES CORP CENTRAL INDEX KEY: 0001063292 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 562088493 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-45458 FILM NUMBER: 1526485 BUSINESS ADDRESS: STREET 1: 6525 MORRISON BLVD STREET 2: SUITE 318 CITY: CHARLOTTE STATE: NC ZIP: 28211 BUSINESS PHONE: 7043650569 MAIL ADDRESS: STREET 1: 6525 MORRISON BLVD STREET 2: SUITE 318 CITY: CHARLOTTE STATE: NC ZIP: 28211 S-3/A 1 0001.txt As filed with the Securities and Exchange Commission on February 6, 2001 Registration No. 333-45458 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 1 to FORM S-3 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ACE SECURITIES CORP. (Exact name of registrant as specified in its charter) DELAWARE 56-2088493 -------- ---------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 6525 MORRISON BOULEVARD SUITE 318 CHARLOTTE, NORTH CAROLINA 28211 (704) 365-0569 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ELIZABETH S. ELDRIDGE ACE SECURITIES CORP. 6525 MORRISON BOULEVARD SUITE 318 CHARLOTTE, NORTH CAROLINA 28211 (704) 365-0569 (NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPY TO: REED D. AUERBACH STROOCK & STROOCK & LAVAN LLP 180 MAIDEN LANE NEW YORK, NEW YORK 10038 (212) 806-6648 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. /__/ If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /__/ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /__/ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. /__/ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE 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 seven base Prospectuses (each, a "Prospectus") relating to the offering of one or more series of securities each of which will include one or more classes of certificates and/or one or more classes of notes. The first Prospectus (the "Automobile Prospectus") contemplates the securitization of assets which may include (1) certain new and used automobile, recreational vehicle, including motor homes, campers, boats, boat motors, motorcycles, jet skis, wave runners, all terrain vehicles, and snow mobiles, van, truck, bus and trailer receivables or (2) asset backed certificates or notes, each representing an interest in a trust fund consisting of a pool of such receivables. The second Prospectus (the "Mortgage Prospectus #1") contemplates the securitization of assets which may include (1) one or more mortgage pools, containing (A) mortgage loans secured by residential, cooperative and multifamily properties and (B) certain conventional mortgage pass-through certificates issued by one or more trusts established by one or more private entities or (2) one or more contract pools containing manufactured housing conditional sales contracts and installment loan agreements or participation certificates representing participation interests in such contracts. The third Prospectus (the "Mortgage Prospectus #2") contemplates the securitization of assets which may include (1) one or more mortgage pools, containing (A) mortgage loans secured by residential, cooperative and multifamily properties and (B) certain conventional mortgage pass-through notes issued by one or more trusts established by one or more private entities or (2) one or more contract pools containing manufactured housing conditional sales contracts and installment loan agreements or participation certificates representing participation interests in such contracts. The fourth Prospectus (the "Credit Card Prospectus") contemplates the securitization of assets that may include a pool of receivables arising from time to time in the ordinary course of business in one or more designated portfolios of credit card, charge card or certain other types of accounts and asset-backed securities consisting of notes secured by, receivables arising in certain designated portfolios of credit card, charge card or certain other types of accounts. The fifth Prospectus (the "Floorplan Prospectus") contemplates the securitization of assets that may include a pool of receivables arising from time to time in the ordinary course of business in one or more designated portfolios of wholesale consumer receivables and asset-backed securities consisting of notes secured by, receivables arising in certain designated portfolios of wholesale consumer receivables. The sixth Prospectus (the "Equipment Prospectus #1") contemplates the securitization of assets that may include a pool of receivables arising from time to time in the ordinary course of business in one or more designated portfolios of wholesale consumer receivables and asset-backed securities consisting of certificates secured by, receivables arising in certain designated portfolios of wholesale consumer receivables. The seventh Prospectus (the "Floorplan Prospectus #2") contemplates the securitization of assets that may include a pool of receivables arising from time to time in the ordinary course of business in one or more designated portfolios of equipment receivables. This Registration Statement also contains three forms of prospectus supplement with respect to the Automobile Prospectus, two forms of prospectus supplement with respect to the Mortgage Prospectus #1, two forms of prospectus supplement with respect to Mortgage Prospectus #2, two forms of prospectus supplement with respect to the Credit Card Prospectus, one form of prospectus supplement with respect to each Floorplan Prospectus, and one form of prospectus supplement with respect to the Equipment Prospectus. SUBJECT TO COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus dated [ ]) $[ ] (APPROXIMATE) ACE SECURITIES CORP. [ ] TRUST [ ] AUTO RECEIVABLES OWNER TRUST [ ]-[ ] $[ ] [ ]% ASSET BACKED NOTES, CLASS A-1 $[ ] [ ]% ASSET BACKED NOTES, CLASS A-2 [ ] SELLER AND SERVICER CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The notes will represent interests in the trust fund only and will not represent interests in or obligations of any other entity. This prospectus supplement may be used to offer and sell the notes only if accompanied by the prospectus. The notes will be issued by a trust. The sources for payment of the notes are a pool of non-prime auto loans held by the issuing trust, cash held by the issuing trust and, in the case of the class A-1 notes and class A-2 notes, a financial guaranty insurance policy issued by [ ]. We are only offering to you the class A-1 notes and class A-2 notes. The class B notes are subordinated to the class A notes to the extent described in this prospectus supplement. Interest and principal on the notes are scheduled to be paid monthly, on the [ ]th day of the month. The first scheduled payment date is [ ]. Deutsche Banc Alex. Brown is purchasing the class A-1 notes from the issuing trust at approximately [ ]% of the principal amount of the class A-1 notes plus accrued interest from [ ], [ ] and the class A-2 notes at approximately [ ]% of the principal amount of the class A-2 notes plus accrued interest from [ ]. Deutsche Banc Alex. Brown is offering the class A-1 notes and class A-2 notes from time to time in negotiated transactions or at varying prices which will be determined at the time of sale. The aggregate proceeds to the issuing trust, before deducting expenses payable by or on behalf of the issuing trust estimated at $[ ], will be $[ ]. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNDERWRITER: DEUTSCHE BANC ALEX. BROWN The date of this prospectus supplement is [ ] IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the notes offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your notes, and (2) this prospectus supplement, which describes the specific terms of your notes. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the notes in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. -------------------------------------------------------------------- Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the notes and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the notes will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. -------------------------------------------------------------------- We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. Table of Contents PROSPECTUS SUPPLEMENT Summary of Terms............................................. Risk Factors................................................. The Seller and the Servicer.................................. The Trust.................................................... Trust Property............................................... The Seller's Automobile Financing Program.................... The Backup Servicer.......................................... The Receivables.............................................. Yield Considerations......................................... Use of Proceeds.............................................. The Insurer.................................................. Incorporation of Certain Documents by Reference................................................. The Notes.................................................... Description of the Transaction Documents..................... The Policy................................................... Material Federal Income Tax Consequences..................... Certain State Tax Consequences............................... ERISA Considerations......................................... Ratings...................................................... Underwriting................................................. Experts...................................................... Legal Matters................................................ Glossary..................................................... Index of Terms............................................... PROSPECTUS Risk Factors................................................. The Trusts................................................... The Trustee.................................................. The Receivables Pools........................................ The Collateral Certificates.................................. The Government Securities.................................... Weighed Average Life of the Securities....................... Pool Factors and Trading Information......................... The Seller and the Servicer.................................. Use of Proceeds.............................................. Description of the Notes..................................... Description of the Certificates.............................. Certain Information Regarding the Securities................................................. Description of the Transfer and Servicing Agreements................................................. Certain Matters Regarding the Servicer....................... Certain Legal Aspects of the Receivables.................................................. Material Federal Income Tax Consequences............................................... State and local Tax Consequences............................. ERISA Considerations......................................... Plan of Distribution......................................... Legal Matters................................................ Prospectus Supplement........................................ Reports to Securityholders................................... Available Information........................................ Incorporation of Certain Documents by Reference.............................................. Index of Terms............................................... Annex I - Global Clearance, Settlement and Documentation Procedures.................................. SUMMARY OF TERMS O THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. o WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. PARTIES THE TRUST [ ] Auto Receivables Owner Trust [ ]-[ ] is a Delaware business trust. The trust will issue the notes and be liable for their payment. The issuing trust's principal asset will be a pool of auto loans. SELLER AND SERVICER [ ] is a [ ] corporation. It will sell the auto loans to ACE Securities Corp. [ ] will also service the auto loans held by the issuing trust. COMPANY ACE Securities Corp. is a special purpose Delaware corporation. Neither Deutsche Banc Alex. Brown nor any of its affiliates has guaranteed, will guarantee or is or will be otherwise obligated with respect to any notes. THE INSURER [ ] is a [ ] financial guaranty insurance company. [ ] will issue a policy, which will guarantee the payment of timely interest and principal due on the class A-1 notes and class A-2 notes but only as set forth in the section of this prospectus supplement titled "The Policy." THE OWNER TRUSTEE [ ] is a [ ]. [ ] will be the owner trustee. THE INDENTURE TRUSTEE [ ] is a [ ]. [ ] will be the indenture trustee and the backup servicer. DATES INITIAL CUTOFF DATE o [ ]. The issuing trust will receive payments due on, or received with respect to, the auto loans after this date. CLOSING DATE o On or about [ ]. DESCRIPTION OF THE SECURITIES The issuing trust will issue three classes of asset backed notes. The class A-1 notes will be designated as the "Class A-1 Notes" and the class A-2 notes will be designated as the "Class A-2 Notes". The Class A-1 Notes together with the Class A-2 Notes will be designated as the "Class A Notes". The class B notes will be designated as the "Class B Notes." Only the Class A Notes are offered to you pursuant to this prospectus supplement. Any information in this prospectus supplement relating to the Class B Notes is presented solely to provide you with a better understanding of the Class A Notes. Each of the Class A-1 Notes and Class A-2 Notes will have the initial principal amount and the interest rate set forth in the following table. The dates on which the final payment of principal and interest on each of the Class A-1 Notes and Class A-2 Notes is scheduled to be made are also set forth in the following table. FINAL INITIAL NOTE SCHEDULE PRINCIPAL INTEREST PAYMENT CLASS BALANCE RATE DATE - ----- ------------ -------- --------- A-1 $[ ] [ ]% [ ] A-2 $[ ] [ ]% [ ] The Class A Notes will initially be issued in book-entry form only. The Class A Notes will be issued in minimum denominations of $1,000 and multiples of $1,000 in excess of $1,000. You may hold your Class A Notes through The Depository Trust Company in the United States. The notes will be secured solely by the pool of non-prime auto loans and the other assets of the issuing trust which are described under the section entitled "The Trust Property." A collection period means, with respect to a payment date, the calendar month prior to the month in which the payment date occurs. The Class A-2 Notes will not receive any payment of principal on a payment date until the full amount of the Class A-1 Notes principal has been paid in full. On each payment date, the Class B Notes will not receive any payment of interest or principal until all amounts due the Class A Notes on the payment date have been paid in full. PAYMENT DATES o The payment date will be the [ ]th day of each month, or, if that day is not a business day, on the next succeeding business day. The first payment date will be [ ]. o The record date for all payment dates is the [ ]th day of each month, or, if that day is not a business day, on the prior business day. INTEREST o In the case of the first payment date, interest will accrue from [ ] through and excluding the first payment date of [ ]. For any subsequent payment interest will accrue on the Class A Notes during the month preceding each payment date. Interest on the notes will be calculated on a "30/360" basis. PRINCIPAL o Prior to achieving a required level of overcollateralization, the amount of principal available to be distributed to the Class A Notes is generally equal to (1) the amount of collections on the auto loan pool allocable to principal during the prior calendar month plus any losses recognized on the auto loan pool during the prior calendar month and (2) a specified amount of excess interest received on the auto loan pool during the prior calendar month, after paying specific expenses of the trust, interest on the Class A Notes and funding the reserve account to the required level, necessary to achieve the required level of overcollateralization. o Once the required level of overcollateralization has been reached, the amount of principal available to be distributed to the Class A Notes will be equal to (1) the amount of collections on the auto loan pool allocable to principal during the prior calendar month plus any losses recognized on the auto loan pool during the prior calendar month less (2) the excess of (a) the amount of overcollateralization on the payment date less (b) the required level of overcollateralization on the payment date. Additionally, once the required level of overcollateralization has been reached, excess interest will no longer be used to create any further overcollateralization. o Principal distributable to the Class A Notes will be distributed first to the Class A-1 Notes until its principal balance is reduced to zero and then will be distributed to the Class A-2 Notes until its principal balance has been reduced to zero. o In addition, the outstanding principal amount of the Class A-1 Notes and the Class A-2 Notes, to the extent not previously paid, will be payable on the final scheduled payment date of the related class of notes. THE TRUST ASSETS The issuing trust's assets will include: o non-prime motor vehicle retail installment sale contracts secured by new and used automobiles and light-duty trucks; o monies due on, or received under the receivables, after [ ]; o an assignment of the security interests in the vehicles securing the auto loan pool; o the related files; o all rights to proceeds from claims on physical damage, credit life and disability insurance policies covering the vehicles or the obligors; o all rights to liquidation proceeds with respect to the auto loan pool; o an assignment of the rights of ACE Securities Corp. under a receivables purchase agreement with [ ]; o an assignment of the rights of [ ] against dealers under agreements between [ ] and these dealers; o specific bank accounts; o all proceeds of the foregoing; and o particular rights under the principal transaction documents for this offering. THE AUTO LOAN POOL The auto loans consist of non-prime motor vehicle retail installment sale contracts originated by dealers and then acquired by [ ] pursuant to its contract acquisition program. [The motor vehicle retail installment sale contracts consist primarily of contracts with individuals with less than perfect credit due to various factors. These factors include the manner in which the individuals have handled previous credit, the limited extent of their prior credit history and/or their limited financial resources.] STATISTICAL INFORMATION The statistical information in this prospectus supplement is based on the auto loans in the pool as of [ ]. It is expected that the composition and characteristics of the pool of auto loans on the closing date will be similar to the information set forth in this prospectus supplement. However, some auto loans in the pool may be excluded on the closing date as a result of administrative considerations. [ ] does not believe that the characteristics of the auto loans included in the trust on the closing date in the aggregate will differ materially from the information set forth in this prospectus supplement. o As of [ ] the auto loans in the pool have: - an aggregate principal balance of $[ ]; - a weighted average annual percentage rate of approximately [ ]%; - a weighted average original term to scheduled maturity of approximately 60 months; - a weighted average remaining term to scheduled maturity of approximately [ ] months; and - a remaining term to scheduled maturity of not more than 72 months and not less than [ ] months. PRE-FUNDING FEATURE Approximately $[ ] of the proceeds of the notes will be held by [ ]in an account which is formed solely to hold this money, and used to purchase additional auto loans with the prior written consent of [ ] in each case. The issuing trust will purchase from ACE Securities Corp. additional non-prime auto loans from time to time on or before [ ], [ ], from funds on deposit in this account. The obligation of ACE Securities Corp. to sell additional auto loans to the trust is conditioned on these loans having been sold to ACE Securities Corp. from [ ]. The auto loans acquired by the issuing trust during the period between the day of the closing and [ ], will also be originated or acquired by [ ]. The characteristics of the subsequently-acquired auto loans are not expected to differ to any great extent from the auto loans acquired by the issuing trust on the day of the closing. THE INSURANCE POLICY On the day of the closing, [ ] will issue a financial guaranty insurance policy for the benefit of the Class A noteholders. Pursuant to this policy, [ ] will unconditionally and irrevocably guarantee the payments of interest and principal for each payment date with respect to the Class A Notes required to be made during the term of the policy, subject to the further provisions of the policy as described in this prospectus supplement. The Class B Notes do not have the benefit of the policy. OPTIONAL REDEMPTION The notes, if still outstanding, may be redeemed in whole, but not in part, on any payment date on which [ ] exercises its "clean-up call" option to purchase the auto loan pool. This can only occur after the pool balance declines to 10% or less of the original pool balance. [ ]'s exercise of the "clean-up call" is also subject to the satisfaction of particular conditions, including obtaining the prior written consent, in some circumstances, of [ ] The redemption price is equal to the unpaid principal amount of the notes plus accrued and unpaid interest on the notes. MANDATORY REDEMPTION IF PRE-FUNDING ACCOUNT IS NOT DEPLETED Each of the Class A-1 Notes and Class A-2 Notes will be redeemed in part on a pro rata basis if any portion of the $[ ] deposited in a segregated pre-funding account with [ ]remains on deposit in that account on [ ], or prior to this date if the amount remaining in the account is less than $100,000, provided, however if the amount remaining in the pre-funding account is less than $100,000, only the Class A-1 Notes will be redeemed. UPON EVENT OF DEFAULT The notes may be accelerated and subject to immediate payment at par upon the occurrence of an event of default under the indenture. So long as [ ] is not in default, the power to declare an event of default will be held by [ ]. In the case of an event of default, the notes will automatically be accelerated and subject to immediate payment at par. The policy issued by [ ] does not guarantee payment of any amounts that become due on an accelerated basis, unless [ ] elects, in its sole discretion, to pay the amounts in whole or in part. RATING OF THE NOTES The Class A Notes must receive at least the following ratings from [ ] and [ ] in order to be issued. RATING ------ CLASS ___ ___ - ----- ----- ----- A-1.......................... A-2.......................... TAX STATUS Stroock & Stroock & Lavan LLP, special federal tax counsel, will deliver an opinion of counsel that, for federal income tax purposes, the Class A Notes will be treated as indebtedness and the trust will not be an association, or publicly traded partnership, taxable as a corporation. Each noteholder, by accepting a Class A Note, will agree to treat the notes as indebtedness. ERISA CONSIDERATION Subject to particular considerations discussed in this prospectus supplement under "ERISA Considerations," the Class A Notes are eligible for purchase by employee benefit plans. RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE CERTIFICATES. THE INFORMATION RELATING TO There can be no assurance that THE AUTO LOANS MAY NOT REFLECT the net loss experience ACTUAL EXPERIENCE. calculated and presented in this prospectus supplement by [ ] with respect to its portfolio of serviced contracts will reflect actual experience with respect to the auto loans included in the issuing trust. In addition, there can be no assurance that the future delinquency or loan loss experience of the servicer with respect to the auto loans will be better or worse than that set forth in this prospectus supplement with respect to [ ]'s servicing portfolio. THE [ ] FINANCE PROGRAM AND [ ] generally originated by THE NATURE OF OBLIGORS automobile dealers for sale and MAY INCREASE THE RISK OF assignment to [ ]. [ ] purchases DELINQUENCIES AND LOSSES. automobile retail installment sale contracts which may not meet the credit standards of traditional primary lenders. As a result, the underwriting standards applied by [ ] are not as stringent as those of the finance companies of motor vehicle manufacturers or other financial institutions. The [ ] finance program focuses on the non-prime market, including borrowers with sub-standard credit profiles who may not be able to receive financing from more traditional sources. The borrowers may have had credit problems in the past, including prior delinquencies, repossessions, bankruptcy filings or charge-offs by other credit companies. Accordingly, borrowers may have greater difficulty or be less likely to make their scheduled payments. The number of delinquencies and losses on the auto loans is expected to be higher than would be the case with lower risk borrowers. Due to the credit quality of these borrowers, the auto loans have been originated with higher annual percentage interest rates than more traditional lenders charge lower risk borrowers. Any increase in losses on the auto loans will result in accelerated prepayments on the Class A Notes. Any reinvestment risks associated with prepayment will be borne by the noteholders. Additionally, if [ ], as the security insurer, defaults under the policy, you will bear the risk of loss on the auto loans. You are urged to consider the credit quality of the auto loans when analyzing an investment in the notes. A CHANGE IN SERVICER MAY [ ] believes that its credit loss ADVERSELY AFFECT COLLECTIONS ON and delinquency experience reflect THE AUTO LOANS. in part its trained staff and collection procedures. If a servicer termination event occurs under the sale and servicing agreement and [ ] is removed as servicer, or if [ ] resigns or is terminated as servicer, the backup servicer has agreed to assume the obligations of successor servicer. Typically, a change in servicers results in a temporary disruption of servicing. There can be no assurance, however, that collections with respect to the auto loans will not be adversely affected by any change in servicer. THE ISSUING TRUST HAS ONLY The sole sources for repayment of LIMITED ASSETS. the notes are payments on the auto loans, amounts on deposit in the pre-funding account, other cash accounts held by [ ], proceeds from the repossession and sale of related financed vehicles that secure defaulted auto loans and payments made under the insurance policy. The receivables are NOT insured or guaranteed by any person. The notes represent obligations of the trust and will not be insured or guaranteed by any entity. The money in the pre-funding account will be used solely to purchase additional auto loans or, in limited circumstances, redeem a portion of the Class A Notes and is not available to cover losses on the auto loan pool. The capitalized interest account is designed to cover obligations of the issuing trust relating to the portion of its assets not invested in auto loans and is not designed to provide protection against losses on the auto loan pool. Although the insurance policy will be available to cover shortfalls in distributions of the payments due on the Class A Notes, pursuant to, and in accordance with, the insurance policy, the issuing trust will depend on current distributions on the auto loan pool, including amounts otherwise payable to the Class B Notes, and amounts, if any, available in specific collateral accounts maintained for the benefit of [ ] to make payments on the Class A Notes. The Class A Notes represent limited obligations of the issuing trust, and the Class A Notes will not be insured or guaranteed by [ ], ACE Securities Corp., [ ]or any other person or entity. If [ ] has not perfected security interests in the related financed vehicles, its ability to realize on the collateral securing the auto loans may be affected and the proceeds to be distributed to the noteholders on a current basis may be reduced. GEOGRAPHIC CONCENTRATION OF AUTO Obligors with respect to LOANS MAY INCREASE CONCENTRATION RISKS. approximately [ ]% of the auto loans were located in [ ] as of based on current principal balance as of the Initial Cutoff Date and the address of the Obligor. Adverse economic conditions or other factors affecting [ ] could increase the delinquency, loan loss or repossession experience of the issuing trust with respect to the auto loans. LIMITED ABILITY TO The underwriter may assist in RESELL CLASS A NOTES. resales of the Class A Notes, but they are not required to do so. A secondary market for the Class A Notes may not develop. If a secondary market does develop, it might not continue or it might not be sufficiently liquid to allow you to resell any of your Class A Notes. THE RATE AT WHICH THE CLASS Interest on the auto loans will be A NOTES WILL AMORTIZE CANNOT payable to the holders of the Class BE PREDICTED. A-1 Notes and Class A-2 Notes on each payment date. This amount will equal one-twelfth of the interest rate on the note balance of the class as of the close of business on the last day of the month immediately preceding the payment date. The auto loans have different APRs. All of the auto loans are prepayable at any time. The rate of prepayments on the auto loans may be influenced by a variety of economic, social and other factors. These factors include the fact that a consumer obligor generally may not sell or transfer the related financed vehicle securing an auto loan without the consent of [ ] unless the loan is repaid by the Obligor at the time of the sale or transfer. The rate of prepayment on the auto loans may also may be influenced by the structure of the loan, the nature of the consumer obligors and the related financed vehicles and servicing decisions. In addition, under some circumstances, [ ] is obligated to purchase auto loans as a result of breaches of particular representations and warranties, pursuant to the sale and servicing agreement and the receivables purchase agreement. Under some circumstances, the servicer is obligated to purchase auto loans pursuant to the sale and servicing agreement as a result of specified uncured breaches of covenants by it. The servicer may also purchase all the auto loans if the pool balance has declined to less than 10% of the original pool balance, subject to specified limitations in the sale and servicing agreement. [ ] is not aware of publicly available industry statistics that set forth principal prepayment experience for motor vehicle retail installment contracts similar to the auto loans. None of the issuing trust, ACE Securities Corp. or [ ] make any representation as to the actual prepayment rates on the auto loans. [ ], however, believes that the actual rate of prepayments will result in the Class A Notes being repaid prior to their respective final scheduled payment date. The amounts paid to noteholders will include prepayments on the auto loans. The noteholders will bear all reinvestment risk resulting from the timing of payments on the notes. EFFECT OF LITIGATION ON Due to the consumer-oriented [ ]'S FINANCIAL CONDITION. nature of [ ]'s industry and the application of particular laws and regulations, industry participants are regularly named as defendants in litigation alleging violations of federal and state laws and regulations and consumer law torts, including fraud. Many of these actions involve alleged violations of consumer protection laws. A significant judgment against [ ] or others within the industry could have a material adverse effect on [ ]. It could affect [ ]'s financial condition, results of operations and/or its ability to perform its obligations under the receivables purchase agreement, the sale and servicing agreement and the trust agreement. RATINGS OF THE CLASS A A rating is not a recommendation to NOTES ARE NOT GUARANTEED TO REMAIN purchase, hold or IN PLACE. sell notes. The ratings of the Class A Notes address the likelihood of the payment of principal and interest on the Class A Notes pursuant to their terms. There is no assurance that a rating will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if in its judgment circumstances in the future so warrant. In the event that any ratings initially assigned to the Class A Notes are subsequently lowered or withdrawn for any reason, including by reason of a downgrading of the claims-paying ability of [ ], no person or entity will be obligated to provide any additional credit enhancement with respect to the Class A Notes. Any reduction or withdrawal of a rating may have an adverse effect on the liquidity and market price of the Class A Notes. EVENTS OF DEFAULT Upon the occurrence of an event UNDER THE INDENTURE MAY RESULT IN of default under the indenture, so AN ACCELERATION. long as _[ ] shall not have defaulted and the default is not continuing, [ ] as indenture trustee, will continue to submit claims under the insurance policy as necessary in accordance with the terms of the insurance policy to enable the issuing trust to continue to make payments due with respect to the Class A Notes on each payment date. However, following the occurrence of an event of default, [ ] may, at its option, elect to cause the liquidation of the assets of the issuing trust, in whole or in part, and pay all or any portion of the outstanding amount of the Class A Notes, plus accrued interest on the Class A Notes. IF THE ISSUING TRUST DOES NOT USE If the issuing trust has not used ALL OF THE MONEY IN THE PRE-FUNDING all of the money deposited in ACCOUNT A MANDATORY REDEMPTION the pre-funding account to purchase OF A PORTION OF THE CLASS additional auto loans by [ ], [ ], A NOTES COULD RESULT. then the holders of each of the Class A-1 Notes and the Class A-2 Notes will receive a pro rata prepayment of principal in an amount equal to the unused amount or if the amount remaining in the pre-funding account is less than $100,000, only the Class A-1 Notes will be redeemed. Any reinvestment risk from the mandatory redemption of a portion of the Class A Notes from the unused amount will be borne by the holders of the Class A Notes. [ ] MAY NOT BE ABLE TO ORIGINATE The ability of [ ] to acquire or SUFFICIENT AUTO LOANS TO USE originate sufficient additional ALL MONEYS IN THE PRE-FUNDING ACCOUNT. auto loans may be affected by a variety of social and economic factors including: interest rates; unemployment levels; the rate of inflation and consumer perception of economic conditions generally. If [ ] does not originate sufficient additional auto loans then the money deposited in the pre-funding account will not be completely used and a mandatory redemption of a portion of the Class A Notes will result. THE SELLER AND THE SERVICER [To be inserted] THE TRUST The issuing trust, [ ]Auto Receivables Owner Trust [ ]- [ ] (the "Trust" or the "Issuer"), is a business trust formed under the laws of the State of Delaware pursuant to the trust agreement for the transactions described in this prospectus supplement. On or about [ ] (the "Closing Date"), the Trust will issue Class A-1 [ ]% Asset Backed Notes (the "Class A-1 Notes"), Class A-2 [ ]% Asset Backed Notes (the "Class A-2 Notes", and together with the Class A-1 Notes, the "Class A Notes") and Class B [ ]% Asset Backed Notes (the "Class B Notes" and, together with the Class A Notes, the "Notes.") The Class A-1 Notes will have an aggregate original principal amount of $[ ], the Class A-2 Notes will have an aggregate original principal amount of $[ ] and the Class B Notes will have an aggregate original principal amount of $[ ]. Only the Class A Notes are offered to you pursuant to this prospectus supplement. Any information in this prospectus supplement relating to the Class B Notes is presented solely to provide you with a better understanding of the Class A Notes. On the Closing Date, the Trust will also issue an Asset Backed Certificate (the "Certificate") which represents the equity ownership in the trust and is subordinate in right of payment to the Notes. The Certificate is not being offered by this prospectus supplement. After its formation, the Trust will not engage in any activity other than o acquiring, holding and managing motor vehicle retail installment sales contracts secured by new and used automobiles, recreational vehicles, including motor homes, campers, boats, boat motors, motorcycles, jet skis, waverunners, all-terrain-vehicles and snowmobiles, vans trucks, buses and trailers financed by these motor vehicle retail installment sales contracts (the "Receivables") and the other assets of the Trust and proceeds from the Trust, o issuing the Notes and the Certificate, o making payments on the Notes, and o engaging in other activities that are necessary, suitable or convenient to accomplish the foregoing or are incidental to the foregoing or connected with the foregoing. The proceeds from the initial sale of the Notes will be used by the Trust to purchase the Initial Receivables from the Company pursuant to the Sale and Servicing Agreement and to fund deposits in the Pre-Funding Account and the Capitalized Interest Account. The Servicer will service the Receivables pursuant to the Sale and Servicing Agreement and will be compensated for acting as Servicer. See "Description of the Transaction Documents--Servicing Compensation" in this prospectus supplement. The Trust's principal offices are located in Wilmington, Delaware, in care of [ ], as Owner Trustee, at the address listed below under "--The Owner Trustee." CAPITALIZATION OF THE TRUST The following table illustrates the capitalization of the Trust as of the Initial Cutoff Date, as if the issuance and sale of the Notes had taken place on this date: Class A-1 Notes............................ $[ ] Class A-2 Notes............................ $[ ] Class B Notes.............................. $[ ] Total................................. $[ ] THE OWNER TRUSTEE [ ], the Owner Trustee (the "Owner Trustee") under the Trust Agreement dated as of [ ], as amended as of [ ] among the Seller, the Company and the Owner Trustee (the "Trust Agreement") is a [ ] and its principal offices are located at [ ]. The Owner Trustee will perform limited administrative functions under the Trust Agreement. The Owner Trustee's liability in connection with the issuance and sale of the Notes is limited solely to the express obligations of the Owner Trustee set forth in the Trust Agreement and the Sale and Servicing Agreement. THE INDENTURE TRUSTEE [ ] will be the Indenture Trustee under the Indenture dated as of [ ]among the Trust and the Indenture Trustee (the "Indenture"). [ ] is a [ ], the corporate trust office of which is located at [ ]. TRUST PROPERTY Each Note represents a limited obligation of the Trust secured by the property of the Trust (the "Trust Property"). The Trust Property will include, among other things, the following: o non-prime motor vehicle retail installment sale contracts (the "Initial Receivables") secured by new and used automobiles and light-duty trucks (the "Initial Financed Vehicles"); o monies due or received under the Initial Receivables (a) with respect to the Initial Receivables, after [ ] (the "Initial Cutoff Date"), or (b) with respect to the Subsequent Receivables after the related cutoff date (each a "Subsequent Cutoff Date"); o amounts as from time to time may be held in one or more separate trust accounts established and maintained by the Indenture Trustee, including the Collection Account, the Pre-Funding Account and the Capitalized Interest Account, and the proceeds of these accounts, as described below (see "Description of the Transaction Documents--Accounts"); o security interests in the Financed Vehicles granted by the obligors (the "Obligors") pursuant to the Receivables and any accessions; o the interest of the Seller in any proceeds from claims on any credit life, credit disability, and physical damage insurance policies or other insurance policies covering the Financed Vehicles or Obligors; o specific rights under the Sale and Servicing Agreement and the Receivables Purchase Agreement; o amounts payable to the Seller under all Dealer Recourse obligations; o all items contained in the related receivable files and any and all other documents that the Seller keeps on file in accordance with its customary procedures relating to the Receivables; o property, including the right to receive future Liquidation Proceeds, that secures any of the Receivables and that has been acquired pursuant to the liquidation of any Receivable; and o any and all payments on and proceeds of the foregoing. Additional non-prime motor vehicle retail installment sale contracts (the "Subsequent Receivables") secured by new and used automobiles and light-duty trucks (the "Subsequent Financed Vehicles") and related property are intended to be purchased by the Trust from the Seller from time to time on or before [ ], from funds on deposit in the Pre-Funding Account. The Subsequent Receivables will be purchased by the Company from the Seller pursuant to one or more subsequent purchase agreements (each, a "Subsequent Purchase Agreement") between the Company and the Seller, and from the Company by the Trust pursuant to one or more subsequent transfer agreements. The purchase by the Trust of the Initial Receivables and the Subsequent Receivables are in this prospectus supplement referred to as the "Receivables," and the Initial Financed Vehicles and the Subsequent Financed Vehicles are in this prospectus supplement referred to as the "Financed Vehicles." Pursuant to the dealer agreement between the Dealer and the Seller, a Dealer generally is obligated to pay the Seller for the unpaid balance of those Receivables which do not meet limited representations made by the Dealers (these obligations referred to in this prospectus supplement as "Dealer Recourse"). These representations and warranties relate primarily to the origination of the contracts and the perfection of the security interests in the related Financed Vehicles, and do not typically relate to the creditworthiness of the related Obligors or the collectability of the relevant contracts. Although the Dealer Agreements with respect to the Receivables will not be assigned to the Trust or Indenture Trustee, the Receivables Purchase Agreement and the Sale and Servicing Agreement will require the Seller to cause the amount of any recovery in respect to any Receivable pursuant to any Dealer Recourse to be deposited in the Collection Account in satisfaction of the Seller's obligations under the Sale and Servicing Agreement. The sales by the Dealers of installment sale contracts to the Seller do not generally provide for recourse against the Dealers for unpaid amounts in the event of a default by an Obligor under the installment sales contract, other than in connection with the breach of the foregoing representations and warranties. There can be no assurance that the Seller will pursue all claims under the Dealer Agreements nor that the Seller will prevail if any claim is made. The Receivables were generally originated by Dealers in accordance with the Seller's requirements under agreements with Dealers for assignment to the Seller and were so assigned. All the Initial Receivables will be sold and assigned by the Seller to the Company pursuant to the Receivables Purchase Agreement and by the Company to the Trust pursuant to the Sale and Servicing Agreement on or prior to the Closing Date. The Subsequent Receivables will be sold and assigned on one or more future dates occurring no later than [ ] (each, a "Subsequent Transfer Date"). The Indenture Trustee, as custodian, will hold the original installment sales contract or promissory note as well as copies of documents and instruments relating to each Receivable (the "Receivables File"). Pursuant to the Indenture, the Trust will grant a security interest in the Trust Property in favor of the Indenture Trustee on behalf of the Noteholders and for the benefit of the [ ] (the "Insurer") in support of the obligations owing to it under the Insurance and Indemnity Agreement, dated as of [ ], between the Seller, the Trust, the Certificateholder and the Insurer. Any proceeds of the security interest in the Trust Property would be distributed according to the Indenture as described under "The Notes--Priority of Distribution Amounts." The Insurer would be entitled to the distributions only after payment of amounts owing to, among others, Noteholders. THE SELLER'S AUTOMOBILE FINANCING PROGRAM [To Be Inserted] DELINQUENCY AND LOSS EXPERIENCE The following tables set forth information relating to the delinquency and loss experience of the Seller for the periods indicated. The data presented in the delinquency and loss tables below are for illustrative purposes only. There is no assurance that the delinquency and credit loss experience with respect to the Seller's automobile, light-duty truck and sports utility vehicle installment contracts in the future, or that the experience of the Trust Property with respect to the Receivables pledged to the Indenture Trustee for the benefit of the Noteholders, will be similar to that set forth below. Losses and delinquencies are affected by, among other things, general and regional economic conditions and the supply of and demand for automobiles, light-duty trucks and sports utility vehicles. The delinquency and loss percentages may be affected by the increase in size of, and the relative lack of seasoning of, a substantial portion of the portfolio. THE INFORMATION IN THE TABLE BELOW IS NOT INTENDED TO INDICATE OR PREDICT THE EXPECTED DELINQUENCY EXPERIENCE ON PAST, CURRENT OR FUTURE POOLS OF AUTOMOBILE LOANS FOR WHICH THE SERVICER IS THE PRIMARY SERVICER. See "Risk Factors--The information relating to the auto loans may not reflect actual experience."
HISTORICAL DELINQUENCY EXPERIENCE AS OF ______________ AS OF ____________ ----------------------------------------- ---------------------------------------- % OF % OF NO. OF PRINCIPAL PRINCIPAL NO. OF PRINCIPAL PRINCIPAL RECEIVABLES BALANCE BALANCE RECEIVABLES BALANCE BALANCE ----------- ----------- ----------- ----------- ----------- ----------- Aggregate Principal Balance at Period End(1), (2)....................... Delinquencies 31-60 Days........................ 61-90 Days........................ 91+ Days.......................... Total Delinquencies................. Amount in Repossession(3)........... Total Delinquencies and Amount in Repossession......................
AS OF ______________ -------------------------------------- % OF NO. OF PRINCIPAL PRINCIPAL RECEIVABLES BALANCE BALANCE ----------- ----------- ----------- Aggregate Principal Balance at Period End(1), (2)....................... Delinquencies 31-60 Days........................ 61-90 Days........................ 91+ Days.......................... Total Delinquencies................. Amount in Repossession(3)........... Total Delinquencies and Amount in Repossession......................
AS OF ______________ AS OF ____________ ----------------------------------------- ------------------------------------ % OF % OF NO. OF PRINCIPAL PRINCIPAL NO. OF PRINCIPAL PRINCIPAL RECEIVABLES BALANCE BALANCE RECEIVABLES BALANCE BALANCE ----------- ----------- ----------- ----------- ----------- --------- Aggregate Principal Balance at Period End (1), (2)................................. Delinquencies 31-60 Days................................... 61-90 Days................................... 91+ Days..................................... Total Delinquencies............................ Amount in Repossession(3)...................... Total Delinquencies and Amount in Repossession................................. ------------------- (1) The aggregate principal balance is equal to the gross receivable less unearned finance charges on Precomputed Receivables plus the principal balance on Simple Interest Receivables. (2) Represents the aggregate principal balance of all contracts purchased and serviced by the Seller. (3) Represents the aggregate principal balance as of the repossession date.
HISTORICAL NET LOSS EXPERIENCE DURING THE PERIOD ENDED --------------------------------------------------------------------------- ______ ______ ______ ______ ______ ______ ---------- ---------- ---------- ---------- ---------- ---------- Average Aggregate Principal Balance(1)........................................ Gross Charge-Offs(2)................................ Recoveries(3)....................................... Net Losses.......................................... Net Losses as a Percentage of Average Aggregate Principal Balance....................... --------------------- (1) The aggregate principal balance is equal to the gross receivable less unearned finance charges on Precomputed Receivables plus the principal balance on Simple Interest Receivables. (2) Gross Charge-Offs are defined as the remaining principal balance of the charged-off contract less the net proceeds of the liquidation of the related vehicle. (3) Recoveries include post-liquidation amounts received on previously charged-off contracts, including deficiency payments, rebates on related extended service contracts and insurance policies.
THE BACKUP SERVICER If a Servicer Termination Event occurs and remains unremedied and the Seller is terminated as Servicer or resigns as Servicer, in each case in accordance with the Sale and Servicing Agreement, [ ], a [ ], will serve as Backup Servicer. The Backup Servicer will receive a fee on each Payment Date equal to one-twelfth the product of [ ] basis points and the then outstanding Note Balance as compensation for, among other things, (1) standing by to act as successor Servicer and (2) confirming particular calculations made by the Servicer on the monthly statement to Noteholders, including but not limited to (a) interest and principal payments due to the Noteholders and (b) some of the Receivables performance ratios. THE RECEIVABLES Pursuant to the Receivables Purchase Agreement, the Seller will sell and assign to the Company all of its right, title and interest in and to the Receivables and the other Trust Property, and the Company, pursuant to the Sale and Servicing Agreement, will sell and assign to the Trust all of its right, title and interest in and to the Receivables and any other Trust Property. The Trust will then pledge all of its right, title and interest in and to the Receivables to the Indenture Trustee for the benefit of the Noteholders and the Insurer pursuant to the Indenture. The Receivables consist of non-prime motor vehicle retail installment sales contracts. The Receivables were purchased by the Seller in the ordinary course of its business pursuant to its finance programs and underwriting standards. As detailed in this prospectus supplement, credit guidelines may be less stringent than those applied in the origination of other automobile loans by other lenders. See "The Seller's Automobile Financing Program." No selection procedures adverse to the Noteholders or the Insurer were utilized in selecting the Initial Receivables sold and assigned to the Company and then sold and assigned to the Trust. The Receivables existing as of the Initial Cutoff Date were selected from the Seller's portfolio according to several criteria. Among the criteria, each Receivable: (1) arises from the delivery and acceptance of a Financed Vehicle and which delivery and acceptance has been fully performed by the Obligor and the Dealer party to the transaction, (2) arises from the normal course of the Dealer's business, (3) is not in default, (4) the Obligor of which is a natural person residing in any state or the District of Columbia, (5) the Obligor of which is not a government or a governmental subdivision or agency, (6) met the Seller's underwriting criteria at the time of purchase, (7) is denominated and payable in Dollars in the United States, (8) is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor in accordance with its terms, (9) is not subject to any dispute, litigation, counterclaim or defense, or any offset or right of offset at the time of purchase by the Seller, any exercisable right of rescission, (10) is not more than [ ] days past due, (11) has an original term to scheduled maturity of not less than [ ] or more than 72 months, (12) has a remaining term to scheduled maturity of not less than [ ] months or greater than 72 months, (13) provides for equal monthly payments which will cause the Receivable to fully amortize [ ] during its term, (14) has a remaining principal balance of not less than $[ ] or more than $[ ], (15) has an APR of not less than [ ]% and (16) the model year of the related Financed Vehicle is not earlier than [ ]. PAYMENTS ON THE RECEIVABLES All of the Receivables provide for the payment by the related Obligor of a specific total amount of payments, payable in substantially equal monthly installments on each scheduled payment date, which total represents the amount financed plus interest charges on the amount financed for the term of the Receivable. Each Receivable provides for repayment of the Amount Financed by an Obligor according to: o the Rule of 78's (a "Rule of 78's Receivables"), o the actuarial method (an "Actuarial Receivable" and together with Rule of 78's Receivables, the "Precomputed Receivables") or o the simple interest method (a "Simple Interest Receivable"). Under a Rule of 78's Receivable, the rate at which the amount of finance charges is earned and, correspondingly, the amount of each scheduled monthly payment allocated to reduction of the outstanding principal balance of the related Receivable are calculated in accordance with the "Rule of 78's". Under the Rule of 78's, the portion of a payment allocable to interest earned during that month is determined by multiplying the total amount of interest payable over the term of the Receivable by a fraction, the denominator of which is equal to the sum of a series of numbers beginning with one and ending with the number of scheduled monthly payments due under the related Receivable, and the numerator of which is the number of payments remaining under the Receivable before giving effect to the payment to which the fraction is being applied. The difference between the amount of the scheduled monthly payment made by the Obligor and the amount of earned interest calculated for the month is applied to principal reduction. An Actuarial Receivable provides for amortization of the loan over a series of fixed level monthly installments. Each scheduled monthly payment is deemed to consist of an amount of interest equal to one-twelfth of the stated APR of the Receivable multiplied by the outstanding principal balance of the Receivable and an amount of principal equal to the remainder of the scheduled monthly payment. All payments received by the Servicer on or in respect of Precomputed Receivables, including the final scheduled payment, will be allocated pursuant to the Sale and Servicing Agreement on an actuarial basis. No adjustment will be made in the event of early or late payments, although in the latter case, the Obligor may be subject to a late charge. "Simple Interest Receivables" provide for the amortization of the amount financed under the Receivable over a series of fixed level monthly payments. However, unlike the monthly payment under Rule of 78s Receivables, each monthly payment consists of an installment of interest which is calculated on the basis of the outstanding principal balance of the receivable multiplied by the stated APR and further multiplied by the period elapsed, as a fraction of a calendar year, since the preceding payment of interest was made. As payments are received under a Simple Interest Receivable, the amount received is applied first to interest accrued to the date immediately preceding the date of payment and the balance is applied to reduce the unpaid principal balance. Accordingly, if an Obligor pays a fixed monthly installment before its scheduled due date, the portion of the payment allocable to interest for the period since the preceding payment was made will be less than it would have been had the payment been made as scheduled, and the portion of the payment applied to reduce the unpaid principal balance will be correspondingly greater. Conversely, if an Obligor pays a fixed monthly installment after its scheduled due date, the portion of the payment allocable to interest for the period since the preceding payment was made will be greater than it would have been had the payment been made as scheduled, and the portion of the payment applied to reduce the unpaid principal balance will be correspondingly less. In either case, the Obligor pays a fixed monthly installment until the final scheduled payment date, at which time the amount of the final installment is increased or decreased as necessary to repay the then outstanding principal balance. In the event of a prepayment in full, voluntarily or by acceleration, of a Precomputed Receivable, a "rebate" in the loan accounting records of the Servicer may be made to the Obligor of that portion of the total amount of payments under the relevant Receivable allocable to "unearned" finance charges. In the event of the prepayment in full, voluntarily or by acceleration, of a Simple Interest Receivable, a "rebate" will not be made to the Obligor, but the Obligor will be required to pay interest only to the date immediately preceding the date of prepayment. The amount of a rebate under a Precomputed Receivable generally will be less than or equal to the remaining scheduled payments of interest that would have been due under a Simple Interest Receivable for which all remaining payments were made on schedule. The amount of a rebate under a Rule of 78's Receivable calculated in accordance with the Rule of 78's generally will be less than the amount of a rebate on an Actuarial Receivable calculated in accordance with the actuarial method. Distributions to Noteholders will not be affected by Rule of 78's rebates under the Rule of 78's Receivables because pursuant to the Sale and Servicing Agreements distributions will be determined using the actuarial method. Amounts received upon prepayment in full of a Rule of 78's Receivable in excess of the then outstanding principal balance of the Receivable and accrued interest on the then outstanding principal balance of the Receivable, calculated pursuant to the actuarial method, will not be passed through to Noteholders. PURCHASE OR REPLACEMENT OBLIGATIONS Pursuant to the Receivables Purchase Agreement and the Sale and Servicing Agreement, the Seller will be obligated to repurchase or replace, subject to limits on replacement set forth in the Sale and Servicing Agreement, any Receivable sold and assigned to the Trust as to which a breach has occurred as to particular representations or warranties made by the Seller with respect to the Receivable, if the breach has not been cured by the last day of the first full calendar month following the discovery by or notice to the Seller of the breach, if the breach will materially and adversely affect the interests of the Noteholders, the Insurer or the Trust in the relevant Receivable. The Indenture Trustee will also have rights to enforce the obligations of the Seller under the Receivables Purchase Agreement. See "Description of the Transaction Documents--Sale and Assignment of Receivables" and "Trust Property" in this prospectus supplement. The Sale and Servicing Agreement also provides that if the Servicer breaches certain of its servicing obligations under the Sale and Servicing Agreement, including but not limited to its obligation to maintain perfection of the first priority security interest of the Seller created by each Receivable in the related Financed Vehicle, or other covenants with regard to the Servicer, in each case only in a manner that materially and adversely affects the interests of the Noteholders, the Insurer or the Trust in any Receivable, the Servicer will purchase or replace the relevant Receivable from the Trust, unless the breach has been cured by the last day of the first full calendar month following the discovery by or notice to the Servicer of the breach. COMPOSITION OF THE POOL OF INITIAL RECEIVABLES The tables below set forth information regarding the composition and characteristics of the pool of Receivables as of the Initial Cutoff Date. It is expected that the composition and characteristics of the Receivables on the Closing Date will be similar to the information set forth below. However, some Receivables may be excluded on the Closing Date as of a result of particular administrative considerations. The Seller does not believe that the characteristics of the Receivables included in the Trust on the Closing Date in the aggregate will differ materially from the information set forth in this prospectus supplement. COMPOSITION OF THE INITIAL RECEIVABLES Aggregate Principal Balance............. $[ ] Number of Receivables................... [ ] Average Amount Financed................. $[ ] Range of Amounts Financed............... $[ ] to $[ ] Average Current Principal Balance....... $[ ] Range of Current Principal Balances..... $[ ] to $[ ] Weighted Average APR.................... [ ]% Range of APRs........................... [ ]% to [ ]% Weighted Average Original Term to Scheduled Maturity(1)................. [ ] months Range of Original Terms to Scheduled Maturity.............................. [ ] to [ ] months Weighted Average Remaining Term to Scheduled Maturity(1)................. [ ] months Range of Remaining Terms to Scheduled Maturity. [ ] to 72 months - ---------------------- (1) Rounded to the nearest month.
DISTRIBUTION OF RECEIVABLES BY CURRENT PRINCIPAL BALANCE (AS OF THE INITIAL CUTOFF DATE) PERCENTAGE OF PERCENTAGE OF TOTAL NUMBER CURRENT AGGREGATE CURRENT PRINCIPAL NUMBER OF OF PRINCIPAL PRINCIPAL BALANCE RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1) - ----------------- ------------- ---------------- -------------- ------------- $5,000.00 to 9,999.99........ 10,000.00 to 14,999.99........ 15,000.00 to 19,999.99........ 25,000.00 to 29,999.99........ 30,000.00 to 34,999.99........ ------------- ---------------- --------------- ------------- TOTAL......................... 100.00% $_____________ 100.00% ------------- ---------------- --------------- --------------
DISTRIBUTION OF RECEIVABLES BY AMOUNT FINANCED (AS OF THE INITIAL CUTOFF DATE) PERCENTAGE OF PERCENTAGE OF TOTAL NUMBER CURRENT AGGREGATE AMOUNT NUMBER OF OF PRINCIPAL PRINCIPAL FINANCED RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1) - ----------------- ------------- ---------------- -------------- ------------- $5,000.00 to 9,999.99........ 10,000.00 to 14,999.99........ 15,000.00 to 19,999.99........ 20,000.00 to 24,999.99........ 25,000.00 to 29,999.99........ 30,000.00 to 34,999.99........ 35,000.00 to 39,999.99........ ------------- ---------------- --------------- ------------- TOTAL......................... 100.00% $_____________ 100.00% ------------- ---------------- --------------- -------------- - --------------------- (1) Percentages may not add to 100.00% due to rounding.
DISTRIBUTION OF RECEIVABLES BY APR (AS OF THE INITIAL CUTOFF DATE) PERCENTAGE OF PERCENTAGE OF TOTAL NUMBER CURRENT AGGREGATE NUMBER OF OF PRINCIPAL PRINCIPAL RANGE OF APRS (%) RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1) - ----------------- ------------- ---------------- -------------- ------------ 10.00 to 10.99............... 11.00 to 11.99............... 12.00 to 12.99............... 13.00 to 13.99............... 14.00 to 14.99............... 15.00 to 15.99............... 16.00 to 16.99............... 17.00 to 17.99............... 18.00 to 18.99............... 19.00 to 19.99............... 20.99 to 20.99............... 21.00 to 21.99............... 22.00 to 22.99............... 23.00 to 23.99............... 24.00 to 24.99............... 25.00 to 25.99............... ------------- ---------------- --------------- ------------- TOTAL........................ 100.00% $_____________ 100.00% ------------- ---------------- --------------- -------------
DISTRIBUTION OF RECEIVABLES BY MODEL YEAR OF FINANCED VEHICLE (AS OF THE INITIAL CUTOFF DATE) PERCENTAGE OF PERCENTAGE OF TOTAL NUMBER CURRENT AGGREGATE NUMBER OF OF PRINCIPAL PRINCIPAL MODEL YEAR RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1) - ----------------- ------------- ---------------- -------------- ------------- 1999........................ 1998........................ 1997........................ 1996........................ 1995........................ 1994........................ 1993........................ 1992........................ 1991........................ ------------- ---------------- --------------- ------------- TOTAL....................... 100.00% $_____________ 100.00% ------------- ---------------- --------------- ------------- - --------------------- (1) Percentages may not add up to 100.00% due to rounding.
DISTRIBUTION OF RECEIVABLES BY REMAINING TERM TO SCHEDULED MATURITY (AS OF THE INITIAL CUTOFF DATE) PERCENTAGE OF PERCENTAGE OF TOTAL NUMBER CURRENT AGGREGATE NUMBER OF OF PRINCIPAL PRINCIPAL RANGE OF REMAINING TERMS RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1) - ------------------------ ------------- ---------------- -------------- ------------ 24 to 29 months.............. 30 to 35 months.............. 36 to 41 months.............. 42 to 47 months.............. 48 to 53 months.............. 54 to 59 months.............. 60 to 65 months.............. 66 to 71 months.............. 72 months.................... ------------- ---------------- --------------- ------------- TOTAL........................ 100.00% $_____________ 100.00% ------------- ---------------- --------------- ----------
DISTRIBUTION OF RECEIVABLES BY ORIGINAL TERM TO SCHEDULED MATURITY (AS OF THE INITIAL CUTOFF DATE) PERCENTAGE OF PERCENTAGE OF TOTAL NUMBER CURRENT AGGREGATE NUMBER OF OF PRINCIPAL PRINCIPAL RANGE OR ORIGINAL TERMS RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1) - ------------------------ ------------- ---------------- -------------- ------------ 30 to 35 months........... 36 to 41 months........... 42 to 47 months........... 48 to 53 months........... 54 to 59 months........... 60 to 65 months........... 66 to 71 months........... 72 months................. ------------- ---------------- --------------- ------------- TOTAL..................... 100.00% $_____________ 100.00% ------------- ---------------- --------------- ------------- - --------------------- (1) Percentages may not add up to 100.00% due to rounding.
DISTRIBUTION OF RECEIVABLES BY ADDRESS OF OBLIGOR (AS OF THE INITIAL CUTOFF DATE) PERCENTAGE OF PERCENTAGE OF TOTAL NUMBER CURRENT AGGREGATE NUMBER OF OF PRINCIPAL PRINCIPAL STATE RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1) - ------------------------ ------------- ---------------- -------------- ------------ - --------.................... - ---------................... - ---------................... - ------------................ - ----------.................. - -----------................. - ------------................ - ---------................... - -----------................. - -----------................. - ---------................... - ----------.................. - ----------.................. - ---------................... - ----------.................. - ---------................... - -----------................. - -----------................. - ---------................... - -----------................. - ----------.................. - ----------.................. - --------.................... - ----------.................. - -----------................. - -----------................. - ---------................... - -------..................... - ----------.................. ------------- ---------------- --------------- ------------- TOTAL....................... 100.00% $_____________ 100.00% ------------- ---------------- --------------- ------------- - -------------------- (1) Percentages may not add up to 100.00% due to rounding.
MATURITY AND PREPAYMENT CONSIDERATIONS All the Receivables are prepayable at any time. The rate of prepayments on the Receivables may be influenced by a variety of economic, social and other factors, including the fact that an Obligor generally may not sell or transfer the Financed Vehicle securing a Receivable without the consent of the Seller unless the loan is repaid by the Obligor at the time of the sale or transfer. For this purpose the term "prepayments" includes prepayments in full, or in part, including, without limitation, some partial prepayments related to refunds of extended service contract costs and unearned insurance premiums, liquidations due to default, as well as receipts of proceeds from physical damage, credit life and credit accident and health insurance policies and other Receivables repurchased for administrative reasons. The rate of prepayment on the Receivables may also be influenced by the structure of the loan, the nature of the Obligors and the Financed Vehicles and servicing decisions as discussed above. In addition, under some circumstances, the Seller is obligated to repurchase or replace Receivables as a result of breaches of representations and warranties pursuant to the Sale and Servicing Agreement and the Receivables Purchase Agreement, and under some circumstances, the Servicer is obligated to purchase Receivables pursuant to the Sale and Servicing Agreement as a result of breaches of specific covenants. Subject to particular conditions, the Servicer has the option to purchase the Receivables when the aggregate principal balance of the Receivables is 10% or less of the Original Pool Balance. If prepayments are received on the Receivables, the actual weighted average life of the Receivables may be shorter than the scheduled weighted average life, i.e., the weighted average life assuming that payments will be made as scheduled and that no prepayments will be made. "Weighted Average Life" means the average amount of time during which each dollar of principal on a Receivable is outstanding. Any reinvestment risks resulting from a faster or slower incidence of prepayment of Receivables will be borne by the Noteholders. See also "The Notes--Optional Purchase of Receivables" regarding the Servicer's right to purchase the Receivables and the other Trust Property on any Determination Date as of which the Aggregate Principal Balance has declined to less than 10% of the Original Pool Balance. Prepayments on automobile receivables can be measured relative to a prepayment standard or model. The model used in this prospectus supplement, the Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each month relative to the original number of receivables in a pool of receivables. ABS further assumes that all the Receivables are the same size and amortize at the same rate and that each Receivable in each month of its life will either be paid as scheduled or be prepaid in full. For example, in a pool of receivables originally containing 10,000 receivables, a 1% ABS rate means that 100 receivables prepay each month. ABS does not purport to be an historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of receivables, including the Receivables. The tables captioned "Percent of Initial Note Principal Balance at Various ABS Percentages" ("ABS Tables") have been prepared on the basis of the following assumptions: o the Trust includes two pools of Receivables with the characteristics set forth in the following table; o the Receivables prepay in full at the specified constant percentage of ABS monthly, with no defaults, losses or repurchases, o each scheduled monthly payment on the Receivables is made on the last day of each month and each month has 30 days; o the initial principal amount of each of the Class A-1 Notes and Class A-2 Notes are as set forth on the cover page of this prospectus supplement; o interest accrues during each Interest Period at the following assuming coupon rates; Class A-1 Notes, [ ]% and Class A-2 Notes, [ ]%; o payments on the notes are made on the [ ](th) of each month whether or not a Business Day; o the Class A Notes are purchased on [ ]; o the scheduled monthly payment for each Receivable has been calculated on the basis of the assumed characteristics in the following table so that each Receivable will amortize in amounts sufficient to repay the Principal Balance of the Receivable by its indicated remaining term to maturity; o the first due date for each Receivable is the last day of the month of the assumed cutoff date for each Receivable as set forth in the following table; o the entire Pre-Funded Amount is used to purchase Subsequent Receivables; o the Servicer does exercise its option to purchase the Receivables; and o the difference between the gross APR and the net APR is equal to the Servicer Fee, and the net APR is further reduced by the fees due to the Indenture Trustee, the Backup Servicer and the Insurer. REMAINING ORIGINAL TERM TO AGGREGATE TERM TO SCHEDULED PRINCIPAL GROSS ASSUMED MATURITY (IN MATURITY (IN POOL BALANCE APR(%) CUTOFF DATE MONTHS) MONTHS) - --------- ------------ ----------- ------------- ------------- ------------- 1 $ [ ] [ ] [ ] [ ] [ ] 2 [ ] [ ] [ ] [ ] [ ] Total $ [ ] The ABS Tables indicate, based on the assumptions set forth above, the percentages of the initial principal amount of the Class A-1 Notes and Class A-2 Notes that would be outstanding after each of the Payment Dates shown at various percentages of ABS and the corresponding weighted average lives of the Notes. The actual characteristics and performance of the Receivables will differ from the assumptions used in constructing the ABS Tables. The assumptions used are hypothetical and have been provided only to give a general sense of how the principal cash flows might behave under the varying prepayment scenarios. For example, it is very unlikely that the Receivables will prepay at a constant level of ABS until maturity, that all of the Receivables will prepay at the same level of ABS or that the coupon rates on the Notes will remain constant. Moreover, the diverse terms of Receivables could produce slower or faster principal distributions than indicated in the ABS Tables at the various constant percentage of ABS specified, even if the original and remaining terms of maturity of the Receivables are as assumed. Any difference between the assumptions and the actual characteristics and performance of the Receivables, including actual prepayment experience or losses, will affect the percentages of initial balances outstanding over time and the weighted average lives of the Class A-1 Notes and Class A-2 Notes.
PERCENT OF INITIAL NOTE BALANCE AT VARIOUS ABS PERCENTAGES(1) CLASS A-1 NOTES CLASS A-2 NOTES PAYMENT ----------------------------------------------------------------------------------------------------- DATE ___% ___% ___% ___% ___% ___% ___% ___% - --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- INITIAL - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- - --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Weighted Average Life in Years(2) (1) The percentages in this table have been rounded to nearest whole number. (2) The weighted average life of a note is determined by (1) multiplying the amount of each principal payment on a note by the number of years from the date of the Issuance of the note to the related Payment Date, (b) adding the results and (c) dividing the sum by the related initial principal amount of the note.
YIELD CONSIDERATIONS Other than on the first Payment Date, on each Payment Date, interest on the Receivables will be passed through to the Class A-1 and Class A-2 Noteholders in an amount equal to one-twelfth of the Interest Rate multiplied by the Note Balance of the applicable Class on the last day of the immediately preceding Collection Period. In the event of prepayments on Receivables, Noteholders will nonetheless be entitled to receive interest for the full month on the Notes. See also "The Receivables--Payments on the Receivables" in this prospectus supplement. USE OF PROCEEDS The Trust will use the net proceeds from the sale of the Notes to purchase Receivables from the Company and to make the initial deposit into the Capitalized Interest Account and the Pre-Funding Account. The Company will use the net proceeds paid to the Company by the Trust to purchase Receivables from the Seller, which in turn will use the proceeds to pay related expenses and repay specific warehouse loans and any additional proceeds will be added to the Seller's general funds and used for its general corporate purposes. THE INSURER The following information has been obtained from the Insurer and has not been verified by the Seller, the Company or the Underwriter. No representations or warranty is made by the Seller, the Company or the Underwriter with respect to this information. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE In addition to the documents described in the prospectus under "Incorporation of Certain Documents by Reference," the consolidated financial statements of the Insurer and its subsidiaries included in, or as exhibits to, the following documents which have been filed with the Commission by Holdings, are incorporated by reference in this prospectus supplement: o Annual Report on Form 10-K for the year ended [ ], o Quarterly Report on Form 10-Q for the period ended [ ], o Quarterly Report on Form 10-Q for the period ended [ ], and o Quarterly Report on Form 10-Q for the period ended [ ]. All financial statements of the Insurer included in documents filed by the Insurer pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act") subsequent to the date of this prospectus supplement and prior to the termination of the offering of the Class A Notes shall be deemed to be incorporated by reference into this prospectus supplement and to be a part of this prospectus supplement from the respective dates of filing of these documents. The Seller will provide without charge to any person to whom this prospectus supplement is delivered, upon their oral or written request, a copy of any or all of the foregoing financial statements incorporated in this prospectus supplement by reference. Requests for copies should be directed to: [ ] The Seller on behalf of the Trust undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Trust's annual report pursuant to section 13(a) or section 15(d) of the Exchange Act and each filing of the financial statements of the Insurer included in or as an exhibit to the annual report the Insurer of filed pursuant to section 13(a) or section 15(d) of the Exchange Act that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the Class A Notes offered by this prospectus supplement, and the offering of the Class A Notes at that time shall be deemed to be the initial bona fide offering of the Class A Notes. All documents filed by the Company with respect to the Registration Statement, either on its own behalf or on behalf of the Trust, relating to the Class A Notes, with the Securities and Exchange pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this prospectus supplement and prior to the termination of any offering of the Class A Notes offered by this prospectus supplement, shall be deemed to be incorporated by reference in this prospectus supplement and to be a part of this prospectus supplement from the date of the filing of these documents. Any statement contained in this prospectus supplement or in a document incorporated or deemed to be incorporated by reference in this prospectus supplement shall be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that a statement contained in this prospectus supplement or in any other subsequently filed document which also is or is deemed to be incorporated by reference in this prospectus supplement, modifies or replaces the statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement. THE NOTES The Notes will be issued pursuant to the Indenture, a form of which has been filed as an exhibit to the Registration Statement. The following summary describes some of the terms of the Class A Notes and the Indenture. The summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Notes and the Indenture. The following summary supplements the description of the general terms and provisions of the Notes of any given series and the related Indenture set forth in the accompanying prospectus, to which description reference is made by this prospectus supplement. The Class A Notes initially will be represented by notes registered in the name of Cede & Co., as the nominee of The Depository Trust Company ("DTC"), and will only be available in the form of book-entries on the records of DTC and participating members of DTC in denominations of $1,000. All references to "Holders" or "Noteholders" and to authorized denominations, when used with respect to the Notes, shall reflect the rights of Note Owners, and limitations of Note Owners, as they may be indirectly exercised through DTC and its participating members, except as otherwise specified in this prospectus supplement. See "Certain Information Regarding the Securities--Book-Entry Regulation" in the prospectus supplement and Annex I to the prospectus. In general, the Class A-1 Noteholders will be entitled to receive, on each Payment Date, the Class A-1 Principal Payment Amount and the Class A-1 Interest Payment Amount and the Class A-2 Noteholders will be entitled to receive, on each Payment Date, the Class A-2 Principal Payment Amount and the Class A-2 Interest Payment Amount, subject to the priority of payments as described in "--Priority of Distribution Amounts." Payments on the Notes will be made from the Note Distribution Account. MANDATORY REDEMPTION The Class A Notes will be redeemed in part on the Mandatory Redemption Date in the event that any portion of the Pre-Funded Amount remains on deposit in the Pre-Funding Account at the end of the Funding Period. The aggregate principal amount of the Class A Notes to be redeemed will be an amount equal to the remaining Pre-Funded Amount on that date (the "Class A Mandatory Redemption Amount"). The Class A Mandatory Redemption Amount will be distributed pro rata to each of the Class A-1 Notes and the Class A-2 Notes, based on the current principal balance of each Class, provided, however, that if the amount remaining in the Pre-Funding Account is less than $100,000, only the Class A-1 Notes will be redeemed. OPTIONAL PURCHASE OF RECEIVABLES As an administrative convenience, the Servicer may purchase all the Receivables and other Trust Property on any Payment Date if, as of the last day of the related Collection Period, the Aggregate Principal Balance has declined to less than 10% of the sum of (1) the Aggregate Principal Balance as of the Initial Cutoff Date plus (2) the aggregate principal balances of the Subsequent Receivables added to the Trust as of their respective Cutoff Dates (the "Original Pool Balance"). To exercise this option, the Servicer must pay the aggregate Purchase Amounts for the Receivables and obtain the prior written consent of the Insurer, or if the redemption would result in a claim under the Policy or if the redemption would result in any amount owing to the Insurer remaining unpaid. Upon exercising the option, the Servicer will succeed to all interests in and to the Trust Property. The purchase price paid by the Servicer will be deposited into the Collection Account and distributed pursuant to "--Priority of Distribution Amounts" below. See "Certain Matters Regarding the Servicer--Termination" in the accompanying prospectus. This purchase will cause a redemption of the Notes; provided, however, that the Servicer will provide the Indenture Trustee, the Backup Servicer, the Insurer and the Rating Agencies at least 10 days' prior written notice of any redemption. The Indenture Trustee will give notice to each Noteholder at least five days prior to any redemption. The redemption price for each Note will be no less than the outstanding principal balance of the relevant Note on the date of redemption plus accrued and unpaid interest on the outstanding principal balance (the "Redemption Price"). The Servicer will deposit the Redemption Price into the Collection Account, and the Indenture Trustee will distribute the amounts so deposited in accordance with the "Priority of Distribution Amounts" below. DISTRIBUTIONS FROM THE TRUST No later than 12:00 p.m. New York City time on each Determination Date, the Servicer will inform the Indenture Trustee of the amount of aggregate collections on the Receivables and the aggregate Purchase Amount of Receivables to be purchased by the Servicer with respect to the related Collection Period. The Servicer will determine prior to the Determination Date, the Class A-1 Interest Payment Amount, the Class A-1 Principal Payment Amount, the Class A-2 Interest Payment Amount, the Class A-2 Principal Payment Amount, the Payment Amount, the amounts, if any, required to be deposited in the Class A Reserve Account, the Class A Overcollateralization Amount and the Class A Target Overcollateralization Amount. For purposes of this prospectus supplement, the following terms shall have the following meanings: "Additional Funds Available" means, with respect to any Payment Date the sum of (1) the Deficiency Claim Amount, if any, received by the Indenture Trustee with respect to the Payment Date plus (2) the Insurer Optional Deposit, if any, received by the Indenture Trustee with respect to the Payment Date. "Class A Interest Carryover Shortfall" means, as of the close of business on any Payment Date, the sum of (1) the Class A-1 Interest Carryover Shortfall and (2) the Class A-2 Interest Carryover Shortfall. "Class A Interest Payment Amount" means, with respect to any Payment Date, the sum of (1) the Class A-1 Interest Payment Amount and (2) the Class A-2 Interest Payment Amount. "Class A Mandatory Redemption Amount" means the amount, if any, remaining of the Pre-Funded Amount on the Mandatory Redemption Date. "Class A Overcollateralization Amount" means, with respect to any Payment Date, an amount equal to the excess, if any, of: (1) the sum of, (a) the remaining Aggregate Principal Balance as of the last day of the related Collection Period and (b) all amounts, if any, in the Pre-Funding Account, over (2) the remaining Class A Note Balance, after giving effect to the amounts payable on the Payment Date pursuant to clauses (1) through (5) under "--Priority of Distribution Amounts" on the Payment Date. "Class A Principal Payment Amount" means, with respect to any Payment Date, the sum of the Class A-1 Principal Payment Amount and the Class A-2 Principal Payment Amount. "Class A Target Overcollateralization Amount" means, with respect to any Payment Date, an amount equal to the product of (1) [ ]%, or any lesser percentage as the Insurer may decide in its sole discretion, and (2) the sum of (a) the remaining Aggregate Principal Balance, and (b) amounts, if any, in the Pre-Funded Account, each determined as of the last day of the related Collection Period. "Class A-1 Interest Carryover Shortfall" means, as of the close of business on any Payment Date, the excess of (a) the Class A-1 Interest Payment Amount for the Payment Date and any outstanding Class A-1 Interest Carryover Shortfall from the immediately preceding Payment Date plus interest on this outstanding Class A-1 Interest Carryover Shortfall, to the extent permitted by law, at the Class A-1 Interest Rate from the preceding Payment Date through the current Payment Date, calculated on the basis of a 360-day year consisting of twelve 30-day months, over (b) the amount of interest that the Holders of the Class A-1 Notes actually received on the current Payment Date. "Class A-1 Interest Payment Amount" means, with respect to any Payment Date, 30 days' interest, calculated on the basis of a 360-day year consisting of twelve 30-day months or, in the case of the first Payment Date, the number of days (on a "30/360" basis) from and including [ ], to but excluding [ ], at the Class A-1 Interest Rate on the Class A-1 Note Balance as of the close of business on the last day of the related Collection Period. "Class A-1 Mandatory Redemption Amount" means, (1) with respect to the Mandatory Redemption Date on which the Class A Mandatory Redemption Amount is less than $100,000, the Class A Mandatory Redemption Amount, and (2) with respect to any Payment Date on which the Class A Mandatory Redemption Amount is greater than $100,000, the product of (A) the Class A Mandatory Redemption Amount and (B) a fraction, the numerator of which is the Class A-1 Note Balance as of the class of business on the date prior to the related Payment Date and the denominator of which is the Class A Note Balance as of the class of business on the date prior to the related Payment Date. "Class A-1 Principal Carryover Shortfall" means, as of the close of business on any Payment Date, the excess of (a) the Class A-1 Principal Payment Amount and any outstanding Class A-1 Principal Carryover Shortfall from the immediately preceding Payment Date, over (b) the amount of principal that the Holders of the Class A-1 Notes actually received on the current Payment Date. "Class A-2 Interest Payment Amount" means, with respect to any Payment Date, 30 days' interest, calculated on the basis of a 360-day year consisting of twelve 30-day months or, in the case of the first Payment Date, the number of days (on a "30/360" basis) from and including [ ], to but excluding [ ], at the Class A-2 Interest Rate on the Class A-2 Note Balance as of the close of business on the last day of the related Collection Period. "Class A-1 Principal Payment Amount" means: (a) with respect to any Payment Date other than the Class A-1 Final Scheduled Payment Date: the lesser of, (1) the Class A-1 Note Balance immediately prior to the Payment Date and (2) the sum of (A) the Principal Payment Amount and (B) the Class A-1 Mandatory Redemption Amount and (b) with respect to the Class A-1 Final Scheduled Payment Date, the then outstanding Class A-1 Note Balance. "Class A-2 Interest Carryover Shortfall" means, as of the close of business on any Payment Date, the excess of (a) the Class A-2 Interest Payment Amount for the Payment Date and any outstanding Class A-2 Interest Carryover Shortfall from the immediately preceding Payment Date plus interest on the outstanding Class A-2 Interest Carryover Shortfall, to the extent permitted by law, at the Class A-2 Interest Rate from the preceding Payment Date through the current Payment Date, calculated on the basis of a 360-day year consisting of twelve 30-day months, over (b) the amount of interest that the Holders of the Class A-2 Notes actually received on the current Payment Date. "Class A-2 Mandatory Redemption Amount" means, with respect to the Mandatory Redemption Payment Date, the positive difference, if any, between the Class A Mandatory Redemption Amount and the Class A-1 Mandatory Redemption Amount. "Class A-2 Principal Carryover Shortfall" means, as of the close of business on any Payment Date, the excess of (a) the Class A-2 Principal Payment Amount and any outstanding Class A-2 Principal Carryover Shortfall from the immediately preceding Payment Date, over (b) the amount of principal that the Holders of the Class A-2 Notes actually received on the current Payment Date. "Class A-2 Principal Payment Amount" means: (a) with respect to any Payment Date other than the Class A-2 Final Scheduled Payment Date: the lesser of, (1) the Class A-2 Note Balance immediately prior to the Payment Date, and (2) the difference between (A) the sum of the Principal Payment Amount and the Class A-2 Mandatory Redemption Amount and (B) the Class A-1 Principal Payment Amount and (b) with respect to the Class A-2 Final Scheduled Payment Date, the then outstanding Class A-2 Note Balance. "Class B Interest Carryover Shortfall" means, as of the close of business on any Payment Date, the excess of (a) the Class B Interest Payment Amount for the Payment Date and any outstanding Class B Interest Carryover Shortfall from the immediately preceding Payment Date plus interest on the outstanding Class B Interest Carryover Shortfall, to the extent permitted by law, at the Class B Interest Rate from the preceding Payment Date through the current Payment Date, calculated on the basis of a 360-day year consisting of twelve 30-day months, over (b) the amount of interest that the Holders of the Class B Notes actually received on the current Payment Date. "Class B Interest Payment Amount" means, with respect to any Payment Date, 30 days' interest, calculated on the basis of a 360-day year consisting of twelve 30-day months or, in the case of the first Payment Date, the number of days (on a "30/360" basis) from and including [ ] to but excluding [ ], at the Class B Interest Rate on the Class B Note Balance as of the close of business on the last day of the related Collection Period. "Class B Principal Payment Amount" means: (a) with respect to any Payment Date other than the Class B Final Scheduled Payment Date: the lesser of, (x) the Class B Note Balance immediately prior to the Payment Date, and (y) amounts remaining from the sum of, (A) Available Funds and (B) amounts available from the Class A Reserve Account in accordance with the terms of the Sale and Servicing Agreement, after application of priorities First through Ninth under "--Priority of Distribution Amounts," and (b) with respect to the Class B Final Scheduled Payment Date, the then outstanding Class B Note Balance. "Contract Scheduled Payment" means, for any Collection Period for any Receivable, the amount indicated in the Receivable as required to be paid by the Obligor in the relevant Collection Period, without giving effect to deferments of payments granted to Obligors by the Servicer pursuant to the Sale and Servicing Agreement or any rescheduling of payments in an insolvency or similar proceeding. "Defaulted Receivable" means any Receivable with respect to which any of the following shall have occurred: o for which the related Financed Vehicle has been repossessed by the Servicer; o for which all or more than 10% of any payment is 120 days or more past due; or o a Contract with respect to which the Servicer has determined in good faith that all amounts expected to be recovered have been received. "Draw Date" means, with respect to any Payment Date the third business Day (as defined in the Policy) immediately preceeding the Payment Date. "Excess Overcollateralization Amount" means, with respect to any Payment Date, the excess, if any, of (1) the Class A Overcollateralization Amount calculated for this purpose only without deduction for any Excess Overcollateralization Amount (I.E., assuming that the entire amount described in clause (x) of the definition of "Principal Payment Amount" is distributed as principal on the Class A Notes) over (2) the Class A Target Overcollateralization Amount on the Payment Date. "Insurer Optional Deposit" means, with respect to any Payment Date, an amount delivered by the Insurer, at its sole option, other than amounts in respect of a Policy Claim Amount, for deposit into the Collection Account for any of the following purposes: (1) to provide funds in respect of the payment of fees or expenses of any provider of services to the Trust with respect to the Payment Date; or (2) to include this amount as part of the Additional Funds Available for the Payment Date to the extent that without this amount a draw would be required to be made on the Policy. "Liquidated Receivable" means any Receivable with respect to which any of the following shall have occurred with respect to any Collection Period: o the sale of the Financed Vehicle; o for which all or more than 10% of any Contract Scheduled Payment is 120 days or more past due, except in the case of repossessed Financed Vehicles, o the Servicer has determined in good faith that all amounts it expects to be recovered have been received, or o 90 days have elapsed since the Servicer repossessed the Financed Vehicle. "OC Stabilization Date" means the first Payment Date on which the Class A Overcollateralization Amount equals the Class A Target Overcollateralization Amount. "Policy Claim Amount" means, for any Payment Date, the excess, if any, of (1) the sum of the Class A Interest Payment Amount and the Class A Principal Payment Amount for the Payment Date over (2) the sum of (a) the amounts actually deposited into the Class A Note Distribution Account on the related Payment Date and (b) the Additional Funds Available to pay the Class A Interest Payment Amount or the Class A Principal Payment Amount if any, for the Payment Date. "Principal Balance" of a Receivable: o as of the Cutoff Date, means the Amount Financed minus (1) in the case of a Precomputed Receivable, that portion of all payments, including all Contract Scheduled Payments and any prepayments in full or partial prepayments, actually received on or prior to that date and allocable to principal in accordance with the actuarial method and (2) in the case of a Simple Interest Receivable, that portion of all payments, including all Contract Scheduled Payments and any prepayments in full or partial prepayments, actually received on or prior to that date and allocable to principal in accordance with the simple interest method, and o as of any date after the Cutoff Date, means the Principal Balance as of the Cutoff Date minus (1) in the case of a Precomputed Receivable, that portion of all payments, including all Contract Scheduled Payments and any prepayments in full or partial prepayments, actually received on or prior to that date, but after the Cutoff Date, and allocable to principal in accordance with the actuarial method, (2) in the case of a Simple Interest Receivable, that portion of all payments, including all Contract Scheduled Payments and any prepayments in full or partial prepayments, actually received on or prior to that date, but after the Cutoff Date, and allocable to principal in accordance with the simple interest method and (3) any Cram Down Loss in respect of the Receivable. The Principal Balance of a Liquidated Receivable for purposes other than the definition of Principal Payment Amount shall be equal to $0. "Principal Payment Amount" means the amount equal to the excess, if any, of (x) the sum of the following amounts, without duplication: o the principal portion of all Contract Scheduled Payments received during the Collection Period on Precomputed Receivables, calculated in accordance with the actuarial method, and all payments of principal received on Simple Interest Receivables, calculated in accordance with the simple interest method, during the Collection Period; o the principal portion of all prepayments received during the related Collection Period; o the portion of the Purchase Amount allocable to principal of each Receivable that became a Purchased Receivable as of the last day of the related Collection Period and, at the option of the Insurer, the Principal Balance of each Receivable that was required to be but was not so purchased or repurchased; o the Principal Balance of each Receivable that first became a Liquidated Receivable during the related Collection Period; and o the aggregate amount of Cram Down Losses with respect to the Receivables that have occurred during the related Collection Period, over (y) the Excess Overcollateralization Amount, if any, for the Payment Date. "Purchase Amount" means, with respect to a Receivable, the Principal Balance plus interest on the Principal Balance at the respective APR from the last day through which interest has been paid to the last day of the immediately preceding Collection Period if purchased prior to the Determination Date immediately following the end of the Collection Period, and otherwise through the last day of the month of repurchase. CALCULATION OF PAYMENT AMOUNTS. The Class A-1 Noteholders will be entitled to receive, to the extent funds are available, the Class A-1 Principal Payment Amount and the Class A-1 Interest Payment Amount with respect to each Payment Date. The Class A-2 Noteholders will be entitled to receive to the extent funds are available, the Class A-2 Principal Payment Amount and the Class A-2 Interest Payment Amount with respect to each Payment Date, subject to the priority of payments as described in "--Priority of Distribution Amounts". The "Class A-1 Note Balance" will initially represent $[ ], and afterward, an amount equal to the initial Class A-1 Note Balance reduced by all amounts distributed to the Noteholders that are allocable to principal. The "Class A-2 Note Balance" will initially represent $[ ], and afterward, an amount equal to the initial Class A-2 Note Balance reduced by all amounts distributed to the Class A-2 Noteholders that are allocable to principal. PRIORITY OF DISTRIBUTION AMOUNTS On each Payment Date, the Indenture Trustee will, based on the information contained in the Servicer's Certificate delivered on the related Determination Date, distribute the following amounts in the following order of priority: (1) first, from the Available Funds, to the Servicer, the Servicer Fee (as defined in this prospectus supplement) for the related Collection Period, and any Servicer Expenses for the related or any prior Collection Period and other amounts mistakenly deposited in the Collection Account belonging to the Servicer, if any, or otherwise required to be distributed to the Servicer in accordance with the Sale and Servicing Agreement; (2) second, from the remaining Available Funds, to the Lockbox Bank, the Indenture Trustee, the Owner Trustee and the Backup Servicer, any accrued and unpaid fees and in the case of the Backup Servicer, Servicer Transition Expenses, if any, up to an amount specified in the Sale and Servicing Agreement, in each case, to the extent the Person (as defined in this prospectus supplement) has not previously received this amount from the Servicer; (3) third, from the remaining Available Funds, pro rata in respect of the amounts due, (a) to the Class A-1 Noteholders, the Class A-1 Interest Payment Amount for the Payment Date and the Class A-1 Interest Carryover Shortfall, if any, and (b) to the Class A-2 Noteholders, the Class A-2 Interest Payment Amount for the Payment Date and the Class A-2 Interest Carryover Shortfall, if any; (4) fourth, from the remaining Available Funds, to the Class A-1 Noteholders, the Class A-1 Principal Payment Amount for the Payment Date, and the Class A-1 Principal Carryover Shortfall, if any; (5) fifth, from the remaining Available Funds, to the Class A-2 Noteholders, the Class A-2 Principal Payment Amount for the Payment Date, and the Class A-2 Principal Carryover Shortfall, if any; (6) sixth, from the remaining Available Funds, to the Insurer to the extent of any amounts owing the Insurer under the Insurance Agreement; (7) seventh, from the remaining Available Funds, to the Class A Reserve Account to the extent necessary to increase the amount on deposit tin this prospectus supplement to its then required level; (8) eighth, on or prior to the OC Stabilization Date, from the remaining Available Funds, and together with amounts, if any, available in accordance with the terms of the Class A Reserve Account Agreement, sequentially, to the Class A-1 Noteholders and to the Class A-2 Noteholders, as principal, until the Class A Target Overcollateralization Amount is achieved; (9) ninth, from the remaining Available Funds, to the Class B Noteholders, the Class B Interest Payment Amount for the Payment Date and the Class B Interest Carryover Shortfall, if any; (10) tenth, from the remaining Available Funds, and together with amounts, if any, available from the Class A Reserve Account in accordance with the terms of the Sale and Servicing Agreement, to the Class B Noteholders, the Class B Principal Payment Amount; and (11) eleventh, from the remaining Available Funds, to the Class A Reserve Account, or as otherwise specified in the Trust Documents, any remaining funds. PAYMENT DATE CALCULATIONS AND PAYMENTS In the event that any Servicer's Certificate delivered by the Servicer indicates that the Available Funds with respect to a Payment Date are insufficient to fund in full the related Scheduled Payments plus the amounts described in clauses (1), (2) and (6) above in "--Priority of Distribution Amounts", the Indenture Trustee shall request the Deficiency Claim Amount from the Class A Reserve Account, at the time required by and pursuant to, the Class A Reserve Account Agreement. Any funds received by the Indenture Trustee pursuant to this request will be deposited in the Collection Account and paid on the related Payment Date to the persons entitled to the funds, in the amounts described in clauses (1) through (6) of "--Priority of Distributions" in accordance with the priority of payment. Further, in the event that any Servicer's Certificate delivered by the Servicer indicates that the sum of (1) the Available Funds with respect to a Payment Date, plus (2) any related Deficiency Claim Amount funds deposited in the Collection Account or otherwise received by the Indenture Trustee is insufficient to fund in full the related Scheduled Payments, the Indenture Trustee shall furnish to the Insurer no later than 12:00 noon New York City time on the related Draw Date a completed notice of claim in the amount of the Policy Claim Amount. Amounts paid by the Insurer pursuant to any notice of claim shall be deposited by the Insurer into the Note Distribution Account for payment to Noteholders on the Payment Date. STATEMENTS TO NOTEHOLDERS On each Payment Date, the Indenture Trustee must provide to each Class A Noteholder, the Insurer and the Rating Agencies a statement prepared by the Servicer based on the information in the related Servicer's Certificate, which statement sets forth the information required under the Sale and Servicing Agreement. Each statement will include the following information with respect to the Payment Date or the immediately preceding Collection Period, as applicable: (1) the amount of the payment allocable to interest with respect to the Class A-1 Notes, the Class A-2 Notes and the Class B Notes, as applicable; (2) the amount of the payment allocable to principal on or with respect to the Class A-1 Notes, the Class A-2 Notes and the Class B Notes; (3) the amount of the payment pursuant to a claim on the Policy; (4) the amount of fees paid by the Trust with respect to the related Collection Period, including any Servicer Fee and Servicer Expenses; (5) the Class A-1 Note Balance, the Class A-2 Note Balance and the Class B Note Balance; (6) the Class A-1 Interest Carryover Shortfall, the Class A-2 Interest Carryover Shortfall and the Class B Interest Carryover Shortfall, if any, and the Class A-1 Principal Carryover Shortfall, the Class A-2 Principal Carryover Shortfall and the Class B Principal Carryover Shortfall, if any; (7) the Class A-1 Note Factor, the Class A-2 Note Factor and the Class B Note Factor; (8) for each date during the Pre-Funding Period, the remaining Pre-Funded Amount, the amount in the Pre-Funding Account and the amount remaining the Capitalized Interest Account; (9) the number of Receivables and the aggregate Principal Balance due of the Receivables, for which the related Obligors are delinquent in making Contract Scheduled Payments (A) between 31 and 60 days, (B) between 61 and 90 Days, (C) between 91 and 120 days and (D) more than 120 days; (10) the number of Receivables which became Liquidated Receivables, and the aggregate principal amount of the Receivables which became Liquidated Receivables net of Recoveries; (11) the number of Receivables which became Defaulted Receivables, and the aggregate principal amount of these Receivables; (12) the number and the aggregate Purchase Amount of Receivables that became Purchased Receivables during the related Collection Period and the number and aggregate Purchase Amount of Receivables that were required to be repurchased during the related Collection Period but were not so repurchased; (13) the Principal Balance, APR and model year of each Receivable that was replaced and the Principal Balance, APR and model year of the corresponding Replacement Receivable; (14) the number and the aggregate Principal Balance of Receivables with respect to which, to the knowledge of the Servicer, Obligors became the subject of bankruptcy proceedings during the Collection Period, or during a prior Collection Period, if the Servicer first became aware of the proceeding during the current Collection Period; (15) the amount of any Deficiency Claim Amounts deposited in the Collection Account from the Class A Reserve Account; (16) the Class A Overcollateralization Amount and the Class A Target Overcollateralization Amount; and (17) the beginning balance, amount of claims paid, amount of deposits made, and ending balance of the applicable collateral self-insurance fund, if any. Each amount set forth pursuant to subclauses (1), (2) and (5) will be expressed as a dollar amount per $1,000 of the initial principal amount of a Note. Unless and until Definitive Notes are issued, the reports will be sent on behalf of the Trust to Cede & Co., as registered holder of the Class A Notes and the nominee of DTC. See "Reports to Securityholders" and "Description of the Notes" in the prospectus. Within the required period of time after the end of each calendar year, the Indenture Trustee will furnish to each person who at any time during the calendar year was a Noteholder, a statement as to the aggregate amounts of interest and principal paid to that Noteholder and any other information as the Servicer deems necessary to enable the Noteholder to prepare its tax returns. See "Certain Federal Income Tax Consequences." CREDIT SUPPORT The Class A Overcollaterization Amount and the Class A Reserve Account (a funded cash reserve account (the "Class A Reserve Account")), result in credit support for the Class A Notes. This credit support is required to be increased to, and subsequently maintained at, a level established by the Insurer. This level changes over time. The Insurer may permit the required level of credit support provided by the Class A Reserve Account and the Class A Overcollateralization Amount to be reduced, or "step down", over time without the consent of Noteholders. OVERCOLLATERIZATION. Overcollaterization for the Class A Notes is created as a result of the application of "excess interest" and "excess principal" to the payment of principal on the Class A Notes. The "excess interest" is interest which is collected on the Receivables in excess of the amount of interest that is paid on the Class A Notes, used to pay specific fees, or, under some circumstances, deposited to the Class A Reserve Account. This application of excess interest results in the outstanding principal balance of the Class A Notes amortizing more quickly than the Pool Balance. The "excess principal" is the principal allocated to the Class A Notes which is in excess of the principal the Class A Notes would receive if the principal collected on the Receivables were distributed pro rata to the Class A Notes and Class B Notes based on their relative outstanding principal balances. This application of the "excess principal" results in the outstanding principal balance on the Class A Notes amortizing more quickly than the Aggregate Principal Balance on a percentage basis. If the Insurer permits the required level of overcollaterization to step down, principal collections which would otherwise be paid through to the Class A Noteholders as part of the Class A Principal Payment Amount may be instead released to the Class B Noteholders or the Certificateholder. SUBORDINATION. As of the Closing Date, the principal balance of the Class B Notes equals ____% of the Note Balance. The transaction is structured so that until the OC Stabilization Date, the Class B Note Balance will grow as a percentage of the Note Balance. The Class B Notes are subordinated in right of payment to the payment of the Class A Notes. No payments of principal will be made to the Class B Notes until the OC Stabilization Date. Payment of interest on the Class B Notes is subordinated to payment of interest and principal on the Class A Notes, the funding of the Class A Reserve Account and, until the OC Stabilization Date, the payment of excess interest as additional principal to the Class A Notes. If there are losses on the Receivables, those losses will be borne entirely by the Certificateholder and by the Class B Notes before there are any losses on the Class A Notes. CLASS A RESERVE ACCOUNT. The Class A Reserve Account will be funded with an initial cash deposit on the Closing Date. On each subsequent Payment Date, the Indenture Trustee will be required to deposit additional amounts into the Class A Reserve Account from payments on the Receivables as described under "The Notes--Priority of Distribution Amounts" above to the extent that the balance on deposit tin this prospectus supplement is below the then required level. Amounts, if any, on deposit in the Class A Reserve Account on a Payment Date will be available to the extent provided in the Class A Reserve Account Agreement to fund any Deficiency Claim Amount with respect to the Payment Date. Amounts on deposit in the Class A Reserve Account on any Payment Date on or prior to the OC Stabilization Date, after giving effect to all distributions made on the Payment Date, in excess of the specified Class A Reserve Account Requirements for the Payment Date shall be distributed to Class A Noteholders as a prepayment of principal on the Class A Notes. On any Payment Date after the OC Stabilization Date, the excess funds may be released to the Class B Noteholders or the Certificateholder without the consent of the Class A Noteholders. In addition, the Certificateholder, the Insurer and the Collateral Agent under the Class A Reserve Account Agreement may amend the Class A Reserve Account Agreement, and any provisions in the Insurance Agreement relating to the Class A Reserve Account, in any respect, including, without limitation, reducing or eliminating the funding requirements of the Class A Reserve Account or permitting these funds to be used for the benefit of persons other than Class A Noteholders, without the consent of, or notice to, the Trustee, the Owner Trustee or the Noteholders. The Collateral Agent shall not withhold or delay its consent with respect to any amendment that does not adversely affect the Collateral Agent in its individual capacity. Notwithstanding any reduction in or elimination of the funding requirements of the Class A Reserve Account or the depletion of the Class A Reserve Account, the Insurer will be obligated on each Payment Date to fund the full amount of each Scheduled Payment required to be paid by the Payment Date, and which would not be in the absence of a payment under the Policy. If the Insurer breaches its obligations, any losses on the Receivables will be borne first by the Class B Noteholders and then by the Noteholders. THE INDENTURE THE INDENTURE TRUSTEE. [ ] is the Indenture Trustee under the Indenture. For the purpose of meeting the legal requirements of some jurisdictions, the Indenture Trustee may appoint co-trustees or separate trustees of all or any part of the trust estate and confer upon this party any powers, duties, obligations, rights and trusts as the Indenture Trustee deems necessary, or desirable. In the event of an appointment, all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee by the Indenture will be conferred or imposed upon the Indenture Trustee and the separate trustee or co-trustee jointly, or, in any jurisdiction in which the Indenture Trustee shall be incompetent or unqualified to perform particular acts, singly upon the separate trustee or co-trustee who will exercise and perform these rights, powers, duties, and obligations solely at the direction of the Indenture Trustee. The Indenture Trustee may resign at any time after 60 days' written notice to the Issuer, the Insurer and Noteholders in which event the Controlling Party will be obligated to appoint a successor trustee. The Controlling Party may remove the Indenture Trustee if, among other reasons, the Indenture Trustee ceases to be eligible to continue as the Indenture Trustee under the Indenture, becomes legally unable to act or becomes insolvent. In these circumstances, the Controlling Party will be obligated to appoint a successor trustee. Any resignation or removal of the Indenture Trustee and appointment of a successor trustee will not become effective until acceptance of the appointment of a successor trustee. The Sale and Servicing Agreement will provide that the Indenture Trustee will be entitled to indemnification by the Servicer for, and will be held harmless against, any loss, liability, fee, disbursement or expense incurred by the Indenture Trustee not resulting from the Indenture Trustee's own willful misfeasance, bad faith or negligence and other than by reason of a breach of any of the Indenture Trustee's representations or warranties set forth in the Sale and Servicing Agreement. The Sale and Servicing Agreement will further provide that the Servicer will indemnify the Indenture Trustee for some of the taxes that may be asserted in connection with the transaction. The Indenture Trustee makes no representations as to the validity or sufficiency of the Sale and Servicing Agreement, the Notes, other than the authentication of the Notes, or any Receivables or the Related Documents and is not accountable for the use or application by the Seller or the Servicer of any funds paid to the Seller or the Servicer in respect of the Notes or the Receivables, or the investment of any monies received by the Servicer before the monies are deposited in the Collection Account. The Indenture Trustee has not independently verified the Receivables. The Indenture Trustee is required to perform only those duties specifically required of it under the Sale and Servicing Agreement and the Indenture. The Indenture Trustee shall determine whether the certificates, reports or other instruments required to be furnished to the Indenture Trustee under the Sale and Servicing Agreement and the Indenture conform to the requirements of the Sale and Servicing Agreement and the Indenture, respectively. MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT. The Trust and Indenture Trustee may, with the prior written consent of the Insurer, prior to the occurrence and continuance of an Insurer Default, but without consent of the Noteholders, enter into one or more supplemental indentures for any of the following purposes: o to correct or amplify the description of the property subject to the lien of the Indenture or add additional property to it; o to evidence the succession of another Person to the Trust and the assumption by the successor of the covenants of the Trust; o to add additional covenants for the benefit of the Noteholders or to surrender any right or power conferred on the Trust; o to convey, transfer, assign, mortgage or pledge any additional property to or with the Indenture Trustee; o to cure any ambiguity, or to correct or supplement any provision in the Indenture or in any supplemental indenture that may be inconsistent with any other provision of the Indenture or any supplemental indenture; o to add to or change any of the provisions of the Indenture as shall be necessary and permitted to facilitate the administration by more than one trustee; and o to add any provisions to, change in any manner or eliminate any of the provisions of the Indenture or modify in any manner the rights of Noteholders under the Indenture; provided that any action must not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of any Noteholder. MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT. With the prior written consent of the Insurer, prior to the occurrence and continuance of an Insurer Default, and the Note Majority, the Trust and the Indenture Trustee may execute one or more supplemental indentures to add, change or eliminate any other provisions of the Indenture, modify in any manner the rights of the Noteholders or provide for the acceptance of the appointment of a successor Indenture Trustee. Without the prior written consent of the Insurer, prior to the occurrence and continuance of an Insurer Default, and the Holder of each outstanding related Note affected, however, no supplemental indenture will: o change the due date of any installment of principal of or interest on any Note or reduce the principal amount of any Note, the interest rate on the Note or the redemption price with respect to the Note, change the provisions of the Indenture relating to the application of collections on, or the proceeds of the sale of, the collateral to the payment of principal of or interest on the Notes, change any place of payment where or the coin or currency in which any Note or any interest on the Note is payable; o impair the right to institute suit for the enforcement of particular provisions of the Indenture regarding payment; o reduce the percentage of the aggregate amount of the outstanding Notes the consent of the Holders of which is required for any supplemental indenture or the consent of the Holders of which is required for any waiver of compliance with particular provisions of the Indenture or of some of the defaults under the Indenture and their consequences as provided for in the Indenture; o modify or alter the provisions of the Indenture regarding particular aspects of what constitutes an "Outstanding" Note; o reduce the percentage of the aggregate outstanding amount of the Notes the consent of the Holders of which is required to direct the Indenture Trustee to sell or liquidate the Receivables if the proceeds of the sale would be insufficient to pay the principal amount and accrued but unpaid interest on the outstanding Notes; o modify the provision of the Indenture requiring consent of Noteholders except to increase the percentage of the aggregate principal amount of the Notes required to amend the sections of the Indenture or to provide additional provisions requiring the consent of each Noteholder prior to modification or waiver; o modify any of the provisions of the Indenture affecting the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date; o permit the creation of any lien ranking prior to or on a parity with the lien of the Indenture with respect to any of the collateral for the Notes or, except as otherwise permitted or contemplated in the Indenture, terminate the lien of the Indenture on any collateral or deprive the Holder of any Note of the security afforded by the lien of the Indenture; or o become effective if the Rating Agency Condition has not been satisfied with respect to it. EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. Unless an Insurer Default shall have occurred and be continuing, "Events of Default" under the Indenture will consist of those events defined in the Insurance Agreement as Insurance Agreement Indenture Cross Defaults, and will constitute an Event of Default under the Indenture only if the Insurer shall have delivered to the Indenture Trustee, and not rescinded, a written notice specifying that any Insurance Agreement Indenture Cross Default constitutes an Event of Default under the Indenture. "Insurance Agreement Indenture Cross Defaults" consist of: (1) any payment being made under the Policy; (2) some events of bankruptcy, insolvency, receivership or liquidation of the Trust, the Seller or the Certificateholder; (3) the Trust becoming taxable as an association, or publicly traded partnership, taxable as a corporation for federal or state income tax purposes; (4) the Class A Notes not being treated as indebtedness for federal or applicable state income tax purposes and the characterization's having a material adverse effect on the Trust and the Noteholders or the Insurer; (5) the sum of the Available Funds with respect to any Payment Date plus the amount, if any, available from particular collateral accounts maintained for the benefit of the Insurer is less than the sum of the amounts described in clauses (1)-(6) under "The Notes--Priority of Distribution Amounts" in this prospectus supplement; and (6) any failure to perform in any material respect any other covenants or agreements in the Indenture, or any representation or warranty of the Trust made in the Indenture or in any certificate or other writing delivered pursuant to the Indenture or in connection with the Indenture proving to have been incorrect in any material respect when made, and the failure continuing or not being cured, or the circumstances or condition in respect of which the misrepresentation or warranty was incorrect not having been eliminated or otherwise cured, for 30 days after the giving of written notice of the failure or incorrect representation or warranty to the Trust and the Indenture Trustee by the Insurer. Upon the occurrence of an Event of Default, so long as an Insurer Default shall not have occurred and be continuing, the Insurer will have the right, but not the obligation, to cause the Indenture Trustee to liquidate the Trust Property in whole or in part, on any date or dates following the acceleration of the Class A Notes due to the Event of Default as the Insurer, in its sole discretion, shall elect, and to deliver the proceeds of the liquidation to the Indenture Trustee for distribution to the Class A-1 Noteholders and Class A-2 Noteholders on a pro rata basis based on the Class A-1 Note Balance and the Class A-2 Note Balance then outstanding, in accordance with the terms of the Indenture. The Insurer may not, however, cause the Indenture Trustee to liquidate the Trust Property in whole or in part if the proceeds of the liquidation would not be sufficient to pay all outstanding principal of and accrued interest on the Notes, unless the Event of Default arose from an event specified in (1), (2), (3), or (4) in the immediately preceding paragraph. Following the occurrence of any Event of Default, the Indenture Trustee will continue to submit claims under the Policy for any shortfalls in the Scheduled Payments on the Class A Notes in accordance with the terms of the Policy. Following any Event of Default under the Indenture, the Insurer, in its sole discretion, may elect to pay all or any portion of the outstanding amount of the Class A Notes, plus accrued interest on the Class A Notes. See "The Policy" in this prospectus supplement. If an Insurer Default has occurred and is continuing, "Events of Default" under the Indenture will consist of the Events of Default described in the accompanying prospectus under "Description of the Notes--Provisions of the Indenture" and "--Events of Default; Rights Upon Events of Default"; and the Indenture Trustee and the Noteholders have the rights under the Indenture described tin this prospectus supplement. NOTE FACTORS; STATEMENT TO NOTEHOLDERS; SERVICER REPORTS TO THE INDENTURE TRUSTEE The "Class A-1 Note Factor" will be a seven-digit decimal number that the Servicer will compute each month indicating the Class A-1 Note Balance as of the close of business on the last day of the related Collection Period in that month as a fraction of the respective original outstanding principal balance of the Class A-1 Notes. The Class A-1 Note Factor will be 1.0000000 as of the Cutoff Date; and afterward, the Class A-1 Note Factor will decline to reflect reductions in the Class A-1 Note Balance as a result of scheduled payments collected, partial prepayments, prepayments and liquidations of the Receivables. The amount of a Class A-1 Noteholder's pro rata share of the Class A-1 Note Balance can be determined on any date by multiplying the original denomination of the Holder's Note by the Class A-1 Note Factor as of the close of business on the most recent Payment Date. The "Class A-2 Note Factor" will be a seven-digit decimal number that the Servicer will compute each month indicating the Class A-2 Note Balance as of the close of business on the last day of the related Collection Period in that month as a fraction of the respective original outstanding principal balance of the Class A-2 Notes. The Class A-2 Note Factor will be 1.0000000 as of the Cutoff Date; and afterward, the Class A-2 Note Factor will decline to reflect reductions in the Class A-2 Note Balance as a result of scheduled payments collected, partial prepayments, prepayments and liquidations of the Receivables. The amount of a Class A-2 Noteholder's pro rata share of the Class A-2 Note Balance can be determined on any date by multiplying the original denomination of the Holder's Note by the Class A-2 Note Factor as of the close of business on the most recent Payment Date. Under the Sale and Servicing Agreement, the Servicer will perform some monitoring and reporting functions for the Trust, including the preparation and delivery of the Servicer's Certificate on each Determination Date to the Indenture Trustee, the Backup Servicer, the Insurer, and the Rating Agencies setting forth specified information with respect to the preceding Collection Period. Within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of the Sale and Servicing Agreement, the Indenture Trustee will be required to mail to each person who at any time during the relevant calendar year will have been a Noteholder, a statement containing information related to the Noteholder's preparation of federal income tax returns. DESCRIPTION OF THE TRANSACTION DOCUMENTS The following summary describes some of the terms of the Transaction Documents. Forms of the Transaction Documents have been filed as exhibits to the Registration Statement. This summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions in the Transaction Documents. The following summary supplements the description of the general terms and provisions of the Transfer and Servicing Agreements (as this term is used in the prospectus) set forth in the prospectus, to which description reference is made by this prospectus supplement. SALE AND ASSIGNMENT OF RECEIVABLES Some information with respect to the sale of the Receivables by the Seller and the Company is set forth under "Description of the Transfer and Servicing Agreements--Sale and Assignment of Primary Assets" in the prospectus. See also "The Receivables" in this prospectus supplement and "The Receivables Pools" in the prospectus for additional information regarding the Receivables and some of the obligations of the Seller and the Servicer with respect to the Receivables. At the time of issuance of the Notes, the Seller will sell and assign to the Company, the Seller's entire interest in the Receivables, including its security interests in the Financed Vehicles, and the Company will sell and assign to the Trust the Company's entire interest in the Receivables, including the security interests in the Financed Vehicles. On or before the Closing Date, the Trust will pledge the Receivables to the Indenture Trustee for the benefit of the Noteholders and the Insurer pursuant to the Indenture. Each Receivable will be identified in a schedule to the Sale and Servicing Agreement. The Indenture Trustee will, concurrently with the pledge, authenticate and deliver the Notes, which have been executed on behalf of the Trust. Any conveyance of Subsequent Receivables is subject to the satisfaction, on or before the related Subsequent Transfer Date, of the following conditions, among others: (1) each Subsequent Receivable satisfies the eligibility criteria specified in the Sale and Servicing Agreement; (2) the Insurer, so long as no Insurer Default shall have occurred and be continuing, shall in its absolute and sole discretion have approved the transfer of the Subsequent Receivables to the Trust; (3) the Seller will not have selected the Subsequent Receivable in a manner that it believes is adverse to the interests of the Noteholders or the Insurer; (4) as of each applicable Subsequent Cutoff Date, the Receivables in the Trust together with the Subsequent Receivables to be conveyed by the Seller as of the Subsequent Cutoff Date, meet the following criteria, computed based on the characteristics of the Initial Receivables on the Initial Cutoff Date and any Subsequent Receivables on the related Subsequent Cutoff Date: (a) the weighted average APR of the Receivables will not be less than one percent less than the weighted average APR of the Initial Receivables on the Initial Cutoff Date; (b) the remaining term of the Receivables will not be greater than 72 months nor less than [ ] months; (c) not more than [ ]% of the Principal Balances of the Receivables will be attributable to Loans for the purchase of used Financed Vehicles; (d) the APR is not less than [ ]% nor more than [ ]%; and (e) no vehicle is older than a [ ] model year, and the Trust, the Indenture Trustee, the Owner Trustee (f) and the Insurer shall have received written confirmation from a firm of certified independent public accountants as to the satisfaction of the criteria in clauses (a) through (e) above; (5) the Seller shall have executed and delivered to the Trust, with a copy to the Indenture Trustee, a Subsequent Transfer Agreement conveying the Subsequent Receivable to the Trust, including a schedule identifying the Subsequent Receivables; (6) the Seller shall have delivered certain opinions of counsel to the Indenture Trustee, the Insurer, the Owner Trustee and the Rating Agencies with respect to the validity of the conveyance of the Subsequent Receivables; and (7) the Rating Agencies shall have each notified the Seller, the Owner Trustee, the Indenture Trustee and the Insurer in writing that, following the addition of all of the Subsequent Receivables, each of the Class A-1 Notes and the Class A-2 Notes will be rated [ ] by [ ] and [ ] by [ ]. Pursuant to the Receivables Purchase Agreement and the Sale and Servicing Agreement, the Seller will represent and warrant that, among other things: o as of each Cutoff Date, the information provided in the schedule to the Sale and Servicing Agreement with respect to the Receivables is correct in all material respects; o at the date of issuance of the Notes and any Subsequent Transfer Date, the Receivables are free and clear of all liens or claims and no right of setoff, counterclaim or rescission has been asserted or, to the best of its knowledge, threatened with respect to the Receivables; o at the date of issuance of the Notes and any Subsequent Transfer Date, each of the Receivables is secured by, or will be when all necessary steps have been taken to result in, a first priority perfected security interest in the Financed Vehicle in favor of the Seller and this security interest has been validly assigned to the Seller, the Trust and the Indenture Trustee; and o each Receivable, at the time it was originated, complied, and at the date of issuance of the Notes and any Subsequent Transfer Data, complies in all material respects with applicable federal, state and local laws, including consumer credit, truth in lending, equal credit opportunity and disclosure laws. Pursuant to the Receivables Purchase Agreement and the Sale and Servicing Agreement, the Seller will be obligated to repurchase or replace subject to limits on replacement set forth in the Sale and Servicing Agreement a Receivable from the Trust, if the interests of the Noteholders, the Insurer or the Trust in the Receivable are materially adversely affected by a breach of any representation or warranty made by the Seller, with respect to the Receivable, if the breach has not been cured following discovery by or notice to the Seller of the breach. Pursuant to the Sale and Servicing Agreement, the Servicer will be obligated to purchase or replace a Receivable from the Trust if the interests of the Noteholders, the Insurer or the Trust in the Receivables are materially adversely affected by a breach of some of its servicing obligations under the Sale and Servicing Agreement, including its obligation to maintain perfection of the first priority security interest created by each Receivable in the related Financed Vehicle or other covenants with respect to the Servicer, if the breach has not been cured following the discovery or notice to the Servicer of the breach. Each Receivable will be purchased from the Trust or replaced by the Seller or the Servicer, as the case may be, at a price equal to the Purchase Amount. The purchase or replacement obligations will constitute the sole remedy available to the Noteholders or the Indenture Trustee for any uncured breaches. Pursuant to the Sale and Servicing Agreement, the Servicer will service and administer the Receivables. The documents evidencing the Initial Receivables and Subsequent Receivables will be delivered to the Indenture Trustee on the Closing Date and Subsequent Transfer Date. In addition, the Seller's accounting records and computer systems will be marked to reflect the sale and assignment, and UCC financing statements reflecting the sale and assignment will be filed. See "Certain Legal Aspects of the Receivables--Security Interests in Financed Vehicles" in the accompanying prospectus. ACCOUNTS Each Obligor has been instructed to make payments with respect to the Receivables after the applicable Cutoff Date to a Lockbox which has been established and will be maintained by [ ] (the "Lockbox Bank"). Upon receipt of payments in the Lockbox, the Lockbox Bank will deposit funds into an account maintained by the Lockbox Bank at a depository institution (the "Lockbox Account") acceptable to the Insurer. The Indenture Trustee will establish the Collection Account (the "Collection Account") in the name of the Indenture Trustee for the benefit of the Noteholders and the Insurer. All payments made on or with respect to the Receivables previously deposited in the Lockbox Account will be transferred to the Collection Account within two Business Days of the receipt of available funds tin this prospectus supplement. Upon receipt, but in no event later than two Business Days after the receipt of amounts in respect of Receivables, each of the Servicer and the Seller will remit all amounts received by it in respect of the Receivables in the form of checks with payment coupons directly to the Lockbox. Other payments received by each of the Servicer and the Seller will be deposited into a local servicing account for processing, and then transferred to the Collection Account within two Business Days of the receipt of available funds tin this prospectus supplement. The Collection Account will be maintained with the Indenture Trustee as long as the Indenture Trustee's deposits have a rating acceptable to the Insurer and the Rating Agencies. If the deposits of the Indenture Trustee no longer have an acceptable rating, the Indenture Trustee shall cause the accounts to be moved to a bank or trust company having acceptable ratings. The Indenture Trustee will also establish and maintain an account, in its name, on behalf of Noteholders and the Insurer, in which amounts released from the Collection Account for distribution to Noteholders will be deposited and from which all distributions to Noteholders will be made (the "Note Distribution Account"). On the Closing Date, a cash amount equal to approximately $[ ] (the "Initial Pre-Funded Amount") will be deposited in an account (the "Pre-Funding Account") which will be established with the Indenture Trustee. The "Funding Period" is the period from the Closing Date until the earliest of the date on which: (1) the amount on deposit in the Pre-Funding Account is less than $100,000, (2) a Servicer Termination Event occurs under the Sale and Servicing Agreement or an Insurance Agreement Event of Default occurs, or (3) the Payment Date in [ ]. The Initial Pre-Funded Amount, as reduced from time to time during the Funding Period by the amount used to purchase Subsequent Receivables in accordance with the Sale and Servicing Agreement, is referred to in this prospectus supplement as the "Pre-Funded Amount." The Seller expects that the Pre-Funded Amount will be reduced to less than $100,000 on or before the Payment Date in [ ]. Any Pre-Funded Amount remaining at the end of the Funding Period will be payable to the Noteholders as described in this prospectus supplement. The "Mandatory Redemption Date" is the earlier of (1) the Payment Date in [ ] and (2) if the last day of the Funding Period occurs on or prior to the Determination Date in [ ], then the [ ] Payment Date. On the Closing Date, a cash amount shall be deposited in an account (the "Capitalized Interest Account") which will be established with the Indenture Trustee. The amount, if any, deposited in the Capitalized Interest Account will be applied on the Payment Dates occurring in [ ], [ ] and [ ], and to fund an amount (the "Monthly Capitalized Interest Amount") equal to the amount of interest accrued for each Payment Date at the excess of (1) the weighted average interest rate on the Class A Notes over (2) [ ]%, on the portion of the Class A Notes having a principal balance in excess of the Aggregate Principal Balances of the Receivables. Any amounts remaining in the Capitalized Interest Account on the Mandatory Redemption Date and not used for these purposes are required to be paid to the Class A Noteholders on the relevant date. See "Description of the Transaction Documents--Accounts." All of these Accounts shall be Eligible Deposit Accounts (as defined in the prospectus) acceptable to the Insurer, so long as no Insurer Default has occurred and is continuing. Consistent with the Sale and Servicing Agreement and its normal collection practices and procedures, the Servicer may, in its discretion, arrange with the Obligor on a Receivable to extend or modify the payment schedule, subject to particular limitations. No extension or modification in accordance with the Sale and Servicing Agreement will result in a repurchase obligation for the Servicer. SERVICING PROCEDURES The Servicer will make all reasonable efforts to collect all payments due with respect to the Receivables and will continue these collection procedures as it follows with respect to all comparable motor vehicle receivables that it services for itself or others, in a manner consistent with the Sale and Servicing Agreement. If the Servicer determines that eventual payment in full of a Receivable is unlikely, the Servicer will follow its normal collection practices and procedures, including the repossession and disposition of the Financed Vehicle securing the Receivable at a public or private auction, or the taking of any other action permitted by applicable law. The Servicer will not be required under the Sale and Servicing Agreement to make any advances of principal or interest due on any Receivable. COLLECTIONS The Servicer or the Seller, as the case may be, will remit or cause to be remitted the aggregate Purchase Amount of any Receivables required to be purchased by it from the Trust to the Collection Account. Under the Sale and Servicing Agreement, the amounts of any recoveries in respect of any Receivables repurchased by Dealers pursuant to any Dealer Recourse constitute collections on the Receivables. For purposes of the Sale and Servicing Agreement, collections on a Receivable, other than a Receivable purchased by the Servicer or the Seller, which are not late fees or other administrative fees and expenses collected during a Collection Period are required to be applied first to the Contract Scheduled Payment. To the extent that the collections on a Receivable during a Collection Period exceed the Contract Scheduled Payment on the Receivable, the collections are required to be applied to prepay the Receivable in full. If the collections are insufficient to prepay the Receivable in full, any partial prepayment of principal during a Collection Period will be immediately applied to reduce the principal balance of the Receivable during that Collection Period. SERVICING COMPENSATION The Servicer is entitled under the Sale and Servicing Agreement to receive on each Payment Date a fee (the "Servicer Fee") equal to the sum of (a) the product of one-twelfth and [ ]% (the "Servicing Fee Rate") and the Principal Balance outstanding at the beginning of the calendar month immediately preceding the month in which the Payment Date occurs and (b) any late fees. If the Backup Servicer, or any other entity becomes the successor Servicer, it will receive compensation at the Servicing Fee Rate. The Servicer will also be reimbursed for particular expenses related to the repossession of Financed Vehicles (the "Servicer Expenses"). The Servicer Fee and Servicer Expenses will be paid out of collections from the Receivables pursuant to the distribution described under "The Notes--Priority of Distribution Amounts". The Servicer Fee and the Servicer Expenses will compensate the Servicer for performing the functions of a third-party servicer of the Receivables as an agent for the Trust, including collecting and posting all payments, responding to inquiries of Obligors on the Receivables, investigating delinquencies, reporting any required tax information to Obligors, paying costs of collections and monitoring the collateral. In addition, the Servicer Fee will (a) compensate the Servicer for administering the Receivables, including accounting for collections, furnishing monthly and annual statements with respect to payments and generating federal income tax information, if any, and (b) reimburse the Servicer for some of the taxes, independent accountants' fees and other costs incurred in connection with administering the Receivables. BACKUP SERVICING AND BACKUP SERVICING COMPENSATION Pursuant to the Sale and Servicing Agreement, [ ] will perform particular duties as the Backup Servicer. In addition, following the resignation or removal of the Servicer, the Backup Servicer has agreed to serve as the successor Servicer under the Sale and Servicing Agreement. The Backup Servicer will be required to carry out its duties in accordance with the customary and usual procedures of institutions which perform similar functions. On each Payment Date, the Backup Servicer will be entitled to receive a fee for acting as Backup Servicer (the "Backup Servicer Fee") equal to one-twelfth the product of [ ] basis points and the outstanding Note Balance. In addition, following the resignation or removal of the Servicer, the Backup Servicer will be reimbursed for particular costs and expenses associated with the transition of the Backup Servicer to Servicer (the "Servicer Transition Expenses"). The Sale and Servicing Agreement will provide that the Backup Servicer may not resign from its obligations and duties as Backup Servicer under the Sale and Servicing Agreement, except upon determination that, by reason of a change in legal requirements, the Backup Servicer's performance of these duties would be in violation of particular legal requirements and the Controlling Party does not elect to waive the obligations of the Backup Servicer to perform the duties that render it legally unable to act or to delegate those duties to another Person. No resignation will become effective until a successor backup servicer has assumed the Backup Servicer's servicing obligations and duties under the Sale and Servicing Agreement. Notwithstanding the foregoing, the Backup Servicer may resign for any reason, provided an entity acceptable to the Controlling Party has assumed the Backup Servicer's obligations and duties under the Sale and Servicing Agreement prior to the effectiveness of any resignation and the Rating Agency Condition is also satisfied with respect to the resignation and assumption of the Backup Servicer's obligations. EVIDENCE AS TO COMPLIANCE The Sale and Servicing Agreement will provide that the Servicer will cause a firm of nationally recognized independent certified public accountants to deliver to the Servicer, on or before [ ] of each year, commencing [ ], a statement to the effect that the firm has audited the books and records of the Servicer and issued its report on the books and records from the fiscal year ended on the immediately preceding [ ]. The Servicer will deliver a copy of the report to the Indenture Trustee, the Insurer, the Backup Servicer and the Rating Agencies. The Sale and Servicing Agreement will also provide for delivery to the Indenture Trustee, the Insurer, the Backup Servicer and the Rating Agencies, on or before [ ] of each year, commencing [ ], of a certificate signed by an officer of the Servicer stating that, to the officer's knowledge, the Servicer has fulfilled its obligations under the Sale and Servicing Agreement throughout the preceding 12 months, or, for the initial report, for a longer period as will have elapsed from the date of issuance of the Notes, or, if there has been a default in the fulfillment of any obligation, describing each default. A copy of the certificate may be obtained by any Noteholder by a request in writing to the Indenture Trustee addressed to the Corporate Trust Office. CERTAIN MATTERS REGARDING THE SERVICER The Sale and Servicing Agreement will provide that the Servicer may not resign from its obligations and duties as Servicer under the Sale and Servicing Agreement, except (1) upon determination that, by reason of a change in legal requirements, the Servicer's performance of these duties would be in violation of particular legal requirements and (2) the Insurer, or, if an Insurer Default has occurred and is continuing, a Note Majority, does not elect to waive the obligations of the Servicer to perform the duties that render it legally unable to act or to delegate those duties to another Person. No resignation will become effective until the Backup Servicer or a successor servicer has assumed the Servicer's servicing obligations and duties under the Sale and Servicing Agreement. The Sale and Servicing Agreement will further provide that neither the Servicer nor any of its stockholders, directors, officers, employees or agents, will be liable to the Trust or the Indenture Trustee for taking any action or for refraining from taking any action pursuant to the Sale and Servicing Agreement; provided, however, that neither the Servicer nor any Person will be protected against any liability that would otherwise be imposed by reason of the Servicer's material breach of the Sale and Servicing Agreement, willful misfeasance, bad faith or negligence, other than errors in judgment, in the performance of its duties. Subject to the provisions of the Sale and Servicing Agreement, any entity into which the Servicer may be merged or consolidated, resulting from any merger, conversion or consolidation to which the Servicer is a party, which acquires all or substantially all of the assets of the Servicer, or succeeding to the business of the Servicer, which in any case assumes the obligations of the Servicer, will be the successor of the Servicer, under the Sale and Servicing Agreement. The Servicer may at any time perform specific duties as Servicer through other subcontractors with the prior written consent of the Insurer. SERVICER TERMINATION EVENTS; RIGHTS UPON SERVICER TERMINATION EVENT A "Servicer Termination Event" under the Sale and Servicing Agreement will include: o the Servicer's failure to make deposits into the Collection Account or to deliver to the Indenture Trustee any proceeds or payments payable to the Noteholders or the Insurer required to be so deposited or delivered in accordance with the Sale and Servicing Agreement, which failure continues unremedied for a period of two Business Days, one Business Day with respect to payment of Purchase Amounts, after the earlier of (x) discovery of the failure by the Servicer and (y) notice of the failure is given by the Indenture Trustee to the Servicer; o the Servicer's failure or failures to satisfy any other covenant or agreement set forth in the Sale and Servicing Agreement, which failure or failures, individually or in the aggregate, materially and adversely affect the rights of Noteholders or the Insurer and remains uncured for a period of 60 days after the earlier of the date on which (a) it obtains actual knowledge of the failure or (b) it receives written notice of the failure from (1) the Insurer or the Indenture Trustee or (2) if an Insurer Default has occurred and is continuing, the Note Majority; o partiuclar events of insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings with respect to the Servicer indicating its insolvency; o so long as an Insurer Default shall not have occurred and be continuing, the Insurer shall not have delivered an extension notice, o so long as an Insurer Default shall not have occurred and be continuing, an Insurance Agreement Event of Default shall have occurred or an event of default under any other Insurance Agreement relating to any series of securities shall have occurred; o a claim is made under the Policy; or o any representation or warranty shall prove to be incorrect in any material respect and this incorrectness shall have a material adverse effect on the interest of the Trust, the Noteholders or the Insurer in the Receivables, which has not been cured within 30 days. "Insurer Default" shall mean the occurrence and continuance of any of the following events: (a) the Insurer shall have failed to make a payment required under the Policy in accordance with its terms; (b) the Insurer shall have o filed a petition or commenced any case or proceeding under any provision or chapter of the United States Bankruptcy Code or any similar federal or state law relating to the insolvency, bankruptcy, rehabilitation, liquidation or reorganization, o made a general assignment for the benefit of its creditors, or o had an order for relief entered against it under the United States Bankruptcy Code or any other similar federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization which is final and nonappealable; or (c) a court of competent jurisdiction, the New York Department of Justice or other competent regulatory authority shall have entered a final and nonappealable order, judgment or decree (1) appointing a custodian, trustee, agent or receiver for the Insurer or for all or any material portion of its property or (2) authorizing the taking of possession by a custodian, trustee, agent or receiver of the Insurer, or the taking of possession of all or any material portion of the property of the Insurer. As long as a Servicer Termination Event under the Sale and Servicing Agreement remains unremedied, (x) provided that no Insurer Default shall have occurred and be continuing, the Insurer in its sole and absolute discretion, or (y) if an Insurer Default shall have occurred and be continuing, then the Note Majority may terminate all of the rights and obligations of the Servicer under the Sale and Servicing Agreement. Upon termination, all authority, power, obligations and responsibilities of the Servicer under the Sale and Servicing Agreement, other than obligations and responsibilities arising prior to the termination, will automatically pass to the Backup Servicer, or other successor servicer appointed by the Insurer, provided that no Insurer Default shall have occurred and be continuing. WAIVER OF PAST DEFAULTS As set forth under "Certain Matters Regarding Servicer--Waiver of Past Defaults" in the prospectus, the Insurer may, so long as no Insurer Default shall have occurred and be continuing, on behalf of the Noteholders, waive any default by the Servicer in the performance of its obligations under the Sale and Servicing Agreement and its consequences. No waiver will impair the Noteholders' rights with respect to subsequent defaults. AMENDMENT The Sale and Servicing Agreement may be amended by the Issuer, the Seller, the Servicer, the Company, the Indenture Trustee and the Backup Servicer, with the prior written consent of the Insurer, so long as no Insurer Default has occurred and is continuing, but without the consent of any of the Certificateholders or the Noteholders, to cure any ambiguity, to correct or supplement any provision in this prospectus supplement or for the purpose of adding any provision to or changing in any manner or eliminating any provision of this prospectus supplement or modifying in any manner the rights of the Noteholders; PROVIDED, HOWEVER, that the action must not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of the Noteholders. The Seller, the Issuer, the Servicer, the Company, the Backup Servicer and the Indenture Trustee may also amend the Sale and Servicing Agreement with the prior written consent of the Insurer, so long as no Insurer Default has occurred and is continuing, and a Note Majority to add, change or eliminate any provisions of the Sale and Servicing Agreement or to modify the rights of the Noteholders; provided, however, that the action will not: o increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that are required to be made for the benefit of the Noteholders or Certificateholders; o reduce the aforesaid percentage of the Noteholders or Certificateholders which is required to consent to any amendment, without, in either case, the consent of the Holders of all Notes and Certificates outstanding; PROVIDED, FURTHER, that if an Insurer Default has occurred and is continuing, the action shall not materially adversely affect the interest of the Insurer; or o result in a downgrade or withdrawal of the then current rating of the Notes by the Rating Agencies without the consent of each Noteholder. The above should in no way be construed to require the consent of the Noteholders or Certificateholders to a reduction in the Target Overcollateralization Amount or the required level of the Class A Reserve Account. LIST OF NOTEHOLDERS; VOTING OF NOTES Upon written request by three or more Noteholders or any one or more Noteholders with an aggregate principal balance evidencing not less than 25% of the Note Balance and upon compliance by these Noteholders with other provisions of the Sale and Servicing Agreement, the Indenture Trustee will afford the Noteholders, within five Business Days after receipt of the request, access during business hours to the current list of Noteholders for purposes of communicating with other Noteholders with respect to their rights under the Sale and Servicing Agreement and the Notes. If the Seller, the Seller or any of their affiliates owns any Notes, the Note will not have voting rights under the Sale and Servicing Agreement or the other Related Documents. The Sale and Servicing Agreement will not provide for the holding of any annual or other meetings of Noteholders. TERMINATION The respective obligations of the Issuer, the Seller, the Servicer, the Company, the Backup Servicer and the Indenture Trustee pursuant to the Sale and Servicing Agreement will terminate upon the latest of: o the maturity or other liquidation of the last Receivable and the payment to Noteholders and the Insurer of amounts required to be paid under the Notes, the Indenture and the Insurance Agreement; o the expiration of the Policy in accordance with its terms; or o the payment to Noteholders of all amounts required to be paid to them pursuant to the Indenture and the expiration of any related preference period. In order to avoid excessive administrative expense, the Servicer has the option to purchase from the Trust, as of the last day of any month as of which the Aggregate Principal Balance with respect to the Receivables is less than or equal to 10% of the Original Pool Balance, all remaining Receivables at a price equal to the aggregate of the Purchase Amounts of the Receivables as of that last day, plus the appraised value of any other property held by the Trust, with the prior written consent of the Insurer, if the redemption would result in a claim under the Policy or if the redemption would result in any amount owing to the Insurer remaining unpaid. The Indenture Trustee will give written notice of termination to each Noteholder of record. The final distribution to any Noteholder will be made only upon surrender and cancellation of that Holder's Note at the office or agency of the Indenture Trustee specified in the notice of termination; PROVIDED, HOWEVER, that if on the Payment Date upon which final payment of the Notes is to be made, there are five or fewer Noteholders of record, the final payment to that Noteholder will be made by check or wire transfer as described above and each Noteholder shall present and surrender its Note at the office or agency designated in the notice of final distribution referred to above within 30 days after the Payment Date. THE POLICY The following summary of the terms of the Policy does not purport to be complete and is qualified in its entirety by reference to the Policy. Simultaneously with the issuance of the Class A Notes, the Insurer will deliver the Policy to the Indenture Trustee for the benefit of each Class A Noteholder. Under the Policy, the Insurer will unconditionally and irrevocably guarantee to the Indenture Trustee, on each Payment Date, for the benefit of each Class A Noteholder the full and complete payment of (1) Scheduled Payments on the Class A Notes and (2) the amount of any Scheduled Payment which subsequently is avoided in whole or in part as a preference payment under applicable law. In the event the Indenture Trustee fails to make a claim under the Policy, Class A Noteholders do not have the right to make a claim directly under the Policy, but may sue to compel the Indenture Trustee to do so. "Scheduled Payments" means payments which are scheduled to be made on the Class A Notes during the term of the Policy in accordance with the original terms of the Class A Notes when issued and without regard to any subsequent amendment or modification of the Class A Notes, the Sale and Servicing Agreement or the Indenture that has not been consented to by the Insurer, which "Scheduled Payments", are (1) the Class A Interest Payment Amount, with respect to a Payment Date and (2) the Class A Principal Payment Amount with respect to a Payment Date. Scheduled Payments do not include payments which become due on an accelerated basis as a result of o a default by the Trust, o an election by the Trust to pay principal on an accelerated basis, o the occurrence of an Event of Default under the Indenture or o any other cause, unless the Insurer elects, in its sole discretion, to pay in whole or in part the principal due upon acceleration, together with any accrued interest to the date of acceleration. In the event the Insurer does not so elect, the Policy will continue to guarantee Scheduled Payments due on the Class A Notes in accordance with their original terms. Scheduled Payments shall not include (1) any portion of a Class A Interest Payment Amount due to the Class A Noteholders because the appropriate notice and certificate for payment in proper form was not timely Received by the Insurer, (2) any portion of a Class A Interest Payment Amount due to Class A Noteholders representing interest on any Class A Interest Carryover Shortfall or (3) any Class A Mandatory Redemption Amounts, unless the Insurer elects, in its sole discretion, to pay the amount in whole or in part. Scheduled Payments shall not include, any amounts due in respect of the Class A Notes attributable to any increase in interest rate, penalty or other sum payable by the Trust by reason of any default or event of default in respect of the Class A Notes or by reason of any deterioration of the creditworthiness of the Trust nor shall coverage be provided under the Policy in respect of any taxes, withholding or other charge imposed with respect to any Noteholder by any governmental authority due in connection with the payment of any Scheduled Payment to a Class A Noteholder. Payment of claims on the Policy made in respect of Scheduled Payments will be made by the Insurer following Receipt by the Insurer of the appropriate notice for payment on the later to occur of (1) 12:00 noon, New York City time, on the third Business Day following Receipt of notice for payment, and (2) 12:00 noon, New York City time, on the date on which the payment was due on the Class A Notes. If payment of any amount avoided as a preference under applicable bankruptcy, insolvency, receivership or similar law is required to be made under the Policy, the Insurer shall cause the payment to be made on the later of (a) the date when due to be paid pursuant to the Order referred to below or (b) the first to occur of (1) the fourth Business Day following Receipt by the Insurer from the Indenture Trustee of o a certified copy of the order (the "Order") of the court or other governmental body that exercised jurisdiction to the effect that the Class A Noteholder is required to return Scheduled Payments made with respect to the Class A Notes during the term of the Policy because the payments were avoidable as preference payments under applicable bankruptcy law, o a certificate of the Class A Noteholder that the Order has been entered and is not subject to any stay and o an assignment duly executed and delivered by the Class A Noteholder, in a form as is reasonably required by the Insurer and provided to the Class A Noteholder by the Insurer, irrevocably assigning to the Insurer all rights and claims of the Class A Noteholder relating to or arising under the Class A Notes against the Trust or otherwise with respect to the preference payment, or (2) the date of Receipt by the Insurer from the Indenture Trustee of the items referred to in clauses (A), (B) and (C) above if, at least four Business Days prior to the date of Receipt, the Insurer shall have Received written notice from the Indenture Trustee that these items were to be delivered on that date and the date was specified in the notice. This payment shall be disbursed to the receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Order and not to the Indenture Trustee or any Class A Noteholder directly, unless a Class A Noteholder has previously paid the amount to the receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Order, in which case the payment shall be disbursed to the Indenture Trustee for distribution to the Class A Noteholder upon proof of the payment reasonably satisfactory to the Insurer. In connection with the foregoing, the Insurer shall have the rights provided pursuant to the Sale and Servicing Agreement including, without limitation, the right to direct all matters relating to any preference claim and subrogation to the rights of the Indenture Trustee and each Class A Noteholder in the conduct of any proceeding with respect to a preference claim. OTHER PROVISIONS OF THE POLICY The terms "Receipt" and "Received" with respect to the Policy shall mean actual delivery to the Insurer and to its fiscal agent, if any, prior to 12:00 noon, New York City time, on a Business Day; delivery either on a day that is not a Business Day or after 12:00 noon, New York City time, shall be deemed to be Received on the next succeeding Business Day. If any notice or certificate given under the Policy by the Indenture Trustee is not in proper form or is not properly completed, executed or delivered, it shall be denied not to have been Received, and the Insurer or its fiscal agent shall promptly so advise the Indenture Trustee, and the Indenture Trustee may submit an amended notice. Under the Policy, "Business Day" means any day other than a Saturday, Sunday, legal holiday or other day on which commercial banking institutions in Wilmington, Delaware, the City of New York or any other location of any successor Servicer, successor Owner Trustee or successor Indenture Trustee are authorized or obligated by law, executive order or governmental decree to be closed. The Insurer's obligations under the Policy in respect of Scheduled Payments shall be discharged to the extent funds are transferred to the Indenture Trustee as provided in the Policy whether or not the funds are properly applied by the Indenture Trustee. The Insurer shall be subrogated to the rights of each Class A Noteholder to receive payments of principal and interest to the extent of any payment by the Insurer under the Policy. Claims under the Policy constitute direct, unsecured and unsubordinated obligations of the Insurer ranking not less than pari passu with other unsecured and unsubordinated indebtedness of the Insurer for borrowed money. Claims against the Insurer under the Policy and each other financial guaranty insurance policy issued by the Policy constitute pari passu claims against the general assets of the Insurer. The terms of the Policy cannot be modified or altered by any other agreement or instrument, or by the merger, consolidation or dissolution of the Trust. The Policy may not be canceled or revoked prior to distribution in full of all Scheduled Payments with respect to the Notes. THE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. The Policy is governed by the laws of the State of New York. It is a condition to issuance that the Class A Notes be rated [ ] by [ ] and [ ] by [ ]. The ratings by the Rating Agencies of the Class A Notes will be based on the issuance of the Policy. A rating is not a recommendation to purchase, hold or sell Class A Notes. In the event that the rating initially assigned to any of the Class A Notes is subsequently lowered or withdrawn for any reason, including by reason of a downgrading of the claims-paying ability of the Insurer, no person or entity will be obligated to provide any additional credit enhancement with respect to the Class A Notes. Any reduction or withdrawal of a rating may have an adverse effect on the liquidity and market price of the Notes. See "Ratings" in this prospectus supplement. MATERIAL FEDERAL INCOME TAX CONSEQUENCES The following is a general summary of some of the related Federal income tax consequences of the purchase, ownership and disposition of the Class A Notes. This discussion does not address every aspect of the Federal income tax laws that may be relevant to holders of Class A Notes in light of their personal investment circumstances or to particular types of Class A Noteholders subject to special treatment under the Federal income tax laws, including, without limitation, banks and thrifts, insurance companies, dealers in securities, foreign investors, regulated investment companies, individuals, trusts and estates and pass-through entities, the equity holders of which are any of the foregoing. This discussion is directed to prospective purchasers who purchase Class A Notes in the initial distribution of the Class A Notes and who hold the Class A Notes as "capital assets" within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). Prospective purchasers are urged to consult their own tax advisors in determining the Federal, state, local, foreign and any other tax consequences to them of the purchase, ownership and disposition of the Class A Notes. The following summary is based upon current provisions of the Code, the Treasury regulations promulgated under the Code, judicial authority, and ruling authority, all of which are subject to change, which change may be retroactive. The Issuer will be provided with an opinion of Federal Tax Counsel regarding some of the related Federal income tax matters discussed below. An opinion of Federal Tax Counsel, however, is not binding on the Internal Revenue Service (the "IRS") or the courts. Moreover, there are no cases or IRS rulings on similar transactions with terms similar to those of the Class A Notes. As a result, the IRS may disagree with all or a part of the discussion below. No ruling on any of the issues discussed below will be sought from the IRS. TAX CHARACTERIZATION OF THE ISSUER Stroock & Stroock & Lavan LLP will deliver its opinion that the Issuer will not be classified as an association, or publicly traded partnership, taxable as a corporation for Federal income tax purposes. This opinion will be based on the assumption of compliance by all parties with the terms of the Trust Agreement and related documents. If the Issuer were taxable as a corporation for Federal income tax purposes, the Issuer would be subject to corporate income tax on its taxable income. The Issuer's taxable income would include all its income on the Receivables, possibly reduced by its interest expense on the Class A Notes. Any corporate income tax could materially reduce cash available to make payments on the Class A Notes and distributions on the Certificates, and Certificateholders, and possibly Class A Noteholders, could be liable for any tax that is not paid by the Trust. TAX CONSEQUENCES TO HOLDERS OF THE CLASS A NOTES TREATMENT OF THE CLASS A NOTES AS INDEBTEDNESS. The Issuer will agree, and the Class A Noteholders will agree by their purchase of Class A Notes, to treat the Class A Notes as debt for Federal, state and local income and franchise tax purposes. Federal Tax Counsel will advise the Issuer that in its opinion the Class A Notes will be classified as debt for Federal income tax purposes. Alternatively, if, contrary to the opinion of Federal Tax Counsel, the Class A Notes were not properly classified as debt and Issuer were treated as a publicly traded partnership taxable as a corporation, it would be subject to Federal income tax, and any similar state or local taxes, at corporate tax rates on its taxable income generated by ownership of the Receivables. This tax could result in reduced distributions to Class A Noteholders. Distributions to Class A Noteholders generally would not be deductible in computing the taxable income of the publicly traded partnership. In addition, all or a portion of any distributions would, to the extent of the current and accumulated earnings and profits of the corporation, be treated as dividend income to the Class A Noteholders, and in the case of Class A Noteholders that are foreign persons would be subject to withholding tax. INTEREST INCOME AND OID ON THE CLASS A NOTES. It is not anticipated that the Class A Notes will be issued with original issue discount ("OID") within the meaning of Section 1273 of the Code. The stated interest on the Class A Notes will be taxable to a Class A Noteholder as ordinary interest income when received or accrued in accordance with the Class A Noteholder's method of tax accounting. If the Class A Notes were treated as being issued with OID, the excess of the "stated redemption price at maturity" of the Class A Notes over their issue price would constitute OID. Under the OID Regulations, a holder of a Class A Note issued with a DE MINIMIS amount of OID must include this OID in income, on a pro rata basis, as principal payments are made on the Class A Note. A subsequent purchaser who buys a Class A Note for more or less than its principal amount will generally be subject, respectively, to the premium amortization or market discount rules of the Code. SALE OR OTHER DISPOSITION. If a Class A Noteholder sells a Class A Note, the holder will recognize gain or loss in an amount equal to the difference between the amount realized on the sale and the holder's adjusted tax basis in the Class A Note. The adjusted tax basis of a Class A Note to a particular Class A Noteholder will equal the holder's cost for the Class A Note, increased by any market discount, and gain previously included by the Class A Noteholder in income with respect to the Class A Note and decreased by the amount of premium, if any, previously amortized and by the amount of principal payments previously received by the Class A Noteholder with respect to the related Class A Note. Any gain or loss will be capital gain or loss, except for gain representing accrued interest, including OID, and accrued market discount not previously included in income. Capital losses generally may be used by a corporate taxpayer only to offset capital gains, and by an individual taxpayer only to the extent of capital gains plus $3,000 of other income. FOREIGN HOLDERS. Except as discussed below, a Class A Noteholder that is not a "United States person" (as defined below) generally will not be subject to United States income or withholding tax in respect of a distribution on a Class A Note provided that (i) the holder complies to the extent necessary with certain certification requirements, which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is not a United States person (as defined below), (ii) the holder is not a "10-percent shareholder" within the meaning of Section 871(h)(3)(B) of the Code, which could be interpreted to include a person that directly or indirectly owns 10% or more of the certificates in the Trust or the equity in the Seller or the Company, (iii) the holder is not a "controlled foreign corporation" (as defined in the Code) related to the Trust or related to a 10 percent holder of certificates in the Trust or equity in the Seller or the Company, and (iv) the holder is not engaged in a United States trade or business, or otherwise subject to Federal income tax as a result of any direct or indirect connection to the United States other than through its ownership of a Class A Note. For these purposes, the term "United States person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership (or other entity properly treated as a corporation or partnership for Federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate whose income is includable in gross income for United States Federal income taxation regardless of its source, and (iv) a trust for which one or more United States fiduciaries have the authority to control all substantial decisions and for which a court of the United States can exercise primary supervision over the trust's administration. A "Foreign Person" is any person that is not a United States person. Each Class A Noteholder should consult its tax advisors regarding the tax documentation and certifications that must be provided to secure the exemption from United States withholding taxes. Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a Class A Note by a Foreign Person generally will be exempt from United States Federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Foreign Person and (ii) in the case of an individual Foreign Person, the Foreign Person is not present in the United States for 183 days or more in the taxable year. If the interest, gain or income on a Class A Note held by a Foreign Person is effectively connected with the conduct of a trade or business in the United States by the Foreign Person (although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected), the holder generally will be subject to United States Federal income tax on the interest, gain or income at regular Federal income tax rates. In addition, if the Foreign Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits," within the meaning of the Code, for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty (as modified by the branch profits tax rules). If the IRS were to contend successfully that the Class A Notes are interests in a partnership, not taxable as a corporation, a Class A Noteholder that is a foreign person might be required to file a United States. Federal income tax return and pay tax on its share of partnership income at regular United States tax rates, including the branch profits tax, and could be subject to withholding tax on its share of partnership income. If the Class A Notes were recharacterized as interests in a "publicly traded partnership" taxable as a corporation, distributions on the Class A Notes treated as dividends would generally be subject to withholding tax on the gross amount of the dividends at the rate of 30% unless the rate were reduced by an applicable treaty. If the Class A Notes are recharacterized as equity interests in a partnership, or, contrary to the opinion of Federal Tax Counsel, in a publicly traded partnership taxable as a corporation, any taxes required to be so withheld will be treated for all purposes of the Class A Notes as having been paid to the related Class A Noteholder. BACKUP WITHHOLDING. Distributions made on the Class A Notes and proceeds from the sale of Class A Notes to or through certain brokers may be subject to a "backup" withholding tax of 31 percent of "reportable payments" (including interest accruals, original issue discount, and, under certain circumstances, distributions in reduction of principal amount) if the holder of the Class A Notes fails to comply with certain identification procedures, unless the Class A Noteholder is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld from distributions on the Class A Notes would be refunded by the IRS or allowable as a credit against the Class A Noteholder's Federal income tax. CERTAIN STATE TAX CONSEQUENCES In addition to the federal income tax consequences described in "Material Federal Income Tax Consequences" above, potential purchasers should consider the state income tax consequences of the acquisition, ownership and disposition of the Class A Notes. State income tax law may vary substantially from state to state, and this discussion does not purport to describe any aspect of the income tax laws of any state. Therefore, potential purchasers should consult their own tax advisors with respect to the various tax consequences of an investment in the Class A Notes. ERISA CONSIDERATIONS Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit sharing, or other employee benefit plan, as well as individual retirement accounts and particular types of Keogh Plans subject to those provisions, and entities deemed to hold plan assets of these plans (each, a "Benefit Plan"), from engaging in particular transactions involving "plan assets" with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to the Benefit Plan. A violation of these "prohibited transaction" rules may generate excise tax and other penalties and liabilities under ERISA and the Code for these persons. ERISA also imposes particular duties on persons who are fiduciaries of Benefit Plans subject to ERISA. Under ERISA, any person who exercises any authority or control respecting the management or disposition of the assets of a Benefit Plan is considered to be a fiduciary of the Benefit Plan, subject to exceptions not here relevant. Some transactions involving the Issuer might be deemed to constitute prohibited transactions under ERISA and the Code with respect to a Benefit Plan that purchases Class A Notes if assets of the Issuer were deemed to be assets of the Benefit Plan. Under a regulation issued by the United States Department of Labor (the "Plan Assets Regulation"), the assets of the Issuer would be treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan acquired an equity interest in the Issuer and none of the exceptions contained in the Plan Assets Regulation was applicable. An "equity interest" is defined under the Plan Assets Regulation as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Although there is little guidance on the subject, the Issuer believes that, at the time of their issuance the Class A Notes should be treated as indebtedness without substantial equity features for purposes of the Plan Assets Regulation. The debt status of the Class A Notes could be affected subsequent to their issuance by particular types of changes in the financial condition of the Issuer. Without regard to whether Class A Notes are treated as an equity interest under the Plan Assets Regulation, the acquisition or holding of the Class A Notes by or on behalf of a Benefit Plan could be considered to give rise to a prohibited transaction if the Issuer, the Seller, the Servicer, the Backup Servicer, the Indenture Trustee or the Owner Trustee is or becomes a party in interest or a disqualified person with respect to a Benefit Plan or in the event that a subsequent transfer of a Class A Note occurs between a Benefit Plan and a party in interest or disqualified person with respect to the Plan. Some exemptions from the prohibited transaction rules could be applicable to the purchase and holding of Class A Notes by a Benefit Plan depending on the type and circumstances of the plan fiduciary making the decision to acquire the Class A Notes. Included among these exemptions, each of which contains several conditions which must be satisfied before the exemption applies, are: PTCE 90-1, regarding partiuclar transactions entered into by insurance company pooled separate accounts; PTCE 95-60, regarding particular transactions entered into by insurance company general accounts; PTCE 96-23, regarding particular transactions effected by "in-house asset managers"; PTCE 91-38 regarding particular types of transactions entered into by bank collective investment funds; and PTCE 84-14, regarding particular transactions effected by "qualified professional asset managers." By acquiring a Class A Note, each purchaser and each transferee of a Class A Note shall be deemed to represent and warrant that either (1) it is not acquiring a Class A Note with the assets of a Benefit Plan; or (2) its purchase and holding of the Class A Notes will qualify for prohibited transaction exemptive relief under PTCE 95-60, PTCE 96-23, PTCE 91-38, PTCE 90-1, PTCE 84-14 or some other applicable exemption. Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA) and some church plans (as defined in Section 3(33) of ERISA) may not be subject to ERISA requirements. However, governmental plans can be subject, under federal, fiduciary, state or local law, to restrictions which are similar to ERISA and church plans may be subject to other types of prohibited transaction restrictions under the Code. A Benefit Plan fiduciary considering the purchase of Class A Notes should consult its tax and/or legal advisors regarding whether the assets of the Issuer would be considered plan assets, the possibility of exemptive relief from the prohibited transaction rules and other issues and their potential consequences. RATINGS It is a condition to issuance that each of the Class A-1 Notes and the Class A-2 Notes be rated [ ] by [ ] and [ ] by [ ]. The ratings by the Rating Agencies of the Class A Notes will be based on the issuance of the Policy. A rating is not a recommendation to purchase, hold or sell Class A Notes. In the event that the rating initially assigned to any of the Class A Notes is subsequently lowered or withdrawn for any reason, including by reason of a downgrading of the claims-paying ability of the Insurer, no person or entity will be obligated to provide any additional credit enhancement with respect to the Class A Notes. Any reduction or withdrawal of a rating may have an adverse effect on the liquidity and market price of the Class A Notes. UNDERWRITING Subject to the terms and conditions set forth in an underwriting agreement dated [ ] (the "Underwriting Agreement"), the Company has agreed to cause the Trust to sell to Deutsche Banc Alex. Brown (the "Underwriter"), and the Underwriter has agreed to purchase, all of the Class A Notes. Under the terms and conditions of the Underwriting Agreement, the Underwriter is committed to take and pay for all the Class A Notes offered by this prospectus supplement, if any are taken. The Seller has been advised by the Underwriter that the Underwriter proposes to offer the Class A Notes from time to time for sale in negotiated transactions or otherwise, at prices determined at the time of sale. The Underwriter may effect these transactions by selling Class A Notes to or through dealers and these dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the Underwriter and any purchasers of Class A Notes for whom they may act as agents. The Underwriter and any dealers that participate with the Underwriter in the distribution of the Class A Notes may be deemed to be underwriters, and any discounts or commissions received by them and any profit on the resale of Class A Notes by them may be deemed to be underwriting discounts or commissions under the Securities Act of 1933, as amended (the "Securities Act"). The Class A Notes are a new issue of securities with no established trading market. The Trust has been advised by the Underwriter that it intends to make a market in the Class A Notes, but the Underwriter is not obligated to make a market and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Class A Notes. An affiliate of the underwriter provides a warehouse facility to the Seller. The Seller has agreed to indemnify the Underwriter against particular types of liabilities, including liabilities under the Securities Act. EXPERTS The consolidated balance sheets of Financial Security and Subsidiaries as of December 31, [ ] and [ ] and the related consolidated statements of income, changes in shareholder's equity and cash flows for each of the three years in the period ended December 31, [ ], incorporated by reference in this prospectus supplement, have been incorporated in this prospectus supplement in reliance on the report of [ ], independent accountants, given on the authority of that firm as experts in accounting and auditing. LEGAL MATTERS Some legal matters relating to the Class A Notes and some related federal income tax and other matters will be passed upon for the Seller by [ ]. Some legal matters relating to the Class A Notes will be passed upon for the Underwriter and the Company by Stroock & Stroock & Lavan LLP, New York, New York. GLOSSARY AGGREGATE PRINCIPAL BALANCE: With respect to the Closing Date, the Cutoff Date Principal Balance, and with respect to any Determination Date, the sum of the Principal Balances, computed as of the last day of the related Collection Period end date, for all Receivables, other than Liquidated Receivables and Purchased Receivables. AMOUNT FINANCED: With respect to a Receivable, the aggregate amount advanced extended under the Receivable toward the purchase price of the Financed Vehicle and related costs, including amounts of credit extended in respect of accessories, insurance premiums, service and warranty policies or contracts and other items customarily financed as part of motor vehicle retail installment contracts or promissory notes, and related costs. AVAILABLE FUNDS: With respect to any Determination Date, the sum of (1) the "Collected Funds" received by the Servicer during the related Collection Period, (2) all Purchase Amounts deposited in the Collection Account for the related Collection Period, (3) all income received from investments of funds in the Collection Account during the related Collection Period, (4) the Monthly Capitalized Interest Amount with respect to the Payment Date, (5) the Insurer Optional Deposit, if any, and (6) any remaining Pre-Funded Amount applied to the mandatory redemption of Notes. CERTIFICATEHOLDER: The holder of a Certificate CLASS: A class of Notes. CLASS A NOTE BALANCE: The sum of (1) the Class A-1 Note Balance and (2) the Class A-2 Note Balance. CLASS A-1 FINAL SCHEDULED PAYMENT DATE: [ ] or, if this day is not a Business Day, the next succeeding Business Day. CLASS A-2 FINAL SCHEDULED PAYMENT DATE: [ ], or, if this day is not a Business Day, the next succeeding Business Day. CLASS B NOTE BALANCE: An amount equal to $[ ] on the Closing Date and after, an amount equal to the initial Class B Note Balance reduced by all amounts distributed to the Class B Noteholders that are allocable to principal. COLLECTED FUNDS: With respect to any Determination Date, the amount of funds in the Collection Account representing collections on the Receivables received by the Servicer during the related Collection Period, including all Liquidation Proceeds collected during the related Collection Period, but excluding any Purchase Amounts, and all amounts paid by Dealers under Dealer Agreements or Dealer Assignments with respect to the Receivables during the related Collection Period. COLLECTION PERIOD: With respect to any Payment Date or Determination Date, the calendar month preceding the month in which the Payment Date or Determination Date occurs. CONTROLLING PARTY: The Insurer, so long as an Insurer Default shall not have occurred and be continuing, otherwise, the Indenture Trustee for the benefit of the Noteholders; provided, however, that the Owner Trustee for the benefit of the Certificateholder will be the Controlling Party after all unpaid principal and interest on the Notes shall have been paid in full and all amounts due to the Insurer have been paid and the Policy has expired in accordance with its terms. CORPORATE TRUST OFFICE: The office of the Indenture Trustee at which its corporate trust business shall be principally administered, which office as of the date of this prospectus supplement is located at [ ]. CRAM DOWN LOSS: With respect to a Receivable, if a court of appropriate jurisdiction in an insolvency proceeding shall have issued an order reducing the amount owed on a Receivable or otherwise modifying or restructuring the Contract Scheduled Payments to be made on a Receivable, an amount equal to (1) the excess of the Principal Balance of the Receivable immediately prior to the order over the Principal Balance of the Receivable as so reduced and/or (2) if the court shall have issued an order reducing the effective rate of interest on the Receivable, the net present value, using as the discount rate the higher of the APR on the Receivable or the rate of interest, if any, specified by the court in the order, of the Contract Scheduled Payments as so modified or restructured. A Cram Down Loss shall be deemed to have occurred on the date of issuance of the order. CUTOFF DATE: With respect to the Initial Receivables, the Initial Cutoff Date, and with respect to the Subsequent Receivables, the Subsequent Cutoff Date. DEALER AGREEMENT: An agreement generally between the Seller and a Dealer relating to the sale of retail installment contracts to the Seller and all documents and instruments relating to that agreement. DEALER ASSIGNMENT: With respect to a Receivable, the executed assignment conveying a Receivable to the Seller. DEFICIENCY CLAIM AMOUNT: With respect to any Determination Date, the positive difference, if any, of (1) the sum of the related Scheduled Payments plus the amounts described in clauses (1), (2) and (3) under the heading "The Notes--Priority of Distribution Amounts" minus (2) the amount of Available Funds with respect to the Determination Date, which amount will be withdrawn from the Class A Reserve Account to the extent funds are on deposit tin this prospectus supplement in accordance with the terms of the Class A Reserve Account Agreement and deposited into the Collection Account on the related Payment Date. DETERMINATION DATE: With respect to a Collection Period, the 5th Business Day preceding the Payment Date in the next calendar month; provided, however that the first Determination Date will be the Closing Date. HOLDER OR NOTEHOLDER: The Person in whose name a Note is registered in the Note Register. LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, o proceeds from the disposition of Financed Vehicles securing the Liquidated Receivables, o any insurance proceeds or rebates, or o other monies received from the Obligor or otherwise, less amounts required to be refunded to the Obligor. MANAGED RECEIVABLE: Any retail installment contract, including any related promissory note, for a Financed Vehicle, and all rights and obligations under the retail installment contract, generally originated by and currently serviced by the Seller for Obligors. NOTE BALANCE: The sum of the Class A Note Balance and Class B Note Balance. NOTE MAJORITY: As of any date of determination, Holders of Class A-1 Notes and Class A-2 Notes and Class B Notes representing more than 50% of the Note Balance. PAYMENT AMOUNT: With respect to a Payment Date, the sum of (1) the Available Funds as of the last day of a Collection Period, plus (2) the Deficiency Claim Amount, if any, with respect to the Payment Date. PERSON: Any legal person, including any individual, corporation, limited liability company, partnership, joint venture, estate, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of these or any other entity. PURCHASED RECEIVABLE: A Receivable that was purchased as of the close of business on the last day of a Collection Period by the Seller or the Servicer as the result of the violation of particular representations or warranties of the Seller under the Sale and Servicing Agreement or a breach by the Servicer of some of the Servicer's obligations. RATING AGENCY CONDITION: With respect to any action, that the Rating Agency has been given prior notice of and that the Rating Agency has notified the Seller, the Seller, the Servicer and the Indenture Trustee in writing that the action will not result in a reduction or withdrawal of the then current rating of the Notes. SALE AND SERVICING AGREEMENT: The Sale and Servicing Agreement between the Seller, in its individual capacity and as Servicer, ACE Securities Corp., as Company, [ ] Auto Receivables Owner Trust [ ]- [ ] as purchaser, and [ ], as Indenture Trustee and Backup Servicer. SERVICER'S CERTIFICATE: With respect to each Collection Period, a certificate, completed by and executed on behalf of the Servicer, in accordance with the applicable Sale and Servicing Agreement provisions. SERVICER RECEIVABLES FILES: The following documents or instruments in the Servicer's possession with respect to each Receivable: (1) documents evidencing or relating to any Insurance Policy; and (2) any and all other documents, in original or electronic form, that the Servicer keeps on file in accordance with its customary procedures relating to the individual Receivable, Obligor or Financed Vehicle. STATE: Any state of the United States or the District of Columbia. TRANSACTION DOCUMENTS: The Sale and Servicing Agreement, the Indenture, the Trust Agreement, the Notes, the Receivables Purchase Agreement, the Underwriting Agreement and the other agreements executed in connection with the closing of the transactions described in this prospectus supplement. TRUST AGREEMENT: The Trust Agreement between ACE Securities Corp., the Certificateholder, the Seller, and [ ], as Owner Trustee. INDEX OF TERMS Set forth below is a list of the defined terms used in this prospectus supplement and the pages on which the definitions of these terms may be found. 10 percent shareholder.................................................S-65 ABS....................................................................S-29 ABS Tables.............................................................S-29 Actuarial Receivable...................................................S-23 Additional Funds Available.............................................S-35 Aggregate Principal Balance............................................S-70 Amount Financed........................................................S-70 Available Funds........................................................S-70 Backup Servicer Fee....................................................S-55 Benefit Plan...........................................................S-66 Business Day...........................................................S-62 capital assets.........................................................S-63 Capitalized Interest Account...........................................S-54 Certificate............................................................S-15 Certificateholder......................................................S-70 Class..................................................................S-70 Class A Interest Carryover Shortfall...................................S-35 Class A Interest Payment Amount........................................S-35 Class A Mandatory Redemption Amount....................................S-35 Class A Note Balance...................................................S-70 Class A Notes..........................................................S-15 Class A Overcollateralization Amount...................................S-35 Class A Principal Payment Amount.......................................S-36 Class A Reserve Account................................................S-44 Class A Target Overcollateralization Amount............................S-36 Class A-1 Final Scheduled Payment Date.................................S-70 Class A-1 Interest Carryover Shortfall.................................S-36 Class A-1 Interest Payment Amount......................................S-36 Class A-1 Mandatory Redemption Amount..................................S-36 Class A-1 Note Balance.................................................S-41 Class A-1 Note Factor..................................................S-49 Class A-1 Notes........................................................S-15 Class A-1 Principal Carryover Shortfall................................S-36 Class A-1 Principal Payment Amount.....................................S-37 Class A-2 Final Scheduled Payment Date.................................S-70 Class A-2 Interest Carryover Shortfall.................................S-37 Class A-2 Interest Payment Amount......................................S-37 Class A-2 Mandatory Redemption Amount..................................S-37 Class A-2 Note Balance.................................................S-41 Class A-2 Note Factor..................................................S-50 Class A-2 Notes........................................................S-15 Class A-2 Principal Carryover Shortfall................................S-37 Class A-2 Principal Payment Amount.....................................S-37 Class B Interest Carryover Shortfall...................................S-38 Class B Interest Payment Amount........................................S-38 Class B Note Balance...................................................S-70 Class B Notes..........................................................S-15 Class B Principal Payment Amount.......................................S-38 Closing Date...........................................................S-15 Code...................................................................S-63 Collected Funds........................................................S-70 Collection Account.....................................................S-53 Collection Period......................................................S-71 Contract Scheduled Payment.............................................S-38 controlled foreign corporation.........................................S-65 Controlling Party......................................................S-71 Corporate Trust Office.................................................S-71 Cram Down Loss.........................................................S-71 Cutoff Date............................................................S-71 Dealer Agreement.......................................................S-71 Dealer Assignment......................................................S-71 Dealer Recourse........................................................S-17 Defaulted Receivable...................................................S-38 Deficiency Claim Amount................................................S-71 Determination Date.....................................................S-71 disqualified persons...................................................S-66 Draw Date..............................................................S-39 DTC....................................................................S-34 equity interest........................................................S-67 Events of Default......................................................S-48 excess interest........................................................S-44 Excess Overcollateralization Amount....................................S-39 excess principal.......................................................S-44 Exchange Act...........................................................S-33 Final Regulations......................................................S-65 Financed Vehicles......................................................S-17 Foreign Person.........................................................S-65 Funding Period.........................................................S-53 Holder.................................................................S-72 Holders................................................................S-34 Indenture..............................................................S-16 in-house asset managers................................................S-67 Initial Cutoff Date....................................................S-16 Initial Financed Vehicles..............................................S-16 Initial Pre-Funded Amount..............................................S-53 Initial Receivables....................................................S-16 Insurance Agreement Indenture Cross Defaults...........................S-48 Insurer................................................................S-18 Insurer Default........................................................S-57 Insurer Optional Deposit...............................................S-39 IRS....................................................................S-63 Issuer.................................................................S-15 Liquidated Receivable..................................................S-39 Liquidation Proceeds...................................................S-72 Lockbox Account........................................................S-53 Lockbox Bank...........................................................S-53 Managed Receivable.....................................................S-72 Mandatory Redemption Date..............................................S-54 Monthly Capitalized Interest Amount....................................S-54 Note Balance...........................................................S-72 Note Distribution Account..............................................S-53 Note Majority..........................................................S-72 Noteholder.............................................................S-72 Noteholders............................................................S-34 Notes..................................................................S-15 Obligors...............................................................S-16 OC Stabilization Date..................................................S-39 OID....................................................................S-64 Order..................................................................S-61 Original Pool Balance..................................................S-34 Owner Trustee..........................................................S-16 parties in interest....................................................S-66 Payment Amount.........................................................S-72 Person.................................................................S-72 plan assets............................................................S-66 Plan Assets Regulation.................................................S-66 Policy Claim Amount....................................................S-39 portfolio interest.....................................................S-65 Precomputed Receivables................................................S-22 Pre-Funded Amount......................................................S-54 Pre-Funding Account....................................................S-53 Principal Balance......................................................S-40 Principal Payment Amount...............................................S-39 publicly traded partnership............................................S-66 Purchase Amount........................................................S-41 Purchased Receivable...................................................S-72 qualified professional asset managers..................................S-67 Rating Agency Condition................................................S-72 Receipt................................................................S-62 Receivables............................................................S-15 Receivables File.......................................................S-18 Received...............................................................S-62 Redemption Price.......................................................S-35 related person.........................................................S-65 Rule of 78's Receivables...............................................S-22 Sale and Servicing Agreement...........................................S-72 Scheduled Payments.....................................................S-60 Securities Act.........................................................S-68 Servicer Expenses......................................................S-55 Servicer Fee...........................................................S-55 Servicer Receivables Files.............................................S-72 Servicer Termination Event.............................................S-57 Servicer Transition Expenses...........................................S-55 Servicer's Certificate.................................................S-72 Servicing Fee Rate.....................................................S-55 Simple Interest Receivable.............................................S-22 State..................................................................S-73 stated redemption price at maturity....................................S-64 Subsequent Cutoff Date.................................................S-16 Subsequent Financed Vehicles...........................................S-17 Subsequent Purchase Agreement..........................................S-17 Subsequent Receivables.................................................S-17 Subsequent Transfer Date...............................................S-18 Transaction Documents..................................................S-73 Trust..................................................................S-15 Trust Agreement....................................................S-16, 73 Trust Property.........................................................S-16 Underwriter............................................................S-68 Underwriting Agreement.................................................S-68 Weighted Average Life..................................................S-29 The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus dated [ ]) $[ ] (APPROXIMATE) [ ] AUTO GRANTOR TRUST [ ]-[ ] Issuer ACE SECURITIES CORP. Depositor [ ] Servicer CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[] IN THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The certificates will represent interests in the trust fund only and will not represent interests in or obligations of any other entity. This prospectus supplement may be used to offer and sell the certificates only if accompanied by the prospectus CERTIFICATES OFFERED o $[ ], [ ]% Class A certificates o $[ ],[ ]% Class B certificates ASSETS o Retail automobile receivables CREDIT ENHANCEMENT o Class A certificates o subordination of Class B certificates o reserve account o Class B certificates o reserve account EXPECTED RATINGS o AAA from S&P and Aaa from Moody's for the Class A certificates o AA from S&P and A3 from Moody's for the Class B certificates NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS IS ACCURATE OR COMPLETE. MAKING ANY CONTRARY REPRESENTATION IS A CRIMINAL OFFENSE.
Underwriting Discounts Price to and Proceeds to Public(1) Commissions the Depositor(1)(2) Per Class A Certificates.................. % % % Per Class B Certificates.................. % % % Total..................................... $ $ $ - ------------- (1) Plus accrued interest from [ ]. (2) Before deducting expenses, estimated to be $[ ].
DEUTSCHE BANC ALEX. BROWN The date of this prospectus supplement is [ ] IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the certificates offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your certificates, and (2) this prospectus supplement, which describes the specific terms of your certificates. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the certificates in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. -------------------------------------------------------------------- Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the certificates and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the certificates will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. -------------------------------------------------------------------- We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. TABLE OF CONTENTS PROSPECTUS SUPPLEMENT CAPTION PAGE Summary of Terms...................................S- Risk Factors.......................................S- Formation of the Trust.............................S- The Trust Property.................................S- The Receivables Pool...............................S- The Servicer.......................................S- Weighted Average Life of the Certificates....................................S- Use of Proceeds....................................S- Description of the Certificates....................S- Federal Income Tax Consequences....................S- State and Local Tax Consequences...................S- ERISA Considerations...............................S- Underwriting.......................................S- Ratings............................................S- Legal Matters......................................S- PROSPECTUS CAPTION PAGE Risk Factors..................................... The Trusts....................................... The Trustee...................................... The Receivables Pools............................ The Collateral Certificates...................... The Government Securities........................ Weighted Average Life of the Securities.......... Pool Factors and Trading Information............. The Seller and the Servicer...................... Use of Proceeds.................................. Description of the Notes......................... Description of the Certificates.................. Certain Information Regarding.................... the Securities................................. Description of the Transfer and Servicing Agreements........................... Certain Legal Aspects of the Receivables......... Material Federal Income Tax Consequences......... State and Local Tax Consequences................. ERISA Considerations............................. Plan of Distribution............................. Legal Matters.................................... Prospectus Supplement............................ Reports to Securityholders....................... Available Information............................ Incorporation of Certain Documents by Reference.. Index of Terms................................... Annex I - Global Clearance, Settlement and Tax Documentation Procedures...................... SUMMARY OF TERMS THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. ISSUER...................... [ ] Auto Grantor Trust [ ]-[ ]. DEPOSITOR................... Ace Securities Corp. SERVICER.................... [........] SELLER...................... [........] TRUSTEE..................... [........] COLLATERAL AGENT............ [........] CLOSING DATE................ On or about [..... ]. CUTOFF DATE................. The opening of business on [ ] DISTRIBUTION DATES.......... The [ ]th day of each month or the next business day if the [ ]th day is not a business day, beginning in [ ]. RECORD DATES The business day immediately prior to a distribution date or, if definitive certificates are issued, the last day of the month prior to a distribution date. MINIMUM DENOMINATIONS $25,000 except for one Class B certificate. FORM Book-entry. INTEREST ACCRUAL METHOD 30/360. Final Scheduled Distribution Date [........]. THE RECEIVABLES The receivables are amounts owed by individuals under fixed rate simple interest or actuarial retail installment sale contracts to purchase or refinance new or used automobiles, including passenger cars, minivans, sport utility vehicles and light trucks, substantially all of which were purchased from motor vehicle dealers. The receivables had the following characteristics as of [ ]. As of the closing date, no more than [ ]% of the receivables will have characteristics that differ from those described in this prospectus supplement as of [ ]. Number of receivables.............. Principal amount................... $ Annual percentage rates............ % to % Weighted average annual percentage % rate............................... Original term...................... months to months Weighted average original term..... months Remaining term..................... months to months Weighted average remaining term.... months New by principal................... % Used by principal.................. % Simple interest by principal....... % Actuarial by principal............. % States PA by principal................. % DE by principal................. % NJ by principal................. % INTEREST DISTRIBUTIONS On each distribution date, if the trust has sufficient cash, it will pay you the interest accrued on your certificates during the related interest period. The trust will not pay interest on the Class B certificates on any distribution date until the Class A certificateholders have received their full payment of interest on that distribution date. Interest periods begin on the prior distribution date and run through the day before the current distribution date. The first interest period begins on [ ] and runs through the day before the first distribution date. We will assume that each year has 360 days consisting of twelve 30 day months. PRINCIPAL DISTRIBUTIONS The Class A certificates and Class B certificates will be entitled to a pro rata share of the principal collections. However, the trust will make principal distributions to the Class A certificates before making principal distributions to the Class B certificates on each distribution date. RESERVE ACCOUNT There will be a reserve account to help cover cash flow shortfalls. Initially, the account will be $[ ]. On each distribution date the trustee will deposit amounts remaining after distribution of the servicing fee and amounts to be paid to the certificateholders in the reserve account until the amount equals a specified amount. OPTIONAL TERMINATION When the principal amount of the receivables is 10% or less than it was on the cutoff date, the servicer may buy the receivables. You must receive the principal amount of your certificates and all accrued but unpaid interest or the receivables will not be sold. FEDERAL TAX CONSEQUENCES Stroock & Stroock & Lavan LLP, special federal tax counsel to the trust, is of the opinion that the trust will be classified, for federal income tax purposes, as a grantor trust and not as an association taxable as a corporation. Certificateholders must report their respective allocable shares of income earned on trust assets excluding certain amounts retained by the depositor as described in this prospectus supplement and, subject to the limitations applicable to individuals, estates, trusts and partnerships, may deduct their respective allocable shares of reasonable servicing and other fees. However, the tax code is complex, and we recommend that you and your tax advisors review the information under the caption "Federal Income Tax Consequences" in this prospectus supplement and "Material Federal Income Tax Consequences -- Grantor Trusts" in the prospectus. ERISA CONSIDERATIONS The certificates may be purchased by ERISA and other retirement plans if one or more administrative exemptions apply. See "ERISA Considerations" in this prospectus supplement and the prospectus. RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE CERTIFICATES. YOU MAY HAVE DIFFICULTY SELLING YOUR CERTIFICATES The certificates will not be listed on any securities exchange. As a result, if you want to sell your certificates you must locate a purchaser that is willing to purchase those certificates. Each underwriter intends to make a secondary market for the certificates purchased by it. The underwriters will do so by offering to buy the certificates from investors that wish to sell. However, neither underwriter will be obligated to make offers to buy the certificates and may stop making offers at any time. In addition, the prices offered, if any, may not reflect prices that other potential purchasers, were they to be given the opportunity, would be willing to pay. There have been times in the past where there have been very few buyers of asset backed securities, and there may be times in the future where there will be very few buyers of asset backed securities. As a result, you may not be able to sell your certificates when you want to do so or you may not be able to obtain the price that you wish to receive. CERTAIN FEATURES OF THE There are a number of features of the RECEIVABLES POOL MAY receivables in the pool that create RESULT IN LOSSES OR CASH additional risk of loss, including the FLOW SHORTFALLS following: [THE CONCENTRATION OF Economic conditions in the states where RECEIVABLES IN SPECIFIC obligors reside may affect the delinquency, GEOGRAPHIC AREAS MAY loan loss and repossession experience of the INCREASE THE RISK OF LOSS. trust with respect to the receivables. As of the cutoff date, with respect to approximately [ ]%, [ ]% and [ ]% of the principal amount of the receivables, obligors took initial title to the motor vehicles relating to the receivables in [ ], [ ] and [ ], respectively. Economic conditions in any state or region may decline over time and from time to time. Because of the concentration of the obligors in certain states, any adverse economic conditions in those states may have a greater effect on the performance of the certificates than if the concentration did not exist. We are not aware of any adverse economic conditions that are peculiar to [ ], [ ] or [ ] as of the date of this prospectus supplement. In addition, we do not believe that the laws of those states relating to motor vehicle financing and the rights of lenders are more burdensome than those in other states.] NEWLY ORIGINATED LOANS Defaults on automobile loans tend to occur MAY BE MORE LIKELY TO at higher rates during the early years DEFAULT WHICH MAY CAUSE LOSSES. of the automobile loans. A substantial majority of the automobile loans will have been originated within 12 months prior to the sale to the trust. As a result, the trust may experience higher rates of default than if the automobile loans had been outstanding for a longer period of time. CLASS B CERTIFICATES WILL ABSORB CASH SHORTFALLS BEFORE THE CLASS A CERTIFICATES The Class B certificateholders will not receive any distribution of interest until the full amount of interest on the Class A certificates has been paid on each distribution date. The Class B certificateholders will not receive any distributions of principal until the full amount of principal of the Class A certificates has been paid on that distribution date. Holders of the certificates must rely for repayment upon payments on the receivables, and, if and to the extent available, amounts on deposit in the reserve account. If funds in the reserve account are exhausted, the trust will depend solely on current distributions on the receivables to make payments on the certificates. Delinquent payments on the receivables may result in a shortfall in the distributions on the Class B certificates on any distribution date due to the priority of payments on the Class A certificates. YOUR YIELD TO MATURITY MAY BE REDUCED BY PREPAYMENTS, DELINQUENCIES AND DEFAULTS The pre-tax yield to maturity on your investment is uncertain and will depend on a number of factors including the following: THE RATE OF RETURN OF PRINCIPAL IS UNCERTAIN. The amount of distributions of principal of the certificates and the time when you receive those distributions depends on the amount and the times at which borrowers make principal payments on the receivables. Those principal payments may be regularly scheduled payments or unscheduled payments resulting from prepayments or defaults of the receivables. YOU MAY BE UNABLE TO REINVEST DISTRIBUTIONS IN COMPARABLE INVESTMENTS. Asset backed securities, like the certificates, usually produce more returns of principal to investors when market interest rates fall below the interest rates on the receivables and produce less returns of principal when market interest rates are above the interest rates on the receivables. As a result, you are likely to receive more money to reinvest at a time when other investments generally are producing a lower yield than that on the certificates, and are likely to receive less money to reinvest when other investments generally are producing a higher yield than that on the certificates. You will bear the risk that the timing and amount of distributions on your certificates will prevent you from attaining your desired yield. AN EARLY TERMINATION WILL SHORTEN THE LIFE OF YOUR INVESTMENT WHICH MAY REDUCE YOUR YIELD TO MATURITY. If the receivables are sold upon exercise of the servicer's optional termination, you will receive the principal amount of your certificates plus accrued interest through the related interest period. Because your certificates will no longer be outstanding, you will not receive the additional interest payments that you would have received had the certificates remained outstanding. If you bought your securities at a premium, your yield to maturity will be lower than it would have been if the optional termination had not been exercised. WITHDRAWAL OR DOWNGRADING OF INITIAL RATINGS WILL REDUCE THE PRICES FOR CERTIFICATES A security rating is not a recommendation to buy, sell or hold securities. Similar ratings on different types of securities do not necessarily mean the same thing. We recommend that you analyze the significance of each rating independently from any other rating. Any rating agency may change its rating of the certificates after those certificates are issued if that rating agency believes that circumstances have changed. Any subsequent withdrawal or downgrade in rating will likely reduce the price that a subsequent purchaser will be willing to pay for the certificates. CLASS B CERTIFICATEHOLDERS MAY HAVE TO PAY TAXES ON AMOUNTS NOT ACTUALLY RECEIVED For federal income tax purposes, amounts otherwise payable to the owners of the Class B certificates that are paid to the owners of the Class A certificates will be deemed to have been received by the owners of the Class B certificates and then paid by them to the owners of the Class A certificates pursuant to a guaranty. Accordingly, the owners of the Class B certificates could be liable for taxes on amounts not actually received. See "Federal Income Tax Consequences" in this prospectus supplement and "Material Federal Income Tax Consequences -- Grantor Trusts" in the prospectus. THE CERTIFICATES ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS The certificates are not a suitable investment for any investor that requires a regular or predictable schedule of payments or payment on any specific date. The certificates are complex investments that should be considered only by investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment, default and market risk, the tax consequences of an investment, and the interaction of these factors. FORMATION OF THE TRUST Pursuant to a pooling and servicing agreement (as amended and supplemented, the "Agreement"), to be dated as of [.....] (the "Cutoff Date"), among Ace Securities Corp., as depositor (the "Depositor"), [ ], as seller (in this capacity, the "Seller") and as servicer (in this capacity, the "Servicer"), [ ], as trustee (the "Trustee"), and [ ], as collateral agent (the "Collateral Agent"), the Depositor will establish [ ] Auto Grantor Trust [ ] (the "Trust"). Pursuant to the Agreement, the Depositor will establish the Trust by selling and assigning a pool of fixed rate simple interest and actuarial motor vehicle retail installment sales contracts and other motor vehicle installment chattel paper (the "Receivables") secured by new and used automobiles, recreational vehicles, including motor homes, campers, boats, boat motors, motorcycles, jet skis, waverunners, all-terrain vehicles and snowmobiles, vans trucks, buses and trailers (the "Financed Vehicles") and the other Trust Property, as described below under "The Trust Property" to the Trust in exchange for the $[ ], [ ]% Class A certificates (the "Class A Certificates") and the $[ ], [ ]% Class B certificates (the "Class B Certificates," and, together with the Class A Certificates, the "Certificates"). The Depositor will sell the Certificates to [ ] and Deutsche Banc Alex. Brown, (the "Underwriters") in exchange for cash. All references in this prospectus supplement to sales, assignments and transfers to the Trust refer to sales, assignments and transfers to the Trustee on behalf of the Trust for the benefit of the holders of the Certificates (the "Certificateholders"). The Servicer will, directly or through subservicers, hold the Receivables and the certificates of title or ownership or other documents evidencing the notation of the Seller's lien on the certificates of title or ownership relating to the Financed Vehicles as custodian for the Trustee. However, the Receivables will not be marked or stamped to indicate that they have been sold to the Trust, and the certificates of title for the Financed Vehicles will not be endorsed or otherwise amended to identify the Trustee as the new secured party. Under the foregoing circumstances and in certain jurisdictions, the Trust's interest in the Receivables and the Financed Vehicles may be defeated. See "Risk Factors -- The trust's security interest in the financed vehicles will not be noted on the certificates of title which may cause losses" and "Certain Legal Aspects of the Receivables" in the Prospectus. The Trust will not acquire any contracts or assets other than the Trust Property, and it is not anticipated that the Trust will have any need for additional capital resources. Because the Trust will have no operating history upon its establishment and will not engage in any business activity other than acquiring and holding the Trust Property, issuing the Certificates and distributing payments on these Certificates, no historical or pro forma financial statements or ratios of earnings to fixed charges with respect to the Trust have been included in this prospectus supplement. THE TRUST PROPERTY Each Certificate represents a fractional undivided interest in the Trust. The "Trust Property" will include the Receivables, which, except as provided below, were originated by motor vehicle dealers (the "Dealers") and purchased by the Seller pursuant to agreements with Dealers ("Dealer Agreements"). Approximately [ ]% of the aggregate Principal Balance of the Receivables as of the Cutoff Date (the "Initial Pool Balance") were directly originated by the Seller in connection with referrals from an insurance company. On the date of the issuance of the Certificates (the "Closing Date"), the Depositor will buy the Receivables from the Seller and the Depositor will sell the Receivables to the Trust. The Trust Property also includes: o all monies received under the Receivables on and after the Cutoff Date and, with respect to Actuarial Receivables, monies received under the Actuarial Receivables prior to the Cutoff Date that are due on or after the Cutoff Date; o amounts as from time to time may be held in the Collection Account, the Payahead Account, the Class A Distribution Account and the Class B Distribution Account, established and maintained by the Servicer pursuant to the Agreement as described below; o security interests in the Financed Vehicles; o the rights of the Seller to receive proceeds from claims under particular insurance policies; o the rights of the Trustee on behalf of the Certificateholders under the Agreement; o the rights of the Seller to refunds for the costs of extended service contracts and to refunds of unearned premiums with respect to credit life and credit accident and health insurance policies covering the Financed Vehicles or the retail purchasers of, or other persons owing payments on, the Financed Vehicles (the "Obligors"); o all right, title and interest of the Seller, other than with respect to any Dealer commission, with respect to the Receivables under the related Dealer Agreements; o rights with respect to any repossessed Financed Vehicles; and o all proceeds (within the meaning of the Uniform Commercial Code) of the foregoing. The Reserve Account will be maintained in the name of the Collateral Agent for the benefit of the Certificateholders, but will not be part of the Trust. THE RECEIVABLES POOL POOL COMPOSITION The Receivables were selected from the Seller's portfolio by several criteria, including, as of the Cutoff Date, the following: 1. each Receivable was originated in the United States of America; 2. each Receivable was originated by a Dealer and purchased by the Seller pursuant to a Dealer Agreement; provided, that approximately [ ]% of the Initial Pool Balance was comprised of Receivables originated directly by the Seller in connection with referrals from an insurance company; 3. each Receivable is either a Simple Interest Receivable or an Actuarial Receivable; 4. each Receivable has an original term to maturity of not more than [ ] months and a remaining term to maturity of [ ] months or less as of the Cutoff Date; 5. each Receivable provides for level monthly payments which fully amortize the amount financed except for the last payment, which may be different from the level payment; 6. each Receivable is not more than [ ] days contractually past due as of the Cutoff Date and is not more than [ ] months paid ahead; and 7. each Receivable has an APR of no less than [ ]%. As of the Cutoff Date, no Obligor on any Receivable was noted in the records of the Servicer as being the subject of any pending bankruptcy or insolvency proceeding. The latest scheduled maturity of any Receivable is not later than [ ] (the "Final Scheduled Maturity Date"). The Receivables were selected from the motor vehicle retail installment sales contracts and other installment chattel paper secured by Financed Vehicles ("Motor Vehicle Loans") in the portfolio of the Seller that met the above criteria. The Depositor and the Seller believe that these selection procedures are not materially adverse to Certificateholders. The Depositor considers an account past due if any portion of the payment due on a due date is not received by the succeeding due date for that account. The composition, distribution by remaining term, distribution by APR, geographic distribution and distribution by remaining principal of the Receivables, in each case, as of the Cutoff Date are set forth in the tables below. The percentages in the following tables may not add to 100% due to rounding.
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE NEW FINANCED USED FINANCED VEHICLES VEHICLES TOTAL Aggregate Principal Balance.................. $[ ] $[ ] $[ ] Number of Receivables........................ [ ] [ ] [ ] Average Principal Balance.................... $[ ] $[ ] $[ ] Average Original Balance..................... $[ ] $[ ] $[ ] Weighted Average APR......................... [ ]% [ ]% [ ]% APR (Range).................................. [ ]%- [ ]% [ ]%- [ ]% [ ]%- [ ]% Weighted Average Original Term............... [ ] months [ ] months [ ] months Original Term (Range)........................ [ ] to [ ] months [ ] to [ ] months [ ] to [ ]months Weighted Average Remaining Term.............. [ ] months [ ] months [ ] months Remaining Term (Range)....................... [ ] to [ ] months [ ] to [ ] months [ ] to [ ] months
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES AS OF THE CUTOFF DATE PERCENTAGE REMAINING NUMBER OF AGGREGATE OF INITIAL TERM (RANGE) RECEIVABLES PRINCIPAL BALANCE POOL BALANCE 1 - 12 months................ [ ] $ [ ] [ ]% 13 - 24 months............... [ ] [ ] [ ] 25 - 36 months............... [ ] [ ] [ ] 37 - 48 months............... [ ] [ ] [ ] 49 - 60 months............... [ ] [ ] [ ] 61 - 72 months............... [ ] [ ] [ ] Total..................... [ ] $[ ] 100.00% = ======
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE RECEIVABLES AS OF THE CUTOFF DATE PERCENTAGE ANNUAL NUMBER OF AGGREGATE OF INITIAL PERCENTAGE RATE (RANGE) RECEIVABLES PRINCIPAL BALANCE POOL BALANCE 7.75% - 7.99%........................ [ ] $ [ ] [ ]% 8.00% - 8.99%........................ [ ] [ ] [ ] 9.00% - 9.99%........................ [ ] [ ] [ ] 10.00% - 10.99%...................... [ ] [ ] [ ] 11.00% - 11.99%...................... [ ] [ ] [ ] 12.00% - 12.99%...................... [ ] [ ] [ ] 13.00% - 13.99%...................... [ ] [ ] [ ] 14.00% - 14.99%...................... [ ] [ ] [ ] 15.00% - 15.99%...................... [ ] [ ] [ ] 16.00%............................... [ ] [ ] [ ] Total..................... [ ] $[ ] 100.00% = ======
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE PERCENTAGE NUMBER OF AGGREGATE OF INITIAL STATE(1) RECEIVABLES PRINCIPAL BALANCE POOL BALANCE Pennsylvania......................... [ ] $[ ] [ ]% Delaware............................. [ ] [ ] [ ] New Jersey........................... [ ] [ ] [ ] Maryland............................. [ ] [ ] [ ] New York............................. [ ] [ ] [ ] West Virginia........................ [ ] [ ] [ ] Others(2)............................ [ ] [ ] [ ] Total..................... [ ] $[ ] 100.00% = ====== - --------------- (1) Based on the state where the Obligors took initial title to the motor vehicles, which may differ from the state of origination of the Receivable and/or the billing addresses of the Obligors. (2) Includes [ ] other states and the District of Columbia, none of which have a concentration of Receivables in excess of [ ]% of the Initial Pool Balance.
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE RECEIVABLES AS OF THE CUTOFF DATE PERCENTAGE REMAINING PRINCIPAL NUMBER OF AGGREGATE OF INITIAL BALANCE (RANGE) RECEIVABLES PRINCIPAL BALANCE POOL BALANCE Below $1,000......................... [ ] [ ] [ ]% $1,000 to below $5,000............... [ ] [ ] [ ] $5,000 to below $10,000.............. [ ] [ ] [ ] $10,000 to below $15,000............. [ ] [ ] [ ] $15,000 to below $20,000............. [ ] [ ] [ ] $20,000 to below $25,000............. [ ] [ ] [ ] $25,000 to below $30,000............. [ ] [ ] [ ] $30,000 to below $35,000............. [ ] [ ] [ ] $35,000 to below $40,000............. [ ] [ ] [ ] $40,000 to below $45,000............. [ ] [ ] [ ] $45,000 to below $50,000............. [ ] [ ] [ ] $50,000 to below $55,000............. [ ] [ ] [ ] Total..................... [ ] $[ ] 100.00% = ======
As of the Cutoff Date, approximately [ ]% of the aggregate principal balance of the Simple Interest Receivables, constituting [ ]% of the number of Simple Interest Receivables, were between [ ] payment and [ ] payments paid-ahead. See "Maturity and Prepayment Assumptions -- Paid-Ahead Receivables" in the Prospectus. As of the Cutoff Date, approximately [ ]% of the aggregate principal balance of the Receivables are Simple Interest Receivables. "Simple Interest Receivables" are receivables that provide for the amortization of the amount financed under the receivable over a series of fixed level monthly payments. Each monthly payment includes an installment of interest which is calculated on the basis of the outstanding principal balance of the receivable multiplied by the stated Annual Percentage Rate ("APR") and further multiplied by the period elapsed, as a fraction of a calendar year, since the preceding payment of interest was made. As payments are received under a Simple Interest Receivable, the amount received is applied first to interest accrued to the date of payment and the balance is applied to reduce the unpaid principal balance. Accordingly, if an Obligor pays a fixed monthly installment before its scheduled due date, the portion of the payment allocable to interest for the period since the preceding payment was made will be less than it would have been had the payment been made as scheduled, and the portion of the payment applied to reduce the unpaid principal balance will be correspondingly greater. Conversely, if an Obligor pays a fixed monthly installment after its scheduled due date, the portion of the payment allocable to interest for the period since the preceding payment was made will be greater than it would have been had the payment been made as scheduled, and the portion of the payment applied to reduce the unpaid principal balance will be correspondingly less. In either case, the Obligor pays a fixed monthly installment until the final scheduled payment date, at which time the amount of the final installment is increased or decreased as necessary to repay the then outstanding principal balance. As of the Cutoff Date, approximately [ ]% of the aggregate principal balance of the Receivables are Actuarial Receivables. "Actuarial Receivables" are receivables that provide for amortization of the amount financed over a series of fixed, level-payment monthly installments. Each monthly installment, including the monthly installment representing the final payment on a Receivable, consists of an amount of interest equal to 1/12 of the APR of the amount financed multiplied by the unpaid principal balance of the amount financed, and an amount of principal equal to the remainder of the monthly payment. If an Actuarial Receivable is prepaid in full, with minor variations based upon state law, under the terms of the motor vehicle retail installment sale contract or loan agreement, as the case may be, a "refund" or "rebate" (which may be netted from the prepayment) will be made to the borrower of the portion of the total amount of payments then due and payable under this contract or agreement allocable to "unearned" interest, calculated on the basis of a constant interest rate. If a Simple Interest Receivable is prepaid, rather than receive a rebate, the borrower is required to pay interest only to the date of prepayment. The amount of a rebate under an Actuarial Receivable generally may be less than the remaining scheduled payments of interest that would have been due under a Simple Interest Receivable for which all payments were made on schedule. The Servicer may accede to an Obligor's request to pay scheduled payments in advance, in which event the Obligor will not be required to make another regularly scheduled payment until the time a scheduled payment not paid in advance is due. The amount of any payment made, which are not amounts representing Payaheads, in advance will be treated as a principal prepayment and will be distributed as part of the Principal Distribution Amount in the month following the Collection Period in which the prepayment was made. The "Collection Period" with respect to a Distribution Date will be the calendar month preceding the calendar month in which that Distribution Date occurs. See "Maturity and Prepayment Assumptions" in the Prospectus. THE SERVICER The Servicer is [ ]. [Insert description of the Servicer.]
DELINQUENCY EXPERIENCE (DOLLARS IN THOUSANDS) AT DECEMBER 31, [ ] [ ] [ ] [ ] NUMBER NUMBER NUMBER NUMBER OF LOANS DOLLARS OF LOANS DOLLARS OF LOANS DOLLARS OF LOANS Principal Amount Outstanding (1)......... [ ] $[ ] [ ] $[ ] [........] $[ ] [........] Delinquencies (2) 30-59 Days............................... [ ] [ ] [ ] [ ] [........] [ ] [........] 60-89 Days............................... [ ] [ ] [ ] [ ] [........] [ ] [........] 90-119 Days.............................. [ ] [ ] [ ] [ ] [........] [ ] [........] over 120 days............................ [ ] [ ] [ ] [ ] [........] [ ] [........] Total Delinquencies...................... [ ] $[ ] [ ] $[ ] [........] $[ ] [........] [ ] NUMBER DOLLARS OF LOANS DOLLARS Principal Amount Outstanding (1)......... $[ ] [........ ] $[.......] Delinquencies (2) 30-59 Days............................... [ ] [........ ] [........] 60-89 Days............................... [ ] [........ ] [........] 90-119 Days.............................. [ ] [........ ] [........] over 120 days............................ [ ] [........ ] [........] Total Delinquencies...................... $[ ] [........ ] $[.......] - ------------ (1) Principal Amount Outstanding is the aggregate remaining principal balance of all Receivables serviced, net of unearned interest. (2) The period of delinquency is based on the number of days scheduled payments are contractually past due. Includes repossessions on hand which have not been charged-off. A receivable is 30 days contractually past due if any portion of a scheduled payment has not been received by the subsequent calendar month's scheduled payment date. (3) As a percent of Principal Amount Outstanding in dollars (4) Percentages representing Total Delinquencies may not equal the sum of the components thereof due to rounding.
HISTORICAL LOSS EXPERIENCE (DOLLARS IN THOUSANDS) For Year Ended December 31, [........] [........] [........] [........] [........] ---------- ---------- ---------- ---------- ---------- Period End Principal Amount Outstanding (1)........... $[...... ] $[.......] $[....... ] $[.......] $[....... ] Average Principal Amount Outstanding (2).. $[....... ] $[.......] $[....... ] $[.......] $[....... ] Number of Loans Outstanding (as of period end)........ [........ ] [........] [...... ] [......] [........ ] Average Number of Loans Outstanding (2)............... [........ ] [........] [...... ] [......] [........ ] Gross Losses (3)...................................... $ [...... ] $ [......] $ [...... ] $ [......] $ [...... ] Recoveries (4)........................................ [...... [.... [.. ] [...] [.. ] -------- -------- ------ ----- ------ Net Losses (Gains) (5)................................ [........ ] [........] [........ ] [........ ] [........ ] Gross Losses as a Percentage of Principal Amount Outstanding......................................... [ ]% [ ]% [ ]% [ ]% [ ]% Gross Losses as a Percentage of Average Principal Amount Outstanding.................................. [ ]% [ ]% [ ]% [ ]% [ ]% Net Losses (Gains) as a Percentage of Principal Amount Outstanding......................................... [ ]% [ ]% [ ]% [ ]% [ ]% Net Losses (Gains) as a Percentage of Average Principal Amount Outstanding.................................. [ ]% [ ]% [ ]% [ ]% [ ]% - -------------------- (1) Principal Amount Outstanding is the aggregate remaining principal balance of all Receivables serviced, net of unearned interest. (2) Average of the month-end balances for each of the twelve months in the applicable calendar year. (3) Gross Losses is the aggregate remaining principal balance charged-off after the sale of the related vehicle, other than sales reflected in footnote (4), adjusted for all costs of repossession and sale. (4) Recoveries generally include amounts received on contracts following the time at which the contract is charged off. (5) Net Losses (Gains) is equal to Gross Losses less Recoveries. Net Losses (Gains) may not equal the difference of the components thereof due to rounding.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES Prepayments on automotive receivables can be measured relative to a prepayment standard or model. The model used in this Prospectus Supplement, the Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each month relative to the original number of receivables in a pool of receivables. ABS further assumes that all the receivables are the same size and amortize at the same rate and that each receivable in each month of its life will either be paid as scheduled or be prepaid in full. For example, in a pool of receivables originally containing 10,000 receivables, a 1% ABS rate means that 100 receivables prepay each month. ABS does not purport to be an historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of receivables, including the Receivables. All the Receivables are prepayable at any time. For this purpose the term "prepayments" includes prepayments by Obligors in full or in part, certain partial prepayments related to liquidations due to default, including rebates of extended warranty contract costs and insurance premiums, as well as receipts of proceeds from physical damage, credit life, theft and disability insurance policies and certain other Receivables, purchased or repurchased pursuant to the terms of the Agreement. The rate of prepayments on the Receivables may be influenced by a variety of economic, social and other factors, including changes in interest rates and the fact that an Obligor generally may not sell or transfer the Financed Vehicle securing a Receivable without the consent of the secured party, which generally results in the repayment of the remaining principal balance of the Receivable. In addition, under some circumstances, the Seller is obligated to repurchase and the Servicer is obligated to purchase, Receivables pursuant to the Agreement as a result of uncured breaches of representations and warranties in the case of the Seller and uncured breaches of covenants in the case of the Servicer. In addition, the Servicer has the option to purchase the Receivables when the aggregate principal balance of the Receivables is 10% or less of the Initial Pool Balance, at a purchase price equal to the sum of the Class A Principal Balance and the Class B Principal Balance plus accrued and unpaid interest. Accordingly, under some circumstances it is likely that the Certificates will be repaid before the Final Scheduled Distribution Date set forth in this prospectus supplement under "Summary of Terms -- Final Scheduled Distribution Date." Reinvestment risk associated with early payment of the Certificates will be borne exclusively by the Certificateholders. The table captioned "Percent of Initial Class A and Class B Principal Balance at Various ABS Percentages" (the "ABS Table") has been prepared on the basis of the characteristics of the Receivables. The ABS Table assumes that: (1) the Receivables prepay in full at the specified constant percentage of ABS monthly, with no defaults, losses or repurchases, (2) each scheduled monthly payment on the Receivables is due and made on the last day of each month and each month has 30 days, (3) distributions on the Certificates are made on each Distribution Date, and each Distribution Date is assumed to be the fifteenth day of each applicable month, (4) the balance in the Reserve Account on each Distribution Date is equal to the Specified Reserve Account Balance, and (5) the Servicer does not exercise its option to purchase the Receivables. The ABS Table sets forth the percent of the Initial Class A Principal Balance and the percent of the Initial Class B Principal Balance that would be outstanding after each of the Distribution Dates shown and the corresponding weighted average lives at various constant ABS percentages. The ABS Table also assumes that the Receivables have been aggregated into six hypothetical pools with all of the Receivables within each pool having the following characteristics and that the level scheduled monthly payment for each of the six pools, which is based on its aggregate principal balance, weighted average APR, weighted average original term to maturity and weighted average remaining term to maturity as of the cutoff date, will be such that each pool will fully amortize by the end of its remaining term to maturity.
WEIGHTED AVERAGE WEIGHTED AVERAGE ORIGINAL TERM REMAINING TERM AGGREGATE WEIGHTED AVERAGE TO MATURITY TO MATURITY POOL PRINCIPAL BALANCE ANNUAL PERCENTAGE (IN MONTHS) (IN MONTHS) - ---- ----------------- ------------------ --------- -------- RATE ---- 1......................... $ [ ] [ ]% [ ] [ ] 2......................... [ ] [ ] [ ] [ ] 3......................... [ ] [ ] [ ] [ ]1 4......................... [ ] [ ] [ ] [ ] 5......................... [ ] [ ] [ ] [ ] 6......................... [ ] [ ] [ ] [ ]
The actual characteristics and performance of the Receivables will differ from the assumptions used in constructing the ABS Tables. The assumptions used are hypothetical and have been provided only to give a general sense of how the principal cash flows might behave under varying prepayment scenarios. For example, it is very unlikely that the Receivables will prepay at a constant level of ABS until maturity or that all of the Receivables will prepay at the same level of ABS. Moreover, the diverse terms of Receivables within each of the hypothetical pools could produce slower or faster principal distributions than indicated in the ABS Table at the various constant percentages of ABS specified, even if the original and remaining terms to maturity of the Receivables are as assumed. Any difference between assumptions and the actual characteristics and performance of the Receivables, or actual prepayment experience, will affect the percentages of initial balances outstanding over time and the weighted average lives of the Class A Certificates and the Class B Certificates.
CERTIFICATES ------------------------------------------------------------------------ ASSUMED ABS PERCENTAGE ------------------------------------------------------------------------ DISTRIBUTION DATES [ ] [ ] [ ] [ ] - ------------------ Closing Date.......................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... [ ]............................... Weighted Average Life (years) (1)......................... Weighted Average Life to Optional Clean-Up Call (years) (1)......................... Optional Clean-Up Call Date................................ [ ] [ ] [ ] [ ] (1) The weighted average life of a Certificate is determined by (a) multiplying the amount of each principal payment of the Certificate by the number of years from the date of the issuance of the Certificate to the Distribution Date on which the principal payment is made, (b) adding the results and (c) dividing the sum by the initial principal balance of the Certificate. * Less than 0.5% but greater than 0.0%.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE, INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES, AND SHOULD BE READ IN CONJUNCTION WITH THESE ASSUMPTIONS. USE OF PROCEEDS The net proceeds from the sale of the Certificates will be applied by the Depositor first, to deposit $[ ] into the Reserve Account and second, to purchase the Receivables and the other Trust Property from the Seller. DESCRIPTION OF THE CERTIFICATES The Certificates will be issued pursuant to the Agreement, substantially in the form filed as an exhibit to the Registration Statement. The following information summarizes all material provisions of the Certificates and the Agreement. The following summary supplements the description of the general terms and provisions of the Certificates of any given Series and the related Agreement set forth in the Prospectus, to which description reference is made by this prospectus supplement. OVERVIEW OF THE CERTIFICATES The Class A Certificates will be issued in an initial aggregate principal amount of $[ ] (the "Initial Class A Principal Balance") and the Class B Certificates will be issued in an initial aggregate principal amount of $[ ] (the "Initial Class B Principal Balance"). The Certificates will evidence fractional undivided interests in the assets of the Trust to be created pursuant to the Agreement. The Class A Certificates will evidence in the aggregate an undivided ownership interest of approximately [ ]% of the Trust (the "Class A Percentage") and the Class B Certificates will evidence in the aggregate an undivided ownership interest of approximately [...]% of the Trust (the "Class B Percentage"). The Certificates will constitute Fixed Rate Securities, as this term is defined under "Certain Information Regarding the Securities -- Fixed Rate Securities" in the Prospectus. Interest on the outstanding principal amount of each class of Certificates will accrue at the fixed rate per annum specified for that class on the cover page of this prospectus supplement (each rate, a "Pass-Through Rate"). Interest on the outstanding principal amount of each class of Certificates will accrue at the related Pass-Through Rate from and including [ ], in the case of the first Distribution Date, or from and including the most recent Distribution Date on which interest has been paid to but excluding the following Distribution Date (each representing an "Interest Period"). Interest on the Certificates will be calculated on the basis of a 360 day year consisting of twelve 30 day months. Distributions of principal and interest will be made on the [ ]th day of each month, or if the 15th day is not a business day on the next succeeding Business Day (each, a "Distribution Date"), commencing [ ]. Distributions on a Distribution Date will be made to Certificateholders of record on the Business Day prior to the applicable Distribution Date, or if definitive Certificates have been issued, the last day of the month prior to a Distribution Date (each date, a "Record Date"). A "Business Day" is a day other than a Saturday, a Sunday or a day on which banking institutions or trust companies in New York, New York, [ ] or [ ] are authorized by law, regulation, executive order or governmental decree to be closed. The Certificates will be available in book-entry form through the facilities of The Depository Trust Company in the United States and Clearstream, Luxembourg and the Euroclear System in Europe. See "Certain Information Regarding the Securities--Book-Entry Registration" and "--Definitive Securities" in the Prospectus and Annex I to the Prospectus. THE POOLING AND SERVICING AGREEMENT SALE AND ASSIGNMENT OF THE RECEIVABLES Information regarding the conveyance of the Receivables by the Seller to the Depositor and by the Depositor to the Trust on the Closing Date pursuant to the Agreement is set forth in the Prospectus under "Description of the Transfer and Servicing Agreements -- Sale and Assignment of Receivables." ACCOUNTS The Servicer will establish one or more segregated accounts (the "Collection Account"), in the name of the Trustee on behalf of the Trust and the Certificateholders, into which all payments made on or with respect to the Receivables will be deposited. The Servicer will also establish a segregated account (the "Class A Distribution Account"), in the name of the Trustee on behalf of the Trust and the Class A Certificateholders, and a segregated account (the "Class B Distribution Account"), in the name of the Trustee on behalf of the Trust and the Class B Certificateholders, from which all distributions with respect to the Class A Certificates and the Class B Certificates, respectively, will be made. The Servicer will establish a segregated account (the "Reserve Account"), in the name of [ ], as collateral agent, on behalf of the Certificateholders. The Servicer will establish an additional account (the "Payahead Account"), in the name of the Trustee on behalf of the Trust and the Certificateholders, into which early payments by or on behalf of Obligors on Actuarial Receivables will be deposited until the time the payment becomes due. Until the time payments are transferred from the Payahead Account to the Collection Account, they will not constitute collected interest or collected principal and will not be available for distribution to the Certificateholders. The Collection Account, the Class A Distribution Account, the Class B Distribution Account, the Payahead Account and the Reserve Account are sometimes referred to as the "Trust Accounts." The Reserve Account will be maintained for the benefit of the Certificateholders, but will not be an asset of the Trust. SERVICING COMPENSATION The Servicer will be entitled to receive a fee (the "Base Servicing Fee") for each Collection Period in an amount equal to the product of one-twelfth of 0.50% per annum (the "Servicing Fee Rate") and the Pool Balance as of the first day of the Collection Period. The "Base Servicing Fee" will also include any late fees, other administrative fees or similar charges allowed by applicable law with respect to the Receivables. The Base Servicing Fee, together with any portion of the Base Servicing Fee that remains unpaid from prior Distribution Dates (collectively, the "Servicing Fee"), will be paid on each Distribution Date out of Interest Collections from the Receivables prior to distributions to the Certificateholders. If [ ] or an affiliate of [ ] is no longer the Servicer, a non-affiliated Servicer will also be entitled to receive an additional fee (the "Non-Affiliated Servicing Fee") for each Collection Period in an amount equal to the product of one-twelfth of 0.50% per annum and the Pool Balance as of the first day of the Collection Period. The Non-Affiliated Servicing Fee, together with any portion of the Non-Affiliated Servicing Fee that remains unpaid from prior Distribution Dates, will be paid in the order of priority described herein. See "Description of the Transfer and Servicing Agreement -- Servicing Compensation and Payment of Expenses" in the Prospectus. DISTRIBUTIONS ON CERTIFICATES DEPOSITS TO THE COLLECTION ACCOUNT. On or before the earlier of the tenth Business Day of the month in which a Distribution Date occurs and the fourth Business Day preceding that Distribution Date (the "Determination Date"), the Servicer will provide the Trustee with information with respect to the preceding Collection Period, including the aggregate amounts of the following: o Collections on the Receivables o Advances to be remitted by the Servicer o Liquidated Receivables, if any o Purchase Amounts of the Receivables to be repurchased by the Seller or purchased by the Servicer with respect to the Distribution Date On or before the Business Day preceding each Distribution Date, the Servicer will cause the Interest Collections and the Principal Collections for the Distribution Date to be deposited into the Collection Account. "COLLECTIONS" for any Distribution Date will equal the sum of Interest Collections and Principal Collections for the related Distribution Date. "INTEREST COLLECTIONS" for any Distribution Date will equal the sum of the following amounts with respect to any Distribution Date, computed, with respect to Simple Interest Receivables, in accordance with the simple interest method, and, with respect to Actuarial Receivables, in accordance with the actuarial method: o that portion of all collections on the Receivables allocable to interest in respect of the preceding Collection Period, including with respect to Actuarial Receivables, amounts withdrawn from the Payahead Account and allocable to interest and excluding amounts deposited into the Payahead Account and allocable to interest, in each case in respect of the related Collection Period; o all proceeds, other than any proceeds from any Dealer commission ("Liquidation Proceeds") of the liquidation of Liquidated Receivables, net of expenses incurred by the Servicer in connection with the liquidation and any amounts required by law to be remitted to the Obligor on the Liquidated Receivables, to the extent attributable to interest due on the Liquidated Receivables, which became Liquidated Receivables during the Collection Period in accordance with the Servicer's customary servicing procedures; o the Purchase Amount of each Receivable that was repurchased by the Seller or purchased by the Servicer during the preceding Collection Period to the extent attributable to accrued interest on that Receivable; o all monies collected, from whatever source, other than any proceeds from any Dealer commission, in respect to Liquidated Receivables during any Collection Period following the Collection Period in which the Receivable was written off, net of the sum of any amounts expended by the Servicer for the account of the Obligor and any amounts required by law to be remitted to the Obligor ("Recoveries"); and o all Advances with respect to interest for the related Distribution Date. In calculating the Interest Collections, all payments and proceeds, including Liquidation Proceeds, of any Receivables repurchased by the Seller or purchased by the Servicer the Purchase Amount of which has been included in the Interest Collections on a prior Distribution Date shall be excluded. "PRINCIPAL COLLECTIONS" for any Distribution Date will equal the sum of the following amounts with respect to any Distribution Date, computed, with respect to Simple Interest Receivables, in accordance with the simple interest method, and with respect to Actuarial Receivables, in accordance with the actuarial method: o that portion of all collections on the Receivables allocable to principal in respect of the preceding Collection Period, without regard to any extensions or modifications effected after the Cutoff Date, other than with respect to any extensions or modifications in connection with Cram Down Losses during the related Collection Period, including with respect to Actuarial Receivables, amounts withdrawn from the Payahead Account and allocable to principal and excluding amounts deposited into the Payahead Account and allocable to principal, in each case in respect of the related Collection Period; o Liquidation Proceeds attributable to the principal amount of Receivables which became Liquidated Receivables during the preceding Collection Period in accordance with the Servicer's customary servicing procedures with respect to the Liquidated Receivables; o all Advances made by the Servicer of principal due on the Actuarial Receivables in respect of the preceding Collection Period; o to the extent attributable to principal, the Purchase Amount of each Receivable repurchased by the Seller or purchased by the Servicer during the preceding Collection Period; and o partial prepayments on Receivables in respect of the preceding Collection Period relating to refunds of extended service contracts, or of physical damage, credit life, credit accident or health insurance premium, disability insurance policy premiums, but only if these costs or premiums were financed by the respective Obligor and only to the extent not included in the first bullet point above. In calculating the Principal Collections, all payments and proceeds, including Liquidation Proceeds, of any Receivables repurchased by the Seller or purchased by the Servicer the Purchase Amount of which has been included in the Principal Collections on a prior Distribution Date shall be excluded. WITHDRAWALS FROM THE PAYAHEAD ACCOUNT. On or before the Business Day preceding each Distribution Date, the Servicer will or will cause the Trustee to (x) deposit into the Collection Account in immediately available funds, the portion of Payaheads constituting scheduled payments on Actuarial Receivables or that are to be applied to prepay Actuarial Receivables in full and (y) distribute to the Depositor, in immediately available funds, all investment earnings on funds in the Payahead Account with respect to the preceding Collection Period. Monthly Withdrawals from the Collection Account. Except as set forth under "--Collections on Actuarial Receivables" below, on each Distribution Date, the Servicer shall instruct the Trustee to withdraw from the Collection Account and deposit in the Payahead Account in immediately available funds, the aggregate Payaheads collected during the preceding Collection Period. On each Distribution Date, the Servicer shall calculate the amounts set forth below and shall instruct the Trustee to make the following deposits and distributions, after payment to the Servicer from the Collection Account of amounts in reimbursement of Advances previously made by the Servicer (as described below under "--Advances"), to the extent of Interest Collections (and, in the case of shortfalls occurring under clause (2) below in the Class A Interest Distribution, the Class B Percentage of Principal Collections to the extent of such shortfalls): (1) to the Servicer, the Servicing Fee and if the Servicer is an entity other than [ ], or [ ] or one of their affiliates, the Non-Affiliated Servicing Fee; (2) to the Class A Distribution Account, after the application of clause (1), the Class A Interest Distribution; and (3) to the Class B Distribution Account, after the application of clauses (1) and (2), the Class B Interest Distribution. On each Distribution Date, the Servicer shall calculate the amounts set forth below and shall instruct the Trustee to make the following deposits and distributions, to the extent of Principal Collections and Interest Collections remaining after the application of clauses (1), (2) and (3) above: (4) to the Class A Distribution Account, the Class A Principal Distribution; (5) to the Class B Distribution Account, after the application of clause (4), the Class B Principal Distribution; and (6) to the Reserve Account, any amounts remaining after the application of clauses (1) through (5); these amounts to be distributed as described below under "Credit Enhancement--Reserve Account." To the extent necessary to satisfy the distributions described in clauses (1) through (5) above, the Servicer shall calculate the amounts set forth below and shall instruct the Trustee to withdraw from the Reserve Account and deposit in the Class A Distribution Account or the Class B Distribution Account as described below in the following order of priority on each Distribution Date: (1) an amount equal to the excess of the Class A Interest Distribution over the sum of Interest Collections (net of amounts paid to the Servicer pursuant to clause (1) of the preceding paragraph) and the Class B Percentage of Principal Collections will be deposited into the Class A Distribution Account; (2) an amount equal to the excess of the Class B Interest Distribution over the portion of Interest Collections (net of amounts paid to the Servicer pursuant to clause (1) of the preceding paragraph) remaining after the distribution of the Class A Interest Distribution will be deposited into the Class B Distribution Account; (3) an amount equal to the excess of the Class A Principal Distribution over the portion of Principal Collections and Interest Collections (net of amounts paid to the Servicer pursuant to clause (1) of the preceding paragraph) remaining after the distribution of the Class A Interest Distribution and the Class B Interest Distribution will be deposited into the Class A Distribution Account; and (4) an amount equal to the excess of the Class B Principal Distribution over the portion of Principal Collections and Interest Collections remaining (net of amounts paid to the Servicer pursuant to clause (1) of the preceding paragraph) after the distribution of the Class A Interest Distribution, the Class B Interest Distribution and the Class A Principal Distribution will be deposited into the Class B Distribution Account. On each Distribution Date, all amounts on deposit in the Class A Distribution Account will be distributed to the Class A Certificateholders and all amounts on deposit in the Class B Distribution Account will be distributed to the Class B Certificateholders. RELATED DEFINITIONS For purposes of this prospectus supplement, the following terms have the following meanings: "CRAM DOWN LOSS" means, with respect to a Receivable if a court of appropriate jurisdiction in a bankruptcy or insolvency proceeding shall have issued an order reducing the amount owed on the Receivable or otherwise modifying or restructuring the scheduled payments to be made on the Receivable, an amount equal to: (1) the excess of the principal balance of the Receivable immediately prior to the court order over the principal balance of the Receivable as so reduced; and (2) if the issuing court shall have issued an order reducing the effective rate of interest on the Receivable, the net present value, using as the discount rate the higher of the APR on the Receivable or the rate of interest, if any, specified by the court in the order, of the scheduled payments as so modified or restructured. A "Cram Down Loss" shall be deemed to have occurred on the date of issuance of the court order. "CLASS A INTEREST CARRYOVER SHORTFALL" means, with respect to any Distribution Date, the excess of Class A Monthly Interest for the preceding Distribution Date and any outstanding Class A Interest Carryover Shortfall on the preceding Distribution Date, over the amount in respect of interest that is actually deposited in the Class A Distribution Account on the preceding Distribution Date, plus 30 days of interest on that excess, to the extent permitted by law, at the Class A Pass-Through Rate. "CLASS A INTEREST DISTRIBUTION" means, with respect to any Distribution Date, the sum of Class A Monthly Interest for the Distribution Date and the Class A Interest Carryover Shortfall for the Distribution Date. "CLASS A MONTHLY INTEREST" means, with respect to any Distribution Date, the product of (x) one-twelfth of the Class A Pass-Through Rate and (y) the Class A Principal Balance as of the immediately preceding Distribution Date, after giving effect to any payments made on that Distribution Date, or, in the case of the first Distribution Date, the Initial Class A Principal Balance. "CLASS A MONTHLY PRINCIPAL" means, with respect to any Distribution Date, the Class A Percentage of Principal Collections for the Distribution Date plus the sum of (1) the Class A Percentage of Realized Losses with respect to Receivables which became Liquidated Receivables during the related Collection Period and (2) the Class A Percentage of the aggregate amount of Cram Down Losses during the related Collection Period. "CLASS A PASS-THROUGH RATE" means, with respect to the Class A Certificates, % per annum. "CLASS A PRINCIPAL BALANCE" equals the Initial Class A Principal Balance, as reduced by all amounts allocable to principal on the Class A Certificates previously distributed to Class A Certificateholders. "CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Distribution Date, the excess of Class A Monthly Principal for the preceding Distribution Date and any outstanding Class A Principal Carryover Shortfall on the preceding Distribution Date over the amount in respect of principal that is actually deposited in the Class A Distribution Account on the preceding Distribution Date. "CLASS A PRINCIPAL DISTRIBUTION" means, with respect to any Distribution Date, the sum of Class A Monthly Principal for that Distribution Date and the Class A Principal Carryover Shortfall for that Distribution Date; provided, however, that the Class A Principal Distribution shall not exceed the Class A Principal Balance immediately prior to that Distribution Date. In addition, on the Final Scheduled Distribution Date, the principal required to be deposited in the Class A Distribution Account will include the lesser of: (a) any principal due and remaining unpaid on each Receivable in the Trust as of the Final Scheduled Maturity Date; or (b) the portion of the amount required to be deposited under clause (a) above that is necessary, after giving effect to the other amounts to be deposited in the Class A Distribution Account on the applicable Distribution Date and allocable to principal, to reduce the Class A Principal Balance to zero. "CLASS B INTEREST CARRYOVER SHORTFALL" means, with respect to any Distribution Date, the excess of Class B Monthly Interest for the preceding Distribution Date and any outstanding Class B Interest Carryover Shortfall on the preceding Distribution Date, over the amount in respect of interest that is actually deposited in the Class B Distribution Account on the preceding Distribution Date, plus 30 days of interest on this excess, to the extent permitted by law, at the Class B Pass-Through Rate. "CLASS B INTEREST DISTRIBUTION" means, with respect to any Distribution Date, the sum of Class B Monthly Interest for that Distribution Date and the Class B Interest Carryover Shortfall for that Distribution Date. "CLASS B MONTHLY INTEREST" means, with respect to any Distribution Date, the product of (x) one-twelfth of the Class B Pass-Through Rate and (y) the Class B Principal Balance as of the immediately preceding Distribution Date, after giving effect to any payments made on that Distribution Date, or, in the case of the first Distribution Date, the Initial Class B Principal Balance. "CLASS B MONTHLY PRINCIPAL" means, with respect to any Distribution Date, the Class B Percentage of Principal Collections for that Distribution Date plus the sum of (1) the Class B Percentage of Realized Losses with respect to Receivables which became Liquidated Receivables during the related Collection Period and (2) the Class B Percentage of the aggregate amount of Cram Down Losses during the related Collection Period. "CLASS B PASS-THROUGH RATE" means, with respect to the Class B Certificates, [ ] % per annum. "CLASS B PRINCIPAL BALANCE" equals the Initial Class B Principal Balance, as reduced by all amounts allocable to principal on the Class B Certificates previously distributed to Class B Certificateholders. "CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Distribution Date, the excess of Class B Monthly Principal for the preceding Distribution Date and any outstanding Class B Principal Carryover Shortfall on the preceding Distribution Date over the amount in respect of principal that is actually deposited in the Class B Distribution Account on the preceding Distribution Date. "CLASS B PRINCIPAL DISTRIBUTION" means, with respect to any Distribution Date, the sum of Class B Monthly Principal for that Distribution Date and the Class B Principal Carryover Shortfall for that Distribution Date; provided, however, that the Class B Principal Distribution shall not exceed the Class B Principal Balance immediately prior to that Distribution Date. In addition, on the Final Scheduled Distribution Date, the principal required to be distributed to Class B Certificateholders will include the lesser of: (a) any principal due and remaining unpaid on each Receivable in the Trust as of the Final Scheduled Maturity Date; or (b) the portion of the amount required to be deposited under clause (a) above that is necessary, after giving effect to the other amounts to be deposited in the Class B Distribution Account on the Distribution Date and allocable to principal, to reduce the Class B Principal Balance to zero, and, in the case of clauses (a) and (b), remaining after any required distribution of the amount described in clause (a) to the Class A Distribution Account. "LIQUIDATED RECEIVABLES" means, Receivables (x) which have been liquidated by the Servicer through the sale of the related Financed Vehicle, (y) as to which all or a portion representing 10% or more of a scheduled payment due is 120 or more days delinquent or (z) with respect to which proceeds have been received which, in the Servicer's judgment, constitute the final amounts recoverable in respect of such Receivable. A Receivable first becomes a Liquidated Receivable upon the earliest to occur of (x), (y) or (z) above. The "POOL BALANCE" at any time will represent the aggregate principal balance of the Receivables at the end of the preceding Collection Period, after giving effect to all payments, other than Payaheads, received from Obligors and Purchase Amounts to be remitted by the Servicer and the Seller, as the case may be, all for the related Collection Period, all losses realized on Receivables that became Liquidated Receivables during the related Collection Period and all Cram Down Losses for the related Collection Period. "REALIZED LOSSES" means, for any period, the excess of the principal balance of a Liquidated Receivable over Liquidation Proceeds to the extent allocable to principal. ADVANCES With respect to any Distribution Date, the Servicer may, in its sole discretion, make a payment (an "Advance") with respect to each Receivable, other than a Liquidated Receivable, equal to (A) with respect to Simple Interest Receivables, the excess, if any, of (x) the product of the principal balance of such Receivable as of the last day of the related Collection Period and one-twelfth of its APR, over (y) the interest actually received by the Servicer with respect to such Receivable from the Obligor or from the payment of the Repurchase Amount during or with respect to such Collection Period and (B) with respect to Actuarial Receivables, the scheduled payment of principal and interest due during the related Collection Period but not received. The Servicer may elect not to make any Advance with respect to a Receivable to the extent that the Servicer, in its sole discretion, determines that such Advance is not recoverable from subsequent payments on such Receivable or from funds in the Reserve Account. With respect to Simple Interest Receivables, to the extent that the amount set forth in clause (y) above plus amounts withdrawn from the Reserve Account during or with respect to the related Collection Period and allocable to interest with respect to a Simple Interest Receivable is greater than the amount set forth in clause (x) above with respect to a Simple Interest Receivable, this amount shall be distributed to the Servicer on the related Distribution Date to reimburse the Servicer for previous unreimbursed Advances with respect to that Simple Interest Receivable. Before a Simple Interest Receivable becomes a Liquidated Receivable, this reimbursement will only be from accrued interest due from the Obligor under that Receivable. Collections on an Actuarial Receivable made during a Collection Period shall be applied first to repay any unreimbursed Advances on that Actuarial Receivable. In addition, on the Business Day before each Distribution Date the Trustee shall withdraw from the Reserve Account an amount equal to the amount of any outstanding Advances on Liquidated Receivables to the extent not recovered from Liquidation Proceeds. The Servicer will deposit all Advances with respect to any Distribution Date into the Collection Account on the Business Day before each Distribution Date. COLLECTIONS ON ACTUARIAL RECEIVABLES To the extent that collections on an Actuarial Receivable during a Collection Period exceed the outstanding Advances on the Actuarial Receivable, the collections shall then first be applied to the scheduled payment on that Receivable. If any collections remaining after the scheduled payment is made are insufficient to prepay the Actuarial Receivable in full, then, the remaining collections (the "Payaheads") shall be transferred to and kept in the Payahead Account, until a later Collection Period where the collections may be transferred to the Collection Account and applied either to the scheduled payment or to prepay the Actuarial Receivable in full. The scheduled payment with respect to an Actuarial Receivable is that portion of the payment required to be made by the related Obligor during each calendar month sufficient to amortize the principal balance of that Actuarial Receivable under the actuarial method over the term of the Actuarial Receivable and to provide interest at the APR of that Actuarial Receivable. Notwithstanding the foregoing, so long as the Servicer is not required to remit collections to the Collection Account within two Business Days of receipt, the Servicer will not be required to deposit Payaheads to the Payahead Account but shall be required to deposit Payaheads to the Collection Account as described above. CREDIT ENHANCEMENT SUBORDINATION OF THE CLASS B CERTIFICATES. The rights of the Class B Certificateholders to receive distributions with respect to the Receivables will be subordinated to the rights of the Class A Certificateholders to the extent described below. This subordination is intended to enhance the likelihood of timely receipt by Class A Certificateholders of the full amount of interest and principal required to be paid to them, and to afford such Class A Certificateholders limited protection against losses in respect of the Receivables. No distribution will be made to the Class B Certificateholders on any Distribution Date in respect of interest until the full amount of interest on the Class A Certificates payable on such Distribution Date has been distributed to the Class A Certificateholders. No distribution will be made to the Class B Certificateholders on any Distribution Date in respect of principal until the full amount of interest on and principal of the Class A Certificates and interest on the Class B Certificates payable on such Distribution Date has been distributed to the Class A Certificateholders and the Class B Certificateholders, respectively. Distributions of interest on the Class B Certificates, however, to the extent of collections on or in respect of the Receivables allocable to interest and certain available amounts on deposit in the Reserve Account, will not be subordinated to the payment of principal of the Class A Certificates. RESERVE ACCOUNT. In the event of delinquencies or losses on the Receivables, the protection afforded to the Class A Certificateholders will be effected both by the preferential right of the Class A Certificateholders to receive current distributions with respect to the Receivables, to the extent described above under "-- Subordination of the Class B Certificates," prior to any distribution being made on a Distribution Date to the Class B Certificateholders, and to receive amounts on deposit in the Reserve Account. Amounts on deposit in the Reserve Account will also be generally available to cover shortfalls in required distributions to the Class B Certificateholders, in respect of interest, after payment of interest on the Class A Certificates and, in respect of principal, after payment of interest on and principal of the Class A Certificates and interest on the Class B Certificates. The Reserve Account will not be a part of or otherwise includible in the Trust and will be a segregated trust account held by the Collateral Agent for the benefit of the Certificateholders. On the Closing Date, the Depositor will deposit $[ ] ([ ]% of the Initial Pool Balance) (the "Reserve Account Initial Deposit") into the Reserve Account. The Reserve Account Initial Deposit will be augmented on each Distribution Date by deposit in the Reserve Account of Collections remaining after distribution of the Servicing Fee and amounts to be paid to Class A Certificateholders and Class B Certificateholders as described above under "--Distributions on Certificates." To the extent that amounts on deposit in the Reserve Account after distributions on a Distribution Date exceed the Specified Reserve Account Balance, such excess will be released first, to the Servicer (if the Servicer is [ ]), in an amount equal to the Non-Affiliated Servicing Fee, together with any portion of the Non-Affiliated Servicing Fee that remains unpaid from prior Distribution Dates, and second, to the Depositor. Upon any such release to the Depositor of amounts from the Reserve Account, neither the Class A Certificateholders nor the Class B Certificateholders will have any further rights in, or claims to, such amounts. "SPECIFIED RESERVE ACCOUNT BALANCE" with respect to any Distribution Date will equal [ ]% of the Pool Balance as of the last day of the related Collection Period, but in any event will not be less than the lesser of: (1) [ ] ([ ]% of the Initial Pool Balance), and (2) the Pool Balance; PROVIDED, that if the Average Net Loss Ratio exceeds [ ]% or the Average Delinquency Percentage exceeds [ ]% on a Distribution Date, beginning with the [ ] Distribution Date, the Specified Reserve Account Balance for the Distribution Date shall be calculated using a percentage of [ ]%. "AGGREGATE NET LOSSES" means, for any Distribution Date, the amount equal to (1) the aggregate Principal Balance of all Receivables that became Liquidated Receivables during the related Collection Period minus (2) the Liquidation Proceeds allocable to principal collected during the related Collection Period with respect to any Liquidated Receivables. "AVERAGE DELINQUENCY PERCENTAGE" means, for any Distribution Date, the average of the Delinquency Percentages for the Distribution Date and the preceding two Distribution Dates. "AVERAGE NET LOSS RATIO" means, for any Distribution Date, the average of the Net Loss Ratios for the Distribution Date and the preceding two Distribution Dates. "DELINQUENCY PERCENTAGE" means, for any Distribution Date, the sum of the outstanding Principal Balances of all Receivables which are 60 days or more delinquent, including Receivables relating to Financed Vehicles that have been repossessed, as of the close of business on the last day of the Collection Period immediately preceding the Distribution Date, determined in accordance with the Servicer's normal practices, this sum expressed as a percentage of the Pool Balance as of the close of business on the last day of the related Collection Period. "LIQUIDATION PROCEEDS" means with respect to any Receivable, (1) insurance proceeds, (2) the monies collected during a Collection Period from whatever source on a Liquidated Receivable and (3) proceeds of a Financed Vehicle sold after repossession, in each case, net of any liquidation expenses and payments required by law to be remitted to the Obligor. "NET LOSS RATIO" means, for any Distribution Date, an amount expressed as a percentage, equal to the product of (A) twelve and (B) (1) the Aggregate Net Losses for the Distribution Date, divided by (2) the average of the Pool Balances on each of the first day of the related Collection Period and the last day of the related Collection Period. The Specified Reserve Account Balance may be reduced to a lesser amount; provided, that the reduction may not adversely affect any rating of the Certificates by a Rating Agency. In no circumstances will the Depositor be required to deposit any amounts in the Reserve Account other than the Reserve Account Initial Deposit to be made on the Closing Date. Amounts held from time to time in the Reserve Account will continue to be held for the benefit of the Certificateholders and may be invested in Eligible Investments. Any loss on an investment will be charged to the Reserve Account. Any investment earnings, net of losses, will be paid to the Depositor. The time necessary for the Reserve Account to reach and maintain the Specified Reserve Account Balance at any time after the date of issuance of the Certificates will be affected by the delinquency, credit loss and repossession and prepayment experience of the Receivables and, therefore, cannot be accurately predicted. If on any Distribution Date the protection afforded the Class A Certificates by the Class B Certificates and by the Reserve Account is exhausted, the Class A Certificateholders will directly bear the risks associated with ownership of the Receivables. If on any Distribution Date amounts on deposit in the Reserve Account have been depleted, the protection afforded the Class B Certificates by the Reserve Account will be exhausted and the Class B Certificateholders will directly bear the risks associated with ownership of the Receivables. None of the Class B Certificateholders, the Trustee, the Servicer, the Seller or the Depositor will be required to refund any amounts properly distributed or paid to them, whether or not there are sufficient funds on any subsequent Distribution Date to make full distributions to the Class A Certificateholders. TERMINATION The Servicer will be permitted, at its option, in the event that the Pool Balance as of the last day of a Collection Period has declined to 10% or less of the Initial Pool Balance, to purchase from the Trust, on any Distribution Date occurring in a subsequent Collection Period, all remaining Receivables in the Trust at a purchase price equal to the sum of the Class A Principal Balance and the Class B Principal Balance plus accrued and unpaid interest at the applicable Pass-Through Rates. The exercise of this right will effect an early retirement of the Certificates. See "Description of the Transfer and Servicing Agreements -- Termination" in the Prospectus. DUTIES OF THE TRUSTEE The Trustee will make no representations as to the validity or sufficiency of the Agreement, the Certificates, other than the execution and authentication of the Certificates, the Receivables or any related documents, and will not be accountable for the use or application by the Depositor or the Servicer of any funds paid to the Depositor or the Servicer in respect of the Certificates or the Receivables, or the investment of any monies by the Servicer before the monies are deposited into the Collection Account. The Trustee will not independently verify the Receivables. If no Event of Servicing Termination (as described in the Prospectus) has occurred and is continuing, the Trustee will be required to perform only those duties specifically required of it under the Agreement. Generally, those duties are limited to the receipt of the various certificates, reports or other instruments required to be furnished to the Trustee under the Agreement, in which case it will only be required to examine them to determine whether they conform to the requirements of the Agreement. The Trustee will not be charged with knowledge of a failure by the Servicer to perform its duties under the Agreement which failure constitutes an Event of Servicing Termination unless a responsible officer of the Trustee obtains actual knowledge of the failure as specified in the Agreement. The Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Agreement or to make any investigation of matters arising under the Agreement or to institute, conduct or defend any litigation under the Agreement or in relation to the Agreement at the request, order or direction of any of the Certificateholders, unless the Certificateholders have offered the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred in or by an exercise of the Trustee's rights or powers or an investigation. No Class A Certificateholder or Class B Certificateholder will have any right under the Agreement to institute any proceeding with respect to the Agreement, unless the holder has given the Trustee written notice of default and unless, with respect to the Class A Certificates, the holders of Class A Certificates evidencing not less than a majority of the aggregate outstanding principal balance of the Class A Certificates or, with respect to the Class B Certificates, the holders of Class B Certificates evidencing not less than a majority of the aggregate outstanding principal balance of the Class B Certificates, have made a written request to the Trustee to institute a proceeding in its own name as Trustee under the Agreement and have offered to the Trustee reasonable indemnity, and the Trustee for 30 days has neglected or refused to institute any proceedings. THE TRUSTEE [ ], a national banking association, will act as Trustee under the Agreement. The Trustee, in its individual capacity or otherwise, and any of its affiliates, may hold Certificates in their own names or as pledgee. In addition, for the purpose of meeting the legal requirements of some jurisdictions, the Servicer and the Trustee, acting jointly, or in some instances, the Trustee, acting alone, will have the power to appoint co-trustees or separate trustees of all or any part of the Trust. In the event of an appointment, all rights, powers, duties and obligations conferred or imposed upon the Trustee by the Agreement will be conferred or imposed upon the Trustee and the co-trustee or separate trustee jointly, or, in any jurisdiction where the Trustee is incompetent or unqualified to perform certain acts, singly upon the co-trustee or separate trustee who shall exercise and perform these rights, powers, duties and obligations solely at the direction of the Trustee. The Trustee may resign at any time, in which event the Servicer will be obligated to appoint a successor trustee. The Servicer may also remove the Trustee if the Trustee ceases to be eligible to serve, becomes legally unable to act, is adjudged insolvent or is placed in receivership or similar proceedings. In these circumstances, the Servicer will be obligated to appoint a successor trustee. However, any resignation or removal of the Trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by the successor trustee. The Agreement will provide that the Servicer will pay the Trustee's fees. The Agreement will also provide that the Trustee will be entitled to indemnification by the Depositor for, and will be held harmless against, any loss, liability or expense incurred by the Trustee not resulting from the Trustee's own willful misfeasance, bad faith or negligence. Indemnification will be unavailable to the Trustee to the extent that any loss, liability or expense results from a breach of any of the Trustee's representations or warranties set forth in the Agreement, and for any tax, other than those for which the Depositor or the Servicer is required to indemnify the Trustee. The Trustee's Corporate Trust Office is located at [ ]. The Depositor, the Servicer, the Seller and their respective affiliates may have other banking relationships with the Trustee and its affiliates in the ordinary course of their business. In the Agreement, [ ] will agree to perform certain bond administration, distribution obligations and custodial functions on behalf of the Trustee and to act as successor servicer if [ ] is removed as servicer. In performing these functions, [ ] will be entitled to all of the rights, powers and indemnities afforded to the Trustee under the Agreement. FEDERAL INCOME TAX CONSEQUENCES Upon the issuance of the Certificates, Stroock & Stroock & Lavan LLP, special tax counsel ("Federal Tax Counsel"), will deliver its opinion to the effect that, under then current law, assuming compliance with the Agreement, the Trust will be classified for federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, each Certificateholder will be subject to federal income taxation as if it owned directly its interest in each asset owned by the Trust and paid directly its share of expenses paid by the Trust. Certain individuals, estates, trusts and partnerships may be limited in their ability to fully deduct the expenses of the Trust. See "Material Federal Income Tax Consequences" in the Prospectus for a discussion of those limits. For federal income tax purposes, the Depositor will be deemed to have retained a fixed portion of the interest due on each Receivable (the "Spread"). The Spread will be treated as "stripped coupons" within the meaning of Section 1286 of the Internal Revenue Code of 1986, as amended (the "Code"). The Servicer may also be deemed to have retained a "stripped coupon" if and to the extent that the Servicing Fee is determined to be unreasonable. In addition, because the Class B Pass-Through Rate exceeds the Class A Pass-Through Rate, a portion of the interest accrued on each Receivable will be treated as a "stripped coupon" purchased by the Class B Certificateholders. Accordingly, each Class A Certificateholder will be treated as owning its pro rata percentage interest in the principal of, and interest payable on, each Receivable (minus the portion of the interest payable on such Receivable that is treated as Spread, as a stripped coupon retained by the Servicer or as a stripped coupon purchased by the Class B Certificateholders), and such interest in each Receivable will be treated as a "stripped bond" within the meaning of Section 1286 of the Code. Similarly, each Class B Certificateholder will be treated as owning its pro rata percentage interest in the principal of each Receivable, plus a disproportionate share of the interest payable on each Receivable. CLASS A CERTIFICATEHOLDERS Because the Class A Certificates represent stripped bonds, they will be subject to the original issue discount ("OID") rules of the Code. Accordingly, the tax treatment of a Class A Certificateholder will depend upon whether the amount of OID on a Class A Certificate is less than a statutorily defined de minimis amount. See "Material Federal Income Tax Consequences -- Grantor Trusts -- Stripped Certificates" for a discussion regarding the calculation of OID, if any, on stripped bonds. If the amount of OID is de minimis under the OID provisions of the Code, the Class A Certificates would not be treated as having OID. Each Class A Certificateholder would be required to report on its federal income tax return its share of the gross income of the Trust, including interest and certain other charges accrued on the Receivables and any gain upon collection or disposition of the Receivables (but not including any portion of the Receivables treated as "stripped coupons" as described above that are treated as owned by other parties). Such gross income attributable to interest on the Receivable would exceed the Class A Pass-Through Rate by an amount equal to the Class A Certificateholder's share of the expenses of the Trust for the period during which it owns a Class A Certificate. As indicated above, a Class A Certificateholder generally would be entitled to deduct its share of expenses of the Trust, subject to certain limitations that apply in the case of Certificateholders that are individuals, trusts, estates or partnerships. Any amounts received by a Class A Certificateholder from the Reserve Account or from the subordination of the Class B Certificates will be treated for federal income tax purposes as having the same character as the payments they replace. A Class A Certificateholder would report its share of the income of the Trust under its usual method of accounting. Accordingly, interest would be includable in a Certificateholder's gross income when it accrues on the Receivables, or, in the case of Certificateholders who are cash basis taxpayers, when received by the Servicer on behalf of Certificateholders. The actual amount of discount on a Receivable would be includable in income as principal payments are received on the Receivables. If OID relating to a Class A Certificate is not de minimis, a Class A Certificateholder will be required to include in income, in addition to the amounts described above, any OID as it accrues, regardless of when cash payments are received, using a method reflecting a constant yield on the Receivables. Although the Trustee intends to account for OID, if any, reportable by holders of Class A Certificates by reference to the price paid for a Class A Certificate by an initial purchaser, the amount of OID will differ for subsequent purchasers. Such subsequent purchasers should consult their tax advisers regarding the proper calculation of OID on the interest in the Receivables represented by a Class A Certificate. CLASS B CERTIFICATEHOLDERS IN GENERAL. Except as described below, it is believed that the Class B Certificateholders will be subject to tax in the same manner as Class A Certificateholders. However, no federal income tax authorities address the precise method of taxation of an instrument such as the Class B Certificates and Federal Tax Counsel cannot opine on this issue. In the absence of applicable authorities, the Trustee intends to report income to Class B Certificateholders in the manner described below. Each Class B Certificateholder will be treated as owning (x) the Class B Percentage of each Receivable plus (y) a disproportionate portion of the interest on each Receivable (not including the Spread). Income will be reported to a Class B Certificateholder based on the assumption that all amounts payable to the Class B Certificateholders are taxable under the coupon stripping provisions of the Code and treated as a single obligation. In applying those provisions, the Trustee will take the position that a Class B Certificateholder's entire share of the interest on a Receivable will qualify as "qualified stated interest." Thus, except to the extent modified by the effects of subordination of the Class B Certificates, as described below, income will be reported to Class B Certificateholders in the manner described above for holders of the Class A Certificates. EFFECT OF SUBORDINATION If the Certificateholders of one Class of Certificates receive distributions of less than their share of the Trust's receipts of principal or interest (the "Shortfall Amount") because of the subordination of the Certificates, it is believed that such Certificateholders would probably be treated for federal income tax purposes as if they had: (1) received as distributions their full share of such receipts, (2) paid over to the Certificateholders of the other Class of Certificates an amount equal to such Shortfall Amount, and (3) retained the right to reimbursement of such amounts to the extent of future collections otherwise available for deposit in the Reserve Account. However, Federal Tax Counsel cannot opine to such treatment. Under this treatment, (x) Class B Certificateholders would be required to accrue as current income any interest, OID income, or (to the extent paid on the Receivables) accrued market discount of the Trust that was a component of the Shortfall Amount, even though such amount was in fact paid to the Class A Certificateholders, (y) a loss would only be allowed to the Class B Certificateholders when their right to receive reimbursement of such Shortfall Amount became worthless (i.e., when it became clear that that amount would not be available from any source to reimburse such loss), and (z) reimbursement of such Shortfall Amount prior to such a claim of worthlessness would not be taxable income to Class B Certificateholders because such amount was previously included in income. Those results should not significantly affect the inclusion of income for Class B Certificateholders on the accrual method of accounting, but could accelerate inclusion of income to Class B Certificateholders on the cash method of accounting by, in effect, placing them on the accrual method. Moreover, the character and timing of loss deductions are unclear and all Class B Certificateholders are encouraged to consult their tax advisors regarding such character and timing. All Certificateholders should see "Material Federal Income Tax Consequences" in the Prospectus for a more detailed discussion of the material federal income tax consequences of the purchase, ownership and disposition of the Certificates. STATE AND LOCAL TAX CONSEQUENCES The discussion under "Federal Income Tax Consequences" above does not address the tax consequences of purchase, ownership or disposition of the Certificates under any state or local tax law. We recommend that investors consult their own tax advisors regarding state and local tax consequences. ERISA CONSIDERATIONS A fiduciary of a pension, profit-sharing, retirement or other employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), should consider the fiduciary standards under ERISA in the context of the plan's particular circumstances before authorizing an investment of a portion of such plan's assets in the Certificates. Accordingly, pursuant to Section 404 of ERISA, such fiduciary should consider among other factors: (1) whether the investment is for the exclusive benefit of plan participants and their beneficiaries; (2) whether the investment satisfies the applicable diversification requirements; (3) whether the investment is in accordance with the documents and instruments governing the plan; and (4) whether the investment is prudent, considering the nature of the investment. Fiduciaries of plans also should consider ERISA's prohibition on improper delegation of control over, or responsibility for, plan assets. In addition, benefit plans subject to ERISA, as well as individual retirement accounts or certain types of Keogh plans not subject to ERISA but subject to Section 4975 of the Code and any entity whose source of funds for the purchase of Certificates includes plan assets by reason of a plan or account investing in such entity (each, a "Plan"), are prohibited from engaging in a broad range of transactions involving Plan assets and persons having certain specified relationships to a Plan ("Parties in Interest" and "Disqualified Persons"). Such transactions are treated as "prohibited transactions" under Sections 406 and 407 of ERISA and excise taxes are imposed upon such persons by Section 4975 of the Code. An investment in Certificates by a Plan might result in the assets of the Trust being deemed to constitute Plan assets, which in turn might mean that certain aspects of such investment, including the operation of the Trust, might be prohibited transactions under ERISA and the Code. Neither ERISA nor the Code defines the term "plan assets." Under Section 2510.3-101 of the United States Department of Labor ("DOL") regulations (the "Regulation"), a Plan's assets may include an interest in the underlying assets of an entity (such as a trust) for certain purposes, including the prohibited transaction provisions of ERISA and the Code, if the Plan acquires an "equity interest" in such entity, unless certain exceptions apply. The Depositor believes that the Certificates will give Certificateholders an equity interest in the Trust for purposes of the Regulation and can give no assurance that the Certificates will qualify for any of the exceptions under the Regulation. As a result, the assets of the Trust may be considered the assets of any Plan which acquires a Certificate. The DOL has issued an individual exemption, Prohibited Transaction Exemption ("PTE") [ ] which was amended by PTE 97-34 and was recently further amended by PTE 2000-58 to [ ] and its affiliates, including [ ] (the "Exemption"). The Exemption generally exempts from the application of the prohibited transaction provisions of Section 406 of ERISA and the excise taxes imposed on such prohibited transactions pursuant to Section 4975(a) and (b) of the Code and Section 502(i) of ERISA certain transactions relating to the initial purchase, holding and subsequent resale by Plans of certificates in pass-through trusts that consist of certain receivables, loans and other obligations that meet the conditions and requirements set forth in the Exemption. The receivables covered by the Exemption include motor vehicle installment obligations such as the Receivables. The Depositor believes that the Exemption will apply to the acquisition, holding and resale of the Class A Certificates by a Plan and that all conditions of the Exemption other than those within the control of the investors have been or will be met. All Certificateholders should refer to "ERISA Considerations" in the Prospectus for a detailed discussion of the general and specific conditions of the Exemption. If the general conditions of the Exemption are satisfied, the Exemption may provide relief from the restrictions imposed by Sections 406(a) and 407(a) of ERISA as well as the excise taxes imposed by Section 4975(a) and (b) of the Code by reason of Section 4975(c)(1)(A) through (D) of the Code, in connection with the direct or indirect sale, exchange, transfer or holding of the Certificates by a Plan. However, no exemption is provided from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a Certificate on behalf of an "Excluded Plan" by any person who has discretionary authority or renders investment advice with respect to the assets of such Excluded Plan. For purposes of the Certificates an Excluded Plan is a Plan sponsored by any member of the Restricted Group. If certain specific conditions of the Exemption are also satisfied, the Exemption may provide relief from the restrictions imposed by Sections 406(b)(l) and (b)(2) and 407(a) of ERISA and the taxes imposed by Section 4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code in connection with the direct or indirect sale, exchange, transfer or holding of Certificates in the initial issuance of Certificates between the Depositor or the Underwriters and a Plan other than an Excluded Plan when the person who has discretionary authority or renders investment advice with respect to the investment of Plan assets in the Certificates is (a) an Obligor with respect to 5% or less of the fair market value of the Receivables or (b) an affiliate of such person. The Exemption also may provide relief from the restriction imposed by Sections 406(a) and 407(a) of ERISA and the taxes imposed by Section 4975(c)(1)(A) through (D) of the Code if such restrictions are deemed to otherwise apply merely because a person is deemed to be a party in interest or a disqualified person with respect to an investing Plan by virtue of providing services to a Plan (or by virtue of having certain specified relationships to such a person) solely as a result of such Plan's ownership of Certificates. 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 conditions set forth in Section II of the Exemption and the other requirements set forth in the Exemption will be satisfied. Any Plan fiduciary considering whether to purchase a Certificate on behalf of a Plan are encouraged to consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and the Code to such investment. UNDERWRITING Subject to the terms and conditions set forth in the Underwriting agreement relating to the Certificates (the "Underwriting Agreement"), the Depositor has agreed to sell to [ ] and Deutsche Banc Securities Inc. (together, the "Underwriters"), and each of the Underwriters has severally agreed to purchase, the principal amount of Class A Certificates and Class B Certificates set forth opposite its name below, subject to the satisfaction of certain conditions precedent.
PRINCIPAL AMOUNT OF CLASS A PRINCIPAL AMOUNT OF CLASS B UNDERWRITER CERTIFICATES CERTIFICATES [ ]...................................... $[....... ] $ [...... ] Deutsche Banc Securities Inc....................... $[....... ] $ [...... ] - -- Total.......................................... $[....... ] $[....... ] = =
The Depositor has been advised by the Underwriters that the Underwriters propose to offer the Certificates to the public initially at the public offering prices set forth on the cover page of this Prospectus, and to certain dealers at these prices less a concession of [ ]% per Class A Certificate and [ ]% per Class B Certificate; that the Underwriters and these dealers may allow a discount of [ ]% per Class A Certificate and [.]% per Class B Certificate on the sale to certain other dealers; and that after the initial public offering of the Certificates, the public offering prices and the concessions and discounts to dealers may be changed by the Underwriters. Until the distribution of the Certificates is completed, rules of the Securities and Exchange Commission may limit the ability of the Underwriters and certain selling group members to bid for and purchase the Certificates. As an exception to these rules, the Underwriters are permitted to engage in certain transactions that stabilize the prices of the Certificates. These transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of such Certificates. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of purchases for these purposes. Neither the Depositor nor either Underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the prices of the Certificates. In addition, neither the Depositor nor either Underwriter makes any representation that either Underwriter will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice. Deutsche Banc Securities Inc. is an affiliate of the Depositor and the Seller. This Prospectus Supplement may be used by Deutsche Banc Securities Inc., an affiliate of the Depositor, in connection with offers and sales relating to market-making transactions in the Certificates in which Deutsche Banc Securities Inc. acts as principal. Deutsche Banc Securities Inc. may also act as agent in such transactions. Sales will be made at prices related to the prevailing prices at the time of sale. The Depositor has agreed to indemnify the Underwriters against particular liabilities, including civil liabilities under the Securities Act, or contribute to payments which the Underwriters may be required to make in respect of these liabilities. In the opinion of the Commission, this indemnification is against public policy as expressed in the Securities Act and, may, therefore, be unenforceable. The Trustee or the Collateral Agent, as applicable, may, from time to time, invest the funds in the Trust Accounts in Eligible Investments acquired from either of the Underwriters. RATINGS It is a condition to the issuance of the Class A Certificates that the Class A Certificates be rated "AAA" by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P") and "Aaa" by Moody's Investors Service, Inc. ("Moody's") (each, a "Rating Agency"). It is a condition to the issuance of the Class B Certificates that the Class B Certificates be rated at least "AA" by S&P and "A3" by Moody's. The ratings of the Class A Certificates will be based primarily on the Receivables, the Reserve Account, and the terms of the Certificates, including the subordination provided by the Class B Certificates. The ratings of the Class B Certificates will be based primarily on the Receivables and the Reserve Account. The ratings of the Certificates should be evaluated independently from similar ratings on other types of securities. The ratings do not address the possibility that Certificateholders may suffer a lower than anticipated yield. There can be no assurance that any rating will remain in effect for any given period of time or that a rating will not be lowered or withdrawn by the assigning Rating Agency if, in its judgment, circumstances so warrant. In the event that the rating initially assigned to any of the Certificates is subsequently lowered or withdrawn for any reason, no person or entity will be obligated to provide any additional credit enhancement with respect to these certificates. There can be no assurance whether any other rating agency will rate any of the Certificates, or if one does, what rating would be assigned by any other rating agency. A security rating is not a recommendation to buy, sell or hold securities. LEGAL MATTERS Some legal matters relating to the Certificates and some related federal income tax and other matters will be passed upon for the Seller by [ ]. Some legal matters relating to the Certificates will be passed upon for the Underwriter and the Company by Stroock & Stroock & Lavan LLP, New York, New York. The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus dated [ ]) The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sales is not permitted. $[ ] [ ] AUTO TRUST [ ]-[ ] ISSUER ACE SECURITIES CORPORATION DEPOSITOR [ ] SERVICER CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The notes will represent interests in the trust fund only and will not represent interests in or obligations of any other entity. This prospectus supplement may be used to offer and sell the notes only if accompanied by the prospectus. SECURITIES OFFERED o $[ ], [ ]% asset backed notes o $[ ], [ ]% asset backed certificates ASSETS o Retail automobile receivables CREDIT ENHANCEMENT o Subordination of the certificates o Reserve account EXPECTED RATINGS o [ ] or equivalent for the notes o [ ] or equivalent for the certificates NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS IS ACCURATE OR COMPLETE. MAKING ANY CONTRARY REPRESENTATION IS A CRIMINAL OFFENSE. Subject to the satisfaction of certain conditions, the underwriter named below is offering the notes and certificates at the price to public shown. The securities will be delivered in book entry form only on or about [ ]. Underwriting Price to Discounts and Proceeds to Public Commissions the Depositor(1) -------- ------------- ---------------- Per Note...................... [ ]% [ ]% [ ]% Per Certificate............... [ ]% [ ]% [ ]% Total.........................$[ ] $[ ] $[ ] _______________ (1) Before deducting expenses, estimated to be $ [ ]. DEUTSCHE BANC ALEX. BROWN The date of this prospectus supplement is [ ]. IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the securities offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your securities, and (2) this prospectus supplement, which describes the specific terms of your securities. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the securities in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. ___________________ Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the securities and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the securities will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. ___________________ We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. TABLE OF CONTENTS PROSPECTUS SUPPLEMENT Caption Page - ------- ---- Summary of Terms..............................................................S- Risk Factors..................................................................S- Formation of the Trust........................................................S- The Trust Property............................................................S- The Receivables Pool..........................................................S- The Servicer..................................................................S- Weighted Average Life of the Securities.......................................S- Use of Proceeds...............................................................S- Description of the Notes......................................................S- Description of the Certificates...............................................S- Description of the Transfer and Servicing Agreements..........................S- Federal Income Tax Consequences...............................................S- State and Local Tax Consequences..............................................S- Erisa Considerations..........................................................S- Underwriting..................................................................S- Legal Matters.................................................................S- PROSPECTUS Caption Page - ------- ---- Risk Factors.................................................................... The Trusts...................................................................... The Trustee..................................................................... The Receivables Pools........................................................... The Collateral Certificates..................................................... The Government Securities....................................................... Weighted Average Life of the Securities......................................... Pool Factors and Trading Information............................................ The Seller and the Servicer..................................................... Use of Proceeds................................................................. Description of Notes............................................................ Description of the Certificates................................................. Certain information Regarding the Securities.................................... Description of the Transfer and Servicing Agreements............................ Certain Matters Regarding the Servicer.......................................... Certain Legal Aspects of the Receivables........................................ Material Federal Income Tax Consequences........................................ State and Local Tax Consequences................................................ ERISA Considerations............................................................ Plan of Distribution............................................................ Legal Matters................................................................... Prospectus Supplement........................................................... Reports to Securityholders...................................................... Available Information........................................................... Incorporation of Certain Documents by Reference................................. Index of Terms.................................................................. Annex 1 - Global Clearance, Settlement and Tax Documentation Procedures......... SUMMARY OF TERMS THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE SECURITIES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. ISSUER........................[ ] Auto Trust [ ]-[ ], a limited purpose Delaware business trust. DEPOSITOR.....................Ace Securities Corporation. SERVICER......................[ ]. SELLER........................[ ]. OWNER TRUSTEE.................[ ]. INDENTURE TRUSTEE.............[ ]. CLOSING DATE..................On or about [ ]. CUT-OFF DATE..................The [close] [opening] of business on [ ]. DISTRIBUTION DATES............[ ] of each month or the next business day if the [ ] day is not a business day, beginning in [ ]. RECORD DATES..................Last day of the month prior to a distribution date. MINIMUM DENOMINATIONS........$25,000. FORM.........................Book-entry. INTEREST ACCRUAL METHOD......30/360. FINAL SCHEDULED DISTRIBUTION DATE..........[ ] for the notes and [ ] for the certificates. THE RECEIVABLES The receivables are amounts owed by individuals under retail installment sale contracts to purchase or refinance new or used automobiles, recreational vehicles, including motor homes, campers, boats, boat motors, motorcycles, jet skis, waverunners, all-terrain-vehicles and snowmobiles, vans trucks, buses and trailers. The depositor expects that the receivables will have the following characteristics as of [ ]. As of the closing date, no more than 5% of the receivables will have characteristics that differ from those described in this prospectus supplement as of [ ]. Number of contracts [ ] Principal Amount $[ ] Annual Percentage Rates [ ]% to [ ]% Weighted Average Annual Percentage Rate [ ]% Original term [ ] months to [ ] months Weighted Average original term [ ] months Remaining term [ ] months to [ ] months Weighted Average remaining term [ ] months New [ ]% Used [ ]% States [ ] [ ]% [ ] [ ]% Balloon Loans [ ]% [For approximately [ ]% of the principal amount of the receivables, the amount of the receivable was more than the value of the financed vehicle at the time the loan was made.] INTEREST DISTRIBUTIONS On each distribution date, if the trust has sufficient cash, it will pay you the interest accrued on your securities during the related interest period. Interest periods begin on the prior distribution date and run through the day before the current distribution date. The first interest period, however, begins on the closing date and runs through the day before the first distribution date. We will assume that each year has 360 days. PRINCIPAL DISTRIBUTIONS The trust will pay all principal collections to the noteholders until the notes are paid in full. The trust will not pay any principal collections to the certificateholders until the notes are paid in full. RESERVE ACCOUNT There will be a reserve account to help cover cash flow shortfalls. Initially, the account will be $[ ]. On each distribution date amounts remaining after distribution of the total servicing fee and amounts to be paid to the noteholders and certificateholders will be deposited in the reserve account until the amount equals a specified amount. OPTIONAL TERMINATION When the principal amount of the receivables is 10% or less than it was on the cut-off date, the servicer may buy the receivables. If the servicer does not do so, the indenture trustee will try to sell the receivables to another buyer. In either case, you must receive the principal amount of your securities and all accrued but unpaid interest or the receivables will not be sold. TAX CONSEQUENCES Stroock & Stroock & Lavan LLP, special federal tax counsel to the trust, is of the opinion that, for federal income tax purposes the notes will constitute indebtedness and the certificates will constitute interests in a trust fund that will not be treated as an association taxable as a corporation or publicly traded partnership taxable as a corporation. The trust and holders of the certificates will agree by their purchase of certificates, if there is more than one holder of the certificates, to treat the trust as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the trust, the holders of the certificates as partners of the partnership and the notes as debt of the partnership, and if there is one holder of certificates, to treat that holder as the owner of the assets of the trust and to treat the trust as a disregarded entity. The tax code is complex, and we recommend that you and your tax advisors review the information under the caption "Federal Income Tax Consequences" in this prospectus supplement and under the caption "Material Federal Income Tax Consequences" in the prospectus. ERISA CONSIDERATIONS The notes may be purchased by ERISA and other retirement plans if one or more administrative exemptions apply. The certificates may not be purchased by ERISA or other retirement plans. SEE "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE SECURITIES. YOU MAY HAVE DIFFICULTY SELLING The securities will not be listed on any YOUR SECURITIES securities exchange. As a result, if you want to sell your securities you must locate a purchaser that is willing to purchase those securities. The underwriter intends to make a secondary market for the securities. The underwriter will do so by offering to buy the securities from investors that wish to sell. However, the underwriter will not be obligated to make offers to buy the securities and may stop making offers at any time. In addition, the prices offered, if any, may not reflect prices that other potential purchasers, were they to be given the opportunity, would be willing to pay. There have been times in the past where there have been very few buyers of asset backed securities, and there may be such times in the future. As a result, you may not be able to sell your securities when you want to do so or you may not be able to obtain the price that you wish to receive. CERTAIN FEATURES OF THE RECEIVABLES There are a number of features of the POOL MAY RESULT IN LOSSES. receivables in the pool that create additional risk of loss, including the following: CERTAIN OBLIGORS HAVE LITTLE EQUITY For approximately [ ]% of the principal IN THEIR FINANCED VEHICLES WHICH MAY amount of the receivables, the original RESULT IN MORE SEVERE LOSSES. principal amount of the loan exceeded the cost of the related vehicle. Although each such obligor was required to make a downpayment from the obligor's own funds, those obligors have no equity in their vehicles. While those borrowers had excellent credit histories at the time, the lack of any equity in the vehicle may make it more likely that those obligors will default if their personal financial conditions change. In addition, if such an obligor defaults and the vehicle is repossessed, the trust is likely to suffer a loss. THE CONCENTRATION OF THE RECEIVABLES Economic conditions in the states where IN SPECIFIC GEOGRAPHIC AREAS MAY obligors reside may affect the INCREASE THE RISK OF LOSS. delinquency, loan loss and repossession experience of the trust with respect to the receivables. As of the cut-off date, the billing addresses of the obligors with respect to approximately [ ]%, [ ]%, and [ ]% of the principal amount of the receivables were located in [ ], [ ] and [ ], respectively. Economic conditions in any state or region may decline over time and from time to time. Because of the concentration of the obligors in certain states, any adverse economic conditions in those states may have a greater effect on the performance of the securities than if the concentration did not exist. NEWLY ORIGINATED LOANS MAY BE MORE Defaults on automobile loans tend to LIKELY TO DEFAULT WHICH MAY CAUSE occur at higher rates during the early LOSSES. years of the automobile loans. Substantially all of the automobile loans will have been originated within [ ] months prior to the sale to the trust. As a result, the trust may experience higher rates of default than if the automobile loans had been outstanding for a longer period of time. BALLOON LOANS MAY HAVE A HIGHER A balloon loan has monthly payments that RATES OF DEFAULT WHICH MAY CAUSE will not fully pay off the loan balance LOSSES. by the maturity date. As a result the borrower usually will have to refinance the balloon loan in order to pay the amount due. The borrower may not be able to refinance the balloon loan for any number of reasons, including the level of available interest rates, the age or condition of the vehicle, or the borrower's payment or credit history. The trust will not have any funds to refinance a balloon loan, and the seller is not obligated to do so. CERTIFICATES WILL ABSORB CASH The certificateholders will not receive SHORTFALLS AND LOSSES BEFORE THE any distribution of interest until the NOTES. full amount of interest on the notes has been paid on each distribution date. The certificateholders will not receive any distributions of principal until the notes have been repaid in full. Holders of the certificates must rely for repayment upon payments on the receivables, and, if and to the extent available, amounts on deposit in the reserve account. If funds in the reserve account are exhausted, the trust will depend solely on current distributions on the receivables to make payments on the securities. Delinquent payments on the receivables may result in a shortfall in the distributions on the certificates on any distribution date due to the priority of payments on the notes. Although on each distribution date distributions of interest on the certificates ranks senior to payments of principal of the notes, after an event of default or an acceleration of the notes, the principal amount of the notes must be paid in full prior to the distribution of any amounts on the certificates. YOUR YIELD TO MATURITY MAY BE The pre-tax yield to maturity is REDUCED BY PREPAYMENTS uncertain and will depend on a number of factors including the following: THE RATE OF RETURN OF PRINCIPAL IS The amount of distributions of principal UNCERTAIN. of the securities and the time when you receive those distributions depends on the amount and the times at which borrowers make principal payments on the receivables. Those principal payments may be regularly scheduled payments or unscheduled payments resulting from prepayments or defaults of the receivables. YOU MAY BE UNABLE TO REINVEST Asset backed securities, like the DISTRIBUTIONS IN COMPARABLE securities, usually produce more returns INVESTMENTS. of principal to investors when market interest rates fall below the interest rates on the receivables and produce less returns of principal when market interest rates are above the interest rates on the receivables. As a result, you are likely to receive more money to reinvest at a time when other investments generally are producing a lower yield than that on the securities, and are likely to receive less money to reinvest when other investments generally are producing a higher yield than that on the securities. You will bear the risk that the timing and amount of distributions on your securities will prevent you from attaining your desired yield. AN EARLY TERMINATION WILL SHORTEN If the receivables are sold upon THE LIFE OF YOUR INVESTMENT WHICH exercise of the servicer's optional MAY REDUCE YOUR YIELD TO MATURITY. termination or the auction call, you will receive the principal amount of your securities plus accrued interest through the related interest period. Because your securities will no longer be outstanding, you will not receive the additional interest payments that you would have received had the securities remained outstanding. If you bought your securities at par or at a premium, your yield to maturity will be lower than it would have been if the optional termination or auction call had not been exercised. WITHDRAWAL OR DOWNGRADING OF INITIAL A security rating is not a RATINGS WILL REDUCE THE PRICES FOR recommendation to buy, sell or hold SECURITIES securities. Similar ratings on different types of securities do not necessarily mean the same thing. You are encouraged to analyze the significance of each rating independently from any other rating. Any rating agency may change its rating of the securities after those securities are issued if that rating agency believes that circumstances have changed. Any subsequent change in rating will likely reduce the price that a subsequent purchaser will be willing to pay for the securities. THE SECURITIES ARE NOT SUITABLE The securities are not a suitable INVESTMENTS FOR ALL INVESTORS investment for any investor that requires a regular or predictable schedule of payments or payment on any specific date. The securities are complex investments that should be considered only by investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment, default and market risk, the tax consequences of an investment, and the interaction of these factors. FORMATION OF THE TRUST THE TRUST [ ] Auto Trust [ ]-[ ] is a business trust to be formed by the Depositor under the laws of the State of Delaware pursuant to the Trust Agreement for the transactions described in the Prospectus. After its formation, the Trust will not engage in any activity other than (1) acquiring, holding and managing the Receivables and the other assets of the Trust and proceeds therefrom, (2) issuing the Certificates and the Notes, (3) making payments on the Certificates and the Notes and (4) engaging in other activities that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith. The Trust will initially be capitalized with equity of $[ ], excluding amounts deposited in the Reserve Account, representing the initial principal balance of the Certificates. The Notes and Certificates will be transferred by the Trust to the Depositor in exchange for the Receivables. The Certificates and the Notes will be sold to the Underwriter for cash. The Servicer will initially service the Receivables pursuant to a sale and servicing agreement, to be dated as of [ ] (the "Sale and Servicing Agreement"), among the Seller, the Depositor, the Trust and the Servicer, and will be compensated for acting as the Servicer. See "Description of the Transfer and Servicing Agreements--Servicing Compensation" in this prospectus supplement and "--Servicing Compensation and Payment of Expenses" in the Prospectus. To facilitate servicing and to minimize administrative burden and expense, the Servicer will be appointed custodian for the Receivables by the Trust, but will not stamp the Receivables to reflect the sale and assignment of the Receivables to the Trust, nor amend the certificates of title of the Financed Vehicles. If the protection provided to the investment of the Securityholders in the Trust by the Reserve Account is insufficient, the Trust will look to the Obligors on the Receivables, and the proceeds from the repossession and sale of Financed Vehicles which secure defaulted Receivables. In such event, there may not be sufficient funds to make distributions with respect to the Securities. The Trust's principal offices are in [ ], in care of [ ], as Owner Trustee, at the address listed below under "--The Owner Trustee." CAPITALIZATION OF THE TRUST The following table illustrates the capitalization of the Trust as of the Cut-off Date, as if the issuance and sale of the Notes and the Certificates had taken place on such date: Notes .............................$[ ] Certificates.......................$[ ] Total.........................$[ ] THE OWNER TRUSTEE [ ] is the Owner Trustee under the Trust Agreement. [ ] is a [ ] and its principal offices are located at [ ], [ ]. The Owner Trustee will perform limited administrative functions under the Trust Agreement, including making distributions from the Certificate Distribution Account. The Owner Trustee's liability in connection with the issuance and sale of the Certificates and the Notes is limited solely to the express obligations of the Owner Trustee set forth in the Trust Agreement. THE TRUST PROPERTY The Notes will be collateralized by the Trust Property (other than the Certificate Distribution Account). Each Certificate represents a fractional undivided interest in the Trust. The "Trust Property" will include the Receivables, which were originated indirectly by Dealers and purchased indirectly by the Seller pursuant to agreements with Dealers ("Dealer Agreements"). On the Closing Date, the Depositor will buy the Receivables from the Seller and the Depositor will sell the Receivables to the Trust. The Servicer will, directly or through subservicers, service the Receivables. The Trust Property also includes: o all monies received under the Receivables on and after the Cut-off Date and, with respect to Receivables which are Actuarial Receivables, monies received thereunder prior to the Cut-off Date that are due on or after the Cut-off Date; o such amounts as from time to time may be held in the Collection Account, the Reserve Account, the Payahead Account, the Note Distribution Account and the Certificate Distribution Account, established and maintained by the Servicer pursuant to the Sale and Servicing Agreement as described below; o security interests in the Financed Vehicles; o the rights of the Seller to receive proceeds from claims under certain insurance policies; o the rights of the Trust under the Sale and Servicing Agreement; o the rights of the Seller to refunds for the costs of extended service contracts and to refunds of unearned premiums with respect to credit life and credit accident and health insurance policies covering the Financed Vehicles or the retail purchasers of, or other persons owing payments on, the Financed Vehicles (the "Obligors"); o all right, title and interest of the Seller (other than with respect to any Dealer commission) with respect to the Receivables under the related Dealer Agreements; o rights with respect to any repossessed Financed Vehicles; and o all proceeds (within the meaning of the UCC) of the foregoing. The Reserve Account will be maintained in the name of the Indenture Trustee for the benefit of the Noteholders and the Certificateholders. THE RECEIVABLES POOL POOL COMPOSITION The Receivables were selected from the Seller's portfolio by several criteria, including, as of the Cut-off Date, the following: 1. each Receivable has a scheduled maturity of not later than the Final Scheduled Maturity Date; 2. each Receivable was originated in the United States of America; 3. each Receivable has an original term to maturity of not more than [ ] months and a remaining term to maturity of [ ] months or less as of the Cut-off Date; 4. approximately [ ]% of the Initial Pool Balance was secured by new Financed Vehicles, and approximately [ ]% of the Initial Pool Balance was secured by used Financed Vehicles; 5. each Receivable provides for level monthly payments which fully amortize the amount financed except, in the case of Simple Interest Receivables, for the last payment, which may be different from the level payment; 6. each Receivable is not more than [ ] days contractually past due as of the Cut-off Date and is not more than [ ] months paid ahead; 7. each Receivable has an outstanding principal balance between $[ ] and $[ ]; 8. and each Receivable has an APR of no less than [ ]%. As of the Cut-off Date, no Obligor on any Receivable was noted in the related records of the Servicer as being the subject of any pending bankruptcy or insolvency proceeding. The latest scheduled maturity of any Receivable is not later than [ ]. No selection procedures believed by the Depositor to be adverse to Certificateholders or the Noteholders were used in selecting the Receivables. The Depositor considers an account past due if any portion of the payment due on a due date is not received by the succeeding due date for that account. The composition, distribution by remaining term, distribution by APR, geographic distribution and distribution by remaining principal of the Receivables, in each case, as of the Cut-off Date are set forth in the tables below. The percentages in the following tables may not add to 100% due to rounding. COMPOSITION OF THE RECEIVABLES AS OF THE CUT-OFF DATE NEW FINANCED USED FINANCED VEHICLES VEHICLES TOTAL ------------ ------------- ------------- Aggregate Principal Balance........$ $ $ Number of Receivables.............. Average Principal Balance..........$ $ $ Average Original Balance...........$ $ $ Weighted Average Contract Rate.....% Contract Rate (Range)..............%- % %- % %- % Weighted Average Original Term.....months months months Original Term (Range)..............to months to months to months Weighted Average Remaining Term....months months months Remaining Term (Range).............to months to months to months DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES AS OF THE CUT-OFF DATE Remaining Term Number of Aggregate Principal Percentage of Original (Range) Receivables Balance Pool Balance - -------------- ----------- ------------------- ---------------------- Less than 30 months.... $ % 30 to 35 months........ 36 to 41 months........ 42 to 47 months........ 48 to 53 months........ 54 to 59 months........ 60 to 65 months........ 66 to 71 months........ 72 to 77 months........ 78 t o 89 months....... ----------- ------------------- ---------------------- Total.................. $ 100.00% =========== =================== ====================== DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE RECEIVABLES AS OF THE CUT-OFF DATE Annual Percentage Number of Aggregate Principal Percentage of Original Rate Range Receivables Balance Pool Balance - ----------------- ----------- ------------------- ---------------------- 8.00% to below......... $ % 8.00% to 8.99%......... 9.00% to 9.99%......... 10.00% to 10.99%....... 11.00% to 11.99%....... 12.00% to 12.99%....... 13.00% to 13.99%....... 14.00% to 14.99%....... 15.00% to 15.99%....... 16.00% to 16.99%....... 17.00% to 17.99%....... 18.00% to 18.99%....... 19.00% to 19.99%....... 20.00% to 20.99%....... 21.00% to 21.99%....... 22.00% and above....... ----------- ------------------- ---------------------- Total.................. $ 100.00% =========== =================== ====================== GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUT-OFF DATE Number of Aggregate Principal Percentage of Original State(1) Receivables Balance Pool Balance - -------- ----------- ------------------- ---------------------- [ ]............... $ % [ ]............... [ ]............... [ ]............... [ ]............... [ ]............... [ ]............... [ ]............... Others (2)............. ----------- ------------------- ---------------------- Total.................. $ 100.00% =========== =================== ====================== ______________ (1) Based on billing addresses of the Obligors as of the Cut-off Date, which may differ from the state of origination of the Receivable. (2) Includes [ ] other states and [ ] none of which have a concentration of Receivables in excess of [ ]% of the aggregate principal balance. DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE RECEIVABLES AS OF THE CUT-OFF DATE Remaining Principal Number of Aggregate Principal Percentage of Original Balance (Range) Receivables Balance Pool Balance - ------------------- ----------- ------------------- ---------------------- $ 2,500 to $ 4,999..... $ % $ 5,000 to $ 7,499..... $ 7,500 to $ 9,999..... $10,000 to $12,499..... $12,500 to $14,999..... $15,000 to $17,499..... $17,500 to $19,999..... $20,000 to $22,499..... $22,500 to $24,999..... $25,000 to $27,499..... $27,500 to $29,999..... $30,000 to $32,499..... $32,500 to $34,999..... $35,000 to $37,499..... $37,500 to $39,999..... $40,000 to $41,499..... $42,500 to $44,999..... $45,000 to $47,499..... $47,500 to $49,999..... $50,000 to $52,499..... $52,500 to $54,999..... ----------- ------------------- ---------------------- Total.................. $ 100.00% =========== =================== ====================== As of the Cut-off Date, approximately [ ]% of the aggregate principal balance of the Receivables, constituting [ ]% of the number of Receivables, were between 1 payment and [ ] payments paid-ahead. As of the Cut-off Date, approximately [ ]% of the aggregate principal balance of the Receivables, constituting [ ]% of the number of Receivables, are Actuarial Receivables. "Actuarial Receivables" are receivables that provide for amortization of the amount financed over a series of fixed, level-payment monthly installments. Each monthly installment, including the monthly installment representing the final payment on the Receivable, consists of an amount of interest equal to 1/12 of the Annual Percentage Rate ("APR") of the amount financed multiplied by the unpaid principal balance of the amount financed, and an amount of principal equal to the remainder of the monthly payment. As of the Cut-off Date, approximately [ ]% of the aggregate principal balance of the Receivables, constituting [ ]% of the number of Receivables, are Simple Interest Receivables. "Simple Interest Receivables" are receivables that provide for the amortization of the amount financed under the receivable over a series of fixed level monthly payments. However, unlike the monthly payment under an Actuarial Receivable, each monthly payment includes an installment of interest which is calculated on the basis of the outstanding principal balance of the receivable multiplied by the stated APR and further multiplied by the period elapsed (as a fraction of a calendar year) since the preceding payment of interest was made. As payments are received under a Simple Interest Receivable, the amount received is applied first to interest accrued to the date of payment and the balance is applied to reduce the unpaid principal balance. Accordingly, if an Obligor pays a fixed monthly installment before its scheduled due date, the portion of the payment allocable to interest for the period since the preceding payment was made will be less than it would have been had the payment been made as scheduled, and the portion of the payment applied to reduce the unpaid principal balance will be correspondingly greater. Conversely, if an Obligor pays a fixed monthly installment after its scheduled due date, the portion of the payment allocable to interest for the period since the preceding payment was made will be greater than it would have been had the payment been made as scheduled, and the portion of the payment applied to reduce the unpaid principal balance will be correspondingly less. In either case, the Obligor pays a fixed monthly installment until the final scheduled payment date, at which time the amount of the final installment is increased or decreased as necessary to repay the then outstanding principal balance. If an Actuarial Receivable is prepaid in full, with minor variations based upon state law, under the terms of the motor vehicle retail installment sale contract or loan agreement, as the case may be, a "refund" or "rebate" will be made to the borrower of the portion of the total amount of payments then due and payable under such contract or agreement allocable to "unearned" interest, calculated on the basis of a constant interest rate. If a Simple Interest Receivable is prepaid, rather than receive a rebate, the borrower is required to pay interest only to the date of prepayment. The amount of a rebate under an Actuarial Receivable generally will be less than the remaining scheduled payments of interest that would have been due under a Simple Interest Receivable for which all payments were made on schedule. The Servicer may accede to an Obligor's request to pay scheduled payments in advance, in which event the Obligor will not be required to make another regularly scheduled payment until the time a scheduled payment not paid in advance is due. The amount of any payment (which are not amounts representing Payaheads) made in advance will be treated as a principal prepayment and will be distributed as part of the Principal Distribution Amount in the month following the Collection Period in which the prepayment was made. See "Maturity and Prepayment Considerations" in the Prospectus. THE SERVICER The Servicer is [ ]. [Insert description of the Servicer.] DELINQUENCY EXPERIENCE (DOLLARS IN THOUSANDS)
At December 31, ------------------------------------------------------------------------------------------------------------- [ ] [ ] [ ] [ ] [ ] --------------------- --------------------- --------------------- --------------------- --------------------- Number Number Number Number Number of of of of of Loans Dollars Percent Loans Dollars Percent Loans Dollars Percent Loans Dollars Percent Loans Dollars Percent ----- ------- ------- ----- ------- ------- ----- ------- ------- ----- ------- ------- ----- ------- ------- Principal Amount Outstanding (1).... Delinquencies (2)... 30-59 Days......... 60-89 Days......... 90-119 Days........ over 120 days...... Total Delinquencies as a Percentage of the Total Amount Outstanding........ ______________ (1) Principal Amount Outstanding is the aggregate remaining principal balance of all Receivables serviced, net of unearned interest. (2) The period of delinquency is based on the number of days scheduled payments are contractually past due. Includes repossessions on hand which have not been charged-off. A receivable is 30 days contractually past due if a scheduled payment has not been received by the subsequent calendar month's scheduled payment date.
[WEIGHTED AVERAGE LIFE OF THE SECURITIES] [Prepayments on automotive receivables can be measured relative to a prepayment standard or model. The model used in this Prospectus, the Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each month relative to the original number of receivables in a pool of receivables. ABS further assumes that all the receivables are the same size and amortize at the same rate and that each receivable in each month of its life will either be paid as scheduled or be prepaid in full. For example, in a pool of receivables originally containing 10,000 receivables, a 1% ABS rate means that 100 receivables prepay each month. ABS does not purport to be an historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of receivables, including the Receivables. As the rate of payment of principal of the Notes and in respect of the Certificate Balance will depend on the rate of payment (including prepayments) of the principal balance of the Receivables, final payment of the Notes could occur significantly earlier than the Final Scheduled Maturity Date for the Notes. The final distribution in respect of the Certificates also could occur prior to the Final Scheduled Distribution Date for the Certificates. Reinvestment risk associated with early payment of the Notes and the Certificates will be borne exclusively by the Noteholders and the Certificateholders, respectively. The table captioned "Percent of Initial Note Principal Balance or Initial Certificate Balance at Various ABS Percentages" (the "ABS Table") has been prepared on the basis of the characteristics of the Receivables. The ABS Table assumes that (1) the Receivables prepay in full at the specified constant percentage of ABS monthly, with no defaults, losses or repurchases, (2) each scheduled monthly payment on the Receivables is made on the last day of each month and each month has 30 days, (3) payments on the Notes and distributions on the Certificates are made on each Distribution Date (and each such date is assumed to be the [ ] day of each applicable month), (4) the balance in the Reserve Account on each Distribution Date is equal to the Specified Reserve Account Balance, and (5) the Servicer does not exercise its option to purchase the Receivables. The first two pools have an assumed cut-off date of [ ] and the remaining pools have an assumed cut-off date of [ ]. The ABS Table sets forth the percent of the initial principal amount of the Notes and the percent of the initial Certificate Balance that would be outstanding after each of the Distribution Dates shown and the corresponding weighted average lives thereof at various constant ABS percentages. The ABS Table also assumes that the Receivables have been aggregated into four hypothetical pools with all of the Receivables within each such pool having the following characteristics and that the level scheduled monthly payment for each of the four pools (which is based on its aggregate principal balance, APR, original term to maturity as of the Cut-off Date) will be such that each pool will fully amortize by the end of its remaining term to maturity.
REMAINING TERM WEIGHTED AVERAGE WEIGHTED AVERAGE TO MATURITY WEIGHTED ORIGINAL TERM REMAINING TERM TO RANGE AGGREGATE AVERAGE TO MATURITY MATURITY POOL (IN MONTHS) PRINCIPAL BALANCE CONTRACT RATE (IN MONTHS) (IN MONTHS) ---- -------------- ----------------- ------------- ---------------- ----------------- 1................. $ % 2................. $ % 3................. $ % 4................. $ %
The actual characteristics and performance of the Receivables will differ from the assumptions used in constructing the ABS Table. The assumptions used are hypothetical and have been provided only to give a general sense of how the principal cash flows might behave under varying prepayment scenarios. For example, it is very unlikely that the Receivables will prepay at a constant level of ABS until maturity or that all of the Receivables will prepay at the same level of ABS. Moreover, the diverse terms of Receivables within each of the four hypothetical pools could produce slower or faster principal distributions than indicated in the ABS Table at the various constant percentages of ABS specified, even if the original and remaining terms to maturity of the Receivables are as assumed. Any difference between such assumptions and the actual characteristics and performance of the Receivables, or actual prepayment experience, will affect the percentages of initial balances outstanding over time and the weighted average lives of the Notes and the Certificates.] PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES Notes ---------------------------------------- Assumed ABS Percentage(2) ---------------------------------------- DISTRIBUTION DATES [ ]% [ ]% [ ]% [ ]% - ------------------ ---------- --------- --------- --------- Closing Date......................... 100 100 100 100 [ ]........... [ ]........... [ ]........... _________________.................... Weighted Average Life (years)(1)..... ______________ (1) The weighted average life of a Note is determined by (i) multiplying the amount of each principal payment of such Note by the number of years from the date of the issuance of such Note to the Distribution Date on which such principal payment is made, (ii) adding the results and (iii) dividing the sum by the initial principal balance of such Note. (2) An asterisk "*" means a percent of initial Note principal balance of more than zero and less than 0.5%. THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH. PERCENT OF INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES Certificates ---------------------------------------- Assumed ABS Percentage ---------------------------------------- DISTRIBUTION DATES [ ]% [ ]% [ ]% [ ]% - ------------------ ---------- --------- --------- --------- Closing Date......................... 100 100 100 100 _______________...................... _______________...................... _______________...................... _______________...................... ______________ THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH. USE OF PROCEEDS The net proceeds from the sale of the Securities will be applied by the Depositor first, to deposit approximately $[ ] into the Reserve Account and second, the balance to purchase the Receivables and the other Trust Property from the Seller. DESCRIPTION OF THE NOTES The Notes will be issued pursuant to the terms of the Indenture, substantially in the form filed as an exhibit to the Registration Statement. The following information summarizes all material provisions of the Notes and the Indenture. The following summary supplements the description of the general terms and provisions of the Notes of any given Series and the related Indenture set forth in the Prospectus, to which description reference is hereby made. THE NOTES PAYMENTS OF INTEREST. The Notes will constitute [Fixed Rate] Securities, as such term is defined under "Certain Information Regarding the Securities--Fixed Rate Securities" in the Prospectus. Interest on the outstanding principal amount of the Notes will accrue at the Interest Rate and will be payable to the Noteholders monthly on each Distribution Date, commencing [ ]. Interest will accrue from and including the Closing Date (in the case of the first Distribution Date), or from and including the most recent Distribution Date on which interest has been paid to but excluding the following Distribution Date (each representing an "Interest Period"). Interest on the Notes will be calculated on the basis of a 360 day year consisting of twelve 30 day months. Interest payments on the Notes will generally be derived from the Total Distribution Amount remaining after the payment of the Servicing Fee for the related Collection Period and all accrued and unpaid Servicing Fees for prior Collection Periods (the "Total Servicing Fee"). See "Description of the Transfer and Servicing Agreements--Distributions" and "--Credit Enhancement--Reserve Account" in this prospectus supplement. Interest payments to the Noteholders will have the same priority. Under certain circumstances, the amount available for interest payments could be less than the amount of interest payable on the Notes on any Distribution Date. Interest accrued as of any Distribution Date but not paid on such Distribution Date will be due on the next Distribution Date, together with interest on such amount at the Interest Rate. PAYMENTS OF PRINCIPAL. Principal payments will be made to the Noteholders on each Distribution Date in an amount equal to the Noteholders' Percentage of the Principal Distribution Amount in respect of such Collection Period, subject to certain limitations. Principal payments on the Notes will be generally derived from the Total Distribution Amount remaining after the payment of the Total Servicing Fee, the Noteholders' Interest Distributable Amount and the Certificateholders' Interest Distributable Amount; provided, however, that following the occurrence and during the continuation of certain Events of Default or an acceleration of the Notes, the Noteholders will be entitled to be paid in full before the distributions may be made on the Certificates. See "Description of the Transfer and Servicing Agreements--Distributions" and "--Credit Enhancement--Reserve Account" in this prospectus supplement. The principal balance of the Notes, to the extent not previously paid, will be due on the Note Final Scheduled Distribution Date. The actual date on which the aggregate outstanding principal amount of the Notes is paid may be earlier than the Note Final Scheduled Distribution Date based on a variety of factors. OPTIONAL REDEMPTION. The Notes will be redeemed in whole, but not in part, on any Distribution Date on which the Servicer exercises its option to purchase the Receivables. The Servicer may purchase the Receivables when the Pool Balance has declined to 5% or less of the Initial Pool Balance. The redemption price will be equal to the unpaid principal amount of the Notes and the Certificates plus accrued and unpaid interest thereon. See "Description of the Transfer and Servicing Agreements--Termination" in the Prospectus. AUCTION SALE. In the event of an Auction Sale, the Notes will be redeemed in an amount equal to the unpaid principal amount of the then outstanding Notes plus accrued and unpaid interest thereon at the Interest Rate. See "Description of the Transfer and Servicing Agreements--Termination" in the Prospectus. THE INDENTURE TRUSTEE. [ ] will be the Indenture Trustee under the Indenture. The Depositor maintains normal commercial banking relations with the Indenture Trustee. DESCRIPTION OF THE CERTIFICATES The Certificates will be issued pursuant to the terms of the Trust Agreement, substantially in the form filed as an exhibit to the Registration Statement. The following information summarizes all material provisions of the Certificates and the Trust Agreement. The following summary supplements the description of the general terms and provisions of the Certificates of any given Series and the related Trust Agreement set forth in the Prospectus, to which description reference is hereby made. THE CERTIFICATES DISTRIBUTIONS OF INTEREST. Certificateholders will be entitled to distributions of interest in an amount equal to accrued interest on the Certificate Balance at the Pass-Through Rate. Such amounts will be distributable monthly on each Distribution Date commencing [ ]. [The Certificates will constitute Fixed Rate Securities, as such term is defined under "Certain Information Regarding the Securities--Fixed Rate Securities"] in the Prospectus. That interest entitlement will accrue from and including the Closing Date (in the case of the first such Distribution Date) or from the most recent Distribution Date on which interest distributions have been made to but excluding such Distribution Date and will be calculated on the basis of a 360-day year of twelve 30-day months. Interest distributions with respect to the Certificates will be funded from the portion of the Total Distribution Amount remaining after the distribution of the Total Servicing Fee and the Noteholders' Interest Distributable Amount. On any Distribution Date, the Certificateholders' Interest Distributable Amount will equal 30 days' interest at the Pass-Through Rate on the Certificate Balance (or, in the case of the first Distribution Date, interest accrued from and including the Closing Date to but excluding the first Distribution Date) plus any amounts due but not paid on previous Distribution Dates with interest thereon at the Pass-Through Rate. See "Description of the Transfer and Servicing Agreements--Distributions" and "--Credit Enhancement--Reserve Account" herein. DISTRIBUTIONS OF PRINCIPAL PAYMENTS. Certificateholders will be entitled to distributions of principal on each Distribution Date commencing on the Distribution Date on which the Notes have been paid in full, in an amount equal to the Certificateholders' Percentage of the Principal Distribution Amount in respect of the related Collection Period, subject to certain limitations. Distributions with respect to principal payments will generally be funded from the portion of the Total Distribution Amount remaining after the distribution of the Total Servicing Fee, the Noteholders' Distributable Amount, if any, and the Certificateholders' Interest Distributable Amount. See "Description of the Transfer and Servicing Agreement--Distributions" and "--Credit Enhancement--Reserve Account" in this prospectus supplement. On and after any Distribution Date on which the Notes have been paid in full, funds in the Reserve Account will be applied to reduce the Certificate Balance to zero if, after giving effect to all distributions to the Servicer, the Noteholders and the Certificateholders on such Distribution Date, the amount on deposit in the Reserve Account is equal to or greater than the Certificate Balance. SUBORDINATION OF CERTIFICATES. The rights of Certificateholders to receive distributions of interest are subordinated to the rights of Noteholders to receive payments of interest. In addition, the Certificateholders have no right to receive distributions of principal until the principal amount of the Notes has been paid in full. Consequently, funds on deposit in the Collection Account (including amounts deposited therein from the Reserve Account) will be applied to the payment of interest on the Notes before distributions of interest on the Certificates and will be applied to the payment of principal on the Notes before distributions of principal on the Certificates. In addition, following the occurrence of certain Events of Default or an acceleration of the Notes, the Noteholders will be entitled to be paid in full before the Certificateholders are entitled to any distributions. OPTIONAL PREPAYMENT. If the Servicer exercises its option to purchase the Receivables when the Pool Balance declines to 5% or less of the Initial Pool Balance, Certificateholders will receive an amount in respect of the Certificates equal to the Certificate Balance together with accrued and unpaid interest thereon, which distribution will effect early retirement of the Certificates. See "Description of the Transfer and Servicing Agreements--Termination" in the Prospectus. AUCTION SALE. In the event of an Auction Sale, the Certificates will be prepaid at a price equal to the Certificate Balance plus accrued and unpaid interest thereon at the Pass-Through Rate. See "Description of the Transfer and Servicing Agreements--Termination" in the Prospectus. DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS The following information summarizes all material provisions of the Sale and Servicing Agreement, substantially in the form filed as an exhibit to the Registration Statement, pursuant to which the Trust is purchasing and the Servicer is undertaking to service the Receivables and the Trust Agreement pursuant to which the Trust will be created and the Certificates will be issued (collectively the "Transfer and Servicing Agreements"). The following summary supplements the description of the general terms and provisions of the Transfer and Servicing Agreements set forth in the Prospectus, to which description reference is hereby made. SALE AND ASSIGNMENT OF RECEIVABLES Certain information regarding the conveyance of the Receivables by the Seller to the Depositor and by the Depositor to the Trust on the Closing Date pursuant to the Sale and Servicing Agreement is set forth in the Prospectus under "Description of the Transfer and Servicing Agreements--Sale and Assignment of Receivables." ACCOUNTS [The assets of the Trust will not include a Pre-Funding Account.] All other Accounts referred to under "Description of the Transfer and Servicing Agreements--Accounts" in the Prospectus, as well as a Reserve Account, will be established by the Servicer and maintained with the Indenture Trustee in the name of the Indenture Trustee on behalf of the Noteholders and the Certificateholders. SERVICING COMPENSATION The Servicer will be entitled to receive a fee (the "Servicing Fee") for each Collection Period in an amount equal to the product of one-twelfth of [ ]% per annum for so long as [ ] or an affiliate thereof is the Servicer, and [ ]% per annum if [ ] or an affiliate thereof is no longer the Servicer (the "Servicing Fee Rate") and the Pool Balance as of the first day of the Collection Period. The "Servicing Fee" will also include such other amounts to be paid to the Servicer as described in the Prospectus. The Servicing Fee, together with any portion of the Servicing Fee that remains unpaid from prior Distribution Dates (the "Total Servicing Fee"), will be paid from the Total Distribution Amount. The Total Servicing Fee will be paid prior to the distribution of any portion of the Interest Distribution Amount to the Noteholders or the Certificateholders. See "Description of the Transfer and Servicing Agreement--Servicing Compensation and Payment of Expenses" in the Prospectus. DISTRIBUTIONS DEPOSITS TO THE COLLECTION ACCOUNT. On or before the earlier of the eighth business day of the month in which a Distribution Date occurs and the fourth business day preceding such Distribution Date (the "Determination Date"), the Servicer will calculate the Total Distribution Amount, the Interest Distribution Amount, the Available Principal, the Principal Distribution Amount, the Total Servicing Fee, the Noteholders' Interest Distributable Amount, the Noteholders' Principal Distributable Amount, the Certificateholders' Interest Distributable Amount, the Certificateholders' Principal Distributable Amount, the Advances, if any, to be made by the Servicer of interest and principal due on the Actuarial Receivables, the amount, if any, to be withdrawn from the Payahead Account and deposited in the Collection Account, the amount, if any, to be withdrawn from the Reserve Account and deposited in the Collection Account and the amount, if any, to be withdrawn from the Reserve Account and paid to the Depositor, in each case, with respect to such Distribution Date. On or before each Distribution Date, the Servicer will cause the Indenture Trustee to withdraw from the Payahead Account and (1) deposit into the Collection Account in immediately available funds, the portion of Payaheads constituting scheduled payments on Actuarial Receivables or that are to be applied to prepay Actuarial Receivable in full and (2) distribute to the Depositor, in immediately available funds, all investment earnings on funds in the Payahead Account with respect to the preceding Collection Period. On or before each Distribution Date the Servicer will deposit any advances for such Distribution Date into the Collection Account. On or before the business day preceding each Distribution Date, the Servicer will cause the Interest Distribution Amount and the Available Principal for such Distribution Date to be deposited into the Collection Account. On or before each Distribution Date, the Servicer shall cause the Indenture Trustee to withdraw from the Reserve Account and deposit in the Collection Account an amount (the "Reserve Account Transfer Amount") equal to the lesser of (x) the amount of cash or other immediately available funds in the Reserve Account on such Distribution Date (before giving effect to any withdrawals therefrom relating to such Distribution Date) or (y) the amount, if any, by which (A) the sum of the Total Servicing Fee, the Noteholders' Interest Distributable Amount, the Certificateholders' Interest Distributable Amount, the Noteholders' Principal Distributable Amount and the Certificateholders' Principal Distributable Amount for such Distribution Date exceeds (B) the sum of the Interest Distribution Amount and the Available Principal for such Distribution Date. The "Interest Distribution Amount" for a Distribution Date will be the sum of the following amounts with respect to any Distribution Date, computed, with respect to Simple Interest Receivables, in accordance with the simple interest method, and with respect to Actuarial Receivables, in accordance with the actuarial method: o that portion of all collections on the Receivables allocable to interest in respect of the preceding Collection Period (including, with respect to Actuarial Receivables, amounts withdrawn from the Payahead Account and allocable to interest and excluding amounts deposited into the Payahead Account and allocable to interest, in each case, in respect of the preceding Collection Period); o all proceeds (other than any proceeds from any Dealer commission) ("Liquidation Proceeds") of the liquidation of Liquidated Receivables, net of expenses incurred by the Servicer in connection with such liquidation and any amounts required by law to be remitted to the Obligor on such Liquidated Receivables, to the extent attributable to interest due thereon, which became Liquidated Receivables during such Collection Period in accordance with the Servicer's customary servicing procedures; o all advances made by the Servicer of interest due on the Actuarial Receivables in respect of the preceding Collection Period; o the Purchase Amount of each Receivable that was repurchased by the Seller or purchased by the Servicer during the preceding Collection Period to the extent attributable to accrued interest thereon; o all monies collected, from whatever source (other than any proceeds from any Dealer commission), in respect to Liquidated Receivables during any Collection Period following the Collection Period in which such Receivable was written off, net of the sum of any amounts expended by the Servicer for the account of the Obligor and any amounts required by law to be remitted to the Obligor ("Recoveries"); and o investment earnings for such Distribution Date; In calculating the Interest Distribution Amount, the following shall be excluded: all payments and proceeds (including Liquidation Proceeds) of any Receivables (1) repurchased by the Seller or purchased by the Servicer, the Purchase Amount of which has been included in the Interest Distribution Amount on a prior Distribution Date and (2) received on Actuarial Receivables and distributed to the Servicer, with respect to such Distribution Date, as reimbursement for any unreimbursed advances in accordance with the Sale and Servicing Agreement. The "Available Principal" for a Distribution Date will be the sum of the following amounts with respect to any Distribution Date, computed, with respect to Simple Interest Receivables, in accordance with the simple interest method, and, with respect to Actuarial Receivables, in accordance with the actuarial method: o that portion of all collections on the Receivables allocable to principal in respect of the preceding Collection Period (including, with respect to Actuarial Receivables, amounts withdrawn from the Payahead Account and allocable to principal and excluding amounts deposited into the Payahead Account and allocable to principal, in each case, in respect of the preceding Collection Period); o Liquidation Proceeds attributable to the principal amount of Receivables which became Liquidated Receivables during the preceding Collection Period in accordance with the Servicer's customary servicing procedures with respect to such Liquidated Receivables; o all advances made by the Servicer of principal due on the Actuarial Receivables in respect of the preceding Collection Period; o to the extent attributable to principal, the Purchase Amount of each Receivable repurchased by the Seller or purchased by the Servicer during the preceding Collection Period; and o partial prepayments on Receivables in respect of the preceding Collection Period relating to refunds of extended service contracts, or of physical damage, credit life, credit accident or health insurance premium, disability insurance policy premiums, but only if such costs or premiums were financed by the respective Obligor and only to the extent not included in the first bullet point above. In calculating the Available Principal, the following shall be excluded: all payments and proceeds (including Liquidation Proceeds) of any Receivables (1) repurchased by the Seller or purchased by the Servicer the Purchase Amount of which has been included in the Available Principal on a prior Distribution Date, and (2) received on Actuarial Receivables and distributed to the Servicer, with respect to such Distribution Date, as reimbursement for any unreimbursed advances in accordance with the Sale and Servicing Agreement. The "Principal Distribution Amount" for a Distribution Date will be the sum of the following amounts with respect to the preceding Collection Period: (1) (a) with respect to Simple Interest Receivables, that portion of all collections on the Receivable allocable to principal in respect of the preceding Collection Period and (b) with respect to Actuarial Receivables the sum of (x) the amount of all scheduled payments allocable to principal due during the preceding Collection Period and (y) the portion of all prepayments in full allocable to principal received during the preceding Collection Period, in the case of both (a) and (b) without regard to any extensions or modifications thereof effected after the Cut-off Date, other than with respect to any extensions or modifications in connection with Cram Down Losses during such Collection Period; (2) the principal balance of each Receivable that was repurchased by the Seller or purchased by the Servicer in each case during the preceding Collection Period (except to the extent included in (1) above); (3) the principal balance of each Liquidated Receivable which became such during the preceding Collection Period (except to the extent included in (1) above); (4) partial prepayments on Receivables in respect of the preceding Collection Period relating to refunds of extended service contracts, or of physical damage, credit life, credit accident or health insurance premium, disability insurance policy premiums, but only if such costs or premiums were financed by the respective Obligor and only to the extent not included in clause (1) above; and (5) the aggregate amount of Cram Down Losses during such Collection Period. MONTHLY WITHDRAWALS FROM COLLECTION ACCOUNT. On each Distribution Date, the Servicer shall instruct the Indenture Trustee to withdraw from the Collection Account and deposit in the Payahead Account in immediately available funds, the aggregate Payaheads collected during the preceding Collection Period. On each Distribution Date, the Servicer shall instruct the Indenture Trustee to make the following withdrawals, based upon the calculations set forth in "Deposits to the Collection Account" above, deposits and distributions, in the amounts and in the order of priority specified below, to the extent of the sum of the Interest Distribution Amount and the Available Principal in respect of such Distribution Date and the Reserve Account Transfer Amount in respect of such Distribution Date (the "Total Distribution Amount"): (1) from the Collection Account to the Servicer, from the Total Distribution Amount, the Total Servicing Fee; (2) from the Collection Account to the Note Distribution Account, from the Total Distribution Amount remaining after the application of clause (1), the Noteholders' Interest Distributable Amount; (3) from the Collection Account to the Certificate Distribution Account, from the Total Distribution Amount remaining after the application of clauses (1) and (2), the Certificateholders' Interest Distributable Amount; (4) from the Collection Account to the Note Distribution Account, from the Total Distribution Amount remaining after the application of clauses (1) through (3), the Noteholders' Principal Distributable Amount; (5) from the Collection Account to the Certificate Distribution Account, from the Total Distribution Amount remaining after the application of clauses (1) through (4), the Certificateholders' Principal Distributable Amount; and (6) from the Collection Account to the Reserve Account, any amounts remaining after the application of clauses (1) through (5). Notwithstanding the foregoing, following the occurrence and during the continuation of certain Events of Default or an acceleration of the Notes, the Total Distribution Amount remaining after the application of clauses (1) and (2) above will be deposited in the Note Distribution Account to the extent necessary to reduce the principal balance of the Notes to zero. On each Distribution Date, all amounts on deposit in the Note Distribution Account will be paid in the following order of priority: (a) to the Noteholders, accrued and unpaid interest on the outstanding principal balance of the Notes at the Interest Rate; and (b) to the Noteholders in reduction of principal until the principal balance of the Notes has been reduced to zero; On each Distribution Date, all amounts on deposit in the Certificate Distribution Account will be distributed to the Certificateholders in the following order of priority: (a) to the Certificateholders, accrued and unpaid interest on the Certificate Balance at the Pass-Through Rate; and (b) to the Certificateholders in reduction of principal until the principal balance of the Certificates has been reduced to zero. RELATED DEFINITIONS For purposes hereof, the following terms have the following meanings: "Collection Period" means, with respect to a Distribution Date, (x) in the case of the initial Distribution Date, the period from and including the Cut-off Date through and including [ ] and (y) thereafter, the calendar month preceding the related Distribution Date. "Cram Down Loss" means, with respect to a Receivable if a court of appropriate jurisdiction in a bankruptcy or insolvency proceeding shall have issued an order reducing the amount owed on such Receivable or otherwise modifying or restructuring the scheduled payments to be made on such Receivable, an amount equal to (1) the excess of the principal balance of such Receivable immediately prior to such order over the principal balance of such Receivable as so reduced and/or (2) if such court shall have issued an order reducing the effective rate of interest on such Receivable, the net present value (using as the discount rate the higher of the APR on such Receivable or the rate of interest, if any, specified by the court in such order) of the scheduled payments as so modified or restructured. A "Cram Down Loss" shall be deemed to have occurred on the date of issuance of such order. The "Pool Balance" at any time will represent the aggregate principal balance of the Receivables at the end of the preceding Collection Period, after giving effect to all payments (other than Payaheads) received from Obligors, Purchase Amounts and advances to be remitted by the Depositor, the Servicer and the Seller, as the case may be, all for such Collection Period, all losses realized on Receivables that became Liquidated Receivables during such Collection Period and all Cram Down Losses for such Collection Period. "Realized Losses" means the excess of the principal balance of a Liquidated Receivable over Liquidation Proceeds to the extent allocable to principal. "Liquidated Receivables" means, Receivables (1) which have been liquidated by the Servicer through the sale of the related Financed Vehicle, (2) as to which all or a portion representing 10% or more of a scheduled payment due is [150] or more days delinquent or (3) with respect to which proceeds have been received which, in the Servicer's judgment, constitute the final amounts recoverable in respect of such Receivable. "Noteholders' Distributable Amount" means, with respect to any Distribution Date, the sum of the Noteholders' Principal Distributable Amount and the Noteholders' Interest Distributable Amount. "Noteholders' Interest Distributable Amount" means, with respect to any Distribution Date, the sum of the Noteholders' Monthly Interest Distributable Amount for such Distribution Date and the Noteholders' Interest Carryover Shortfall for such Distribution Date. "Noteholders' Monthly Interest Distributable Amount" means, with respect to any Distribution Date, the product of (x) one-twelfth of the Interest Rate (or, in the case of the first Distribution Date, the Interest Rate multiplied by a fraction, the numerator of which is the number of days elapsed from and including the Closing Date to but excluding such Distribution Date and the denominator of which is 360) and (y) the outstanding principal balance of the Notes on the immediately preceding Distribution Date, after giving effect to all distributions of principal to the Noteholders on such Distribution Date (or, in the case of the first Distribution Date, on the Closing Date). "Noteholders' Interest Carryover Shortfall" means, with respect to any Distribution Date, the excess of the Noteholders' Monthly Interest Distributable Amount for the preceding Distribution Date and any outstanding Noteholders' Interest Carryover Shortfall on such preceding Distribution Date over the amount in respect of interest that is actually deposited in the Note Distribution Account on such preceding Distribution Date, plus interest on the amount of interest due but not paid to Noteholders on the preceding Distribution Date, to the extent permitted by law, at the Interest Rate borne by the Notes from such preceding Distribution Date through the current Distribution Date. "Noteholders' Principal Distributable Amount" means, with respect to any Distribution Date, the sum of the Noteholders' Monthly Principal Distributable Amount for such Distribution Date and the Noteholders' Principal Carryover Shortfall as of the close of the preceding Distribution Date; provided, however, that the Noteholders' Principal Distributable Amount shall not exceed the outstanding principal balance of the Notes. In addition, on the Note Final Scheduled Distribution Date, the principal required to be deposited in the Note Distribution Account will include the amount necessary (after giving effect to the other amounts to be deposited in the Note Distribution Account on such Distribution Date and allocable to principal) to reduce the outstanding principal balance of the Notes to zero. "Noteholders" Monthly Principal Distributable Amount" means, with respect to any Distribution Date, the Noteholders' Percentage of the Principal Distribution Amount. "Noteholders' Percentage" means (a) for each Distribution Date until the principal balance of the Notes is reduced to zero, 100%, and (b) zero for each Distribution Date thereafter. "Noteholders' Principal Carryover Shortfall" means, as of the close of any Distribution Date, the excess of the Noteholders' Monthly Principal Distributable Amount and any outstanding Noteholders' Principal Carryover Shortfall from the preceding Distribution Date over the amount in respect of principal that is actually deposited in the Note Distribution Account. "Certificateholders' Distributable Amount" means, with respect to any Distribution Date, the sum of the Certificateholders' Principal Distributable Amount and the Certificateholders' Interest Distributable Amount. "Certificateholders' Interest Distributable Amount" means, with respect to any Distribution Date, the sum of the Certificateholders' Monthly Interest Distributable Amount for such Distribution Date and the Certificateholders' Interest Carryover Shortfall for such Distribution Date. "Certificateholders' Monthly Interest Distributable Amount" means, with respect to any Distribution Date, the product of (x) one-twelfth of the Pass-Through Rate (or, in the case of the first Distribution Date, the Pass-Through Rate multiplied by a fraction, the numerator of which is the number of days elapsed from and including the Closing Date to but excluding such Distribution Date) and the denominator of which is 360) and (y) the Certificate Balance on the immediately preceding Distribution Date, after giving effect to all payments of principal to the Certificateholders on or prior to such Distribution Date (or, in the case of the first Distribution Date, on the Closing Date). "Certificateholders' Interest Carryover Shortfall" means, with respect to any Distribution Date, the excess of the Certificateholders' Monthly Interest Distributable Amount for the preceding Distribution Date and any outstanding Certificateholders' Interest Carryover Shortfall on such preceding Distribution Date, over the amount in respect of interest at the Pass-Through Rate that is actually deposited in the Certificate Distribution Account on such preceding Distribution Date, plus interest on such excess, to the extent permitted by law, at the Pass-Through Rate from and including such preceding Distribution Date to but excluding the current Distribution Date. "Certificateholders' Principal Distributable Amount" means, with respect to any Distribution Date, the sum of the Certificateholders' Monthly Principal Distributable Amount for such Distribution Date and the Certificateholders' Principal Carryover Shortfall as of the close of the preceding Distribution Date; provided, however, that the Certificateholders' Principal Distributable Amount shall not exceed the Certificate Balance. In addition, on the Certificate Final Scheduled Distribution Date, the principal required to be distributed to Certificateholders will include the lesser of (a) any payments of principal due and remaining unpaid on each Receivable in the Trust as of the Final Scheduled Maturity Date or (b) the portion of the amount that is necessary (after giving effect to the other amounts to be deposited in the Certificate Distribution Account on such Distribution Date and allocable to principal) to reduce the Certificate Balance to zero, in either case after giving effect to any required distribution of the Noteholders' Principal Distributable Amount to the Note Distribution Account. In addition, on any Distribution Date on which, after giving effect to all distributions to the Servicer, the Noteholders and the Certificateholders on such Distribution Date, (1) the outstanding principal balance of the Notes is zero and (2) the amount on deposit in the Reserve Account is equal to or greater than the Certificate Balance, the Certificateholders' Principal Distributable Amount shall include an amount equal to such Certificate Balance. "Certificateholders' Monthly Principal Distributable Amount" means, with respect to any Distribution Date, the Certificateholders' Percentage of the Principal Distribution Amount or, with respect to any Distribution Date on or after the Distribution Date on which the outstanding principal balance of the Notes is reduced to zero, 100% of the Principal Distribution Amount (less any amount required on the first such Distribution Date to reduce the outstanding principal balance of the Notes to zero, which shall be deposited into the Note Distribution Account). "Certificateholders' Percentage" means 100% minus the Noteholders' Percentage. "Certificateholders' Principal Carryover Shortfall" means, as of the close of any Distribution Date, the excess of the Certificateholders' Monthly Principal Distributable Amount and any outstanding Certificateholders' Principal Carryover Shortfall from the preceding Distribution Date, over the amount in respect of principal that is actually deposited in the Certificate Distribution Account on such Distribution Date. "Certificate Balance" equals, initially, $[ ] and, thereafter, equals the initial Certificate Balance, reduced by all amounts allocable to principal previously distributed to Certificateholders. "Pass-Through Rate" means, with respect to the Certificates, [ ]% per annum. CREDIT ENHANCEMENT RESERVE ACCOUNT. Pursuant to the Sale and Servicing Agreement, the Reserve Account will be created and maintained with the Indenture Trustee. On the Closing Date, the Depositor will deposit $[ ] ([ ]% of aggregate initial principal balance of the Notes plus the initial Certificate Balance) (the "Reserve Account Initial Deposit") in the Reserve Account. The Reserve Account Initial Deposit will be augmented on each Distribution Date by the deposit in the Reserve Account of amounts remaining after distribution of the Total Servicing Fee and amounts to be paid to the Noteholders and Certificateholders. If the amount on deposit in the Reserve Account on any Distribution Date (after giving effect to all deposits or withdrawals therefrom on such Distribution Date) is greater than the Specified Reserve Account Balance for such Distribution Date, the Servicer will instruct the Indenture Trustee to distribute the amount of the excess to the Depositor. Upon any distribution to the Depositor of amounts from the Reserve Account, neither the Noteholders nor the Certificateholders will have any rights in, or claims to, such amounts. In certain circumstances, funds in the Reserve Account will be used to reduce the Certificate Balance to zero. "Specified Reserve Account Balance" with respect to any Distribution Date generally means the greater of (a) [ ]% of the sum of the aggregate outstanding principal amount of the Notes and the outstanding Certificate Balance on such Distribution Date (after giving effect to all payments on the Notes and distributions with respect to the Certificates to be made on such Distribution Date) or (b) [ ]% of the aggregate initial principal balance of the Notes plus the initial Certificate Balance. In no circumstances will the Depositor be required to deposit any amounts in the Reserve Account other than the Reserve Account Initial Deposit to be made on the Closing Date. SUBORDINATION OF THE CERTIFICATES. The rights of the Certificateholders to receive distributions will be subordinated to the rights of the Noteholders following the occurrence of certain Events of Default or an acceleration of the Notes. The subordination of the Certificates is intended to enhance the likelihood of receipt by Noteholders of amounts due them and to decrease the likelihood that the Noteholders will experience losses. In addition, the Reserve Account is intended to enhance the likelihood of receipt by Noteholders and Certificateholders of amounts due them and to decrease the likelihood that the Noteholders and Certificateholders will experience losses. However, in certain circumstances, the Reserve Account could be depleted. If the amount required to be withdrawn from the Reserve Account to cover shortfalls in collections on the Receivables exceeds the amount on deposit in the Reserve Account a temporary shortfall in the amounts distributed to the Noteholders or the Certificateholders could result. In addition, depletion of the Reserve Account ultimately could result in losses to Noteholders and Certificateholders. FEDERAL INCOME TAX CONSEQUENCES Stroock & Stroock & Lavan LLP is of the opinion that, (x) based on the terms of the Notes and the transactions relating to the Receivables as set forth herein, the Notes will be treated as debt for federal income tax purposes and (y) based on the applicable provisions of the Trust Agreement and Related Documents, for federal income tax purposes, the Trust will not be classified as an association taxable as a corporation and the Trust will not be treated as a publicly traded partnership taxable as a corporation. The Trust and Certificateholders will agree by their purchase of Certificates, if there is more than one Certificateholders, to treat the Trust as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the Trust, the Certificateholders as partners of the partnership and the Notes as debt of the partnership, and if there is one Certificateholder, to treat that holder as the owner of the assets of the Trust and to treat the Trust as a disregarded entity. It is not anticipated that the Notes will be treated as issued will original issue discount ("OID"). See "Material Federal Income Tax Consequences" in the Prospectus. STATE AND LOCAL TAX CONSEQUENCES The discussion above does not address the tax consequences of purchase, ownership or disposition of the Securities under any state or local tax law. We recommend that investors consult their own tax advisors regarding state and local tax consequences. ERISA CONSIDERATIONS THE NOTES Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit sharing, or other employee benefit plan, as well as individual retirement accounts and particular types of Keogh Plans subject to those provisions, and entities deemed to hold plan assets of these plans (each, a "Benefit Plan"), from engaging in particular transactions involving "plan assets" with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to the Benefit Plan. A violation of these "prohibited transaction" rules may generate excise tax and other penalties and liabilities under ERISA and the Code for these persons. ERISA also imposes particular duties on persons who are fiduciaries of Benefit Plans subject to ERISA. Under ERISA, any person who exercises any authority or control respecting the management or disposition of the assets of a Benefit Plan is considered to be a fiduciary of the Benefit Plan, subject to exceptions not here relevant. Some transactions involving the Trust might be deemed to constitute prohibited transactions under ERISA and the Code with respect to a Benefit Plan that purchases [ ] Notes if assets of the Trust were deemed to be assets of the Benefit Plan. Under a regulation issued by the United States Department of Labor (the "Plan Assets Regulation"), the assets of the Trust would be treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan acquired an equity interest in the Trust and none of the exceptions contained in the Plan Assets Regulation was applicable. An "equity interest" is defined under the Plan Assets Regulation as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Although there is little guidance on the subject, the Trust believes that, at the time of their issuance the [ ] Notes should be treated as indebtedness without substantial equity features for purposes of the Plan Assets Regulation. The debt status of the [ ] Notes could be affected subsequent to their issuance by particular types of changes in the financial condition of the Trust. Without regard to whether [ ] Notes are treated as an equity interest under the Plan Assets Regulation, the acquisition or holding of the [ ] Notes by or on behalf of a Benefit Plan could be considered to give rise to a prohibited transaction if the Trust, the Seller, the Servicer, the Indenture Trustee or the Owner Trustee is or becomes a party in interest or a disqualified person with respect to a Benefit Plan or in the event that a subsequent transfer of a [ ] Note occurs between a Benefit Plan and a party in interest or disqualified person with respect to the Plan. Some exemptions from the prohibited transaction rules could be applicable to the purchase and holding of [ ] Notes by a Benefit Plan depending on the type and circumstances of the plan fiduciary making the decision to acquire the [ ] Notes. Included among these exemptions, each of which contains several conditions which must be satisfied before the exemption applies, are: PTCE 90-1, regarding partiuclar transactions entered into by insurance company pooled separate accounts; PTCE 95-60, regarding particular transactions entered into by insurance company general accounts; PTCE 96-23, regarding particular transactions effected by "in-house asset managers"; PTCE 91-38 regarding particular types of transactions entered into by bank collective investment funds; and PTCE 84-14, regarding particular transactions effected by "qualified professional asset managers." By acquiring a [ ] Note, each purchaser and each transferee of a [ ] Note shall be deemed to represent and warrant that either (1) it is not acquiring a [ ] Note with the assets of a Benefit Plan; or (2) its purchase and holding of the [ ] Notes will qualify for prohibited transaction exemptive relief under PTCE 95-60, PTCE 96-23, PTCE 91-38, PTCE 90-1, PTCE 84-14 or some other applicable exemption. Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA) and some church plans (as defined in Section 3(33) of ERISA) may not be subject to ERISA requirements. However, governmental plans can be subject, under federal, fiduciary, state or local law, to restrictions which are similar to ERISA and church plans may be subject to other types of prohibited transaction restrictions under the Code. A Benefit Plan fiduciary considering the purchase of [ ] Notes should consult its tax and/or legal advisors regarding whether the assets of the Trust would be considered plan assets, the possibility of exemptive relief from the prohibited transaction rules and other issues and their potential consequences. THE CERTIFICATES The Certificates may not be acquired (directly or indirectly) by or on behalf of any Benefit Plan or any entity (including an insurance company general account) whose underlying assets include plan assets of the Benefit Plan by reason of a plan's investment in the entity. By acceptance of a Certificate, each Certificateholder will be deemed to have represented and warranted that it is not a Benefit Plan. UNDERWRITING Subject to the terms and conditions set forth in the Underwriting agreement relating to the Notes and the Certificates (the "Underwriting Agreement"), the Depositor has agreed to sell to Deutsche Banc Securities Inc. (the "Underwriter"), and the Underwriter has agreed to purchase, the Notes and the Certificates, subject to the satisfaction of certain conditions precedent. The Depositor has been advised by the Underwriter that the Underwriter proposes to offer the Notes to the public initially at the public offering prices set forth on the cover page of this prospectus supplement, and to certain dealers at such prices less a concession of [ ]% per Note, that the Underwriter and such dealers may allow a discount of [ ]% per Note on the sale to certain other dealers; and that after the initial public offering of the Notes, the public offering prices and the concessions and discounts to dealers may be changed by the Underwriter. The Depositor has been advised by the Underwriter that the Underwriter proposes to offer the Certificates to the public initially at the public offering price set forth on the cover page of this prospectus supplement, and to certain dealers at such price less a concession of [ ]% per Certificate; that the Underwriter and such dealers may allow a discount of [ ]% per Certificate on the sale to certain other dealers; and that after the initial public offering of the Certificates, the public offering price and the concession and discount to dealers may be changed by the Underwriter. Until the distribution of the Securities is completed, rules of the Securities and Exchange Commission may limit the ability of the Underwriter and certain selling group members to bid for and purchase the Securities. As an exception to these rules, the Underwriter is permitted to engage in certain transactions that stabilize the prices of the Securities. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of such Securities. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. Neither the Depositor nor the Underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the prices of the Securities. In addition, neither the Depositor nor the Underwriter makes any representation that the Underwriter will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. The Depositor has agreed to indemnify the Underwriter against certain liabilities, including civil liabilities under the Securities Act, or contribute to payments which the Underwriter may be required to make in respect thereof. In the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and, may, therefore, be unenforceable. The Trust may, from time to time, invest the funds in the Trust Accounts and the Certificate Distribution Account in Eligible Investments acquired from the Underwriter. The closing of the sale of the Notes is conditioned on the closing of the sale of the Certificates, and the closing of the sale of the Certificates is conditioned on the closing of the sale of the Notes. LEGAL MATTERS Certain legal matters with respect to the Notes and the Certificates will be passed upon for the Depositor by [ ]. Certain legal matters with respect to the Notes and the Certificates will be passed upon for the Underwriter by Stroock & Stroock & Lavan LLP, New York, New York. Stroock & Stroock & Lavan LLP also will pass upon the material federal income tax consequences related to the Notes and the Certificates. Certain legal matters under the laws of the State of Delaware will be passed upon for the Depositor by [ ], [ ]. SUBJECT TO COMPLETION, [ ] PROSPECTUS ACE SECURITIES CORP. COMPANY ASSET BACKED CERTIFICATES ASSET BACKED NOTES (ISSUABLE IN SERIES) AUTO RECEIVABLES AND RECEIVABLES SECURITIES TRUSTS -------------------- THE TRUST: Each trust will be established to hold assets transferred to it by ACE Securities Corp. The assets in each trust will generally consist of one or more of the following: 1. One or more pools of o motor vehicle installment loan agreements or motor vehicle retail installment sale contracts secured by new and used automobiles, recreational vehicles, including motor homes, campers, boats, boat motors, motorcycles, jet skis, waverunners, all-terrain-vehicles, and snowmobiles, vans, trucks, buses and/or trailers, and security interests in the vehicles financed by the motor vehicle installment loan agreements or retail installment sale contracts, o private securities evidencing ownership interests in or secured by loans similar to the types of loans described above; 2. Government Securities; 3. All monies due under the above assets, which may be net of amounts payable to the servicer; and 4. Funds or accounts established for the related trust, or one or more forms of enhancement. The assets in your trust are specified in the prospectus supplement for that particular trust, while the types of assets that may be included in a trust, whether or not in your trust, are described in greater detail in this prospectus. THE SECURITIES: ACE Securities Corp. Will sell the securities pursuant to a prospectus supplement. The securities will be grouped into one or more series, each having its own distinct designation. Each series will be issued in one or more classes and will evidence beneficial ownership of, or be secured by, the assets in the trust that the series relates to. A prospectus supplement for a series will specify all of the terms of the series and of each of the classes in the series. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE OFFERED SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. MAKING ANY CONTRARY REPRESENTATION IS A CRIMINAL OFFENSE. The date of this prospectus is [ ] TABLE OF CONTENTS Risk Factors..............................................................1 The Trusts................................................................6 The Trustee...............................................................7 The Receivables Pools.....................................................7 The Collateral Certificates..............................................10 The Government Securities................................................11 Weighted Average Life of the Securities..................................20 Pool Factors and Trading Information.....................................21 The Seller and The Servicer..............................................22 Use of Proceeds..........................................................22 Description of the Notes.................................................22 Description of the Certificates..........................................28 Certain Information Regarding the Securities.............................30 Description of the Transfer and Servicing Agreements.....................34 Certain Matters Regarding the Servicer...................................43 Certain Legal Aspects of the Receivables.................................47 Material Federal Income Tax Consequences.................................53 State and Local Tax Considerations.......................................74 ERISA Considerations.....................................................76 Plan of Distribution.....................................................83 Legal Matters............................................................84 Prospectus Supplement....................................................84 Reports to Securityholders...............................................84 Available Information....................................................85 Incorporation of Certain Documents by Reference..........................85 Index of Terms...........................................................87 Annex I - Global Clearance, Settlement and Tax Documentation Procedures RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE CERTIFICATES. YOU SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS SUPPLEMENT. LIMITED LIQUIDITY MAY RESULT IN DELAYS IN YOUR ABILITY TO SELL SECURITIES OR LOWER RETURNS............................There will be no market for the securities of any series prior to their issuance, and there can be no assurance that a secondary market will develop. If a secondary market does develop, there can be no assurance that it will provide holders with liquidity of investment or that the market will continue for the life of the securities of the related series. Deutsche Banc Alex. Brown presently expects to make a secondary market in the securities, but has no obligation to do so. Absent a secondary market for the securities you may experience a delay if you choose to sell your securities or the price you receive may be less than you would receive for a comparable liquid security. LIMITED ASSETS FOR PAYMENTS - NO RECOURSE TO COMPANY, SELLER OR SERVICER........................The company does not have, nor is it expected to have, any significant assets. The securities of a series will be payable solely from the assets of the trust fund for that series. Except for any related insurance policies or credit support, there will be no recourse to the company or any other person for any default on the notes or any failure to receive distributions on the certificates with respect to any series. Consequently, holders of securities of each series must rely solely upon payments with respect to the assets constituting the trust fund for a series of securities, including, if applicable, any amounts available pursuant to any enhancement for that series, for the payment of principal of and interest on the securities of that series. The only obligations, if any, of the company with respect to the securities of any series will be with respect to its breach of specific representations and warranties. The company does not have, and is not expected in the future to have, any significant assets with which to meet any obligation to repurchase assets with respect to which there has been a breach of any representation or warranty. If, for example, the company were required to repurchase a receivable, its only sources of funds to make the repurchase would be from funds obtained from the enforcement of a corresponding obligation, if any, on the part of the originator of the receivable, or the seller, as the case may be, or from a reserve fund established to provide funds for repurchases. If the company does not have sufficient assets and no other party is obligated to repurchase defective assets, you may experience a loss. LIMITS ON ENHANCEMENT MAY RESULT IN LOSSES TO YOU............Although we intend the enhancement for the securities to reduce the risk of delinquent payments or losses to holders of a series of securities entitled to the benefit of the enhancement, the amount of the enhancement will be limited, as set forth in the related prospectus supplement. In addition, the amount available will decline and could be depleted prior to the payment in full of the related series of securities, and losses on the primary assets could result in losses to holders of those securities. TIMING AND RATE OF PREPAYMENTS MAY RESULT IN LOWER YIELD..........The yield to maturity experienced by a holder of securities may be affected by the rate and timing of payments of principal of the receivables or of the underlying receivables relating to the private securities. The rate and timing of principal payments of the securities of a series will be affected by a number of factors, including the following: o the extent of prepayments, which may be influenced by a variety of factors, o the manner of allocating principal payments among the classes of securities of a series as specified in the related prospectus supplement, and o the exercise of any right of optional termination. Prepayments may also result from repurchases of receivables or underlying receivables, as applicable, due to material breaches of the seller's or the company's representations or warranties. Interest payable on the securities of a series on a distribution date will include all interest accrued during the period specified in the related prospectus supplement. In the event interest accrues during the calendar month prior to a distribution date, the effective yield to holders will be reduced from the yield that would otherwise be obtainable if interest payable on the security were to accrue through the day immediately preceding each distribution date, and the effective yield at par to holders will be less than the indicated coupon rate. RISKS OF SUBORDINATED SECURITIES...To the extent specified in the applicable prospectus supplement, distributions of interest on and principal of one or more classes of securities of a series may be subordinated in priority of payment to interest and principal due on one or more other classes of securities of the related series. Any subordinated securities will be affected to a greater degree by any losses on the receivables or of the underlying receivables relating to the private securities. POTENTIAL LACK OF SECURITY.........The company will assign security interests in the financed vehicles securing the receivables to the related trust. Due to administrative burden and expense, however, we will not cause the certificates of title to the financed vehicles to be amended to reflect the assignment to the trust unless otherwise specified in the prospectus supplement. In the absence of amendment, a trust may not have a perfected security interest in the financed vehicles securing the receivables in some states. If a trust does not have a perfected security interest in a financed vehicle, its ability to realize in the event of a default on that financed vehicle may be adversely affected. To the extent that the trust's security interest in a financed boat is perfected, the trust will have a prior claim over subsequent purchasers of such financed boat and holders of subsequently perfected security interests in such financed boat. Under the laws of many states, certain possessory liens for repairs on a boat and storage, as well as certain rights in favor of federal and state governmental authorities arising from the use of a boat in connection with illegal activities, may take priority even over a perfected security interest. Under the Ship Mortgage Statutes, certain preferred maritime liens will have priority over security interests in financed boats perfected under federal law. Certain federal tax liens may have priority over the lien of a secured party. In addition, through fraud or negligence, the trust could lose its security interest or the priority of its security interest in a financed boat. If a security interest in a financed boat is initially perfected (by titling or UCC filing) under applicable state law and the financed boat subsequently is federally documented, the trust could lose the priority of its security interest in such financed boat to a purchaser thereof or to the holder of a subsequently perfected Preferred Mortgage covering such financed boat. See "Certain Legal Aspects of the Receivables--Security Interests in the Financed Vehicles." Ace Securities Corp. shall not have an obligation to repurchase a contract as to which any of the aforementioned occurrences result in the trust's losing the priority of its security interest or its security interest in such financed boat after the date such security interest was conveyed to the trust (other than through fraud or negligence of the seller or the servicer). RISK OF COMMINGLING................We will require the servicer to deposit all payments on the receivables collected during each collection period into the related collection account within two business days of receipt of the payments. However, if a servicer satisfies particular requirements for less frequent remittances we will not require the servicer to deposit the amounts into the collection account until the business day preceding each distribution date. Pending deposit into the collection account, collections may be invested by the servicer at its own risk and for its own benefit and will not be segregated from funds of the servicer. If the servicer were unable to remit the funds, the applicable securityholders might incur a loss. To the extent set forth in the related prospectus supplement, the servicer may, in order to satisfy the requirements described above, obtain a letter of credit or other security for the benefit of the related trust to secure timely remittances of collections on the receivables. REMOVAL OF A SERVICER AFTER A SERVICER DEFAULT.................The related prospectus supplement may provide that with respect to a series of securities issued by an owner trust, upon the occurrence of a servicer default, the related indenture trustee or noteholders may remove the servicer without the consent of the related trustee or any certificateholders. The trustee or the certificateholders with respect to a series may not have the ability to remove the servicer if a servicer default occurs. In addition, the noteholders with respect to a series have the ability, with specified exceptions, to waive defaults by the servicer, including defaults that could materially adversely affect the certificateholders of the series. BOOK-ENTRY REGISTRATION-- BENEFICIAL OWNERS NOT RECOGNIZED BY TRUST................Issuance of the securities in book-entry form may reduce the liquidity of these securities in the secondary trading market since investors may be unwilling to purchase securities for which they cannot obtain physical certificates. Since transactions in the securities can be effected only through The Depository Trust Company and any other entities set forth in the related prospectus supplement, your ability to pledge a security to persons or entities that do not participate in The Depository Trust Company or any other entities or otherwise to take actions in respect of the related securities may be limited due to lack of a physical certificate representing the securities. You may experience some delay in the receipt of distributions of interest and principal on the securities since the distributions will be forwarded by the trustee to The Depository Trust Company and The Depository Trust Company will credit the distributions to the accounts of its participants which will subsequently credit them to your account either directly or indirectly through indirect participants. THE TRUSTS With respect to each series of securities, ACE Securities Corp., the company, and/or [ ], the seller, or one of its affiliates will establish a separate trust (each, a "Trust") pursuant to a trust agreement (a "Trust Agreement") between the company and the related trustee or pooling and servicing agreement (a "Pooling and Servicing Agreement") among the company, the servicer and the trustee for the related Trust, as applicable, for the transactions described in this prospectus and in the related prospectus supplement. The property of each Trust will include Primary Assets and all payments due under the Primary Assets on and after the applicable cutoff date in the case of Precomputed Receivables and all payments received under the Precomputed Receivables on and after the applicable cutoff date or closing date, as specified in the related prospectus supplement, in the case of Simple Interest Receivables, Collateral Certificates, Government Securities and Private Label Custody Receipt Securities. On the applicable closing date, after the issuance of the notes and/or certificates of a given series, the company will transfer or sell Primary Assets to the Trust in the outstanding principal amount specified in the related prospectus supplement. The property of each Trust may also include: o amounts as from time to time may be held in separate trust accounts established and maintained pursuant to the related Trust Agreement, sale and servicing agreement (a "Sale and Servicing Agreement") among the company, the servicer and the related Trust or Pooling and Servicing Agreement, as applicable, and the proceeds of these accounts, as described in this prospectus and in the related prospectus supplement; o security interests in vehicles financed by the Receivables (the "Financed Vehicles") and any other interest of a seller in the Financed Vehicles; o the rights to proceed from claims on physical damage, credit life and disability insurance policies covering Financed Vehicles or the obligors, as the case may be; o any property that has secured a Receivable and that has been acquired by the applicable Trust; and o any and all proceeds of the Primary Assets or the foregoing. To the extent specified in the related prospectus supplement, a Reserve Account or other form of credit enhancement may be a part of the property of a given Trust or may be held by the trustee for the benefit of holders of the related securities. The servicer specified in the related prospectus supplement, as servicer under the Pooling and Servicing Agreement or Sale and Servicing Agreement, as applicable, will service the Receivables held by each Trust and will receive fees for these services. See "Description of the Transfer and Servicing Agreements--Servicing Compensation and Payment of Expenses" in this prospectus and "Description of the Transfer and Sale and Servicing Agreement--Servicing Compensation" in the related prospectus supplement. To facilitate the servicing of Receivables and unless otherwise specified in the related prospectus supplement, each seller and each trustee will authorize the servicer to retain physical possession of the Receivables held by each Trust and other documents relating to possession of the Receivables as custodian for each Trust. Due to the administrative burden and expense, the certificates of title to the Financed Vehicles will not be amended to reflect the sale and assignment of the security interest in the Financed Vehicles to a Trust. In the absence of an amendment, a Trust may not have a perfected security interest in some of the Financed Vehicles in some states. See "Certain Legal Aspects of the Receivables" and "Description of the Transfer and Servicing Agreements--Sale and Assignment of Primary Assets". In the case of Primary Assets consisting of Collateral Certificates, Government Securities and/or Private Label Custody Receipt Securities, the trustee specified in the related prospectus supplement will manage the Collateral Certificates, Government Securities and/or Private Label Custody Receipt Securities. If the protection provided to (1) holders of notes issued by an owner trust by the subordination of the related certificates and by the Reserve Account, if any, or any other available form of credit enhancement for the series or (2) certificateholders by any Reserve Account or other form of credit enhancement is insufficient, the noteholders or certificateholders, as the case may be, will have to look to payments by or on behalf of obligors on Receivables or on the Collateral Certificates, the Government Securities, and the Private Label Custody Receipt Securities, as applicable, and the proceeds from the repossession and sale of Financed Vehicles that secure defaulted Receivables for distributions of principal and interest on the securities. In this event, some factors, such as the applicable Trust's not having perfected security interests in all of the Financed Vehicles, may limit the ability of a Trust to realize on the collateral securing the related Primary Assets, or may limit the amount realized to less than the amount due under Receivables. Securityholders may be subject to delays in payment on, or may incur losses on their investment in, the securities as a result of defaults or delinquencies by obligors and depreciation in the value of the related Financed Vehicles. See "Description of the Transfer and Servicing Agreements--Credit and Cash Flow Enhancement" and "Certain Legal Aspects of the Receivables". The principal offices of each Trust and the related trustee will be specified in the applicable prospectus supplement. THE TRUSTEE The trustee for each Trust will be specified in the related prospectus supplement. The trustee's liability in connection with the issuance and sale of the related securities is limited solely to the express obligations of the trustee set forth in the related Trust Agreement and Sale and Servicing Agreement or the related Pooling and Servicing Agreement, as applicable. A trustee may resign at any time, in which event the servicer will be obligated to appoint a successor trustee. The servicer may also remove the related trustee if the trustee ceases to be eligible to continue as trustee under the related Trust Agreement or Pooling and Servicing Agreement, as applicable, and will be obligated to appoint a successor trustee. Any resignation or removal of a trustee and appointment of a successor trustee will not become effective until the acceptance of the appointment by the successor trustee. THE RECEIVABLES POOLS The motor vehicle installment loan agreements or motor vehicle retail installment sale contracts secured by new and used automobiles, recreational vehicles, including motor homes, campers, boats, boat motors, motorcycles, jet skis, waverunners, all-terrain-vehicles and snowmobiles, vans, trucks, buses and/or trailers (the "Receivables") in a Receivables Pool have been or will be originated or acquired by a seller in the ordinary course of business, in accordance with its credit and underwriting standards as described in the related prospectus supplement. The Receivables to be sold to each Trust will be selected from a seller's portfolio for inclusion in a Receivables Pool based on several criteria, which criteria include that, subject to particular limitations which, if applicable, will be specified in the related prospectus supplement, each Receivable o is secured by a new or used vehicle, o was originated or acquired, either from a motor vehicle dealer or a financial institution, by the seller, o provides for level monthly payments, except for the last payment, which may be different from the level payments, that, unless otherwise provided in the related prospectus supplement, amortize the amount financed over the original term to maturity of the related Receivable, o is a Precomputed Receivable or a Simple Interest Receivable and o satisfies the other criteria, if any, set forth in the related prospectus supplement. No selection procedures believed by the seller to be adverse to Securityholders were or will be used in selecting the Receivables. "Precomputed Receivables" consist of either (1) monthly actuarial receivables ("Actuarial Receivables") or (2) receivables that provide for allocation of payments according to the "sum of periodic balances" or "sum of monthly payments" method, similar to the "Rule of 78s" ("Rule of 78S Receivables"). An Actuarial Receivable provides for amortization of the loan over a series of fixed level monthly installment payments. Each monthly installment, including the monthly installment representing the final payment on the Receivable, consists of (x) an amount of interest equal to 1/12 of the stated contract interest rate under the related Receivable multiplied by the unpaid principal balance of the loan, plus (y) an amount allocable to principal equal to the remainder of the monthly payment. A Rule of 78s Receivable provides for the payment by the obligor of a specified total amount of payments, payable in equal monthly installments on each due date, which total represents the principal amount financed plus add-on interest in an amount calculated at the stated contract interest rate under the related Receivable for the term of the receivable. The rate at which the amount of add-on interest is earned and, correspondingly, the amount of each fixed monthly payment allocated to reduction of the outstanding principal amount are calculated in accordance with the Rule of 78s. "Simple Interest Receivables" are receivables that provide for the amortization of the amount financed under them over a series of fixed level monthly payments. However, unlike the monthly payment under an Actuarial Receivable, each monthly payment consists of an installment of interest that is calculated on the basis of the outstanding principal balance of the receivable multiplied by the stated contract interest rate under the related Receivable and further multiplied by the period elapsed, as a fraction of a calendar year, since the preceding payment of interest was made. As payments are received under a Simple Interest Receivable, the amount received generally is applied first to interest accrued to the date of payment and the balance is applied to reduce the unpaid principal balance. Accordingly, if an obligor pays a fixed monthly installment before its scheduled due date, the portion of the payment allocable to interest for the period since the preceding payment was made will be less than it would have been had the payment been made as scheduled, and the portion of the payment applied to reduce the unpaid principal balance will be correspondingly greater. Conversely, if an obligor pays a fixed monthly installment after its scheduled due date, the portion of the payment allocable to interest for the period since the preceding payment was made will be greater than it would have been had the payment been made as scheduled, and the portion of the payment applied to reduce the unpaid principal balance will be correspondingly less. In either case, the obligor is obligated to pay a fixed monthly installment until the final scheduled payment date, at which time the amount of the final installment may be increased or decreased as necessary to repay the then outstanding principal balance. In the event of the prepayment in full, voluntarily or by acceleration, of a Rule of 78s Receivable, under the terms of the contract a "refund" or "rebate" will be made to the obligor of the portion of the total amount of payments then due and payable allocable to "unearned" add-on interest, calculated in accordance with a method equivalent to the Rule of 78s. If an Actuarial Receivable is prepaid in full, with minor variations based upon state law, the Actuarial Receivable requires that the rebate be calculated on the basis of a constant interest rate. If a Simple Interest Receivable is prepaid, rather than receive a rebate, the obligor is required to pay interest only to the date of prepayment. The amount of a rebate under a Rule of 78s Receivable generally will be less than the amount of a rebate on an Actuarial Receivable and generally will be less than the remaining scheduled payments of interest that would have been due under a Simple Interest Receivable for which all payments were made on schedule. To the extent provided in the related prospectus supplement, each Trust will account for the Rule of 78s Receivables as if the Receivables were Actuarial Receivables. Amounts received upon prepayment in full of a Rule of 78s Receivable in excess of the then outstanding principal balance of the Receivable and accrued interest on the Receivable, calculated pursuant to the actuarial method, will not be paid to noteholders or passed through to certificateholders of the applicable series, but will be paid to the servicer as additional servicing compensation. Information with respect to each Receivables Pool will be set forth in the related prospectus supplement, including, to the extent appropriate, the composition and distribution by annual percentage rate and by states of origination of the Receivables, the portion of each Receivables Pool consisting of Precomputed Receivables and of Simple Interest Receivables, and the portion of each Receivables Pool secured by new vehicles and by used vehicles. DELINQUENCIES, REPOSSESSIONS AND NET LOSSES Information concerning the experience of a seller pertaining to delinquencies, repossessions and net losses with respect to Receivables will be set forth in each prospectus supplement. There can be no assurance that the delinquency, repossession and net loss experience on any Receivables Pool will be comparable to prior experience or to the information. NEW AND USED FINANCED VEHICLES The extension of credit to an obligor on a Receivable is based on an assessment of an applicant's ability to repay the amounts due on the Receivable and the adequacy of the related Financed Vehicle. An assessment generally does not distinguish between new or used vehicles. Rather, the amount advanced under a motor vehicle loan generally will not exceed 100% of the value of the collateral unless otherwise specified in the related prospectus supplement. For new motor vehicles, the value equals the dealer invoice for the motor vehicle that serves as collateral, plus sales tax, license fee, title fee, the cost of service and warranty contracts, and any premium for credit life and disability insurance obtained in connection with the loan. For used motor vehicles, the value equals the wholesale price reported in the most recent edition of the National Automotive dealers Association Used Car Guide, the National Auto Research Division Black Book or any other industry guide as specified in the related prospectus supplement, plus sales tax, license fee, title fee, the cost of service and warranty contracts, and any premium for credit life and disability insurance obtained in connection with the loan. The maximum age of any used motor vehicle acceptable as collateral generally is ten model years. Additional information with respect to delinquencies, repossessions and net losses with respect to Receivables secured by new or used Financed Vehicles will be set forth in each prospectus supplement. THE COLLATERAL CERTIFICATES The primary assets ("Primary Assets") for a series will include Receivables or Collateral Certificates, which include certificates evidencing an undivided interest in, or notes or loans secured by, Receivables. These Collateral Certificates will have previously been offered and distributed to the public pursuant to an effective registration statement or are being registered under the securities Act in connection with the offering of a series of securities, which offering, distribution and registration may have been undertaken, or may be undertaken, by the company and/or one or more affiliates of the company, in each case, subject to exceptions which, if applicable, will be described in the related prospectus supplement. Collateral Certificates will have been issued pursuant to a pooling and servicing agreement, a sale and servicing agreement, a trust agreement, an indenture or similar agreement (an "Underlying Trust Agreement"). The servicer (the "Underlying Servicer") of the underlying motor vehicle installment loans or sale contracts will have entered into the Underlying Trust Agreement with a trustee (the "Underlying Trustee"). The issuer of the Collateral Certificates (the "Underlying Issuer") will be o a financial institution, corporation or other entity engaged generally in the business of purchasing or originating motor vehicle installment loan agreements and motor vehicle retail installment sale contracts, o a limited purpose corporation organized for the purpose of, among other things, establishing trusts, acquiring and selling receivables to the trusts and selling beneficial interests in these trusts, or o one of the trusts. If so specified in the related prospectus supplement, the Underlying Issuer may be the company and/or one or more affiliates of the company. The obligations of the Underlying Issuer will generally be limited to specific representations and warranties with respect to the assets conveyed by it to the related trust. The related prospectus supplement will, subject to exceptions which, if applicable, will be described in the related prospectus supplement, provide that the Underlying Issuer will not have guaranteed any of the assets conveyed to the related trust or any of the Collateral Certificates issued under the Underlying Trust Agreement. Distributions of principal and interest will be made on the Collateral Certificates on the dates specified in the related prospectus supplement. The Collateral Certificates may be entitled to receive nominal or no principal distribution or nominal or no interest distributions. Principal and interest distributions will be made on the Collateral Certificates by the Underlying Trustee or the Underlying Servicer. The Underlying Issuer or the Underlying Servicer may have the right to repurchase assets underlying the Collateral Certificates after a specific date or under other circumstances specified in the related prospectus supplement. ENHANCEMENT RELATING TO COLLATERAL CERTIFICATES Enhancement in the form of reserve funds, subordination of other securities issued in connection with the Collateral Certificates, guarantees, letters of credit, cash collateral accounts, insurance policies or other types of enhancement may be provided with respect to the Receivables underlying the Collateral Certificates or with respect to the Collateral Certificates themselves. The type, characteristics and amount of enhancement will be a function of particular characteristics of the Receivables and other factors and will have been established for the Collateral Certificates on the basis of requirements of rating agencies. ADDITIONAL INFORMATION The related prospectus supplement for a series for which the Primary Assets include Collateral Certificates will specify, to the extent relevant and to the extent the information is reasonably available to the company and the company reasonably believes the information to be reliable: o the aggregate approximate principal amount and type of the Collateral Certificates to be included in the Primary Assets; o the characteristics of the receivables which comprise the underlying assets for the Collateral Certificates; o the expected and final maturity of the Collateral Certificates; o the interest rate of the Collateral Certificates; o the Underlying Issuer, the Underlying Servicer, if other than the Underlying Issuer, and the Underlying Trustee for the Collateral Certificates; o characteristics of the enhancement, if any, such as reserve funds, insurance funds, insurance policies, letters of credit or guarantees relating to the receivables underlying the Collateral Certificates or to the Collateral Certificates themselves; o the terms on which the underlying receivables for the Collateral Certificates may, or are required to, be purchased prior to their stated maturity or the stated maturity of the Collateral Certificates; and o the terms on which receivables may be substituted for those originally underlying the Collateral Certificates. THE GOVERNMENT SECURITIES Primary Assets for a series may include, but will not consist entirely of, any combination of o receipts or other instruments created under the Department of the Treasury's Separate Trading of Registered Interest and Principal of securities, or STRIPS, program ("Treasury Strips"), which interest and/or principal strips evidence ownership of specific interest and/or principal payments to be made on particular United States Treasury Bonds ("Treasury Bonds"), o Treasury Bonds and o other debt securities ("GSEs Bonds") of United States government sponsored enterprises ("GSEs"; and together with Treasury Strips and Treasury Bonds, collectively, "Government Securities"). The Government Securities, if any, included in a Trust are intended to assure investors that funds are available to make specified payments of principal and/or interest due on the related securities. Accordingly, the Government Securities, if any, included in a Trust are intended both to (1) support the ratings assigned to these securities, and (2) perform a function similar to that described in this prospectus under "Description of the Transfer and Servicing Agreements--Credit and Cash Flow Enhancement". A description of the respective general features of Treasury Bonds, Treasury Strips and GSE Bonds is set forth below. The prospectus supplement for each series of securities the Trust with respect to which contains Government Securities will contain information as to: (1) the title and series of each Government Security, the aggregate principal amount, denomination and form of each Government Security; (2) the limit, if any, upon the aggregate principal amount of the Government Security; (3) the dates on which, or the range of dates within which, the principal of, and premium, if any, on, the Government Security will be payable; (4) the rate or rates, or the method of determination of the rate or rates, at which the Government Security will bear interest, if any, the date or dates from which the interest will accrue, and the dates on which the interest will be payable; (5) whether the Government Security was issued at a price lower than the principal amount of that Government Security; (6) material events of default or restrictive covenants provided for with respect to the Government Security; (7) the rating of the Government Security, if any; (8) the issuer of each Government Security; (9) the material risks, if any, posed by any Government Securities and issuers of the Government Securities (which risks, if appropriate, will be described in the "Risk Factors" section of the related prospectus supplement); and (10) any other material terms of the Government Security. With respect to a Trust which includes a pool of Government Securities, the related prospectus supplement will, to the extent applicable, describe the composition of the Government Securities' pool, particular material events of default or restrictive covenants common to the Government Securities, and, on an aggregate, percentage or weighted average basis, as applicable, the characteristics of the pool with respect to the terms set forth in (3), (4) and (5) of the preceding sentence and any other material terms regarding the pool. The Government Securities included in a Trust will be senior, unsecured, nonredeemable obligations of the issuer of the Government Securities, will be denominated in United States dollars and, if rated, will be rated at least investment grade by at least one nationally recognized rating agency. In addition, the inclusion of Government Securities in a Trust with respect to a series of securities is conditioned upon their characteristics being in form and substance satisfactory to the Rating Agency rating the related series of securities. TREASURY BONDS Treasury Bonds are issued by and are the obligations of the United States of America. Accordingly, the payment of principal and interest on each Treasury Bond will be guaranteed by the full faith and credit of the United States of America. Interest is typically payable on the Bonds semiannually. Treasury Bonds are issued in registered form in denominations of $1,000, $5,000, $10,000, $100,000 and $1,000,000 and in book-entry form in integral multiples of these amounts. TREASURY STRIPS In general, Treasury Strips are created by separating, or stripping, the principal and interest components of Treasury Bonds that have an original maturity of 10 or more years from the date of issue. A particular Treasury Strip evidences ownership of the principal payment or one of the periodic interest payments, generally semiannual, due on the Treasury Bond to which the Treasury Strip relates. In 1985 the Department of the Treasury announced that all new issues of Treasury Bonds with maturities of 10 years or more would be transferable in their component pieces on the Federal Reserve wire system. In so doing, the Treasury created a generic, book-entry Treasury Strip named STRIPS (Separate Trading of Registered Interest and Principal of Securities) which, unlike private label Treasury Strips, can be issued without the need for a custodial arrangement. The STRIPS program has eclipsed the private sector programs (which are described below under "--Private Label Custody Receipt Securities"), and investment banks no longer sponsor new issues of custodial receipts. Treasury Strips may be either "serial" or "callable". A serial Treasury Strip evidences ownership of one of the periodic interest payments to be made on a Treasury Bond. No payments are made on the Treasury Strip, nor is it redeemable, prior to its maturity, at which time the holder becomes entitled to receive a single payment of the face amount of the Treasury Strip. Callable Treasury Strips relate to payments scheduled to be made after the related Treasury Bonds have become subject to redemption. These Treasury Strips evidence ownership of both principal of the related Treasury Bonds and each of the related interest payments commencing, typically, on the first interest payment date following the first optional redemption date. If the underlying Treasury Bonds are actually redeemed, holders of callable Treasury Strips generally receive a payment equal to the principal portion of the total face amount of the Treasury Strips plus the interest payment represented by the Treasury Strips maturing on the redemption date. No callable Treasury Strips will be included in a Trust. The face amount of any Treasury Strip is the aggregate of all payments scheduled to be received on the Treasury Strip. Treasury Strips are available in registered form and generally may be transferred and exchanged by the holders of the Treasury Strips in accordance with procedures applicable to the particular issue of the Treasury Strips. A holder of a private label Treasury Strip, as opposed to a STRIP, cannot enforce payment on that Treasury Strip against the Treasury. Instead, the holder must look to the custodian for payment. The custodian, and the holder of a Treasury Strip that obtains ownership of the underlying Treasury Bond, can enforce payment of the underlying Treasury Bond against the Treasury. If any private label Treasury Strips are included in a Trust with respect to any series of securities, the prospectus supplement for the series will include the identity and a brief description of each custodian that issued the Treasury Strips. If the company knows that the company of the Treasury Bonds underlying the Treasury Strips is the company or any of its affiliates, the company will disclose that fact in the related prospectus supplement. GSE BONDS As specified in the applicable prospectus supplement, the obligations of one or more of the following GSEs may be included in a Trust: Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Association ("Freddie Mac"), Student Loan Marketing Association ("Sallie Mae"), REFCO, Tennessee Valley Authority ("TVA"), Federal Home Loan Banks ("FHLB"), to the extent the obligations represent the joint and several obligations of the twelve Federal Home Loan Banks, and Federal Farm Credit Banks ("FFCB"). GSE debt securities are exempt from registration under the securities Act pursuant to Section 3(a)(2) of the securities Act, or are deemed by statute to be so exempt, and are not required to be registered under the Exchange Act. The securities of any GSE, including a GSE Guaranteed Bond, will be included in a Trust only to the extent that (1) its obligations are supported by the full faith and credit of the United States government or (2) the organization makes publicly available its annual report which shall include financial statements or similar financial information with respect to the organization (a "GSE Issuer"). Unless otherwise specified in the related prospectus supplement, the GSE Bonds will not be guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality of the United States other than the related GSE. Unless otherwise specified in the related prospectus supplement, none of the GSE Bonds will have been issued pursuant to an indenture, and no trustee is provided for with respect to any GSE Bonds. There will generally be a fiscal agent ("Fiscal Agent") for an issuer of GSE Bonds whose actions will be governed by a fiscal agency agreement. A Fiscal Agent is not a trustee for the holders of the GSE Bonds and does not have the same responsibilities or duties to act for the holders as would a trustee. GSE Bonds may be subject to particular contractual and statutory restrictions which may provide some protection to securityholders against the occurrence or effects of specified events. Unless otherwise specified in the related prospectus supplement, each GSE is limited to activities as will promote its statutory purposes as set forth in the publicly available information with respect to the issuer. A GSE's promotion of its statutory purposes, as well as its statutory, structural and regulatory relationships with the federal government, may cause or require the GSE to conduct its business in a manner that differs from what an enterprise which is not a GSE might employ. THE FEDERAL NATIONAL MORTGAGE ASSOCIATION Fannie Mae is a federally chartered and stockholder owned corporation organized and existing under the Federal National Mortgage Association Charter Act. It is the largest investor in home mortgage loans in the United States. Fannie Mae originally was established in 1938 as a corporation wholly owned by the United States government to provide supplemental liquidity to the mortgage market and was transformed into a stockholder owned and privately managed corporation by legislation enacted in 1968 and 1970. Fannie Mae provides funds to the mortgage market by purchasing mortgage loans from lenders, thus replenishing their funds for additional lending. Fannie Mae acquires funds to purchase loans from many capital market investors that ordinarily may not invest in mortgage loans, therefore expanding the total amount of funds available for housing. Operating nationwide, Fannie Mae helps to redistribute mortgage funds from capital-surplus to capital-short areas. Fannie Mae also issues mortgage-backed securities ("MBS"). Fannie Mae receives guaranty fees for its guaranty of timely payment of principal of and interest on MBS. Fannie Mae issues MBS primarily in exchange for pools of mortgage loans from lenders. The issuance of MBS enables Fannie Mae to further its statutory purpose of increasing the liquidity of residential mortgage loans. Fannie Mae prepares an Information Statement annually which describes Fannie Mae, its business and operations and contains Fannie Mae's audited financial statements. From time to time Fannie Mae prepares supplements to its Information Statement which include specific unaudited financial data and other information concerning the business and operations of Fannie Mae. Unless otherwise specified in the applicable prospectus supplement, these documents can be obtained without charge from the Office of Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016, telephone (202) 752-7115. Fannie Mae is not subject to the periodic reporting requirements of the Exchange Act. THE FEDERAL HOME LOAN MORTGAGE CORPORATION Freddie Mac is a publicly held government-sponsored enterprise created on July 24, 1970 pursuant to the Federal Home Loan Mortgage Corporation Act, Title III of the Emergency Home Finance Act of 1970, as amended (the "FHLMC Act"). Freddie Mac's statutory mission is to provide stability in the secondary market for home mortgages, to respond appropriately to the private capital market and to provide ongoing assistance to the secondary market for home mortgages, including mortgages secured by housing for low- and moderate-income families involving a reasonable economic return to Freddie Mac, by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for home mortgage financing. The principal activity of Freddie Mac consists of the purchase of conventional residential mortgages and participation interests in those mortgages from mortgage lending institutions and the sale of guaranteed mortgage securities backed by the mortgages so purchased. Freddie Mac generally matches and finances its purchases of mortgages with sales of guaranteed securities. Mortgages retained by Freddie Mac are financed with short- and long-term debt, cash temporarily held pending disbursement to security holders, and equity capital. Freddie Mac prepares an Information Statement annually which describes Freddie Mac, its business and operations and contains Freddie Mac's audited financial statements. From time to time Freddie Mac prepares supplements to its Information Statement which include specific unaudited financial data and other information concerning the business and operations of Freddie Mac. Unless otherwise specified in the applicable prospectus supplement, these documents can be obtained from Freddie Mac by writing or calling Freddie Mac's Investor Inquiry Department at 8200 Jones Branch Drive, McLean, Virginia, 22102; outside Washington, D.C. metropolitan area, telephone (800) 336-3672; within Washington, D.C. metropolitan area, telephone (703) 759-8160. Freddie Mac is not subject to the periodic reporting requirements of the Exchange Act. THE STUDENT LOAN MARKETING ASSOCIATION Sallie Mae is a stockholder-owned corporation established by the 1972 amendments to the Higher Education Act of 1965, as amended, to provide liquidity, primarily through secondary market and warehousing activities, for lenders participating in federally sponsored student loan programs, primarily the Federal Family Education Loan ("FFEL") program and the Health Education Assistance Loan Program. Under the Higher Education Act, Sallie Mae is authorized to purchase, warehouse, sell and offer participations or pooled interests in, or otherwise deal in, student loans, including, but not limited to, loans insured under the FFEL program, and to make commitments for any of the foregoing. Sallie Mae is also authorized to buy, sell, hold, underwrite and otherwise deal in obligations of eligible lenders, if the obligations are issued by the eligible lenders for the purpose of making or purchasing federally guaranteed student loans under the Higher Education Act. As a federally chartered corporation, Sallie Mae's structure and operational authorities are subject to revision by amendments to the Higher Education Act or other federal enactments. Sallie Mae prepares an Information Statement annually which describes Sallie Mae, its business and operations and contains Sallie Mae's audited financial statements. From time to time Sallie Mae prepares supplements to its Information Statement which include specific unaudited financial data and other information concerning the business and operations of Sallie Mae. Unless otherwise specified in the applicable prospectus supplement, these documents can be obtained without charge upon written request to the Corporate and Investor Relations Division of Sallie Mae at 1050 Thomas Jefferson Street, N.W., Washington, D.C. 20007, telephone (202) 298-3010. Sallie Mae is not subject to the periodic reporting requirements of the Exchange Act. THE RESOLUTION FUNDING CORPORATION REFCO is a mixed-ownership government corporation established by Title V of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"). The sole purpose of REFCO is to provide financing for the Resolution Trust Corporation (the "RTC"). REFCO is to be dissolved, as soon as practicable, after the maturity and full payment of all obligations issued by it. REFCO is subject to the general oversight and direction of the Oversight Board, which is comprised of the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System, the Secretary of Housing and Urban Development and two independent members to be appointed by the President with the advice and consent of the Senate. The day-to-day operations of REFCO are under the management of a three-member Directorate comprised of the Director of the Office of Finance of the FHLB and two members selected by the Oversight Board from among the presidents of the twelve FHLB. The RTC was established by FIRREA to manage and resolve cases involving failed savings and loan institutions pursuant to policies established by the Oversight Board. The RTC was granted authority to issue nonvoting capital certificates to REFCO in exchange for the funds transferred from REFCO to the RTC. Pursuant to FIRREA, the net proceeds of these obligations are used to purchase nonvoting capital certificates issued by the RTC or to retire previously issued REFCO obligations. Information concerning REFCO may be obtained from the Secretary/Treasurer, Resolution Funding Corporation, Suite 1000, 11921 Freedom Drive, Reston, Virginia 22090; telephone (703) 487-9517. REFCO is not subject to the periodic reporting requirements of the Exchange Act. THE FEDERAL HOME LOAN BANKS The Federal Home Loan Banks constitute a system of twelve federally chartered corporations (collectively, the "FHLB"), each wholly owned by its member institutions. The mission of the FHLB is to enhance the availability of residential mortgage credit by providing a readily available, low-cost source of funds to their member institutions. A primary source of funds for the FHLB is the proceeds from the sale to the public of debt instruments issued as consolidated obligations, which are the joint and several obligations of all the FHLB. The FHLB are supervised and regulated by the Federal Housing Finance Board, which is an independent federal agency in the executive branch of the United States government, but obligations of the FHLB are not obligations of the United States government. The Federal Home Loan Bank System produces annual and quarterly financial reports in connection with the original offering and issuance by the Federal Housing Finance Board of consolidated bonds and consolidated notes of the FHLB. Unless otherwise specified in the applicable prospectus supplement, questions regarding financial reports should be directed to the Deputy Director, Financial Reporting and Operations Division, Federal Housing Finance Board, 1777 F Street, N.W., Washington, D.C. 20006; telephone (202) 408-2901. Unless otherwise specified in the applicable prospectus supplement, copies of financial reports may be obtained by written request to Capital Markets Division, Office of Finance, Federal Home Loan Banks, Suite 1000, 11921 Freedom Drive, Reston, Virginia 22090, telephone (703) 487-9500. The FHLB are not subject to the periodic reporting requirements of the Exchange Act. TENNESSEE VALLEY AUTHORITY TVA is a wholly owned corporate agency and instrumentality of the United States of America established pursuant to the Tennessee Valley Authority Act of 1933, as amended (the "TVA Act"). TVA's objective is to develop the resources of the Tennessee Valley region in order to strengthen the regional and national economy and the national defense. The programs of TVA consist of power and nonpower programs. For the fiscal year ending September 30, 1995, TVA received $139 million in congressional appropriations from the federal government for the nonpower programs. The power program is required to be self-supporting from revenues it produces. The TVA Act authorizes TVA to issue evidences of indebtedness that may be serviced only from proceeds of its power program. TVA bonds are not obligations of or guaranteed by the United States government. TVA prepares an Information Statement annually which describes TVA, its business and operations and contains TVA's audited financial statements. From time to time TVA prepares supplements to its Information Statement which include specific unaudited financial data and other information concerning the business and operations of TVA. Unless otherwise specified in the applicable prospectus supplement, these documents can be obtained by writing or calling Tennessee Valley Authority, 400 West Summit Hill Drive, Knoxville, Tennessee 37902-1499, Attention: Vice President and Treasurer, telephone (423) 632-3366. TVA is not subject to the periodic reporting requirements of the Exchange Act. FEDERAL FARM CREDIT BANKS The Farm Credit System is a nationwide system of lending institutions and affiliated service and other entities (the "System"). Through its Banks ("FCBs") and related associations, the System provides credit and related services to farmers, ranchers, producers and harvesters of aquatic products, rural homeowners, some farm-related businesses, agricultural and aquatic cooperatives and rural utilities. System institutions are federally chartered under the Farm Credit Act of 1971, as amended (the "Farm Credit Act"), and are subject to regulation by a Federal agency, the Farm Credit Administration (the "FCA"). The FCBs and associations are not commonly owned or controlled. They are cooperatively owned, directly or indirectly, by their respective borrowers. Unlike commercial banks and other financial institutions that lend to the agricultural sector in addition to other sectors of the economy, under the Farm Credit Act the System institutions are restricted solely to making loans to qualified borrowers in the agricultural sector, to some related businesses and to rural homeowners. Moreover, the System is required to make credit and other services available in all areas of the nation. In order to fulfill its broad statutory mandate, the System maintains lending units in all 50 states and the Commonwealth of Puerto Rico. The System obtains funds for its lending operations primarily from the sale of debt securities issued under Section 4.2(d) of the Farm Credit Act ("Systemwide Debt Securities"). The FCBs are jointly and severally liable on all Systemwide Debt Securities. Systemwide Debt Securities are issued by the FCBs through the Federal Farm Credit Banks Funding Corporation, as agent for the FCBs (the "Funding Corporation"). Information regarding the FCBs and the Farm Credit System, including combined financial information, is contained in disclosure information made available by the Funding Corporation. This information consists of the most recent Farm Credit System Annual Information Statement and any Quarterly Information Statements issued subsequent to the Farm Credit System Annual Information Statement and particular press releases issued from time to time by the Funding Corporation. Unless otherwise specified in the applicable prospectus supplement, this information and the Farm Credit System Annual Report to Investors for the current and two preceding fiscal years are available for inspection at the Federal Farm Credit Banks Funding Corporation, Investment Banking Services Department, 10 Exchange Place, Suite 1401, Jersey City, New Jersey 07302, telephone (201) 200-8000. Upon request, the Funding Corporation will furnish, without charge, copies of the above information. The FCBs are not subject to the periodic reporting requirements of the Exchange Act. PRIVATE LABEL CUSTODY RECEIPT SECURITIES If so specified in the applicable prospectus supplement, the Trust for a series may include, but will not consist entirely of, any combination of (1) receipts or other instruments, other than Treasury Strips, evidencing ownership of specific interest and/or principal payments to be made on particular Treasury Bonds held by a custodian ("Private Label Custody Strips") and (2) receipts or other instruments evidencing ownership of specific interest and/or principal payments to be made on specific Resolution Funding Corporation ("REFCO") bonds ("REFCO Strips"; and together with Private Label Custody Strips, "Private Label Custody Receipt Securities"). The Private Label Custody Receipt Securities, if any, included in a Trust are intended to assure investors that funds are available to make specified payments of principal and/or interest due on the related securities. Accordingly, the Private Label Custody Receipt Securities, if any, included in a Trust are intended both to (1) support the ratings assigned to the securities, and (2) perform a function similar to that described in this prospectus under "Description of the Transfer and Servicing Agreements--Credit and Cash Flow Enhancement". A description of the respective general features of Private Label Custody Strips and REFCO Strips is set forth below. The prospectus supplement for each series of securities the Trust with respect to which contains Private Label Custody Receipt Securities will contain information as to: (1) the title and series of each Private Label Custody Receipt Security, the aggregate principal amount, denomination and form of each Private Label Custody Receipt Security; (2) the limit, if any, upon the aggregate principal amount of each Private Label Custody Receipt Security; (3) the dates on which, or the range of dates within which, the principal of, and premium, if any, on, each Private Label Custody Receipt Security will be payable; (4) the rate or rates, or the method of determination of the rate or rates, at which each Private Label Custody Receipt Security will bear interest, if any, the date or dates from which the interest will accrue, and the dates on which the interest will be payable; (5) whether each Private Label Custody Receipt Security was issued at a price lower than the principal amount of that Private Label Custody Receipt Security; (6) material events of default or restrictive covenants provided for with respect to each Private Label Custody Receipt Security; (7) the rating of each Private Label Custody Receipt Security, if any; (8) the issuer of each Private Label Custody Receipt Security; (9) the material risks, if any, posed by each Private Label Custody Receipt Security and the issuer of each Private Label Custody Receipt Security, which risks, if appropriate, will be described in the "Risk Factors" section of the related prospectus supplement; and (10) any other material terms of each Private Label Custody Receipt Security. With respect to a Trust which includes a pool of Private Label Custody Receipt Securities, the related prospectus supplement will, to the extent applicable, describe the composition of the Private Label Custody Receipt Securities' pool, particular material events of default or restrictive covenants common to the Private Label Custody Receipt Securities, and, on an aggregate, percentage or weighted average basis, as applicable, the characteristics of the pool with respect to the terms set forth in (3), (4) and (5) of the preceding sentence and any other material terms regarding the pool. The Private Label Custody Receipt Securities included in a Trust will be senior, unsecured, nonredeemable obligations of the issuers of the Private Label Custody Receipt Securities, will be denominated in United States dollars and, if rated, will be rated at least investment grade by at least one nationally recognized rating agency. In addition, the inclusion of Private Label Custody Receipt Securities in a Trust with respect to a series of securities is conditioned upon their characteristics being in form and substance satisfactory to the Rating Agency rating the related series of securities. Each Trust will be provided with an opinion of Federal Tax Counsel to the effect that the Private Label Custody Receipt Securities included in the Trust are exempt from the registration requirements of the securities Act. A copy of the opinion will be filed with the SEC in a Current Report on Form 8-K or in a post-effective amendment to the Registration Statement. PRIVATE LABEL CUSTODY STRIPS The first "stripping" of Treasury Bonds occurred in the 1970s when government securities dealers physically separated coupons from definitive certificates and offered them to investors as tax-deferred investments. Investors were able to purchase the "strip" at a deep discount and pay no federal income tax until resale or maturity. This tax treatment was limited in 1982 by the Tax Equity and Fiscal Responsibility Act ("TEFRA") which required holders of strips to accrue a portion of the discount toward par annually and report this accrual, even though unrealized, as taxable income. TEFRA also required that all new Treasury issues be made available only in book-entry form. The shift to "book-entry only" Treasury Bonds created a shortage of the physical certificates needed for stripping. In response, various dealers created custodial receipt programs in which Treasury Bonds in book-entry form were deposited with custodians who would then issue certificates evidencing rights in principal and interest payments. Some of the better known programs first came to market in 1982 and 1983. Although available eventually in denominations as small as $1,000, these custodial receipts lacked the liquidity of the physical strips. While physical strips had multiple market-makers, custodial receipts were proprietary and, as such, the sole market-maker would usually be an affiliate of the program's sponsor. As a result, the market that developed for the receipts was segmented. In early 1984, a group of dealers sought to enhance the liquidity of custodial receipts by developing a generic, multiple market-maker security known as a TR (Treasury Receipt). A large secondary market quickly developed in these generic Treasury Strips. Treasury Receipts, physical strips and the proprietary receipts trade at varying discounts from STRIPS which reflect, among other things, lower levels of liquidity and the structuring difference discussed above. A holder of a Private Label Custody Strip, as opposed to a STRIP, cannot enforce payment on a Treasury Strip against the Treasury, instead, the holder must look to the custodian for payment. The custodian, and the holder of a Private Label Custody Strip that obtains ownership of the underlying Treasury Bond, can enforce payment of the underlying Treasury Bond against the Treasury. If any Private Label Custody Strips are included in a Trust with respect to any series of securities, the prospectus supplement for the series will include the identity and a brief description of each custodian that issued the Private Label Custody Strips. If the company knows that the company of the Treasury Bonds underlying the Private Label Custody Strips is the company or any of its affiliates, the company will disclose this fact in the related prospectus supplement. REFCO STRIPS A REFCO Bond may be divided into its separate components, consisting of: (1) each future semiannual interest distribution (an "Interest Component"); and (2) the principal payment (the "Principal Component") (each component individually referred to in this prospectus as a "REFCO Strip"). REFCO Strips are not created by REFCO. Instead, third parties such as investment banking firms create them. Each REFCO Strip has an identifying designation and CUSIP number. REFCO Strips generally trade in the market for Treasury Strips at yields of a few basis points over Treasury Strips of similar maturities. REFCO Strips are viewed generally by the market as liquid investments. For a REFCO Bond to be separated into its components, the par amount of the REFCO Bond must be in an amount which, based on the stated interest rate of the REFCO Bond, will produce a semiannual interest payment of $1,000 or an integral multiple of $1,000. REFCO Bonds may be separated into their components at any time from the issue date until maturity. Once created, REFCO Strips are maintained and transferred in integral multiples of $1,000. A holder of a REFCO Strip cannot enforce payment on the REFCO Strip against REFCO. Instead, the holder must look to the custodian for payment. The custodian, and the holder of a REFCO Strip that obtains ownership of the underlying REFCO Bond, can enforce payment of the underlying REFCO Bond against REFCO. The identity and a brief description of each custodian that has issued any REFCO Strip included in a Trust will be set forth in the related prospectus supplement. If the company knows that the company of the REFCO Bonds underlying the REFCO Strips included in the Trust is the company or any of its affiliates, the company will disclose this fact in the related prospectus supplement. WEIGHTED AVERAGE LIFE OF THE SECURITIES The weighted average life of the notes, if any, and the certificates of any series generally will be influenced by the rate at which the principal balances of the related Primary Assets are paid, which payment may be in the form of scheduled amortization or prepayments. With respect to securities backed by Receivables and to receivables underlying Collateral Certificates, the term "prepayments" includes prepayments in full, partial prepayments, including those related to rebates of extended warranty contract costs and insurance premiums, liquidations due to defaults, as well as receipts of proceeds from physical damage, credit life and disability insurance policies, or the Repurchase Amount of Receivables and/or Collateral Certificates repurchased by the company or a seller or purchased by a servicer for administrative reasons. With respect to securities backed by Government Securities and/or Private Label Custody Receipt Securities, as applicable, the term "prepayments" means the Repurchase Amount of Government Securities and/or Private Label Custody Receipt Securities repurchased by the company or purchased by a servicer for administrative reasons. Substantially all of the Receivables and receivables underlying Collateral Certificates are prepayable at any time without penalty to the obligor. The rate of prepayment of automotive receivables is influenced by a variety of economic, social and other factors, including the fact that an obligor generally may not sell or transfer the Financed Vehicle securing a receivable without the consent of the related seller. The rate of prepayment on receivables may also be influenced by the structure of the loan. In addition, under some circumstances, the related seller will be obligated to repurchase Receivables from a given Trust pursuant to the related Receivables Purchase Agreement as a result of breaches of representations and warranties, and the servicer will be obligated to purchase Receivables from the Trust pursuant to the Sale and Servicing Agreement or Pooling and Servicing Agreement as a result of breaches of specific covenants. See "Description of the Transfer and Servicing Agreements--Sale and Assignment of Primary Assets" and "Servicing Procedures". See also "Certain Matters Regarding the Servicer--Termination" regarding the servicer's option to purchase Primary Assets from a given Trust. In light of the above considerations, there can be no assurance as to the amount of principal payments to be made on the notes and/or certificates of a series on each Distribution Date since the amount will depend, in part, on the amount of principal collected on the related Primary Assets during the applicable Collection Period. Any reinvestment risks resulting from a faster or slower incidence of payment of Primary Assets will be borne entirely by the noteholders and certificateholders. The related prospectus supplement may set forth some additional information with respect to the maturity and prepayment considerations applicable to particular Primary Assets and the related series of securities. POOL FACTORS AND TRADING INFORMATION The "Note Pool Factor" for each class of notes will be a seven-digit decimal which the servicer or trustee will compute prior to each distribution with respect to the class of notes indicating the remaining outstanding principal balance of that class of notes, as of the applicable Distribution Date, after giving effect to payments to be made on the applicable Distribution Date, as a fraction of the initial outstanding principal balance of the class of notes. The "Certificate Pool Factor" for each class of certificates will be a seven-digit decimal which the servicer or trustee will compute prior to each distribution with respect to the class of certificates indicating the remaining certificate balance of the class of certificates, as of the applicable Distribution Date, after giving effect to distributions to be made on the applicable Distribution Date, as a fraction of the initial certificate balance of the class of certificates. Each Note Pool Factor and each Certificate Pool Factor will be 1.0000000 as of the related closing date, and after will decline to reflect reductions in the outstanding principal balance of the applicable class of notes or the reduction of the certificate balance of the applicable class of certificates. A noteholder's portion of the aggregate outstanding principal balance of the related class of notes will be the product of (1) the original denomination of the noteholder's Note and (2) the applicable Note Pool Factor at the time of determination. A certificateholder's portion of the aggregate outstanding certificate balance for the related class of certificates will be the product of (a) the original denomination of the certificateholder's Certificate and (b) the applicable Certificate Pool Factor at the time of determination. As provided in the related prospectus supplement, the noteholders, if any, and the certificateholders will receive reports on or about each Distribution Date concerning payments received on the Receivables, the Pool Balance and each Note Pool Factor or Certificate Pool Factor, as applicable. In addition, Securityholders of record during any calendar year will be furnished information for tax reporting purposes not later than the latest date permitted by law. See "Certain Information Regarding the Securities-- Statements to Securityholders". THE SELLER AND THE SERVICER Information with respect to the seller and the servicer will be set forth in the related prospectus supplement. USE OF PROCEEDS If so provided in the related prospectus supplement, the net proceeds from the sale of the securities of a series will be applied by the applicable Trust to the purchase of the Primary Assets from the company or the seller, as applicable. The company will use the portion of the net proceeds paid to it to purchase the Primary Assets. DESCRIPTION OF THE NOTES Each owner trust will issue one or more classes of notes pursuant to an indenture (an "Indenture") between the related owner trust and the indenture trustee, a form of which has been filed as an exhibit to the Registration Statement of which this prospectus forms a part. The following summary describes the material provisions of each Indenture which are anticipated to be common to any notes included in a series of securities. The following summary does not purport to be a complete description of all terms of the related notes or Indenture and therefore is subject to, and is qualified in its entirely by reference to, the provisions of the related notes and Indenture. If so specified in the related prospectus supplement, each class of notes will initially be represented by one or more certificates registered in the name of the nominee of DTC (together with any successor company selected by the Trust, the "Depository"). The notes will be available for purchase in minimum denominations of $1,000 or any other minimum denomination as shall be specified in the related prospectus supplement and integral multiples of $1,000 or any other minimum denomination so specified in the related prospectus supplement in book-entry form or any other form as shall be specified in the related prospectus supplement. If the notes are available in book-entry form only, the company has been informed by DTC that DTC's nominee will be Cede unless another nominee is specified in the related prospectus supplement. Accordingly, the nominee is expected to be the holder of record of the notes of each class. If the notes are available in book-entry form only, unless and until Definitive notes are issued under the limited circumstances described in this prospectus or in the related prospectus supplement, no noteholder will be entitled to receive a physical certificate representing a Note. If the notes are available in book-entry form only, all references in this prospectus and in the related prospectus supplement to actions by noteholders refer to action taken by DTC upon instructions from it participating organizations, and all references in this prospectus and in the related prospectus supplement to distributions, notices, reports and statements to noteholders refer to distributions, notices, reports and statements to DTC or its nominee, as registered holder of the notes, for distribution to noteholders in accordance with DTC's procedures with respect to distributions. See "Certain Information Regarding the Securities--Book-Entry Registration" and "--Definitive Securities". DISTRIBUTION OF PRINCIPAL AND INTEREST The timing and priority of payment, seniority, allocations of losses, interest rate and amount of or method of determining payments of principal and interest on each class of notes of a series will be described in the related prospectus supplement. The right of holders of any class of notes to receive payments of principal and interest may be senior or subordinate to the rights of holders of one or more other class or classes of notes of the series, as described in the related prospectus supplement. The related prospectus supplement may provide that payments of interest on the notes will be made prior to payments of principal on the notes. If so provided in the related prospectus supplement, a series of notes may include one or more classes of strip notes entitled to (1) principal payments with disproportionate, nominal or no interest payments or (2) interest payments with disproportionate, nominal or no principal payments. Each class of notes may have a different interest rate, which may be a fixed, variable or adjustable interest rate, and which may be zero for some classes of strip notes, or any combination of the foregoing. The related prospectus supplement will specify the interest rate for each class of notes of a series or the method for determining the interest rate. One or more classes of notes of a series may be redeemable in whole or in part under the circumstances specified in the related prospectus supplement, including as a result of the exercise by the servicer of its option to purchase the related Receivable Pool. See "Certain Matters Regarding the Servicer--Termination". To the extent specified in any prospectus supplement, one or more classes of notes of a given series may have fixed principal payment schedules, as set forth in the prospectus supplement. Holders of any notes will be entitled to receive payments of principal on any given Distribution Date in the applicable amount set forth on the schedule with respect to the notes, in the manner and to the extent set forth in the related prospectus supplement. The related prospectus supplement may also provide that payment of interest to noteholders of all classes within a series will have the same priority. Under some circumstances, the amount available for payments could be less than the amount of interest payable on the notes on a Distribution Date, in which case each class of notes will receive its ratable share, based upon the aggregate amount of interest due to the class of notes, of the aggregate amount available to be distributed on the date as interest on the notes of the series. See "Description of the Transfer and Servicing Agreements--Distributions" and "--Credit and Cash Flow Enhancement". In the case of a series of securities issued by an owner trust that includes two or more classes of notes, the sequential order and priority of payment in respect of principal and interest, and any schedule or formula or other provisions applicable to the determination of the sequential order and priority of payment in respect of principal and interest, of each class will be set forth in the related prospectus supplement. Payments in respect of principal of and interest on any class of notes will be made on a pro rata basis among all the noteholders of the class or by any other method as is specified in the prospectus supplement. If specified in the related prospectus supplement, the Trust may issue securities from time to time and use the proceeds of this issuance to make principal payments with respect to a series. PROVISIONS OF THE INDENTURE EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. "Events of Default" in respect of a series of notes under the related Indenture will consist of: (1) a default for five days or more in the payment of any interest on any Note; (2) a default in the payment of the principal of, or any installment of the principal of, any Note when the same becomes due and payable; (3) a default in the observance or performance of any material covenant or agreement of the related Trust made in the related Indenture and the continuation of any default for a period of 30 days, or for a longer period, not in excess of 90 days, as may be reasonably necessary to remedy the default; provided that the default is capable of remedy within 90 days or less and servicer on behalf of the related trustee delivers an Officer's Certificate to the related indenture trustee to the effect that the trustee has commenced, or will promptly commence and diligently pursue, all reasonable efforts to remedy the default, after notice of the default is given to the related Trust by the applicable indenture trustee or to the Trust and the related indenture trustee by the holders of 25% of the aggregate outstanding principal amount of the notes; (4) any representation or warranty made by the Trust in the related Indenture or in any certificate delivered pursuant to the related Indenture or in connection with the related Indenture having been incorrect in a material respect as of the time made, if the breach is not cured with 30 days, or for a longer period, not in excess of 90 days, as may be reasonably necessary to remedy the default; provided that the default is capable of remedy within 90 days or less and servicer on behalf of the related trustee delivers an Officer's Certificate to the related indenture trustee to the effect that the trustee has commenced, or will promptly commence and diligently pursue, all reasonable efforts to remedy the default, after notice of the breach is given to the Trust by the applicable indenture trustee or to the Trust and the indenture trustee by the holder of 25% of the aggregate outstanding principal amount of the notes; (5) particular events of bankruptcy, insolvency, receivership or liquidation with respect to the Trust or a substantial part of the property of the Trust and (6) any other events as may be specified in the prospectus supplement. The amount of principal required to be paid to noteholders of each series under the related Indenture on any Distribution Date generally will be limited to amounts available to be deposited in the applicable Note Distribution Account. Therefore, the failure to pay principal on a class of notes generally will not result in the occurrence of an Event of Default until the applicable final scheduled Distribution Date for the class of notes. If an Event of Default should occur and be continuing with respect to the notes of any series, the related indenture trustee or holders of a majority in principal amount of the notes may declare the principal of the notes to be immediately due and payable. This declaration may, under some circumstances, be rescinded by the holders of a majority in principal amount of the notes then outstanding. If the notes of any series are declared due and payable following an Event of Default, the related indenture trustee may institute proceedings to collect amounts due on the notes, foreclose on the property of the Trust, exercise remedies as a secured party, sell the related Primary Assets or elect to have the applicable Trust maintain possession of the Primary Assets and continue to apply collections on these Primary Assets as if there had been no declaration of acceleration. Subject to particular limitations that, if applicable, will be specified in the related prospectus supplement, the indenture trustee will be prohibited from selling the Primary Assets following an Event of Default, other than a default in the payment of any principal of, or a default for five days or more in the payment of any interest on, any Note of the series, unless o the holders of all outstanding notes consent to the sale, o the proceeds of the sale are sufficient to pay in full the principal of and the accrued interest on the outstanding notes at the date of sale or o the indenture trustee determines that the proceeds of the Primary Assets would not be sufficient on an ongoing basis to make all payments on the notes as these payments would have become due if these obligations had not been declared due and payable, and the indenture trustee obtains the consent of the holders of 66 2/3% of the aggregate outstanding principal amount of the notes. Subject to the provisions of the applicable Indenture relating to the duties of the related indenture trustee, if an Event of Default occurs and is continuing with respect to a series of notes, the indenture trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the holders of the notes if it reasonably believes it will not be adequately indemnified against the costs, expenses and liabilities that might be incurred by it in complying with the request. Subject to the provisions for indemnification and particular limitations contained in the related Indenture, the holders of a majority of the aggregate outstanding principal amount of the notes of a series will have the right to direct the time, method and place of conducting any proceeding or exercising any remedy available to the related indenture trustee. In addition, the holders of notes representing a majority of the aggregate outstanding principal amount of the notes may, in some cases, waive any default with respect to the notes, except a default in the payment of principal of or interest on any Note or a default in respect of a covenant or provision of the Indenture that cannot be modified or amended without the waiver or consent of the holders of all the outstanding notes of the series. Except to the extent provided in the related prospectus supplement, no holder of a Note will have the right to institute any proceeding with respect to the related Indenture, unless: o the holder previously has given to the applicable indenture trustee written notice of a continuing Event of Default; o the holders of not less than 25% of the outstanding principal amount of the notes have made written request to the indenture trustee to institute a proceeding in its own name as indenture trustee; o the holder or holders have offered the indenture trustee reasonable indemnity; o the indenture trustee has for 60 days failed to institute a proceeding; and o no direction inconsistent with a written request has been given to the indenture trustee during the 60-day period by the holders of a majority of the outstanding principal amount of the notes of the series. With respect to any owner trust, none of the related indenture trustee in its individual capacity, the related trustee in its individual capacity, any holder of a Certificate representing an ownership interest in the Trust, or any of their respective beneficiaries, agents, officers, directors, employees, affiliates, successors or assigns will, in the absence of an express agreement to the contrary, be personally liable for the payment of the principal of or interest on the related notes or for the agreements of the Trust contained in the applicable Indenture. No Trust may engage in any activity other than as described in this prospectus or in the related prospectus supplement. No Trust will incur, assume or guarantee any indebtedness other than indebtedness incurred pursuant to the related notes and the related Indenture, pursuant to any Advances made to it by the servicer or otherwise in accordance with the Related Documents. CERTAIN COVENANTS. Each Indenture will provide that the related Trust may not consolidate with or merge into any other entity, unless o the entity formed by or surviving the consolidation or merger is organized under the laws of the United States, any state or the District of Columbia; o the entity expressly assumes the Trust's obligation to make due and punctual payments upon the notes of the related series and to perform or observe every agreement and covenant of the Trust under the Indenture; o no Event of Default shall have occurred and be continuing immediately after the merger or consolidation; o the Trust has been advised by each Rating Agency that the merger or consolidation will not result in the qualification, reduction or withdrawal of its then-current rating of any class of the notes or certificates of the series; o the Trust has received an opinion of counsel to the effect that the consolidation or merger would have no material adverse tax consequence to the Trust or to any related noteholder or certificateholder; o any action as is necessary to maintain the lien and security interest created by the Indenture has been taken; and o the Trust has delivered to the related indenture trustee an Officer's Certificate and an opinion of counsel that the merger complies with the requirements and conditions precedent of the Indenture. No owner trust will: o except as expressly permitted by the applicable Indenture, the applicable Transfer and Servicing Agreements or other documents with respect to the Trust (the "Related Documents"), sell, transfer, exchange or otherwise dispose of any of the assets of the Trust; o claim any credit on or make any deduction from the principal and interest payment in respect to the related notes, other than amounts withheld under the Code or applicable state tax laws, or assert any claim against any present or former holder of the notes because of the payment of taxes levied or assessed upon the Trust; o dissolve or liquidate in whole or in part; o permit the validity or effectiveness of the related Indenture to be impaired or permit any person to be released from any covenants or obligations with respect to the related notes under the Indenture except as may be expressly permitted by the related Indenture; o permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance to be created on or extent to or otherwise arise upon or burden the assets of the Trust or any part of the Trust, or any interest in the Trust or the proceeds of the Trust; or o permit the lien of the related Indenture not to constitute a valid first priority security interest, other than with respect to a tax, mechanics' or similar lien, in the asset of the Trust. Each indenture trustee and the related noteholders, by accepting the related notes, will covenant that they will not at any time institute against the applicable Trust any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law. MODIFICATION OF INDENTURE. Each trustee and the related indenture trustee may, with the consent of the holders of a majority of the aggregate outstanding principal amount of the notes of the related series, execute a supplemental indenture to add provisions to, change in any manner or eliminate any provisions of, the related Indenture, or modify (except as provided below) in any manner the rights of the related noteholders. Except as otherwise provided in the related Indenture, without the consent of the holder of each outstanding Note affected by the related supplemental indenture, no supplemental indenture will: o change the due date of any installment of principal of or interest on any Note or reduce the principal amount of any Note, the interest rate specified on any Note or the redemption price with respect to any Note, change the provisions of the related Indenture relating to the application of collections on, or the proceeds of the sale of, the property of the related Trust to payment of principal or interest on the notes of the series, or change any place of payment where or the coin or currency in which any Note or any interest on any Note is payable; o impair the right to institute suit for the enforcement of specific provisions of the related Indenture; o reduce the percentage of the aggregate amount of the outstanding notes of the series, the consent of the holders of which is required for any supplemental indenture or for any waiver of compliance with specific provisions of the related Indenture or of particular defaults under the related Indenture and their consequences as provided for in the related Indenture; o modify or alter the provisions of the related Indenture regarding the voting of notes held by the applicable owner trust, any other obligor on the notes, the seller or an affiliate of any of them; o reduce the percentage of the aggregate outstanding amount of the notes, the consent of the holders of which is required to direct the related indenture trustee to sell or liquidate the Primary Assets if the proceeds of the sale would be insufficient to pay the principal amount and accrued and unpaid interest on the outstanding notes of the series; o decrease the percentage of the aggregate principal amount of the notes required to amend the sections of the related Indenture that specify the percentage of the aggregate principal amount of the notes of the series necessary to amend the related Indenture or other related agreements; or o permit the creation of any lien ranking prior to or on a parity with the lien of the related Indenture with respect to any of the collateral for the notes or, except as otherwise permitted or contemplated in the Indenture, terminate the lien of the related Indenture on any of the collateral or deprive the holder of any Note of the security afforded by the lien of the related Indenture. An owner trust and the related indenture trustee may also enter into supplemental indentures, without obtaining the consent of the noteholders of the related series, (1) to cure any ambiguity; (2) to correct or supplement any provisions in the Indenture; or (3) for the purpose of, among other things, adding any provisions to or changing in any manner or eliminating any of the provisions of the related Indenture; provided that the action referred to in clause (3) above will not materially and adversely affect the interest of any noteholder. ANNUAL COMPLIANCE STATEMENT. Each owner trust will be required to file annually with the related indenture trustee a written statement as to the fulfillment of its obligations under the Indenture. INDENTURE TRUSTEE'S ANNUAL REPORT. If required by the Trust Indenture Act, the indenture trustee for each owner trust will mail each year to all related noteholders a brief report relating to its eligibility and qualification to continue as indenture trustee under the related Indenture, any amounts advanced by it under the Indenture, the amount, interest rate and maturity date of particular indebtedness, if any, owing by the owner trust to the applicable Indenture Trust in its individual capacity, the property and funds physically held by the indenture trustee as indenture trustee and any action taken by it that materially affects the related notes that has not been previously reported. SATISFACTION AND DISCHARGE OF INDENTURE. Each Indenture will be discharged with respect to the collateral securing the related notes upon the delivery to the related indenture trustee for cancellation of all of the notes or, with limitations, upon deposit with the indenture trustee of funds sufficient for the payment in full of all the notes. THE INDENTURE TRUSTEE The indenture trustee for a series of notes will be specified in the related prospectus supplement. The indenture trustee for any series may resign at any time, in which event the related owner trust will be obligated to appoint a successor indenture trustee for the series. Additionally, the Holders of a majority of the outstanding amount of the notes of a series may remove the related indenture trustee and appoint a successor indenture trustee. An owner trust may also remove the related indenture trustee if the indenture trustee ceases to be eligible to continue in that capacity under the related Indenture, if particular insolvency events occur with respect to the indenture trustee or if the indenture trustee otherwise becomes incapable of acting as indenture trustee. In these circumstances, the owner trust will be obligated to appoint a successor indenture trustee for the applicable series of notes. No resignation or removal of the indenture trustee and appointment of a successor indenture trustee for a series of notes will become effective until the acceptance of the appointment by the successor indenture trustee for the series and payment of all fees and expenses owed to the outgoing indenture trustee. DESCRIPTION OF THE CERTIFICATES Each Trust will issue one or more classes of certificates pursuant to a Trust Agreement or Pooling and Servicing Agreement, as applicable. A form of each of the Trust Agreement and the Pooling and Servicing Agreement has been filed as an exhibit to the Registration Statement of which this prospectus forms a part. The following summary describes the material provisions of the Trust Agreement and the Pooling and Servicing Agreement, in each case, which are anticipated to be common to any certificates included in a series of securities. The following summary does not purport to be a complete description of all terms of the related notes, Trust Agreement or Pooling and Servicing Agreement and therefore is subject to, and is qualified in its entirety by reference to, the provisions of the related certificates and Trust Agreement or Pooling and Servicing Agreement, as applicable. If so specified in the related prospectus supplement and except for the certificates, if any, of a series purchased by the company, a seller or any of their respective affiliates, each class of certificates will initially be represented by one or more certificates registered in the name of the Depository. The certificates will be available for purchase in minimum denominations of $10,000 or any other minimum denomination as shall be specified in the related prospectus supplement and integral multiples of $1,000 in excess of $10,000 or any other minimum denomination so specified in the related prospectus supplement in book-entry form only, or any other form as shall be specified in the related prospectus supplement. If the certificates are available in book-entry form only, the company has been informed by DTC that DTC's nominee will be Cede. Accordingly, the nominee is expected to be the holder of record of the certificates of any series. If the certificates are available in book-entry form only, unless and until Definitive certificates are issued under the limited circumstances described in this prospectus or in the related prospectus supplement, no certificateholder, other than the company, a seller or any of their respective affiliates, will be entitled to receive a physical certificate representing a Certificate. If the certificates are available in book-entry form only, all references in this prospectus and in the related prospectus supplement to actions by certificateholders refer to actions taken by DTC upon instructions from the Participants, and all references in this prospectus and in the related prospectus supplement to distributions, notices, reports and statements to certificateholders refer to distributions, notices, reports and statements to DTC or its nominee, as the case may be, as the registered holder of the certificates, for distribution to certificateholders in accordance with DTC's procedures with respect to distributions. See "Certain Information Regarding the Securities--Book-Entry Registration" and "--Definitive Securities". Any Certificate of a series owned by the company, a seller or any of their respective affiliates will be entitled to equal and proportionate benefits under the applicable Trust Agreement or Pooling and Servicing Agreement, as applicable, except that, unless otherwise provided in the related Trust Agreement, the certificates will be deemed not to be outstanding for the purpose of determining whether the requisite percentage of certificateholders has given any request, demand, authorization, direction, notice, or consent or taken any other action under the Related Documents. DISTRIBUTIONS OF PRINCIPAL AND INTEREST The timing and priority of distributions, seniority, allocations of losses, certificate pass-through rate and amount of or method of determining distributions with respect to principal and interest on each class of certificates of a series will be described in the related prospectus supplement. Distributions of interest on these certificates will be made on the dates specified in the related prospectus supplement (the "Distribution Date") and will be made prior to distributions with respect to principal of the certificates. To the extent provided in the related prospectus supplement, a series of certificates may include one or more classes of strip certificates entitled to (1) principal distributions with disproportionate, nominal or no interest distributions or (2) interest distributions with disproportionate, nominal or no principal distributions. Each class of certificates may have a different certificate pass-through rate, which may be a fixed, variable or adjustable certificate pass-through rate, and which may be zero for some classes of strip certificates, or any combination of the foregoing. The related prospectus supplement will specify the certificate pass-through rate for each class of certificates of a series or the method for determining the certificate pass-through rate. In the case of a series of securities that includes two or more classes of certificates, the timing, sequential order, priority of payment or amount of distributions in respect of interest and principal, and any schedule or formula or other provisions applicable to the determination of the timing, sequential order, priority of payment or amount of distributions in respect of interest and principal, of each class will be as set forth in the related prospectus supplement. In the case of certificates issued by an owner trust, distributions in respect of these certificates will be subordinated to payments in respect of the notes of the related series and to the extent described in the related prospectus supplement. Distributions in respect of interest on and principal of any class of certificates will be made on a pro rata basis among all holders of certificates of the class. CERTAIN INFORMATION REGARDING THE SECURITIES BOOK-ENTRY REGISTRATION If so specified in the related prospectus supplement, DTC will act as securities company for each class of securities offered by this prospectus. Each class of securities initially will be represented by one or more certificates registered in the name of Cede, the nominee of DTC. As the nominee of DTC, it is anticipated that the only "noteholder" and/or "certificateholder" with respect to a series of securities will be Cede. Beneficial owners of the securities ("Security Owners") will not be recognized as "noteholders" by the related indenture trustee, as the term is used in each Indenture, or as "certificateholders" by the related trustee, as the term is used in each Trust Agreement or Pooling and Servicing Agreement, as applicable, and Security Owners will be permitted to exercise the rights of noteholders or certificateholders only indirectly through DTC and its participating members ("Participants"). DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code (the "UCC") in effect in the State of New York, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for the Participants and to facilitate the clearance and settlement of securities transactions between Participants through electronic book-entries, thus eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to the DTC system also is available to banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (the "Indirect Participants"). Security Owners that are not Participants or Indirect Participants but desire to purchase, sell or otherwise transfer ownership of, or an interest in, the securities may do so only through Participants and Indirect Participants. In addition, all Security Owners will receive all distributions of principal and interest from the related indenture trustee or the related trustee, as applicable, through Participants or Indirect Participants. Under a book-entry format, Security Owners may experience some delay in their receipt of payments, since these payments will be forwarded by the applicable trustee or indenture trustee to DTC's nominee. DTC will then forward the payments to the Participants, which will then forward them to Indirect Participants or Security Owners. Under the rules, regulations and procedures creating and affecting DTC and its operations (the "Rules"), DTC is required to make book-entry transfers among Participants on whose behalf it acts with respect to the securities and to receive and transmit distributions of principal of and interest on the securities. Participants and Indirect Participants with which Security Owners have accounts with respect to the securities similarly are required to make book-entry transfers and to receive and transmit the payments on behalf of their respective Security Owners. Accordingly, although Security Owners will not possess physical certificates representing the securities, the Rules provide a mechanism by which Participants and Indirect Participants will receive payments and transfer or exchange interests, directly or indirectly, on behalf of Security Owners. Because DTC can act only on behalf of Participants, who in turn may act on behalf of Indirect Participants, the ability of a Security Owner to pledge securities to persons or entities that do not participate in the DTC system, or otherwise take actions with respect to the securities, may be limited due to the lack of a physical certificate representing the securities. DTC has advised the company that it will take any action permitted to be taken by a Security Owner under the Indenture, Trust Agreement or Pooling and Servicing Agreement, as applicable, only at the direction of one or more Participants to whose account with DTC the securities are credited. DTC may take conflicting actions with respect to other undivided interests to the extent that these actions are taken on behalf of Participants whose holdings include the undivided interests. Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte, L-2967 Luxembourg ("Clearstream, Luxembourg"), was incorporated in 1970 as "Cedel S.A.", a company with limited liability under Luxembourg law (a societe anonyme). Cedel S.A. subsequently changed its name to Cedelbank. On January 10, 2000, Cedelbank's parent company, Cedel International, societe anonyme ("CI") merged its clearing, settlement and custody business with that of Deutsche Borse Clearing AG ("DBC"). The merger involved the transfer by CI of substantially all of its assets and liabilities (including its shares in CB) to a new Luxembourg company, New Cedel International, societe anonyme ("New CI"), which is 50% owned by CI and 50% owned by DBC's parent company Deutsche Borse AG. The shareholders of these two entities are banks, securities dealers and financial institutions. Cedel International currently has 92 shareholders, including U.S. financial institutions or their subsidiaries. No single entity may own more than 5 percent of Cedel International's stock. Further to the merger, the Board of Directors of New Cedel International decided to rename the companies in the group in order to give them a cohesive brand name. The new brand name that was chosen is "Clearstream". With effect from January 14, 2000 New CI has been renamed "Clearstream International, societe anonyme". On January 18, 2000, Cedelbank was renamed "Clearstream Banking, societe anonyme", and Cedel Global Services was renamed "Clearstream Services, societe anonyme". On January 17, 2000 DBC was renamed "Clearstream Banking AG". This means that there are now two entities in the corporate group headed by Clearstream International which share the name "Clearstream Banking", the entity previously named "Cedelbank" and the entity previously named "Deutsche Brse Clearing AG". Clearstream, Luxembourg holds securities for its customers ("Clearstream, Luxembourg Participants") and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg customers through electronic book-entry changes in accounts of Clearstream, Luxembourg customers, thereby eliminating the need for physical movement of certificates. Transactions may be settled by Clearstream, Luxembourg in any of 36 currencies, including United States Dollars. Clearstream, Luxembourg provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream, Luxembourg also deals with domestic securities markets in over 30 countries through established depository and custodial relationships. Clearstream, Luxembourg is registered as a bank in Luxembourg, and as such is subject to regulation by the Commission de Surveillance du Secteur Financier, "CSSF", which supervises Luxembourg banks. Clearstream, Luxembourg's customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg has approximately 2,000 customers located in over 80 countries, including all major European countries, Canada, and the United States. Indirect access to Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream, Luxembourg. Clearstream, Luxembourg has established an electronic bridge with Morgan Guaranty Trust Company of New York as the Operator of the Euroclear System (MGT/EOC) in Brussels to facilitate settlement of trades between Clearstream, Luxembourg and MGT/EOC. Except as required by law, none of Deutsche Banc Alex. Brown, the company, the related seller, the related servicer, or related indenture trustee, if any, or the related trustee will have any liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of securities of any series held by DTC's nominee, or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. DEFINITIVE SECURITIES If so stated in the related prospectus supplement, the notes and/or certificates of a given series will be issued in fully registered, certificated form ("Definitive notes" and "Definitive certificates", respectively, and, collectively, "Definitive Securities") to noteholders or certificateholders or their respective nominees, rather than to DTC or its nominee, only if o the related trustee of a grantor trust or the related indenture trustee in the case of an owner trust, as applicable, determines that DTC is no longer willing or able to discharge properly its responsibilities as Depository with respect to the related securities and the indenture trustee or trustee, as applicable, is unable to locate a qualified successor, o the indenture trustee or trustee, as applicable, elects, at its option, to terminate the book-entry system through DTC or o after the occurrence of an Event of Default or Servicer Default, Security Owners representing at least a majority of the outstanding principal amount of the notes or certificates, as applicable, of the series, advise the related trustee through DTC that the continuation of a book-entry system through DTC, or a successor to DTC, is no longer in the best interests of the related Security Owners. Upon the occurrence of any of the events described in the immediately preceding paragraph, the related trustee or indenture trustee, as applicable, will be required to notify the related Security Owners, through Participants, of the availability of Definitive Securities. Upon surrender by DTC of the certificates representing all securities of any affected class and the receipt of instructions for re-registration, the trustee will issue Definitive Securities to the related Security Owners. Distributions on the related Definitive Securities will subsequently be made by the related trustee or indenture trustee, as applicable, directly to the holders in whose name the related Definitive Securities are registered at the close of business on the applicable record date, in accordance with the procedures set forth in this prospectus and in the related Indenture or the related Trust Agreement or Pooling and Servicing Agreement, as applicable. Distributions will be made by check mailed to the address of the holders as they appear on the register specified in the related Indenture, Trust Agreement or Pooling and Servicing Agreement, as applicable; however, the final payment on any securities, whether Definitive Securities or securities registered in the name of a Depository or its nominee, will be made only upon presentation and surrender of the securities at the office or agency as specified in the notice of final distribution to Securityholders. Definitive Securities will be transferable and exchangeable at the offices of the related trustee or indenture trustee, or any security registrar appointed by the related trustee or the indenture trustee, as applicable. No service charge will be imposed for any registration of transfer or exchange, but the trustee or indenture trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection with a registration of transfer or exchange. STATEMENTS TO SECURITYHOLDERS With respect to each series of securities, on or prior to each Distribution Date, the related servicer will prepare and forward to the related indenture trustee or trustee to be included with the distribution to each Securityholder of record a statement setting forth for the related Collection Period the following information, and any other information specified in the related prospectus supplement: (1) the amount of the distribution allocable to principal of each class of securities of the series; (2) the amount of the distribution allocable to interest on each class of securities of the series; (3) if applicable, the amount of the Servicing Fee paid to the related servicer with respect to the related Collection Period; (4) the outstanding principal balance and Note Pool Factor for each class of notes, if any, and the certificate balance and Certificate Pool Factor for each class of certificates of the series as of the related record date; (5) the balance of any Reserve Account or other form of credit enhancement, after giving effect to any additions to the balance of the Reserve Account or withdrawals from the Reserve Account or reductions to the Reserve Account to be made on the following Distribution Date; and (6) the aggregate amount of realized losses, if any, in respect of Receivables and any other loss, delinquency or other ratios set forth in the related prospectus supplement for the related Collection Period. Items (1), (2) and (4) above with respect to the notes or certificates of a series will be expressed as a dollar amount per $1,000 of initial principal balance of the notes or the initial certificate balance of the certificates, as applicable. In addition, within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of each Trust, the related trustee or indenture trustee, as applicable, will mail to each person who at any time during the related calendar year shall have been a registered Securityholder a statement containing information for the purposes of the Securityholder's preparation of federal income tax returns. See "Material Federal Income Tax Consequences". LIST OF SECURITYHOLDERS Three or more holders of the notes of any series or one or more holders of the notes evidencing not less than 25% of the aggregate outstanding principal balance of the notes of the series may, by written request to the related indenture trustee, obtain access to the list of all noteholders maintained by the indenture trustee for the purpose of communicating with other noteholders with respect to their rights under the related Indenture or under the notes. The indenture trustee may elect not to afford the requesting noteholders access to the list of noteholders if it agrees to mail the desired communication or proxy, on behalf of and at the expense of the requesting noteholders, to all noteholders of the series. Three or more holders of the certificates of any series or one or more holders of the certificates evidencing not less than 25% of the certificate balance of the certificates may, by written request to the related trustee, obtain access to the list of all certificateholders maintained by the trustee for the purpose of communicating with other certificateholders with respect to their rights under the related Trust Agreement or Pooling and Servicing Agreement, as applicable, or under the certificates. DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS The following summary describes the material provisions, in each case, to the extent anticipated to be common to any series of securities, of: o each Receivables Purchase Agreement pursuant to which the seller will transfer Receivables to the company, o each Trust Agreement or Pooling and Servicing Agreement pursuant to which a Trust will be created, Collateral Certificates, Government Securities and/or Private Label Custody Receipt Securities, as applicable, may be sold or transferred to the Trust, certificates will be issued, and the servicer will service Receivables and the trustee will manage Government Securities, if any and Private Label Custody Receipt Securities, if any, in the case of a grantor trust, o each Sale and Servicing Agreement pursuant to which the company will transfer Receivables to a Trust and the servicer will service Receivables, in the case of an owner trust, or o in the case of securities backed by Collateral Certificates, each Trust Agreement pursuant to which a Trust will be created, Collateral Certificates will be sold or transferred to the Trust, Government Securities and Private Label Custody Receipt Securities may be sold or transferred to the Trust and a trustee will manage Collateral Certificates, Government Securities, if any, and Private Label Custody Receipt Securities, if any (collectively, the "Transfer and Servicing Agreements"). Forms of the Transfer and Servicing Agreements have been filed as exhibits to the Registration Statement of which this prospectus forms a part. The following summary does not purport to be a complete description of all of the terms of the Transfer and Servicing Agreements and therefore is subject to, and is qualified in its entirety by reference to, the provisions of the related Transfer and Servicing Agreement. SALE AND ASSIGNMENT OF PRIMARY ASSETS In the case of Primary Assets consisting of Receivables, on or prior to the related closing date, a seller will transfer and assign to the company, pursuant to a Receivables Purchase Agreement, without recourse, all of its right, title and interest in and to Receivables in the outstanding principal amount specified in the related prospectus supplement, including its security interests in the related Financed Vehicles. Each Receivable will be identified in a schedule appearing as an exhibit to the related Receivables Purchase Agreement (the "Schedule of Receivables"). In each Receivables Purchase Agreement the seller will represent and warrant to the company, among other things, that o the information set forth in the Schedule of Receivables is correct in all material respects as of the applicable cutoff date; o the obligor on each Receivable is contractually required to maintain physical damage insurance covering the related Financed Vehicle in accordance with the seller's normal requirements; o on the closing date, the Receivables are free and clear of all security interests, liens, charges and encumbrances, and no offsets, defenses or counterclaims have been asserted or threatened; o at the closing date, each of the Receivables is secured by a perfected, first-priority security interest in the related Financed Vehicle in favor of the seller; o each Receivable, at the time it was originated, complied and, on the closing date complies, in all material respects with applicable federal and state laws, including, without limitation, consumer credit, truth-in-lending, equal credit opportunity and disclosure laws; and o any other representations and warranties that may be set forth in the related prospectus supplement. To the extent specified in the related prospectus supplement, as of the last day of the second Collection Period, or, if the seller so elects, the last day of the first Collection Period, following the discovery by or notice to the seller of any breach of a representation and warranty of the seller that materially and adversely affects the interests of the related Trust in any Receivable, the seller will be obligated to repurchase the Receivable, unless the seller cures the breach in a timely fashion. The purchase price for any of these Receivables will be equal to the unpaid principal balance owed by the obligor on the Receivable, plus accrued and unpaid interest on the unpaid principal balance at the applicable APR to the last day of the month of repurchase (the "Repurchase Amount"). This repurchase obligation will constitute the sole remedy available to the Securityholders, the related trustee and any related indenture trustee for any uncured breach. On the related closing date, the company will transfer and assign to the related Trust, pursuant to a Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, without recourse, all of its right, title and interest in and to Primary Assets in the outstanding principal amount specified in the related prospectus supplement. Concurrently with the transfer and assignment of Primary Assets to the related Trust, the related trustee or indenture trustee, as applicable, will execute, authenticate and deliver the related securities. Pursuant to the terms of the Sale and Servicing Agreement or the Pooling and Servicing Agreement, as applicable, the company will assign to the related Trust the representations and warranties made by the related seller under the related Receivables Purchase Agreement for the benefit of the related Securityholders and will make limited representations and warranties with respect to the other Primary Assets included in the Trust. To the extent that the related seller does not repurchase a Primary Asset in the event of a breach of its representations and warranties with respect to the Primary Asset, the company will not be required to repurchase the Primary Asset unless the breach also constitutes a breach of one of the company's representations and warranties under the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, with respect to that Primary Asset, if any, and the breach materially and adversely affects the interests of the Securityholders in any Primary Asset. Neither the seller nor the company will have any other obligation with respect to the Primary Assets or the securities. TRUST ACCOUNTS With respect to each owner trust, the servicer will establish and maintain with the related indenture trustee, or the trustee will establish and maintain, (a) one or more accounts, on behalf of the related Securityholders, into which all payments made on or in respect of the related Primary Assets will be deposited (the "Collection Account") and (b) an account, in the name of the indenture trustee on behalf of the noteholders, into which amounts released from the Collection Account and any Reserve Account or other form of credit enhancement for payment to the noteholders will be deposited and from which all distributions to the noteholders will be made (the "Note Distribution Account"). With respect to each owner trust and grantor trust, the servicer or the related trustee will establish and maintain an account, in the name of the trustee on behalf of the certificateholders, into which amounts released from the Collection Account and any Reserve Account or other form of credit enhancement for distribution to the certificateholders will be deposited and from which all distributions to the certificateholders will be made (the "Certificate Distribution Account"). With respect to any grantor trust, the servicer or the related trustee will also establish and maintain the Collection Account and any other Trust Account in the name of the related trustee on behalf of the related certificateholders. If so provided in the related prospectus supplement, the servicer will establish for each series of securities an additional account (the "Payahead Account"), in the name of the related indenture trustee, in the case of an owner trust, or trustee, in the case of a grantor trust, into which, to the extent required in the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, early payments made by or on behalf of obligors on Precomputed Receivables will be deposited until the time these payments become due. Until the time payments are transferred from the Payahead Account to the Collection Account, they will not constitute collected interest or collected principal and will not be available for distribution to noteholders or certificateholders. Any other accounts to be established with respect to a Trust will be described in the related prospectus supplement. For each series of securities, funds in the Collection Account, Note Distribution Account, Certificate Distribution Account and any Reserve Account or other accounts identified in the related prospectus supplement (collectively, the "Trust Accounts") will be invested as provided in the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, in Eligible Investments. "Eligible Investments" will generally be limited to investments acceptable to the Rating Agencies as being consistent with the rating of the related securities. Eligible Investments will generally be limited to obligations or securities that mature on or before the date of the next scheduled distribution to Securityholders of the series. However, to the extent permitted by the Rating Agencies, funds in any Reserve Account may be invested in securities that will not mature prior to the date of the next scheduled distribution with respect to the notes or certificates and will not be sold prior to maturity to meet any shortfalls. Thus, the amount of available funds on deposit in a Reserve Account at any time may be less than the balance of that Reserve Account. If the amount required to be withdrawn from a Reserve Account to cover shortfalls in collections on the related Receivables (as provided in the related prospectus supplement) exceeds the amount of available funds on deposit in the Reserve Account, a temporary shortfall in the amounts distributed to the related noteholders or certificateholders could result, which could, in turn, increase the average life of the related notes or certificates. Unless otherwise and to the extent provided in the related prospectus supplement, investment earnings on funds deposited in the Trust Accounts, net of losses and investment expenses (collectively, "Investment Earnings"), will be deposited in the applicable Collection Account on each Distribution Date and will be treated as collections of interest on the related Receivables. The Trust Accounts will be maintained as Eligible Deposit Accounts. "Eligible Deposit Account" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a company institution organized under the laws of the United States of America or any one of the states of the United States of America or the District of Columbia, or any domestic branch of a foreign bank, having corporate trust powers and acting as trustee for funds deposited in the account, so long as any of the securities of the company institution have a credit rating from each Rating Agency in one of its generic rating categories that signifies investment grade. "Eligible Institution" means, with respect to a Trust, (a) the corporate trust department of the related indenture trustee or trustee, as applicable, or (b) a company institution organized under the laws of the United States of America or any one of the states of the United States of America or the District of Columbia, or any domestic branch of a foreign bank, (1) that has either (A) a long-term unsecured debt rating acceptable to the Rating Agencies or (B) a short-term unsecured debt rating or certificate of deposit rating acceptable to the Rating Agencies and (2) whose deposits are insured by the FDIC. PRE-FUNDING If so specified in the related prospectus supplement, a portion of the issuance proceeds of the securities of a particular series (this amount, the "Pre-Funded Amount") will be deposited in an account (the "Pre-Funding Account") to be established with the trustee, which will be used to acquire additional Receivables from time to time during the time period specified in the related prospectus supplement (the "Pre-Funding Period"). Prior to the investment of the Pre-Funded Amount in additional Receivables, the Pre-Funded Amount may be invested in one or more Eligible Investments. Except as otherwise provided in the applicable Agreement, an "Eligible Investment" is any of the following, in each case as determined at the time of the investment or contractual commitment to invest in the relevant Eligible Investment, to the extent these investments would not require registration of the Trust Fund as an investment company pursuant to the Investment Company Act of 1940: (a) negotiable instruments or securities represented by instruments in bearer or registered or book-entry form which evidence (1) obligations which have the benefit of the full faith and credit of the United States of America, including company receipts issued by a bank as custodian with respect to any instrument or security held by the custodian for the benefit of the holder of the company receipt, (2) demand deposits or time deposits in, or bankers' acceptances issued by, any depositary institution or trust company incorporated under the laws of the United States of America or any state of the United States of America and subject to supervision and examination by Federal or state banking or depositary institution authorities; provided that at the time of the trustee's investment or contractual commitment to invest in the relevant Eligible Investment, the certificates of deposit or short-term deposits, if any, or long-term unsecured debt obligations, other than the obligations whose rating is based on collateral or on the credit of a Person other than the institution or trust company, of the depositary institution or trust company has a credit rating in the highest rating category from each Rating Agency, (3) certificates of deposit having a rating in the highest rating category from each Rating Agency or (4) investments in money market funds which are, or which are composed of instruments or other investments which are, rated in the highest rating category from each Rating Agency; (b) demand deposits in the name of the trustee in any depositary institution or trust company referred to in clause (a)(2) above; (c) commercial paper, having original or remaining maturities of no more than 270 days, having a credit rating in the highest rating category from each Rating Agency; (d) Eurodollar time deposits that are obligations of institutions whose time deposits carry a credit rating in the highest rating category from each Rating Agency; (e) repurchase agreements involving any Eligible Investment described in any of clauses (a)(1), (a)(3) or (d) above, so long as the other party to the repurchase agreement has its long-term unsecured debt obligations rated in the highest rating category from each Rating Agency; and (f) any other investment with respect to which each Rating Agency rating the securities indicates will not result in the reduction or withdrawal of its then existing rating of the securities. Except as otherwise provided in the applicable Agreement, any Eligible Investment must mature no later than the Business Day prior to the next Distribution Date. During any Pre-Funding Period, the seller or any other party specified in the related prospectus supplement will be obligated, subject only to the availability of additional Receivables, to transfer to the related Trust Fund additional Receivables from time to time during the related Pre-Funding Period. Additional Receivables will be required to satisfy specific eligibility criteria more fully set forth in the related prospectus supplement, which eligibility criteria will be consistent with the eligibility criteria of the Receivables included in the Trust Fund as of the closing date subject to exceptions as are expressly stated in the related prospectus supplement. Although the specific parameters of the Pre-Funding Account with respect to any issuance of securities will be specified in the related prospectus supplement, it is anticipated that: o the Pre-Funding Period will not exceed 90 days from the related closing date; o that the additional loans to be acquired during the Pre-Funding Period will be subject to the same representations and warranties as the Receivables included in the related Trust Fund on the closing date, although additional criteria may also be required to be satisfied, as described in the related prospectus supplement; and o the Pre-Funded Amount will not exceed 25% of the principal amount of the securities issued pursuant to a particular offering. SERVICING PROCEDURES To assure uniform quality in servicing the Receivables and to reduce administrative costs, the company and each Trust will designate the servicer as custodian to maintain possession, as the Trust's agent, of the related Receivables and any other documents relating to the Receivables. The seller's and the servicer's accounting records and computer systems will be marked to reflect the sale and assignment of the related Receivables to each Trust, and UCC financing statements reflecting the sale and assignment will be filed. The servicer will make reasonable efforts to collect all payments due with respect to the Receivables and will, consistent with the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, follow the collection procedures as it follows with respect to comparable Receivables it services for itself and others. The prospectus supplement will specify that the servicer may, in its discretion, arrange with the obligor on a Receivable to extend or modify the payment schedule, but no arrangement will, if inconsistent with its normal procedures, for purposes of any Sale and Servicing Agreement or Pooling and Servicing Agreement, reduce the contract rate of, the amount of the scheduled payments under, or extend the final payment date of, any Receivable beyond the "Final Scheduled Maturity Date" (as the term is defined with respect to any Receivables Pool in the related prospectus supplement). Some arrangements may result in the servicer purchasing the Receivables for the Repurchase Amount, while others may result in the servicer making Advances. The servicer may sell the related Financed Vehicle securing any Receivable at a public or private sale, or take any other action permitted by applicable law. See "Certain Legal Aspects of the Receivables". COLLECTIONS With respect to each Trust, the servicer or the trustee will deposit all payments on the related Primary Assets, from whatever source, and all proceeds of the related Primary Assets, collected during the period specified in the related prospectus supplement (a "Collection Period") into the related Collection Account not later than two business days after receipt of payments and proceeds of the related Primary Assets or any other period as specified in the related prospectus supplement. However, notwithstanding the foregoing, these amounts may be remitted to the Collection Account by the servicer on a monthly basis on or prior to the applicable Distribution Date if no Servicer Default exists and each other condition to making deposits less frequently than daily as may be specified by the Rating Agencies or set forth in the related prospectus supplement is satisfied. Pending deposit into the Collection Account, the collections may be invested by the servicer at its own risk and for its own benefit and will not be segregated from its own funds. If the servicer were unable to remit the funds to the Collection Account on any Distribution Date, Securityholders might incur a loss. To the extent set forth in the related prospectus supplement, the servicer may, in order to satisfy the requirements described above, obtain a letter of credit or other security for the benefit of the related Trust to secure timely remittances of collections on the related Primary Assets and payment of the aggregate Repurchase Amount with respect to Receivables repurchased by the servicer. Collections on a Precomputed Receivable during any Collection Period will be applied first to the repayment of any outstanding Precomputed Advances made by the servicer with respect to the Receivable, as described below, and then to the scheduled monthly payment due on the Receivable. Any portion of the collections remaining after the scheduled monthly payment has been made (these excess amounts, the "Payaheads") will, unless the remaining amount is sufficient to prepay the Precomputed Receivable in full, and subject to limitations which, if applicable, will be specified in the related prospectus supplement, be transferred to and kept in the Payahead Account until a later Distribution Date on which the Payaheads may be applied either to the scheduled monthly payment due during the related Collection Period or to prepay the Receivable in full. ADVANCES If specified in the related prospectus supplement, to the extent the collections of interest and principal on a Precomputed Receivable for a Collection Period fall short of the related scheduled payment, the servicer generally will advance the shortfall (a "Precomputed Advance"). The servicer will be obligated to make a Precomputed Advance on a Precomputed Receivable only to the extent that the servicer, in its sole discretion, expects to recoup the Advance from subsequent collections or recoveries on the Receivable or other Precomputed Receivables in the related Receivables Pool. The servicer will deposit the Precomputed Advance in the applicable Collection Account on or before the business day preceding the applicable Distribution Date. The servicer will recoup its Precomputed Advance from subsequent payments by or on behalf of the related obligor or from insurance or liquidation proceeds with respect to the related Receivable and will release its right to reimbursement in conjunction with its purchase of the Receivable as servicer or, upon determining that reimbursement from the preceding sources is unlikely, will recoup its Precomputed Advance from any collections made on other Precomputed Receivables in the related Receivables Pool. If specified in the related prospectus supplement, on or before the business day prior to each Distribution Date, the servicer will deposit into the related Collection Account an amount equal to the amount of interest that would have been due on the related Simple Interest Receivables at their respective annual percentage rates for the related Collection Period, assuming that the Simple Interest Receivables are paid on their respective due dates, minus the amount of interest actually received on the Simple Interest Receivables during the applicable Collection Period (a "Simple Interest Advance", and together with Precomputed Advances, "Advances"). If the calculation results in a negative number, an amount equal to the amount shall be paid to the servicer in reimbursement of outstanding Simple Interest Advances. In addition, if specified in the related prospectus supplement, if a Simple Interest Receivable becomes a Liquidated Receivable (as the term is defined in the related prospectus supplement), the amount of accrued and unpaid interest on the Simple Interest Receivable that became a Liquidated Receivable, but not including interest for the then current collection Period, will be withdrawn from the Collection Account and paid to the servicer in reimbursement of outstanding Simple Interest Advances. No advances of principal will be made with respect to Simple Interest Receivables. NET DEPOSITS For administrative convenience, unless the servicer or the trustee is required to remit collections to the Collection Account on a daily basis as described under "Collections" above, the servicer or the trustee will be permitted to make deposits of collections, aggregate Advances and Repurchase Amounts for any Trust for or in respect of each Collection Period net of distributions to be made to the servicer with respect to the Collection Period. The servicer also may cause a single, net transfer to be made from the Collection Account to the Payahead Account, or vice versa. SERVICING COMPENSATION AND PAYMENT OF EXPENSES To the extent provided in the related prospectus supplement, with respect to each Trust the related servicer will be entitled to receive, out of interest collected on or in respect of the related Primary Assets serviced by the servicer, a fee for each Collection Period (the "Servicing Fee") in an amount equal to the percentage per annum specified in the related prospectus supplement (the "Servicing Fee Rate") of the Pool Balance related to the Primary Assets as of the first day of the related Collection Period. Unless otherwise provided in the related prospectus supplement, the Servicing Fee, together with any portion of the Servicing Fee that remains unpaid from prior Distribution Dates, will be paid solely to the extent of the Interest Distribution Amount; however, the Servicing Fee will be paid prior to the distribution of any portion of the Interest Distribution Amount to the holders of the notes or certificates of any series. To the extent provided in the related prospectus supplement, the servicer will also collect and retain any late fees, prepayment charges and other administrative fees or similar charges allowed by applicable law with respect to Receivables and will be entitled to reimbursement from each Trust for some liabilities. Payments by or on behalf of obligors will be allocated to scheduled payments under the related Receivable and late fees and other charges in accordance with the servicer's normal practices and procedures. If applicable, the Servicing Fee will compensate the servicer for performing the functions of a third party servicer of motor vehicle receivables as an agent for the related Trust, including collecting and posting all payments, responding to inquiries of obligors on the Receivables, investigating delinquencies, sending payment statements and reporting the collateral. The Servicing Fee will also compensate the servicer for administering the Receivables, including making Advances, accounting for collection, furnishing monthly and annual statements to the related Indenture Trust and/or trustee, and generating federal income tax information for the Trust and for the related noteholders and/or certificateholders as well as the Trust's compliance with the reporting provisions under the Exchange Act. The Servicing Fee may also reimburse the servicer for particular taxes, the fees of the related indenture trustee and/or trustee, accounting fees, outside auditor fees, date processing cost and other costs incurred in connection with administering the Primary Assets. DISTRIBUTIONS With respect to each series of securities, beginning on the Distribution Date specified in the related prospectus supplement, distributions of principal and interest, or, where applicable, principal only or interest only, on each class of securities entitled to these distributions will be made by the related trustee or indenture trustee, as applicable, to the certificateholders and noteholders of the series. The timing, calculation, allocation, order, source and priorities of, and requirements for, all payments to the holders of each class of notes and/or distributions to holders of each class of certificates will be set forth in the related prospectus supplement. With respect to each Trust, on each Distribution Date collections on or in respect of the related Primary Assets will be transferred from the Collection Account to the Note Distribution Account or Certificate Distribution Account, as applicable, for distribution to the noteholders and certificateholders to the extent provided in the related prospectus supplement. Credit enhancement, such as a Reserve Account, will be available to cover shortfalls in the amount available for distribution on the date to the extent specified in the related prospectus supplement. As and to the extent described in the related prospectus supplement, distributions in respect of principal of a class of securities of a series may be subordinate to distributions in respect of interests on the class, and distributions in respect of one or more classes of certificates of the series may be subordinate to payments in respect of the notes, if any, of the series or other classes of certificates. Distributions of principal on the securities of a series may be based on the amount of principal collected or due, or the amount of realized losses incurred, in a Collection Period. CREDIT AND CASH FLOW ENHANCEMENT The amounts and types of any credit and cash flow enhancement arrangements and the provider of the credit and cash flow enhancement arrangements, if applicable, with respect to each class of securities of a series will be set forth in the related prospectus supplement. To the extent provided in the related prospectus supplement, credit or cash flow enhancement may be in the form of subordination of one or more classes of securities, Reserve Accounts, spread accounts, letters of credit, surety bonds, insurance policies, over-collateralization, credit or liquidity facilities, guaranteed investment contracts, swaps or other interest rate protection agreements, repurchase obligations, other agreements with respect to third party payments or other support, cash deposits, or any other arrangements that are incidental to or related to the Primary Assets included in a Trust as may be described in the related prospectus supplement, or any combination of the foregoing. If specified in the applicable prospectus supplement, credit or cash flow enhancement for a class of securities may cover one or more other classes of securities of the same series, and credit enhancement for a series of securities may cover one or more other series of securities. The existence of a Reserve Account or other form of credit enhancement for the benefit of any class or series of securities is intended to enhance the likelihood of receipt by the Securityholders of the class or series of the full amount of principal and interest due on the applicable class or series and to decrease the likelihood that the Securityholders will experience losses. The credit enhancement for a class or series of securities will not, as a general rule, provide protection against all types of loss and will not guarantee repayment of all principal and interest on a class or series of securities. If losses occur which exceed the amount covered by credit enhancement or which are not covered by the credit enhancement, Securityholders will bear their allocable share of these losses, as described in the prospectus supplement. In addition, if a form of credit enhancement covers more than one series of securities, Securityholders of any series will be subject to the risk that credit enhancement may be exhausted by the claims of Securityholders of other series. RESERVE ACCOUNT. If so provided in the related prospectus supplement, pursuant to the related Transfer and Servicing Agreement, the company or the seller will establish for a series or class or classes of securities an account (the "Reserve Account"), which will be maintained with the related indenture trustee or trustee, as applicable. A Reserve Account will be funded by an initial deposit by the company or the seller, as applicable, on the closing date in the amount set forth in the related prospectus supplement. As further described in the related prospectus supplement, the amount on deposit in the Reserve Account may be increased or reinstated on each Distribution Date, to the extent described in the related prospectus supplement, by the deposit there of amounts from collections on the Primary Assets. The related prospectus supplement will describe the circumstances under which and the manner in which distributions may be made out of the Reserve Account, either to holders of the securities covered by the Reserve Account or to the company, the seller or to any other entity. EVIDENCE AS TO COMPLIANCE Each Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, will provide that a firm of independent public accountants will furnish annually to the related Trust and indenture trustee and/or trustee a statement as to compliance by the Sale and servicer during the preceding twelve months, or, in the case of the first statement, during a shorter period that shall have elapsed since the applicable closing date, with particular standards relating to the servicing of the Receivables, the servicer's accounting records and computer files with respect to the servicer's compliance and other matters. Each Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, will also provide for delivery to the related Trust and indenture trustee and/or trustee each year of a certificate signed by an officer of the servicer stating that the servicer has fulfilled it obligations under the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, throughout the preceding twelve months, or, in the case of the first certificate, during a shorter period that shall have elapsed since the applicable closing date, or, if there has been a default in the fulfillment of any obligation, describing each default. The servicer will agree to give each indenture trustee and/or trustee, as applicable, notice of particular Servicer Defaults under the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable. Copies of the foregoing statements and certificates may be obtained by Securityholders by a request in writing addressed to the related trustee or indenture trustee, as applicable, at the Corporate Trust Office for the trustee or indenture trustee specified in the related prospectus supplement. STATEMENTS TO TRUSTEES AND THE TRUST Prior to each Distribution Date with respect to each series of securities, the servicer will provide to the applicable indenture trustee, if any, and the applicable trustee as of the close of business on the last day of the preceding Collection Period a statement setting forth substantially the same information as is required to be provided in the periodic reports provided to Securityholders of the series as described under "Certain Information Regarding the Securities--Statements to Securityholders". CERTAIN MATTERS REGARDING THE SERVICER Each Sale and Servicing Agreement and Pooling and Servicing Agreement will provide that the servicer may not resign from its obligations and duties as servicer under the applicable Agreement, except upon determination that the servicer's performance of his duties is no longer permissible under applicable law or if resignation is required by regulatory authorities. No resignation will become effective until the related indenture trustee or trustee, as applicable, or a successor servicer has assumed the servicing obligations and duties under the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable. Each Sale and Servicing Agreement and Pooling and Servicing Agreement will further provide that neither the servicer nor any of its directors, officers, employees and agents will be under any liability to the related Trust or Securityholders for taking any action or for refraining from taking any action pursuant to the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, or for errors in judgment; provided, that neither the servicer nor any person will be protected against any liability that would otherwise be imposed by reason of wilful misfeasance, bad faith or gross negligence in the performance of the servicer's duties or by reason of reckless disregard of its obligations and duties under the applicable Agreement. In addition, each Sale and Servicing Agreement and Pooling and Servicing Agreement will provide that the servicer is under no obligation to appear in, prosecute or defend any legal action that is not incidental to its servicing responsibilities under the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, and that, in its opinion, may cause it to incur any expense or liability. Under the circumstances specified in each Sale and Servicing Agreement and Pooling and Servicing Agreement, any entity into which the servicer may be merged or consolidated, or any entity resulting from any merger or consolidation to which the servicer is a party, or any entity succeeding to all or substantially all of the business of the servicer, or any corporation which assumes the obligations of the servicer, will be the successor to the servicer under the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable. SERVICER DEFAULTS A "Servicer Default" under each Sale and Servicing Agreement and Pooling and Servicing Agreement will consist of: (1) any failure by the servicer to deliver to the related trustee or indenture trustee, as applicable, for deposit in any of the Trust Accounts any required payment or to direct the related trustee or Indenture Trust, as applicable, to make any required distributions from the Trust Accounts, which failure continues unremedied for five business days after discovery by an officer of the servicer or written notice of failure is given (a) to the servicer by the related trustee or indenture trustee, as applicable, or (b) to the servicer and to the related trustee or indenture trustee, as applicable, by holders of notes, if any, evidencing not less that 25% of the aggregate outstanding principal amount of the notes or, in the event a series of securities includes no notes or if the notes have been paid in full, by holders of certificates evidencing not less that 25% of the certificate balance; (2) any failure by the servicer duly to observe or perform in any material respect any covenant or agreement in the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, which failure materially and adversely affects the rights of the related Securityholders and which continues unremedied for 60 days after written notice of failure is given to the servicer in the same manner described in clause (1) above; (3) specific events of bankruptcy, insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings and particular actions by the servicer indicating its insolvency, reorganization pursuant to bankruptcy proceedings or inability to pay its obligations; and (4) any other events as may be set forth in the related prospectus supplement. RIGHTS UPON SERVICER DEFAULT Generally, in the case of an owner trust, as long as a Servicer Default under the related Sale and Servicing Agreement remains unremedied, the related indenture trustee or holders of notes of the related series evidencing not less than 50% of the aggregate principal amount of the notes then outstanding may terminate all the rights and obligations of the servicer under the related Sale and Servicing Agreement, and upon this termination the indenture trustee or a successor servicer appointed by the indenture trustee will succeed to all the responsibilities, duties and liabilities of the servicer under the related Sale and Servicing Agreement and will be entitled to similar compensation arrangements. Generally, in the case of any grantor trust, as long as a Servicer Default under the related Pooling and Servicing Agreement remains unremedied, the related trustee or holders of certificates of the related series evidencing not less than 25% of the certificate balance may terminate all the rights and obligations of the servicer under the related Pooling and Servicing Agreement, and upon this termination the trustee or a successor servicer appointed by the trustee will succeed to all the responsibilities, duties and liabilities of the servicer under the related Pooling and Servicing Agreement and will be entitled to similar compensation arrangements. If, however, a bankruptcy trustee or similar official has been appointed for the servicer, and no Servicer Default other than the appointment has occurred, the trustee or official may have the power to prevent any indenture trustee or the related noteholders or the trustee or the related certificateholders from effecting a transfer of servicing. If the related indenture trustee, if any, or the related trustee is unwilling or unable to act as successor to the servicer, the indenture trustee or trustee, as applicable, may appoint, or may petition a court of competent jurisdiction to appoint, a successor with a net worth of at least $100,000,000 and whose regular business includes the servicing of motor vehicle receivables. The indenture trustee, if any, or the trustee may arrange for compensation to be paid to the successor servicer, which in no event may be greater than the compensation payable to the servicer under the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable. WAIVER OF PAST DEFAULTS To the extent provided in the related prospectus supplement, (1) in the case of each owner trust, holders of the related notes evidencing not less than a majority of the aggregate outstanding principal amount of the notes, or of certificates evidencing not less than a majority of the outstanding certificate balance, in the case of any default that does not adversely affect the indenture trustee or noteholders, and (2) in the case of each grantor trust, holders of certificates evidencing not less than a majority of the certificate balance, may, on behalf of all the noteholders and certificateholders, waive any default by the servicer in the performance of its obligations under the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, and its consequences, except a default in making any required deposits to or payments from any Trust Account or in respect of a covenant or provision in the Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, that cannot be modified or amended without the consent of each Securityholder, in which event the related waiver will require the approval of holders of all of the securities of the series. No waiver will impair the Securityholders' right with respect to any subsequent Servicer Default. AMENDMENT Unless otherwise provided in the related prospectus supplement, each of the Transfer and Servicing Agreements may be amended by the parties to the Transfer and Servicing Agreements without the consent of the related noteholders or certificateholders: (1) to cure any ambiguity, (2) to correct or supplement any provisions in the related Transfer and Servicing Agreement, or (3) for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the related Transfer and Servicing Agreement; provided, that any action in this clause (3) will not, in the opinion of counsel satisfactory to the related trustee or indenture trustee, as applicable, adversely affect in any material respect the interests of the company or any noteholder. The Transfer and Servicing Agreements may also be amended from time to time by the parties to the Transfer and Servicing Agreements with the consent of the holders of notes evidencing at least a majority of the aggregate principal amount of the then outstanding notes, if any, and with the consent of the holders of certificates evidencing at least a majority of the aggregate principal amount of the then outstanding certificates, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the related Transfer and Servicing Agreement or of modifying in any manner the rights of the noteholders or certificateholders, as applicable; provided that no amendment may (1) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on or in respect of the related Primary Assets or distributions that are required to be made for the benefit of the noteholders or certificateholders or (2) reduce the aforesaid percentage of the notes or certificates of the series the holders of which are required to consent to any amendment, without the consent of the holders of all of the outstanding notes or certificates, as the case may be, of the series. PAYMENT IN FULL OF THE NOTES Upon the payment in full of all outstanding notes of a given series and the satisfaction and discharge of the related Indenture, the related trustee will succeed to all the rights of the indenture trustee, and the certificateholders of the series generally will succeed to the rights of the noteholders of the series under the related Sale and Servicing Agreement. TERMINATION The obligations of the related servicer, the related trustee and the related indenture trustee, if any, with respect to a Trust pursuant to the related Transfer and Servicing Agreement will terminate upon the latest to occur of o the maturity or other liquidation of the last Primary Asset and the disposition of any amounts received upon liquidation of any remaining Primary Asset, o the payment to noteholders, if any, and certificateholders of all amounts required to be paid to them pursuant to the Transfer and Servicing Agreements and o the occurrence of either event described below. In order to avoid excessive administrative expenses, the related servicer will be permitted, at its option, to purchase from a Trust all remaining Primary Assets as of the end of any Collection Period, if the then outstanding Pool Balance is 10%, or, if any seller is a bank, 5%, or less of the Pool Balance as of the related cutoff date, at a purchase price equal to the price specified in the related prospectus supplement. If and to the extent provided in the related prospectus supplement, the indenture trustee or trustee, as applicable, will, within ten days following a Distribution Date as of which the Pool Balance is equal to or less than the percentage of the original Pool Balance specified in the related prospectus supplement, solicit bids for the purchase of the Primary Assets remaining in the Trust, in the manner and subject to the terms and conditions set forth in the related prospectus supplement. If the indenture trustee or trustee receives satisfactory bids as described in the related prospectus supplement, then the Primary Assets remaining in the Trust will be sold to the highest bidder. CERTAIN LEGAL ASPECTS OF THE RECEIVABLES SECURITY INTERESTS IN FINANCED VEHICLES In states in which retail installment contracts such as the Receivables evidence the credit sale of automobiles, recreational vehicles, vans, trucks, buses and trailers by dealers to obligors, the contracts also constitute personal property security agreements and include grants of security interests in the vehicles under the UCC as in effect in these states. Perfection of security interests in the automobiles, recreational vehicles, vans, trucks, buses and trailers financed, directly or indirectly, by a seller is generally governed by the motor vehicle registration laws of the state in which the vehicle is located. In general, a security interest in automobiles, recreational vehicles, vans, trucks, buses and trailers is perfected by obtaining the certificate of title to the financed vehicle or notation of the secured party's lien on the vehicles' certificate of title. However, security interests in boats may be perfected in one of three ways: in certificate of title states, a security interest is perfected as described above; in other states, a security interest may be perfected by filing a UCC-1 financing statement, however, a purchase money lien in consumer goods is perfected without any filing requirement and if a boat is required to be documented under Federal law, a preferred mortgage may be obtained under the Ship Mortgage Act by filing the mortgage with the Coast Guard, which is the exclusive method for perfecting security interests in documented boats. The contracts may represent marine retail installment sale contracts purchased from Dealers or direct loans to Obligors secured by boats (the "Financed Boats"). When originated, each contract may have granted a security interest in the Financed Boat financed thereby. Each such security interest would be required to be perfected under applicable state law and, in the case of certain Financed Boats described below, under applicable federal law. Generally, security interests in boats may be perfected in one of three ways: (i) in "title" states, by notation of the secured party's lien on the certificate of title issued by an applicable state motor vehicle or wildlife department or other appropriate state agency; (ii) in non-title states, by filing a UCC-1 financing statement; and (iii) in respect of a boat eligible for documentation under federal law, by filing all documents necessary to create a first preferred ship mortgage (a "Preferred Mortgage") under the Ship Mortgage Act of 1920 (1988 Recodification) ss. 30101 et seq. (the "Ship Mortgage Statutes"). Vessels that meet the federal five net ton standard (determined in a manner prescribed by 46 CFR Part 69 (Measurement of Vessels)) qualify for documentation under federal law ("U.S. Documentable Boats"). However, federal documentation of vessels used exclusively for recreational purposes is discretionary. In the event that the originator of a contract failed to perfect the security interest in a Financed Boat (for example, by complying with the UCC rather than the applicable certificate of title statute, or by failing to comply with applicable state title law, or the Ship Mortgage Statutes or applicable United States Coast Guard (the "Coast Guard") regulations), such originator would not have a perfected first priority security interest in such Financed Boat. In this event, if third party liens equal or exceed the value of the Financed Boat, the only recourse of the Trust would be against the Obligor on an unsecured basis, or, if applicable, against a Dealer or financial intermediary pursuant to its repurchase obligation or against the Seller. Under the Ship Mortgage Statutes, in the absence of an assignment of record of a Preferred Mortgage, the assignment of the related contract by itself will not convey the perfected preferred mortgage lien on the Financed Boat subject to such Preferred Mortgage and neither the Seller (if not the secured party of record) nor the Trust will have a perfected security interest in such Financed Boat. However, to the extent specified in the related Prospectus Supplement, pursuant to the Sale and Servicing Agreement, the Seller will agree to cause filings of the assignments to the Trust of certain specified Preferred Mortgages (each a "Designated Preferred Mortgage") showing the chain of ownership of each such Preferred Mortgage from the originator of each such contract to the Trust, within the time period specified in the related Prospectus Supplement. However, due to administrative burden and expense, assignments may not be made of all Preferred Mortgages relating to the contracts. Under the Ship Mortgage Statutes, in the absence of an assignment of a Preferred Mortgage, or in the event an assignment of a Preferred Mortgage is not effective, the Trust will not have a perfected security interest in the related Financed Boat as against third parties without knowledge of the transfer. In such case, if third party liens equal or exceed the value of such Financed Boat, the only recourse of the Trust would be against the related Obligor on an unsecured basis. Under the laws of many states, certain possessory liens for repairs performed on a Financed Boat and storage, as well as certain rights in favor of federal and state governmental authorities arising from the use of a boat in connection with illegal activities, may take priority over a security interest perfected under state law. Certain U.S. federal tax liens may also have priority over the security interest of a secured party. Under the Ship Mortgage Statutes, a Preferred Mortgage supersedes a perfected state law security interest, a state or federally created lien or forfeiture rights (so long as the secured party is innocent of wrongdoing) other than preferred maritime liens such as those arising under federal statutory or common-law for captain's or crew's wages, tort claims (so-called "general average" claims) and salvage claims. Maritime liens arising under federal law or state laws for repair, storage or supplies which are subordinate to a preferred ship mortgage lien typically have priority over state security interests under federal law or under applicable law of the state where the contract was originated or under applicable law of the state to which the related Financed Boats may have been relocated. Preferred federal maritime liens are, of course, also prior to all state created security interests or liens. The Seller will represent in the Sale and Servicing Agreement that, as of the Initial Cut-off Date or Subsequent Cut-off Date, as the case may be, it has no knowledge of any such liens with respect to any Financed Boat related to a contract. However, such liens could arise at any time during the term of a contract. No notice will be given to the Owner Trustee or the Indenture Trustee in the event such a lien arises. Generally all of the Receivables name the seller as obligee or assignee and as the secured party. The seller will take all actions necessary under the laws of the state in which the financed vehicle is located to perfect the seller's security interest in the financed vehicle, including, where applicable, having a notation of its lien recorded on the vehicle's certificate of title or file a UCC-1 Financing Statement. If the seller, because of clerical error or otherwise, has failed to take action with respect to financed vehicle, it will not have a perfected security interest and its security interest may be subordinate to the interest of, among others, subsequent purchasers of the financed vehicle that give value without notice of the seller's security interest and to whom a certificate of ownership is issued in the purchaser's name, holders of perfected security interests in the financed vehicle and the trustee in bankruptcy of the obligor. The seller's security interest may also be subordinate to third parties in the event of fraud or forgery by the obligor or administrative error by state recording officials or in the circumstances noted below. Pursuant to each Sale and Servicing Agreement and Pooling and Servicing Agreement, the seller will assign its interests in the Financed Vehicles securing the related Receivables to the related Trust. However, because of administrative burden and expense, neither the seller nor the related trustee will amend any certificate of title to identify the Trust as the new secured party on the certificates of title relating to the Financed Vehicles. Unless otherwise specified in the related prospectus supplement, the servicer will hold certificates of title relating to the Financed Vehicles in its possession as custodian for the Trust pursuant to the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable. See "Description of the Transfer and Servicing Agreements--Sale and Assignment of Primary Assets". In most states, assignments such as those under the related Trust Agreement or Pooling and Servicing Agreement, as applicable, are effective conveyances of a security interest in the related financed vehicle without amendment of any lien noted on the vehicle's certificate of title, and the assignee succeeds by assignment to the assignor's rights as secured party. Although re-registration of the motor vehicle is not necessary in these states to convey a perfected security interest in the Financed Vehicles to a Trust, because the related Trust will not be listed as legal owner on the certificates of title to the Financed Vehicles, a Trust's security interest could be defeated through fraud or negligence. However, in the absence of fraud or forgery by the vehicle owner or the servicer or administrative error by state of local agencies, the notation of the seller's lien on a certificate of title will be sufficient to protect a Trust against the rights of subsequent purchasers of a Financed Vehicle or subsequent creditors who take a security interest in a Financed Vehicle. If there are any Financed Vehicles as to which the seller fails to obtain a first-priority perfected security interest, the Trust's security interest would be subordinate to, among others, subsequent purchasers of Financed Vehicles and holders of perfected security interests in Financed Vehicles. A failure, however, would constitute a breach of the seller's representations and warranties under the related Receivables Purchase Agreement and the seller will be required to repurchase the Receivable from the Trust unless the breach is cured in a timely manner. See "Description of the Transfer and Servicing Agreements--Sale and Assignment of Primary Assets" and "Risk Factors--Certain Legal Aspects--Lack of Security Interests in Financed Vehicles". Under the laws of most states in which a perfected security interest is governed by a certificate of title statute, a perfected security interest in a motor vehicle continues for four months after the vehicle is moved to a new state from the one in which it is initially registered and after until the owner re-registers the motor vehicle in the new state. A majority of these states require surrender of a certificate of title to re-register a vehicle. Accordingly, a secured party must surrender possession if it holds the certificate of title of the vehicle or, in the case of vehicles registered in states providing for the notation of a lien on the certificate of title but not possession by the secured party, the secured party would receive notice of surrender from the state of re-registration if the security interest is noted on the certificate of title. Thus, the secured party would have the opportunity to reperfect its security interest in the vehicle in the state of relocation. However, these procedural safeguards will not protect the secured party if, through fraud, forgery or administrative error, an obligor somehow procures a new certificate of title that does not list the secured party's lien. Additionally, in states that do not require a certificate of title for registration of a vehicle, re-registration could defeat perfection. In the ordinary course of servicing the Receivables, the servicer will take steps to effect re-perfection upon receipt of notice of re-registration or information from the obligor as to relocation. Similarly, when an obligor sells a Financed Vehicle and the purchaser of that Financed Vehicle attempts to re-register the vehicle, the seller must surrender possession of the certificate of title or will receive notice as a result of having its lien noted on the certificate of title and accordingly will have an opportunity to require satisfaction of the related Receivable before its lien is released. Under each Sale and Servicing Agreement and Pooling and Servicing Agreement, the servicer will be obligated to take appropriate steps, at its own expense, to maintain perfection of security interests in the related Financed Vehicles and is obligated to purchase the related Receivable if it fails to do so. In states which the perfection of a security interest is governed by the filing of a UCC-1 financing statement, or the obligor moves from a title state to a non-title state, the servicer will file a UCC-1 financing statement in the new state of the obligor as soon as possible after receiving notice of the obligor's change of residence. UCC-1 financing statements expire after five years. When the term of a loan exceeds five years, the filing must be continued in order to maintain the servicer's perfected security interest. The servicer takes steps to effect continuation. In the event that an obligor moves to a state other than the state in which the UCC-1 financing statement is filed or in some states to a different county in the state, under the laws of most states the perfection of the security interest in the boat would continue for four months after relocation, unless the perfection in the original jurisdiction would have expired earlier. A new financing statement must be filed in the state of relocation or, if the state is a title state, a notation on the certificate of title must be made in order to continue the security interest. The servicer generally takes steps to effect re-perfection upon notification of an address change. Generally, in both title states and in non-title states, the servicer will not re-perfect a state law security interest which has expired or where the obligor has moved if the Receivable has a small balance, a short remaining term and the obligor has a good payment record. Under the laws of most states, liens for repairs performed on a motor vehicle and liens for unpaid taxes take priority over even a perfected, first-priority security interest in the vehicle. The Code also grants priority to particular federal tax liens over the lien of a secured party. The laws of some states and federal law permit the confiscation of motor vehicles by governmental authorities under some circumstances if used in unlawful activities, which may result in the loss of a secured party's perfected security interest in a confiscated motor vehicle. In each Receivables Purchase Agreement, the seller will represent and warrant that, as of the date any Receivable is sold to the Trust, the security interest in the related Financed Vehicle is or will be prior to all other present liens, other than tax liens and other liens that arise by operation of law, upon and security interests in the Financed Vehicle. However, liens for repairs or taxes could arise, or the confiscation of a Financed Vehicle could occur, at any time during the term of a Receivable. No notice will be given to the related trustee, the related indenture trustee, if any, or related Securityholders in the event a lien arises or confiscation occurs. Any lien or confiscation arising or occurring after the closing date will not give rise to a repurchase obligation of the seller under the related Receivables Purchase Agreement. REPOSSESSION In the event of default by an obligor, the holder of the related retail installment sale contract has all the remedies of a secured party under the UCC, except where specifically limited by other state laws. The UCC remedies of a secured party include the right to repossession by self-help means, unless these means would constitute a breach of the peace. Self-help repossession is the method employed by the servicer in most cases and is accomplished simply by taking possession of the related motor vehicle. In cases where the obligor objects or raises a defense to repossession, or if otherwise required by applicable state law, a court order must be obtained from the appropriate state court, and the vehicle must then be recovered in accordance with that order. In some jurisdictions, the secured party is required to notify an obligor debtor of the default and the intent to repossess the collateral and to give the obligor a period of time within which to cure the default prior to repossession. Generally, the right to cure may only be exercised on a limited number of occasions during the term of the related contract. NOTICE OF SALE; REDEMPTION RIGHTS The UCC and other state laws require the secured party to provide the obligor with reasonable notice of the date, time and place of any public sale and/or the date after which any private sale of the collateral may be held. The obligor has the right to redeem the collateral prior to actual sale by paying the secured party the unpaid principal balance of the obligation, accrued interest on the unpaid principal balance of the obligation, plus reasonable expenses for repossessing, holding and preparing the collateral for disposition and arranging for its sale, plus, in some jurisdictions, reasonable attorneys' fees or, in some states, by payment of delinquent installments or the unpaid principal balance of the related obligation. DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS The proceeds of the resale of any Financed Vehicle generally will be applied first to the expenses of resale and repossession and then to the satisfaction of the related indebtedness. While some states impose prohibitions or limitations on deficiency judgments if the net proceeds from any resale do not cover the full amount of the indebtedness, a deficiency judgment can be sought in other states that do not prohibit or limit deficiency judgments. However, the deficiency judgment would be a personal judgment against the obligor for the shortfall, and a defaulting obligor can be expected to have very little capital or sources of income available following repossession; in many cases, therefore, it may not be useful to seek a deficiency judgment or, if one is obtained, it may be settled at a significant discount or be uncollectible. In addition to the notice requirement, the UCC requires that every aspect of the sale or other disposition, including the method, manner, time, place and terms, be "commercially reasonable". Generally, courts have held that when a sale is not "commercially reasonable", the secured party loses its right to a deficiency judgment. In addition, the UCC permits the debtor or other interested party to recover for any loss caused by noncompliance with the provisions of the UCC. Also, prior to a sale, the UCC permits the debtor or other interested person to restrain the secured party from disposing of the collateral if it is established that the secured party is not proceeding in accordance with the "default" provisions under the UCC. Occasionally, after the resale of a motor vehicle and payment of all related expenses and indebtedness, there is a surplus of funds. In that case, the UCC requires the creditor to remit the surplus to any holder of a subordinate lien with respect to the related vehicle or, if no subordinate lienholder exists, to the former owner of the vehicle. CONSUMER PROTECTION LAWS Numerous federal and state consumer protection laws and related regulations impose substantial requirements upon creditors and servicers involved in consumer finance. These laws include the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Relief Act, state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code, and state motor vehicle retail installment sales acts, retail installment sales acts and other similar laws. Also, the laws of some states impose finance charge ceilings and other restrictions on consumer transactions and require contract disclosures in addition to those required under other restrictions on consumer transactions and require contract disclosures in addition to those required under federal law. These requirements impose specific statutory liabilities upon creditors who fail to comply with their provisions. In some cases, this liability could affect the ability of an assignee, such as a Trust, to enforce consumer finance contracts such as Receivables. The so-called "Holder-in-Due-Course" rule of the Federal Trade Commission (the "FTC Rule"), the provisions of which are generally duplicated by the Uniform Consumer Credit Code, other statutes or the common law, has the effect of subjecting a seller in a consumer credit transaction, and some related creditors and their assignees, to all claims and defenses that the obligor in the transaction could assert against the seller of the goods. Liability under the FTC Rule is limited to the amounts paid by the obligor under the contract, and the holder of the contract may also be unable to collect any balance remaining due under the contract from the obligor. Most of the Receivables will be subject to the requirements of the FTC Rule. Accordingly, each Trust, as holder of the related Receivables, will be subject to any claims or defenses that the purchasers of the related Financed Vehicles may assert against the sellers of those Financed Vehicles. If an obligor were successful in asserting any claims or defenses, the claim or defense would constitute a breach of the seller's warranties under the related Receivables Purchase Agreement and would create an obligation of the seller to repurchase the Receivable unless the breach is cured in a timely manner. See "Description of the Transfer and Servicing Agreements--Sale and Assignment of Primary Assets". Courts have applied general equitable principles to secured parties pursuing repossession and litigation involving deficiency balances. These equitable principles may have the effect of relieving an obligor from some or all of the legal consequences of a default. In several cases, consumers have asserted that the self-help remedies of secured parties under the UCC and related laws violate the due process protections of the Fourteenth Amendment to the Constitution of the United States. Courts have generally either upheld the notice provisions of the UCC and related laws as reasonable or have found that the creditors' repossession and resale do not involve sufficient state action to afford constitutional protection to borrowers. Under each Receivables Purchase Agreement the seller will represent and warrant that each Receivable complies in all material respects with all applicable federal and state laws. Accordingly, if an obligor has a claim against a Trust for a violation of any law and that claim materially and adversely affects the interests of the Trust in a Receivable, the violation would constitute a breach of the seller's representation and warranty and would create an obligation of the seller to repurchase the Receivable unless the breach is cured. See "Description of the Transfer and Servicing Agreements--Sale and Assignment of Primary Assets". OTHER LIMITATIONS In addition to the laws limiting or prohibiting deficiency judgments, numerous other statutory provisions, including federal bankruptcy laws and related state laws, may interfere with or affect the ability of a creditor to realize upon collateral or enforce a deficiency judgment. For example, in a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a creditor from repossessing a motor vehicle and, as part of the rehabilitation plan, may reduce the amount of the secured indebtedness to the market value of the motor vehicle at the time of bankruptcy, as determined by the court, leaving the party providing financing as a general unsecured creditor for the remainder of the indebtedness. A bankruptcy court may also reduce the monthly payments due under the related contract or change the rate of interest and time of repayment of the indebtedness. MATERIAL FEDERAL INCOME TAX CONSEQUENCES The following is a general discussion of the anticipated material United States federal income tax consequences of the purchase, ownership and disposition of securities. The summary does not purport to deal with federal income tax consequences applicable to all categories of holders, some of which may be subject to special rules. For example, it does not discuss the tax treatment of beneficial owners of notes ("Note Owners") or certificates ("Certificate Owners") that are insurance companies, regulated investment companies or dealers in securities. Moreover, there are no cases or Internal Revenue Service ("IRS") rulings on similar transactions involving both debt and equity interests issued by a trust with terms similar to those of the notes and the certificates. As a result, the IRS might disagree with all or part of the discussion below. Prospective investors are urged to consult their own tax advisors in determining the federal, state, local, foreign and any other tax consequences to them of the purchase, ownership and disposition of the notes and the certificates. The following summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations promulgated under the Code and judicial or ruling authority, all of which are subject to change, which change may be retroactive. Each Trust will be provided with an opinion of tax counsel specified in the related prospectus supplement ("Federal Tax Counsel") regarding some related federal income tax matters discussed below. An opinion of Federal Tax Counsel, however, is not binding on the IRS or the courts. No ruling on any of the issues discussed below will be sought from the IRS. The opinion of Federal Tax Counsel specifically addresses only those issues specifically identified below as being covered by that opinion; however, the opinion also states that the additional discussion set forth below accurately sets forth the advice of Federal Tax Counsel with respect to material federal income tax issues. For purposes of the following summary, references to the Trust, the notes, the certificates and related terms, parties and documents shall be deemed to refer, unless otherwise specified in this prospectus, to each Trust and the notes, certificates and related terms, parties and documents applicable to the Trust. TRUSTS WHICH ARE NOT TREATED AS GRANTOR TRUSTS TAX CHARACTERIZATION OF THE TRUSTS. In the case of a Trust which is not intended to be treated as a grantor trust (an "owner trust"), Federal Tax Counsel will deliver its opinion that the Trust will not be an association, or publicly traded partnership, taxable as a corporation for federal income tax purposes. The opinion of Federal Tax Counsel will be based on the assumption that the terms of the Trust Agreement and related documents will be complied with, and on counsel's conclusions that the nature of the income of the Trust, or restrictions, if any, on transfers of the certificates, will exempt the Trust from the rule that some publicly traded partnerships are taxable as corporations. If a Trust were taxable as a corporation for federal income tax purposes, the Trust would be subject to corporate income tax on its taxable income. The Trust's taxable income would include all of its income on the related Primary Assets, which might be reduced by its interest expense on the notes. Any corporate income tax could materially reduce cash available to make payments on the notes and distributions on the certificates, and Certificate Owners, and possibly Note Owners, could be liable for any resulting corporate income tax that is unpaid by the Trust. TAX CONSEQUENCES TO NOTE OWNERS. TREATMENT OF THE NOTES AS INDEBTEDNESS. The Trust will agree, and the Note Owners will agree by their purchase of notes, to treat the notes as debt for federal tax purposes. Federal Tax Counsel will, subject to exceptions which, if applicable, will be specified in the related prospectus supplement, advise the owner trust that the notes will be classified as debt for federal income tax purposes, or classified in any other manner as shall be provided in the related prospectus supplement. If, contrary to the opinion of Federal Tax Counsel, the IRS successfully asserted that one or more of the notes did not represent debt for federal income tax purposes, the notes might be treated as equity interests in the Trust. If so treated, the Trust might be treated as a publicly traded partnership that would be taxable as a corporation unless it met particular qualifying income tests, and the resulting taxable corporation would not be able to reduce its taxable income by deductions for interest expense on notes recharacterized as equity. Treatment of the notes as equity interests in a partnership could have adverse tax consequences to some holders, even if the Trust were not treated as a publicly traded partnership taxable as a corporation. For example, income allocable to foreign holders might be subject to United States tax and United States tax return filing and withholding requirements, income allocable to tax-exempt holders might constitute "unrelated business taxable income" (if some, but not all, of the notes were recharacterized as equity in a partnership), individual holders might be subject to limitations on their ability to deduct their share of Trust expenses, and income from the Trust's assets would be taxable to Note Owners without regard to whether cash distributions are made to such Note Owners and without regard to the Note Owner's method of tax accounting. The discussion below assumes that the notes will be characterized as debt for federal income tax purposes. INTEREST INCOME ON THE NOTES-GENERAL. Expect as discussed below, interest on a note generally is includable in a Note Owner's income as ordinary interest income when actually or constructively received, if the Note Owner uses the cash method of accounting for federal income tax purposes, or when accrued, if the Note Owner uses an accrual method of accounting for federal income tax purposes. Notes of certain series may be issued with "original issue discount" within the meaning of Section 1273(a) of the Code. Holders of notes issued with original issue discount generally must include original issue discount in gross income for federal income tax purposes as it accrues, in advance of receipt of the cash attributable to such income, under a method that takes account of the compounding of interest. The Code requires that information with respect to the original issue discount accruing on any note be reported periodically to the IRS and to certain categories of Note Owners. Each Trust will report original issue discount, if any, to the Note Owners based on the Treasury regulations relating to original issue discount (the "OID Regulations"). The OID Regulations concerning contingent payment debt instruments do not apply to the prepayable debt instruments, such as the notes. The OID Regulations provide that, in the case of debt instruments such as the notes, (i) the amount and rate of accrual of original issue discount will be calculated based on a reasonable assumed prepayment rate (the "Prepayment Assumption"), and (ii) adjustments will be made in the amount and rate of accrual of such discount to reflect differences between the actual prepayment rate and the Prepayment Assumption. The method for determining the appropriate assumed prepayment rate will eventually be set forth in Treasury regulations, but those regulations have not yet been issued. The applicable legislative history indicates, however, that such regulations will provide that the assumed prepayment rate for securities such as the notes will be the rate used in pricing the initial offering of those securities. If the notes of a series are issued with original issue discount, the Prospectus Supplement for that series of notes will specify the Prepayment Assumption. However, no representation is made that the notes of that series will, in fact, prepay at a rate based on the Prepayment Assumption or at any other rate. In general, a note will be considered to be issued with original issue discount if its stated redemption price at maturity exceeds its issue price. Except as discussed below under "--Payment Lag Notes; Initial Period Considerations," and "--Qualified Stated Interest," and in the case of certain Variable Rate Notes (as defined below) and accrual notes, the stated redemption price at maturity of a note is its principal amount. The issue price of a note is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of the class of notes is sold. Notwithstanding the general definition of original issue discount, such discount will be considered to be zero for any note on which such discount is less than 0.25% of its stated redemption price at maturity multiplied by its weighted average life. The weighted average life of a note apparently is computed for purposes of this DE MINIMIS rule as the sum, for all distributions included in the stated redemption price at maturity of the note, of the amounts determined by multiplying (i) the number of complete years (rounding down for partial years) from the applicable closing date to the date on which each such distribution is expected to be made, determined under the Prepayment Assumption, by (ii) a fraction, the numerator of which is the amount of such distribution and the denominator of which is the note's stated redemption price at maturity. The OID Regulations provide that holders will include any DE MINIMIS original issue discount ratably as payments of stated principal are made on the notes. The Note Owner of a note issued with original issue discount must include in gross income the sum of the "daily portions" of such original issue discount for each day during its taxable year on which it held such note. In the case of an original Note Owner, the daily portions of original issue discount are determined first by calculating the portion of the original issue discount that accrued during each period (an "accrual period") that begins on the day following a Distribution Date (or in the case of the first such period, begins on the applicable closing date) and ends on the next succeeding Distribution Date. The original issue discount accruing during each accrual period is then allocated ratably to each day during such period to determine the daily portion of original issue discount for that day. The portion of the original issue discount that accrues in any accrual period will equal the excess, if any, of (i) the sum of (A) the present value, as of the end of the accrual period, of all of the distributions to be made on the note, if any, in future periods and (B) the distributions made on the note during the accrual period that are included in such note's stated redemption price at maturity, over (ii) the adjusted issue price of such note at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence will be calculated (i) assuming that the notes will be prepaid in future periods at a rate computed in accordance with the Prepayment Assumption and (ii) using a discount rate equal to the original yield to maturity of the notes. For these purposes, the original yield to maturity of the notes will be calculated based on their issue price and assuming that the notes will be prepaid in accordance with the Prepayment Assumption. The adjusted issue price of a note at the beginning of any accrual period will equal the issue price of such note, increased by the portion of the original issue discount that has accrued during prior accrual periods, and reduced by the amount of any distributions made on such note in prior accrual periods that were included in such note's stated redemption price at maturity. The daily portions of original issue discount may increase or decrease depending on the extent to which the actual rate of prepayments diverges from the Prepayment Assumption. If original issue discount accruing during any accrual period computed as described above is negative, a Note Owner may only be entitled to offset such amount against positive original issue discount accruing on such note in future accrual periods. Such a Note Owner may be entitled to deduct a loss to the extent that its remaining basis would exceed the maximum amount of future payments to which such Note Owner is entitled. However, Treasury regulations do not address this issue. A subsequent Note Owner that purchases a note issued with original issue discount at a cost that is less than its remaining stated redemption price at maturity will also generally be required to include in gross income, for each day on which it holds such note, the daily portions of original issue discount with respect to the note, calculated as described above. However, if (i) the excess of the remaining stated redemption price at maturity over such cost is less than (ii) the aggregate amount of such daily portions for all days after the date of purchase until final retirement of such note, then such daily portions will be reduced proportionately in determining the income of such Note Owner. QUALIFIED STATED INTEREST. Interest payable on a note which qualifies as "qualified stated interest" for purposes of the OID Regulations will not be includable in the stated redemption price at maturity of the note. Conversely, if the interest on a note does not constitute "qualified stated interest," such interest will be includable in the stated redemption price at maturity of the note and the note, consequently, will have original issue discount. Interest payments will not qualify as qualified stated interest unless the interest payments are "unconditionally payable." The OID Regulations state that interest is unconditionally payable if reasonable legal remedies exist to compel timely payment, or the debt instrument otherwise provides terms and conditions that make the likelihood of late payment (other than a late payment that occurs within a reasonable grace period) or nonpayment of interest a remote contingency, as defined in the OID Regulations. Any terms or conditions that do not reflect arm's length dealing or that the Note Owner does not intend to enforce are not considered. PREMIUM. A purchaser of a note that purchases such note at a cost greater than its remaining stated redemption price at maturity will be considered to have purchased such note at a premium, and may, under Section 171 of the Code, elect to amortize such premium under a constant yield method over the life of the note. The Prepayment Assumption is probably taken into account in determining the life of the note for this purpose. Except as provided in regulations, amortizable premium will be treated as an offset to interest income on the note. PAYMENT LAG NOTES; INITIAL PERIOD CONSIDERATIONS. Certain notes may provide for distributions of interest based on a period that is the same length as the interval between Distribution Dates but ends prior to each Distribution Date. Any interest that accrues prior to the applicable closing date may be treated under the OID Regulations either (i) as part of the issue price and the stated redemption price at maturity of the notes or (ii) as not included in the issue price or the stated redemption price. The OID Regulations provide a special application of the DE MINIMIS rule for debt instruments with long first accrual periods where the interest payable for the first period is at a rate which is effectively less than that which applies in all other periods. In such cases, for the sole purpose of determining whether original issue discount is DE MINIMIS, the OID Regulations provide that the stated redemption price is equal to the instrument's issue price plus the greater of the amount of foregone interest or the excess (if any) of the instrument's stated principal amount over its issue price. VARIABLE RATE NOTES. Under the OID Regulations, notes paying interest at a variable rate (each, a "Variable Rate Note") are subject to special rules. A Variable Rate Note will qualify as a "variable rate debt instrument" if (i) its issue price does not exceed the total noncontingent principal payments due under the Variable Rate Note by more than a specified DE MINIMIS amount; (ii) it provides for stated interest, paid or compounded at least annually, at a current value of (a) one or more qualified floating rates, (b) a single fixed rate and one or more qualified floating rates, (c) a single objective rate or (d) a single fixed rate and a single objective rate that is a qualified inverse floating rate; and (iii) it does not provide for any principal payments that are contingent, as defined in the OID Regulations, except as provided in (i), above. Because the OID Regulations relating to contingent payment debt instruments do not apply to prepayable debt instruments, such as the notes, principal payments on the notes should not be considered contingent for this purpose. A "qualified floating rate" is any variable rate where variations in the value of such rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which the Variable Rate Note is denominated. A multiple of a qualified floating rate will generally not itself constitute a qualified floating rate for purposes of the OID Regulations. However, a variable rate equal to (i) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35 or (ii) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate will constitute a qualified floating rate for purposes of the OID Regulations. In addition, under the OID Regulations, two or more qualified floating rates that can reasonably be expected to have approximately the same values throughout the term of the Variable Rate Note will be treated as a single qualified floating rate (a "Presumed Single Qualified Floating Rate"). Two or more qualified floating rates with values within 25 basis points of each other as determined on the Variable Rate Note's issue date will be conclusively presumed to be a Presumed Single Qualified Floating Rate. Notwithstanding the foregoing, a variable rate that would otherwise constitute a qualified floating rate, but which is subject to one or more restrictions such as a cap or floor, will not be a qualified floating rate for purposes of the OID Regulations unless the restriction is fixed throughout the term of the Variable Rate Note or the restriction is not reasonably expected as of the issue date to significantly affect the yield of the Variable Rate Note. An "objective rate" is a rate that is not itself a qualified floating rate but which is determined using a single fixed formula and which is based upon objective financial or economic information. The OID Regulations also provide that other variable rates may be treated as objective rates if so designated by the IRS in the future. Despite the foregoing, a variable rate of interest on a Variable Rate Note will not constitute an objective rate if it is reasonably expected that the average value of such rate during the first half of the Variable Rate Note's term will be either significantly less than or significantly greater than the average value of the rate during the final half of the Variable Rate Note's term. Further, an objective rate does not include a rate that is based on information that is within the control of the issuer (or a party related to the issuer) or that is unique to the circumstances of the issuer (or a party related to the issuer). An objective rate will qualify as a "qualified inverse floating rate" if such rate is equal to a fixed rate minus a qualified floating rate and variations in the rate can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate. The OID Regulations also provide that if a Variable Rate Note provides for stated interest at a fixed rate for an initial period of less than one year followed by a variable rate that is either a qualified floating rate or an objective rate and if the variable rate on the Variable Rate Note's issue date is intended to approximate the fixed rate, then the fixed rate and the variable rate together will constitute either a single qualified floating rate or objective rate, as the case may be (a "Presumed Single Variable Rate"). If the value of the variable rate and the initial fixed rate are within 25 basis points of each other as determined on the Variable Rate Note's issue date, the variable rate will be conclusively presumed to approximate the fixed rate. For Variable Rate Notes that qualify as "variable rate debt instruments" under the OID Regulations and provide for interest at either a single qualified floating rate, a single objective rate, a Presumed Single Qualified Floating Rate or a Presumed Single Variable Rate throughout the term (a "Single Variable Rate Note"), original issue discount is computed as described above in "--Interest Income on the Notes--Original Issue Discount" based on the following: (i) stated interest on the Single Variable Rate Note which is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually will constitute qualified stated interest; (ii) by assuming that the variable rate on the Single Variable Rate Note is a fixed rate equal to: (a) in the case of a Single Variable Rate Note with a qualified floating rate or a qualified inverse floating rate, the value, as of the issue date, of the qualified floating rate or the qualified inverse floating rate or (b) in the case of a Single Variable Rate Note with an objective rate (other than a qualified inverse floating rate), a fixed rate which reflects the reasonably expected yield for such Single Variable Rate Note; and (iii) the qualified stated interest allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than) the interest assumed to be paid under the assumed fixed rate described in (ii), above. In general, any Variable Rate Note other than a Single Variable Rate Note (a "Multiple Variable Rate Note") that qualifies as a "variable rate debt instrument" will be converted into an "equivalent" fixed rate debt instrument for purposes of determining the amount and accrual of original issue discount and qualified stated interest on the Multiple Variable Rate Note. The OID Regulations generally require that such a Multiple Variable Rate Note be converted into an "equivalent" fixed rate debt instrument by substituting any qualified floating rate or qualified inverse floating rate provided for under the terms of the Multiple Variable Rate Note with a fixed rate equal to the value of the qualified floating rate or qualified inverse floating rate, as the case may be, as of the Multiple Variable Rate Note's issue date. Any objective rate (other than a qualified inverse floating rate) provided for under the terms of the Multiple Variable Rate Note is converted into a fixed rate that reflects the yield that is reasonably expected for the Multiple Variable Rate Note. (A Multiple Variable Rate Note may not bear more than one objective rate.) In the case of a Multiple Variable Rate Note that qualifies as a "variable rate debt instrument" and provides for stated interest at a fixed rate in addition to either one or more qualified floating rates or a qualified inverse floating rate, the fixed rate is initially converted into a qualified floating rate (or a qualified inverse floating rate, if the Multiple Variable Rate Note provides for a qualified inverse floating rate). Under such circumstances, the qualified floating rate or qualified inverse floating rate that replaces the fixed rate must be such that the fair market value of the Multiple Variable Rate Note as of the Multiple Variable Rate Note's issue date is approximately the same as the fair market value of an otherwise identical debt instrument that provides for either the qualified floating rate or qualified inverse floating rate rather than the fixed rate. Subsequent to converting the fixed rate into either a qualified floating rate or a qualified inverse floating rate, the Multiple Variable Rate Note is then converted into an "equivalent" fixed rate debt instrument in the manner described above. Once the Multiple Variable Rate Note is converted into an "equivalent" fixed rate debt instrument pursuant to the foregoing rules, the amounts of original issue discount and qualified stated interest, if any, are determined for the "equivalent" fixed rate debt instrument by applying the original issue discount rules to the "equivalent" fixed rate debt instrument in the manner described above in "--Interest Income on the Notes--Original Issue Discount." A holder of the Multiple Variable Rate Note will account for such original issue discount and qualified stated interest as if the holder held the "equivalent" fixed rate debt instrument. In each accrual period, appropriate adjustments will be made to the amount of qualified stated interest or original issue discount assumed to have been accrued or paid with respect to the "equivalent" fixed rate debt instrument in the event that such amounts differ from the actual amount of interest accrued or paid on the Multiple Variable Rate Note during the accrual period. If a Variable Rate Note does not qualify as a "variable rate debt instrument" under the OID Regulations, then the Variable Rate Note would be treated as a contingent payment debt obligation. The manner in which a Variable Rate Note would be taxed if such note were treated as a contingent payment debt obligation is not governed by the OID Regulations relating to contingent payment debt obligations which do not apply to prepayable debt instruments, such as the notes, and Treasury regulations do not otherwise address this point. MARKET DISCOUNT. A Note Owner that acquires a note at a market discount (that is, a discount that exceeds any unaccrued original issue discount) will recognize gain upon receipt of a principal distribution, regardless of whether the distribution is scheduled or is a prepayment. In particular, the Note Owner will be required to allocate that principal distribution first to the portion of the market discount on such note that has accrued but has not previously been includable in income, and will recognize ordinary income to that extent. In general terms, unless Treasury regulations when issued provide otherwise, market discount on a note may be treated, at the election of the holder of the note, as accruing either (i) under a constant yield method, taking into account the Prepayment Assumption, or (ii) in proportion to accruals of original issue discount (or, if there is no original issue discount, in proportion to stated interest on the note). In addition, a Note Owner may be required to defer deductions for a portion of the Note Owner's interest expense on any debt incurred or continued to purchase or carry a note purchased with market discount. The deferred portion of any interest deduction would not exceed the portion of the market discount on the note that accrues during the taxable year in which such interest would otherwise be deductible and, in general, would be deductible when such market discount is included in income upon receipt of a principal distribution on, or upon the sale of, the note. The Code requires that information necessary to compute accruals of market discount be reported periodically to the IRS and to certain categories of Note Owners. Notwithstanding the above rules, market discount on a note will be considered to be zero if such discount is less than 0.25% of the remaining stated redemption price at maturity of such note multiplied by its weighted average remaining life. Weighted average remaining life presumably is calculated in a manner similar to weighted average life (described above under "--Interest Income on the Notes--Original Issue Discount"), taking into account distributions (including prepayments) prior to the date of acquisition of such note by the subsequent purchaser. If market discount on a note is treated as zero under this rule, the actual amount of such discount must be allocated to the remaining principal distributions on such note in proportion to the amounts of such principal distributions, and when each such distribution is made, gain equal to the discount, if any, allocated to the distribution will be recognized. ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD RULES. The OID Regulations provide that the holder of a debt instrument issued after April 4, 1994 may elect to include in gross income all interest that accrues on such debt instrument using the constant yield method. For purposes of this election, interest includes stated interest, original issue discount, and market discount, as adjusted to account for any premium. Note Owners should consult their own tax advisors regarding the availability or advisability of such an election. SALES OF NOTES. If a note is sold, the seller will recognize gain or loss equal to the difference between the amount realized on the sale and its adjusted basis in the note. A holder's adjusted basis in a note generally equals the cost of the note to the holder, increased by income reported by the holder with respect to the note and reduced (but not below zero) by distributions on the note (other than qualified stated interest) received by the holder and by amortized premium. While any such gain or loss generally will be capital gain or loss provided the Note is held as a capital asset, gain recognized on the sale of a note by a seller who purchased the note at a market discount would be taxable as ordinary income in an amount not exceeding the portion of such discount that accrued during the period the note was held by such seller, reduced by any market discount includable in income under the rules described above under "--Interest Income on the Notes--Market Discount." Further, the notes will be "evidences of indebtedness" within the meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from a sale of a note by a bank or other financial institution to which such section applies would be ordinary income or loss. SHORT-TERM NOTES. In the case of a Note with a maturity of one year or less from its issue date (a "Short-Term Note"), no interest is treated as qualified stated interest, and therefore all interest is included in original issue discount. Note Owners that report income for federal income tax purposes on an accrual method and some other Note Owners, including banks and certain dealers in securities, (collectively, "Short-Term Accruers") are required to include original issue discount in income on Short-Term Notes on a straight-line basis, unless an election is made to accrue the original issue discount according to a constant yield method based on daily compounding. Any other Note Owner of a Short Term Note is not required to accrue original issue discount for federal income tax purposes, unless it elects to do so. In the case of a Note Owner that is not required, and does not elect, to include original issue discount in income currently, any gain realized on the sale, exchange or retirement of a Short-Term Note is ordinary income to the extent of the original issue discount accrued on a straight-line basis, or, if elected, according to a constant yield method based on daily compounding, through the date of sale, exchange or retirement. In addition, Note Owners that are not required, and do not elect, to include original issue discount in income currently are required to defer deductions for any interest paid on indebtedness incurred or continued to purchase or carry a Short-Term Note in an amount not exceeding the deferred interest income with respect to the Short-Term Note, which includes both the accrued original issue discount and accrued interest that are payable but that have not been included in gross income, until the deferred interest income is realized. A Note Owner may elect to apply the foregoing rules, except for the rule characterizing gain on sale, exchange or retirement as ordinary, with respect to "acquisition discount" rather than original issue discount. Acquisition discount is the excess of the stated redemption price at maturity of the Short-Term Note over the Note Owner's basis in the Short-Term Note. This election applies to all obligations acquired by the taxpayer on or after the first day of the first taxable year to which the election applies, unless revoked with the consent of the IRS. A Note Owner's tax basis in a Short-Term Note is increased by the amount included in the Note Owner's income with respect to the Note. FOREIGN INVESTORS IN NOTES. Except as discussed below, a Note Owner that is not a "United States person" (as defined below) generally will not be subject to United States income or withholding tax in respect of a distribution on a note provided that (i) the holder complies to the extent necessary with certain certification requirements, which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is not a United States person (as defined below), (ii) the holder is not a "10-percent shareholder" within the meaning of Section 871(h)(3)(B) of the Code, which could be interpreted to include a person that directly or indirectly owns 10% or more of the certificates in the Trust, (iii) the holder is not a "controlled foreign corporation" (as defined in the Code) related to the Trust or related to a 10 percent holder of certificates in the Trust, and (iv) the holder is not engaged in a United States trade or business, or otherwise subject to federal income tax as a result of any direct or indirect connection to the United States other than through its ownership of a note. For these purposes, the term "United States person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership (or other entity properly treated as a corporation or partnership for federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate whose income is includable in gross income for United States federal income taxation regardless of its source, and (iv) a trust for which one or more United States fiduciaries have the authority to control all substantial decisions and for which a court of the United States can exercise primary supervision over the trust's administration. A "Foreign Person" is any person that is not a United States person. Each Note Owner should consult its tax advisors regarding the tax documentation and certifications that must be provided to secure the exemption from United States withholding taxes. Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a note by a Foreign Person generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Foreign Person and (ii) in the case of an individual Foreign Person, the Foreign Person is not present in the United States for 183 days or more in the taxable year. If the interest, gain or income on a note held by a Foreign Person is effectively connected with the conduct of a trade or business in the United States by the Foreign Person (although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected), the holder generally will be subject to United States federal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the Foreign Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its "effectively connected earnings and profits," within the meaning of the Code, for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty (as modified by the branch profits tax rules). BACKUP WITHHOLDING ON NOTES. Distributions made on the notes and proceeds from the sale of notes to or through certain brokers may be subject to a "backup" withholding tax of 31 percent of "reportable payments" (including interest accruals, original issue discount, and, under certain circumstances, distributions in reduction of principal amount) if the holder of the notes fails to comply with certain identification procedures, unless the Note Owner is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld from distributions on the notes would be refunded by the IRS or allowable as a credit against the Note Owner's federal income tax. TAX CONSEQUENCES TO CERTIFICATE OWNERS OF OWNER TRUST. TREATMENT OF THE TRUST AS A PARTNERSHIP. The Trust will agree, and the related Certificate Owners will agree by their purchase of certificates, if there is more than one Certificate Owner, to treat the Trust as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the Trust, the partners of the partnership being the Certificate Owners, including, to the extent relevant, the seller in its capacity as recipient of distributions from any reserve fund, and the notes being debt of the partnership, and if there is one Certificate Owner, to treat the Certificate Owner as the owner of the assets of the Trust and to treat the Trust as a disregarded entity. However, the proper characterization of the arrangement involving the Trust, the certificates, the notes, the seller, the company and the servicer is not certain because there is no authority on transactions closely comparable to that contemplated in this prospectus. A variety of alternative characterizations are possible. For example, because the certificates have certain features characteristic of debt, the certificates might be considered debt of the Trust. Generally, provided such certificates are issued at or close to face value, any such characterization would not result in materially adverse tax consequences to holders of Certificates as compared to the consequences from treatment of the certificates as equity in a partnership, described below. The following discussion assumes that the certificates represent equity interests in a partnership. The following discussion also assumes that all payments on the certificates are denominated in U.S. dollars, none of the Certificates have interest rates which would qualify as contignent under the Treasury regulations relating to original issue discount, and that a series of securities includes a single class of certificates. If these conditions are not satisfied with respect to any given series of certificates, additional tax considerations with respect to such certificates will be disclosed in the applicable Prospectus Supplement. PARTNERSHIP TAXATION. As a partnership, the Trust will not be subject to federal income tax. Rather, each Certificate Owner will be required to take into account separately the Certificate Owner's allocable share of income, gains, losses, deductions and credits of the Trust, whether or not there is a corresponding cash distribution. Thus, cash basis holders will in effect be required to report income from the certificates on the accrual basis and Certificate Owners may become liable for taxes on Trust income even if they have not received cash from the Trust to pay the taxes. The Trust's income will consist primarily of interest and finance charges earned on the related Primary Assets, including appropriate adjustments for market discount, original issue discount and bond premium, and any gain upon collection or disposition of the Primary Assets. The Trust's deductions will consist primarily of interest accruing with respect to the notes, servicing and other fees, and losses or deductions upon collection or disposition of Primary Assets. The federal income tax treatment of any Collateral Certificates held by the Trust will depend on the terms of the Collateral Certificates and their characterization (for example, as indebtedness) for federal income tax purposes. The tax items of a partnership are allocable to the partners in accordance with the Code, Treasury regulations and the partnership agreement (i.e., the Trust Agreement and related documents). The Trust Agreement will provide, in general, that the Certificate Owners will be allocated taxable income of the Trust for each month equal to the sum of: o the interest or other income that accrues on the certificates in accordance with their terms for the relevant month including, as applicable, interest accruing at the related certificate pass-through rate for that month and interest on amounts previously due on the certificates but not yet distributed; o any Trust income attributable to discount on the related Primary Assets that corresponds to any excess of the principal amount of the certificates over their initial issue price; o any prepayment premium payable to the Certificate Owners for the applicable month; and o any other amounts of income payable to the Certificate Owners for the applicable month. The allocation will be reduced by any amortization by the Trust of premium on Primary Assets that corresponds to any excess of the issue price of certificates over their principal amount. Losses will generally be allocated in the manner in which they are borne. Based on the economic arrangement of the parties, the foregoing approach for allocating Trust income should be permissible under applicable Treasury regulations, although no assurance can be given that the IRS would not require a greater amount of income to be allocated to Certificate Owners. Moreover, even under the foregoing method of allocation, Certificate Owners may be allocated income equal to the entire certificate pass-through rate plus the other items described above, even though the Trust might not have sufficient cash to make current cash distributions of the amount. In addition, because tax allocations and tax reporting will be done on a uniform basis for all Certificate Owners, but Certificate Owners may be purchasing certificates at different times and at different prices, Certificate Owners may be required to report on their tax returns taxable income that is greater or less than the amount reported to them by the Trust. Assuming notes are also issued, all or substantially all of the taxable income allocated to a Certificate Owner that is a pension, profit sharing or employee benefit plan or other tax-exempt entity, including an individual retirement account, will constitute "unrelated business taxable income" generally taxable to the holder under the Code. An individual taxpayer's share of expenses of the Trust, including fees to the servicer, but not interest expense, would be miscellaneous itemized deductions and thus deductible only to the extent such expenses plus all other miscellaneous itemized deductions exceeds two percent of the individual's adjusted gross income. An individual taxpayer will be allowed no deduction for his share of expenses of the Trust, other than interest, in determining his liability for alternative minimum tax. In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for the taxable year for an individual whose adjusted gross income exceeds a prescribed threshold amount will be reduced by the lesser of (1) 3% of the excess of adjusted gross income over the specified threshold amount or (2) 80% of the amount of itemized deductions otherwise allowable for the applicable taxable year. Accordingly, deductions might be disallowed to the individual in whole or in part and might result in the Certificate Owner being taxed on an amount of income that exceeds the amount of cash actually distributed to the holder over the life of the Trust. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership;" 70% of that partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. The Trust intends to make all tax calculations relating to income and allocations to Certificate Owners on an aggregate basis to the extent relevant. If the IRS were to require that the calculations be made separately for each Primary Asset, the calculations may result in some timing and character differences under some circumstances. DISCOUNT AND PREMIUM. The purchase price paid by the Trust for the related Primary Assets may be greater or less than the remaining principal balance of the Primary Assets at the time of purchase. If so, the Primary Assets will have been acquired at a premium or market discount, as the case may be. See "Tax Consequences to Note Owners--Premium" and "--Market Discount". As indicated above, the Trust will make this calculation on an aggregate basis, but it is possible that the IRS might require that it be recomputed on a Primary Asset-by-Primary Asset basis. Further, to the extent a Primary Asset is a Treasury Strip, Private Label Custody Strip, REFCO Strip or other instrument evidencing ownership of specific interest and/or principal of a particular bond, it will be subject to the rules relating to original issue discount (in lieu of the rules relating to market discount). See "Tax Consequences to Note Owners--Original Issue Discount" above. If the Trust acquires the Primary Assets at a market discount or premium, the Trust will elect to include any market discount in income currently as it accrues over the life of the Primary Assets or to offset any premium against interest income on the Primary Assets. As indicated above, a portion of the market discount income or premium deduction may be allocated to Certificate Owners. SECTION 708 TERMINATION. Under Section 708 of the Code, the Trust will be deemed to terminate for federal income tax purposes if 50% or more of the capital and profits interests in the Trust are sold or exchanged within a 12-month period. If a termination occurs under Section 708 of the Code, the Trust will be considered to contribute its assets to a new Trust, which would be treated as a new partnership, in exchange for certificates in the new Trust. The original Trust will then be deemed to distribute the certificates in the new Trust to each of the owners of certificates in the original Trust in liquidation of the original Trust. The Trust will not comply with particular technical requirements that might apply when a constructive termination occurs. As a result, the Trust may be subject to some tax penalties and may incur additional expenses if it is required to comply with those requirements. Furthermore, the Trust might not be able to comply with these requirements due to lack of data. DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be recognized on a sale of certificates in an amount equal to the difference between the amount realized and the seller's tax basis in the certificates sold. Any gain or loss would be long-term capital gain or loss if the Certificate Owner's holding period exceeded one year. A Certificate Owner's tax basis in a Certificate will generally equal its cost, increased by its share of Trust income allocable to the Certificate Owner and decreased by any distributions received or losses allocated with respect to the certificate. In addition, both the tax basis in the certificates and the amount realized on a sale of a certificate would include the Certificate Owner's share, determined under Treasury Regulations, of the notes and other liabilities of the Trust. A Certificate Owner acquiring certificates at different prices will generally be required to maintain a single aggregate adjusted tax basis in the certificates and, upon a sale or other disposition of some of the certificates, allocate a portion of the aggregate tax basis to the certificates sold, rather than maintaining a separate tax basis in each certificate for purposes of computing gain or loss on a sale of that certificate. If a Certificate Owner is required to recognize an aggregate amount of income (not including income attributable to disallowed itemized deductions described above) over the life of the certificates that exceeds the aggregate cash distributions with respect to the certificates, the excess will generally give rise to a capital loss upon the retirement of the certificates. ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Trust's taxable income and losses will be determined monthly and the tax items for a particular calendar month will be apportioned among the Certificate Owners in proportion to the principal amount of certificates owned by them as of the close of the last day of the applicable month. As a result, a Certificate Owner purchasing certificates may be allocated tax items, which will affect the purchaser's tax liability and tax basis, attributable to periods before the actual transaction. The use of a monthly convention may not be permitted by existing Treasury regulations. If a monthly convention is not allowed, or only applies to transfers of less than all of the partner's interest, taxable income or losses of the Trust might be reallocated among the Certificate Owners. The Trust's method of allocation between transferors and transferees may be revised to conform to a method permitted by future laws, regulations or other IRS guidance. DISTRIBUTIONS. In the case of any distribution to a Certificate Owner, no gain will be recognized to that Certificate Owner to the extent that the amount of any money distributed for that Certificate exceeds the adjusted basis of that Certificate Owner's interest in the Certificate. To the extent that the amount of money distributed exceeds that Certificate Owner's adjusted basis, gain will be currently recognized. In the case of any distribution to a Certificate Owner, no loss will be recognized except upon a distribution in liquidation of a Certificate Owner's interest. Any gain or loss recognized by a Certificate Owner generally will be capital gain or loss. SECTION 754 ELECTION. In the event that a Certificate Owner sells its certificates at a profit (or loss), the purchasing Certificate Owner will have a higher (or lower) basis in the certificates than the selling Certificate Owner had. The tax basis of the Trust's assets will not be adjusted to reflect that higher (or lower) basis unless the Trust were to file an election under Section 754 of the Code. In order to avoid the administrative complexities that would be involved in keeping accurate accounting records, as well as potentially onerous information reporting requirements, the Trust current does not intend to make an election under Section 754 of the Code. As a result, Certificate Owners might be allocated a greater or lesser amount of Trust income than would be appropriate based on their own purchase price for certificates. ADMINISTRATIVE MATTERS. The trustee is required to keep or cause to be kept complete and accurate books of the Trust. The trustee will file a partnership information return (IRS Form 1065) with the IRS for each taxable year of the Trust and will report each Certificate Owner's allocable share of items of Trust income and expense to Certificate Owners and the IRS on Schedule K-1. The Trust will provide the Schedule K-1 information to nominees that fail to provide the Trust with the information statement described below and the nominees will be required to forward this information to the beneficial owners of the certificates. Generally, holders must timely file tax returns that are consistent with the information return filed by the Trust or be subject to penalties unless the holder notifies the IRS of all the inconsistencies. Under Section 6031 of the Code, any person that holds certificates as a nominee at any time during a calendar year is required to furnish the Trust with a statement containing specific information on the nominee, the beneficial owners and the certificates so held. The information includes (1) the name, address and taxpayer identification number of the nominee and (2) as to each beneficial owner o the name, address and identification number of such person, o whether such person is a United States person, a tax-exempt entity or a foreign government, an international organization, or any wholly owned agency or instrumentality of either of the foregoing, and o particular information on certificates that were held, bought or sold on behalf of the person throughout the year. In addition, brokers and financial institutions that hold certificates through a nominee are required to furnish directly to the Trust information as to themselves and their ownership of certificates. A clearing agency registered under Section 17A of the Exchange Act is not required to furnish any information statement to the Trust. The information referred to above for any calendar year must be furnished to the Trust on or before the following January 31. Nominees, brokers and financial institutions that fail to provide the Trust with the information described above may be subject to penalties. The company ordinarily will be designated as the tax matters partner for each Trust in the related Trust Agreement and, as the tax matters partner, will be responsible for representing the Certificate Owners in some specific disputes with the IRS. The Code provides for administrative examination of a partnership as if the partnership were a separate and distinct taxpayer. Generally, the statute of limitations for partnership items does not expire before the later of three years after the date on which the partnership information return is filed or the last day for filing the return for the applicable year, determined without regard to extensions. Any adverse determination following an audit of the return of the Trust by the appropriate taxing authorities could result in an adjustment of the returns of the Certificate Owners, and, under some circumstances, a Certificate Owner may be precluded from separately litigating a proposed adjustment to the items of the Trust. An adjustment could also result in an audit of a Certificate Owner's returns and adjustments of items not related to the income and losses of the Trust. A special audit system exists for qualifying large partnerships that have elected to apply a simplified flow-through reporting system under Sections 771 through 777 of the Code. Unless otherwise specified in the applicable Prospectus Supplement, a Trust will not elect to apply the simplified flow-through reporting system. TAXATION OF CERTAIN FOREIGN CERTIFICATE OWNERS. As used below, the term "Non-United States Owner" means a Certificate Owner that is not a United States person, as defined under "Tax Consequences to Note Owners--Foreign Investors in Note" above. It is not clear whether the Trust would be considered to be engaged in a trade or business in the United States for purposes of federal withholding taxes with respect to Non-United States Owners because there is no clear authority dealing with that issue under facts substantially similar to those described in this Prospectus. Although it is not expected that the Trust would be engaged in a trade or business in the United States for these purposes, the Trust will withhold as if it were so engaged in order to protect the Trust from possible adverse consequences of a failure to withhold. The Trust expects to withhold on the portion of its taxable income that is allocable to Non-United States Owners pursuant to Section 1446 of the Code, as if the income were effectively connected to a U.S. trade or business, at a rate of 35% for Non-United States Owners that are taxable as corporations and 39.6% for all other Non-United States Owners. Subsequent adoption of Treasury regulations or the issuance of other administrative pronouncements may require the Trust to change its withholding procedures. Each Non-United States Owner might be required to file a U.S. individual or corporate income tax return on its share of the Trust's income including, in the case of a corporation, a return in respect of the branch profits tax. Assuming the Trust is not engaged in a U.S. trade or business, a Non-United States Owner would be entitled to a refund with respect to all or a portion of taxes withheld by the Trust if, in particular, the Owner's allocable share of interest from the Trust constituted "portfolio interest" under the Code. The interest, however, may not constitute "portfolio interest" if, among other reasons, the underlying obligation is not in registered form or if the interest is determined without regard to the income of the Trust, in the later case, the interest being properly characterized as a guaranteed payment under Section 707(c) of the Code. If this were the case, Non-United States Owners would be subject to a United States federal income and withholding tax at a rate of 30 percent on the Trust's gross income, without any deductions or other allowances for costs and expenses incurred in producing the income, unless reduced or eliminated pursuant to an applicable treaty. In this case, a Non-United States Owner would only be entitled to a refund for that portion of the taxes, if any, in excess of the taxes that should have been withheld with respect to the interest. BACKUP WITHHOLDING. Distributions made on the certificates and proceeds from the sale of the certificates will be subject to a "backup" withholding tax of 31% if, in general, the Certificate Owner fails to comply with particular identification procedures, unless the holder is an exempt recipient under applicable provisions of the Code and, if necessary, demonstate such status. Any amounts so withheld would be refunded by the IRS or allowable as a credit against the Certificate Owner's federal income tax. GRANTOR TRUSTS CHARACTERIZATION. In the case of a grantor trust, Federal Tax Counsel will deliver its opinion that the Trust will not be classified as an association taxable as a corporation and that the Trust will be classified as a grantor trust under subpart E, Part I of subchapter J of the Code. In this case, beneficial owners of certificates (referred to in this Prospectus as "grantor trust certificateholders") will be treated for federal income tax purposes as owners of a portion of the Trust's assets as described below. The certificates issued by a Trust that is treated as a grantor trust are referred to in this Prospectus as "grantor trust certificates". TAXATION OF GRANTOR TRUST CERTIFICATEHOLDERS. Subject to the discussion below under "Stripped Certificates" and "Subordinated Certificates," each grantor trust certificateholder will be treated as the owner of a pro rata undivided interest in the Primary Assets and other assets of the Trust. Accordingly, and subject to the discussion below of the recharacterization of the Servicing Fee, each grantor trust certificateholder must include in income its pro rata share of the interest and other income from the Primary Assets, including any interest, original issue discount, market discount, prepayment fees, assumption fees, and late payment charges with respect to the assets, and, subject to limitations discussed below, may deduct its pro rata share of the fees and other deductible expenses paid by the Trust, at the same time and to the same extent as these items would be included or deducted by the grantor trust certificateholder if the grantor trust certificateholder held directly a pro rata interest in the assets of the Trust and received and paid directly the amounts received and paid by the Trust. Any amounts received by a grantor trust certificateholder in lieu of amounts due with respect to any Primary Asset because of a default or delinquency in payment will be treated for federal income tax purposes as having the same character as the payments they replace. Each grantor trust certificateholder will be entitled to deduct its pro rata share of servicing fees, prepayment fees, assumption fees, any loss recognized upon an assumption and late payment charges retained by the servicer, provided that these amounts are reasonable compensation for services rendered to the Trust. Grantor trust certificateholders that are individuals, estates or trusts will be entitled to deduct their share of expenses only to the extent these expenses plus all other miscellaneous itemized deductions exceed two percent of the grantor trust certificateholder's adjusted gross income, and will be allowed no deduction for these expenses in determining their liabilities for alternative minimum tax. In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for the taxable year for an individual whose adjusted gross income exceeds a prescribed threshold amount will be reduced by the lesser of (1) 3% of the excess of adjusted gross income over the specified threshold amount or (2) 80% of the amount of itemized deductions otherwise allowable for the applicable taxable year. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership," 70% of the partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. The servicing compensation to be received by the servicer may be questioned by the IRS as exceeding a reasonable fee for the services being performed in exchange for the servicing compensation, and a portion of the servicing compensation could be recharacterized as an ownership interest retained by the servicer or other party in a portion of the interest payments to be made with respect to the Trust's assets. In this event, a certificate might be treated as a Stripped Certificate subject to the stripped bond rules of Section 1286 of the Code and the original issue discount provisions rather than to the market discount and premium rules. See the discussion below under "Stripped Certificates". Except as discussed below under "--Stripped Certificates" or "--Subordinated certificates," this discussion assumes that the servicing fees paid to the servicer do not exceed reasonable servicing compensation. A purchaser of a grantor trust certificate will be treated as purchasing an interest in each Primary Asset in the Trust at a price determined by allocating the purchase price paid for the certificate among all Primary Assets in proportion to their fair market values at the time of the purchase of the certificate. To the extent that the portion of the purchase price of a grantor trust certificate allocated to a Primary Asset is less than or greater than the portion of the stated redemption price at maturity of the Primary Asset, the interest in the Primary Asset will have been acquired at a discount or premium. See "--Market Discount" and "--Premium," below. The treatment of any discount on a Primary Asset will depend on whether the discount represents original issue discount or market discount. Except as indicated otherwise in the applicable Prospectus Supplement, it is not expected that any Primary Asset (other than Primary Asset that is a Treasury Strip, Private Label Interest and/or principal of a particular bond) will have original issue discount (except as discussed below under "Stripped Certificates" or "Subordinated Certificates"). For the rules governing original issue discount, see "Trusts Which Are Not Treated as Grantor Trusts--Tax Consequences to Note Owners--Original Issue Discount" above. However, in the case of Primary Assets that constitute short-term Government Securities the rules set out above dealing with short-term obligations (see "Trusts Which Are Not Treated as Grantor Trusts--Tax Consequences to Note Owners--Short-Term Notes" above) are applied with reference to acquisition discount rather than original issue discount, if the obligations constitute "short-term Government obligations" within the meaning of Section 1271(a)(3)(B) of the Code. Further, if 20 percent or more of the grantor trust certificateholders are Short-Term Accruers, all holders of grantor trust certificates may be required to accrue acquisition discount or original issue discount, as the case may be, with respect to short-term obligations held by the Trust in the same manner as a Short-Term Accruer would accrue such discount. See "Trusts Which Are Not Treated as Grantor Trusts--Tax Consequences to Note Owners--Short-Term Notes" above. The information provided to grantor trust certificateholders will not include information necessary to compute the amount of discount or premium, if any, at which an interest in each Primary Asset is acquired. MARKET DISCOUNT. A grantor trust certificateholder that acquires an undivided interest in Primary Assets may be subject to the market discount rules of Sections 1276 through 1278 to the extent an undivided interest in a Primary Asset is considered to have been purchased at a "market discount". For a discussion of the market discount rules under the Code, see "Trusts Which Are Not Treated as Grantor Trusts--Consequences to Note Owners--Market Discount" above. As discussed above, to the extent a Primary Asset is a Treasury Strip, Private Label Custody Strip, REFCO Strip or other instrument evidencing ownership of specific interest and/or principal of a particular bond, it will be subject to the rules relating to original issue discount (in lieu of the rules relating to the market discount). See "Tax Consequences to Note Owners--Original Issue Discount" above. PREMIUM. To the extent a grantor trust certificateholder is considered to have purchased an undivided interest in a Primary Asset for an amount that is greater than the stated redemption price at maturity of the interest, the grantor trust certificateholder will be considered to have purchased the interest in the Primary Asset with "amortizable bond premium" equal in amount to the excess. For a discussion of the rules applicable to amortizable bond premium, see "Trusts Which Are Not Treated as Grantor Trusts--Tax Consequences to Note Owners--Premium" above. STRIPPED CERTIFICATES. Some classes of certificates may be subject to the stripped bond rules of Section 1286 of the Code and for purposes of this discussion will be referred to as "Stripped Certificates." In general, a Stripped Certificate will be subject to the stripped bond rules where there has been a separation of ownership of the right to receive some or all of the principal payments on a Primary Asset from ownership of the right to receive some or all of the related interest payments. In general, where a separation has occurred, under the stripped bond rules of Section 1286 of the Code the holder of a right to receive a principal or interest payment on the bond is required to accrue into income, on a constant yield basis under rules governing original issue discount (see "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners--Original Issue Discount"), the difference between the holder's initial purchase price for the right to receive and the principal or interest payment to be received with respect to that right. Certificates will constitute Stripped Certificates and will be subject to these rules under various circumstances, including the following: o if any servicing compensation is deemed to exceed a reasonable amount (see "Taxation of Grantor Trust Certificateholders," above); o if the company or any other party retains a retained yield with respect to the Primary Assets held by the Trust; o if two or more classes of certificates are issued representing the right to non-pro rata percentages of the interest or principal payments on the Trust's assets; or o if certificates are issued which represent the right to interest-only payments or principal-only payments. The tax treatment of the Stripped Certificates with respect to the application of the original issue discount provisions of the Code is currently unclear. However, the trustee intends to treat each Stripped Certificate as a single debt instrument issued on the day it is purchased for purposes of calculating any original issue discount. Original issue discount with respect to a Stripped Certificate must be included in ordinary gross income for federal income tax purposes as it accrues in accordance with the constant yield method that takes into account the compounding of interest and this accrual of income may be in advance of the receipt of any cash attributable to that income. See "Trusts Which Are Not Treated as Grantor Trusts--Tax Consequences to Note Owners--Original Issue Discount" above. For purposes of applying the original issue discount provisions of the Code, the issue price of a Stripped Certificate will be the purchase price paid by each holder of the Stripped Certificate and the stated redemption price at maturity may include the aggregate amount of all payments to be made with respect to the Stripped Certificate whether or not denominated as interest. The amount of original issue discount with respect to a Stripped Certificate may be treated as zero under the original issue discount de minimis rules described above. SUBORDINATED CERTIFICATES. In the event the Trust issues two classes of grantor trust certificates that are identical except that one class is a subordinate class, with a relatively high Certificate Pass Through Rate, and the other is a senior class, with a relatively low Certificate Pass Through Rate (referred to in this Prospectus as the "Subordinate Certificates" and "Senior Certificates", respectively), the grantor trust certificateholders in the aggregate will be deemed to have acquired the following assets: (1) the principal portion of each Primary Asset plus a portion of the interest due on each Primary Asset (the "Trust Stripped Bond"), and (2) a portion of the interest due on each Primary Asset equal to the difference between the certificate pass through rate on the Subordinate Certificates and the certificate pass through rate on the Senior Certificates, if any, which difference is then multiplied by the Subordinate Class Percentage (the "Trust Stripped Coupon"). The "Subordinate Class Percentage" equals the initial aggregate principal amount of the Subordinate Certificates divided by the sum of the initial aggregate principal amount of the Subordinate Certificates and the Senior Certificates. The "Senior Class Percentage" equals the initial aggregate principal amount of the Senior Certificates divided by the sum of the initial aggregate principal amount of the Subordinate Certificates and the Senior Certificates. The Senior Certificateholders in the aggregate will own the Senior Class Percentage of the Trust Stripped Bond and accordingly each Senior Certificateholder will be treated as owning its pro rata share of such asset. The Senior Certificateholders will not own any portion of the Trust Stripped Coupon. The Subordinate Certificateholders in the aggregate own both the Subordinate Class Percentage of the Trust Stripped Bond plus 100% of the Trust Stripped Coupon, if any, and accordingly each Subordinate Certificateholder will be treated as owning its pro rata share in both assets. The Trust Stripped Bond will be treated as a "stripped bond" and the Trust Stripped Coupon will be treated as "stripped coupons" within the meaning of Section 1286 of the Code. Although not entirely clear, the interest income on the Subordinate Certificates and the portion of the Servicing Fee allocable to such certificates that does not constitute excess servicing will be treated by the Trust as qualified state interest, assuming the interest with respect to the Primary Assets would otherwise qualify as qualified stated interest. Accordingly, except to the extent modified below, the income of the Subordinate Certificates will be reported in the same manner as described generally above for holders of Senior Certificates. If the Subordinate Certificateholders receive distribution of less than their share of the Trust's receipts of principal or interest (the "Shortfall Amount") because of the subordination of the Subordinate Certificates, holders of Subordinate Certificates would probably be treated for federal income tax purposes as if they had o received as distributions their full share of receipts, o paid over to the Senior Certificateholders an amount equal to the Shortfall Amount and o retained the right to reimbursement of the relevant amounts to the extent these amounts are otherwise available as a result of collections on the Primary Assets or amounts available from a reserve account or other form of credit enhancement, if any. Under this analysis, o Subordinate Certificateholders would be required to accrue as current income any interest income, original issue discount, or (to the extent paid on assets of the Trust) accrued market discount of the Trust that was a component of the Shortfall Amount, even though that amount was in fact paid to the Senior Certificateholders, o a loss would only be allowed to the Subordinate Certificateholders when their right to receive reimbursement of the Shortfall Amount became worthless (i.e., when it becomes clear that amount will not be available from any source to reimburse the loss) and o reimbursement of the Shortfall Amount prior to a claim of worthlessness would not be taxable income to Subordinate Certificateholders because the amount was previously included in income. Those results should not significantly affect the inclusion of income for Subordinate Certificateholders on the accrual method of accounting, but could accelerate inclusion of income to Subordinate Certificateholders on the cash method of accounting by, in effect, placing them on the accrual method. Moreover, the character and timing of loss deductions are unclear. Subordinate Certificateholders are strongly urged to consult their own tax advisors regarding the appropriate timing, amount and character of any losses sustained with respect to the Subordinate Certificates including any loss resulting from the failure to recover previously accrued interest or discount income. Election to Treat All Interest as Original Issue Discount. The Treasury Regulations relating to original issue discount permit a grantor trust certificateholder to elect to accrue all interest, discount, including de minimis market or original issue discount, reduced by any premium, in income as interest, based on a constant yield method. If an election were to be made with respect to an interest in a Primary Asset with market discount, the Certificate Owner would be deemed to have made an election to include in income currently market discount with respect to all other debt instruments having market discount that the grantor trust certificateholder acquires during the year of the election or afterward. See "--Market Discount" above. Similarly, a grantor trust certificateholder that makes this election for an interest in a Primary Asset that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that the grantor trust certificateholder owns at the beginning of the first taxable year to which the election applies or acquires afterward. See "--Premium" above. The election to accrue interest, discount and premium on a constant yield method with respect to a grantor trust certificate is irrevocable. PREPAYMENTS. The Taxpayer Relief Act of 1997 (the "1997 Act") contains a provision requiring original issue discount on any pool of debt instruments the yield on which may be affected by reason of prepayments be calculated taking into account the Prepayment Assumption and requiring the discount to be taken into income on the basis of a constant yield to assumed maturity taking account of actual prepayments. The legislative history to the 1986 Act states that similar rules apply with respect to market discount and amortizable bond premium on debt instruments. SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. Sale or exchange of a grantor trust Certificate prior to its maturity will result in gain or loss equal to the difference, if any, between the amount realized, exclusive of amounts attributable to accrued and unpaid interest, which will be treated as ordinary income, allocable to the Primary Asset and the owner's adjusted basis in the grantor trust certificate. The adjusted basis generally will equal the seller's cost for the grantor trust certificate, increased by the original issue discount and any market discount included in the seller's gross income with respect to the grantor trust certificate, and reduced, but not below zero, by any premium amortized by the seller and by principal payments on the grantor trust certificate previously received by the seller. The gain or loss will, except as discussed below, be capital gain or loss to an owner for which the Primary Assets represented by a grantor trust certificate are "capital assets" within the meaning of Section 1221. A capital gain or loss will be long-term or short-term depending on whether or not the grantor trust certificate has been owned for the long-term capital gain holding period, currently more than one year. Notwithstanding the foregoing, any gain realized on the sale or exchange of a grantor trust certificate will be ordinary income to the extent of the seller's interest in accrued market discount on Primary Assets not previously taken into income. See "--Market Discount," above. Further, "evidences of indebtedness" within the meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a grantor trust certificate by a bank or thrift institution to which such section applied will be treated as ordinary gain or loss. FOREIGN INVESTORS IN GRANTOR TRUST CERTIFICATES. A holder of grantor trust certificate who is not a "United States person" (as defined above at "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners--Foreign Investors in Notes") and is not subject to federal income tax as a result of any direct or indirect connection to the United States other than its ownership of a grantor trust certificate generally will not be subject to United States income or withholding tax in respect of payments of interest or original issue discount on its grantor trust certificate to the extent attributable to debt obligations held by the Trust that were originated after July 18, 1984, provided that the grantor trust certificateholder complies to the extent necessary with certain certification requirements which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is not a United States person. Interest or original issue discount on a grantor trust certificate attributable to debt obligations held by the Trust that were originated prior to July 19, 1984 will be subject to a 30% withholding tax (unless such tax is reduced or eliminated by an applicable tax treaty). All holders of grantor trust certificates should consult their tax advisors regarding the tax documentation and certifications that must be provided to secure any applicable exemptions from United States withholding taxes. Any capital gain realized on the sale or other taxable disposition of a grantor trust certificate by a Foreign Person (as defined above at "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners--Foreign Investors in Notes") generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Foreign Person and (ii) in the case of an individual Foreign Person, the Foreign Person is not present in the United States for 183 days or more in the taxable year. If the interest, gain or income with respect to a grantor trust certificate held by a Foreign Person is effectively connected with the conduct of a trade or business in the United States by the Foreign Person (although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected), the holder generally will be subject to United States federal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the Foreign Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its "effectively connected earnings and profits," within the meaning of the Code, for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty (as modified by the branch profits tax rules). BACKUP WITHHOLDING. Distributions made on the grantor trust certificates and proceeds from the sale of the grantor trust certificates will be subject to a "backup" withholding tax of 31% if, in general, the grantor trust certificateholder fails to comply with particular identification procedures, unless the holder is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld, would be refunded by the IRS or allowable as a credit against the grantor trust certificateholder's federal income tax. STATE AND LOCAL TAX CONSIDERATIONS The discussion above does not address the tax consequences of purchase, ownership or disposition of certificates or notes under any state or local tax laws. We recommend that investors consult their own tax advisors regarding TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEOWNERS'S OR CERTIFICATE OWNER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS OF NOTES OR CERTIFICATES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. ERISA CONSIDERATIONS GENERAL A fiduciary of a pension, profit-sharing, retirement or other employee benefit plan subject to Title I of ERISA should consider the fiduciary standards under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") in the context of the plan's particular circumstances before authorizing an investment of a portion of such plan's assets in the Securities. Accordingly, pursuant to Section 404 of ERISA, such fiduciary should consider among other factors (i) whether the investment is for the exclusive benefit of plan participants and their beneficiaries; (ii) whether the investment satisfies the applicable diversification requirements; (iii) whether the investment is in accordance with the documents and instruments governing the plan; and (iv) whether the investment is prudent, considering the nature of the investment. Fiduciaries of plans also should consider ERISA's prohibition on improper delegation of control over, or responsibility for, plan assets. In addition, employee benefit plans or other retirement arrangements subject to ERISA, as well as individual retirement accounts, certain types of Keogh plans not subject to ERISA but subject to Section 4975 of the Code, or any entity (including insurance company separate or general accounts) whose underlying assets include plan assets by reason of such plans, arrangements or accounts investing in the entity (each, a "Plan") are prohibited from engaging in a broad range of transactions involving Plan assets and persons having certain specified relationships to a Plan ("parties in interest" and "disqualified persons"). Such transactions are treated as "prohibited transactions" under Sections 406 of ERISA and excise taxes and/or other penalties are imposed upon such persons under ERISA and/or Section 4975 of the Code unless an exemption applies. The seller, underwriter of the Securities, the servicer, the trustee, the indenture trustee and certain of their affiliates might be considered "parties in interest" or "disqualified persons" with respect to a Plan. If so, the acquisition, holding or disposition of Securities by or on behalf of such Plan could be considered to give rise to a "prohibited transaction" within the meaning of ERISA and the Code unless a statutory, regulatory or administrative exception or exemption is available. ERISA CONSIDERATIONS RELATING TO CERTIFICATES PLAN ASSETS. In 29 C.R.F ss.2510.3-101 (the "Plan Asset Regulations"), the U.S. Department of Labor ("DOL") has defined what constitutes "plan assets" for purposes of ERISA and Section 4975 of the Code. The Plan Asset Regulations provide that if a Plan makes an investment in an "equity interest" in an entity, an undivided portion of the assets of the entity will be considered the assets of such Plan unless certain exceptions set forth in such Regulations apply. The Certificates will be deemed an equity interest for purposes of the Plan Asset Regulations, and the seller can give no assurance that the Certificates will qualify for any of the exceptions under the Plan Asset Regulations. As a result, (i) a Plan may be deemed to have acquired an interest in the assets of the Trust and not merely an interest in the Certificates, (ii) the fiduciary investment standards of ERISA could apply to such assets and (iii) transactions occurring in the course of managing, operating and servicing the Trust and its assets might constitute prohibited transactions, unless a statutory, regulatory or administrative exemption applies. UNDERWRITER EXEMPTION GENERAL DISCUSSION. The DOL has granted to Deutsche Bank Alex. Brown an individual exemption, Prohibited Transaction Exemption 94-84, and to Deutsche Morgan Grenfell/C.J. Lawrence Inc., similar approval (FAN 97-03E), which were both amended by Prohibited Transaction Exemption 97-34 ("PTE 97-34") and further recently amended pursuant to Prohibited Transaction Exemption 2000-58 ("PTE 2000-58") (collectively, the "Exemption") which is applicable to Certificates which meet its requirements whenever Deutsche Banc Alex. Brown or its affiliate is the sole underwriter, manager or co-manager of an underwriting syndicate or is the selling or placement agent. The Exemption generally exempts certain transactions from the application of certain of the prohibited transaction provisions of ERISA and the Code provided that the conditions set forth in the Exemption are satisfied. These transactions include the servicing, managing and operation of investment trusts holding fixed (generally non-revolving pools) of enumerated categories of assets which include the Receivables and the purchase, sale and holding of Certificates which represent beneficial ownership interests in the assets of such trusts. GENERAL CONDITIONS OF EXEMPTION. The Exemption sets forth general conditions which must be satisfied for a transaction involving the purchase, sale and holding of the Certificates to be eligible for exemptive relief thereunder. First, the acquisition of Certificates by Plans must be on terms 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 assets held by the Trust must be secured. Third, unless the Certificates are issued in "designated transactions" (as described below) and are backed by fully-secured Receivables, they may not be subordinated. Fourth, the Certificates at the time of acquisition by the Plan must be rated in one of the three (or in the case of designated transactions, four) highest generic rating categories by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., Moody's Investors Services, Inc. or Fitch, Inc. (each, a "Rating Agency"). Fifth, the trustee and the indenture trustee generally cannot be affiliates of any member of the "Restricted Group" which consists of any (i) underwriter as defined in the Exemption, (ii) the seller, (iii) the servicer, (iv) the counterparty of any "interest swap" (as described below) held as an asset of the Trust and (v) any obligor with respect to Receivables constituting more than 5% of the aggregate unamortized principal balance of the Receivables held in the Trust as of the date of initial issuance of the Certificates. Sixth, the sum of all payments made to, and retained by, such underwriters must represent not more than reasonable compensation for underwriting the Certificates; the sum of all payments made to, and retained by, the seller pursuant to the assignment of the Receivables to the related Trust must represent not more than the fair market value of such Receivables; and the sum of all payments made to, and retained by, the servicer must represent not more than reasonable compensation for such person's services under the Agreement and reimbursement of such person's reasonable expenses in connection therewith. Seventh, (i) the investment pool must consist only of assets of the type enumerated in the Exemption and which have been included in other investment pools; (ii) Certificates evidencing interests in such other investment pools must have been rated in one of the three (or in the case of designated transactions, four) highest generic rating categories by one of the Rating Agencies for at least one year prior to a Plan's acquisition of Certificates; and (iii) Certificates evidencing interests in such other investment pools must have been purchased by investors other than Plans for at least one year prior to a Plan's acquisition of Certificates. Finally, the investing Plan must be an accredited investor as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act of 1933, as amended. The seller assumes that only Plans which are accredited investors under the federal securities laws will be permitted to purchase the Certificates. RECENT AMENDMENTS TO EXEMPTION. PTE 2000-58 (the "Amendment") recently amended the Exemption to make the acquisition of Certificates by Plans in an initial offering or in a secondary market transaction, the holding or transfer of Certificates and the servicing, management and operation of the Trust and its assets on or after November 13, 2000 eligible for exemptive relief to a broader range of Certificates. Prior to such amendment, the Exemption generally permitted Plans to purchase only unsubordindated Certificates rated within the highest three generic rating categories backed by secured collateral. Such Certificates had to be issued by a Trust which was a grantor trust, REMIC or a FASIT whose corpus could not include certain types of assets such as interest-rate swaps. TYPES OF TRUSTS. The Amendment has expanded the types of permitted Trusts to include owner-trusts, as well as grantor trusts, REMICs and FASITs. Owner-trusts are subject to certain restrictions in their governing documents to ensure that their assets may not be reached by the creditors of the seller in the event of bankruptcy or other insolvency and must provide certain legal opinions. DESIGNATED TRANSACTIONS. In the case where the Certificates are backed by Trust assets such as the Receivables which are secured motor vehicle receivables, credit instruments or obligations that bear interest or are purchased a discount as described and defined in the Exemption as designated transactions ("Designated Transactions"), the Amendment permits the Certificates issued by the Trust in such transactions to be rated in one of the highest four generic rating categories by a Rating Agency and/or to be subordinated. The Receivables are the type of assets which qualify for Designated Transaction treatment unless otherwise specified in the Prospectus Supplement. INSURANCE COMPANY GENERAL ACCOUNTS. In the event that Certificates do not meet the requirements of the Exemption solely because they are Subordinate Certificates or fail to meet a minimum rating requirement under the Exemption, certain Plans may be eligible to purchase Certificates pursuant to Section III of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60") which permits insurance company general accounts as defined in PTCE 95-60 to purchase such Certificates if they otherwise meet all of the other requirements of the Exemption. PERMITTED ASSETS. The Amendment permits an interest-rate swap to be an asset of a Trust which issues Certificates acquired by Plans in an initial offering or in the secondary market on or after November 13, 2000 and clarifies the requirements regarding yield supplement agreements. An interest-rate swap (or if purchased by or on behalf of the Trust) an interest-rate cap contract (collectively, a "Swap" or "Swap Agreement") is a permitted Trust asset if it: (a) is an "eligible Swap;" (b) is with an "eligible counterparty;" (c) is purchased by a "qualified plan investor;" (d) meets certain additional specific conditions which depend on whether the Swap is a "ratings dependent Swap" or a "non-ratings dependent Swap" and (e) permits the Trust to make termination payments to the Swap (other than currently scheduled payments) solely from excess spread or amounts otherwise payable to the servicer or seller. An "eligible Swap" is one which: (a) is denominated in U.S. dollars; (b) pursuant to which the Trust pays or receives, on or immediately prior to the respective payment or distribution date for the class of Certificates to which the Swap relates, a fixed rate of interest or a floating rate of interest based on a publicly available index (E.G., LIBOR or the U.S. Federal Reserve's Cost of Funds Index (COFI)), with the Trust receiving such payments on at least a quarterly basis and obligated to make separate payments no more frequently than the counterparty, with all simultaneous payments being netted ("Allowable Interest Rate"); (c) has a notional amount that does not exceed either: (i) the principal balance of the class of Certificates to which the Swap relates, or (ii) the portion of the principal balance of such class represented by obligations ("Allowable Notional Amount"); (d) is not leveraged (I.E., payments are based on the applicable notional amount, the day count fractions, the fixed or floating rates permitted above, and the difference between the products thereof, calculated on a one-to-one ratio and not on a multiplier of such difference) ("Leveraged"); (e) has a final termination date that is either the earlier of the date on which the issuer terminates or the related class of Certificates are fully repaid and (f) does not incorporate any provision which could cause a unilateral alteration in the interest rate requirements described above or the prohibition against leveraging. An "eligible counterparty" means a bank or other financial institution which has a rating at the date of issuance of the Certificates, which is in one of the three highest long-term credit rating categories or one of the two highest short-term credit rating categories, utilized by at least one of the Rating Agencies rating the Certificates; provided that, if a counterparty is relying on its short-term rating to establish eligibility hereunder, such counterparty must either have a long-term rating in one of the three highest long-term rating categories or not have a long-term rating from the applicable Rating Agency. A "qualified plan investor" is a Plan or Plans where the decision to buy such class of Certificates is made on behalf of the Plan by an independent fiduciary qualified to understand the Swap transaction and the effect the Swap would have on the rating of the Certificates and such fiduciary is either (a) a "qualified professional asset manager" ("QPAM") under Prohibited Transaction Class Exemption 84-14 ("PTCE 84-14") (see below), (b) an "in-house asset manager" under Prohibited Transaction Class Exemption 96-23 ("PTCE 96-23") (see below) or (c) has total assets (both Plan and non-Plan) under management of at least $100 million at the time the Certificates are acquired by the Plan. In "ratings dependent Swaps" (where the rating of a class of Certificates is dependent on the terms and conditions of the Swap), the Swap Agreement must provide that if the credit rating of the counterparty is withdrawn or reduced by any Rating Agency below a level specified by the Rating Agency, the servicer must, within the period specified under the Swap Agreement: (a) obtain a replacement Swap Agreement with an eligible counterparty which is acceptable to the Rating Agency and the terms of which are substantially the same as the current Swap Agreement (at which time the earlier Swap Agreement must terminate); or (b) cause the Swap counterparty to establish any collateralization or other arrangement satisfactory to the Rating Agency such that the then current rating by the Rating Agency of the particular class of Certificates will not be withdrawn or reduced (and the terms of the Swap Agreement must specifically obligate the counterparty to perform these duties for any class of Certificates with a term of more than one year). In the event that the servicer fails to meet these obligations, Plan certificateholders must be notified in the immediately following periodic report which is provided to certificateholders but in no event later than the end of the second month beginning after the date of such failure. Sixty days after the receipt of such report, the exemptive relief provided under the Exemption will prospectively cease to be applicable to any class of Certificates held by a Plan which involves such ratings dependent Swap. "Non-ratings dependent Swaps" (those where the rating of the Certificates does not depend on the terms and conditions of the Swap) are subject to the following conditions. If the credit rating of the counterparty is withdrawn or reduced below the lowest level permitted above, the servicer will, within a specified period after such rating withdrawal or reduction: (a) obtain a replacement Swap Agreement with an eligible counterparty, the terms of which are substantially the same as the current Swap Agreement (at which time the earlier Swap Agreement must terminate); (b) cause the counterparty to post collateral with the Trust in an amount equal to all payments owed by the counterparty if the Swap transaction were terminated; or (c) terminate the Swap Agreement in accordance with its terms. An "eligible yield supplement agreement" is any yield supplement agreement or similar arrangement (or if purchased by or on behalf of the Trust) an interest rate cap contract to supplement the interest rates otherwise payable on obligations held by the Trust ("EYS Agreement"). If the EYS Agreement has a notional principal amount and/or is written on an International Swaps and Derivatives Association, Inc. (ISDA) form, the EYS Agreement may only be held as an asset of the Trust with respect to Certificates purchased by Plans on or after April 7, 1998 if it meets the following conditions: (a) it is denominated in U.S. dollars; (b) it pays an Allowable Interest Rate; (c) it is not Leveraged; (d) it does not allow any of these three preceding requirements to be unilaterally altered without the consent of the trustee; (e) it is entered into between the Trust and an eligible counterparty and (f) it has an Allowable Notional Amount. PRE-FUNDING ACCOUNTS. The Exemption was amended by PTE 97-34 to extend exemptive relief to Certificates issued in transactions using pre-funding accounts whereby a portion of the Receivables backing the Certificates are transferred to the Trust within a specified period following the Closing Date ("DOL Pre-Funding Period") (see below) instead of requiring that all such Receivables be either identified or transferred on or before the Closing Date. The relief is effective for transactions occurring on or after May 23, 1997 provided that the following conditions are met. First, the ratio of the amount allocated to the Pre-Funding Account to the total principal amount of the Certificates being offered ("Pre-Funding Limit") must not exceed twenty-five percent (25%). Second, all Receivables transferred after the Closing Date (referred to here as "Additional Receivables") must meet the same terms and conditions for eligibility as the original Receivables used to create the Trust, which terms and conditions have been approved by the Rating Agency. Third, the transfer of such Additional Receivables to the Trust during the DOL Pre-Funding Period must not result in the Certificates receiving a lower credit rating from the Rating Agency upon termination of the DOL Pre-Funding Period than the rating that was obtained at the time of the initial issuance of the Certificates by the Trust. Fourth, solely as a result of the use of pre-funding, the weighted average annual percentage interest rate (the "average interest rate") for all of the Receivables in the Trust at the end of the DOL Pre-Funding Period must not be more than 100 basis points lower than the average interest rate for the Receivables which were transferred to the Trust on the Closing Date. Fifth, either: (i) the characteristics of the Additional Receivables must be monitored by an insurer or other credit support provider which is independent of the seller; or (ii) an independent accountant retained by the seller must provide the seller with a letter (with copies provided to the Rating Agency, the underwriter and the trustee) stating whether or not the characteristics of the Additional Receivables conform to the characteristics described in the Prospectus, Prospectus Supplement, Private Placement Memorandum ("Offering Documents") and/or the Agreement. In preparing such letter, the independent accountant must use the same type of procedures as were applicable to the Receivables which were transferred as of the Closing Date. Sixth, the DOL Pre-Funding Period must end no later than three months or 90 days after the Closing Date or earlier, in certain circumstances, if the amount on deposit in the Pre-Funding Account is reduced below the minimum level specified in the Agreement or an event of default occurs under the Agreement. Seventh, amounts transferred to any Pre-Funding Account and/or Capitalized Interest Account used in connection with the pre-funding may be invested only in investments which are permitted by the Rating Agency and (i) are direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality thereof (provided that such obligations are backed by the full faith and credit of the United States); or (ii) have been rated (or the obligor has been rated) in one of the three highest generic rating categories by the Rating Agency ("Acceptable Investments"). Eighth, certain disclosure requirements must be met. LIMITATIONS ON SCOPE OF THE EXEMPTION. If the general conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by ERISA and the Code in connection with the initial acquisition, transfer or holding, and the acquisition or disposition in the secondary market, of the Certificates by Plans. However, no exemption is provided from the restrictions of ERISA for the acquisition or holding of a Certificates on behalf of an "Excluded Plan" by any person who is a fiduciary with respect to the assets of such Excluded Plan. For those purposes, an Excluded Plan is a Plan sponsored by any member of the Restricted Group. Exemptive relief may also be provided for the acquisition, holding and disposition of Certificates by Plans if the fiduciary or its affiliate is the obligor with respect to 5% or less of the fair market value of the Receivables in the Trust provided that: (i) the Plan is not an Excluded Plan, (ii) each Plan's investment in each class of Certificates does not exceed 25% of the outstanding Certificates in the class, (iii) after the Plan's acquisition of the Certificates, no more than 25% of the assets over which the fiduciary has investment authority are invested in Certificates of a trust containing assets which are sold or serviced by the same entity and (iv) in the case of initial issuance (but not secondary market transactions), at least 50% of each class of Certificates and at least 50% of the aggregate interests in the Trust are acquired by persons independent of the Restricted Group. ERISA CONSIDERATIONS RELATING TO NOTES Under the Plan Asset Regulations, the assets of the Trust would be treated as "plan assets" of a Plan for the purposes of ERISA and the Code only if the Plan acquires an "equity interest" in the Trust and none of the exceptions contained in the Plan Asset Regulations is applicable. An equity interest is defined under the Plan Asset Regulations as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Assuming that the Notes are treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulations, then such Notes will be eligible for purchase by Plans. However, without regard to whether the Notes are treated as an "equity interest" for such purposes, the acquisition or holding of Notes by or on behalf of a Plan could be considered to give rise to a prohibited transaction if the Trust or any of its affiliates is or becomes a party in interest or disqualified person with respect to such Plan, or in the event that a Note is purchased in the secondary market and such purchase constitutes a sale or exchange between a Plan and a party in interest or disqualified person with respect to such Plan. There can be no assurance that the Trust or any of its affiliates will not be or become a party in interest or a disqualified person with respect to a Plan that acquires Notes. The Amendment to the Exemption permits Trust which are grantor trusts, owner-trusts, REMICs or FASITs to issue Notes, as well as Certificates, provided a legal opinion is received to the effect that the noteholders have a perfected security interest in the Trust's assets. The exemptive relief provided under the Exemption for any prohibited transactions which could be caused as a result of the operation, management or servicing of the Trust and its assets would not be necessary with respect to Notes with no substantial equity features which are issued as obligations of the Trust. However, effective for the acquisition, holding or transfer of Notes between a Plan and a party in interest which occurs on or after November 13, 2000, the Exemption would provide prohibited transaction exemptive relief, provided that the same conditions of the Exemption described above relating to Certificates are met with respect to the Notes. The same limitations of such exemptive relief relating to acquisitions of Certificates by fiduciaries with respect to Excluded Plans would also be applicable to the Notes as described herein in "LIMITATIONS ON SCOPE OF THE EXEMPTION." In the event that the Exemption is not applicable to the Notes, one or more other prohibited transactions exemptions may be available to Plans purchasing or transferring the Notes depending in part upon the type of Plan fiduciary making the decision to acquire the Notes and the circumstances under which such decision is made. These exemptions include, but are not limited to, Prohibited Transaction Class Exemption 90-1 (regarding investments by insurance company pooled separate accounts), Prohibited Transaction Class Exemption 91-38 (regarding investments by bank collective investments funds), PTCE 84-14 (regarding transactions effected by "qualified professional asset managers"), PTCE 95-60 (regarding investments by insurance company general accounts) and PTCE 96-23 (regarding transactions effected by "in-house asset managers") (collectively, the "Investor-Based Exemptions"). However, even if the conditions specified in these Investor-Based Exemptions are met, the scope of the relief provided under such Exemptions might or might not cover all acts which might be construed as prohibited transactions. EACH PROSPECTUS SUPPLEMENT WILL CONTAIN INFORMATION CONCERNING CONSIDERATIONS RELATING TO ERISA AND THE CODE THAT ARE APPLICABLE TO THE RELATED SECURITIES. BEFORE PURCHASING SECURITIES IN RELIANCE ON THE EXEMPTION, THE INVESTOR-BASED EMEMPTIONS OR ANY OTHER EXEMPTION, A FIDUCIARY OF A PLAN SHOULD ITSELF CONFIRM THAT REQUIREMENTS SET FORTH IN SUCH EXEMPTION WOULD BE SATISFIED. ANY PLAN INVESTOR WHO PROPOSES TO USE "PLAN ASSETS" OF ANY PLAN TO PURCHASE SECURITIES OF ANY SERIES OR CLASS SHOULD CONSULT WITH ITS COUNSEL WITH RESPECT TO THE POTENTIAL CONSEQUENCES UNDER ERISA AND SECTION 4975 OF THE CODE OF THE ACQUISITION AND OWNERSHIP OF SUCH SECURITIES. Governmental plans and church plans as defined in ERISA are not subject to ERISA or Code Section 4975, although they may elect to be qualified under Section 401(a) of the Code and exempt from taxation under Section 501(a) of the Code and would then be subject to the prohibited transaction rules set forth in Section 503 of the Code. In addition, governmental plans may be subject to federal, state and local laws which are to a material extent similar to the provisions of ERISA or a Code Section 4975 ("Similar Law"). A fiduciary of a governmental plan should make its own determination as to the propriety of an investment in Securities under applicable fiduciary or other investment standards and the need for the availability of any exemptive relief under any Similar Law. Plan of Distribution On the terms and conditions set forth in an underwriting agreement with respect to the notes, if any, of a given series and an underwriting agreement with respect to the certificates of the series (collectively, the "Underwriting Agreements"), the company will agree to cause the related Trust to sell to the underwriters named in the Underwriting Agreement and in the related prospectus supplement, and each of these underwriters will severally agree to purchase, the principal amount of each class of notes and certificates, as the case may be, of the related series set forth in the related Underwriting Agreement and in the related prospectus supplement. In the Underwriting Agreements with respect to any given series of securities, the several underwriters will agree, subject to the terms and conditions set forth in the related Underwriting Agreement, to purchase all of the notes and certificates, as the case may be, described in the related Underwriting Agreement that are offered by this prospectus and by the related prospectus supplement if any of the notes and certificates, as the case may be, are purchased. Each prospectus supplement will either (1) set forth the price at which each class of notes and certificates, as the case may be, being offered by the related prospectus supplement will be offered to the public and any concessions that may be offered to particular dealers participating in the offering of the notes and certificates, as the case may be, or (2) specify that the related notes and certificates, as the case may be, are to be resold by the underwriters in negotiated transactions at varying prices to be determined at the time of sale. After the initial public offering of any notes and certificates, as the case may be, public offering prices and concessions may be changed. Pursuant to the Receivables Purchase Agreement between the seller, or its affiliate, and the company, the seller will indemnify the company and the related underwriters against specific civil liabilities, including liabilities under the securities Act, or contribute to payments the company and the several underwriters may be required to make in respect of the Receivables Purchase Agreement. Each Trust may, from time to time, invest the funds in its Trust Accounts in Eligible Investments acquired from the underwriters. Pursuant to each of the Underwriting Agreements with respect to a given series of securities, the closing of the sale of any class of securities will be conditioned on the closing of the sale of all other classes under the related Underwriting Agreement. The place and time of delivery for the notes and certificates, as the case may be, in respect of which this prospectus is delivered will be set forth in the related prospectus supplement. If and to the extent required by applicable law or regulation, this prospectus and the prospectus supplement will also be used by the Underwriter after the completion of the offering in connection with offers and sales related to market-making transactions in the offered securities in which the Underwriter acts as principal. The Underwriter may also act as agent in these transactions. Sales will be made at negotiated prices determined at the time of sale. LEGAL MATTERS Some legal matters relating to the securities of any series will be passed upon by the law firms specified in the related prospectus supplement. Some related federal income tax and other matters will be passed upon for the Trust and the seller, by the law firms specified in the related prospectus supplement. PROSPECTUS SUPPLEMENT The prospectus supplement relating to a series of securities to be offered under this prospectus will, among other things, set forth with respect to each class of securities: o the interest rate and authorized denominations, as applicable, of each class of securities; o specific information concerning the Primary Assets and the related seller and servicer, as applicable; o the terms of any Credit or Cash Flow Enhancement applicable to any class or classes of securities; o information concerning any other assets in the related Trust; o the expected date or dates on which the principal amount, if any, of each class of securities will be paid to holders of the securities; o the extent to which any class within a series is subordinated to any other class of the same series; and o additional information with respect to the plan of distribution of the securities. REPORTS TO SECURITYHOLDERS With respect to each series of securities, the servicer of the related Primary Assets will prepare for distribution to the related Securityholders monthly and annual reports concerning the securities and the related Trust. See "Certain Information Regarding the Securities--Statements to Securityholders." AVAILABLE INFORMATION The company, as originator of the Trusts, has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-3 (together with all amendments and exhibits to the Registration Statement, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities being offered by this prospectus. This prospectus does not contain all of the information set forth in the Registration Statement, some parts of which have been omitted in accordance with the rules and regulations of the Commission. In addition, company is subject to the informational requirements of the securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance with the Exchange Act files reports and other information with the Commission. The Registration Statement, reports and other information are available for inspection without charge at the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the regional offices of the Commission at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of this information can be obtained from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the site is http://www.sec.gov. Upon receipt of a request by an investor who has received an electronic prospectus supplement and prospectus from the Underwriter or a request by the investor's representative within the period during which there is an obligation to deliver a prospectus supplement and Prospectus, the Underwriter will promptly deliver, or cause to be delivered, without charge, to the investor a paper copy of the prospectus supplement and prospectus. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE All documents filed by the company on behalf of the Trust referred to in the accompanying prospectus supplement with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the securities offered by the Trust shall be deemed to be incorporated by reference in this prospectus and to be a part of this prospectus from the dates of filing of the documents. Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus, or in the accompanying prospectus supplement, or in any subsequently filed document that also is or is deemed to be incorporated by reference in this prospectus modifies or supersedes the statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. The company on behalf of any Trust will provide without charge to each person to whom a copy of this prospectus is delivered, on the written or oral request of the person, a copy of any or all of the documents incorporated in this prospectus by reference, except the exhibits to these documents. Requests for copies should be directed to: Secretary, ACE Securities Corp., [ ], telephone, [ ]. INDEX OF TERMS PAGE 1996 Contingent Debt Regulations............................................54 1997 Act....................................................................74 1997 Withholding Regulations................................................60 accrual period..............................................................57 Actuarial Receivables........................................................7 Additional Loans............................................................82 adjusted issue price........................................................57 Advances....................................................................41 average interest rate.......................................................82 Cede.........................................................................1 Certificate Distribution Account............................................36 Certificate Owners..........................................................53 Certificate Pool Factor.....................................................21 Check-the-Box Regulations...................................................64 Code........................................................................53 Collection Account..........................................................36 Collection Period...........................................................40 Definitive certificates.....................................................32 Definitive notes............................................................32 Definitive Securities.......................................................32 Depository..................................................................22 Distribution Date...........................................................29 DOL.........................................................................78 DOL Regulation..............................................................78 DTC..........................................................................1 Eligible Deposit Account....................................................37 Eligible Institution........................................................37 Eligible Investment.........................................................38 Eligible Investments........................................................37 ERISA.......................................................................77 Events of Default...........................................................23 Exchange Act................................................................86 Fannie Mae..................................................................13 Farm Credit Act.............................................................17 FCA.........................................................................17 FCBs........................................................................17 Federal Tax Counsel.........................................................53 FFCB........................................................................13 FFEL........................................................................15 FHLB........................................................................13 FHLMC Act...................................................................14 Final Scheduled Maturity Date...............................................39 Financed Vehicles............................................................5 financial institution.......................................................61 FIRREA......................................................................15 Fiscal Agent................................................................13 Freddie Mac.................................................................13 FTC Rule....................................................................51 Funding Corporation.........................................................17 Government Securities.......................................................11 grantor trust certificateholders............................................70 grantor trust certificates..................................................70 GSE Issuer..................................................................13 GSEs........................................................................11 GSEs Bonds..................................................................11 Indenture...................................................................22 Indirect Participants.......................................................30 Interest Component..........................................................19 Investment Earnings.........................................................37 Investor Based Exemptions...................................................83 IRS.........................................................................53 issue price.................................................................55 Loans.......................................................................82 MBS.........................................................................14 Non-United States Holder....................................................60 Non-United States Owner.....................................................69 Non-United States Person....................................................60 Note Distribution Account...................................................36 Note Owners.................................................................52 Note Pool Factor............................................................21 objective rate..............................................................54 Offering Documents..........................................................83 OID Regulations.............................................................54 Other Pools.................................................................80 Participants................................................................30 Payahead Account............................................................36 Payaheads...................................................................40 Plan........................................................................77 Plan Fiduciary..............................................................77 Pooling Agreement...........................................................83 Pooling and Servicing Agreement..............................................5 Precomputed Advance.........................................................40 Precomputed Receivables......................................................7 Pre-Funded Amount...........................................................37 Pre-Funding Account.........................................................37 Pre-Funding Limit...........................................................82 Pre-Funding Period..........................................................38 Prepayment Assumption.......................................................56 Principal Component.........................................................19 Private Label Custody Receipt Securities....................................17 Private Label Custody Strips................................................17 PTCE........................................................................83 qualified inverse floating rate.............................................54 qualified stated interest...................................................54 Receivables..................................................................6 REFCO.......................................................................17 REFCO Strip.................................................................19 Registration Statement......................................................86 Related Documents...........................................................26 Repurchase Amount...........................................................35 Reserve Account.............................................................43 Restricted Group............................................................82 RTC.........................................................................15 Rule of 78S Receivables......................................................7 Rules.......................................................................30 Sale and Servicing Agreement.................................................5 Sallie Mae..................................................................13 Schedule of Receivables.....................................................35 Securities Act..............................................................86 Security Owners.............................................................30 Senior Certificates.........................................................72 Senior Class Percentage.....................................................73 Servicer Default............................................................44 Servicing Fee...............................................................41 Servicing Fee Rate..........................................................41 Shortfall Amount............................................................73 Short-Term Note.............................................................59 Simple Interest Advance.....................................................41 Simple Interest Receivables..................................................7 stated redemption price at maturity.........................................56 Stripped Certificates.......................................................71 Subordinate Certificates....................................................72 Subordinate Class Percentage................................................72 System......................................................................17 Systemwide Debt Securities..................................................17 TEFRA.......................................................................19 TIN.........................................................................62 Transfer and Servicing Agreements...........................................35 Treasury Bonds..............................................................10 Treasury Strips.............................................................10 Trust........................................................................5 Trust Accounts..............................................................37 Trust Agreement..............................................................5 Trust Stripped Bond.........................................................72 Trust Stripped Coupon.......................................................72 TVA.........................................................................13 TVA Act.....................................................................16 UCC.........................................................................30 Underlying Issuer............................................................9 Underlying Servicer..........................................................9 Underlying Trust Agreement...................................................9 Underlying Trustee...........................................................9 Underwriter's PTE...........................................................80 Underwriting Agreements.....................................................84 United States Person........................................................60 ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in some limited circumstances, the globally offered securities (the "Global securities") will be available only in book-entry form. Unless otherwise specified in the related prospectus supplement, investors in the Global securities may hold Global securities through any of The Depository Trust company ("DTC"), Clearstream, Luxembourg or Euroclear. Unless otherwise specified in the related prospectus supplement, Global securities will be tradeable as home market instruments in both the European and U.S. domestic markets. Unless otherwise specified in the related prospectus supplement, Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global securities through Clearstream, Luxembourg and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding Global securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations. Secondary cross-market trading between Clearstream, Luxembourg or Euroclear and DTC Participants holding securities will be effected on a delivery-against-payment basis through the respective Depositaries of Clearstream, Luxembourg and Euroclear, in this capacity, and as DTC Participants. Non-U.S. holders of Global securities will be subject to U.S. withholding taxes unless the holders meet particular requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT All Global securities will be held in book-entry form by The Depository Trust Company ("DTC") in the name of Cede & Co. ("Cede") as nominee of DTC. Securityholders' interests in the Global securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Clearstream, Luxembourg and Euroclear will hold positions on behalf of their participants through their respective Depositaries, which in turn will hold these positions in accounts as DTC Participants. Securityholders electing to hold their Global securities through DTC will follow the settlement practices applicable to U.S. corporate debt obligations. Securityholder securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Securityholders electing to hold their Global securities through Clearstream, Luxembourg or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds. SECONDARY MARKET TRADING Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC Participants will be settled using the procedures applicable to U.S. corporate debt obligations in same-day funds. TRADING BETWEEN CLEARSTREAM, LUXEMBOURG AND/OR EUROCLEAR PARTICIPANTS. Secondary market trading between Clearstream, Luxembourg Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. TRADING BETWEEN DTC SELLER AND CLEARSTREAM, LUXEMBOURG OR EUROCLEAR PURCHASER. When Global securities are to be transferred from the account of a DTC Participant to the account of a Clearstream, Luxembourg Clearstream, Luxembourg Participant or a Euroclear Participant, the purchaser will send instructions to Clearstream, Luxembourg or Euroclear through a Clearstream, Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. Clearstream, Luxembourg or Euroclear will instruct the respective Depositary, as the case may be, to receive the Global securities against payment. Payment will include interest accrued on the Global securities from and including the last coupon payment date to and excluding the settlement date. Payment will then be made by the respective Depositary to the DTC Participant's account against delivery of the Global securities. After settlement has been completed, the Global securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream, Luxembourg Participant's or Euroclear Participant's account. The Global securities credit will appear the next day (European time) and the cash debit will be back-valued to, and the interest on the Global securities will accrue from, the value date, which would be the preceding day when settlement occurred in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the Clearstream, Luxembourg or Euroclear cash debit will be valued instead as of the actual settlement date. Clearstream, Luxembourg Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to pre-position funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream, Luxembourg or Euroclear. Under this approach, they may take on credit exposure to Clearstream, Luxembourg or Euroclear until the Global securities are credited to their accounts one day later. As an alternative, if Clearstream, Luxembourg or Euroclear has extended a line of credit to them, Clearstream, Luxembourg Participants or Euroclear Participants can elect not to pre-position funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Clearstream, Luxembourg Participants or Euroclear Participants purchasing Global securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global securities were credited to their accounts. However, interest on the Global securities would accrue from the value date. Therefore, in many cases the investment income on the Global securities earned during that one-day period may substantially reduce or offset the amount of the overdraft charges, although this result will depend on each Clearstream, Luxembourg Participant's or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global securities to the respective Depositary for the benefit of Clearstream, Luxembourg Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participant a cross-market transaction will settle no differently than a trade between two DTC Participants. TRADING BETWEEN CLEARSTREAM, LUXEMBOURG OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time zone differences in their favor, Clearstream, Luxembourg Participants and Euroclear Participants may employ their customary procedures for transactions in which Global securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Clearstream, Luxembourg or Euroclear through a Clearstream, Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. In these cases, Clearstream, Luxembourg or Euroclear will instruct the respective Depositary, as appropriate, to deliver the bonds to the DTC Participant's account against payment. Payment will include interest accrued on the Global securities from and including the last coupon payment date to and excluding the settlement date. The payment will then be reflected in the account of the Clearstream, Luxembourg Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Clearstream, Luxembourg Participant's or Euroclear Participant's account would be back-valued to the value date, which would be the preceding day, when settlement occurred in New York. Should the Clearstream, Luxembourg Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debit in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft charges incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream, Luxembourg Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream, Luxembourg or Euroclear and that purchase Global securities from DTC Participants for delivery to Clearstream, Luxembourg Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: (a) borrowing through Clearstream, Luxembourg or Euroclear for one day, until the purchase side of the day trade is reflected in their Clearstream, Luxembourg or Euroclear accounts, in accordance with the clearing system's customary procedures; (b) borrowing the Global securities in the U.S. from a DTC Participant no later than one day prior to settlement, which would give the Global securities sufficient time to be reflected in their Clearstream, Luxembourg or Euroclear account in order to settle the sale side of the trade; or (c) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Clearstream, Luxembourg Participant or Euroclear Participant. CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A beneficial owner of Global securities holding securities through Clearstream, Luxembourg or Euroclear, or through DTC will be subject to the 30% U.S. withholding tax that generally applies to payments of interest, including original issue discount, on registered debt issued by U.S. Persons or to 31% backup withholding, unless (1) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between the beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (2) the beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial owners of securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status) of Benficial Owner for United States Tax Withholding. If the information shown on Form W-8 changes, a new Form W-8BEN must be filed within 30 days of the change. EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Certificate of Foreing Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM W-8BEN). Non-U.S. Persons that are beneficial owners of securities residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate, depending on the treaty terms, by filing Form W-8BEN (including Part II thereof). If the treaty provides only for a reduced rate, the beneficial owner may still be entitled to complete exemption from withholding under item (1) above. EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a Global Security, files by submitting the appropriate form to the person through whom it holds, the clearing agency, in the case of persons holding directly on the books of the clearing agency. Form W-8BEN and Form W-8ECI are generally effective for three calendar years from the close of the calendar year in which it is collected. The term "U.S. Person" means; (1) a citizen or resident of the United States, (2) a corporation or partnership (or other entity properly classified as a corporation or partnership for U.S. Federal income tax purposes) organized in or under the laws of the United States or any state or the District of Columbia, (3) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or (4) 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. Notwithstanding the preceding sentence, to the extent provided in regulations, trusts in existence on August 20, 1996 and treated as United States persons prior to that date that elect to continue to be treated also will be considered U.S. Persons. Treasury regulations provide certain presumptions regarding the entity classification and foreign or U.S. status of a holder that a payor generally must apply in the absence of appropriate documentation from the holder, and provide detailed documentation and procedures for holders claiming withholding tax exemptions through intermediaries. Prospective investors are urged to consult their tax advisors regarding the effect of these regulations on their ability to claim and the means for claiming exemptions from or reduced relates of U.S. withholding taxes. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global securities. Investors are advised to consult their own tax advisers for specific tax advice concerning their holding and disposing of the Global securities. The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus dated [ ]) $[ ] (APPROXIMATE) ACE SECURITIES CORP. [ ] TRUST [ ] ASSET BACKED NOTES [ ] SERVICER ------------------- CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The notes will represent interests in the trust fund only and will not represent interests in or obligations of any other entity. This prospectus supplement may be used to offer and sell the notes only if accompanied by the prospectus.
The trust will issue the following notes: ORIGINAL CLASS INTEREST PRICE UNDERWRITING PROCEEDS CLASS PRINCIPAL AMOUNT(1) RATE(2) TO PUBLIC DISCOUNT TO DEPOSITOR - --------- ------------------- ------- --------- -------- ------------ [ ] $[ ] [ ]% $[ ] [ ]% $[ ] ______________ (1) This amount is approximate, as described in this prospectus supplement. (2) The interest rate is subject to increase as described in this prospectus supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS IS ACCURATE OR COMPLETE. MAKING ANY CONTRARY REPRESENTATION IS A CRIMINAL OFFENSE. [Describe underwriting arrangements.] On or about [ ], delivery of the notes offered by this prospectus supplement will be made through the book-entry facilities of The Depository Trust Company. UNDERWRITER: DEUTSCHE BANC ALEX. BROWN The date of this prospectus supplement is [ ] IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the notes offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your notes, and (2) this prospectus supplement, which describes the specific terms of your notes. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the notes in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. ------------------- Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the notes and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the notes will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. ------------------- We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following tables of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. TABLES OF CONTENTS PROSPECTUS SUPPLEMENT PAGE Summary of Terms....................................4 Risk Factors........................................8 Description of the Trust...........................12 Description of the Notes...........................12 [The Insurance Policy..............................17 Description of the Mortgage Pool...................18 Additional Information.............................25 The Originator.....................................25 The Servicer.......................................25 Description of the Transfer and Servicing Agreements.........................................26 Yield Considerations...............................32 Material Federal Income Tax Considerations.........39 State and Local Income Tax Considerations..........39 ERISA Considerations...............................39 Legal Investment Considerations....................40 Use of Proceeds....................................40 Underwriting.......................................40 Experts............................................41 Legal Matters......................................41 Ratings............................................41 Glossary of Defined Terms..........................43 Annex I............................................44 PROSPECTUS PAGE Description of the Trust Funds....................... Use of Proceeds...................................... Yield Considerations................................. The Depositor........................................ Description of the Securities........................ Description of the Agreements........................ Description of Credit Support........................ Certain Legal Aspects of Mortgage Loans.............. Certain Legal Aspects of the Contracts............... Material Federal Income Tax Considerations........... State and Other Tax Considerations................... Legal Investment..................................... Methods of Distribution.............................. Additional Information............................... Incorporation of Certain Documents by Reference...... Legal Matters........................................ Financial Information................................ Rating............................................... Index of Defined Terms............................... SUMMARY OF TERMS o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. o WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. o WHENEVER WE REFER TO A PERCENTAGE OF SOME OR ALL OF THE MORTGAGE LOANS IN THE TRUST, THAT PERCENTAGE HAS BEEN CALCULATED ON THE BASIS OF THE TOTAL PRINCIPAL BALANCE OF THOSE MORTGAGE LOANS AS OF [ ], UNLESS WE SPECIFY OTHERWISE. WE EXPLAIN IN THIS PROSPECTUS SUPPLEMENT UNDER "DESCRIPTION OF THE NOTES -- RELATED DEFINITIONS" HOW THE PRINCIPAL BALANCE OF A MORTGAGE LOAN IS DETERMINED. WHENEVER WE REFER IN THIS SUMMARY OF TERMS OR IN THE RISK FACTORS SECTION OF THIS PROSPECTUS SUPPLEMENT TO THE TOTAL PRINCIPAL BALANCE OF ANY MORTGAGE LOANS, WE MEAN THE TOTAL OF THEIR PRINCIPAL BALANCES DETERMINED BY THAT METHOD, UNLESS WE SPECIFY OTHERWISE. THE OFFERED NOTES ACE Securities Corp. [ ] Trust [ ] is offering the Class [ ] Asset Backed Notes as part of Series [ ]. The notes will be issued in book-entry form. SEE "DESCRIPTION OF THE NOTES -- GENERAL" IN THIS PROSPECTUS SUPPLEMENT FOR A DISCUSSION OF THE MINIMUM DENOMINATIONS AND THE INCREMENTAL DENOMINATIONS OF THE NOTES. The notes will represent obligations of the trust and will be secured by the assets of the trust, which consist primarily of [describe assets of the trust.] The notes will have an approximate total initial principal amount of $[ ]. Any difference between the total principal amount of the notes on the date they are issued and the approximate total principal amount of the notes on the date of this prospectus supplement will not exceed 5%. PAYMENTS ON THE NOTES Principal and interest on the notes will be payable on the [25]th day of each month, beginning in [ ]. However, if the [25]th day is not a business day, payments will be made on the next business day after the [25]th day of the month. INTEREST PAYMENTS Interest will accrue on the notes at the annual rate described in this prospectus supplement. SEE "DESCRIPTION OF THE NOTES -- PAYMENTS -- PAYMENTS OF INTEREST" IN THIS PROSPECTUS SUPPLEMENT. PRINCIPAL PAYMENTS The amount of principal payable on the notes will be determined by (1) funds actually received on the mortgage loans that are available to make payments on the notes, (2) the amount of interest received on the mortgage loans that is used to pay principal on the notes, calculated as described in this prospectus supplement, (3) [the amount of principal received on the mortgage loans that is released to the residual certificate, calculated as described in this prospectus supplement,] and (4) [ ]. Funds actually received on the mortgage loans may consist of expected, scheduled payments, and unexpected payments resulting from prepayments or defaults by borrowers, liquidation of defaulted mortgage loans, or repurchases of mortgage loans under the circumstances described in this prospectus supplement. WE EXPLAIN HOW PRINCIPAL IS PAID ON THE NOTES UNDER "DESCRIPTION OF THE NOTES -- PAYMENTS -- PAYMENTS OF PRINCIPAL" IN THIS PROSPECTUS SUPPLEMENT. The last possible day on which the principal of the notes could become payable in full is [ ] and is referred to as the maturity date. The notes could be paid in full before the maturity date. LIMITED RECOURSE The only source of cash available to make interest and principal payments on the notes will be the assets of the trust. The trust will have no other source of cash and no entity other than the trust will be required or expected to make any payments on the notes. ENHANCEMENT OF LIKELIHOOD OF PAYMENT ON THE NOTES [DESCRIBE ANY APPLICABLE FINANCIAL GUARANTY INSURANCE POLICY OR GUARANTEE.] [SUBORDINATION OF PAYMENTS No amounts will be paid to the holder of the residual certificate on any distribution date until all amounts due to the notes on that date have been paid and overcollateralization has reached the required level.] [OVERCOLLATERALIZATION On the closing date, the total principal balance of the mortgage loans is expected to exceed the total principal amount of the notes by approximately [ ]%. This condition is referred to as "overcollateralization." Any interest received on the mortgage loans in excess of the amount needed to pay interest on the notes and some expenses and fees of the trust will be used to reduce the total principal amount of the notes to a level set by [ ], until the mortgage loans have a total principal balance that exceeds the total outstanding principal amount of the notes by the amount required by [ ]. We cannot assure you that sufficient interest will be generated by the mortgage loans to increase overcollateralization to the level required by [ ], or to maintain it at that level. SEE "DESCRIPTION OF THE NOTES -- OVERCOLLATERALIZATION" IN THIS PROSPECTUS SUPPLEMENT.] THE MORTGAGE LOANS On the closing date, which is expected to be on or about [ ], the assets of the trust will consist primarily of [describe mortgage loans.] [Description of pre-funding account and additional mortgage loans as applicable.] SEE "DESCRIPTION OF THE MORTGAGE POOL" IN THIS PROSPECTUS SUPPLEMENT FOR A GENERAL DESCRIPTION OF THE MORTGAGE LOANS AND "THE ORIGINATOR" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF THE UNDERWRITING GUIDELINES APPLIED IN ORIGINATING THE MORTGAGE LOANS. [THE PRE-FUNDING ACCOUNT On the closing date, approximately $[ ] will be deposited by [ ] in a pre-funding account maintained by [ ]. It is intended that additional mortgage loans will be sold to the trust by the depositor from time to time, from [ ] until [ ], paid for with the funds on deposit in the pre-funding account. [Description of pre-funding account and additional mortgage loans as applicable.] SEE "DESCRIPTION OF THE NOTES -- PRE-FUNDING ACCOUNT" IN THIS PROSPECTUS SUPPLEMENT.] SERVICING OF THE MORTGAGE LOANS The mortgage loans will be serviced by [ ]. SEE "THE SERVICER" AND "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS" IN THIS PROSPECTUS SUPPLEMENT. OPTIONAL PURCHASE OF MORTGAGE LOANS [ ] will have the option to purchase all of the mortgage loans and the other assets of the trust, after the total principal balance of the mortgage loans declines to less than [ ]% of their initial total principal balance; if [ ] does not exercise that option, [ ] may purchase the mortgage loans and other assets of the trust. If the mortgage loans and other assets are purchased, the noteholders will be paid accrued interest, and principal equal to the outstanding principal amount of the notes. SEE "DESCRIPTION OF THE NOTES -- OPTIONAL REDEMPTION" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF THE PURCHASE PRICE TO BE PAID FOR THE MORTGAGE LOANS. TAX STATUS Stroock & Stroock & Lavan LLP, special federal tax counsel, will deliver an opinion of counsel that for federal income tax purposes, the notes will be treated as indebtedness and the trust will not be an association, or publicly traded partnership, taxable as a corporaiton or a taxable mortgage pool. SEE "MATERIAL FEDERAL INCOME TAX CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS FOR ADDITIONAL INFORMATION CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS TO THE NOTES. ERISA CONSIDERATIONS The Notes may be acquired by employee benefit plans and other retirement arrangements subject to certain conditions. SEE "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS FOR A MORE COMPLETE DISCUSSION OF THESE ISSUES. LEGAL INVESTMENT CONSIDERATIONS [The notes will not constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984.] There are other restrictions on the ability of some types of investors to purchase the notes that prospective investors should consider. SEE "LEGAL INVESTMENT CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS. RATINGS OF THE NOTES The notes will initially be rated "[ ]" by [Rating Agency], and "[ ]" by [Rating Agency]. These ratings are not recommendations to buy, sell or hold these notes. A rating may be changed or withdrawn at any time by the assigning rating agency. o The ratings do not address the possibility that, as a result of principal prepayments, the yield on your notes may be lower than anticipated. SEE "RATINGS" IN THIS PROSPECTUS SUPPLEMENT FOR A MORE COMPLETE DISCUSSION OF THE NOTE RATINGS. RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE NOTES. YOU SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS. UNPREDICTABILITY AND EFFECT OF PREPAYMENTS Borrowers may prepay their mortgage loans in whole or in part at any time; however, approximately [ ] of the mortgage loans require the payment of a prepayment penalty in connection with any voluntary prepayment during [ ]. The prepayment penalties may be waived by the servicer. A prepayment of a mortgage loan will usually result in a prepayment on the notes. o If you purchase your notes at a discount and principal is repaid slower than you anticipate, then your yield may be lower than you anticipate. o If you purchase your notes at a premium and principal is repaid faster than you anticipate, then your yield may be lower than you anticipate. The rate at which defaults and losses occur on the mortgage loans will affect the rate of payment of principal on the notes. We encourage you to review the information in this prospectus supplement about the underwriting guidelines applied in originating the mortgage loans, the credit quality of the mortgage loans and the collateral for the mortgage loans. SEE "YIELD CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF FACTORS THAT MAY INFLUENCE THE RATE AND TIMING OF PREPAYMENTS ON THE MORTGAGE LOANS. [The prepayment experience of the mortgage loans may differ significantly from that of first lien residential mortgage loans, or junior lien mortgage loans with a principal balance lower than the value of the related property.] [EFFECT OF CREATION AND MAINTENANCE OF OVERCOLLATERALIZATION ON PAYMENTS OF PRINCIPAL ON THE NOTES We describe in this prospectus supplement the underwriting guidelines used in originating the mortgage loans, the collateral for the mortgage loans and the servicing of the mortgage loans. These and other factors will affect the rate of defaults and losses on the mortgage loans, which in turn will affect the rate at which overcollateralization is created or maintained. When overcollateralization is less than the level required by [ ], a portion of interest collections on the mortgage loans will be used to make principal payments on the notes. This will accelerate the rate at which you receive payments of principal. When overcollateralization is greater than the level required by [ ], a portion of principal collections on the mortgage loans will be released to the residual certificate. This will slow the rate at which you receive payments of principal.] GEOGRAPHIC CONCENTRATION OF MORTGAGE LOANS Approximately [ ]% of the mortgage loans expected to be in the trust on the closing date are secured by properties in [California]. The rate of delinquencies and defaults, and therefore the rate of prepayments, on the mortgage loans may be higher than if fewer of the mortgage loans were concentrated in one state because the following conditions in [California] will have a disproportionate impact on the mortgage loans in general: o Weak economic conditions in [California] (which may or may not affect real property values) may affect the ability of borrowers to repay their mortgage loans on time; o Declines in the [California] residential real estate market may reduce the values of properties located in [California], which would result in an increase in the combined loan-to-value ratios; o Properties in [California] may be more susceptible than homes located in other parts of the country to some types of uninsurable hazards, such as earthquakes, as well as floods, mudslides and other natural disasters; and o Any increase in the market value of properties located in [California] would reduce the combined loan-to-value ratios of the mortgage loans and could, therefore, make alternative sources of financing available to the borrowers at lower interest rates, which could result in an increased rate of prepayment of the mortgage loans. Natural disasters affect regions of the United States from time to time, and may result in increased losses on mortgage loans in those regions, or in insurance payments that will constitute prepayments of those mortgage loans. FOR ADDITIONAL INFORMATION REGARDING THE GEOGRAPHIC DISTRIBUTION OF THE MORTGAGE LOANS IN THE TRUST, SEE THE APPLICABLE TABLE UNDER "DESCRIPTION OF THE MORTGAGE POOL" IN THIS PROSPECTUS SUPPLEMENT. [SOME OF THE LOANS IN THE MORTGAGE POOL ARE MORE LIKELY TO DEFAULT THAN OTHERS, AND HIGHER THAN EXPECTED DEFAULTS ON THESE LOANS COULD REDUCE THE YIELD ON YOUR NOTES The payment schedules for most of the mortgage loans in the pool require the borrower to pay off the principal balance of the loan gradually over the life of the loan. Some of the mortgage loans in the pool, however, have payment schedules under which the borrowers makes relatively small payments of principal over the life of the loan, and then must make a large final payment at maturity that pays off the entire principal balance outstanding. This final payment is usually much larger than the previous monthly payments. Because the borrower's ability to make this final payment usually depends on the ability to refinance the loan or sell the underlying property, the risk of default is greater than on other types of loans. High rates of default on these types of loans in the pool will result in greater losses on your notes. The ability of a borrower to refinance the type of loan described above or sell the mortgaged property will depend upon a number of factors, including: o the level of mortgage interest rates; o the borrower's equity in the mortgage property; o general economic conditions; and o the availability of credit. We cannot predict how these factors will affect the default rate of these mortgage loans in the pool. You should refer to "Description of the Mortgage Pool" for information on the percentage of loans in the mortgage pool that consists of these loans.] [EFFECT OF LACK OF PRIMARY MORTGAGE INSURANCE ON THE NOTES Approximately [ ]% of the mortgage loans have loan-to-value ratios greater than [ ]%. None of the mortgage loans are covered by a primary mortgage insurance policy. If borrowers default on their mortgage loans, there is a greater likelihood of losses than if the loans were insured. We cannot assure you that the applicable credit enhancement will be adequate to cover those losses. SEE "DESCRIPTION OF THE NOTES" IN THIS PROSPECTUS SUPPLEMENT.] REAL ESTATE MARKET MAY AFFECT PERFORMANCE OF MORTGAGE LOANS A decline in the real estate values or in economic conditions generally could increase the rates of delinquencies, foreclosures and losses on the mortgage loans to a level that is significantly higher than those experienced currently; and no assurance can be given that values of the properties securing the mortgage loans will not decline since the date of origination of the mortgage loan. If the credit enhancement described in this prospectus supplement is not enough to protect your notes from these losses, the yield on your notes may be reduced. [EARLY PRINCIPAL PAYMENT FROM CASH REMAINING IN PRE-FUNDING ACCOUNT If the cash in the pre-fundingaccount on the closing date is not used to acquire additional mortgage loans by [ ], then that cash will be [paid to you on a proportionate basis with the other noteholders in reduction of the principal balance of your notes.] If the amount of that cash is substantial, you will receive a significant unexpected early payment of principal in (or before) [ ]. We cannot assure you that you will be able to reinvest that money in another investment with a comparable yield.] YOU WILL NOT RECEIVE PHYSICAL NOTES, WHICH CAN CAUSE DELAYS IN DISTRIBUTIONS AND HAMPER YOUR ABILITY TO PLEDGE OR RESELL YOUR NOTES Your ownership of the notes will be registered electronically with DTC. The lack of physical notes could: o result in payment delays on the notes because the indenture trustee will be sending distributions on the notes to DTC instead of directly to you; o make it difficult for you to pledge your notes if physical notes are required by the party demanding the pledge; and o could hinder your ability to resell the notes because some investors may be unwilling to buy notes that are not in physical form. SEE "DESCRIPTION OF THE NOTES -- BOOK-ENTRY REGISTRATION" IN THIS PROSPECTUS SUPPLEMENT. LIMITED ABILITY TO RESELL NOTES The underwriter is not required to assist in resales of the notes, although it may do so. A secondary market for the notes may not develop. If a secondary market does develop, it might not continue or it might not be sufficiently liquid to allow you to resell any of your notes. The certificates will not be listed on any securities exchange. [Additional risk factors to be provided as applicable.] DESCRIPTION OF THE TRUST GENERAL ACE Securities Corp. [ ] Trust [ ] (the "Trust" or the "Issuer") will be a [statutory business trust] [common law trust] formed under the laws of [ ] pursuant to an amended and restated Trust Agreement (the "Trust Agreement") dated as of [ ] (the "Cut-off Date") between ACE Securities Corp. as depositor (the "Depositor") and [ ] as owner trustee (the "Owner Trustee"), for the transactions described in this prospectus supplement. The Trust will not engage in any activity other than acquiring, holding and managing the Mortgage Loans (as defined in this prospectus supplement) and the other assets of the Trust and proceeds from the Mortgage Loans and other assets, issuing the Securities (as defined in this prospectus supplement), making payments on the Securities, and engaging in related activities. On or about [ ] (the "Closing Date"), the Trust will purchase the Mortgage Loans from the Depositor pursuant to a Sale and Servicing Agreement (as amended and supplemented from time to time, the "Sale and Servicing Agreement") dated as of the Cut-off Date, among the Trust, the Depositor, the Servicer and [ ], as indenture trustee (the "Indenture Trustee"). The Trust's principal offices are located in [ ]. THE OWNER TRUSTEE [ ] will act not in its individual capacity but solely as the Owner Trustee under the Trust Agreement. [ ] is a [ ] banking corporation and its principal offices are located at [ ]. The compensation of the Owner Trustee will be paid by [ ]. THE RESIDUAL CERTIFICATE The equity interest in the Trust will be represented by a residual interest certificate (the "Residual Certificate"). The holder of the Residual Certificate (the "Residual Certificateholder," and together with the Noteholders (as defined in this prospectus supplement), the "Securityholders") will be entitled to receive [to be described as applicable]. DESCRIPTION OF THE NOTES GENERAL The Trust will issue the Class [ ] Notes (the "Notes") pursuant to an Indenture dated as of the Cut-off Date (the "Indenture") between the Issuer and the Indenture Trustee. The Trust will also issue the Residual Certificate pursuant to the Trust Agreement. The Notes and the Residual Certificate are referred to in this prospectus supplement as the "Securities." Only the Notes are offered by this prospectus supplement. The Notes will be secured by the Trust Estate (as defined below) pursuant to the Indenture. The "Trust Estate" will consist primarily of [describe as applicable]. The Notes will be issued in the approximate initial total principal amount specified on the cover page of this prospectus supplement (the "Original Class Principal Amount"). The total principal amount of the Notes outstanding at any time is referred to in this prospectus supplement as the "Class Principal Amount." The Residual Certificate will be issued without a principal amount or interest rate, and will be entitled only to the amounts that are described in this prospectus supplement. The Original Class Principal Amount of the Notes may be increased or decreased by up to 5% to the extent that the Cut-off Date Balance (as defined in this prospectus supplement) of the Mortgage Loans is increased or decreased as described under "Description of the Mortgage Pool" in this prospectus supplement. Payments on the Notes will be made on the [25th] day of each month or, if the [25th] day is not a Business Day, on the next succeeding Business Day, commencing in [ ] (each, a "Distribution Date"), to holders of Notes ("Noteholders") of record on the applicable Record Date. The "Record Date" for each Distribution Date will be the close of business on the last Business Day of the calendar month immediately before the month in which that Distribution Date occurs. o A "Business Day" is generally any day other than a Saturday or Sunday or a day on which banks in [New York] are closed. Payments on the Notes will be made to each registered holder entitled to these payments, either (1) by check mailed to the Noteholder's address as it appears on the books of the Indenture Trustee, or (2) at the request, submitted to the Indenture Trustee in writing not later than the related Record Date, of any Noteholder (at the Noteholder's expense) in immediately available funds; provided, that the final payment for any Note will be made only upon presentation and surrender of the Note at the Corporate Trust Office (as defined in this prospectus supplement) of the Indenture Trustee or the office of the Note Registrar (as defined in this prospectus supplement). See "-- The Indenture Trustee" in this prospectus supplement. [PRE-FUNDING ACCOUNT On the Closing Date approximately $[ ] (the "Pre-Funded Amount") will be deposited in an account (the "Pre-Funding Account") maintained by [ ]. During the period (the "Pre-Funding Period") from [ ] until [ ], the Pre-Funding Amount will be maintained in the Pre-Funding Account. The Pre-Funded Amount will be reduced during the Pre-Funding Period by the amount of Subsequent Mortgage Loans (as defined in this prospectus supplement) purchased by the Trust in accordance with the [Sale and Servicing Agreement]. During the Pre-Funding Period, the Pre-Funded Amount will be used only to purchase Subsequent Mortgage Loans. Immediately following the Pre-Funding Period, any Pre-Funded Amount remaining will be distributed to [to be provided as applicable]. Amounts on deposit in the Pre-Funding Account will be invested in [to be provided as applicable] and all investment earnings on amounts on deposit in the Pre-Funding Account will be distributed to [to be provided as applicable] following the Pre-Funding Period.] BOOK-ENTRY REGISTRATION GENERAL. The Notes (the "Book-Entry Notes") will be issued, maintained and transferred on the book-entry records of The Depository Trust Company ("DTC") in the United States [, or through Clearstream Banking, societe anonyme ("Clearstream Luxembourg") or the Euroclear System ("Euroclear") in Europe] and through [its/their] participating organizations (each, a "Participant"). The Book-Entry Notes will be issued in minimum denominations in principal amount of $25,000 and integral multiples of $1 in excess of $25,000. Each Class of Book-Entry Notes will be represented by one or more certificates registered in the name of the nominee of DTC. ACE Securities Corp. (the "Depositor") has been informed by DTC that DTC's nominee will be Cede & Co. [Clearstream Luxembourg and Euroclear will hold omnibus positions on behalf of their Participants through customers' securities accounts in Clearstream Luxembourg's and Euroclear's names on the books of their respective depositaries, which in turn will hold positions in customers' securities accounts in the depositaries' names on the books of DTC.] No person acquiring an interest in a Book-Entry Note (each, a "Beneficial Owner") will be entitled to receive a certificate representing an interest (a "Definitive Note"), except as set forth below under "-- Definitive Notes" and in the prospectus under "Description of the Securities -- Book-Entry Registration and Definitive Securities -- Definitive Securities." Unless and until Definitive Notes are issued, it is anticipated that: o the only "Noteholder" of the Notes will be Cede & Co., as nominee of DTC, and Beneficial Owners will not be Noteholders as that term is used in the Indenture. o Beneficial Owners will receive all distributions of principal of, and interest on, the Offered Notes from the Indenture Trustee through DTC [, Clearstream Luxembourg or Euroclear, as applicable,] and [its/their] Participants. o while the Notes are outstanding, under the rules, regulations and procedures creating and affecting DTC [Clearstream Luxembourg and Euroclear] and [its/their] operations, DTC [Clearstream Luxembourg and Euroclear] [is/are] required to make book-entry transfers among Participants on whose behalf it acts with respect to the Notes and is required to receive and transmit distributions of principal of, and interest on, the Notes. Participants and indirect participants with whom Beneficial Owners have accounts with respect to Notes are similarly required to make book-entry transfers and receive and transmit distributions on behalf of their respective Beneficial Owners. Accordingly, although Beneficial Owners will not possess certificates, DTC [Clearstream Luxembourg and Euroclear] [has/have] in place a mechanism by which Beneficial Owners will receive distributions and will be able to transfer their interest. None of the Depositor, [ ] ("[ ]'), the Servicer , the Owner Trustee or the Indenture Trustee [or additional parties] (as those terms are defined in this prospectus supplement) will have any responsibility for any aspect of the records relating to or payments made on account of beneficial ownership interests of the Book-Entry Notes held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests. For a more complete description of book-entry registration and clearance and the rules and regulations governing DTC [,Clearstream Luxembourg and Euroclear], see "Description of the Securities -- Book-Entry Registration and Definitive Securities" in the prospectus". DEFINITIVE NOTES. Definitive Notes 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 Securities -- Book-Entry Registration and Definitive Securities -- Definitive Securities." Upon the occurrence of an event described in that section, the Trustee is required to direct DTC to notify Participants who have ownership of Book-Entry Notes as indicated on the records of DTC of the availability of Definitive Notes for their Book-Entry Notes. Upon surrender by DTC of the Definitive Notes representing the Book-Entry Notes and upon receipt of instructions from DTC for re-registration, the Trustee will re-issue the Book-Entry Notes as Definitive Notes in the respective principal amounts owned by individual Beneficial Owners, and thereafter the Trustee will recognize the holders of the Definitive Notes as Noteholders under the Indenture and the Sale and Servicing Agreement. PAYMENTS Payments on the Notes on each Distribution Date will be made from the Available Collection Amount. The Available Collection Amount will be determined as [to be provided as applicable.] o With respect to each Distribution Date, the "Due Period" is the calendar month immediately before that Distribution Date. PAYMENTS OF INTEREST. Interest on the Class Principal Amount of the Notes will accrue during each Accrual Period (as defined in this prospectus supplement) at the interest rate specified on the front cover of this prospectus supplement (the "Interest Rate") and will be payable to Noteholders on each Distribution Date, starting in [ ]. [If the Residual Certificateholder does not exercise its option to purchase the Mortgage Loans and the other assets of the Trust when it is first entitled to do so, as described under "--Optional Redemption" in this prospectus supplement, then with respect to each succeeding Distribution Date the Interest Rate will be increased [to be provided as applicable.]] See "-- Optional Redemption" in this prospectus supplement. Interest on the Notes will be calculated on the basis of a 360-day year of twelve 30-day months. o The "Accrual Period" for the Notes will be the calendar month immediately preceding the month in which the related Distribution Date occurs. Payments of interest on the Notes will be made from [to be provided as applicable]. PAYMENTS OF PRINCIPAL. Principal payments will be made to Noteholders on each Distribution Date in an amount generally equal to [to be provided as applicable]. o The "Principal Distribution Amount" for any Distribution Date will be equal to the sum of [to be provided as applicable]. PAYMENT PRIORITIES On each Distribution Date, the Available Funds will be applied in the following order of priority: [to be provided as applicable.] OVERCOLLATERALIZATION On the Closing Date the Cut-off Date Balance is expected to exceed the Original Class Principal Amount of the Notes by approximately $[ ]. The weighted average Net Mortgage Loan Rate (as defined below) of the Mortgage Loans is generally expected to be higher than the Interest Rate of the Notes, thus generating excess interest collections. To the extent described in this prospectus supplement, Excess Spread will be applied on any Distribution Date as [to be provided as applicable]. o The "Net Mortgage Loan Rate" for any Mortgage Loan equals [to be provided as applicable]. MATURITY DATE The Class Principal Amount of the Notes and all interest accrued and unpaid on the Notes will be payable in full on [ ] (the "Maturity Date"). See "--Rights of Noteholders Upon Occurrence of an Event of Default" below. The actual final Distribution Date for the Notes could be substantially earlier than the Maturity Date. REPORTS TO NOTEHOLDERS On each Distribution Date the Indenture Trustee will make available to each Noteholder a statement containing the following information: o the amount of principal distributed on that date to Noteholders; o the amount of interest distributed on that date to Noteholders; o the amount of any outstanding Noteholders' Interest Carryforward Amount for the Notes after distributions on that date; o the Class Principal Amount of the Notes after distributions on that date; o the amount of the Servicing Fees paid with respect to that date; o the Total Loan Balance as of the related Distribution Date; o the number and total Principal Balance of Mortgage Loans (1) remaining outstanding, (2) delinquent by one, two, three or four or more monthly payments, (3) in foreclosure, and (4) with respect to REO Property; o any amount distributed to the holder of the Residual Certificate; and o other information to the extent provided in the Sale and Servicing Agreement. OPTIONAL REDEMPTION On any Distribution Date after the date on which the Total Loan Balance is less than [ ]% of the Cut-off Date Balance, [ ] will (subject to the terms of the Sale and Servicing Agreement) have the option to purchase the Mortgage Loans, any REO Property and any other assets of the Trust for the Termination Price. If [ ] does not exercise that option, [ ] will then have the same purchase option. If either purchase option is exercised, the Notes will be redeemed and the Residual Certificate and the Trust will be terminated (this event, an "Optional Redemption"). If the Residual Certificateholder does not exercise its option as described above when it is first entitled to do so, the Interest Rate of the Notes will be increased as described under "-- Payments of Interest" in this prospectus supplement. RIGHTS OF NOTEHOLDERS UPON OCCURRENCE OF EVENT OF DEFAULT Under the Indenture, a failure to pay the full amount of the Noteholders' Interest Distribution Amount within five days of the Distribution Date on which that payment is due (without regard to the amount of Available Funds) or failure to pay the entire outstanding principal amount of the Notes on the Maturity Date, will constitute an event of default (an "Event of Default"). Upon the occurrence of an Event of Default, the holders of Notes evidencing more than [ ]% of the Class Principal Amount of the Notes then outstanding may exercise their remedies under the Indenture. These remedies include [to be provided as applicable]. See "Description of the Agreements -- Material Terms of the Indenture" in the prospectus. THE INDENTURE TRUSTEE [ ], a [ ], will be the Indenture Trustee under the Indenture. The Indenture Trustee will be entitled to [describe applicable fees of the indenture trustee]. The Indenture Trustee's "Corporate Trust Office" is located at [ ], or any address as the Indenture Trustee may designate from time to time by notice to the Noteholders, the Depositor and the Servicer. [THE INSURANCE POLICY The following information has been provided by [ ] (the "Insurer") for inclusion in this prospectus supplement. Neither the Depositor nor the Underwriter makes any representation as to the accuracy or completeness of this information. The Insurer does not accept any responsibility for the accuracy or completeness of this prospectus supplement or any information or disclosure contained in this prospectus supplement, or omitted from this prospectus supplement, other than with respect to the accuracy of the information regarding the Note Guaranty Insurance Policy (the "Insurance Policy") and the Insurer set forth below under this heading "The Insurance Policy." Additionally, the Insurer makes no representation regarding the Notes or the advisability of investing in the Notes. THE INSURER [To be provided as applicable.] INSURER FINANCIAL INFORMATION [To be provided as applicable.] WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION ABOUT THE INSURER [To be provided as applicable.] FINANCIAL STRENGTH RATINGS OF THE INSURER [To be provided as applicable.] THE INSURANCE POLICY [To be provided as applicable.]] DESCRIPTION OF THE MORTGAGE POOL GENERAL The Mortgage Pool will consist of approximately [ ] Mortgage Loans with original terms to maturity of not more than [thirty] years, having a total Principal Balance as of the Cut-off Date of approximately $[ ] (the "Cut-off Date Balance"). The Mortgage Loans are secured by [to be provided as applicable] ("Mortgages"). All of the Mortgage Loans will be [description of Mortgage Loans.] Generally, the Mortgage Loans were originated or acquired by the Originator (as defined in this prospectus supplement) in one of the following ways: o [to be provided as applicable]. For a description of the underwriting criteria applicable to the Mortgage Loans, see "The Originator -- Underwriting Criteria" in this prospectus supplement. The Servicer will be required to service the Mortgage Loans pursuant to the Sale and Servicing Agreement and will be compensated for these services as described under "Description of the Transfer and Servicing Agreements -- Servicing" in this prospectus supplement. PAYMENTS ON THE MORTGAGE LOANS [To be provided as applicable.] CHARACTERISTICS OF THE MORTGAGE LOANS The Mortgage Loans are expected to have the following approximate total characteristics as of the Cut-off Date. Prior to the issuance of the Notes, Mortgage Loans may be removed from the Mortgage Pool as a result of incomplete documentation or otherwise, if the Depositor deems removal necessary or appropriate. In addition, a limited number of other home loans may be included in the Mortgage Pool prior to the issuance of the Notes. Wherever reference is made in this prospectus supplement to a percentage of some or all of the Mortgage Loans, the percentage is determined (unless otherwise specified) on the basis of the total principal balance of the related Mortgage Loans as of the Cut-off Date. Approximately [ ] of the Mortgage Loans provide for payment by the borrower of a prepayment premium in connection with full or partial prepayments of principal within [three to five years] of the date of origination of the loan, generally equal to [to be provided as applicable]. The Mortgage Loan Rates of the Mortgage Loans range from approximately [ ]% annually to [ ]% annually. The weighted average Mortgage Loan Rate of the Mortgage Loans is approximately [ ]% annually. The Principal Balances of the Mortgage Loans range from approximately $[ ] to $[ ]. The Mortgage Loans have an average Principal Balance of approximately $[ ]. The weighted average Combined Loan-to-Value Ratio at origination of the Mortgage Loans is approximately [ ]%. No more than approximately [ ]% of the Mortgage Loans are secured by Mortgaged Properties located in any one zip code area. The following tables set forth as of the Cut-off Date the number, total Principal Balance and percentage of the Mortgage Loans having the stated characteristics shown in the tables in each range. (The sum of the amounts of the total Principal Balances and the percentages in the following tables may not equal the totals due to rounding.)
CUT-OFF DATE PRINCIPAL BALANCES RANGE OF NUMBER OF TOTAL PERCENTAGE OF PRINCIPAL BALANCES ($) MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00% The average Cut-off Date Principal Balance is approximately $[ ].
LOAN-TO-VALUE RATIOS RANGE OF NUMBER OF TOTAL PERCENTAGE OF LOAN-TO-VALUE RATIOS(%) MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00% The weighted average original Loan-to-Value Ratio is approximately [ ]%
MORTGAGE RATES RANGE OF NUMBER OF TOTAL PERCENTAGE OF MORTGAGE RATES(%) MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ --------- Total....................... $ 100.00% - -------------- * Reflects current Mortgage Rates of Adjustable Rate Mortgage Loans. The weighted average Mortgage Rate is approximately [ ]% per annum.
LOAN TYPES LOAN TYPE NUMBER OF TOTAL PERCENTAGE OF MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00%
ORIGINAL TERMS TO MATURITY RANGE OF MATURITIES (MONTHS) NUMBER OF TOTAL PERCENTAGE OF MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00% The weighted average original term to maturity is approximately [ ] months.
REMAINING TERMS TO MATURITY REMAINING TERM TO NUMBER OF TOTAL PERCENTAGE OF MATURITY (MONTHS) MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00% The weighted average remaining term to maturity of the fully amortizing Mortgage Loans is approximately [ ] months.
GEOGRAPHIC DISTRIBUTION STATE NUMBER OF TOTAL PERCENTAGE OF MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00%
PROPERTY TYPES PROPERTY TYPE NUMBER OF TOTAL PERCENTAGE OF MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00%
LOAN PURPOSES LOAN PURPOSE NUMBER OF TOTAL PERCENTAGE OF MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00%
OCCUPANCY STATUS OCCUPANCY STATUS NUMBER OF TOTAL PERCENTAGE OF MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00%
DOCUMENTATION TYPES DOCUMENTATION TYPES NUMBER OF TOTAL PERCENTAGE OF MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00%
CREDIT GRADES CREDIT GRADE NUMBER OF TOTAL PERCENTAGE OF MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00%
PREPAYMENT PENALTIES PREPAYMENT PENALTY NUMBER OF TOTAL PERCENTAGE OF MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE LOANS BY TOTAL PRINCIPAL BALANCE $ % ---- ------------------ -------- Total....................... $ 100.00%
[SUBSEQUENT MORTGAGE LOANS The obligation of the Trust to purchase additional Mortgage Loans (the "Subsequent Mortgage Loans") on [any] date, as specified in the [Sale and Servicing Agreement] (each, a "Subsequent Transfer Date") will be subject to the Subsequent Mortgage Loans meeting the following criteria: [to be provided as applicable]. These criteria will be based on the characteristics of the Subsequent Mortgage Loans on the related Subsequent Transfer Date. The characteristics of Subsequent Mortgage Loans may vary significantly from time to time, subject to the requirements described above, and may bear no particular relationship to the characteristics of the initial Mortgage Loans at any time. It is expected that a substantial portion of the Subsequent Mortgage Loans will be [to be provided as applicable.]] ADDITIONAL INFORMATION The description in this prospectus supplement of the Mortgage Pool and the Mortgaged Properties is based upon the Mortgage Pool as constituted at the close of business on the Cut-off Date. A Current Report on Form 8-K will be available to purchasers of the Notes and will be filed, together with the Sale and Servicing Agreement, the Indenture and the Trust Agreement, with the Securities and Exchange Commission (the "SEC") within fifteen days after the initial issuance of the Notes. In the event that Mortgage Loans are removed from or added to the Mortgage Pool as described in this prospectus supplement under "Description of the Mortgage Pool," the removal or addition, to the extent material, will be noted in the Current Report on Form 8-K. THE ORIGINATOR GENERAL [Describe the Originator.] UNDERWRITING CRITERIA The information contained in this prospectus supplement regarding the Originator's underwriting requirements and practices was obtained from publicly available information regarding asset-backed notes secured by loans made by the Originator that are similar to the Mortgage Loans and not from the Originator directly. As a result, there can be no assurance that the Mortgage Loans were originated, in whole or in part, in accordance with these underwriting requirements and practices, or that these underwriting requirements and practices were in effect when the Mortgage Loans were originated. [Describe Originator's underwriting guidelines.] THE SERVICER The following information has been provided by the Servicer. Neither the Depositor nor the Underwriter makes any representation as to the accuracy or completeness of this information. GENERAL [ ] (the "Servicer") will service the Mortgage Loans pursuant to the terms of the Sale and Servicing Agreement. [Description of the servicer.] DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS The following summary describes terms of the Sale and Servicing Agreement, the Indenture, the Trust Agreement, and the Administration Agreement (collectively, the "Transfer and Servicing Agreements"). The summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of the Transfer and Servicing Agreements. The following summary supplements, and to the extent inconsistent, replaces, the description of the general terms and provisions of the Transfer and Servicing Agreements under the headings "Description of the Agreements" in the prospectus. SALE AND ASSIGNMENT OF THE MORTGAGE LOANS On the Closing Date, [ ] will sell the Mortgage Loans (other than the right to receive some of the charges payable by borrowers) to the Depositor, and the Depositor will sell the Mortgage Loans (other than those amounts) to the Trust. The Trust will, concurrently, deliver or cause to be delivered the Securities to the Depositor. The Trust will pledge and assign the Mortgage Loans to the Indenture Trustee in exchange for the Notes. Each Mortgage Loan will be identified in a schedule appearing as an exhibit to the Sale and Servicing Agreement (the "Mortgage Loan Schedule"). [In addition, the Depositor will, as to each Mortgage Loan, deliver to a custodian appointed by the Indenture Trustee (the "Custodian") the following documents (together, with respect to each Mortgage Loan, a "Mortgage Loan File"): o the related Note endorsed to the order of the Indenture Trustee, or in blank, without recourse, o any assumption and modification agreements and the Mortgage with evidence of recording indicated on the Mortgage (except for any Mortgage not returned from the public recording office), o an assignment of the Mortgage in the name of the Indenture Trustee, or in blank, in recordable form, and o any intervening assignments of the Mortgage.] Assignments of the Mortgages to the Indenture Trustee will be recorded following the Closing Date in the real property records of the states in which the related Mortgaged Properties are located to protect the Indenture Trustee's interest in the Mortgage Loans against the claims of creditors of [ ] or subsequent purchasers. In the event that, with respect to any Mortgage Loan, the Depositor cannot deliver the assignment with evidence of recording on the Mortgage Loan concurrently with the conveyance of the Mortgage Loan under the Sale and Servicing Agreement because they have not yet been returned by the public recording office, the Depositor will deliver or cause to be delivered to the Custodian a certified true photocopy of the assignment. The Depositor will deliver or cause to be delivered to the Custodian any assignment with evidence of recording indicated on the assignment upon receipt of the assignment from the public recording office. The Custodian will review (or cause to be reviewed) each Mortgage Loan File within ninety days after the conveyance of the related Mortgage Loan to the Trust to ascertain that all required documents have been executed and received. Under the terms of the agreement (the "Mortgage Loan Sale Agreement") pursuant to which the Depositor will purchase the Mortgage Loans from [ ], and of the Sale and Servicing Agreement, the Custodian will conduct an initial review of the Mortgage Loan documents and will notify the Depositor and [ ] as to each Mortgage Loan document that either has not yet been delivered to the Depositor as required or appears to be not properly executed, not in conformity with the description of the Mortgage Loan on the Mortgage Loan schedule or otherwise defective. If any Mortgage Loan document is not delivered or any material defect in a document is not cured within the time period specified in the Mortgage Loan Sale Agreement, [ ] will be required to repurchase the affected Mortgage Loan for a price equal to the unpaid principal balance of the Mortgage Loan plus accrued interest on the Mortgage Loan (the "Repurchase Price") or, in some circumstances, to substitute another Mortgage Loan that satisfies the requirements specified in the Sale and Servicing Agreement. [ ] will make to the Depositor under the Mortgage Loan Sale Agreement representations and warranties that include representations and warranties similar to those summarized in the prospectus under the heading "Description of the Agreements -- Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements -- Representations and Warranties; Repurchases." The Depositor's rights under these representations and warranties will be assigned to the Indenture Trustee for the benefit of the Noteholders. In the event of a breach of any of these representations or warranties that materially and adversely affects the value of any Mortgage Loan or the interests of the Noteholders, [ ] will be obligated, within 60 days following its discovery of a breach or receipt of notice of a breach, to cure the breach or purchase the affected Mortgage Loan from the Trust for the Repurchase Price or, in some circumstances, to substitute another Mortgage Loan. No assurance can be given that, at any particular time, [ ] will be capable, financially or otherwise, of repurchasing defective Mortgage Loans or substituting additional Mortgage Loans for defective Mortgage Loans. TRUST FEES AND EXPENSES The Servicer is entitled to the Servicing Fee and reimbursement for specific expenses as described under "-- Servicing Compensation and Payment of Expenses" below. The fees and expenses of the Indenture Trustee, the Owner Trustee and the Custodian will be paid by [ ]. VOTING RIGHTS Voting rights of Securityholders under the Transfer and Servicing Agreements will be allocated among the Notes and the Residual Certificate as provided in the Transfer and Servicing Agreements. GENERAL SERVICING PROVISIONS The Mortgage Loans will be serviced by the Servicer in accordance with the provisions of the Sale and Servicing Agreement. [Describe servicing provisions as applicable.] NO DELINQUENCY ADVANCES In the event of a delinquency or default with respect to a Mortgage Loan, neither the Servicer nor any Subservicer (as defined below) will have any obligation to advance scheduled monthly payments of principal or interest with respect to the Mortgage Loan. SERVICING ADVANCES The Servicer or any Subservicer will make reasonable and customary expense advances with respect to the Mortgage Loans (each, a "Servicing Advance") and will be entitled to reimbursement for Servicing Advances as described in this prospectus supplement. Servicing Advances may include costs and expenses advanced for the preservation, restoration and protection of any Mortgaged Property, including advances to pay delinquent real estate taxes and assessments. Any Servicing Advances by the Servicer or any Subservicer will be reimbursable from late collections on the related Mortgage Loan, or with respect to any Liquidated Mortgage Loan from the related Liquidation Proceeds. Servicing Advances remaining outstanding will be reimbursed, to the extent of Available Funds, as described under "Description of the Notes -- Payment Priorities." INSURANCE COVERAGE The Servicer is required to obtain and thereafter maintain in effect a bond or similar form of insurance coverage (which may provide blanket coverage) insuring against loss occasioned by the errors and omissions of its officers and employees. EVIDENCE AS TO COMPLIANCE The Sale and Servicing Agreement will provide that each year a firm of independent accountants will furnish a statement to the Indenture Trustee to the effect that the firm has examined the necessary documents and records relating to the servicing of home loans by the Servicer and that, on the basis of that examination, the firm is of the opinion that the servicing has been conducted in accordance with applicable accounting standards, except for those exceptions that the firm believes to be immaterial and those exceptions set forth in the statement. SERVICING COMPENSATION AND PAYMENT OF EXPENSES The Servicer will be paid a monthly fee (the "Servicing Fee") with respect to each Mortgage Loan calculated at [ ]% annually (the "Servicing Fee Rate") on the outstanding principal balance of each Mortgage Loan. No Servicing Fee will be payable on a Liquidated Mortgage Loan unless the Servicer determines that additional collection efforts are warranted with respect to that Mortgage Loan. The Servicer will be entitled to reimbursement from collections on the Mortgage Loans for some of its expenses before any amounts are paid to Noteholders. SUBSERVICING The Servicer will be prohibited from assigning the responsibility for servicing the Mortgage Loans, except as permitted by the Sale and Servicing Agreement, but it may employ one or more subservicers ("Subservicers") as provided under the Sale and Servicing Agreement. If the Servicer chooses to employ Subservicers, the Servicer will remain liable for fulfillment of its obligations under the Sale and Servicing Agreement, and will be considered to have itself received any payment received by a Subservicer whether or not the Subservicer actually remits that payment. RESIGNATION OR REMOVAL OF THE SERVICER The Servicer will agree in the Sale and Servicing Agreement not to resign except with the consent of [ ], unless the Servicer delivers to [ ] an opinion of legal counsel to the effect that the Servicer is no longer permitted under applicable law to perform the duties of the Servicer under the Sale and Servicing Agreement. If the Servicer is in default under the Sale and Servicing Agreement, the Indenture Trustee or Noteholders having a majority of voting rights may remove the Servicer. [Events of default include: o failure by the Servicer to remit any required payment to the Indenture Trustee for one Business Day after receipt of written notice that the payment has not been made; o failure by the Servicer to deposit collections or other recoveries on the Mortgage Loans in the Collection Account on a daily basis in accordance with the Sale and Servicing Agreement; o failure by the Servicer to fulfill any other material requirement under the Sale and Servicing Agreement within the applicable time period; o failure by the Servicer to be qualified to service home loans for either Fannie Mae or Freddie Mac; o failure by the Servicer to maintain any applicable licenses in each jurisdiction where Mortgaged Properties are located; o failure by the Servicer to maintain a minimum net worth of $25,000,000; o insolvency of the Servicer; and o other events specified in the Sale and Servicing Agreement.] [If the Servicer is removed, the Indenture Trustee will immediately assume the role of Servicer under the Sale and Servicing Agreement unless another Servicer is appointed pursuant to the Sale and Servicing Agreement. The Indenture Trustee may continue to service the Mortgage Loans if it is legally qualified to do so or may appoint a successor Servicer as provided in the Sale and Servicing Agreement]. COLLECTION ACCOUNT, NOTE DISTRIBUTION ACCOUNT AND CERTIFICATE DISTRIBUTION ACCOUNT The Servicer is required to deposit in a segregated account (the "Collection Account") within [ ] Business Days of receipt all payments received on or after the Cut-off Date on account of principal and interest on the Mortgage Loans, all Net Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds, any amounts payable in connection with the repurchase or substitution of any Mortgage Loan and any amount required to be deposited in the Collection Account in connection with the redemption of the Notes. Withdrawals will be made from the Collection Account only for the purposes specified in the Sale and Servicing Agreement. The Collection Account may be maintained at any depository institution that satisfies the requirements specified in the Sale and Servicing Agreement. Amounts on deposit in the Collection Account will be invested as provided in the Sale and Servicing Agreement. All interest and any other investment earnings on amounts on deposit in the Collection Account will be paid to [ ]. Any net losses on these investments will be paid by [ ]. The Servicer will establish and maintain with the Paying Agent an account on behalf of the Noteholders, into which amounts released from the Collection Account for payment to the Noteholders will be deposited and from which all payments to the Noteholders will be made (the "Note Distribution Account"). The Servicer will also establish and maintain with the Paying Agent an account in the name of the Owner Trustee on behalf of the Residual Certificateholder, into which amounts released from the Collection Account for distribution to the Residual Certificateholder will be deposited and from which all distributions to the Residual Certificateholder will be made (the "Certificate Distribution Account"). On the [ ] day of each month, or if the [ ] day is not a Business Day, the preceding Business Day, the Servicer will remit the Available Funds to the Paying Agent for deposit into the Note Distribution Account and Certificate Distribution Account by making appropriate withdrawals from the Collection Account. On each Distribution Date, the Indenture Trustee will make withdrawals from the Note Distribution Account and Certificate Distribution Account for application as described under "Description of the Notes -- Payment Priorities" in this prospectus supplement. Amounts on deposit in the Note Distribution Account and Certificate Distribution Account will be invested as provided in the Sale and Servicing Agreement. All interest and any other investment earnings on amounts on deposit in the Note Distribution Account and Certificate Distribution Account will be retained by the Indenture Trustee as its compensation. Any net losses on these investments will be paid by the Indenture Trustee. THE OWNER TRUSTEE AND INDENTURE TRUSTEE The Owner Trustee, the Indenture Trustee and any of their respective affiliates may hold Securities in their own names or as pledgees. For the purpose of meeting the legal requirements of some jurisdictions, the Servicer, the Owner Trustee and the Indenture Trustee acting jointly (or in some instances, the Owner Trustee or the Indenture Trustee acting alone) will have the power to appoint co-trustees or separate trustees of all or any part of the Trust. In the event of an appointment of another trustee all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee by the Sale and Servicing Agreement and the Trust Agreement and upon the Indenture Trustee by the Indenture will be conferred or imposed upon the Owner Trustee and the Indenture Trustee, respectively, and in each case the separate trustee or co-trustee, jointly, or, in any jurisdiction in which the Owner Trustee or Indenture Trustee will be incompetent or unqualified to perform particular acts, singly upon the separate trustee or co-trustee, which will exercise and perform these rights, powers, duties and obligations solely at the direction of the Owner Trustee or the Indenture Trustee, as applicable. The Owner Trustee and the Indenture Trustee may resign at any time, in which event the Servicer will be obligated to appoint a successor to the Owner Trustee or the Indenture Trustee, as the case may be. The Servicer may also remove the Owner Trustee or the Indenture Trustee if either ceases to be eligible to continue as Owner Trustee or Indenture Trustee under the Trust Agreement or the Indenture, as the case may be, becomes legally unable to act or becomes insolvent. In these circumstances, the Servicer will be obligated to appoint a successor Owner Trustee or a successor Indenture Trustee, as applicable. Any resignation or removal of the Owner Trustee or Indenture Trustee and appointment of a successor Owner Trustee or Indenture Trustee will not become effective until acceptance of the appointment by the successor. The Trust Agreement and Indenture will provide that the Owner Trustee and Indenture Trustee will be entitled to indemnification by [ ] and the Depositor for, and will be held harmless against, any loss, liability or expense incurred by the Owner Trustee or Indenture Trustee not resulting from its own willful misfeasance, bad faith or negligence (other than by reason of a breach of any of its representations or warranties to be set forth in the Trust Agreement or Indenture, as the case may be). DUTIES OF THE OWNER TRUSTEE AND INDENTURE TRUSTEE The Owner Trustee will make no representations as to the validity or sufficiency of the Trust Agreement, the Residual Certificate (other than the execution and authentication of the Residual Certificate), the Notes or any Mortgage Loans or related documents, and will not be accountable for the use or application by the Depositor or the Servicer of any funds paid to the Depositor or the Servicer in respect of the Securities or the Mortgage Loans, or the investment of any monies by the Servicer before these monies are deposited into the Collection Account, the Note Distribution Account or the Certificate Distribution Account. So long as no Event of Default has occurred and is continuing, the Owner Trustee will be required to perform only those duties specifically required of it under the Trust Agreement. Generally, those duties will be limited to the receipt of the various certificates, reports or other instruments required to be furnished to the Owner Trustee under the Trust Agreement, in which case it will only be required to examine them to determine whether they conform to the requirements of the Trust Agreement. The Owner Trustee will not be charged with knowledge of a failure by the Servicer to perform its duties under the Sale and Servicing Agreement, which failure constitutes an Event of Default, unless the Owner Trustee has actual knowledge of any failure. The Owner Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Trust Agreement or to make any investigation of matters arising under the Trust Agreement or to institute, conduct or defend any litigation under the Trust Agreement or in relation to the Trust Agreement at the request, order or direction of the holder of the Residual Certificate, unless the Residual Certificateholder has offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred in or by the exercise of its rights or powers, an investigation by it of matters arising or the institution or defense of any litigation. Subject to the rights or consent of the Noteholders and Indenture Trustee, the Residual Certificateholder will not have any right under the Trust Agreement to institute any proceeding with respect to the Trust Agreement, unless the Residual Certificateholder previously has given to the Owner Trustee written notice of the occurrence of an Event of Default and (1) the Event of Default arises from the Servicer's failure to remit payments when due or (2) the holder of the Residual Certificate has made written request upon the Owner Trustee to institute a proceeding in its own name as the Owner Trustee under the Trust Agreement and have offered to the Owner Trustee reasonable indemnity, and the Owner Trustee for 30 days has neglected or refused to institute any proceedings. The Indenture Trustee will make no representations as to the validity or sufficiency of the Indenture, the Residual Certificate, the Notes (other than the execution and authentication of the Notes) or any Mortgage Loans or related documents, and will not be accountable for the use or application by the Depositor, the Servicer or the Owner Trustee of any funds paid to the Depositor, the Servicer or the Owner Trustee in respect of the Securities or the Mortgage Loans, or the investment of any monies by the Servicer before those monies are deposited into the Collection Account or the Note Distribution Account. So long as no Event of Default under the Indenture or the Sale and Servicing Agreement has occurred or is continuing, the Indenture Trustee will be required to perform only those duties specifically required of it under the Transfer and Servicing Agreements. Generally, those duties will be limited to the receipt of the various certificates, reports or other instruments required to be furnished to the Indenture Trustee under the Indenture, in which case it will only be required to examine them to determine whether they conform to the requirements of the Indenture. The Indenture Trustee will not be charged with knowledge of a failure by the Servicer to perform its duties under the Sale and Servicing Agreement, which failure constitutes an Event of Default under the Indenture or the Sale and Servicing Agreement, unless the Indenture Trustee obtains actual knowledge of any failure. The Indenture Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Indenture or to make any investigation of matters arising under the Indenture or to institute, conduct or defend any litigation under the Indenture or in relation to the Indenture at the request, order or direction of any of the Noteholders, unless those Noteholders have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred in or by an exercise of any of its rights or powers, an investigation of matters arising or the institution or defense of any litigation. No Noteholder will have any right under the Indenture to institute any proceeding with respect to the Indenture, unless the holder previously has given to the Indenture Trustee written notice of the occurrence of an Event of Default and (1) the Event of Default arises from the Servicer's failure to remit payments when due or (2) Noteholders evidencing not less than [ ]% of the Class Principal Amount of the Notes, acting together as a single class, have made written request upon the Indenture Trustee to institute a proceeding in its own name as the Indenture Trustee under the Indenture and have offered to the Indenture Trustee reasonable indemnity, and the Indenture Trustee for 30 days has neglected or refused to institute any proceedings. See "Description of the Notes -- Rights of Noteholders Upon Occurrence of Event of Default" in this prospectus supplement. YIELD CONSIDERATIONS GENERAL The yields to maturity (or to early termination) on the Notes will be affected by the rate of principal payments on the Mortgage Loans (including prepayments, which may include amounts received by virtue of purchase, condemnation, insurance or foreclosure) on the Mortgage Loans. Yields will also be affected by the extent to which Mortgage Loans bearing higher Mortgage Loan Rates prepay at a more rapid rate than Mortgage Loans with lower Mortgage Loan Rates, the amount and timing of borrower delinquencies and defaults resulting in Realized Losses, the application of Monthly Excess Cashflow, the purchase price paid for the Notes and other factors. Principal prepayments may be influenced by a variety of economic, geographic, demographic, social, tax, legal and other factors. These factors may include changes in borrowers' housing needs, job transfers, unemployment, borrowers' net equity, if any, in the mortgaged properties, servicing decisions, homeowner mobility, the existence and enforceability of "due-on-sale" clauses, seasoning of loans, market interest rates for similar types of loans and the availability of funds for the loans. Nearly all of the Mortgage Loans contain due-on-sale provisions and the Servicer will generally enforce these provisions unless (1) the Servicer, in a manner consistent with its servicing practices, permits the purchaser of the related Mortgaged Property to assume the Mortgage Loan, or (2) enforcement is not permitted by applicable law. In some cases, the Servicer may, in a manner consistent with its servicing practices, permit a borrower who is selling his principal residence and purchasing a new one to substitute the new Mortgaged Property as collateral for the related Mortgage Loan, or may simply release its lien on the existing collateral, leaving the related Mortgage Loan unsecured. In that event, the Servicer will generally require the borrower to make a partial prepayment in reduction of the principal balance of the Mortgage Loan to the extent that the borrower has received proceeds from the sale of the prior residence that will not be applied to the purchase of the new residence. Approximately [ ] of the Mortgage Loans are subject to prepayment penalties during the first [three to five years] after origination. Prepayment penalties may have the effect of reducing the amount or the likelihood of prepayments on the Mortgage Loans. A prepayment premium may be waived by the Servicer under some circumstances. The remaining Mortgage Loans may be prepaid in full or in part at any time without penalty. In general, if prevailing interest rates fall below the interest rates on the Mortgage Loans, the Mortgage Loans are likely to be subject to higher prepayments than if prevailing rates remain at or above the interest rates on the Mortgage Loans. Conversely, if prevailing interest rates rise above the interest rates on the Mortgage Loans, the rate of prepayment would be expected to decrease. The rate of principal payments on the Mortgage Loans will also be affected by the amortization schedules of the Mortgage Loans, the rate and timing of prepayments by the borrowers, liquidations of defaulted Mortgage Loans and repurchases of Mortgage Loans due to breaches of representations and warranties or defective documentation as described in this prospectus supplement. The timing of changes in the rate of prepayments, liquidations and purchases of the related Mortgage Loans may significantly affect the yield to an investor, even if the average rate of principal payments experienced over time is consistent with an investor's expectation. Because the rate and timing of principal payments on the Mortgage Loans will depend on future events and on a variety of factors (as described more fully in this prospectus supplement and in the prospectus under "Yield Considerations") no assurance can be given as to the rate or the timing of principal payments on the Notes. In general, the earlier a prepayment of principal of the related Mortgage Loans, the greater the effect on an investor's yield. The effect on an investor's yield of principal payments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the Notes may not be offset by a subsequent like decrease (or increase) in the rate of principal payments. From time to time, areas of the United States may be affected by flooding, severe storms, landslides, wildfires or other natural disasters. Any resulting Realized Losses could affect the rate of payment of principal no the Notes. To the extent that the insurance proceeds received with respect to any damaged Mortgage Properties are not applied to the restoration of those Mortgage Properties, the proceeds will be used to prepay the related Mortgage Loans in whole or in part. Any repurchases or repayments of the Mortgage Loans may reduce the weighted average lives of the Notes and will reduce the yields on the Notes to the extent they are purchased at a premium. In addition, any future limitations on the rights of borrowers to deduct interest payments on mortgage loans for federal income tax purposes may result in a higher rate of prepayment on the Mortgage Loans. The Depositor and [ ]make no representations as to the particular factors that will affect the prepayment of the Mortgage Loans, as to the relative importance of these factors, or as to the percentage of the principal balance of the Mortgage Loans that will be paid as of any date. Payments of principal at a faster rate than anticipated will decrease the yield on Notes purchased at a premium; payments of principal at a slower rate than anticipated will decrease the yield on Notes purchased at a discount. The effect on an investor's yield due to payments of principal occurring at a rate that is faster (or slower) than the rate anticipated by the investor during any period following the issuance of the Notes will not be entirely offset by a subsequent like reduction (or increase) in the rate of payments of principal during any subsequent period. The rate of delinquencies and defaults on the Mortgage Loans and of recoveries, if any, on defaulted Mortgage Loans and foreclosed properties will affect the rate and timing of principal payments on the Mortgage Loans, and, accordingly, the weighted average life of the Notes. Some factors may influence delinquencies and defaults, including origination and underwriting standards, loan-to-value ratios and delinquency history. In general, defaults on Mortgage Loans are expected to occur with greater frequency in their early years, although little data is available with respect to the rate of default on similar types of home loans. The rate of default on Mortgage Loans with high loan-to-value ratios, or on Mortgage Loans secured by junior liens, may be higher than that of home loans with lower loan-to-value ratios or secured by first liens on comparable properties. In addition, the rate and timing of prepayments, defaults and liquidations on the Mortgage Loans will be affected by the general economic condition of the area in which the related Mortgaged Properties are located or the related borrower is residing. See "Description of the Mortgage Pool" in this prospectus supplement. The risk of delinquencies and losses is greater and voluntary principal prepayments are less likely in regions where a weak or deteriorating economy exists, as may be evidenced by, among other factors, increasing unemployment or falling property values. Investors in the Notes will bear the risk of reinvestment of amounts received in respect of principal on the Notes at yields that may be lower than the yield on the Notes. The yields to investors in the Notes may be affected by the exercise by [ ] of its right to purchase the Mortgage Loans, as described under "Description of the Notes -- Optional Redemption" in this prospectus supplement, or the failure of [ ] to exercise that right. If the purchaser of a Note offered at a discount from its initial principal amount calculates its anticipated yield to maturity (or early termination) based on an assumed rate of payment of principal that is faster than that actually experienced on the related Mortgage Loans, the actual yield may be lower than that so calculated. Conversely, if the purchaser of a Note offered at a premium calculates its anticipated yield based on an assumed rate of payment of principal that is slower than that actually experienced on the related Mortgage Loans, the actual yield may be lower than that so calculated. The effective yield to holders of the Notes will be lower than the yield otherwise produced by the Interest Rate and the purchase price because monthly payments will not be payable until the [ ] day (or later) of the month following the Accrual Period. OVERCOLLATERALIZATION [Describe as applicable.] MATURITY DATE The Maturity Date of the Notes is as set forth under "Description of the Notes -- Maturity Date" in this prospectus supplement. The Maturity Date of the Notes was determined by [to be provided as applicable]. The actual maturity of the Notes may be significantly earlier than the Maturity Date. WEIGHTED AVERAGE LIFE The following information illustrates the effect of prepayments of the Mortgage Loans on the weighted average life of the Notes under stated assumptions and is not a prediction of the prepayment rate that might actually be experienced on the Mortgage Loans. Weighted average life refers to the average amount of time that will elapse from the date of issuance of a security to the date of distribution to the investor of each dollar distributed in net reduction of principal of the security (assuming no losses). The weighted average life of the Notes will be influenced by, among other things, the rate at which principal of the Mortgage Loans is paid, which may be in the form of scheduled amortization or prepayments (for this purpose, the term "prepayment" includes unscheduled reductions of principal, including without limitation those resulting from full or partial prepayments, refinancings, liquidations and write-offs due to defaults, casualties or other dispositions, substitutions and repurchases by or on behalf of [ ] or the Depositor) and [to be provided as applicable]. Prepayments on loans such as the Mortgage Loans are commonly measured relative to a prepayment standard or model. The model used in this prospectus supplement for the Mortgage Loans represents [to be provided as applicable]. [ ] does not purport to be either a historical description of the prepayment experience or any pool of loans or a prediction of the anticipated rate of prepayment of any pool of loans, including the Mortgage Loans. Neither the Depositor nor the Underwriter makes any representation about the appropriateness of the [ ] model. [The following table was prepared based on the following assumptions, among other things (collectively, the "Modeling Assumptions"): o the initial Class Principal Amount and the Interest Rate are as set forth on the cover of this prospectus supplement; o each scheduled payment of principal and interest on a Mortgage Loan is timely received on the last day of each month starting in [ ]; o principal prepayments are received in full on the last day of each month starting in [ ], and each prepayment includes 30 days of interest on the Mortgage Loan; o prepayments are received on the Mortgage Loans at the applicable constant rates indicated; o there are no defaults or delinquencies on the Mortgage Loans; o Distribution Dates occur on the [ ] day of each month, starting in [ ]; o there are no re-purchases or substitutions of the Mortgage Loans; o the Notes are issued on [ ]; and o the Mortgage Loans were aggregated into assumed Mortgage Loans having the following characteristics:]
HOME PRINCIPAL HOME NET HOME REMAINING LOAN BALANCE LOAN LOAN TERM TO NUMBER INTEREST INTEREST MATURITY RATE RATE (IN MONTHS)
The actual characteristics of the Mortgage Loans may, and the performance of the Mortgage Loans will, differ from the assumptions used in constructing the table below, which is hypothetical in nature and is provided only to give a general sense of how the principal cash flows might behave under varying prepayment scenarios. For example, it is not expected that the Mortgage Loans will prepay at a constant rate until maturity, that all of the Mortgage Loans will prepay at the same rate or that there will be no defaults or delinquencies on the Mortgage Loans. Moreover, the diverse remaining terms to maturity of the Mortgage Loans could produce slower or faster principal payments than indicated in the table in the [assumed prepayment rate] specified, even if the weighted average remaining term to maturity of the Mortgage Loans is as assumed. Any difference between those assumptions and the actual characteristics and performance of the Mortgage Loans or actual prepayment or loss experience will cause the percentages of Original Principal Amounts outstanding over time and the weighted average lives of the Notes to differ (which difference could be material) from the corresponding information in the table for each indicated [assumed prepayment rate]. Subject to the foregoing discussion and assumptions, the following tables indicate the weighted average lives of the Notes and set forth the percentages of the Original Principal Amount of the Notes that would be outstanding after each of the Distribution Dates shown at the indicated [assumed prepayment rate]. The weighted average life of the Notes is determined by (1) multiplying the net reduction, if any, of the Class Principal Amount by the number of years from the date of issuance of the Note to the related Distribution Date, (2) adding the results and (3) dividing the sum by the total of the net reductions of Class Principal Amount referred to in clause (1) and rounding to one decimal place. PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF THE NOTES OUTSTANDING AT THE FOLLOWING [PREPAYMENT RATES]
Class [ ] ----------------------------------------------------------------------------- DISTRIBUTION DATE [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% - ----------------- Initial Percentage........................... 100 100 100 100 100 100 100 Weighted Average - --------------------------------------------- Life in Years With Optional Redemption................. Without Optional Redemption.............. - --------- * Based upon the assumption that [ ] does not exercise its option to repurchase the Mortgage Loans as described under "Description of the Notes -- Optional Redemption" in this prospectus supplement.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS GENERAL Upon the issuance of the notes, Stroock & Stroock & Lavan LLP, special federal tax counsel, will deliver an opinion of counsel that for federal income tax purposes, the Notes will be treated as indebtedness and the Trust will not be an association, or publicly traded partnership, taxable as a corporation or a taxable mortgage pool. [The Trust does not anticipate treating the Notes as having been issued with original issue discount.] [It is anticipated that the Notes will be treated as issued with original issue discount. The prepayment assumption that will be used in determining the rate of accrual of original issue discount with respect to the Notes is [ ]. However, this rate does not represent the rate at which prepayments have actually occurred and no representation is made as to the rate at which prepayments actually will occur in the future. All prospective purchasers of the Notes should see "Material Federal Income Tax Consideration--Partnership Trust Funds and Disregarded Trust Funds--Taxation of Debt Securityholders" in the accompanying prospectus for a summary of the anticipated federal income tax consequences of the purchase, ownership and disposition of the Notes. STATE AND LOCAL INCOME TAX CONSIDERATIONS In addition to the federal income tax matters described under "Material Federal Income Tax Considerations" above, prospective investors should consider the state and local income tax consequences of the acquisition, ownership and disposition of the Notes. State income tax law may differ substantially from the corresponding federal tax law, and this discussion does not purport to describe any aspect of the income tax laws of any state and localilty. Therefore, prospective investors should consult their own tax advisors with respect to the various tax consequences of investments in the Notes. ERISA CONSIDERATIONS The Notes may be purchased by an employee benefit plan or an individual retirement account (a "Plan") subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"). A fiduciary of a Plan must determine that the purchase of a [Note] is consistent with its fiduciary duties under ERISA and does not result in a nonexempt prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Code. For additional information regarding treatment of the Notes under ERISA, See "ERISA Considerations" in the prospectus. LEGAL INVESTMENT CONSIDERATIONS [The Notes will [not] constitute "mortgage related securities" under the Secondary Mortgage Market Enhancement Act of 1984. Accordingly, many institutions with legal authority to invest in "mortgage related securities" may [not] be legally authorized to invest in the Notes.] There may be restrictions on the ability of some investors, including depository institutions, either to purchase the Notes or to purchase Notes representing more than a specified percentage of the investor's assets. Investors should consult their own legal, tax and accounting advisors in determining whether and to what extent the Notes constitute legal investments for the investors and the applicable tax, regulatory and accounting treatment of the Notes. See "Legal Investment Considerations" in the prospectus. USE OF PROCEEDS The net proceeds from the sale of the Notes will be applied by the Depositor, or an affiliate of the Depositor, toward the purchase of the Mortgage Loans. The Mortgage Loans will be acquired by the Depositor from [ ]in a privately negotiated transaction. UNDERWRITING [Subject to the terms and conditions provided in the underwriting agreement and in a terms agreement (collectively, the "Underwriting Agreement") among the Depositor, [ ] and the Underwriter, the Depositor has agreed to sell to the Underwriter, and the Underwriter has agreed to purchase from the Depositor, all of the Notes. The Underwriter has advised the Depositor that the Underwriter intends to initially offer the Notes to the public at the price specified on the front cover of this prospectus supplement. After the initial public offering of the Notes, the public offering price may be changed. The Underwriting Agreement provides that the Depositor will indemnify the Underwriter against some civil liabilities, including liabilities under the Securities Act of 1933, as amended. Until the distribution of the Notes is completed, the rules of the SEC may limit the ability of the Underwriter and some selling group members to bid for and purchase the Notes. As an exception to these rules, the Underwriter is permitted to engage in transactions that stabilize the price of the Notes. These transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Notes. If the Underwriter creates a short position in the Notes in connection with the offering, that is, if they sell more Notes than the amount specified on the cover page of this prospectus supplement, the Underwriter may reduce that short position by purchasing Notes in the open market. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of those purchases. Neither the Depositor nor the Underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes. In addition, neither the Depositor nor the Underwriter makes any representation that the Underwriter will engage in these transactions or that these transactions, once begun, will not be discontinued without notice.] Expenses incurred by the Depositor in connection with this offering are expected to be approximately $[ ]. The Underwriter expects to make a secondary market in the Notes, but has no obligation to do so. There can be no assurance that any secondary market will develop, or, if it does develop, that it will continue. [ ] has entered into an agreement with the Depositor to purchase the Residual Certificate simultaneously with the purchase of the Notes. The Underwriter is an affiliate of [ ] and performs management services for the Depositor. The Underwriter has engaged in other transactions with, arranged other transactions for or performed other services for the Depositor and [ ] in the ordinary course of business. EXPERTS [To be provided as applicable]. LEGAL MATTERS Certain legal matters with respect to the Notes will be passed upon for the Depositor and for the Underwriter by Stroock & Stroock & Lavan LLP, New York, New York. RATINGS It is a condition to the issuance of the Notes that they be rated "[ ]" by [Rating Agency] and "[ ]" by [Rating Agency]. [Rating Agency] and [Rating Agency] are referred to in this prospectus supplement as the "Rating Agencies." A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. A securities rating addresses the likelihood of the receipt by holders of Notes of distributions in the amount of scheduled payments on the Mortgage Loans. The rating takes into consideration the characteristics of the Mortgage Loans and the structural, legal and tax aspects associated with the Notes. The ratings on the Notes do not represent any assessment of the likelihood or rate of principal prepayments. The ratings do not address the possibility that holders of Notes might suffer a lower than anticipated yield due to prepayments. The security ratings assigned to the Notes 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 either Rating Agency. The Depositor has not requested a rating of the Notes by any rating agency other than the Rating Agencies; there can be no assurance, however, as to whether any other rating agency will rate the Notes or, if it does, what rating would be assigned by the other rating agency. The rating assigned by the other rating agency to the Notes could be lower than the ratings assigned by the Rating Agencies. GLOSSARY OF DEFINED TERMS [To be provided.] ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in some limited circumstances, the globally offered ACE Securities Corp. [ ] Asset Backed Notes (the "Global Securities") will be available only in book-entry form. Investors in the Global Securities may hold the Global Securities through any of DTC, Clearstream Luxembourg or Euroclear. The Global Securities will be tradable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through Clearstream Luxembourg and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations and prior mortgage loan asset backed certificates issues. Secondary cross-market trading between Clearstream Luxembourg or Euroclear and DTC Participants holding Certificates will be effected on a delivery-against-payment basis through the respective Depositaries of Clearstream Luxembourg and Euroclear and as DTC Participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless those holders meet specific requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Clearstream Luxembourg and Euroclear will hold positions on behalf of their participants through their respective Depositaries, which in turn will hold the positions in accounts as DTC Participants. Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to prior mortgage loan asset backed certificates issues. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream Luxembourg or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds. SECONDARY MARKET TRADING Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC Participants will be settled using the procedures applicable to prior mortgage loan asset backed certificates issues in same-day funds. TRADING BETWEEN CLEARSTREAM LUXEMBOURG AND/OR EUROCLEAR PARTICIPANTS. Secondary market trading between Clearstream Luxembourg Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. TRADING BETWEEN DTC SELLER AND CLEARSTREAM LUXEMBOURG OR EUROCLEAR PURCHASER. When Global Securities are to be transferred from the account of a DTC Participant to the account of a Clearstream Luxembourg Participant or a Euroclear Participant, the purchaser will send instructions to Clearstream Luxembourg or Euroclear through a Clearstream Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. Clearstream Luxembourg or Euroclear will instruct the respective Depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last interest payment date to and excluding the settlement date, on the basis of either the actual number of days in the accrual period and a year assumed to consist of 360 days or a 360-day year of twelve 30-day months as applicable to the related class of Global Securities. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made by the respective Depositary of the DTC Participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream Luxembourg Participant's or Euroclear Participant's account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Global Securities will accrue from, the value date (that would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Clearstream Luxembourg or Euroclear cash debt will be valued instead as of the actual settlement date. Clearstream Luxembourg Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream Luxembourg or Euroclear. Under this approach, they may take on credit exposure to Clearstream Luxembourg or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream Luxembourg or Euroclear has extended a line of credit to them, Clearstream Luxembourg Participants or Euroclear Participants can elect not to preposition funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Clearstream Luxembourg Participants or Euroclear Participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of overdraft charges, although this result will depend on each Clearstream Luxembourg Participant's or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global Securities to the respective European Depositary for the benefit of Clearstream Luxembourg Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. TRADING BETWEEN CLEARSTREAM LUXEMBOURG OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time zone differences in their favor, Clearstream Luxembourg Participants and Euroclear Participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Clearstream Luxembourg or Euroclear through a Clearstream Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. In these cases Clearstream Luxembourg or Euroclear will instruct the respective Depositary, as appropriate, to deliver the Global Securities to the DTC Participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last interest payment to and excluding the settlement date on the basis of either the actual number of days in the accrual period and a year assumed to consist of 360 days or a 360-day year of twelve 30-day months as applicable to the related class of Global Securities. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected in the account of the Clearstream Luxembourg Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Clearstream Luxembourg Participant's or Euroclear Participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Clearstream Luxembourg Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft incurred over that one day period. If settlement is not completed on the intended value date (that is, the trade fails), receipt of the cash proceeds in the Clearstream Luxembourg Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream Luxembourg or Euroclear and that purchase Global Securities from DTC Participants for delivery to Clearstream Luxembourg Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: o borrowing through Clearstream Luxembourg or Euroclear for one day (until the purchase side of the day trade is reflected in their Clearstream Luxembourg or Euroclear accounts) in accordance with the clearing system's customary procedures; o borrowing the Global Securities in the U.S. from a DTC Participant no later than one day prior to the settlement, which would give the Global Securities sufficient time to be reflected in their Clearstream Luxembourg or Euroclear account in order to settle the sale side of the trade; or o staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Clearstream Luxembourg or Euroclear Participant. CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A beneficial owner of Global securities holding securities through Clearstream Luxembourg or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. Persons or to 31% backup withholding, unless (1) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between the beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (2) the beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial owners of securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. If the information shown on Form W-8 BEN changes, a new Form W-8 must be filed within 30 days of the change. EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM W-8BEN). Non-U.S. Persons that are beneficial owners of securities residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate, depending on the treaty terms, by filing Form W-8BEN (including Part II thereof). If the treaty provides only for a reduced rate, the beneficial owner may still be entitled to complete exemption from withholding under item (1) above. EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain complete exemption from the withholding tax by filing Form W-9 (Request for Taxpayer Identification Number and Certification). U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a Global Security files by submitting the appropriate form to the person through whom it holds, the clearing agency, in the case of persons holding directly on the books of the clearing agency. Form W-8BEN and Form W-8ECI are generally effective for three calendar years from the close of the calendar year in which it is collected. The term "U.S. Person" means (1) a citizen or resident of the United States, (2) a corporation or partnership (or other entity properly classified as a corporation or partnership for U.S. Federal income tax purposes) organized in or under the laws of the United States or any state or the District of Columbia, (3) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or (4) 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. Notwithstanding the preceding sentence, to the extent provided in regulations, trusts in existence on August 20, 1996 and treated as United States persons prior to that date that elect to continue to be so treated also will be considered U.S. Persons. Treasury regulations provide certain presumptions regarding the entity classification and foreign or U.S. status of a holder that a payor generally must apply in the absence of appropriate documentation from the holder, and provide detailed documentation and procedures for holders claiming withholding tax exemptions through intermediaries. Prospective investors are urged to consult their tax advisors regarding the effect of these regulations on their ability to claim and the means for claiming exemptions from or reduced rates of U.S. withholding taxes. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global securities. Investors are advised to consult their own tax advisers for specific tax advice concerning their holding and disposing of the Global securities. $[ ] (APPROXIMATE) ACE SECURITIES CORP. [ ] TRUST [ ] ASSET BACKED NOTES [ ] SERVICER ------------------------- PROSPECTUS SUPPLEMENT ------------------------- DEUTSCHE BANC ALEX. BROWN The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus dated [ ]) $[ ] (APPROXIMATE) ACE SECURITIES CORP. [ ] TRUST [ ] PASS-THROUGH CERTIFICATES [ ] ORIGINATOR AND SERVICER CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The certificates will represent interests in the trust fund only and will not represent interests in or obligations of any other entity. This prospectus supplement may be used to offer and sell the certificates only if accompanied by the prospectus. The trust fund will issue certificates including the following: CLASS INTEREST CLASS PRINCIPAL AMOUNT(1) RATE ----- ------------------- ------ [ ]................ $[ ] [ ] [ ]................ [ ] [ ] [ ]................ [ ] [ ] ------------------- (1) These amounts are approximate, as described in this prospectus supplement. (2) Interest will accrue on the Class [ ] and [ ] Certificates at [described as applicable]. This prospectus supplement and the accompanying prospectus relate only to the offering of the certificates listed in the table above and not to the other classes of certificates that will be issued by the trust fund as described in this prospectus supplement. [Describe assets of trust fund.] NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. [Describe underwriting arrangements.] On or about [ ], delivery of the certificates offered by this prospectus supplement will be made through the book-entry facilities of [ ]. UNDERWRITER: DEUTSCHE BANC ALEX. BROWN The date of this prospectus supplement is [ ] IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the certificates offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your certificates, and (2) this prospectus supplement, which describes the specific terms of your certificates. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the certificates in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the certificates and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the certificates will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. TABLES OF CONTENTS PROSPECTUS SUPPLEMENT PAGE ----- Summary of Terms....................................4 Risk Factors........................................8 Description of the Certificates....................14 [The Insurance Policy..............................22 Description of the Mortgage Pool...................23 Additional Information.............................32 [Originator/Servicer...............................33 The Pooling and Servicing Agreement................35 Yield Considerations...............................40 Material Federal Income Tax Considerations.........45 State and Local Income Tax Considerations..........45 Legal Investment Considerations....................45 Use of Proceeds....................................46 Underwriting.......................................46 ERISA Considerations...............................46 Experts............................................46 Legal Matters......................................47 Ratings............................................47 Glossary of Defined Terms..........................48 Annex I............................................49 PROSPECTUS PAGE ----- Description of the Trust Funds....................... Use of Proceeds...................................... Yield Considerations................................. The Depositor........................................ Description of the Securities........................ Description of the Agreements........................ Description of Credit Support........................ Certain Legal Aspects of Mortgage Loans.............. Certain Legal Aspects of the Contracts............... Material Federal Income Tax Considerations.................................... State and Other Tax Considerations................... Legal Investment..................................... Methods of Distribution.............................. Additional Information............................... Incorporation of Certain Documents by Reference...... Legal Matters........................................ Financial Information................................ Rating............................................... Index of Defined Terms............................... SUMMARY OF TERMS o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE CERTIFICATES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. o WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. o [WHENEVER WE REFER TO A PERCENTAGE OF SOME OR ALL OF THE MORTGAGE LOANS IN THE TRUST FUND OR IN ANY POOL, THAT PERCENTAGE HAS BEEN CALCULATED ON THE BASIS OF THE TOTAL PRINCIPAL BALANCE OF THOSE MORTGAGE LOANS AS OF [ ], UNLESS WE SPECIFY OTHERWISE. WE EXPLAIN IN THIS PROSPECTUS SUPPLEMENT UNDER "DESCRIPTION OF THE CERTIFICATES -- DISTRIBUTIONS OF PRINCIPAL" HOW THE PRINCIPAL BALANCE OF A MORTGAGE LOAN IS DETERMINED. WHENEVER WE REFER IN THIS SUMMARY OF TERMS OR IN THE RISK FACTORS SECTION OF THIS PROSPECTUS SUPPLEMENT TO THE TOTAL PRINCIPAL BALANCE OF ANY MORTGAGE LOANS, WE MEAN THE TOTAL OF THEIR PRINCIPAL BALANCES, UNLESS WE SPECIFY OTHERWISE.] THE OFFERED CERTIFICATES ACE Securities Corp.'s [ ] Pass-Through Certificates consist of the following classes: [ ]. Only the [ ] Certificates are being offered by this prospectus supplement. These certificates will be issued in book-entry form. SEE "DESCRIPTION OF THE CERTIFICATES -- GENERAL" IN THIS PROSPECTUS SUPPLEMENT FOR A DISCUSSION OF THE MINIMUM DENOMINATIONS AND THE INCREMENTAL DENOMINATIONS OF EACH CLASS OF CERTIFICATES. The certificates represent ownership interests in a trust fund, the assets of which consist primarily of [describe assets of trust fund.] The certificates will have an approximate total initial principal amount of $[ ]. Any difference between the total principal amount of the certificates on the date they are issued and the approximate total principal amount of the certificates on the date of this prospectus supplement will not exceed 5%. PAYMENTS ON THE CERTIFICATES Principal and interest on the certificates will be payable on the [25th] day of each month, beginning in [ ]. However, if the [25th] day is not a business day, distributions will be made on the next business day after the [25th] day of the month. INTEREST PAYMENTS Interest will accrue on each class of certificates, [other than the Class [ ] Certificate], at the applicable annual rates described in this prospectus supplement. SEE "DESCRIPTION OF THE CERTIFICATES -- DISTRIBUTIONS OF INTEREST" IN THIS PROSPECTUS SUPPLEMENT. PRINCIPAL PAYMENTS The amount of principal payable on the certificates, [other than the Class [ ] Certificate], will be determined by (1) funds actually received on the mortgage loans in [each] pool that are available to make payments on the certificates, (2) the amount of interest received or advanced on the mortgage loans that is used to pay principal on the certificates, calculated as described in this prospectus supplement, (3) [formulas that allocate a portion of principal payments received on the mortgage loans to each class of certificates, as described in this prospectus supplement,] and (4) [ ]. Funds actually received on the mortgage loans may consist of expected, scheduled payments, and unexpected payments resulting from prepayments or defaults by borrowers, liquidation of defaulted mortgage loans, or repurchases of mortgage loans under the circumstances described in this prospectus supplement. WE EXPLAIN HOW PRINCIPAL IS PAID ON THE CERTIFICATES UNDER "DESCRIPTION OF THE CERTIFICATES -- DISTRIBUTIONS OF PRINCIPAL" IN THIS PROSPECTUS SUPPLEMENT. [PREPAYMENT PENALTIES ON THE MORTGAGE LOANS The holder of the Class [ ] Certificate will be entitled to receive any prepayment penalties received on the mortgage loans. These amounts will not be available to make payments on other classes of certificates. SEE "DESCRIPTION OF THE CERTIFICATES" AND "DESCRIPTION OF THE MORTGAGE POOL - -- GENERAL" IN THIS PROSPECTUS SUPPLEMENT.] LIMITED RECOURSE The only source of cash available to make interest and principal payments on the certificates will be the assets of the trust fund. The trust fund will have no other source of cash and no entity other than the trust fund will be required or expected to make any payments on the certificates. ENHANCEMENT OF LIKELIHOOD OF PAYMENT ON THE CERTIFICATES [DESCRIBE ANY APPLICABLE FINANCIAL GUARANTY INSURANCE POLICY OR GUARANTEE.] [SUBORDINATION OF PAYMENTS The [ ] certificates will have a payment priority as a group over the Class [ ] Certificates both for payments of interest and payments of principal. No amounts will be paid to the Holder of the Class [ ] Certificate on any distribution date until all amounts due to the senior certificates and the Class [ ] Certificates on that date have been paid and overcollateralization has reached the required level.] [OVERCOLLATERALIZATION On the closing date, the total principal balance of the mortgage loans is expected to [approximately equal the total principal amount of the certificates]. Any interest received on the mortgage loans in excess of the amount needed to pay interest on the certificates and some of the expenses and fees of the trust fund will be used to reduce the total principal amount of the certificates to a level set by the rating agencies until the mortgage loans have a total principal balance that exceeds the total outstanding principal amount of the certificates by the amount required by the rating agencies. This condition is referred to as "overcollateralization." We cannot assure you that sufficient interest will be generated by the mortgage loans to create overcollateralization, to increase overcollateralization to the level required by the rating agencies, or to maintain it at that level. SEE "RISK FACTORS -- POTENTIAL INADEQUACY OF CREDIT ENHANCEMENT FOR THE CLASS [ ] CERTIFICATES" AND "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- SUBORDINATION" AND "-- OVERCOLLATERALIZATION" IN THIS PROSPECTUS SUPPLEMENT.] [ALLOCATION OF LOSSES As described in this prospectus supplement, amounts representing losses on the mortgage loans in excess of overcollateralization will be applied to reduce the principal amount of the Class [ ] Certificates until their principal amount has been reduced to zero. o If a loss has been allocated to reduce the principal amount of your Class [ ] Certificate, you will receive no payment in respect of that reduction at that time. o After overcollateralization has been created and has been increased to the required level, you will receive the amount of that loss if there are sufficient funds to pay you, as described in this prospectus supplement, but you will not receive any interest on that amount. After the principal amount of the Class [ ] Certificates has been reduced to zero, amounts representing losses on the mortgage loans will be paid to holders of the senior certificates by [ ], to the extent funds available are insufficient to cover these losses. SEE "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- ALLOCATION OF LOSSES" AND "THE INSURANCE POLICY" IN THIS PROSPECTUS SUPPLEMENT.] THE MORTGAGE LOANS On the closing date, which is expected to be on or about [ ], the assets of the trust fund will consist of [two] pools of mortgage loans with a total principal balance of approximately $[ ]. The mortgage loans will be secured by mortgages, deeds of trust, or other security instruments, all of which are referred to in this prospectus supplement as mortgages. [Description of mortgage loans.] [Description of pre-funding account and additional mortgage loans as applicable.] [The mortgage loans in the trust fund will not be insured or guaranteed by any government agency.] SEE "DESCRIPTION OF THE MORTGAGE POOL" IN THIS PROSPECTUS SUPPLEMENT FOR A GENERAL DESCRIPTION OF THE MORTGAGE LOANS AND "[ORIGINATOR/SERVICER]" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF THE UNDERWRITING GUIDELINES APPLIED IN ORIGINATING THE MORTGAGE LOANS. [THE PRE-FUNDING ACCOUNT On the closing date, approximately $[ ] will be deposited by [ ] in a pre-funding account maintained by [ ]. It is intended that additional mortgage loans will be sold to the trust fund by the depositor from time to time, from [ ] until [ ], paid for with the funds on deposit in the pre-funding account. [Description of pre-funding account and additional mortgage loans as applicable.] SEE "DESCRIPTION OF THE CERTIFICATES --PRE-FUNDING ACCOUNT" IN THIS PROSPECTUS SUPPLEMENT.] SERVICING OF THE MORTGAGE LOANS The mortgage loans will be serviced by [ ]. SEE "[ORIGINATOR/SERVICER]" AND "THE POOLING AND SERVICING AGREEMENT" IN THIS PROSPECTUS SUPPLEMENT. OPTIONAL PURCHASE OF MORTGAGE LOANS [ ] will have the option to purchase all of the mortgage loans and the other property of the trust fund, [other than the insurance policy], after the total principal balance of the mortgage loans declines to less than [ ]% of their initial total principal balance; if [ ] does not exercise that option, [ ] may purchase the Mortgage Loans and other property of the trust fund. If the mortgage loans and other assets are purchased, the certificateholders will be paid accrued interest and principal equal to the outstanding principal amount of the certificates. SEE "DESCRIPTION OF THE CERTIFICATES -- OPTIONAL PURCHASE OF MORTGAGE LOANS; TERMINATION OF THE TRUST FUND" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF THE PURCHASE PRICE TO BE PAID FOR THE MORTGAGE LOANS. TAX STATUS [The Trust Fund will make one or more elections to treat certain assets of the trust as a real estate mortgage investment conduit (each, a "REMIC") for federal income tax purposes. The Class [ ] Certificates will represent regular interests in a REMIC and generally will be treated as debt instruments for federal income tax purposes. The Class [R] Certificates will represent the residual interest in each REMIC.] [Alternatively, grantor trust, partnership or FASIT status to be described as applicable.] SEE "MATERIAL FEDERAL INCOME TAX CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS FOR ADDITIONAL INFORMATION CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS TO THE CERTIFICATES. ERISA CONSIDERATIONS The Offered Certificates may be acquired by employee benefit plans and other retirement arrangements, subject to certain conditions. SEE "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS FOR A MORE COMPLETE DISCUSSION OF THESE ISSUES. LEGAL INVESTMENT CONSIDERATIONS [Only the Class [ ] Certificates] will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984. There are other restrictions on the ability of some types of investors to purchase the certificates that prospective investors should consider. SEE "LEGAL INVESTMENT CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS. RATINGS OF THE CERTIFICATES The certificates will initially have the following ratings from [ ]: [Rating [Rating CLASS AGENCY] AGENCY] ----- ------ ------ [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] These ratings are not recommendations to buy, sell or hold these certificates. A rating may be changed or withdrawn at any time by the assigning rating agency. o The ratings do not address the possibility that, as a result of principal prepayments, the yield on your certificates may be lower than anticipated. SEE "RATINGS" IN THIS PROSPECTUS SUPPLEMENT FOR A MORE COMPLETE DISCUSSION OF THE CERTIFICATE RATINGS. RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE CERTIFICATES. YOU SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS. [SOME OF THE LOANS IN THE The payment schedules for most of MORTGAGE POOL ARE MORE LIKELY the mortgage loans in the pool TO DEFAULT THAN OTHERS, AND require the borrower to pay off the HIGHER THAN EXPECTED DEFAULTS principal balance of the loan ON THESE LOANS COULD REDUCE THE gradually over the life of the YIELD ON YOUR CERTIFICATES loan. Some of the mortgage loans in the pool, however, have payment schedules under which the borrowers makes relatively small payments of principal over the life of the loan, and then must make a large final payment at maturity that pays off the entire principal balance outstanding. This final payment is usually much larger than the previous monthly payments. Because the borrower's ability to make this final payment usually depends on the ability to refinance the loan or sell the underlying property, the risk of default is greater than on other types of loans. High rates of default on these types of loans in the pool will result in greater losses on your certificates. The ability of a borrower to refinance the type of loan described above or sell the mortgaged property will depend upon a number of factors, including: o the level of mortgage interest rates; o the borrower's equity in the mortgage property; o general economic conditions; and o the availability of credit. We cannot predict how these factors will affect the default rate of these mortgage loans in the pool. You should refer to "Description of the Mortgage Pool" for information on the percentage of loans in the mortgage loan pool that consists of these loans.] [MORTGAGE LOAN INTEREST RATES [LIBOR may increase or decrease at MAY LIMIT INTEREST RATES ON THE different times and in different amounts CERTIFICATES than the index applicable to the adjustable rate mortgage loans.] [The trust fund will include a reserve fund whose primary asset will be [describe as applicable]]. SEE "DESCRIPTION OF THE CERTIFICATES -- THE RESERVE FUND" IN THIS PROSPECTUS SUPPLEMENT. FOR DETAILED INFORMATION ON THE INTEREST RATES OF THE MORTGAGE LOANS, SEE "DESCRIPTION OF THE MORTGAGE POOL" IN THIS PROSPECTUS SUPPLEMENT.] [POTENTIAL INADEQUACY OF CREDIT The Class [ ] Certificates are not ENHANCEMENT FOR THE CLASS [ ] insured by any financial guaranty CERTIFICATES insurance policy. The overcollateralization feature described in this prospectus supplement is intende to enhance the likelihood that holders o Class [ ] Certificates will receive regular payments of interest and principal, but is limited in nature and may be insufficient to cover all losses d on the mortgage loans or shortfalls in f interest payments on the mortgage loans. In order to create, increase and maintain overcollateralization, it will be necessary that the mortgage loans generate more interest than is needed to pay interest on the certificates as well as fees and expenses of the trust fund and other amounts that are described in this prospectus supplement. We expect that the mortgage loans will generate more interest than is needed to pay those amounts, at least during some periods, because the weighted average of the interest rates on the mortgage loans will be higher, at the time the certificates are issued, than the weighted average of the interest rates on the certificates. We cannot assure you, however, that enough excess interest will be generated to reach the overcollateralization levels required by the rating agencies. The following factors will affect the amount of excess interest that the mortgage loans will generate: o PREPAYMENTS. Every time a mortgage loan with an interest rate higher than the weighted average of the interest rates on the certificates is prepaid, total excess interest after the date of prepayment will be reduced because that mortgage loan will no longer be outstanding and generating interest. The effect on your certificates of this reduction will be influenced by the amount of prepaid loans and the characteristics of the prepaid loans. Prepayment of a disproportionately high number of high interest rate mortgage loans would have a greater negative effect on future excess interest. o DEFAULTS. The rate of defaults on the mortgage loans may turn out to be higher than expected. Defaulted mortgage loans may be liquidated, and liquidated mortgage loans will no longer be outstanding and generating interest. o LEVEL OF LIBOR. If LIBOR increases, more money will be needed to pay interest to certificateholders, so less money will be available as excess interest.] [SPECIAL RISKS FOR THE CLASS [ ] The rights of holders of Class [ ] CERTIFICATES Certificates to receive payments of interest are subordinate to the rights of holders of senior certificates to receive payments of interest, and the rights of holders of Class [ ] Certificates to receive payments of principal are subordinate to the rights of holders of senior certificates to receive payments of principal. In addition, you should consider the following: o If you buy a Class [ ] Certificate and losses on the mortgage loans exceed excess interest and any overcollateralization that has been created, the principal amount of your certificate will be reduced proportionately with the principal amounts of the other Class [ ] Certificates by the amount of that excess; o If, after overcollateralization is created in the required amount, the mortgage loans generate interest in excess of the amount needed to pay interest and principal on the certificates and fees and expenses of the trust fund, the excess interest will be used to pay you and other holders of Class [ ] Certificates the amount of any reduction in the principal balances of the Class [ ] Certificates caused by application of losses. o We cannot assure you, however, that any excess interest will be generated and, in any event, no interest will be paid to you on the amount by which your principal balance was reduced because of the application of losses. SEE "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- SUBORDINATION" AND "-- ALLOCATION OF LOSSES" IN THIS PROSPECTUS SUPPLEMENT.] [EFFECT OF LACK OF PRIMARY Approximately [ ]% of the mortgage loans MORTGAGE INSURANCE ON THE have loan-to-value ratios greater than CLASS [ ] CERTIFICATES 80%. None of the mortgage loans are covered by a primary mortgage insurance policy. If borrowers default on their mortgage loans, there is a greater likelihood of losses than if the loans were insured. We cannot assure you that the applicable credit enhancement will be adequate to cover those losses. SEE "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- SUBORDINATION" AND "-- ALLOCATION OF LOSSES" IN THIS PROSPECTUS SUPPLEMENT.] UNPREDICTABILITY AND EFFECT OF Borrowers may prepay their mortgage loans PREPAYMENT in whole or in part at any time; [however, approximately [ ]% of the mortgage loans require the payment of a prepayment penalty in connection with some voluntary prepayments, which may discourage these borrowers from prepaying their mortgage loans]. Prepayments of principal may also be caused by liquidations of or insurance payments on the mortgage loans. A prepayment of a mortgage loan will usually result in a prepayment on the certificates. The prepayment experience on the mortgage loans may affect the average life of the certificates. The rate of principal payments on the mortgage loans is from time to time influenced by a variety of economic, demographic, geographic, social, tax, legal and other factors. There can be no assurance as to the rate of prepayment on the mortgage loans or that the rate of payments will conform to the model described in this prospectus supplement. If prevailing interest rates fall significantly below the interest rates on the mortgage loans, principal prepayments are likely to be higher than if prevailing rates remain at or above the interest rates on the mortgage loans. As a result, the actual maturity of the certificates could occur significantly earlier than expected. Conversely, if prevailing interest rates rise significantly above the interest rates on the mortgage loans, principal prepayments are likely to be lower than if prevailing rates remain at or below the interest rates on the mortgage loans and the maturity of the certificates could occur significantly later than expected. In addition, some prepayments may result in the collection of less interest than would otherwise be the case in the month of prepayment. o If you purchase your certificates at a discount and principal is repaid more slowly than you anticipate, then your yield may be lower than you anticipate. o If you purchase your certificates at a premium and principal is repaid faster than you anticipate, then your yield may be lower than you anticipate. SEE "YIELD CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF FACTORS THAT MAY INFLUENCE THE RATE AND TIMING OF PREPAYMENTS ON THE MORTGAGE LOANS. GEOGRAPHIC CONCENTRATION OF MORTGAGE LOANS Approximately [ ]% of the mortgage loans expected to be in the pool on the closing date are secured by properties in [California]. Delinquencies, defaults and losses on the mortgage loans may be higher than if fewer of the mortgage loans were concentrated in one state because the following conditions in [California] will have a disproportionate impact on the mortgage loans in general: o Declines in the [California] residential real estate market may reduce the values of properties located in that state, which would result in an increase in the loan-to-value ratios. o Properties in [California] may be more susceptible than homes located in other parts of the country to some types of uninsured hazards, such as earthquakes, as well as floods, wildfires, mudslides and other natural disasters. Natural disasters affect regions of the United States from time to time, and may result in increased losses on mortgage loans in those regions, or in insurance payments that will constitute prepayments of those mortgage loans. FOR ADDITIONAL INFORMATION REGARDING THE GEOGRAPHIC DISTRIBUTION OF THE MORTGAGE LOANS IN EACH POOL, SEE THE APPLICABLE TABLE UNDER "DESCRIPTION OF THE MORTGAGE POOL" IN THIS PROSPECTUS SUPPLEMENT. REAL ESTATE MARKET MAY AFFECT A decline in the real estate values or in PERFORMANCE OF A MORTGAGE LOANS economic conditions generally could increase the rates of delinquencies, foreclosures and losses on the mortgage loans to a level that is significantly higher than those experienced currently; and no assurance can be given that values of the properties securing the mortgage loans will not decline since the date of origination of the mortgage loan. If the credit enhancement described in this prospectus supplement is not enough to protect your certificates from these losses, the yield on your certificates may be reduced. [EARLY PRINCIPAL PAYMENT FROM If the cash in the pre-funding account on CASH REMAINING IN PRE-FUNDING the closing date is not used to acquire ACCOUNT additional mortgage loans by [ ], then that cash will be [paid to you on a proportionate basis with the other certificateholders in reduction of the principal balance of your certificates.] If the amount of that cash is substantial, you will receive a significant unexpected early payment of principal in (or before) [ ]. We cannot assure you that you will be able to reinvest that money in another investment with a comparable yield.] YOU WILL NOT RECEIVE PHYSICAL Unless you are the purchaser of the CERTIFICATES, WHICH CAN CAUSE residual certificates, your ownership of DELAYS IN DISTRIBUTIONS AND the certificates will be registered HAMPER YOURABILITY TO PLEDG electronically with DTC. The lack of OR RESELL YOUR CERTIFICATES physical certificates could: o result in payment delays on the certificates because the trustee will be sending distributions on the certificates to DTC instead of directly to you; o make it difficult for you to pledge your certificates if physical certificates are required by the party demanding the pledge; and o could hinder your ability to resell the certificates because some investors may be unwilling to buy certificates that are not in physical form. SEE "DESCRIPTION OF THE CERTIFICATES -- BOOK-ENTRY REGISTRATION" IN THIS PROSPECTUS SUPPLEMENT. LIMITED ABILITY TO RESELL The underwriter is not required to assist CERTIFICATES in resales of the certificates, although it may do so. A secondary market for any class of certificates may not develop. If a secondary market does develop, it might not continue or it might not be sufficiently liquid to allow you to resell any of your certificates. The certificates will not be listed on any securities exchange. [Additional risk factors to be provided as applicable.] DESCRIPTION OF THE CERTIFICATES GENERAL The [ ] Pass-Through Certificates will consist of the following Classes: [ ] (together, the "Certificates"). The [ ] Certificates are referred to in this prospectus supplement as the "Senior Certificates." Only the Class [ ] Certificates (the "Offered Certificates") are offered by this prospectus supplement. The Class [ ] Certificates are referred to in this prospectus supplement as the "LIBOR Certificates." The Class [ ] Certificates are referred to in this prospectus supplement as the "Subordinate Certificates." The Class R Certificate is also referred to as the "Residual Certificate." The Class [ ] Certificate will be issued as a single Certificate in fully registered, certificated form. The Certificates represent beneficial ownership interests in a trust fund (the "Trust Fund"), the assets of which consist primarily of (1) [describe mortgage loans] mortgage loans (the "Mortgage Loans"), (2) the assets that from time to time are identified as deposited in respect of the Mortgage Loans in the Collection Account and the Certificate Account (each as defined in this prospectus supplement), (3) property acquired by foreclosure of Mortgage Loans or deed in lieu of foreclosure, (4) any applicable insurance policies and all proceeds of these insurance policies, and (5) [describe other assets, as applicable]. Each Class of Offered Certificates will be issued in the respective approximate initial total principal amount set forth or described on the cover page of this prospectus supplement. The total principal amount of each Class of Offered Certificates is referred to in this prospectus supplement as the "Class Principal Amount" for that Class. The Class [ ] Certificate will be issued without a principal amount or interest rate, and will be entitled only to the amounts that are described in this prospectus supplement. The total Certificate Principal Amount (as defined in this prospectus supplement) of the Certificates and the initial Class Principal Amount of each Class of Offered Certificates may be increased or decreased by up to 5% to the extent that the Cut-off Date Balance (as defined in this prospectus supplement) of the Mortgage Loans is increased or decreased as described under "Description of the Mortgage Pools" in this prospectus supplement. Distributions on the Certificates will be made on the [25th] day of each month or, if the [25th] day is not a Business Day, on the next succeeding Business Day, commencing in [ ] (each, a "Distribution Date"), to Certificateholders of record on the applicable Record Date. The "Record Date" for each Distribution Date will be the close of business on the last Business Day of the calendar month immediately preceding the month in which that Distribution Date occurs. o A "Business Day" is generally any day other than a Saturday or Sunday or a day on which banks in New York or [California] are closed. Distributions on the Offered Certificates will be made to each registered holder entitled to the distributions, either (1) by check mailed to the Certificateholder's address as it appears on the books of the Trustee (as defined in this prospectus supplement), or (2) at the request, submitted to the Trustee in writing at least five Business Days prior to the related Record Date, of any holder of an Offered Certificate (at the holder's expense) in immediately available funds; provided, that the final distribution in respect of any Certificate will be made only upon presentation and surrender of the Certificate at the Corporate Trust Office (as defined in this prospectus supplement) of the Trustee. See "-- The Trustee" in this prospectus supplement. [PRE-FUNDING ACCOUNT On the Closing Date approximately $[ ] (the "Pre-Funded Amount") will be deposited in an account (the "Pre-Funding Account") maintained by [ ], which account shall be part of the trust fund. During the period (the "Pre-Funding Period") from [ ] until [ ], the Pre-Funding Amount will be maintained in the Pre-Funding Account. The Pre-Funded Amount will be reduced during the Pre-Funding Period by the amount of Subsequent Mortgage Loans (as defined in this prospectus supplement) deposited in the trust fund in accordance with the Pooling and Servicing Agreement. During the Pre-Funding Period, the Pre-Funded Amount will be used only to purchase Subsequent Mortgage Loans. Immediately following the Pre-Funding Period, any Pre-Funded Amount remaining will be distributed to [to be provided as applicable]. Amounts on deposit in the Pre-Funding Account will be invested in [to be provided as applicable] and all investment earnings on amounts on deposit in the Pre-Funding Account will be distributed to [to be provided as applicable] following the Pre-Funding Period.] BOOK-ENTRY REGISTRATION GENERAL. The Offered Certificates (the "Book-Entry Certificates") will be issued, maintained and transferred on the book-entry records of The Depository Trust Company ("DTC") in the United States [, or through Clearstream Luxembourg, societe anonyme ("Clearstream Luxembourg") or the Euroclear System ("Euroclear") in Europe] and through [its/their] participating organizations (each, a "Participant"). The Book-Entry Certificates will be issued in minimum denominations in principal amount of $25,000 and integral multiples of $1 in excess of $25,000. Each Class of Book-Entry Certificates will be represented by one or more certificates registered in the name of the nominee of DTC. ACE Securities Corp. (the "Depositor") has been informed by DTC that DTC's nominee will be Cede & Co. [Clearstream Luxembourg and Euroclear will hold omnibus positions on behalf of their Participants through customers' securities accounts in Clearstream Luxembourg's and Euroclear's names on the books of their respective depositaries, which in turn will hold positions in customers' securities accounts in the depositaries' names on the books of DTC.] No person acquiring an interest in a Book-Entry Certificate (each, a "Beneficial Owner") will be entitled to receive a certificate representing an interest (a "Definitive Certificate"), except as set forth below under "-- Definitive Certificates" and in the Prospectus under "Description of the Certificates -- Book-Entry Registration and Definitive Securities -- Definitive Securities." Unless and until Definitive Certificates are issued, it is anticipated that: o the only "Certificateholder" of the Offered Certificates will be Cede & Co., as nominee of DTC, and Beneficial Owners will not be Certificateholders as that term is used in the Pooling and Servicing Agreement (as defined in this prospectus supplement). o Beneficial Owners will receive all distributions of principal of, and interest on, the Offered Certificates from the Trustee through DTC [, Clearstream Luxembourg or Euroclear, as applicable,] and [its/their] Participants. o while the Offered Certificates are outstanding, under the rules, regulations and procedures creating and affecting DTC [Clearstream Luxembourg and Euroclear] and [its/their] operations, DTC [Clearstream Luxembourg and Euroclear] [is/are] required to make book-entry transfers among Participants on whose behalf it acts with respect to the Offered Certificates and is required to receive and transmit distributions of principal of, and interest on, the Offered Certificates. Participants and indirect participants with whom Beneficial Owners have accounts with respect to Offered Certificates are similarly required to make book-entry transfers and receive and transmit distributions on behalf of their respective Beneficial Owners. Accordingly, although Beneficial Owners will not possess certificates, DTC [Clearstream Luxembourg and Euroclear] [has/have] in place a mechanism by which Beneficial Owners will receive distributions and will be able to transfer their interest. None of the Depositor, [ ], the Servicer or the Trustee [or additional parties] (as those terms are defined in this prospectus supplement) will have any responsibility for any aspect of the records relating to or payments made on account of beneficial ownership interests of the Book-Entry Certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests. For a more complete description of book-entry registration and clearance and the rules and regulations governing DTC [,Clearstream Luxembourg and Euroclear], see "Description of the Securities -- Book-Entry Registration and Definitive Securities" in the Prospectus" [and "Global Clearance, Settlement and Tax Documentation Procedures" in Annex I to this Prospectus Supplement]. 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 Securities -- Book-Entry Registration and Definitive Securities -- Definitive Securities." Upon the occurrence of an event described in that section, the Trustee is required to direct DTC to notify Participants who have ownership of Book-Entry Certificates as indicated on the records of DTC of the availability of Definitive Certificates for their Book-Entry Certificates. Upon surrender by DTC of the Definitive Certificates representing the Book-Entry Certificates and upon receipt of instructions from DTC for re-registration, the Trustee will re-issue the Book-Entry Certificates as Definitive Certificates in the respective principal amounts owned by individual Beneficial Owners, and thereafter the Trustee will recognize the holders of the Definitive Certificates as Certificateholders under the Pooling and Servicing Agreement. DISTRIBUTIONS OF INTEREST The amount of interest distributable on each Distribution Date in respect of each Class of Certificates (other than the Class [ ] Certificate) will equal the sum of [to be provided as applicable]. Interest will accrue on the Offered Certificates on the basis of a 360-day year and the actual number of days in each Accrual Period. o The "Interest Rate" for each Class of Certificates will be the applicable annual rate described below. [If [ ] does not exercise its option to purchase the Mortgage Loans when it is first entitled to do so, as described under "-- Optional Purchase of Mortgage Loans; Termination of the Trust Fund" in this prospectus supplement, then with respect to each succeeding Distribution Date, the [ ] will be increased to %]. Subject to the preceding proviso, the Interest Rates for the Class [ ] Certificates will be the applicable annual rate determined as follows: o [To be provided as applicable]. o The "Net Mortgage Rate" for any Mortgage Loan equals the Mortgage Rate of the Mortgage Loan MINUS the Total Expense Rate (as defined in this prospectus supplement). o The "Total Expense Rate" for each Distribution Date is the sum of [the Servicing Fee Rate and the Trustee Fee Rate (each as defined in this prospectus supplement)]. The "Certificate Principal Amount" of any Offered Certificate for any date of determination will equal that Certificate Principal Amount on [ ] (the "Closing Date") as reduced by all amounts previously distributed on that Certificate in respect of principal and, in the case of a Class [ ] Certificate, any Applied Loss Amount (as defined in this prospectus supplement) previously allocated to that Certificate. For each Distribution Date, the "Accrual Period" applicable to each Class of Offered Certificates will be the period beginning on the immediately preceding Distribution Date (or on the Closing Date, in the case of the first Accrual Period) and ending on the day immediately preceding the related Distribution Date. o The "Interest Remittance Amount" for any Distribution Date will equal the sum of [to be provided as applicable]. On each Distribution Date, the Interest Remittance Amount will be distributed in the following order of priority: [To be provided as applicable.] When a principal prepayment in full is made on a Mortgage Loan, the borrower is charged interest only to the date of the prepayment, instead of for a full month, with a resulting reduction in interest payable for the month during which the prepayment is made. Prepayments in part will be applied as of the date of receipt. Full or partial prepayments (or proceeds of other liquidations) received in any Prepayment Period will be distributed to holders of Offered Certificates on the Distribution Date following that Prepayment Period. To the extent that, as a result of a full or partial prepayment, a borrower is not required to pay a full month's interest on the amount prepaid, a shortfall (a "Prepayment Interest Shortfall") in the amount available to make distributions of interest on the Certificates could result. A Prepayment Interest Shortfall will result from a prepayment in full only if that prepayment is received on or after the [16th] day of a calendar month. If a prepayment in full is received on or prior to the [15th] day of a calendar month, there will be an excess of interest over one month's interest for that Mortgage Loan ("Prepayment Interest Excess") available for distribution to Certificateholders on the related Distribution Date. The Servicer is obligated to fund Prepayment Interest Shortfalls that exceed Prepayment Interest Excess, but only in an amount up to the total of the Servicing Fees for the applicable Distribution Date. See "The Pooling and Servicing Agreement -- Prepayment Interest Shortfalls" in this prospectus supplement. Any of these payments by the Servicer is referred to in this prospectus supplement as "Compensating Interest." Any Prepayment Interest Shortfalls not funded by the Servicer ("Net Prepayment Interest Shortfalls") will reduce the Interest Remittance Amount available for distribution on the related Distribution Date. [DETERMINATION OF INDEX On the second Business Day preceding the beginning of each Accrual Period (each date, an "Index Determination Date"), the Trustee will determine the Index for that Accrual Period. On each Index Determination Date, the Index for the next succeeding Accrual Period will be established by the Trustee as follows: [To be provided as applicable.]] DISTRIBUTIONS OF PRINCIPAL Distributions of principal on the Class [ ] Certificates will be made primarily from [to be provided as applicable.] o The "Principal Distribution Amount" for [each Mortgage Pool for] any Distribution Date will be equal to the sum of [to be provided as applicable]. o The "Principal Remittance Amount" for [each Mortgage Pool for] any Distribution Date will be equal to the sum of [to be provided as applicable.] o The "Due Period" for any Distribution Date is the one-month period beginning on [the second day of the calendar month immediately preceding the month in which that Distribution Date occurs and ending on the first day of the month in which that Distribution Date occurs.] o The "Prepayment Period" for each Distribution Date is the one-month period beginning on the Cut-off Date, in the case of [the first Distribution Date, and on the day immediately following the close of the immediately preceding Prepayment Period, in the case of each subsequent Distribution Date, and ending on the [ ]th day (or if that day is not a Business Day, the immediately preceding Business Day) of the month in which that Distribution Date occurs]. On each Distribution Date, the Principal Distribution Amount will be distributed in the following order of priority: [To be provided as applicable]. CREDIT ENHANCEMENT Credit enhancement for the Offered Certificates consists of [the Insurance Policy, the subordination of the Subordinate Certificates, the priority of application of Realized Losses (as defined in this prospectus supplement) and overcollateralization], in each case as described in this prospectus supplement. [The Insurance Policy is described under "The Insurance Policy" below.] [SUBORDINATION. The rights of holders of the Class [ ] Certificates to receive distributions with respect to the Mortgage Loans will be subordinated, to the extent described in this prospectus supplement, to the rights of holders of the Senior Certificates, as described under "-- Distributions of Interest" and "-- Distributions of Principal." This subordination is intended to enhance the likelihood of regular receipt by holders of Senior Certificates of the full amount of interest and principal distributable on the Senior Certificates, and to afford holders of Senior Certificates limited protection against Realized Losses incurred on the Mortgage Loans. No amounts will be distributed to the holder of the Class [ ] Certificate until all amounts due to the holders of the Class [ ] Certificates have been distributed. The limited protection afforded to holders of Class [ ] Certificates by means of the subordination of Subordinate Certificates having a lower priority of distribution will be accomplished by the preferential right of holders of Offered Certificates to receive, prior to any distribution in respect of interest or principal, respectively, being made on any Distribution Date in respect of Certificates having a lower priority of distribution, the amounts of interest due them and principal available for distribution, respectively, on that Distribution Date.] [ALLOCATION OF LOSSES. If a Mortgage Loan becomes a Liquidated Mortgage Loan during any Prepayment Period, the related Net Liquidation Proceeds, to the extent allocable to principal, may be less than the outstanding principal balance of the Mortgage Loan. The amount of that insufficiency is a "Realized Loss." Realized Losses on Mortgage Loans will have the effect of reducing amounts distributable in respect of, first, the Class [ ] Certificate (both through the application of Monthly Excess Interest to fund the deficiency and through a reduction in the Overcollateralization Amount for the related Distribution Date), and second, the Class [ ] Certificates, before reducing amounts distributable in respect of the Senior Certificates. o A "Liquidated Mortgage Loan" is, in general, a defaulted Mortgage Loan as to which the Servicer has determined that all amounts that it expects to recover in respect of that Mortgage Loan have been recovered (exclusive of any possibility of a deficiency judgment). To the extent that Realized Losses occur, those Realized Losses will reduce the Total Loan Balance, and thus may reduce the Overcollateralization Amount. As described in this prospectus supplement, the Overcollateralization Amount is created, increased and maintained by application of Monthly Excess Cashflow to make distributions of principal on the Offered Certificates. If on any Distribution Date after giving effect to all Realized Losses incurred during the related Due Period and distributions of principal on that Distribution Date, the total Certificate Principal Amount of the Certificates exceeds the Total Loan Balance for that Distribution Date (this excess, an "Applied Loss Amount"), the Class Principal Amount of the Class [ ] Certificates will be reduced by that amount, until the Class Principal Amount of the Class [ ] Certificates has been reduced to zero. The Class Principal Amounts of the Senior Certificates will not be reduced by allocation of Applied Loss Amounts. Holders of Class [ ] Certificates will not receive any distributions in respect of Applied Loss Amounts, except to the extent of available Monthly Excess Cashflow as described below.] [OVERCOLLATERALIZATION. The weighted average Net Mortgage Rate of the Mortgage Loans is generally expected to be higher than the weighted average of the interest rates of the Certificates, thus generating excess interest collections. To the extent described in this prospectus supplement, Monthly Excess Interest will be applied on any Distribution Date in reduction of the Certificate Principal Amounts of the Offered Certificates. This application of interest collections as distributions of principal will cause the total Certificate Principal Amount of the Certificates to amortize more rapidly than the Total Loan Balance, creating, increasing and maintaining overcollateralization. However, Realized Losses will reduce overcollateralization, and could result in an Overcollateralization Deficiency. For each Distribution Date, the Monthly Excess Interest and any Excess Principal will be the "Monthly Excess Cashflow," which will be in the following order of priority: [To be provided as applicable.]] [THE RESERVE FUND The Reserve Fund will be an asset of the Trust Fund but not of the REMIC. The holder of the Residual Certificate will be the owner of the Reserve Fund, and amounts on deposit in the Reserve Fund will be invested at the direction of the holder of the Residual Certificate as provided in the Pooling and Servicing Agreement. The Reserve Fund will consist of [to be provided as applicable]. Withdrawals will be made from the Reserve Fund for the benefit of the Offered Certificates as described under "-- Overcollateralization" above. The only asset of the Reserve Fund on the Closing Date will be [to be provided as applicable.] If on any Distribution Date the sum of the amount on deposit in the Reserve Fund and the Overcollateralization Amount exceeds the Targeted Overcollateralization Amount, the excess will be released to the Residual Certificateholder, provided that the amount remaining in the Reserve Fund equals or exceeds the reserve fund requirement specified in the Pooling and Servicing Agreement.] FINAL SCHEDULED DISTRIBUTION DATE It is expected that scheduled distributions on the Mortgage Loans, assuming no defaults or losses that are not covered by the limited credit support described in this prospectus supplement, will be sufficient to make timely distributions of interest on the Offered Certificates and to reduce the Class Principal Amount of each Class of the Senior Certificates to zero not later than [ ] and of the Class [ ] Certificates not later than [ ]. As to each Class, the actual final Distribution Date may be earlier or later, and could be substantially earlier, than the applicable Final Scheduled Distribution Date. REPORTS TO CERTIFICATEHOLDERS On each Distribution Date the Trustee will make available to each Certificateholder a statement containing the following information: o the amount of principal distributed on that date to holders of each Class of Offered Certificates; o the amount of interest distributed on that date to holders of each Class of Offered Certificates; o the Interest Rate applicable to each Class of Offered Certificates; o the Class Principal Amount of each Class of Offered Certificates after distributions on that date; o the amount of the Servicing Fees and Trustee Fee paid with respect to that date; o the Total Loan Balance as of the related Distribution Date; o the amount of any Realized Losses on the Mortgage Loans during the immediately preceding calendar month and total Realized Losses since the Cut-off Date; o the number and aggregate Principal Balance of Mortgage Loans (1) remaining outstanding, (2) delinquent by one, two, three or four or more monthly payments, (3) in foreclosure, and (4) with respect to REO Property; o any amount distributed to the holder of the Residual Certificate; and o other information to the extent provided in the Pooling and Servicing Agreement. OPTIONAL PURCHASE OF MORTGAGE LOANS; TERMINATION OF THE TRUST FUND On any Distribution Date after the date on which the Total Loan Balance is less than [ ]% of the Cut-off Date Balance, the holder of the [ ] will (subject to the terms of the Pooling and Servicing Agreement) have the option to purchase the Mortgage Loans, any REO Property and any other related property for a price equal to the sum of (1) 100% of the total outstanding principal balance of the Mortgage Loans plus accrued interest on the Mortgage Loans at the applicable Mortgage Rate, (2) the fair market value of all other property being purchased, (3) any unpaid Servicing Fees and other amounts payable to the Servicer and the Trustee and (4) [ ]; provided, that the purchase price will not be less than the total Certificate Principal Amount of the Offered Certificates, plus accrued interest on the Offered Certificates. If the holder of the [ ] does not exercise that option, the [ ] will then have the same purchase option. If either purchase option is exercised, the Trust Fund will be terminated (this event, an "Optional Termination"). If the [ ] does not exercise its option as described above when it is first entitled to do so, [to be provided as applicable]. THE TRUSTEE [ ], a [ ] banking corporation, will be the Trustee under the Pooling and Servicing Agreement (the "Trustee"). The Trustee will be paid a monthly fee (the "Trustee Fee") calculated as a fixed percentage equal to [ ]% annually (the "Trustee Fee Rate") on the Total Loan Balance. As additional compensation, the Trustee will be entitled to [to be provided as applicable]. The Trustee's "Corporate Trust Office" for purposes of presentment and surrender of the Offered Certificates for the final distribution on the Offered Certificates and for all other purposes is located at [ ], or any address as the Trustee may designate from time to time by notice to the Certificateholders, the Depositor and the Servicer. [THE INSURANCE POLICY The following information has been supplied by [ ] (the "Insurer") for inclusion in this Prospectus Supplement. Accordingly, the Depositor, the Servicer and the Underwriter do not make any representation as to the accuracy and completeness of this information. The Insurer does not accept any responsibility for the accuracy or completeness of this Prospectus Supplement or any information or disclosure contained in this prospectus supplement, or omitted from this prospectus supplement, other than with respect to the accuracy of the information regarding the Certificate Guaranty Insurance Policy (the "Insurance Policy") and the Insurer set forth below under this heading "The Insurance Policy." Additionally, the Insurer makes no representation regarding the Certificates or the advisability of investing in the Certificates. THE INSURER [To be provided as applicable.] INSURER FINANCIAL INFORMATION [To be provided as applicable.] WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION ABOUT THE INSURER [To be provided as applicable.] FINANCIAL STRENGTH RATINGS OF THE INSURER [To be provided as applicable.] THE INSURANCE POLICY [To be provided as applicable.]] DESCRIPTION OF THE MORTGAGE POOL GENERAL The Mortgage Pool will consist of approximately [ ] [description of Mortgage Loans] Mortgage Loans with original terms to maturity from the first due date of the scheduled monthly payment (a "Monthly Payment") of not more than [30] years, having a total Principal Balance as of the Cut-off Date (after giving effect to Monthly Payments due on that date) of approximately $[ ] (the "Cut-off Date Balance"). The Mortgage Loans were originated or acquired by the originators described in this prospectus supplement generally in accordance with the underwriting guidelines described in this prospectus supplement. Wherever reference is made in this prospectus supplement to a percentage of some or all of the Mortgage Loans, the percentage is determined (unless otherwise specified) on the basis of the total Principal Balance of the related Mortgage Loans as of the Cut-off Date. All of the Mortgage Loans are secured by mortgages or deeds of trust or other similar security instruments creating [to be provided as applicable.] The Mortgage Loans to be included in the Mortgage Pool will be acquired by the Depositor from [ ] ("[ ]"), which acquired the Mortgage Loans from [ ]. See "[Originator/Servicer]" and "The Pooling and Servicing Agreement -- Assignment of Mortgage Loans" in this prospectus supplement. Pursuant to its terms, each Mortgage Loan, other than a loan secured by a condominium unit, is required to be covered by a standard hazard insurance policy in an amount generally equal to the lower of the unpaid principal amount of the Mortgage Loan or the replacement value of the improvements on the Mortgaged Property. Generally, a condominium association is responsible for maintaining hazard insurance covering the entire building. See "Description of Mortgage and Other Insurance Hazard -- Insurance on the Loans -- Standard Hazard Insurance Policies" in the Prospectus. [Approximately [ ]% of the Mortgage Loans have Loan-to-Value Ratios in excess of 80%. None of those Mortgage Loans or any other Mortgage Loans are covered by primary mortgage insurance policies. The "Loan-to-Value Ratio" of a Mortgage Loan at any time is the ratio of the principal balance of the Mortgage Loan at the date of determination to (a) in the case of a purchase, the lesser of the sale price of the Mortgaged Property and its appraised value at the time of sale, or (b) in the case of a refinance or modification, the appraised value of the Mortgaged Property at the time of refinance or modification.] [Approximately [ ]% of the Mortgage Loans are fully amortizing. Approximately [ ]% of the Mortgage Loans will have original terms to maturity that are shorter than their amortization schedules, leaving final payments ("Balloon Payments") due on their maturity dates that are significantly larger than other monthly payments (these loans, "Balloon Loans"). The Balloon Loans are generally expected to have original terms to maturity of [15] years. The ability of the borrower to repay a Balloon Loan at maturity frequently will depend on the borrower's ability to refinance the loan. Any loss on a Balloon Loan as a result of the borrower's inability to refinance the loan will be borne by Certificateholders, to the extent not covered by the applicable credit enhancement. Neither the Servicer nor the Trustee will make any Advances with respect to delinquent Balloon Payments.] ADJUSTABLE RATE MORTGAGE LOANS [Describe adjustment of adjustable rate Mortgage Loans, as applicable.] [THE INDEX The Index applicable to the determination of the Mortgage Rates for the Adjustable Rate Mortgage Loans will be [described as applicable].] THE MORTGAGE LOANS The Mortgage Loans are expected to have the following approximate total characteristics as of the Cut-off Date. Prior to the issuance of the Certificates, the Mortgage Loans may be removed from the Trust Fund as a result of incomplete documentation or otherwise, if the Depositor deems removal necessary or appropriate. In addition, a limited number of other mortgage loans may be included in the Trust Fund prior to the issuance of the Offered Certificates. Number of Mortgage Loans................... Initial Pool Balance.......................$ Mortgage Rates: % Weighted Average...................... Range................................. % to % Weighted Average Remaining Term to Maturity (in months)....................... The Principal Balances of the Mortgage Loans range from approximately $[ ] to approximately $[ ]. The Mortgage Loans have an average Principal Balance of approximately $[ ]. The weighted average Loan-to-Value Ratio at origination of the Mortgage Loans is approximately [ ]%. No more than approximately [ ]% of the Mortgage Loans are secured by Mortgaged Properties located in any one zip code area. The following tables set forth as of the Cut-off Date the number, total Principal Balance and percentage of the Mortgage Loans having the stated characteristics shown in the tables in each range. (The sum of the amounts of the percentages in the following tables may not equal the totals due to rounding.) CUT-OFF DATE PRINCIPAL BALANCES PERCENTAGE OF MORTGAGE LOANS RANGE OF NUMBER OF TOTAL BY TOTAL PRINCIPAL BALANCES($) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - --------------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% The average Cut-off Date Principal Balance is approximately $[ ]. LOAN-TO-VALUE RATIIOS PERCENTAGE OF MORTGAGE LOANS RANGE OF ORIGINAL NUMBER OF TOTAL BY TOTAL PRINCIPAL BALANCES(%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - --------------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% The weighted average original Loan-to-Value Ratio is approximately [ ]%. MORTGAGE RATES PERCENTAGE OF MORTGAGE LOANS RANGE OF NUMBER OF TOTAL BY TOTAL MORTAGE RATES(%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% - --------- * Reflects current Mortgage Rates of Adjustable Rate Mortgage Loans. The weighted average Mortgage Rate is approximately [ ]% per annum. LOAN TYPES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL LOAN TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% ORIGINAL TERMS TO MATURITY PERCENTAGE OF MORTGAGE LOANS RANGE OF NUMBER OF TOTAL BY TOTAL MATURITIES (MONTHS) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------------ -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% The weighted average original term to maturity is approximately [ ] months. REMAINING TERMS TO MATURITY PERCENTAGE OF MORTGAGE LOANS REMAINING TERM TO NUMBER OF TOTAL BY TOTAL MATURITY (MONTHS) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% The weighted average remaining term to maturity of the fully amortizing Mortgage Loans is approximately [ ] months. GEOGRAPHIC DISTRIBUTION PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL STATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% PROPERTY TYPES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL PROPERTY TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% LOAN PURPOSES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL LOAN PURPOSE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% OCCUPANCY STATUS PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL OCCUPANCY STATUS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% DOCUMENTATION TYPES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL DOCUMENTATION TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------------ -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% CREDIT GRADES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL CREDIT GRADE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% PREPAYMENT PENALTIES PERCENTAGE OF MORTGAGE LOANS PREPAYMENT NUMBER OF TOTAL BY TOTAL PENALTY MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------ -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% MAXIMUM RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS RANGE OF NUMBER OF TOTAL BY TOTAL MAXIMUM RATES(%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% The weighted average Maximum Rate of the Adjustable Rate Mortgage Loans is approximately [ ]% per annum. MINIMUM RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS RANGE OF NUMBER OF TOTAL BY TOTAL MINIMUM RATES(%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% The weighted average Minimum Rate of the Adjustable Rate Mortgage Loans is approximately [ ]% per annum. GROSS MARGINS OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS RANGE OF GROSS NUMBER OF TOTAL BY TOTAL MARGINS(%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% The weighted average Gross Margin of the Adjustable Rate Mortgage Loans is approximately % per annum. NEXT ADJUSTMENT DATE OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS NEXT NUMBER OF TOTAL BY TOTAL ADJUSTMENT DATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% INITIAL FIXED TERM/SUBSEQUENT ADJUSTABLE RATE TERM OF THE ADJUSTABLE RATE MORTGAGE LOANS INITIAL FIXED MORTGAGE LOANS TERM/SUBSEQUENT NUMBER OF TOTAL BY TOTAL ADJUSTMENT RATE TERM MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------------- -------------- ----------------- ----------------- $ % ---------- ------------- --------- Total $ 100.00% PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL PERIODIC CAP(%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $100.00% Total....................... $100.00% INITIAL CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL INITIAL CAP($%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- Total....................... $100.00% [SUBSEQUENT MORTGAGE LOANS The obligation of the Trust Fund to purchase additional Mortgage Loans (the "Subsequent Mortgage Loans") on [any] date, as specified in the Pooling and Servicing Agreement (each, a "Subsequent Transfer Date") will be subject to the Subsequent Mortgage Loans meeting the following criteria: [to be provided as applicable]. These criteria will be based on the characteristics of the Subsequent Mortgage Loans on the related Subsequent Transfer Date. The characteristics of Subsequent Mortgage Loans may vary significantly from time to time subject to the requirements described above, and may bear no particular relationship to the characteristics of the initial Mortgage Loans at any time. It is expected that a substantial portion of the Subsequent Mortgage Loans will be [to be provided as applicable.]] ADDITIONAL INFORMATION The description in this Prospectus Supplement of the Mortgage Pool and the Mortgaged Properties is based upon the Mortgage Pool as constituted at the close of business on the Cut-off Date, as adjusted for Monthly Payments due on or before that date. A Current Report on 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. In the event that Mortgage Loans are removed from or added to the Mortgage Pool as set forth in this prospectus supplement under "Description of the Mortgage Pool," the removal or addition, to the extent material, will be noted in the Current Report on Form 8-K. [ORIGINATOR/SERVICER The information in this section has been provided by [servicer]. None of the Depositor, [ ], the Trustee, the Insurer, the Underwriter or any of their respective affiliates has made or will make any representation as to the accuracy or completeness of this information. GENERAL [Description of the Originator/Servicer.] LENDING ACTIVITIES AND LOAN SALES [ ] originates real estate loans through its network of offices and loan origination centers. [ ] also participates in secondary market activities by originating and selling mortgage loans while continuing to service the majority of the loans sold. In other cases [ ]'s whole loan sale agreements provide for the transfer of servicing rights. [ ]'s primary lending activity is funding loans to enable borrowers to purchase or refinance residential real property, which loans are secured by first or second liens on the related real property. [ ]'s single-family real estate loans are predominantly "conventional" mortgage loans, meaning that they are not insured by the Federal Housing Administration or partially guaranteed by the U.S. Department of Veterans Affairs. The following table summarizes [ ]'s one- to four-family residential mortgage loan origination and sales activity for the periods shown below. Sales activity may include sales of mortgage loans purchased by [ ] from other loan originators. Year Ended December 31, Three Months Ended March 31, ----------------------- ---------------------------- (Dollar in thousands) (Dollars in thousands) ------------------------------ --------------------- Originated and $ $ $ $ $ $ $ purchased...... Sales.......... $ $ $ $ $ $ $ LOAN SERVICING The Servicer services all of the mortgage loans it originates that are retained in its portfolio and continues to service at least a majority of the loans that have been sold to investors. Servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent borrowers, and supervising foreclosure in the event of unremedied defaults. The Servicer's servicing activities are audited periodically by applicable regulatory authorities. Some financial records of the Servicer relating to its loan servicing activities are reviewed annually as part of the audit of the Servicer's financial statements conducted by its independent accountants. UNDERWRITING GUIDELINES The Mortgage Loans were originated generally in accordance with guidelines (the "Underwriting Guidelines") established by [ ]. The Underwriting Guidelines are primarily intended to evaluate the value and adequacy of the mortgaged property as collateral and are also intended to consider the borrower's credit standing and repayment ability. On a case-by-case basis and only with the approval of two or more senior lending officers, [ ] may determine that, based upon compensating factors, a prospective borrower not strictly qualifying under the underwriting risk category guidelines described below warrants an underwriting exception. Compensating factors may include, but are not limited to, low loan-to-value ratio, low debt-to-income ratio, good credit history, stable employment and time in residence at the applicant's current address. It is expected that a substantial number of the Mortgage Loans will have been originated under underwriting exceptions. [Describe originator's underwriting guidelines.] SERVICING PRACTICES AND EXPERIENCE In general, when a borrower fails to make a required payment on a residential mortgage loan, [ ] attempts to cause the deficiency to be cured by corresponding with the borrower. In most cases deficiencies are cured promptly. Pursuant to [ ]'s customary procedures for residential mortgage loans serviced by it for its own account, [ ] generally mails a notice of intent to foreclose to the borrower after the loan has become 31 days past due (two payments due but not received) and, within one month thereafter, if the loan remains delinquent, typically institutes appropriate legal action to foreclose on the property securing the loan. If foreclosed, the property is sold at public or private sale and may be purchased by [ ]. In California, real estate lenders are generally unable as a practical matter to obtain a deficiency judgment against the borrower on a loan secured by single-family real estate. The following table sets forth the delinquency and loss experience at the dates indicated for residential (one- to four-family and multifamily) first lien mortgage loans serviced by the Servicer that were originated or purchased by the Servicer: [To be provided as applicable.] There can be no assurance that the delinquency and loss experience of the Mortgage Loans will correspond to the loss experience of the Servicer's mortgage portfolio set forth in the table above. The statistics shown above represent the delinquency and loss experience for the Servicer's total servicing portfolio only for the periods presented, whereas the total delinquency and loss experience on the Mortgage Loans will depend on the results over the life of the Trust Fund. The Servicer's portfolio includes mortgage loans with payment and other characteristics that are not representative of the payment and other characteristics of the Mortgage Loans. A substantial number of the Mortgage Loans may also have been originated based on Underwriting Guidelines that are less stringent than those generally applicable to the servicing portfolio reflected in the table. If the residential real estate market experiences an overall decline in property values, the actual rates of delinquencies, foreclosures and losses could be higher than those previously experienced by the Servicer. In addition, adverse economic conditions (which may or may not affect real property values) may affect the timely payment by borrowers of scheduled payments of principal and interest on the Mortgage Loans and, accordingly, the actual rates of delinquencies, foreclosures and losses on to the Mortgage Loans.] THE POOLING AND SERVICING AGREEMENT GENERAL The Certificates will be issued pursuant to a Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") dated as of [ ] among the Depositor, the Servicer and the Trustee. Reference is made to the Prospectus for important information in addition to that set forth in this Prospectus Supplement regarding the terms and conditions of the Pooling and Servicing Agreement and the Offered Certificates. Offered Certificates in certificated form will be transferable and exchangeable at the Corporate Trust Office of the Trustee. [ ] serve as Certificate Registrar and Paying Agent. ASSIGNMENT OF MORTGAGE LOANS The Depositor will assign the Mortgage Loans to the Trustee, together with all principal and interest received with respect to the Mortgage Loans on and after the Cut-off Date, other than Monthly Payments due on or before that date. Each Mortgage Loan will be identified in a schedule appearing as an exhibit to the Pooling and Servicing Agreement that will specify with respect to each Mortgage Loan, among other things, the original principal balance and the Principal Balance as of the close of business on the Cut-off Date, the Mortgage Rate, the Monthly Payment and the maturity date. The Trustee will, concurrently with the assignment to it of the property constituting the Trust Fund, authenticate and deliver the Certificates. [As to each Mortgage Loan, the following documents are generally required to be delivered to the Trustee or its custodian (the "Custodian") in accordance with the Pooling and Servicing Agreement: o the related original Mortgage Note endorsed without recourse to the Trustee or in blank; o the original Mortgage with evidence of recording indicated on the original Mortgage (or, if the original recorded Mortgage has not yet been returned by the recording office, a copy certified to be a true and complete copy of the Mortgage sent for recording), the original security agreement and related documents; o an original assignment of the Mortgage to the Trustee or in blank in recordable form and originals of all intervening assignments, if any, showing a complete chain of title from origination to the Trustee; o the policies of title insurance issued with respect to each Mortgage Loan; and o the originals of any assumption, modification, extension or guaranty agreements. Where necessary to protect the interest of the Trustee in the Mortgage Loans, the assignments of each Mortgage to the Trustee are required to be submitted for recording promptly after the Closing Date.] Under the terms of the agreements (the "Mortgage Loan Purchase Agreements") pursuant to which [ ] purchased the Mortgage Loans from [the Originator] and the Depositor purchased the Mortgage Loans from [ ], the Custodian [has conducted an initial review of the mortgage loan documents and has notified] the Depositor, [ ] and [the Originator] as to each mortgage loan document that either has not yet been delivered to the Depositor as required or appears to be not properly executed, not in conformity with the description of the Mortgage Loan on the Mortgage Loan schedule or otherwise defective. If any Mortgage Loan document is not delivered or any material defect in a document is not cured within the time period specified in the Mortgage Loan Purchase Agreements, [the Originator] will be required to repurchase the affected Mortgage Loan for a price equal to the unpaid principal balance of the Mortgage Loan plus accrued interest on the Mortgage Loan (the "Repurchase Price") or, in some circumstances, to substitute another mortgage loan. [[The Originator] has made to [ ] and the Depositor under the Mortgage Loan Purchase Agreements representations and warranties that include representations and warranties similar to those summarized in the Prospectus under the heading "Description of the Agreements -- Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements -- Representations and Warranties; Repurchases." [ ]'s and the Depositor's rights under these representations and warranties will be assigned to the Trustee for the benefit of Certificateholders. In the event of a breach of any of these representations or warranties that materially and adversely affects the value of any Mortgage Loan or the interests of Certificateholders or the Insurer, [the Originator] will be obligated, within 60 days following its discovery of a breach or receipt of notice of a breach to cure the breach or purchase the affected Mortgage Loan from the Trust Fund for the Repurchase Price or, in some circumstances, to substitute another mortgage loan.] To the extent that any Mortgage Loan as to which a representation or warranty has been breached is not repurchased by [the Originator] and a Realized Loss occurs on the Mortgage Loan, holders of Offered Certificates, in particular the Class [ ]Certificates, may incur a loss if the applicable credit enhancement is not sufficient to cover that loss. VOTING RIGHTS Voting rights of Certificateholders under the Pooling and Servicing Agreement will be allocated among the Classes of Certificates and among the Certificates of each Class as provided in the Pooling and Servicing Agreement. GENERAL SERVICING PROVISIONS The Mortgage Loans will be serviced by the Servicer in accordance with the provisions of the Pooling and Servicing Agreement. [The Servicer will be required to use reasonable efforts to collect all amounts due under each Mortgage Loan and to administer the Mortgage Loans in accordance with generally accepted servicing practices. See "[Originator/Servicer] -- Servicing Practices and Experience." The Servicer will be required to deposit all amounts collected and recovered with respect to the Mortgage Loans within three Business Days of receipt of those amounts in a separate account in the name of the Trustee (the "Collection Account"); on the [ ] day of each month, or if that date is not a Business Day, on the immediately following Business Day, the Servicer will be required to transfer the Interest Remittance Amount and the Principal Remittance Amount to a separate account maintained by the Trustee for the benefit of the Certificateholders (the "Certificate Account"). The Servicer will be prohibited under the Pooling and Servicing Agreement from making any material modification to the terms of a Mortgage Loan, including a change in the Mortgage Rate other than as provided in the Mortgage Note, deferral or forgiveness of a Monthly Payment or extension of the maturity date, unless the Mortgage Loan is in default or default is, in the judgment of the Servicer, reasonably foreseeable. The Servicer will also be prohibited from waiving any prepayment premium except in the case of a default or imminent default, and then may waive the prepayment premium only if the waiver would maximize amounts collected under the Mortgage Loan.] PREPAYMENT INTEREST SHORTFALLS When a borrower prepays a Mortgage Loan in full or in part between Monthly Payment dates, the borrower pays interest on the amount prepaid only from the last Monthly Payment date to the date of prepayment, with a resulting reduction in interest payable for the month during which the prepayment is made. [Any Prepayment Interest Shortfall resulting from a prepayment in full or in part is required to be paid by the Servicer, but only to the extent that the shortfall does not exceed the total of the Servicing Fees for the applicable Distribution Date.] ADVANCES [The Servicer will be obligated to make advances ("Advances") with respect to delinquent payments of principal of and interest on the Mortgage Loans (other than Balloon Payments), adjusted to the related Mortgage Rate less the Servicing Fee Rate, to the extent that those Advances, in its judgment, are recoverable from future payments and collections, insurance payments or proceeds of liquidation of a Mortgage Loan. The Trustee will be obligated to make any required Advance if the Servicer fails in its obligation to do so, to the extent provided in the Pooling and Servicing Agreement. The Servicer or the Trustee, as applicable, will be entitled to recover any Advances made by it with respect to a Mortgage Loan out of late payments on the Mortgage Loan or out of related liquidation proceeds and insurance proceeds or, if the Servicer determines that those Advances are not recoverable from those sources, then from collections on other Mortgage Loans. These reimbursements may result in Realized Losses. The purpose of making Advances is to maintain a regular cash flow to Certificateholders, rather than to guarantee or insure against losses. No party will be required to make any Advances with respect to reductions in the amount of the Monthly Payments on Mortgage Loans due to reductions made by a bankruptcy court in the amount of a Monthly Payment owed by a borrower or a reduction of the applicable Mortgage Rate by application of the Relief Act.] SERVICING ADVANCES The Servicer will be required to advance its own funds for particular purposes, including preserving and restoring Mortgaged Properties, payment of delinquent taxes and insurance premiums, managing and disposing of REO Properties, and legal proceedings. Advances for these and similar purposes are referred to as "Servicing Advances." The Servicer will be reimbursed for Servicing Advances made with respect to a Mortgage Loan out of late payments on the Mortgage Loan, to the extent provided in the Pooling and Servicing Agreement, or out of related liquidation proceeds and insurance proceeds, if the Servicer determines that Servicing Advances are not recoverable from those sources, then from collections and other recoveries on other Mortgage Loans. The Pooling and Servicing Agreement will require that the Servicer not make a Servicing Advance that is not expected to be recoverable from proceeds of the related Mortgage Loan unless, in the Servicer's judgment, making that Servicing Advance is in the best interests of the Certificateholders. COLLECTION OF TAXES AND INSURANCE PREMIUMS The Servicer will, to the extent required by the related loan documents, maintain escrow accounts for the collection of hazard insurance premiums as well as real estate taxes and similar items with respect to the Mortgage Loans, and will make Servicing Advances with respect to delinquencies in required escrow payments by the related borrowers. INSURANCE COVERAGE The Servicer is required to obtain and thereafter maintain in effect a bond or similar form of insurance coverage (which may provide blanket coverage) insuring against loss occasioned by the errors and omissions of their respective officers and employees. PURCHASES OF DEFAULTED MORTGAGE LOANS The Servicer may, but will not be obligated to, purchase any Mortgage Loan that becomes three months or more delinquent in payment or as to which the Servicer has started foreclosure proceedings, for a price equal to the unpaid principal balance plus interest accrued and unpaid. EVIDENCE AS TO COMPLIANCE The Pooling and Servicing Agreement will provide that each year a firm of independent accountants will furnish a statement to the Trustee to the effect that the firm has examined the necessary documents and records relating to the servicing of mortgage loans by the Servicer and that, on the basis of that examination, the firm is of the opinion that the servicing has been conducted in accordance with applicable accounting standards, except for those exceptions as the firm believes to be immaterial and those exceptions set forth in the statement. SERVICING COMPENSATION AND PAYMENT OF EXPENSES The Servicer will be paid a monthly fee (the "Servicing Fee") with respect to each Mortgage Loan calculated as [ ]% annually (the "Servicing Fee Rate") on the outstanding principal balance of each Mortgage Loan. The Servicer will also be entitled to receive, to the extent provided in the Pooling and Servicing Agreement, additional compensation, in the form of any interest or other income earned on funds it has deposited in the Collection Account pending remittance to the Trustee, as well as customary fees and charges paid by borrowers (other than prepayment premiums). [The Servicing Fee is subject to reduction as described above under "-- Prepayment Interest Shortfalls."] SUBSERVICING The Servicer will be prohibited from assigning the responsibility for servicing the Mortgage Loans, except as permitted by the Pooling and Servicing Agreement, but it may employ one or more subservicers. If the Servicer chooses to employ subservicers, the Servicer will remain liable for fulfillment of its obligations under the Pooling and Servicing Agreement, and will be considered to have itself received any payment received by a subservicer whether or not the subservicer actually remits that payment. RESIGNATION OR REMOVAL OF THE SERVICER The Servicer will agree in the Pooling and Servicing Agreement not to resign except with the consent of the Trustee, unless the Servicer delivers to the Trustee an opinion of legal counsel to the effect that the Servicer is no longer permitted under applicable law to perform the duties of the Servicer under the Pooling and Servicing Agreement. If the Servicer is in default under the Pooling and Servicing Agreement, or the Trustee or Certificateholders having a majority of Voting Rights may remove the Servicer. [Events of default include: o failure by the Servicer to remit any required payment, including any Advance, to the Trustee for one Business Day after receipt of written notice that the payment has not been made; o failure by the Servicer to make a required Servicing Advance for 60 days after receipt of written notice that the Servicing Advance has not been made; o failure by the Servicer to fulfill any other material requirement under the Pooling and Servicing Agreement within the applicable time period; o failure by the Servicer to be qualified to service mortgage loans for either Fannie Mae or Freddie Mac; o insolvency of the Servicer; and o other events specified in the Pooling and Servicing Agreement.] [If the Servicer is removed, the Trustee will immediately assume the role of Servicer under the Pooling and Servicing Agreement unless another Servicer is appointed pursuant to the Pooling and Servicing Agreement. The Trustee will solicit bids from prospective successor Servicers as provided in the Pooling and Servicing Agreement. If a qualifying bid is not received, the Trustee will continue to service the Mortgage Loans if it is legally qualified to do so until the Trustee appoints a successor Servicer as provided in the Pooling and Servicing Agreement. If the servicing rights are sold, any proceeds of the sale after deduction of expenses will be paid to the predecessor Servicer.] YIELD CONSIDERATIONS GENERAL The yields to maturity (or to early termination) on the Offered Certificates will be affected by the rate of principal payments on the Mortgage Loans (including prepayments, which may include amounts received by virtue of purchase, condemnation, insurance or foreclosure) on the Mortgage Loans. Yields will also be affected by the extent to which Mortgage Loans bearing higher Mortgage Rates prepay at a more rapid rate than Mortgage Loans with lower Mortgage Rates, the amount and timing of borrower delinquencies and defaults resulting in Realized Losses, the application of Monthly Excess Cashflow, the purchase price paid for the Offered Certificates and other factors. Principal prepayments may be influenced by a variety of economic, geographic, demographic, social, tax, legal and other factors. In general, if prevailing interest rates fall below the interest rates on the Mortgage Loans, the Mortgage Loans are likely to be subject to higher prepayments than if prevailing rates remain at or above the interest rates on the Mortgage Loans. Conversely, if prevailing interest rates rise above the interest rates on the Mortgage Loans, the rate of prepayment would be expected to decrease. Other factors affecting prepayment of the Mortgage Loans include factors such as changes in borrowers' housing needs, job transfers, unemployment, borrowers' net equity in the mortgaged properties, changes in the value of the mortgaged properties, mortgage market interest rates and servicing decisions. The Mortgage Loans generally have due-on-sale clauses. [Approximately [ ]% of the Mortgage Loans are subject to prepayment premiums during intervals ranging from one to five years following origination, as described under "Description of the Mortgage Pools" in this prospectus supplement. The prepayment premiums may have the effect of reducing the amount or the likelihood of prepayment of these Mortgage Loans during intervals when a prepayment premium would be payable.] The rate of principal payments on the Mortgage Loans will also be affected by the amortization schedules of the Mortgage Loans, the rate and timing of prepayments by the borrowers, liquidations of defaulted Mortgage Loans, repurchases of Mortgage Loans due to breaches of representations and warranties or defective documentation and exercise by the holder of the Residual Certificate of its right to purchase all of the Mortgage Loans as described in this prospectus supplement. The timing of changes in the rate of prepayments, liquidations and purchases of the related Mortgage Loans may significantly affect the yield to an investor, even if the average rate of principal payments experienced over time is consistent with an investor's expectation. Because the rate and timing of principal payments on the Mortgage Loans will depend on future events and on a variety of factors (as described more fully in this prospectus supplement and in the Prospectus under "Yield Considerations") no assurance can be given as to the rate or the timing of principal payments on the Offered Certificates. In general, the earlier a prepayment of principal of the related Mortgage Loans, the greater the effect on an investor's yield. The effect on an investor's yield of principal payments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the Certificates may not be offset by a subsequent like decrease (or increase) in the rate of principal payments. From time to time, areas of the United States may be affected by flooding, severe storms, landslides, wildfires or other natural disasters. [The Originator] will represent and warrant that as of the Closing Date each Mortgaged Property was free of material damage. In the event of an uncured breach of this representation and warranty that materially and adversely affects the value of a Mortgage Loan, [the Originator] will be required to repurchase the affected Mortgage Loan or, under some circumstances, substitute another mortgage loan. If any damage caused by earthquakes, flooding, storms, wildfires, or landslides (or other cause) occurs after the Closing Date, [the Originator] will not have any repurchase obligation. In addition, the standard hazard policies covering the Mortgaged Properties generally do not cover damage caused by earthquakes, flooding and landslides, and earthquake, flood or landslide insurance may not have been obtained with respect to the affected Mortgaged Properties. As a consequence, Realized Losses could result. To the extent that the insurance proceeds received with respect to any damaged Mortgage Properties are not applied to the restoration of those Mortgage Properties, the proceeds will be used to prepay the related Mortgage Loans in whole or in part. Any repurchases or repayments of the Mortgage Loans may reduce the weighted average lives of the Offered Certificates and will reduce the yields on the Offered Certificates to the extent they are purchased at a premium. Prepayments, liquidations and purchases of the Mortgage Loans will result in distributions to holders of the related Certificates of principal amounts that would otherwise be distributed over the remaining terms of those Mortgage Loans. The rate of defaults on the Mortgage Loans will also affect the rate and timing of principal payments on the Mortgage Loans. In general, defaults on mortgage loans are expected to occur with greater frequency in their early years. The yields on the Class [ ] Certificates may be adversely affected by Net Prepayment Interest Shortfalls on the Mortgage Loans. The yields to investors in the Offered Certificates may be affected by the purchase of defaulted Mortgage Loans by the Servicer and by the exercise by [ ] of its right to purchase the Mortgage Loans, as described under "Description of the Certificates -- Optional Purchase of Mortgage Loans; Termination of the Trust Fund" in this prospectus supplement, or the failure of [ ] to exercise that right. If the purchaser of an Offered Certificate offered at a discount from its initial principal amount calculates its anticipated yield to maturity (or early termination) based on an assumed rate of payment of principal that is faster than that actually experienced on the related Mortgage Loans, the actual yield may be lower than that so calculated. Conversely, if the purchaser of a Certificate offered at a premium calculates its anticipated yield based on an assumed rate of payment of principal that is slower than that actually experienced on the related Mortgage Loans, the actual yield may be lower than that so calculated. [The Interest Rates applicable to the Offered Certificates will be affected by the level of [ ] from time to time, and by the Mortgage Rates of the Mortgage Loans from time to time as described under "Risk Factors -- Mortgage Loan Interest Rates May Limit Interest Rates on the Certificates."] OVERCOLLATERALIZATION [Describe as applicable.] [SUBORDINATION OF THE CLASS [ ] CERTIFICATES As described in this prospectus supplement, the Senior Certificates are senior to the Class [ ]Certificates, and the Senior Certificates will have a preferential right to receive amounts in respect of interest to the extent of the Interest Remittance Amount and amounts in respect of principal to the extent of the Principal Distribution Amount for the related Mortgage Pool. As a result, the yield on the Class [ ]Certificates will be particularly sensitive to delinquencies and losses on the Mortgage Loans.] WEIGHTED AVERAGE LIFE Weighted average life refers to the average amount of time that will elapse from the date of issuance of a security to the date of distribution to the investor of each dollar distributed in net reduction of principal of the security (assuming no losses). The weighted average lives of the Offered Certificates will be influenced by, among other things, the rate at which principal of the related Mortgage Loans is paid, which may be in the form of scheduled amortization, prepayments or liquidations. Prepayments on mortgage loans are commonly measured relative to a [ ] prepayment standard or model. The model used in this Prospectus Supplement represents [ ]. [ ] does not purport to be either a historical description of the prepayment experience of any pool of mortgage loans or a prediction of the anticipated rate of prepayment of any mortgage loans, including the Mortgage Loans to be included in the Trust Fund. [The following tables were prepared based on the following assumptions, among other things (collectively, the "Modeling Assumptions"): o the initial Class Principal Amounts are as set forth on the cover of this Prospectus Supplement, and the Interest Rates are as described in this prospectus supplement; o each Monthly Payment of principal and interest is timely received on the first day of each month starting in [ ]; o principal prepayments are received in full on the first day of each month starting in [ ] and there are no Net Prepayment Interest Shortfalls; o prepayments are received on the Mortgage Loans at the [ ] rate; o there are no defaults or delinquencies on the Mortgage Loans; o Distribution Dates occur on the [ ]th day of each month, starting in [ ]; o there are no re-purchases or substitutions of the Mortgage Loans; o [the Mortgage Rates of the Adjustable Rate Mortgage Loans adjust semi-annually;] o [the value of the Index is [ ]%;] o [the value of LIBOR is %;] o the Certificates are issued on [ ]; o the sum of the Trustee Fee Rate and the Servicing Fee Rate is [ ]%; and o the Mortgage Loans were aggregated into assumed mortgage loans having the following characteristics:] ASSUMED MORTGAGE LOAN CHARACTERISTICS ORIGINAL REMAINING GROSS TERM TO TERM TO PRINICPAL COUPON MATURITY MATURITY LOAN AGE GROSS LOAN TYPE BALANCE($) RATE(%) (MONTHS) MONTHS (MONTHS) MARGINS(%) - -------------------------------------------------------------------------------- The actual characteristics of the Mortgage Loans may, and the performance of the Mortgage Loans will, differ from the assumptions used in constructing the tables set forth below, which are hypothetical in nature and are provided only to give a general sense of how the principal cash flows might behave under varying prepayment scenarios. For example, it is not expected that the Mortgage Loans will prepay at a constant rate until maturity, that all of the Mortgage Loans will prepay at the same rate or that there will be no defaults or delinquencies on the Mortgage Loans. Moreover, the diverse remaining terms to maturity of the Mortgage Loans could produce slower or faster principal distributions than indicated, even if the weighted average remaining term to maturity of the Mortgage Loans is as assumed. Any difference between those assumptions and the actual characteristics and performance of the Mortgage Loans or actual prepayment or loss experience will cause the percentages of initial Class Principal Amounts outstanding over time and the weighted average lives of the Offered Certificates to differ (which difference could be material) from the corresponding [assumed prepayment rates]. Subject to the foregoing discussion and assumptions, the following tables indicate the weighted average lives of the Offered Certificates and set forth the percentages of the initial Class Principal Amounts of the Offered Certificates that would be outstanding after each of the Distribution Dates shown at the indicated [assumed prepayment rates]. The weighted average life of an Offered Certificate is determined by (1) multiplying the net reduction, if any, of the applicable Class Principal Amount by the number of years from the date of issuance of the Offered Certificate to the related Distribution Date, (2) adding the results and (3) dividing the sum by the total of the net reductions of Class Principal Amount described in (1) above. PERCENTAGE OF INITIAL CLASS PRINCIPAL AMOUNT OF THE CLASS [ ] CERTIFICATES OUTSTANDING UNDER THE FOLLOWING [PREPAYMENT RATES] DISTRIBUTION DATE [ ] [ ] [ ] [ ] [ ] [ ] - ----------------- --- --- --- --- --- --- Initial Percentage 100 100 100 100 100 100 Weighted Average Life in Years With Optional Termination Without Optional Termination - --------- * Based upon the assumption that [ ] exercises its option to repurchase the Mortgage Loans as described under "Description of the Certificates -- Optional Purchase of Mortgage Loans; Termination of the Trust Fund" in this prospectus supplement, except in the case of the "Weighted Average Life With Optional Termination." MATERIAL FEDERAL INCOME TAX CONSIDERATIONS For federal income tax purposes, one or more elections will be made to treat certain assets of the Trust Fund as a REMIC. Upon the issuance of the Offered Certificates, Stroock & Stroock & Lavan LLP ("Tax Counsel") will deliver its opinion to the effect that, assuming compliance with the Pooling and Servicing Agreement, for federal income tax purposes, each segregate pool of assets for which a REMIC election is made will qualify as a REMIC within the meaning of Section 860D of the Internal Revenue Code of 1986, as amended (the "Code"), and that the Offered Certificates will represent the ownership of regular interests in the REMIC. The Class [R] Certificates will represent the residual interest in each REMIC. All prospectus purchasers of Offered Certificates should see "Material Federal Income Tax Considerations--REMICs" in the accompanying prospectus. Because the Offered Certificates are considered REMIC regular interests, they generally are taxable as debt obligations under the Code, and interest paid or accrued on such certificates, including original issue discount with respect to any such certificate issued with original issue discount, will be taxable to holders of Offered Certificates in accordance with the accrual method of accounting. See "Material Federal Income Tax Considerations--REMICs--Taxation of Owners of Regular Securities" in the accompanying prospectus. The prepayment assumption that is used in determining the rate of accrual of original issue discount with respect to the Offered Certificates is [100% Prepayment Assumption], as defined below. However, this rate does not represent the rate at which prepayments have actually occurred and no representation is made as to the rate at which prepayments actually will occur in the future. The ["100% Prepayment Assumption] assumes a constant prepayment rate of ...] [Alternatively, grantor trust, partnership or FASIT status to be described as applicable.] STATE AND LOCAL INCOME TAX CONSIDERATIONS In addition to the federal income tax matters described under "Material Federal Income Tax Considerations" above, prospective investors should consider the state and local income tax consequences of the acquisition, ownership and disposition of the Offered Certificates. State income tax law may differ substantially from the corresponding federal tax law, and this discussion does not purport to describe any aspect of the income tax laws of any state and locality. Therefore, prospective investors should consult their own tax advisors with respect to the various tax consequences of investments in the Offered Certificates. LEGAL INVESTMENT CONSIDERATIONS [The [Senior Certificates] will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"), for so long as they are rated in one of the two highest rating categories by one or more nationally recognized rating agencies, and, as such, are legal investments for some entities to the extent provided in SMMEA.] These investments, however, will be subject to general regulatory considerations governing investment practices under state and federal laws. Institutions whose investment activities are subject to review by regulatory authorities may be or may become subject to restrictions, which may be retroactively imposed by the regulatory authorities, on the investment by those institutions in some mortgage related securities. In addition, several states have adopted or may adopt regulations that prohibit some state-chartered institutions from purchasing or holding similar types of securities. Accordingly, investors should consult their own legal advisors to determine whether and to what extent the Offered Certificates may be purchased by them. See "Legal Investment Considerations" in the Prospectus. USE OF PROCEEDS The net proceeds from the sale of the Certificates will be applied by the Depositor, or an affiliate of the Depositor, toward the purchase of the Mortgage Loans. The Mortgage Loans will be acquired by the Depositor from [ ] in a privately negotiated transaction. UNDERWRITING [Subject to the terms and conditions provided in the underwriting agreement and in a terms agreement (collectively, the "Underwriting Agreement") among the Depositor, [ ] and the Underwriter, the Depositor and [ ] have agreed to sell to the Underwriter, and the Underwriter has agreed to purchase from the Depositor, all of the Offered Certificates. The distribution of the Offered Certificates by the Underwriter will be effected in each case from time to time in one or more negotiated transactions, or otherwise, at varying prices to be determined, in each case, at the time of sale. The Underwriter may effect these transactions by selling the Certificates to or through dealers, and dealers may receive from the Underwriter, for whom they act as agent, compensation in the form of underwriting discounts, concessions or commissions. The Underwriter and any dealers that participate with the Underwriter in the distribution of the Certificates may be deemed to be an underwriter, and any discounts, commissions or concessions received by them, and any profit on the resale of the Certificates purchased by them, may be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended (the "Act"). The Underwriting Agreement provides that the Depositor will indemnify the Underwriter against some civil liabilities, including liabilities under the Act.] Expenses incurred by the Depositor in connection with this offering are expected to be approximately $[ ]. The Underwriter is an affiliate of the Depositor and [ ]. ERISA CONSIDERATIONS Employee benefit plans and other retirement arrangements that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code ("Plans") and any person utilizing the assets of a Plan, may be eligible to purchase the Offered Certificates, pursuant to a prohibited transaction exemption which has been issued to the Underwriter by the Department of Labor as described in "ERISA Considerations" in the Prospectus, except that if the rating of the Offered Certificates is lower than "BBB-" at the time of its acquisition by a Plan in the secondary market it may only be acquired by an insurance company general account if the exemptive relief granted by the Department of Labor for transactions involving insurance company general accounts in Prohibited Transaction Exemption 95-60, is available with respect to the investment. The Pooling and Servicing Agreement will include restrictions on the transfer of the Offered Certificates. A fiduciary of a Plan must determine that the purchase of a [Note] is consistent with its fiduciary duties under ERISA and does not result in a nonexempt prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Code. See "ERISA Considerations" in the accompanying Prospectus. EXPERTS [Describe as applicable.] LEGAL MATTERS Certain legal matters with respect to the Certificates will be passed upon for the Depositor and for the Underwriter by Strock & Stroock & Lavan LLP. RATINGS It is a condition to the issuance of the [ ] Certificates that they be rated "[ ]" by [Rating Agency] and "[ ]" by [Rating Agency] (the "Rating Agencies "). It is a condition to the issuance of the Class [ ] Certificates that they be rated "[ ]" by [Rating Agency] and "[ ]" by [Rating Agency]. A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. A securities rating addresses the likelihood of the receipt by holders of Offered Certificates of distributions in the amount of scheduled payments on the Mortgage Loans. The rating takes into consideration the characteristics of the Mortgage Loans and the structural, legal and tax aspects associated with the Offered Certificates. The ratings on the Offered Certificates do not represent any assessment of the likelihood or rate of principal prepayments. The ratings do not address the possibility that holders of Offered Certificates might suffer a lower than anticipated yield due to prepayments. The security ratings assigned to 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 either Rating Agency. The Depositor has not requested a rating of the Offered Certificates by any rating agency other than the Rating Agencies; there can be no assurance, however, as to whether any other rating agency will rate the Offered Certificates or, if it does, what rating would be assigned by the other rating agency. The rating assigned by the other rating agency to the Offered Certificates could be lower than the ratings assigned by the Rating Agencies. GLOSSARY OF DEFINED TERMS [To be provided.] ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in some limited circumstances, the globally offered ACE Securities Corp. [ ] Pass-Through Certificates (the "Global Securities") will be available only in book-entry form. Investors in the Global Securities may hold the Global Securities through any of DTC, Clearstream Luxembourg or Euroclear. The Global Securities will be tradable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through Clearstream Luxembourg and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations and prior mortgage loan asset backed certificates issues. Secondary cross-market trading between Clearstream Luxembourg or Euroclear and DTC Participants holding Certificates will be effected on a delivery-against-payment basis through the respective Depositaries of Clearstream Luxembourg and Euroclear and as DTC Participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless those holders meet specific requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Clearstream Luxembourg and Euroclear will hold positions on behalf of their participants through their respective Depositaries, which in turn will hold the positions in accounts as DTC Participants. Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to prior mortgage loan asset backed certificates issues. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream Luxembourg or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds. SECONDARY MARKET TRADING Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC Participants will be settled using the procedures applicable to prior mortgage loan asset backed certificates issues in same-day funds. TRADING BETWEEN CLEARSTREAM LUXEMBOURG AND/OR EUROCLEAR PARTICIPANTS. Secondary market trading between Clearstream Luxembourg Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. TRADING BETWEEN DTC SELLER AND CLEARSTREAM LUXEMBOURG OR EUROCLEAR PURCHASER. When Global Securities are to be transferred from the account of a DTC Participant to the account of a Clearstream Luxembourg Participant or a Euroclear Participant, the purchaser will send instructions to Clearstream Luxembourg or Euroclear through a Clearstream Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. Clearstream Luxembourg or Euroclear will instruct the respective Depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last interest payment date to and excluding the settlement date, on the basis of either the actual number of days in the accrual period and a year assumed to consist of 360 days or a 360-day year of twelve 30-day months as applicable to the related class of Global Securities. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made by the respective Depositary of the DTC Participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream Luxembourg Participant's or Euroclear Participant's account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Global Securities will accrue from, the value date (that would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Clearstream Luxembourg or Euroclear cash debt will be valued instead as of the actual settlement date. Clearstream Luxembourg Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream Luxembourg or Euroclear. Under this approach, they may take on credit exposure to Clearstream Luxembourg or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream Luxembourg or Euroclear has extended a line of credit to them, Clearstream Luxembourg Participants or Euroclear Participants can elect not to preposition funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Clearstream Luxembourg Participants or Euroclear Participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of overdraft charges, although this result will depend on each Clearstream Luxembourg Participant's or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global Securities to the respective European Depositary for the benefit of Clearstream Luxembourg Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. TRADING BETWEEN CLEARSTREAM LUXEMBOURG OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time zone differences in their favor, Clearstream Luxembourg Participants and Euroclear Participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Clearstream Luxembourg or Euroclear through a Clearstream Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. In these cases Clearstream Luxembourg or Euroclear will instruct the respective Depositary, as appropriate, to deliver the Global Securities to the DTC Participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last interest payment to and excluding the settlement date on the basis of either the actual number of days in the accrual period and a year assumed to consist of 360 days or a 360-day year of twelve 30-day months as applicable to the related class of Global Securities. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected in the account of the Clearstream Luxembourg Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Clearstream Luxembourg Participant's or Euroclear Participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Clearstream Luxembourg Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft incurred over that one day period. If settlement is not completed on the intended value date (that is, the trade fails), receipt of the cash proceeds in the Clearstream Luxembourg Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream Luxembourg or Euroclear and that purchase Global Securities from DTC Participants for delivery to Clearstream Luxembourg Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: o borrowing through Clearstream Luxembourg or Euroclear for one day (until the purchase side of the day trade is reflected in their Clearstream Luxembourg or Euroclear accounts) in accordance with the clearing system's customary procedures; o borrowing the Global Securities in the U.S. from a DTC Participant no later than one day prior to the settlement, which would give the Global Securities sufficient time to be reflected in their Clearstream Luxembourg or Euroclear account in order to settle the sale side of the trade; or o staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Clearstream Luxembourg or Euroclear Participant. CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A beneficial owner of Global securities holding securities through Clearstream, Luxembourg or Euroclear, or through DTC will be subject to the 30% U.S. withholding tax that generally applies to payments of interest, including original issue discount, on registered debt issued by U.S. Persons or to 31% backup withholding, unless (1) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between the beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (2) the beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial owners of securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. If the information shown on Form W-8 BEN changes, a new Form W-8 must be filed within 30 days of the change. EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM W-8BEN). Non-U.S. Persons that are beneficial owners of securities residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate, depending on the treaty terms, by filing Form W-8BEN (including Part II thereof). If the treaty provides only for a reduced rate, the beneficial owner may still be entitled to complete exemption from withholding under item (1) above. EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a Global Security files by submitting the appropriate form to the person through whom it holds, the clearing agency, in the case of persons holding directly on the books of the clearing agency. Form W-8BEN and Form W-8ECI are generally effective for three calendar years from the close of the calendar year in which it is collected. The term "U.S. Person" means (1) a citizen or resident of the United States, (2) a corporation or partnership (or other entity properly classified as a corporation or partnership for U.S. Federal income tax purposes) organized in or under the laws of the United States or any state or the District of Columbia, (3) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or (4) 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. Notwithstanding the preceding sentence, to the extent provided in regulations, trusts in existence on August 20, 1996 and treated as United States persons prior to that date that elect to continue to be so treated also will be considered U.S. Persons. Treasury regulations provide certain presumptions regarding the entity classification and foreign or U.S. status of a holder that a payor generally must apply in the absence of appropriate documentation from the holder, and provide detailed documentation and procedures for holders claiming withholding tax exemptions through intermediaries. Prospective investors are urged to consult their tax advisors regarding the effect of these regulations on their ability to claim and the means for claiming exemptions from or reduced rates of U.S. withholding taxes. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global securities. Investors are advised to consult their own tax advisers for specific tax advice concerning their holding and disposing of the Global securities. $[ ] (APPROXIMATE) ACE SECURITIES CORP. [ ] TRUST [ ] PASS-THROUGH CERTIFICATES, [ ,] ORIGINATOR AND SERVICER - ------------------------------------------------------------------------------ PROSPECTUS SUPPLEMENT - ------------------------------------------------------------------------------ DEUTSCHE BANC ALEX. BROWN The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, [ ] PROSPECTUS ASSET BACKED CERTIFICATES ASSET BACKED NOTES (ISSUABLE IN SERIES) ACE SECURITIES CORP., DEPOSITOR THE TRUST FUNDS: Each trust fund will be established to hold assets transferred to it by ACE Securities Corp. The assets in each trust fund will generally consist of one or more of the following: o mortgage loans secured by one- to four-family residential properties; o mortgage loans secured by multi-family residential properties; o unsecured home improvement loans; o manufactured housing installment sale contracts; o mortgage pass-through securities issued or guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac; or o previously issued asset-backed or mortgage-backed securities backed by mortgage loans secured by residential properties or participations in those types of loans. The assets in your trust fund are specified in the prospectus supplement for that particular trust fund, while the types of assets that may be included in a trust fund, whether or not in your trust fund, are described in greater detail in this prospectus. THE SECURITIES: ACE Securities Corp. will sell the securities pursuant to a prospectus supplement. The securities will be grouped into one or more series, each having is own distinct designation. Each series will be issued in one or more classes and will evidence beneficial ownership of, or be secured by, the assets in the trust fund that the series relates to. A prospectus supplement for a series will specify all of the terms of the series and of each of the classes in the series. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is [ ]. Table of Contents Description of the Trust Funds.........................................3 Use of Proceeds.......................................................19 Yield Considerations..................................................19 The Depositor.........................................................26 Description of the Securities.........................................27 Description of the Agreements.........................................44 Description of Credit Support.........................................70 Certain Legal Aspects of Mortgage Loans...............................74 Certain Legal Aspects of the Contracts................................89 Material Federal Income Tax Considerations............................94 State and Other Tax Considerations...................................143 Legal Investment.....................................................149 Methods of Distribution..............................................151 Additional Information...............................................152 Incorporation of Certain Documents by Reference......................153 Legal Matters........................................................154 Financial Information................................................154 Rating...............................................................154 Index of Defined Terms...............................................155 DESCRIPTION OF THE TRUST FUNDS ASSETS The primary assets of each trust fund (the "Assets") will include some or all of the following types of assets: o single family and/or multifamily mortgage loans, which may include Home Equity Loans, home improvement contracts and Land Sale Contracts (each as defined in this prospectus); o home improvement installment sales contracts or installment loans that are unsecured called unsecured home improvement Loans; o manufactured housing installment sale contracts or installment loan agreements referred to as contracts; o any combination of "fully modified pass-through" mortgage-backed certificates guaranteed by the Government National Mortgage Association ("Ginnie Mae"), guaranteed mortgage pass-through securities issued by Fannie Mae ("Fannie Mae") and mortgage participation certificates issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac") (collectively, "Agency Securities"); o previously issued asset-backed certificates, collateralized mortgage obligations or participation certificates (each, and collectively, "Mortgage Securities") evidencing interests in, or collateralized by, mortgage loans or Agency Securities; or o a combination of mortgage loans, unsecured home improvement loans, contracts, Agency Securities and/or Mortgage Securities. The mortgage loans will not be guaranteed or insured by ACE Securities Corp. or any of its affiliates. The mortgage loans will be guaranteed or insured by a governmental agency or instrumentality or other person only if and to the extent expressly provided in the prospectus supplement. The depositor will select each Asset to include in a trust fund from among those it has purchased, either directly or indirectly, from a prior holder (an "Asset Seller"), which may be an affiliate of the depositor and which prior holder may or may not be the originator of that mortgage loan. The Assets included in the trust fund for your series may be subject to various types of payment provisions: o "Level Payment Assets," which may provide for the payment of interest, and full repayment of principal, in level monthly payments with a fixed rate of interest computed on their declining principal balances; o "Adjustable Rate Assets," which may provide for periodic adjustments to their rates of interest to equal the sum of a fixed margin and an index; o "Buy Down Assets," which are Assets for which funds have been provided by someone other than the related borrowers to reduce the borrowers' monthly payments during the early period after origination of those Assets; o "Increasing Payment Assets," as described below; o "Interest Reduction Assets," which provide for the one-time reduction of the interest rate payable on these Assets; o "GEM Assets," which provide for (1) monthly payments during the first year after origination that are at least sufficient to pay interest due on these Assets, and (2) an increase in those monthly payments in later years at a predetermined rate resulting in full repayment over a shorter term than the initial amortization terms of those Assets; o "GPM Assets," which allow for payments during a portion of their terms which are or may be less than the amount of interest due on their unpaid principal balances, and this unpaid interest will be added to the principal balances of those Assets and will be paid, together with interest on the unpaid interest, in later years; o "Step-up Rate Assets" which provide for interest rates that increase over time; o "Balloon Payment Assets;" o "Convertible Assets" which are Adjustable Rate Assets subject to provisions pursuant to which, subject to limitations, the related borrowers may exercise an option to convert the adjustable interest rate to a fixed interest rate; and o "Bi-weekly Assets," which provide for payments to be made by borrowers on a bi-weekly basis. An "Increasing Payment Asset" is an Asset that provides for monthly payments that are fixed for an initial period to be specified in the prospectus supplement and which increase thereafter (at a predetermined rate expressed as a percentage of the monthly payment during the preceding payment period, subject to any caps on the amount of any single monthly payment increase) for a period to be specified in the prospectus supplement from the date of origination, after which the monthly payment is fixed at a level-payment amount so as to fully amortize the Asset over its remaining term to maturity. The scheduled monthly payment for an Increasing Payment Asset is the total amount required to be paid each month in accordance with its terms and equals the sum of (1) the borrower's monthly payments referred to in the preceding sentence and (2) payments made by the respective servicers pursuant to buy-down or subsidy agreements. The borrower's initial monthly payments for each Increasing Payment Asset are set at the level-payment amount that would apply to an otherwise identical Level Payment Asset having an interest rate some number of percentage points below the Asset Rate of that Increasing Payment Asset. The borrower's monthly payments on each Increasing Payment Asset, together with any payments made on the Increasing Payment Asset by the related servicers pursuant to buy-down or subsidy agreements, will in all cases be sufficient to allow payment of accrued interest on the Increasing Payment Asset at the related interest rate, without negative amortization. A borrower's monthly payments on an Increasing Payment Asset may, however, not be sufficient to result in any reduction of the principal balance of that Asset until after the period when those payments may be increased. The Notes or Certificates, as applicable, will be entitled to payment only from the assets of the related trust fund and will not be entitled to payments from the assets of any other trust fund established by the depositor. The assets of a trust fund may consist of certificates representing beneficial ownership interests in, or indebtedness of, another trust fund that contains the Assets, if specified in the prospectus supplement. MORTGAGE LOANS GENERAL Each mortgage loan will generally be secured by a lien on (1) a one- to four-family residential property (including a manufactured home) or a security interest in shares issued by a cooperative housing corporation (a "Single Family Property") or (2) a primarily residential property that consists of five or more residential dwelling units, referred to as a multifamily property, which may include limited retail, office or other commercial space. Single Family Properties are sometimes referred to in this prospectus as "Mortgaged Properties." The mortgage loans will be secured by first and/or junior mortgages or deeds of trust or other similar security instruments creating a first or junior lien on Mortgaged Property. The Mortgaged Properties may also include: o Apartments owned by cooperative housing corporations ("Cooperatives"); and o Leasehold interests in properties, the title to which is held by third party lessors. The term of these leaseholds will exceed the term of the related mortgage note by at least five years or some other time period specified in the prospectus supplement. The mortgage loans may include: o Closed-end and/or revolving home equity loans or balances of these home equity loans ("Home Equity Loans"); o Secured home improvement installment sales contracts and secured installment loan agreements, known as home improvement contracts; and o Mortgage loans evidenced by contracts ("Land Sale Contracts") for the sale of properties pursuant to which the borrower promises to pay the amount due on the mortgage loans to the holder of the Land Sale Contract with fee title to the related property held by that holder until the borrower has made all of the payments required pursuant to that Land Sale Contract, at which time fee title is conveyed to the borrower. The originator of each mortgage loan will have been a person other than the depositor. The prospectus supplement will indicate if any originator is an affiliate of the depositor. The mortgage loans will be evidenced by mortgage notes secured by mortgages, deeds of trust or other security instruments (the "Mortgages") creating a lien on the Mortgaged Properties. The Mortgaged Properties will be located in any one of the fifty states, the District of Columbia, Guam, Puerto Rico or any other territory of the United States. If provided in the prospectus supplement, the mortgage loans may include loans insured by the Federal Housing Administration (the "FHA") or partially guaranteed by the Veteran's Administration (the "VA"). See "--FHA Loans and VA Loans" below. LOAN-TO-VALUE RATIO The "Loan-to-Value Ratio" of a mortgage loan at any particular 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 for Refinance Loans, is generally the lesser of (a) the appraised value determined in an appraisal obtained by the originator at origination of that loan and (b) the sales price for that property. "Refinance Loans" are loans made to refinance existing loans. Unless otherwise specified in the prospectus supplement, the Value of the Mortgaged Property securing a Refinance Loan is the appraised value of the Mortgaged Property 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 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. MORTGAGE LOAN INFORMATION IN THE PROSPECTUS SUPPLEMENTS Your prospectus supplement will contain information, as of the dates specified in that prospectus supplement and to the extent then applicable and specifically known to the depositor, with respect to the mortgage loans, including: o the total outstanding principal balance and the largest, smallest and average outstanding principal balance of the mortgage loans as of, unless otherwise specified in that prospectus supplement, the close of business on the first day of the month of formation of the related trust fund (the "Cut-off Date"); o the type of property securing the mortgage loans; o the weighted average (by principal balance) of the original and remaining terms to maturity of the mortgage loans; o the range of maturity dates of the mortgage loans; o the range of the Loan-to-Value Ratios at origination of the mortgage loans; o the mortgage rates or range of mortgage rates and the weighted average mortgage rate borne by the mortgage loans; o the state or states in which most of the Mortgaged Properties are located; o information regarding the prepayment provisions, if any, of the mortgage loans; o for mortgage loans with adjustable mortgage rates ("ARM Loans"), the index, the frequency of the adjustment dates, the range of margins added to the index, and the maximum mortgage rate or monthly payment variation at the time of any adjustment of and over the life of the ARM Loan; o information regarding the payment characteristics of the mortgage loans, including balloon payment and other amortization provisions; o the number of mortgage loans that are delinquent and the number of days or ranges of the number of days those mortgage loans are delinquent; and o the material underwriting standards used for the mortgage loans. If specific information respecting the mortgage loans is unknown to the depositor at the time the Notes or Certificates, as applicable, 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 that will be available to purchasers of the related Notes or Certificates, as applicable, at or before the initial issuance of that Security and will be filed as part of a Current Report on Form 8-K with the Securities and Exchange Commission (the "Commission") within fifteen days after that initial issuance. The characteristics of the mortgage loans included in a trust fund will not vary by more than five percent (by total principal balance as of the Cut-off Date) from the characteristics of the mortgage loans that are described in the prospectus supplement. The prospectus supplement will specify whether the mortgage loans include (1) Home Equity Loans, which may be secured by Mortgages that are junior to other liens on the related Mortgaged Property and/or (2) home improvement contracts originated by a home improvement contractor and secured by a mortgage on the related mortgaged property that is junior to other liens on the mortgaged property. The home improvements purchased with the home improvement contracts typically include replacement windows, house siding, roofs, swimming pools, satellite dishes, kitchen and bathroom remodeling goods, solar heating panels, patios, decks, room additions and garages. The prospectus supplement will specify whether the home improvement contracts are FHA loans and, if so, the limitations on any FHA insurance. In addition, the prospectus supplement will specify whether the mortgage loans contain some mortgage loans evidenced by Land Sale Contracts. PAYMENT PROVISIONS OF THE MORTGAGE LOANS All of the mortgage loans will provide for payments of principal, interest or both, on due dates that occur monthly, quarterly or semi-annually or at some other interval as is specified in the prospectus supplement or for payments in another manner described in the prospectus supplement. Each mortgage loan may provide for no accrual of interest or for accrual of interest on the mortgage loan at a mortgage rate that is fixed over its term or that adjusts from time to time, or that may be converted from an adjustable to a fixed mortgage rate or a different adjustable mortgage rate, or from a fixed to an adjustable mortgage rate, from time to time pursuant to an election or as otherwise specified in the related mortgage note, in each case as described in the 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 rate or to reflect the occurrence of particular events or that adjust on the basis of other methodologies, and may provide for negative amortization or accelerated amortization, in each case as described in the 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 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 prospectus supplement. If the holders of any class or classes of Offered Notes or Offered Certificates, as applicable, are entitled to all or a portion of any Prepayment Premiums collected from the mortgage loans, the prospectus supplement will specify the method or methods by which any of these amounts will be allocated. See "--Assets" above. REVOLVING CREDIT LINE LOANS As more fully described in the prospectus supplement, the mortgage loans may consist, in whole or in part, of revolving Home Equity Loans or balances of these Home Equity Loans ("Revolving Credit Line Loans"). Interest on each Revolving Credit Line Loan, excluding introductory rates offered from time to time during promotional periods, may be computed and payable monthly on the average daily outstanding principal balance of that loan. From time to time before the expiration of the related draw period specified in a Revolving Credit Line Loan, principal amounts on that Revolving Credit Line Loan may be drawn down (up to a maximum amount as set forth in the prospectus supplement) or repaid. If specified in the prospectus supplement, new draws by borrowers under the Revolving Credit Line Loans will automatically become part of the trust fund described in the prospectus supplement. As a result, the total balance of the Revolving Credit Line Loans will fluctuate from day to day as new draws by borrowers are added to the trust fund and principal payments are applied to those balances and those amounts will usually differ each day, as more specifically described in the prospectus supplement. Under some circumstances, under a Revolving Credit Line Loan, a borrower may, during the related draw period, choose an interest only payment option, during which the borrower is obligated to pay only the amount of interest that accrues on the loan during the billing cycle, and may also elect to pay all or a portion of the principal. An interest only payment option may terminate at the end of the related draw period, after which the borrower must begin paying at least a minimum monthly portion of the average outstanding principal balance of the loan. UNSECURED HOME IMPROVEMENT LOANS The unsecured home improvement loans may consist of conventional unsecured home improvement loans, unsecured installment loans and unsecured home improvement loans that are FHA loans. Except as otherwise described in the prospectus supplement, the unsecured home improvement loans will be fully amortizing and will bear interest at a fixed or variable annual percentage rate. UNSECURED HOME IMPROVEMENT LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS Each prospectus supplement will contain information, as of the dates specified in the prospectus supplement and to the extent then applicable and specifically known to the depositor, with respect to any unsecured home improvement loans, including: o the total outstanding principal balance and the largest, smallest and average outstanding principal balance of the unsecured home improvement loans as of the applicable cut-off date; o the weighted average, by principal balance, of the original and remaining terms to maturity of the unsecured home improvement loans; o the earliest and latest origination date and maturity date of the unsecured home improvements loans; o the interest rates or range of interest rates and the weighted average interest rates borne by the unsecured home improvement loans; o the state or states in which most of the unsecured home improvement loans were originated. o information regarding the prepayment provisions, if any, of the unsecured home improvement loans; o with respect to the unsecured home improvement loans with adjustable interest rates, called ARM unsecured home improvement loans, the index, the frequency of the adjustment dates, the rage of margins added to the index, and the maximum interest rate or monthly payment variation at the time of any adjustment thereof and over the life of the ARM unsecured home improvement loan; o information regarding the payment characteristics of the unsecured home improvement loans; o the number of unsecured home improvement loans that are delinquent and the number of days or ranges of the number of days that unsecured home improvement loans are delinquent; and o the material underwriting standards used for the unsecured home improvement loans. If specific information respecting the unsecured home improvement loans is unknown to the depositor at the time Notes or Certificates, as applicable, 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 that will be available to purchasers of the related Notes or Certificates, as applicable, at or before the initial issuance thereof and will be filed as part of a Current Report on Form 8-K with the Commission within fifteen days after the related initial issuance. The characteristics of the unsecured home improvement loans included in a trust fund will not vary by more than five percent, by total principal balance as of the cut-off date, from the characteristics thereof that are described in the prospectus supplement. CONTRACTS GENERAL To the extent provided in the prospectus supplement, each contract will be secured by a security interest in a new or used manufactured home, called a Manufactured Home. The contracts may include contracts that are FHA loans. The method of computing the Loan-to-Value Ratio of a contract will be described in the prospectus supplement. CONTRACT INFORMATION IN PROSPECTUS SUPPLEMENTS Each prospectus supplement relating to a trust fund whose assets include a substantial proportion of contracts will contain certain information, as of the dates specified in that prospectus supplement and to the extent then applicable and specifically known to the depositor, with respect to any contracts, including: o the total outstanding principal balance and the largest, smallest and average outstanding principal balance of the contracts as of the applicable cut-off date; o whether the manufactured homes were new or used as of the origination of the related contracts; o the weighted average, by principal balance, of the original and remaining terms to maturity of the contracts; o the range of maturity dates of the contracts; o the range of the Loan-to-Value Ratios at origination of the contracts; o the annual percentage rate on each contract, called a contract rate, or range of contract rates and the weighted average contract rate borne by the contracts; o the state or states in which most of the manufactured homes are located at origination; o information regarding the prepayment provisions, if any, of the contracts; o for contracts with adjustable contract rates, referred to as ARM contracts, the index, the frequency of the adjustment dates, and the maximum contract rate or monthly payment variation at the time of any adjustment thereof and over the life of the ARM contract; o the number of contracts that are delinquent and the number of days or ranges of the number of days those contracts are delinquent; o information regarding the payment characteristics of the contracts; and o the material underwriting standards used for the contracts. If specific information respecting the contracts is unknown to the depositor at the time the Notes or Certificates, as applicable, are initially offered, more general information of the nature described above will be provided i the prospectus supplement, and specific information will be set forth in a report that will be available to purchasers of the related Notes or Certificates, as applicable, at or before the initial issuance thereof and will be filed as part of a Current Report on Form 8-K with the Commission within fifteen days after the related initial issuance. The characteristics of the contracts included in a trust fund will not vary by more than five percent (by total principal balance as of the cut-off date) from the characteristics thereof that are described in the prospectus supplement. The information described above regarding the contrac6ts in a trust fund may be presented in the prospectus supplement in combination with similar information regarding the mortgage loans in the trust fund. PAYMENT PROVISIONS OF THE CONTRACTS All of the contracts will provide for payments of principal, interest or both, on due dates that occur monthly or at some other interval as is specified in the prospectus supplement or form payments in another manner described in the prospectus supplement. Each contract may provide for no accrual of interest or for accrual of interest thereon at a contract rate that is fixed over its term or that adjusts from time to time, or as otherwise specified in the prospectus supplement. Each contract may provide for scheduled payments to maturity or payments that adjust from time to time to accommodate changes in the contract rate as otherwise described in the prospectus supplement. AGENCY SECURITIES The Agency Securities will consist of any combination of Ginnie Mae certificates, Fannie Mae certificates and Freddie Mac certificates, which may include Stripped Agency Securities, as described below. GINNIE MAE Ginnie Mae is a wholly-owned corporate instrumentality of the United States within the Department of Housing and Urban Development. Section 306(g) of Title III of the Housing Act authorizes Ginnie Mae to guarantee the timely payment of the principal of and interest on certificates that are based on and backed by a pool of FHA loans, VA loans or by pools of other eligible residential loans. Section 306(g) of the Housing Act provides that "the full faith and credit of the United States is pledged to the payment of all amounts that may be required to be paid under any guaranty under this subsection." To meet its obligations under that guaranty, Ginnie Mae is authorized, under Section 306(d) of the National Housing Act of 1934 (the "Housing Act"), to borrow from the United States Treasury with no limitations as to amount, to perform its obligations under its guarantee. GINNIE MAE CERTIFICATES Each Ginnie Mae certificate will be a "fully modified pass-through" mortgage-backed certificate issued and serviced by an issuer approved by Ginnie Mae or Fannie Mae as a seller-servicer of FHA loans or VA loans, except as described below regarding Stripped Agency Securities (as defined below). The loans underlying Ginnie Mae certificates may consist of FHA loans, VA loans and other loans eligible for inclusion in loan pools underlying Ginnie Mae certificates. Ginnie Mae certificates may be issued under either or both of the Ginnie Mae I program and the Ginnie Mae II program, as described in the prospectus supplement. If the trust fund includes Ginnie Mae certificates, your prospectus supplement will include any material additional information regarding the Ginnie Mae guaranty program, the characteristics of the pool underlying those Ginnie Mae certificates, the servicing of the related pool, the payment of principal and interest on Ginnie Mae certificates and other relevant matters regarding the Ginnie Mae certificates. Except as otherwise specified in the prospectus supplement or as described below with respect to Stripped Agency Securities, each Ginnie Mae certificate will provide for the payment, by or on behalf of the issuer, to the registered holder of that Ginnie Mae certificate of monthly payments of principal and interest equal to the holder's proportionate interest in the total amount of the monthly principal and interest payments on each related FHA loan or VA loan, minus servicing and guaranty fees totaling the excess of the interest on that FHA loan or VA loan over the Ginnie Mae certificates' interest rate. In addition, each payment to a holder of a Ginnie Mae certificate will include proportionate pass-through payments to that holder of any prepayments of principal of the FHA loans or VA loans underlying the Ginnie Mae certificate and the holder's proportionate interest in the remaining principal balance in the event of a foreclosure or other disposition of any related FHA loan or VA loan. The Ginnie Mae certificates do not constitute a liability of, or evidence any recourse against, the issuer of the Ginnie Mae certificates, the depositor or any affiliates of the depositor, and the only recourse of a registered holder (for example, the trustee) is to enforce the guaranty of Ginnie Mae. Ginnie Mae will have approved the issuance of each of the Ginnie Mae certificates included in a trust fund in accordance with a guaranty agreement or contract between Ginnie Mae and the issuer of the Ginnie Mae certificates. Pursuant to that agreement, that issuer, in its capacity as servicer, is required to perform customary functions of a servicer of FHA loans and VA loans, including collecting payments from borrowers and remitting those collections to the registered holder, maintaining escrow and impoundment accounts of borrowers for payments of taxes, insurance and other items required to be paid by the borrower, maintaining primary hazard insurance, and advancing from its own funds to make timely payments of all amounts due on the Ginnie Mae certificate, even if the payments received by that issuer on the loans backing the Ginnie Mae certificate are less than the amounts due. If the issuer is unable to make payments on a Ginnie Mae certificate as they become due, it must promptly notify Ginnie Mae and request Ginnie Mae to make that payment. Upon that notification and request, Ginnie Mae will make those payments directly to the registered holder of the Ginnie Mae certificate. In the event no payment is made by the issuer and the issuer fails to notify and request Ginnie Mae to make that payment, the registered holder of the Ginnie Mae certificate has recourse against only Ginnie Mae to obtain that payment. The trustee or its nominee, as registered holder of the Ginnie Mae certificates included in a trust fund, is entitled to proceed directly against Ginnie Mae under the terms of the guaranty agreement or contract relating to the Ginnie Mae certificates for any amounts that are unpaid when due under each Ginnie Mae certificate. The Ginnie Mae certificates included in a trust fund may have other characteristics and terms, different from those described above so long as the Ginnie Mae certificates and underlying residential loans meet the criteria of the rating agency or agencies. The Ginnie Mae certificates and underlying residential loans will be described in the prospectus supplement. FANNIE MAE Fannie Mae is a federally chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, as amended (the "Charter Act"). Fannie Mae was originally established in 1938 as a United States government agency to provide supplemental liquidity to the mortgage market and was transformed into a stockholder-owned and privately managed corporation by legislation enacted in 1968. Fannie Mae provides funds to the mortgage market by purchasing mortgage loans from lenders. Fannie Mae acquires funds to purchase loans from many capital market investors, thus expanding the total amount of funds available for housing. Operating nationwide, Fannie Mae helps to redistribute mortgage funds from capital-surplus to capital-short areas. In addition, Fannie Mae issues mortgage-backed securities primarily in exchange for pools of mortgage loans from lenders. Fannie Mae receives fees for its guaranty of timely payment of principal and interest on its mortgage-backed securities. FANNIE MAE CERTIFICATES Fannie Mae certificates are Guaranteed Mortgage Pass-Through Certificates typically issued pursuant to a prospectus that is periodically revised by Fannie Mae. Fannie Mae certificates represent fractional undivided interests in a pool of mortgage loans formed by Fannie Mae. Each mortgage loan must meet the applicable standards of the Fannie Mae purchase program. Mortgage loans comprising a pool are either provided by Fannie Mae from its own portfolio or purchased pursuant to the criteria of the Fannie Mae purchase program. Mortgage loans underlying Fannie Mae certificates included in a trust fund will consist of conventional mortgage loans, FHA loans or VA loans. If the trust fund includes Fannie Mae certificates, your prospectus supplement will include any material additional information regarding the Fannie Mae program, the characteristics of the pool underlying the Fannie Mae certificates, the servicing of the related pool, payment of principal and interest on the Fannie Mae certificates and other relevant matters about the Fannie Mae certificates. Except as described below with respect to Stripped Agency Securities, Fannie Mae guarantees to each registered holder of a Fannie Mae certificate that it will distribute amounts representing that holder's proportionate share of scheduled principal and interest at the applicable interest rate provided for by that Fannie Mae certificate on the underlying mortgage loans, whether or not received, and that holder's proportionate share of the full principal amount of any prepayment or foreclosed or other finally liquidated mortgage loan, whether or not the related principal amount is actually recovered. The obligations of Fannie Mae under its guarantees are obligations solely of Fannie Mae and are not backed by, nor entitled to, the full faith and credit of the United States. If Fannie Mae were unable to satisfy those obligations, distributions to the holders of Fannie Mae certificates would consist solely of payments and other recoveries on the underlying loans and, accordingly, monthly distributions to the holders of Fannie Mae certificates would be affected by delinquent payments and defaults on those loans. Fannie Mae certificates evidencing interests in pools of mortgage loans formed on or after May 1, 1985 (other than Fannie Mae certificates backed by pools containing graduated payment mortgage loans or multifamily loans) are available in book-entry form only. For a Fannie Mae certificate issued in book-entry form, distributions on the Fannie Mae certificate will be made by wire, and for a fully registered Fannie Mae certificate, distributions will be made by check. The Fannie Mae certificates included in a trust fund may have other characteristics and terms, different from those described above, as long as the Fannie Mae certificates and underlying mortgage loans meet the criteria of the rating agency or agencies rating the Certificates. The Fannie Mae certificates and underlying mortgage loans will be described in the prospectus supplement. FREDDIE MAC Freddie Mac is a corporate instrumentality of the United States created pursuant to Title III of the Emergency Home Finance Act of 1970, as amended (the "Freddie Mac Act"). Freddie Mac was established primarily for the purpose of increasing the availability of mortgage credit for the financing of needed housing. It seeks to provide an enhanced degree of liquidity for residential mortgage investments primarily by assisting in the development of secondary markets for conventional mortgages. The principal activity of Freddie Mac currently consists of the purchase of first lien, conventional residential mortgage loans or participation interests in those mortgage loans and the resale of the mortgage loans so purchased in the form of mortgage securities, primarily Freddie Mac certificates. Freddie Mac is confined to purchasing, so far as practicable, mortgage loans and participation interests in mortgage loans which it deems to be of the quality, type and class as to meet generally the purchase standards imposed by private institutional mortgage investors. FREDDIE MAC CERTIFICATES Each Freddie Mac certificate represents an undivided interest in a pool of residential loans that may consist of first lien conventional residential loans, FHA loans or VA loans (the "Freddie Mac Certificate Group"). Each of these mortgage loans must meet the applicable standards set forth in the Freddie Mac Act. A Freddie Mac Certificate Group may include whole loans, participation interests in whole loans and undivided interests in whole loans and/or participations comprising another Freddie Mac Certificate Group. If the trust fund includes Freddie Mac certificates, your prospectus supplement will include any material additional information regarding the Freddie Mac guaranty program, the characteristics of the pool underlying that Freddie Mac certificate, the servicing of the related pool, payment of principal and interest on the Freddie Mac certificate and any other relevant matters about the Freddie Mac certificates. Except as described below with respect to Stripped Agency Securities, Freddie Mac guarantees to each registered holder of a Freddie Mac certificate the timely payment of interest on the underlying mortgage loans to the extent of the applicable interest rate on the registered holder's pro rata share of the unpaid principal balance outstanding on the underlying mortgage loans in the Freddie Mac Certificate Group represented by that Freddie Mac certificate, whether or not received. Freddie Mac also guarantees to each registered holder of a Freddie Mac certificate collection by that holder of all principal on the underlying mortgage loans, without any offset or deduction, to the extent of that holder's pro rata share of the principal, but does not, except if and to the extent specified in the prospectus supplement, guarantee the timely payment of scheduled principal. Pursuant to its guarantees, Freddie Mac also guarantees ultimate collection of scheduled principal payments, prepayments of principal and the remaining principal balance in the event of a foreclosure or other disposition of a mortgage loan. Freddie Mac may remit the amount due on account of its guarantee of collection of principal at any time after default on an underlying mortgage loan, but not later than 30 days following the latest of (1) foreclosure sale; (2) payment of the claim by any mortgage insurer; and (3) the expiration of any right of redemption, but in any event no later than one year after demand has been made upon the borrower for accelerated payment of principal. In taking actions regarding the collection of principal after default on the mortgage loans underlying Freddie Mac certificates, including the timing of demand for acceleration, Freddie Mac reserves the right to exercise its servicing judgment for the mortgage loans in the same manner as for mortgage loans that it has purchased but not sold. The length of time necessary for Freddie Mac to determine that a mortgage loan should be accelerated varies with the particular circumstances of each borrower, and Freddie Mac has not adopted servicing standards that require that the demand be made within any specified period. Freddie Mac certificates are not guaranteed by the United States or by any Federal Home Loan Bank and do not constitute debts or obligations of the United States or any Federal Home Loan Bank. The obligations of Freddie Mac under its guarantee are obligations solely of Freddie Mac and are not backed by, nor entitled to, the full faith and credit of the United States. If Freddie Mac were unable to satisfy those obligations, distributions to holders of Freddie Mac certificates would consist solely of payments and other recoveries on the underlying mortgage loans and, accordingly, monthly distributions to holders of Freddie Mac certificates would be affected by delinquent payments and defaults on those mortgage loans. The Freddie Mac certificates included in a trust fund may have other characteristics and terms, different from those described above, so long as the Freddie Mac certificates and underlying mortgage loans meet the criteria of the rating agency or agencies rating the Notes or Certificates, as applicable. The Freddie Mac certificates and underlying mortgage loans will be described in the prospectus supplement. STRIPPED AGENCY SECURITIES The Ginnie Mae certificates, Fannie Mae certificates or Freddie Mac certificates may be issued in the form of certificates ("Stripped Agency Securities") that represent an undivided interest in all or part of either the principal distributions (but not the interest distributions) or the interest distributions (but not the principal distributions), or in some specified portion of the principal or interest distributions (but not all of those distributions), on an underlying pool of mortgage loans or other Ginnie Mae certificates, Fannie Mae certificates or Freddie Mac certificates. Ginnie Mae, Fannie Mae or Freddie Mac, as applicable, will guarantee each Stripped Agency Security to the same extent as that entity guarantees the underlying securities backing the Stripped Agency Securities or to the extent described above for a Stripped Agency Security backed by a pool of mortgage loans, unless otherwise specified in the prospectus supplement. If the trust fund includes Stripped Agency Securities, your prospectus supplement will include any material additional information regarding the characteristics of the assets underlying the Stripped Agency Securities, the payments of principal and interest on the Stripped Agency Securities and other relevant matters about the Stripped Agency Securities. MORTGAGE SECURITIES The Mortgage Securities will represent beneficial interests in loans of the type that would otherwise be eligible to be mortgage loans, unsecured home improvement loans, contract or Agency Securities, or collateralized obligations secured by mortgage loans, unsecured home improvement loans, contract or Agency Securities. The Mortgage Securities will have been (1) issued by an entity other than the depositor or its affiliates; (2) acquired in bona fide secondary market transactions from persons other than the issuer of the Mortgage Securities or its affiliates; and (3) (a) offered and distributed to the public pursuant to an effective registration statement or (b) purchased in a transaction not involving any public offering from a person who is not an affiliate of the issuer of those securities at the time of sale (nor an affiliate of the issuer at any time during the preceding three months); provided a period of two years elapsed since the later of the date the securities were acquired from the issuer. Although individual Underlying Loans may be insured or guaranteed by the United States or an agency or instrumentality of the United States, they need not be, and Mortgage Securities themselves will not be so insured or guaranteed. Except as otherwise set forth in the prospectus supplement, Mortgage Securities will generally be similar to Notes or Certificates, as applicable, offered under this prospectus. The prospectus supplement for the Notes or Certificates, as applicable, of each series evidencing interests in a trust fund including Mortgage Securities will include a description of the Mortgage Securities and any related credit enhancement, and the related mortgage loans, unsecured home improvement loans, contracts, or Agency Securities will be described together with any other mortgage loans or Agency Securities included in the trust fund of that series. As used in this prospectus, the terms "mortgage loans," unsecured home improvement loans, contracts, include the mortgage loans, unsecured home improvement loans, contracts, as applicable, underlying the Mortgage Securities in your trust fund. References in this prospectus to advances to be made and other actions to be taken by the master servicer in connection with the Assets may include any advances made and other actions taken pursuant to the terms of the applicable Mortgage Securities. FHA LOANS AND VA LOANS FHA loans will be insured by the FHA as authorized under the Housing Act, and the United States Housing Act of 1937, as amended. One- to four-family FHA loans will be insured under various FHA programs including the standard FHA 203-b programs to finance the acquisition of one- to four-family housing units and the FHA 245 graduated payment mortgage program. The FHA loans generally require a minimum down payment of approximately 5% of the original principal amount of the FHA loan. No FHA loan may have an interest rate or original principal balance exceeding the applicable FHA limits at the time of origination of that FHA loan. Mortgage loans, unsecured home improvement loans, contracts, that are FHA loans are insured by the FHA (as described in the prospectus supplement, up to an amount equal to 90% of the sum of the unpaid principal of the FHA loan, a portion of the unpaid interest and other liquidation costs) pursuant to Title I of the Housing Act. There are two primary FHA insurance programs that are available for multifamily loans. Sections 221(d)(3) and (d)(4) of the Housing Act allow HUD to insure multifamily loans that are secured by newly constructed and substantially rehabilitated multifamily rental projects. Section 244 of the Housing Act provides for co-insurance of those loans made under Sections 221(d)(3) and (d)(4) by HUD/FHA and a HUD-approved co-insurer. Generally the term of this type of multifamily loan may be up to 40 years and the ratio of the loan amount to property replacement cost can be up to 90%. Section 223(f) of the Housing Act allows HUD to insure multifamily loans made for the purchase or refinancing of existing apartment projects that are at least three years old. Section 244 also provides for co-insurance of mortgage loans made under Section 223(f). Under Section 223(f), the loan proceeds cannot be used for substantial rehabilitation work, but repairs may be made for up to, in general, the greater of 15% of the value of the project and a dollar amount per apartment unit established from time to time by HUD. In general the loan term may not exceed 35 years and a loan-to-value ratio refinancing of a project. VA loans will be partially guaranteed by the VA under the Servicemen's Readjustment Act of 1944, as amended (the "Servicemen's Readjustment Act"). The Servicemen's Readjustment Act permits a veteran (or in some instances the spouse of a veteran) to obtain a mortgage loan guarantee by the VA covering mortgage financing of the purchase of a one- to four-family dwelling unit at interest rates permitted by the VA. The program has no mortgage loan limits, requires no down payment from the purchasers and permits the guarantee of mortgage loans of up to 30 years' duration. However, no VA loan will have an original principal amount greater than five times the partial VA guarantee for that VA loan. The maximum guarantee that may be issued by the VA under this program will be set forth in the prospectus supplement. PRE-FUNDING ACCOUNTS To the extent provided in a prospectus supplement, a portion of the proceeds of the issuance of Notes or Certificates, as applicable, may be deposited into an account maintained with the trustee (a "Pre-Funding Account"). In that case, the depositor will be obligated to sell at a predetermined price - and the trust fund for the related series of Notes or Certificates, as applicable, will be obligated to purchase - additional Assets (the "Subsequent Assets") from time to time, and as frequently as daily, within the period (not to exceed three months) specified in the prospectus supplement (the "Pre-Funding Period") after the issuance of the Notes or Certificates, as applicable, having a total principal balance approximately equal to the amount on deposit in the Pre-Funding Account (the "Pre-Funded Amount") for that series on the date of its issuance. The Pre-Funded Amount for a series will be specified in the prospectus supplement, and will not in any case exceed 50% of the total initial Security Balance of the related Notes or Certificates, as applicable. Any Subsequent Assets will be required to satisfy specific eligibility criteria more fully set forth in the prospectus supplement, which criteria will be consistent with the eligibility criteria of the Assets initially included in the trust fund, subject to those exceptions that are expressly stated in the prospectus supplement. In addition, specific conditions must be satisfied before the Subsequent Assets are transferred into the trust fund, for example, the delivery to the rating agencies and to the trustee of any required opinions of counsel. See "ERISA Considerations--Pre-Funding Accounts" for additional information regarding Pre-Funding Accounts. Except as set forth in the following sentence, the Pre-Funded Amount will be used only to purchase Subsequent Assets. Any portion of the Pre-Funded Amount remaining in the Pre-Funding Account at the end of the Pre-Funding Period will be used to prepay one or more classes of Notes or Certificates, as applicable, in the amounts and in the manner specified in the prospectus supplement. In addition, if specified in the prospectus supplement, the depositor may be required to deposit cash into an account maintained by the trustee (the "Capitalized Interest Account") for the purpose of assuring the availability of funds to pay interest on the Notes or Certificates, as applicable, during the Pre-Funding Period. Any amount remaining in the Capitalized Interest Account at the end of the Pre-Funding Period will be remitted as specified in the prospectus supplement. Amounts deposited in the Pre-Funding and Capitalized Interest Accounts will be permitted to be invested, pending application, only in eligible investments authorized by each applicable rating agency. ACCOUNTS Each trust fund will include one or more accounts, established and maintained on behalf of the securityholders into which the person or persons designated in the prospectus supplement will, to the extent described in this prospectus and in the prospectus supplement deposit all payments and collections received or advanced with respect to the Assets and other assets in the trust fund. This type of account may be maintained as an interest bearing or a non-interest bearing account, and funds held in that account may be held as cash or invested in some short-term, investment grade obligations, in each case as described in the prospectus supplement. See "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Collection Account and Related Accounts." CREDIT SUPPORT If so provided in the prospectus supplement, partial or full protection against some defaults and losses on the Assets in the related trust fund may be provided to one or more classes of Notes or Certificates, as applicable, in the related series in the form of subordination of one or more other classes of Notes or Certificates, as applicable, in that series or by one or more other types of credit support, for example, a letter of credit, insurance policy, guarantee, reserve fund or another type of credit support, or a combination of these (any of these types of coverage for the Notes or Certificates, as applicable, of any series, is referred to generally as "credit support"). The amount and types of coverage, the identification of the entity providing the coverage (if applicable) and related information for each type of credit support, if any, will be described in the prospectus supplement for a series of Notes or Certificates, as applicable. See "Description of Credit Support." CASH FLOW AGREEMENTS If so provided in the 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 other agreements, for example, interest rate swap agreements, interest rate cap or floor agreements, currency swap agreements or similar agreements provided to reduce the effects of interest rate or currency exchange rate fluctuations on the Assets or on one or more classes of Notes or Certificates, as applicable. (Currency swap agreements might be included in the trust fund if some or all of the Assets were denominated in a non-United States currency.) The principal terms of any related guaranteed investment contract or other agreement (any of these types of agreement, a "Cash Flow Agreement"), including provisions relating to the timing, manner and amount of payments under these documents and provisions relating to the termination of these documents, will be described in the prospectus supplement for the related series. In addition, the prospectus supplement will provide information with respect to the borrower under any Cash Flow Agreement. USE OF PROCEEDS The net proceeds to be received from the sale of the Notes or Certificates, as applicable, will be applied by the depositor to the purchase of Assets, or the repayment of the financing incurred in that purchase, and to pay for some of the expenses incurred in connection with that purchase of Assets and sale of Notes or Certificates, as applicable. The depositor expects to sell the Notes or Certificates, as applicable, from time to time, but the timing and amount of offerings of Notes or Certificates, as applicable, will depend on a number of factors, including the volume of Assets acquired by the depositor, prevailing interest rates, availability of funds and general market conditions. YIELD CONSIDERATIONS GENERAL The yield on any Offered Security will depend on the price paid by the securityholder, the Interest Rate of the Security, the receipt and timing of receipt of distributions on the Security and the weighted average life of the Assets in the related trust fund (which may be affected by prepayments, defaults, liquidations or repurchases). INTEREST RATE Notes or Certificates, as applicable, of any class within a series may have fixed, variable or adjustable Interest Rates, which may or may not be based upon the interest rates borne by the Assets in the related trust fund. The prospectus supplement for any series will specify the Interest Rate for each class of Notes or Certificates, as applicable, or, in the case of a variable or adjustable Interest Rate, the method of determining the Interest Rate; the effect, if any, of the prepayment of any Asset on the Interest Rate of one or more classes of Notes or Certificates, as applicable,; and whether the distributions of interest on the Notes or Certificates, as applicable, of any class will be dependent, in whole or in part, on the performance of any borrower under a Cash Flow Agreement. If specified in the prospectus supplement, the effective yield to maturity to each holder of Notes or Certificates, as applicable, entitled to payments of interest will be below that otherwise produced by the applicable Interest Rate and purchase price of that Security because, while interest may accrue on each Asset during a period (each, an "Accrual Period"), the distribution of that interest will be made on a day that may be several days, weeks or months following the period of accrual. TIMING OF PAYMENT OF INTEREST Each payment of interest on the Notes or Certificates, as applicable, entitled to distributions of interest (or addition to the Security Balance of a class of Accrual Securities) will be made by or on behalf of the trustee each month on the date specified in the related prospectus supplement (each date, a "Distribution Date"), and will include interest accrued during the Accrual Period for that Distribution Date. As indicated above under "--Interest Rate," if the Accrual Period ends on a date other than the day before a Distribution Date for the related series, the yield realized by the holders of those Notes or Certificates, as applicable, may be lower than the yield that would result if the Accrual Period ended on the day before the Distribution Date. PAYMENTS OF PRINCIPAL; PREPAYMENTS The yield to maturity on the Notes or Certificates, as applicable, will be affected by the rate of principal payments on the Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities), including principal prepayments resulting from both voluntary prepayments by the borrowers and involuntary liquidations. The rate at which principal prepayments occur will be affected by a variety of factors, including the terms of the Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities), 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 interest rates on the Assets in a particular trust fund (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities), those assets are likely to be the subject of higher principal prepayments than if prevailing rates remain at or above the rates borne by those assets. However, you should note that some Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities) may consist of loans with different interest rates. The rate of principal payment on Mortgage Securities will also be affected by the allocation of principal payments on the underlying assets among the Mortgage Securities or Agency Securities and other Mortgage Securities or Agency Securities of the same series. The rate of principal payments on the Assets in the related trust fund (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities) is likely to be affected by the existence of any Lock-out Periods and Prepayment Premium provisions of the mortgage loans underlying or comprising those Assets, and by the extent to which the servicer of any of these mortgage loans is able to enforce these 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 those provisions, with shorter Lock-out Periods or with lower Prepayment Premiums. Because of the depreciating nature of manufactured housing, which limits the possibilities for refinancing, and because the terms and principal amounts of manufactured housing contracts are generally shorter and smaller than the terms and principal amounts of mortgage loans secured by site-built homes, changes in interest rates have a correspondingly small effect on the amount of the monthly payments on mortgage loans secured by site-built homes. Consequently, changes in interest rates may play a smaller role in prepayment behavior of manufactured housing contracts than they do in the prepayment behavior of loans secured by mortgage on site-built homes. Conversely, local economic conditions and some of the other factors mentioned above may play a larger role in the prepayment behavior of manufactured housing contracts than they do in the prepayment behavior of loans secured by mortgages on site-built homes. If the purchaser of a Security 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 Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities), the actual yield to maturity will be lower than that so calculated. Conversely, if the purchaser of a Security 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 Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities), 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 Notes or Certificates, as applicable, the effect on yield on one or more classes of the Notes or Certificates, as applicable, of that series of prepayments of the Assets in the related trust fund may be mitigated or exacerbated by any provisions for sequential or selective distribution of principal to those classes. When a full prepayment is made on a mortgage loan or a contract, the borrower is charged interest on the principal amount of the mortgage loan or a contract so prepaid for the number of days in the month actually elapsed up to the date of the prepayment or some other period specified in the prospectus supplement. Generally, the effect of prepayments in full will be to reduce the amount of interest paid in the following month to holders of Notes or Certificates, as applicable, entitled to payments of interest because interest on the principal amount of any mortgage loan or a contract so prepaid will be paid only to the date of prepayment rather than for a full month. A partial prepayment of principal is applied so as to reduce the outstanding principal balance of the related mortgage loan or a contract as of its due date in the month in which the partial prepayment is received or some other date as is specified in the prospectus supplement. The timing of changes in the rate of principal payments on the Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities) 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 loans and distributed on a Security, the greater the effect on that 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 particular period may not be offset by a similar decrease (or increase) in the rate of principal payments at a later time. The securityholder will bear the risk of not being able to reinvest principal received from a Security at a yield at least equal to the yield on that Security. PREPAYMENTS--MATURITY AND WEIGHTED AVERAGE LIFE The rates at which principal payments are received on the 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 Notes or Certificates, as applicable, may affect the ultimate maturity and the weighted average life of each class of that series. Prepayments on the mortgage loans or contracts comprising or underlying the 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 Notes or Certificates, as applicable, of the related series. If so provided in the prospectus supplement for a series of Notes or Certificates, as applicable, one or more classes of Notes or Certificates, as applicable, may have a final scheduled Distribution Date, which is the date on or before which the Security Balance of the class of Notes or Certificates, as applicable, is scheduled to be reduced to zero, calculated on the basis of the assumptions applicable to that series. 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 that security will be repaid to the investor. The weighted average life of a class of Notes or Certificates, as applicable, of a series will be influenced by the rate at which principal on the Assets is paid to that 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 Notes or Certificates, as applicable, may be affected by the varying maturities of the Assets in a trust fund. If any Assets in a particular trust fund have actual terms to maturity less than those assumed in calculating final scheduled Distribution Dates for the classes of Notes or Certificates, as applicable, of the related series, one or more classes of these Notes or Certificates, as applicable, may be fully paid before their respective final scheduled Distribution Dates, even in the absence of prepayments. Accordingly, the prepayment experience of the Assets will, to some extent, be a function of the mix of mortgage rates or contract rates and maturities of the mortgage loans or contracts comprising or underlying those 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 or the Standard Prepayment Assumption ("SPA") 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 those loans. SPA represents an assumed rate of prepayment each month relative to the then outstanding principal balance of a pool of loans. A prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum of the then outstanding principal balance of those loans in the first month of the life of the loans and an additional 0.2% per annum in each month thereafter until the thirtieth month. Starting in the thirtieth month and in each month thereafter during the life of the loans, 100% of SPA assumes a constant prepayment rate of 6% per annum each month. Neither CPR nor SPA 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 or contracts underlying or comprising the Assets. The prospectus supplement for each series of Notes or Certificates, as applicable, may contain tables, if applicable, setting forth the projected weighted average life of each class of Offered Notes or Offered Certificates, as applicable, of that series and the percentage of the initial Security Balance of each class that would be outstanding on specified Distribution Dates based on the assumptions stated in the prospectus supplement, including assumptions that prepayments on the mortgage loans comprising or underlying the related Assets are made at rates corresponding to various percentages of CPR, SPA or some other standard specified in the prospectus supplement. These tables and assumptions are intended to illustrate the sensitivity of the weighted average life of the Notes or Certificates, as applicable, 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 Notes or Certificates, as applicable. It is unlikely that prepayment of any mortgage loans or contracts comprising or underlying the Assets for any series will conform to any particular level of CPR, SPA or any other rate specified in the prospectus supplement. OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE TYPE OF ASSET If specified in the prospectus supplement, a number of mortgage loans may have balloon payments due at maturity (which, based on the amortization schedule of those mortgage loans, may be a substantial amount), and because the ability of a borrower to make a balloon payment typically will depend on its ability either to refinance the loan or to sell the related Mortgaged Property, there is a risk that a number of Balloon Payment Assets may default at maturity. The ability to obtain refinancing will depend on a number of factors prevailing at the time refinancing or sale is required, including real estate values, the borrower's financial situation, prevailing mortgage loan interest rates, the borrower's equity in the related Mortgaged Property, tax laws and prevailing general economic conditions. Neither the depositor, the servicer, the master servicer, nor any of their affiliates will be obligated to refinance or repurchase any mortgage loan or to sell the Mortgaged Property except to the extent provided in the prospectus supplement. In the case of defaults, recovery of proceeds may be delayed by, among other things, bankruptcy of the borrower or adverse conditions in the market where the property is located. To minimize losses on defaulted mortgage loans, the servicer may modify mortgage loans that are in default or as to which a payment default is reasonably foreseeable. Any defaulted balloon payment or modification that extends the maturity of a mortgage loan will tend to extend the weighted average life of the Notes or Certificates, as applicable, and may thus lengthen the period of time elapsed from the date of issuance of a Security until it is retired. For some mortgage loans, including ARM Loans, the mortgage rate at origination may be below the rate that would result if the index and margin relating to the mortgage loan were applied at origination. For some contracts, the contract rate may be stepped up during its terms or may otherwise vary or be adjusted. Under the applicable underwriting standards, the borrower under each mortgage loan or contract generally will be qualified on the basis of the mortgage rate or contract rate or contract rate in effect at origination. The repayment of any of these mortgage loans or contracts may therefore be dependent on the ability of the borrower to make larger level monthly payments following the adjustment of the mortgage rate or contract rate. In addition, some mortgage loans may be subject to temporary buydown plans ("Buydown Mortgage Loans") pursuant to which the monthly payments made by the borrower during the early years of the mortgage loan will be less than the scheduled monthly payments on the mortgage loan (the "Buydown Period"). The periodic increase in the amount paid by the borrower of a Buydown Mortgage Loan during or at the end of the applicable Buydown Period may create a greater financial burden for the borrower, who might not have otherwise qualified for a mortgage, and may accordingly increase the risk of default for the related mortgage loan. The mortgage rates on some ARM Loans subject to negative amortization generally adjust monthly and their amortization schedules adjust less frequently. During a period of rising interest rates as well as immediately after origination (initial mortgage rates are generally lower than the sum of the applicable index at origination and the related margin over that index at which interest accrues), the amount of interest accruing on the principal balance of those mortgage loans may exceed the amount of the minimum scheduled monthly payment on the mortgage loans. As a result, a portion of the accrued interest on negatively amortizing mortgage loans may be added to the principal balance of those mortgage loans and will bear interest at the applicable mortgage rate. The addition of any deferred interest to the principal balance of any related class or classes of Notes or Certificates, as applicable, will lengthen the weighted average life of those Notes or Certificates, as applicable, and may adversely affect yield to holders of those Notes or Certificates, as applicable, depending on the price at which those Notes or Certificates, as applicable, were purchased. In addition, for some ARM Loans subject to negative amortization, during a period of declining interest rates, it might be expected that each minimum scheduled monthly payment on this type of mortgage loan would exceed the amount of scheduled principal and accrued interest on the principal balance of that mortgage loan, and since that excess will be applied to reduce the principal balance of the related class or classes of Notes or Certificates, as applicable, the weighted average life of those Notes or Certificates, as applicable, will be reduced and may adversely affect yield to holders of those Notes or Certificates, as applicable, depending on the price at which those Notes or Certificates, as applicable, were purchased. As may be described in the prospectus supplement, the related Agreement may provide that all or a portion of the principal collected on or with respect to the related mortgage loans may be applied by the related trustee to the acquisition of additional Revolving Credit Line Loans during a specified period (rather than used to fund payments of principal to securityholders during that period) with the result that the related Notes or Certificates, as applicable, possess an interest-only period, also commonly referred to as a revolving period, which will be followed by an amortization period. Any of these interest-only or revolving periods may, upon the occurrence of particular events to be described in the prospectus supplement, terminate before the end of the specified period and result in the earlier than expected amortization of the related Notes or Certificates, as applicable. In addition, and as may be described in the prospectus supplement, the related Agreement may provide that all or some of this collected principal may be retained by the trustee (and held in specific temporary investments, including mortgage loans) for a specified period before being used to fund payments of principal to securityholders. The result of the retention and temporary investment by the trustee of this principal would be to slow the amortization rate of the related Notes or Certificates, as applicable, relative to the amortization rate of the related mortgage loans, or to attempt to match the amortization rate of the related Notes or Certificates, as applicable, to an amortization schedule established at the time the Notes or Certificates, as applicable, are issued. Any similar feature applicable to any Notes or Certificates, as applicable, may end on the occurrence of events to be described in the prospectus supplement, resulting in the current funding of principal payments to the related securityholders and an acceleration of the amortization of these Notes or Certificates, as applicable. TERMINATION If specified in the prospectus supplement, a series of Notes or Certificates, as applicable, may be subject to optional early termination through the repurchase of the Assets in the related trust fund by the party specified in the prospectus supplement, on any date on which the total Security Balance of the Notes or Certificates, as applicable, of that series declines to a percentage specified in the prospectus supplement (generally not to exceed 10%) of the Initial Security Balance, under the circumstances and in the manner set forth therein. In addition, if so provided in the prospectus supplement, some classes of Notes or Certificates, as applicable, may be purchased or redeemed in the manner set forth therein. See "Description of the Securities--Termination." DEFAULTS The rate of defaults on the Assets will also affect the rate, timing and amount of principal payments on the Assets and thus the yield on the Notes or Certificates, as applicable. In general, defaults on mortgage loans or contracts are expected to occur with greater frequency in their early years. The rate of default on mortgage loans that are refinance or limited documentation mortgage loans, and on mortgage loans with high Loan-to-Value Ratios, may be higher than for other types of mortgage loans. Furthermore, the rate and timing of prepayments, defaults and liquidations on the mortgage loans or contracts will be affected by the general economic condition of the region of the country in which the related Mortgage Properties or manufactured homes are located. The risk of delinquencies and loss is greater and prepayments are less likely in regions where a weak or deteriorating economy exists, as may be evidenced by, among other factors, increasing unemployment or falling property values. FORECLOSURES The number of foreclosures or repossessions and the principal amount of the mortgage loans or contracts comprising or underlying the Assets that are foreclosed or repossessed in relation to the number and principal amount of mortgage loans or contracts that are repaid in accordance with their terms will affect the weighted average life of the mortgage loans or contracts comprising or underlying the Assets and that of the related series of Notes or Certificates, as applicable. REFINANCING At the request of a borrower, the servicer may allow the refinancing of a mortgage loan or contract in any trust fund by accepting prepayments on the mortgage loan and permitting a new loan secured by a mortgage on the same property. In the event of that refinancing, the new loan would not be included in the related trust fund and, therefore, that refinancing would have the same effect as a prepayment in full of the related mortgage loan or contract. A servicer may, from time to time, implement programs designed to encourage refinancing. These programs may include modifications of existing loans, general or targeted solicitations, the offering of pre-approved applications, reduced origination fees or closing costs, or other financial incentives. In addition, servicers may encourage the refinancing of mortgage loans or contracts, including defaulted mortgage loans or contracts, that would permit creditworthy borrowers to assume the outstanding indebtedness of those mortgage loans or contracts. DUE-ON-SALE CLAUSES Acceleration of mortgage payments as a result of transfers of 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 Assets, other than FHA loans and VA loans, may include "due-on-sale 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, transfer or conveyance of the related Mortgaged Property. For any mortgage loans, except as set forth in the prospectus supplement, the servicer will generally enforce any due-on-sale clause to the extent it has knowledge of the conveyance or proposed conveyance of the underlying Mortgaged Property and it is entitled to do so under applicable law; provided, however, that the servicer will not take any action in relation to the enforcement of any due-on-sale provision that would adversely affect or jeopardize coverage under any applicable insurance policy. See "Certain Legal Aspects of Mortgage Loans--Due-on-Sale Clauses" and "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Due-on-Sale Provisions." The contracts, in general, prohibit the sale or transfer of the related manufactured homes without the consent of the servicer and permit the acceleration of the maturity of the contracts by the servicer upon any sale or transfer that is not consented to. It is expected that the servicer will permit most transfers of manufactured homes and not accelerate the maturity of the related contracts. In some cases, the transfer may be made by a delinquent borrower to avoid a repossession of the manufactured home. In the case of a transfer of a manufactured home after which the servicer desires to accelerate the maturity of related contract, the servicer's ability to do so will depend on the enforceability under state law of the due-on-sale clause. THE DEPOSITOR ACE Securities Corp., the depositor, is a special purpose corporation incorporated in the State of Delaware on June 3, 1998. The principal executive offices of the depositor are located at 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211. Its telephone number is (704) 365-0569. The depositor does not have, nor is it expected in the future to have, any significant assets. The limited purposes of the depositor are, in general, to acquire, own and sell mortgage loans and financial assets; to issue, acquire, own, hold and sell securities and notes secured by or representing ownership interests in mortgage loans and other financial assets, collections on the mortgage loans and related assets; and to engage in any acts that are incidental to, or necessary, suitable or convenient to accomplish, these purposes. All of the shares of capital stock of the depositor are held by Altamont Holdings Corp., a Delaware corporation. DESCRIPTION OF THE SECURITIES GENERAL The Asset-backed certificates (the "Certificates") of each series (including any class of Certificates not offered by this prospectus) will represent the entire beneficial ownership interest in the trust fund created pursuant to the related Agreement. The Asset-backed notes (the "Notes," and together with the Certificates, the "Securities"), will represent indebtedness of the related trust fund and will be issued and secured pursuant to an indenture. Each series of Notes or Certificates, as applicable, will consist of one or more classes of Notes or Certificates, as applicable, that may: o provide for the accrual of interest on the series of Notes or Certificates, as applicable, based on fixed, variable or adjustable rates; o be senior ("Senior Notes" or "Senior Certificates," and collectively, "Senior Securities") or subordinate ("Subordinate Notes" or "Subordinate Certificates," and collectively, "Subordinate Securities") to one or more other classes of Notes or Certificates, as applicable, in respect of distributions on the Notes or Certificates, as applicable,; o be entitled either to (A) principal distributions, with disproportionately low, nominal or no interest distributions or (B) interest distributions, with disproportionately low, nominal or no principal distributions (collectively, "Strip Securities"); o provide for distributions of accrued interest on the series of Notes or Certificates, as applicable, which begin only following the occurrence of specific events, that as the retirement of one or more other classes of Notes or Certificates, as applicable, of that series (collectively, "Accrual Securities"); o provide for payments of principal as described in the prospectus supplement, from all or only a portion of the Assets in that trust fund, to the extent of available funds, in each case as described in the prospectus supplement; and/or o provide for distributions based on a combination of two or more components of the Notes or Certificates, as applicable, with one or more of the characteristics described in this paragraph including a Strip Security component. If specified in the prospectus supplement, distributions on one or more classes of a series of Notes or Certificates, as applicable, may be limited to collections from a designated portion of the Assets in the related trust fund (each portion of the Assets, an "Asset Group"). Any of these classes may include classes of Offered Notes or Offered Certificates, as applicable. Each class of Notes or Certificates, as applicable, offered by this prospectus and the related prospectus supplement (the "Offered Notes" and the "Offered Certificates," respectively, and together, the "Offered Securities") will be issued in minimum denominations corresponding to the Security Balances or, in the case of some classes of Strip Securities, notional amounts or percentage interests specified in the prospectus supplement. The transfer of any Offered Notes or Offered Certificates, as applicable, may be registered and those Notes or Certificates, as applicable, may be exchanged without the payment of any service charge payable in connection with that registration of transfer or exchange, but the depositor or the trustee or any agent of the depositor or the trustee may require payment of a sum sufficient to cover any tax or other governmental charge. One or more classes of Notes or Certificates, as applicable, of a series may be issued in fully registered, certificated form ("Definitive Notes" or "Definitive Certificates," and collectively, "Definitive Securities") or in book-entry form ("Book-Entry Notes" or "Book-Entry Certificates," and collectively, "Book-Entry Securities"), as provided in the prospectus supplement. See "Description of the Securities--Book-Entry Registration and Definitive Securities." Definitive Notes or Definitive Certificates, as applicable, will be exchangeable for other Notes or Certificates, as applicable, of the same class and series of a similar total Security Balance, notional amount or percentage interest but of different authorized denominations. DISTRIBUTIONS Distributions on the Notes or Certificates, as applicable, of each series will be made by or on behalf of the trustee on each Distribution Date as specified in the prospectus supplement from the Available Distribution Amount for that series and that Distribution Date. Distributions (other than the final distribution) will be made to the persons in whose names the Notes or Certificates, as applicable, are registered at the close of business on, unless a different date is specified in the prospectus supplement, 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 prospectus supplement (the "Determination Date"). All distributions for each class of Notes or Certificates, as applicable, on each Distribution Date will be allocated pro rata among the outstanding securityholders in that class or by random selection or as described in the prospectus supplement. Payments will be made either by wire transfer in immediately available funds to the account of a securityholder at a bank or other entity having appropriate facilities for these payments, if that securityholder has so notified the trustee or other person required to make those payments no later than the date specified in the prospectus supplement (and, if so provided in the prospectus supplement, holds Notes or Certificates, as applicable, in the requisite amount specified in the prospectus supplement), or by check mailed to the address of the person entitled to the payment as it appears on the Security Register; provided, however, that the final distribution in retirement of the Notes or Certificates, as applicable, will be made only upon presentation and surrender of the Notes or Certificates, as applicable, at the location specified in the notice to securityholders of that final distribution. AVAILABLE DISTRIBUTION AMOUNT All distributions on the Notes or Certificates, as applicable, of each series on each Distribution Date will be made from the Available Distribution Amount described below, subject to the terms described in the prospectus supplement. Generally, the "Available Distribution Amount" for each Distribution Date equals the sum of the following amounts: (1) the total amount of all cash on deposit in the related Collection Account as of the corresponding Determination Date, exclusive, unless otherwise specified in the prospectus supplement, of: (a) all scheduled payments of principal and interest collected but due on a date after the related Due Period (unless a different period is specified in the prospectus supplement, a "Due Period " for any Distribution Date will begin on the second day of the month in which the immediately preceding Distribution Date occurs, or the Cut-off Date in the case of the first Due Period, and will end on the first day of the month of the related Distribution Date), (b) all prepayments, together with related payments of the interest thereon and related Prepayment Premiums, all proceeds of any FHA insurance, VA Guaranty Policy or insurance policies to be maintained for each Asset (to the extent that proceeds are not applied to the restoration of the Asset or released in accordance with the normal servicing procedures of a servicer, subject to the terms and conditions applicable to the related Asset) (collectively, "Insurance Proceeds"), all other amounts received and retained in connection with the liquidation of Assets in default in the trust fund ("Liquidation Proceeds"), and other unscheduled recoveries received after the related Due Period, or other period specified in the prospectus supplement, (c) all amounts in the Collection Account that are due or reimbursable to the depositor, the trustee, an Asset Seller, a servicer, the master servicer or any other entity as specified in the prospectus supplement or that are payable in respect of particular expenses of the related trust fund, and (d) all amounts received for a repurchase of an Asset from the trust fund for defective documentation or a breach of representation or warranty received after the related Due Period, or other period specified in the prospectus supplement; (2) if the prospectus supplement so provides, interest or investment income on amounts on deposit in the Collection Account, including any net amounts paid under any Cash Flow Agreements; (3) all advances made by a servicer or the master servicer or any other entity as specified in the prospectus supplement for that Distribution Date; (4) if and to the extent the prospectus supplement so provides, amounts paid by a servicer or any other entity as specified in the prospectus supplement with respect to interest shortfalls resulting from prepayments during the related Prepayment Period; and (5) to the extent not on deposit in the related Collection Account as of the corresponding Determination Date, any amounts collected under, from or in respect of any credit support for that Distribution Date. As described below, unless otherwise specified in the prospectus supplement, the entire Available Distribution Amount will be distributed among the related Notes or Certificates, as applicable, (including any Notes or Certificates, as applicable, not offered by this prospectus) on each Distribution Date, and accordingly will be released from the trust fund and will not be available for any future distributions. The prospectus supplement for a series of Notes or Certificates, as applicable, will describe any variation in the calculation or distribution of the Available Distribution Amount for that series. DISTRIBUTIONS OF INTEREST ON THE SECURITIES Each class of Notes or Certificates, as applicable, (other than classes of Strip Securities which have no Interest Rate) may have a different Interest Rate, which will be a fixed, variable or adjustable rate at which interest will accrue on that class or a component of that class (the "Interest Rate" in the case of Certificates). The prospectus supplement will specify the Interest Rate for each class or component or, in the case of a variable or adjustable Interest Rate, the method for determining the Interest Rate. Interest on the Notes or Certificates, as applicable, will be calculated on the basis of a 360-day year consisting of twelve 30-day months unless the prospectus supplement specifies a different basis. Distributions of interest on the Notes or Certificates, as applicable, of any class will be made on each Distribution Date (other than any class of Accrual Securities, which will be entitled to distributions of accrued interest starting only on the Distribution Date, or under the circumstances, specified in the prospectus supplement, and any class of Strip Securities that are not entitled to any distributions of interest) based on the Accrued Security Interest for that class and that Distribution Date, subject to the sufficiency of the portion of the Available Distribution Amount allocable to that class on that Distribution Date. Before any interest is distributed on any class of Accrual Securities, the amount of Accrued Security Interest otherwise distributable on that class will instead be added to the Security Balance of that class on each Distribution Date. For each class of Notes or Certificates, as applicable, and each Distribution Date (other than some classes of Strip Securities), "Accrued Security Interest" will be equal to interest accrued during the related Accrual Period on the outstanding Security Balance of the class of Notes or Certificates, as applicable, immediately before the Distribution Date, at the applicable Interest Rate, reduced as described below. Accrued Security Interest on some classes of Strip Securities will be equal to interest accrued during the related Accrual Period on the outstanding notional amount of the Strip Security immediately before each Distribution Date, at the applicable Interest Rate, reduced as described below, or interest accrual in the manner described in the prospectus supplement. The method of determining the notional amount for a particular class of Strip Securities will be described in the prospectus supplement. Reference to notional amount is solely for convenience in some of the calculations and does not represent the right to receive any distributions of principal. Unless otherwise provided in the prospectus supplement, the Accrued Security Interest on a series of Notes or Certificates, as applicable, 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 before the due date in that accrual period on the mortgage loans or contracts comprising or underlying the Assets in the trust fund for that series. The particular manner in which these shortfalls are to be allocated among some or all of the classes of Notes or Certificates, as applicable, of that series will be specified in the prospectus supplement. The prospectus supplement will also describe the extent to which the amount of Accrued Security Interest that is otherwise distributable on (or, in the case of Accrual Securities, that may otherwise be added to the Security Balance of) a class of Offered Notes or Offered Certificates, as applicable, may be reduced as a result of any other contingencies, including delinquencies, losses and deferred interest on the mortgage loans or contracts comprising or underlying the Assets in the related trust fund. Unless otherwise provided in the prospectus supplement, any reduction in the amount of Accrued Security Interest otherwise distributable on a class of Notes or Certificates, as applicable, by reason of the allocation to that class of a portion of any deferred interest on the mortgage loans or contracts comprising or underlying the Assets in the related trust fund will result in a corresponding increase in the Security Balance of that class. See "Yield Considerations." DISTRIBUTIONS OF PRINCIPAL OF THE SECURITIES The Notes or Certificates, as applicable, of each series, other than some classes of Strip Securities, will have a "Security Balance" which, at any time, will equal the then maximum amount that the holder will be entitled to receive on principal out of the future cash flow on the Assets and other assets included in the related trust fund. The outstanding Security Balance of a Security will be reduced: o to the extent of distributions of principal on that Security from time to time and o if and to the extent provided in the prospectus supplement, by the amount of losses incurred on the related Assets. The outstanding Security Balance of a Security: o may be increased in respect of deferred interest on the related mortgage loans, to the extent provided in the prospectus supplement and o in the case of Accrual Securities, will be increased by any related Accrued Security Interest up until the Distribution Date on which distributions of interest are required to begin. If specified in the prospectus supplement, the initial total Security Balance of all classes of Notes or Certificates, as applicable, of a series will be greater than the outstanding total principal balance of the related Assets as of the applicable Cut-off Date. The initial total Security Balance of a series and each class of the series will be specified in the prospectus supplement. Distributions of principal will be made on each Distribution Date to the class or classes of Notes or Certificates, as applicable, in the amounts and in accordance with the priorities specified in the prospectus supplement. Some classes of Strip Securities with no Security Balance are not entitled to any distributions of principal. If specified in the related prospectus supplement, the trust fund may issue notes or certificates, as applicable, from time to time and use proceeds of this issuance to make principal payments with respect to a series. REVOLVING PERIOD The applicable prospectus supplement may provide that all or a portion of the principal collections may be applied by the trustee to the acquisition of subsequent Revolving Credit Line Loans during a specified period rather than used to distribute payments of principal to securityholders during that period. These notes or certificates, as applicable, would then possess an interest only period, also commonly referred to as a "Revolving Period", which will be followed by an "Amortization Period", during which principal will be paid. Any interest only revolving period may terminate prior to the end of the specified period and result in the earlier than expected principal repayment of the notes or certificates, as applicable. COMPONENTS To the extent specified in the prospectus supplement, distribution on a class of Notes or Certificates, as applicable, may be based on a combination of two or more different components as described under "--General" above. To that extent, the descriptions set forth under "--Distributions of Interest on the Securities" and "--Distributions of Principal of the Securities" above also relate to components of the component class of Notes or Certificates, as applicable. References in those sections to Security Balance may refer to the principal balance, if any, of these components and reference to the Interest Rate may refer to the Interest Rate, if any, on these components. DISTRIBUTIONS ON THE SECURITIES OF PREPAYMENT PREMIUMS If so provided in the prospectus supplement, Prepayment Premiums that are collected on the mortgage loans in the related trust fund will be distributed on each Distribution Date to the class or classes of Notes or Certificates, as applicable, entitled to the distribution as described in the prospectus supplement. ALLOCATION OF LOSSES AND SHORTFALLS If so provided in the prospectus supplement for a series of Notes or Certificates, as applicable, consisting of one or more classes of Subordinate Notes or Subordinate Certificates, as applicable, on any Distribution Date in respect of which losses or shortfalls in collections on the Assets have been incurred, the amount of those losses or shortfalls will be borne first by a class of Subordinate Notes or Subordinate Certificates, as applicable, in the priority and manner and subject to the limitations specified in the prospectus supplement. See "Description of Credit Support" for a description of the types of protection that may be included in a trust fund against losses and shortfalls on Assets comprising that trust fund. The prospectus supplement for a series of Notes or Certificates, as applicable, will describe the entitlement, if any, of a class of Notes or Certificates, as applicable, whose Security Balance has been reduced to zero as a result of distributions or the allocation of losses on the related Assets to recover any losses previously allocated to that class from amounts received on the Assets. However, if the Security Balance of a class of Notes or Certificates, as applicable, has been reduced to zero as the result of principal distributions, the allocation of losses on the Assets, an optional termination or an optional purchase or redemption, that class will no longer be entitled to receive principal distributions from amounts received on the assets of the related trust fund, including distributions in respect of principal losses previously allocated to that class. ADVANCES IN RESPECT OF DELINQUENCIES If so provided in the prospectus supplement, the servicer or another entity described in the prospectus supplement 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 related Collection Account that are not included in the Available Distribution Amount for that Distribution Date, in an amount equal to the total of payments of (1) principal (other than any balloon payments) and (2) interest (net of related servicing fees and Retained Interest) that were due on the Assets in that trust fund during the related Due Period and were delinquent on the related Determination Date, subject to a good faith determination that the advances will be reimbursable from Related Proceeds (as defined below). In the case of a series of Notes or Certificates, as applicable, that includes one or more classes of Subordinate Notes or Subordinate Certificates, as applicable, and if so provided in the prospectus supplement, the servicer's (or another entity's) advance obligation may be limited only to the portion of those delinquencies necessary to make the required distributions on one or more classes of Senior Notes or Senior Certificates, as applicable, and/or may be subject to a good faith determination that advances will be reimbursable not only from Related Proceeds but also from collections on other Assets otherwise distributable on one or more classes of those Subordinate Notes or Subordinate Certificates, as applicable. 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 Notes or Certificates, as applicable, entitled to the payments, rather than to guarantee or insure against losses. Advances of the servicer's (or another entity's) funds will be reimbursable only out of related recoveries on the Assets (including amounts received under any form of credit support) respecting which those advances were made (as to any Assets, "Related Proceeds") and from any other amounts specified in the prospectus supplement, including out of any amounts otherwise distributable on one or more classes of Subordinate Notes or Subordinate Certificates, as applicable, of that series; provided, however, that any advance will be reimbursable from any amounts in the related Collection Account before any distributions being made on the Notes or Certificates, as applicable, to the extent that the servicer (or some other entity) determines in good faith that that advance (a "Nonrecoverable Advance") is not ultimately recoverable from Related Proceeds or, if applicable, from collections on other Assets otherwise distributable on the Subordinate Notes or Subordinate Certificates, as applicable. If advances have been made by the servicer from excess funds in the related Collection Account, the servicer is required to replace these funds in that Collection Account on any future Distribution Date to the extent that funds in that Collection Account on that Distribution Date are less than payments required to be made to securityholders on that date. If specified in the prospectus supplement, the obligations of the 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 borrower on any surety bond will be set forth in the prospectus supplement. If and to the extent so provided in the prospectus supplement, the servicer (or another entity) will be entitled to receive interest at the rate specified in the prospectus supplement on its outstanding advances and will be entitled to pay itself this interest periodically from general collections on the Assets before any payment to securityholders or as otherwise provided in the related Agreement and described in the prospectus supplement. If specified in the prospectus supplement, the master servicer or the trustee will be required to make advances, subject to specific conditions described in the prospectus supplement, in the event of a servicer default. REPORTS TO SECURITYHOLDERS With each distribution to holders of any class of Notes or Certificates, as applicable, of a series, the servicer, the master servicer or the trustee, as provided in the prospectus supplement, will forward or cause to be forwarded to each holder, to the depositor and to any other parties as may be specified in the related Agreement, a statement containing the information specified in the prospectus supplement, or if no information is specified in the prospectus supplement, generally setting forth, in each case to the extent applicable and available: (1) the amount of that distribution to holders of Notes or Certificates, as applicable, of that class applied to reduce the Security Balance of the Notes or Certificates, as applicable,; (2) the amount of that distribution to holders of Notes or Certificates, as applicable, of that class allocable to Accrued Security Interest; (3) the amount of that distribution allocable to Prepayment Premiums; (4) the amount of related servicing compensation and any other customary information as is required to enable securityholders to prepare their tax returns; (5) the total amount of advances included in that distribution, and the total amount of unreimbursed advances at the close of business on that Distribution Date; (6) the total principal balance of the Assets at the close of business on that Distribution Date; (7) the number and total principal balance of mortgage 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 begun; (8) for any mortgage loan or contract liquidated during the related Due Period, (a) the portion of the related liquidation proceeds payable or reimbursable to a servicer (or any other entity) in respect of that mortgage loan and (b) the amount of any loss to securityholders; (9) with respect to collateral acquired by the trust fund through foreclosure or otherwise (an "REO Property") relating to a mortgage loan or contract and included in the trust fund as of the end of the related Due Period, the date of acquisition; (10) for each REO Property relating to a mortgage loan or contract 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 or contract immediately following that Distribution Date (calculated as if that mortgage loan or contract were still outstanding taking into account limited modifications to the terms of the mortgage loan specified in the Agreement), (c) the total amount of unreimbursed servicing expenses and unreimbursed advances in respect of the REO Property and (d) if applicable, the total amount of interest accrued and payable on related servicing expenses and related advances; (11) for any REO Property sold during the related Due Period (a) the total amount of sale proceeds, (b) the portion of those sales proceeds payable or reimbursable to the master servicer in respect of that REO Property or the related mortgage loan or contract and (c) the amount of any loss to securityholders in respect of the related mortgage loan; (12) the total Security Balance or notional amount, as the case may be, of each class of Notes or Certificates, as applicable, (including any class of Notes or Certificates, as applicable, not offered by this prospectus) at the close of business on that Distribution Date, separately identifying any reduction in that Security Balance due to the allocation of any loss and increase in the Security Balance of a class of Accrual Securities if any Accrued Security Interest has been added to that balance; (13) the total amount of principal prepayments made during the related Due Period; (14) the amount deposited in the reserve fund, if any, on that Distribution Date; (15) the amount remaining in the reserve fund, if any, as of the close of business on that Distribution Date; (16) the total unpaid Accrued Security Interest, if any, on each class of Notes or Certificates, as applicable, at the close of business on that Distribution Date; (17) in the case of Notes or Certificates, as applicable, with a variable Interest Rate, the Interest Rate applicable to that Distribution Date, and, if available, the immediately succeeding Distribution Date, as calculated in accordance with the method specified in the prospectus supplement; (18) in the case of Notes or Certificates, as applicable, with an adjustable Interest Rate, for statements to be distributed in any month in which an adjustment date occurs, the adjustable Interest Rate applicable to that Distribution Date, if available, and the immediately succeeding Distribution Date as calculated in accordance with the method specified in the prospectus supplement; (19) as to any series that includes credit support, the amount of coverage of each instrument of credit support included as of the close of business on that Distribution Date; (20) during the Pre-Funding Period, the remaining Pre-Funded Amount and the portion of the Pre-Funding Amount used to acquire Subsequent Assets since the preceding Distribution Date; (21) during the Pre-Funding Period, the amount remaining in the Capitalized Interest Account; and (22) the total amount of payments by the borrowers of (a) default interest, (b) late charges and (c) assumption and modification fees collected during the related Due Period. Within a reasonable period of time after the end of each calendar year, the servicer, the master servicer or the trustee, as provided in the prospectus supplement, will furnish to each securityholder of record at any time during the calendar year the information required by the Code and applicable regulations under the Code to enable securityholders to prepare their tax returns. See "Description of the Securities--Book-Entry Registration and Definitive Securities." TERMINATION The obligations created by the related Agreement for each series of Notes or Certificates, as applicable, will terminate upon the payment to securityholders of that series of all amounts held in the Collection Accounts or by a servicer, the master servicer, if any, or the trustee and required to be paid to them pursuant to that Agreement following the earlier of (1) the final payment or other liquidation of the last Asset subject to the related Agreement or the disposition of all property acquired upon foreclosure of any mortgage loan or contract subject to the Agreement and (2) the purchase of all of the assets of the trust fund by the party entitled to effect that termination, under the circumstances and in the manner set forth in the prospectus supplement. In no event, however, will the trust fund continue beyond the date specified in the prospectus supplement. Written notice of termination of the Agreement will be given to each securityholder, and the final distribution will be made only upon presentation and surrender of the Notes or Certificates, as applicable, at the location to be specified in the notice of termination. If specified in the prospectus supplement, a series of Notes or Certificates, as applicable, may be subject to optional early termination through the purchase of the Assets in the related trust fund by the party specified in the prospectus supplement, under the circumstances and in the manner set forth in the prospectus supplement. If so provided in the prospectus supplement, upon the reduction of the Security Balance of a specified class or classes of Notes or Certificates, as applicable, by a specified percentage, the party specified in the prospectus supplement will solicit bids for the purchase of all assets of the trust fund, or of a sufficient portion of those assets to retire that class or classes or purchase that class or classes at a price set forth in the prospectus supplement, in each case, under the circumstances and in the manner set forth in the prospectus supplement. That price will at least equal the outstanding Security Balances and any accrued and unpaid interest on the Security Balances (including any unpaid interest shortfalls for prior Distribution Dates). Any sale of the Assets of the trust fund will be without recourse to the trust fund or the securityholders. Any purchase or solicitation of bids may be made only when the total Security Balance of that class or classes declines to a percentage of the Initial Security Balance of those Notes or Certificates, as applicable, (not to exceed 10%) specified in the prospectus supplement. In addition, if so provided in the prospectus supplement, some classes of Notes or Certificates, as applicable, may be purchased or redeemed in the manner set forth in the prospectus supplement at a price at least equal to the outstanding Security Balance of each class so purchased or redeemed and any accrued and unpaid interest on the Security Balance (including any unpaid interest shortfalls for prior Distribution Dates). OPTIONAL PURCHASES Subject to the provisions of the applicable Agreement, the depositor, the servicer or any other party specified in the prospectus supplement may, at that party's option, repurchase any mortgage loan that is in default or as to which default is reasonably foreseeable if, in the depositor's, the servicer's or any other party's judgment, the related default is not likely to be cured by the borrower or default is not likely to be averted, at a price equal to the unpaid principal balance of the mortgage loan plus accrued interest on the mortgage loan and under the conditions set forth in the prospectus supplement. BOOK-ENTRY REGISTRATION AND DEFINITIVE SECURITIES GENERAL If provided for in the prospectus supplement, one or more classes of the Offered Notes or Offered Certificates, as applicable, of any series will be issued as Book-Entry Notes or Book-Entry Certificates, as applicable, and each of these classes will be represented by one or more single Notes or Certificates, as applicable, registered in the name of a nominee for the depository, The Depository Trust Company ("DTC") and, if provided in the prospectus supplement, additionally through Clearstream Luxembourg, societe anonyme ("Clearstream Luxembourg") or the Euroclear System ("Euroclear"). Each class of Book-Entry Notes or Book-Entry Certificates, as applicable, will be issued in one or more certificates or notes, as the case may be, that equal the initial principal amount of the related class of Offered Notes or Offered Certificates, as applicable, and will initially be registered in the name of Cede & Co. No person acquiring an interest in a Book-Entry Security (each, a "Beneficial Owner") will be entitled to receive a Definitive Security, except as set forth below under "--Definitive Securities." Unless and until Definitive Notes or Definitive Certificates, as applicable, are issued for the Book-Entry Notes or Book-Entry Certificates, as applicable, under the limited circumstances described in the applicable prospectus supplement or this prospectus, all references to actions by securityholders with respect to the Book-Entry Notes or Book-Entry Certificates, as applicable, will refer to actions taken by DTC, Clearstream Luxembourg or Euroclear upon instructions from their Participants (as defined below), and all references in this prospectus to distributions, notices, reports and statements to securityholders with respect to the Book-Entry Notes or Book-Entry Certificates, as applicable, will refer to distributions, notices, reports and statements to DTC, Clearstream Luxembourg or Euroclear, as applicable, for distribution to Beneficial Owners by DTC in accordance with the procedures of DTC and if applicable, Clearstream Luxembourg and Euroclear. Beneficial Owners will hold their Book-Entry Notes or Book-Entry Certificates, as applicable, through DTC in the United States, or, if the Offered Notes or Offered Certificates, as applicable, are offered for sale globally, through Clearstream Luxembourg or Euroclear in Europe if they are participating organizations ("Participants") of those systems. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include some other organizations. Indirect access to the DTC, Clearstream Luxembourg and Euroclear systems 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"). 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 Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC was created to hold securities for its Participants, some of which (and/or their representatives) own DTC, and facilitate the clearance and settlement of securities transactions between its Participants through electronic book-entry changes in their accounts, thus eliminating the need for physical movement of securities. In accordance with its normal procedures, DTC is expected to record the positions held by each of its Participants in the Book-Entry Notes or Book-Entry Certificates, as applicable, whether held for its own account or as a nominee for another person. In general, beneficial ownership of Book-Entry Notes or Book-Entry Certificates, as applicable, will be subject to the rules, regulations and procedures governing DTC and its Participants as in effect from time to time. CLEARSTREAM LUXEMBOURG Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte, L-2967 Luxembourg ("Clearstream, Luxembourg"), was incorporated in 1970 as "Cedel S.A.", a company with limited liability under Luxembourg law (a societe anonyme). Cedel S.A. subsequently changed its name to Cedelbank. On January 10, 2000, Cedelbank's parent company, Cedel International, societe anonyme ("CI") merged its clearing, settlement and custody business with that of Deutsche Borse Clearing AG ("DBC"). The merger involved the transfer by CI of substantially all of its assets and liabilities (including its shares in CB) to a new Luxembourg company, New Cedel International, societe anonyme ("New CI"), which is 50% owned by CI and 50% owned by DBC's parent company Deutsche Borse AG. The shareholders of these two entities are banks, securities dealers and financial institutions. Cedel International currently has 92 shareholders, including U.S. financial institutions or their subsidiaries. No single entity may own more than 5 percent of Cedel International's stock. Further to the merger, the Board of Directors of New Cedel International decided to rename the companies in the group in order to give them a cohesive brand name. The new brand name that was chosen is "Clearstream". With effect from January 14, 2000 New CI has been renamed "Clearstream International, societe anonyme". On January 18, 2000, Cedelbank was renamed "Clearstream Banking, societe anonyme", and Cedel Global Services was renamed "Clearstream Services, societe anonyme". On January 17, 2000 DBC was renamed "Clearstream Banking AG". This means that there are now two entities in the corporate group headed by Clearstream International which share the name "Clearstream Banking", the entity previously named "Cedelbank" and the entity previously named "Deutsche Brse Clearing AG". Clearstream, Luxembourg holds securities for its customers ("Clearstream, Luxembourg Participants") and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg customers through electronic book-entry changes in accounts of Clearstream, Luxembourg customers, thereby eliminating the need for physical movement of certificates. Transactions may be settled by Clearstream, Luxembourg in any of 36 currencies, including United States Dollars. Clearstream, Luxembourg provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream, Luxembourg also deals with domestic securities markets in over 30 countries through established depository and custodial relationships. Clearstream, Luxembourg is registered as a bank in Luxembourg, and as such is subject to regulation by the Commission de Surveillance du Secteur Financier, "CSSF", which supervises Luxembourg banks. Clearstream, Luxembourg's customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg has approximately 2,000 customers located in over 80 countries, including all major European countries, Canada, and the United States. Indirect access to Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream, Luxembourg. Clearstream, Luxembourg has established an electronic bridge with Morgan Guaranty Trust Company of New York as the Operator of the Euroclear System (MGT/EOC) in Brussels to facilitate settlement of trades between Clearstream, Luxembourg and MGT/EOC. EUROCLEAR Euroclear was created in 1968 to hold securities for its Participants and to clear and settle transactions between its Participants through simultaneous electronic book-entry delivery against payment, thus eliminating the need for physical movement of securities and any risk from lack of simultaneous transfers of securities and cash. Transactions may be settled in any of 32 currencies, including United States dollars. Euroclear includes various other services, including securities lending and borrowing, and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. Euroclear is operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the "Cooperative Corporation"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative Corporation. The Cooperative Corporation establishes policy for Euroclear on behalf of its Participants. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Participant of Euroclear, either directly or indirectly. The Euroclear Operator is the Belgian branch of a New York banking corporation that is a member bank of the Federal Reserve System, and is regulated and examined by the Board of Governors of the Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific securities to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of its Participants, and has no record of or relationship with persons holding through Participants of Euroclear. Clearstream Luxembourg and Euroclear will hold omnibus positions on behalf of their Participants through customers' securities accounts in Clearstream Luxembourg's and Euroclear's names on the books of their respective depositaries which in turn will hold positions in customers' securities accounts in the depositaries names on the books of DTC. Citibank will act as depositary for Clearstream Luxembourg and The Chase Manhattan Bank will act as depositary for Euroclear (individually the "Relevant Depositary" and collectively, the "European Depositaries"). BENEFICIAL OWNERSHIP OF BOOK-ENTRY SECURITIES Except as described below, no Beneficial Owner will be entitled to receive a physical certificate representing a Certificate, or note representing a Note. Unless and until Definitive Notes or Definitive Certificates, as applicable, are issued, it is anticipated that the only "securityholder" of the Offered Notes or Offered Certificates, as applicable, will be Cede & Co., as nominee of DTC. Beneficial Owners will not be "Certificateholders" as that term is used in any Agreement, nor "Noteholders" as that term is used in any indenture. Beneficial Owners are only permitted to exercise their rights indirectly through Participants, DTC, Clearstream Luxembourg or Euroclear, as applicable. The Beneficial Owner's ownership of a Book-Entry Security will be recorded on the records of the brokerage firm, bank, thrift institution or other financial intermediary (each, a "Financial Intermediary") that maintains the Beneficial Owner's account for that purpose. In turn, the Financial Intermediary's ownership of a Book-Entry Security will be recorded on the records of DTC (or of a Participant that acts as agent for the Financial Intermediary, whose interest will in turn be recorded on the records of DTC, if the Beneficial Owner's Financial Intermediary is not a Participant of DTC and on the records of Clearstream Luxembourg or Euroclear, as appropriate). Beneficial Owners will receive all distributions of principal of, and interest on, the Offered Notes or Offered Certificates, as applicable, from the trustee through DTC and its Participants. While the Offered Notes or Offered Certificates, as applicable, are outstanding (except under the circumstances described below), under the rules, regulations and procedures creating and affecting DTC and its operations (the "Rules"), DTC is required to make book-entry transfers among Participants on whose behalf it acts with respect to the Offered Notes or Offered Certificates, as applicable, and is required to receive and transmit distributions of principal of, and interest on, the Offered Notes or Offered Certificates, as applicable. Participants and Indirect Participants with whom Beneficial Owners have accounts with respect to Offered Notes or Offered Certificates, as applicable, are similarly required to make book-entry transfers and receive and transmit distributions on behalf of their respective Beneficial Owners. Accordingly, although Beneficial Owners will not possess certificates or notes, the Rules provide a mechanism by which Beneficial Owners will receive distributions and will be able to transfer their interest. Beneficial Owners will not receive or be entitled to receive certificates or notes representing their respective interests in the Offered Notes or Offered Certificates, as applicable, except under the limited circumstances described below. Unless and until Definitive Notes or Definitive Certificates, as applicable, are issued, Beneficial Owners who are not Participants may transfer ownership of Offered Notes or Offered Certificates, as applicable, only through Participants and Indirect Participants by instructing the Participants and Indirect Participants to transfer Offered Notes or Offered Certificates, as applicable, by book-entry transfer, through DTC for the account of the purchasers of the Offered Notes or Offered Certificates, as applicable, which account is maintained with their respective Participants. Under the Rules and in accordance with DTC's normal procedures, transfer of ownership of Book-Entry Notes or Book-Entry Certificates, as applicable, will be executed through DTC and the accounts of the respective Participants at DTC will be debited and credited. Similarly, the Participants and Indirect Participants will make debits or credits, as the case may be, on their records on behalf of the selling and purchasing Beneficial Owners. Because of time zone differences, any credits of securities received in Clearstream Luxembourg or Euroclear as a result of a transaction with a Participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. These credits or any transactions in securities settled during this processing will be reported to the relevant Participants of Clearstream Luxembourg or Euroclear on that business day. Cash received in Clearstream Luxembourg or Euroclear as a result of sales of securities by or through a Participant of Clearstream Luxembourg or Euroclear to a Participant of DTC will be received with value on the DTC settlement date but will be available in the relevant Clearstream Luxembourg or Euroclear cash account only as of the business day following settlement in DTC. For information with respect to tax documentation procedures relating to the Notes or Certificates, as applicable, see "Material Federal Income Tax Considerations -- Tax Treatment of Foreign Investors" in this prospectus and, if the Book-Entry Notes or Book-Entry Certificates, as applicable, are globally offered and the prospectus supplement so provides, see "Global Clearance, Settlement and Tax Documentation Procedures -- Certain U.S. Federal Income Tax Documentation Requirements" in Annex I to the prospectus supplement. Transfers between Participants of DTC will occur in accordance with DTC Rules. Transfers between Participants of Clearstream Luxembourg or Euroclear will occur in accordance with their respective rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Participants of Clearstream Luxembourg or Euroclear, on the other, will be effected in DTC in accordance with the DTC Rules on behalf of the relevant European international clearing system by the Relevant Depositary; however, cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in that system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to the Relevant Depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same day funds settlement applicable to DTC. Participants of Clearstream Luxembourg or Euroclear may not deliver instructions directly to the European Depositaries. Distributions on the Book-Entry Notes or Book-Entry Certificates, as applicable, will be made on each Distribution Date by the Trustee to DTC. DTC will be responsible for crediting the amount of each distribution to the accounts of the applicable Participants of DTC in accordance with DTC's normal procedures. Each Participant of DTC will be responsible for disbursing the distribution to the Beneficial Owners of the Book-Entry Notes or Book-Entry Certificates, as applicable, that it represents and to each Financial Intermediary for which it acts as agent. Each Financial Intermediary will be responsible for disbursing funds to the Beneficial Owners of the Book-Entry Notes or Book-Entry Certificates, as applicable, that it represents. Under a book-entry format, Beneficial Owners of the Book-Entry Notes or Book-Entry Certificates, as applicable, may experience some delay in their receipt of payments, because the distributions will be forwarded by the Trustee to Cede & Co. Any distributions on Notes or Certificates, as applicable, held through Clearstream Luxembourg or Euroclear will be credited to the cash accounts of Participants of Clearstream Luxembourg or Euroclear in accordance with the relevant system's rules and procedures, to the extent received by the Relevant Depositary. These distributions will be subject to tax reporting in accordance with relevant United States tax laws and regulations. See "Material Federal Income Tax Considerations -- REMICs -- Taxation of Certain Foreign Investors" in this prospectus. Because DTC can only act on behalf of Financial Intermediaries, the ability of a Beneficial Owner to pledge Book-Entry Notes or Book-Entry Certificates, as applicable, to persons or entities that do not participate in the depository system, or otherwise take actions in respect of Book-Entry Notes or Book-Entry Certificates, as applicable, may be limited due to the lack of physical securities for the Book-Entry Notes or Book-Entry Certificates, as applicable. In addition, issuance of the Book-Entry Notes or Book-Entry Certificates, as applicable, in book-entry form may reduce the liquidity of the securities in the secondary market since potential investors may be unwilling to purchase Notes or Certificates, as applicable, for which they cannot obtain physical securities. Monthly and annual reports will be provided to Cede & Co., as nominee of DTC, and may be made available by Cede & Co. to Beneficial Owners upon request, in accordance with the rules, regulations and procedures creating and affecting the depository, and to the Financial Intermediaries to whose DTC accounts the Book-Entry Notes or Book-Entry Certificates, as applicable, of Beneficial Owners are credited. Generally, DTC will advise the applicable trustee that unless and until Definitive Notes or Definitive Certificates, as applicable, are issued, DTC will take any action permitted to be taken by the holders of the Book-Entry Notes or Book-Entry Certificates, as applicable, under the Agreement or indenture, as applicable, only at the direction of one or more Financial Intermediaries to whose DTC accounts the Book-Entry Notes or Book-Entry Certificates, as applicable, are credited, to the extent that actions are taken on behalf of Financial Intermediaries whose holdings include the Book-Entry Notes or Book-Entry Certificates, as applicable. If the Book-Entry Notes or Book-Entry Certificates, as applicable, are globally offered, Clearstream Luxembourg or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a securityholder under the Agreement or indenture, as applicable, on behalf of a Participant of Clearstream Luxembourg or Euroclear only in accordance with its relevant rules and procedures and subject to the ability of the Relevant Depositary to effect those actions on its behalf through DTC. DTC may take actions, at the direction of the related Participants, with respect to some Offered Notes or Offered Certificates, as applicable, that conflict with actions taken with respect to other Offered Notes or Offered Certificates, as applicable. Although DTC, Clearstream Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Book-Entry Notes or Book-Entry Certificates, as applicable, among Participants of DTC, Clearstream Luxembourg and Euroclear, they are under no obligation to perform or continue to perform these procedures and the procedures may be discontinued at any time. None of the depositor, any master servicer, any servicer, the trustee, any securities registrar or paying agent or any of their affiliates will have any responsibility for any aspect of the records relating to or payments made on account of beneficial ownership interests of the Book-Entry Notes or Book-Entry Certificates, as applicable, or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests. DEFINITIVE SECURITIES Notes or Certificates, as applicable, initially issued in book-entry form will be issued as Definitive Notes or Definitive Certificates, as applicable, to Beneficial Owners or their nominees, rather than to DTC or its nominee only (1) if the depositor advises the trustee in writing that DTC is no longer willing or able to properly discharge its responsibilities as depository for the Notes or Certificates, as applicable, and the depositor is unable to locate a qualified successor, (2) if the depositor, at its option, elects to end the book-entry system through DTC or (3) in accordance with any other provisions described in the prospectus supplement. Upon the occurrence of any of the events described in the immediately preceding paragraph, DTC is required to notify all Participants of the availability through DTC of Definitive Notes or Definitive Certificates, as applicable, for the Beneficial Owners. Upon surrender by DTC of the security or securities representing the Book-Entry Notes or Book-Entry Certificates, as applicable, together with instructions for registration, the trustee will issue (or cause to be issued) to the Beneficial Owners identified in those instructions the Definitive Notes or Definitive Certificates, as applicable, to which they are entitled, and thereafter the trustee will recognize the holders of those Definitive Notes or Definitive Certificates, as applicable, as securityholders under the Agreement. DESCRIPTION OF THE AGREEMENTS AGREEMENTS APPLICABLE TO A SERIES REMIC SECURITIES, FASIT SECURITIES, GRANTOR TRUST SECURITIES Notes or Certificates, as applicable, representing interests in a trust fund, or a portion of a trust fund, that the trustee will elect to have treated as a real estate mortgage investment conduit under Sections 860A through 860G of the Code ("REMIC Securities"), FASIT Securities (as defined in this prospectus), or Grantor Trust Securities (as defined in this prospectus) will be issued, and the related trust fund will be created, pursuant to a pooling and servicing agreement or trust agreement (in either case, generally referred to in this prospectus as the "pooling and servicing agreement") among the depositor, the trustee and the sole servicer or master servicer, as applicable. The Assets of that trust fund will be transferred to the trust fund and thereafter serviced in accordance with the terms of the pooling and servicing agreement. In the event there are multiple servicers of the Assets of that trust fund, or in the event the Securities consist of Notes, each servicer will perform its servicing functions pursuant to a related underlying servicing agreement. SECURITIES THAT ARE PARTNERSHIP INTERESTS FOR TAX PURPOSES AND NOTES Certificates, as applicable, that are intended to be treated as partnership interests for tax purposes will be issued, and the related trust fund will be created, pursuant to the pooling and servicing agreement or trust agreement. A series of Notes issued by a trust fund that is intended to be treated as a partnership or disregarded entity for tax purposes will be issued pursuant to an indenture between the related trust fund and an indenture trustee named in the prospectus supplement. The trust fund will be established either as a statutory business trust under the law of the State of Delaware or as a common law trust under the law of the State of New York pursuant to a trust agreement between the depositor and an owner trustee specified in the prospectus supplement relating to that series of Notes. The Assets securing payment on the Notes will be serviced in accordance with a sale and servicing agreement or servicing agreement. MATERIAL TERMS OF THE POOLING AND SERVICING AGREEMENTS AND UNDERLYING SERVICING AGREEMENTS GENERAL The following summaries describe the material provisions that may appear in each pooling and servicing agreement, sale and servicing agreement or servicing agreement (each an "Agreement"). The prospectus supplement for a series of Notes or Certificates, as applicable, will describe any provision of the Agreement relating to that series that materially differs from the description of those provisions contained in this prospectus. The summaries do not purport to be complete and are subject to, and are qualified by reference to, all of the provisions of the Agreement for each trust fund and the description of those provisions in the prospectus supplement. The provisions of each Agreement will vary depending on the nature of the Notes or Certificates, as applicable, to be issued under the Agreement and the nature of the related trust fund. As used in this prospectus for any series, the term "Security" refers to all of the Notes or Certificates, as applicable, of that series, whether or not offered by this prospectus and by the prospectus supplement, unless the context otherwise requires. A form of a pooling and servicing agreement has been filed as an exhibit to the Registration Statement of which this prospectus is a part. The depositor will provide a copy of the pooling and servicing agreement (without exhibits) relating to any series of Notes or Certificates, as applicable, without charge upon written request of a securityholder of that series addressed to ACE Securities Corp., 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211, Attention: Elizabeth S. Eldridge. The servicer or master servicer and the trustee for any series of Notes or Certificates, as applicable, will be named in the prospectus supplement. In the event there are multiple servicers for the Assets in a trust fund, a master servicer will perform some of the administration, calculation and reporting functions for that trust fund and will supervise the related servicers pursuant to a pooling and servicing agreement. For a series involving a master servicer, references in this prospectus to the servicer will apply to the master servicer where non-servicing obligations are described. If specified in the prospectus supplement, a manager or administrator may be appointed pursuant to the pooling and servicing agreement for any trust fund to administer that trust fund. ASSIGNMENT OF ASSETS; REPURCHASES At the time of issuance of any series of Notes or Certificates, as applicable, the depositor will assign (or cause to be assigned) to the designated trustee the Assets to be included in the related trust fund, together with all principal and interest to be received on or with respect to those 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 that assignment, deliver the Notes or Certificates, as applicable, to the depositor in exchange for the Assets and the other assets comprising the trust fund for that series. Each Asset will be identified in a schedule appearing as an exhibit to the related Agreement. That schedule will include detailed information to the extent available and relevant (1) in respect of each mortgage loan included in the related trust fund, including the city and state of the related Mortgaged Property and type of that property, the mortgage 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 Loan-to-Value Ratio as of the date indicated and payment and prepayment provisions, if applicable, and (2) in respect of each Contract included in the related trust fund, including the outstanding principal amount and the Contract Rate; and (3) in respect of each Mortgage Security and Agency Security, the original and outstanding principal amount, if any, and the interest rate on the Mortgage Security or Agency Security. For each mortgage loan, except as otherwise specified in the prospectus supplement, the depositor will deliver or cause to be delivered to the trustee (or to the custodian hereinafter referred to) particular loan documents, which will generally include the original mortgage note endorsed, without recourse, in blank or to the order of the trustee, the original Mortgage (or a certified copy of the original Mortgage) with evidence of recording indicated on the original Mortgage and an assignment of the Mortgage to the trustee in recordable form. However, a trust fund may include mortgage loans where the original mortgage note is not delivered to the trustee if the depositor 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 of the mortgage note has been lost or destroyed. For those mortgage loans, the trustee (or its nominee) may not be able to enforce the mortgage note against the related borrower. The Asset Seller or other entity specified in the prospectus supplement will be required to agree to repurchase, or substitute for, each of these mortgage loans that is subsequently in default if the enforcement thereof or of the related Mortgage is materially adversely affected by the absence of the original mortgage note. The related Agreement will generally require the depositor or another party specified in the prospectus supplement to promptly cause each of these assignments of Mortgage to be recorded in the appropriate public office for real property records, except in the State of California or in other states where, in the opinion of counsel acceptable to the trustee, recording is not required to protect the trustee's interest in the related mortgage loan against the claim of any subsequent transferee or any successor to or creditor of the depositor, the servicer, the relevant Asset Seller or any other prior holder of the mortgage loan. The trustee (or a custodian) will review the mortgage loan documents within a specified period of days after receipt of the mortgage loan documents, and the trustee (or a custodian) will hold those documents in trust for the benefit of the securityholders. If any of these documents are found to be missing or defective in any material respect, the trustee (or that custodian) will immediately notify the servicer and the depositor, and the servicer will immediately notify the relevant Asset Seller or other entity specified in the prospectus supplement. If the Asset Seller cannot cure the omission or defect within a specified number of days after receipt of that notice, then the Asset Seller or other entity specified in the prospectus supplement will be obligated, within a specified number of days of receipt of that notice, to either (1) repurchase the related mortgage loan from the trustee at a price equal to the sum of the unpaid principal balance of the mortgage loan, plus unpaid accrued interest at the interest rate for that Asset 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 servicing expenses that are payable to the servicer, or another price as specified in the prospectus supplement (the "Purchase Price") or (2) substitute a new mortgage loan. There can be no assurance that an Asset Seller or other named entity will fulfill this repurchase or substitution obligation, and neither the servicer nor the depositor will be obligated to repurchase or substitute for that mortgage loan if the Asset Seller or other named entity defaults on its obligation. This repurchase or substitution obligation constitutes the sole remedy available to the securityholders or the trustee for omission of, or a material defect in, a constituent document. To the extent specified in the prospectus supplement, in lieu of curing any omission or defect in the Asset or repurchasing or substituting for that Asset, the Asset Seller or other named entity may agree to cover any losses suffered by the trust fund as a result of that breach or defect. Notwithstanding the preceding three paragraphs, the documents for Home Equity Loans, home improvement contracts and unsecured home improvements loans will be delivered to the trustee (or a custodian) only to the extent specified in the prospectus supplement. Generally these documents will be retained by the servicer, which may also be the Asset Seller. In addition, assignments of the related Mortgages to the trustee will be recorded only to the extent specified in the prospectus supplement. For each contract, the servicer, which may also be the asset seller, generally will maintain custody of the original contract and copies of documents and instruments related to each contract and the security interest in the manufactured home securing each contract. To give notice of the right, title and interest of the trustee in the contracts, the depositor will cause UCC-1 financing statements to be executed by the related asset seller identifying the depositor as secured party and by the depositor identifying the trustee as the secured party and, in each case, identifying all contracts as collateral. The contracts will be stamped or otherwise marked to reflect their assignment from the depositor to the trust fund only to the extent specified in the prospectus supplement. Therefore, if, through negligence, fraud or otherwise, a subsequent purchaser were able to take physical possession of the contracts without notice of that assignment, the interest of the trustee in the contracts could be defeated. While the contract documents will not be reviewed by the trustee or the servicer, if the servicer finds that any document is missing or defective in any material respect, the servicer will be required to immediately notify the depositor and the relevant asset seller or other entity specified in the prospectus supplement. If the asset seller or some other entity cannot cure the omission or defect within a specified number of days after receipt of this notice, then the asset seller or that other entity will be obligated, within a specified number of days of receipt of this notice, to repurchase the related contract from the trustee at the purchase price or substitute for that contract. There can be no assurance that an asset seller or any other entity will fulfill this repurchase or substitution obligation, and neither the servicer nor the depositor will be obligated to repurchase or substitute for that contract if the asset seller or any other entity defaults on its obligation. This repurchase or substitution obligation constitutes the sole remedy available to the securityholders or the trustee for omission of, or a material defect in, a constituent document. To the extent specified in the prospectus supplement, in lieu of curing any omission or defect in the asset or repurchasing or substituting for that asset, the asset seller may agree to cover any losses suffered by the trust fund as a result of that breach or defect. Mortgage Securities and Agency Securities will be registered in the name of the trustee or its nominee on the books of the issuer or guarantor or its agent or, in the case of Mortgage Securities and Agency Securities issued only in book-entry form, through the depository with respect to the Mortgage Securities and Agency Securities, in accordance with the procedures established by the issuer or guarantor for registration of those certificates, and distributions on those securities to which the trust fund is entitled will be made directly to the trustee. REPRESENTATIONS AND WARRANTIES; REPURCHASES To the extent provided in the prospectus supplement the depositor will, for each Asset, assign representations and warranties, as of a specified date (the person making those representations and warranties, the "Warranting Party") covering, by way of example, the following types of matters: o the accuracy of the information set forth for that Asset on the schedule of Assets appearing as an exhibit to the related Agreement; o in the case of a mortgage loan, the existence of title insurance insuring the lien priority of the mortgage loan and, in the case of a contract, that the contract creates a valid first security interest in or lien on the related manufactured home; o the authority of the Warranting Party to sell the Asset; o the payment status of the Asset; o in the case of a mortgage loan, 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 o the existence of hazard and extended perils insurance coverage on the Mortgaged Property or manufactured home. Any Warranting Party shall be an Asset Seller or an affiliate of the Asset Seller or any other person acceptable to the depositor and will be identified in the prospectus supplement. Representations and warranties made in respect of an Asset may have been made as of a date before the applicable Cut-off Date. A substantial period of time may have elapsed between that date and the date of initial issuance of the related series of Notes or Certificates, as applicable, evidencing an interest in that Asset. In the event of a breach of any of these representations or warranties, the Warranting Party will be obligated to reimburse the trust fund for losses caused by that breach or either cure that breach or repurchase or replace the affected Asset 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 that representation and warranty only if the relevant event that causes that breach occurs before that date. That party would have no obligations if the relevant event that causes that breach occurs after that date. Each Agreement will provide that the servicer and/or trustee or another entity identified in the prospectus supplement will be required to notify promptly the relevant Warranting Party of any breach of any representation or warranty made by it in respect of an Asset that materially and adversely affects the value of that Asset or the interests in the prospectus supplement of the securityholders. If the Warranting Party cannot cure that breach within a specified period following the date on which that party was notified of that breach, then the Warranting Party will be obligated to repurchase that Asset from the trustee within a specified period from the date on which the Warranting Party was notified of that breach, at the Purchase Price therefor. If so provided in the prospectus supplement for a series, a Warranting Party, rather than repurchase an Asset as to which a breach has occurred, will have the option, within a specified period after initial issuance of that series of Notes or Certificates, as applicable, to cause the removal of that Asset from the trust fund and substitute in its place one or more other Assets, as applicable, in accordance with the standards described in the prospectus supplement. If so provided in the prospectus supplement for a series, a Warranting Party, rather than repurchase or substitute an Asset as to which a breach has occurred, will have the option to reimburse the trust fund or the securityholders for any losses caused by that breach. This reimbursement, repurchase or substitution obligation will constitute the sole remedy available to securityholders or the trustee for a breach of representation by a Warranting Party. Neither the depositor (except to the extent that it is the Warranting Party) nor the servicer will be obligated to purchase or substitute for an Asset if a Warranting Party defaults on its obligation to do so, and no assurance can be given that the Warranting Parties will carry out those obligations with respect to the Assets. A servicer will make representations and warranties regarding its authority to enter into, and its ability to perform its obligations under, the related Agreement. A breach of any representation of the servicer that materially and adversely affects the interests of the securityholders and which continues unremedied for the number of days specified in the Agreement after the discovery of the breach by the servicer or the receipt of written notice of that breach by the servicer from the trustee, the depositor or the holders of Notes or Certificates, as applicable, evidencing not less than 25% of the voting rights or other percentage specified in the related Agreement, will constitute an Event of Default under that Agreement. See "Events of Default" and "Rights Upon Event of Default." COLLECTION ACCOUNT AND RELATED ACCOUNTS GENERAL. The 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 Assets (collectively, the "Collection Account"), which must be an account or accounts that either: o 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 so that the securityholders have a claim with respect to the funds in the Collection Account or a perfected first priority security interest against any collateral securing those funds that is superior to the claims of any other depositors or general creditors of the institution with which the Collection Account is maintained, or o are maintained with a bank or trust company, and in a manner satisfactory to the rating agency or agencies rating any class of Notes or Certificates, as applicable, of that series. Investment of amounts in the Collection Account is limited to United States government securities and other investment grade obligations specified in the Agreement ("Permitted Investments"). A Collection Account may be maintained as an interest bearing or a non-interest bearing account and the funds held in the Collection Account may be invested pending each succeeding Distribution Date in short-term Permitted Investments. Any interest or other income earned on funds in the Collection Account will, unless otherwise specified in the prospectus supplement, be paid to the servicer or its designee as additional servicing compensation. The Collection Account may be maintained with an institution that is an affiliate of the servicer, if applicable, provided that that institution meets the standards imposed by the rating agency or agencies. If permitted by the rating agency or agencies, a Collection 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 the servicer or serviced or master serviced by it on behalf of others. DEPOSITS. A servicer or the trustee will deposit or cause to be deposited in the Collection Account for one or more trust funds on a daily basis, or any other period provided in the related Agreement, the following payments and collections received, or advances made, by the servicer or the trustee or on its behalf after the Cut-off Date (other than payments due on or before the Cut-off Date, and exclusive of any amounts representing a Retained Interest), except as otherwise provided in the Agreement: (1) all payments on account of principal, including principal prepayments, on the Assets; (2) all payments on account of interest on the Assets, including any default interest collected, in each case net of any portion retained by a servicer as its servicing compensation and net of any Retained Interest; (3) Liquidation Proceeds and Insurance Proceeds, together with the net proceeds on a monthly basis with respect to any Assets acquired for the benefit of securityholders; (4) any amounts paid under any instrument or drawn from any fund that constitutes credit support for the related series of Notes or Certificates, as applicable, as described under "Description of Credit Support;" (5) any advances made as described under "Description of the Securities--Advances in Respect of Delinquencies;" (6) any amounts paid under any Cash Flow Agreement, as described under "Description of the Trust Funds--Cash Flow Agreements;" (7) all proceeds of any Asset or, with respect to a mortgage loan, property acquired in respect of the mortgage loan purchased by the depositor, any Asset Seller or any other specified person as described above under "--Assignment of Assets; Repurchases" and "--Representations and Warranties; Repurchases," all proceeds of any defaulted mortgage loan purchased as described below under "--Realization Upon Defaulted Assets," and all proceeds of any Asset purchased as described under "Description of the Securities--Termination;" (8) any amounts paid by a servicer to cover interest shortfalls arising out of the prepayment of Assets in the trust fund as described below under "--Retained Interest; Servicing Compensation and Payment of Expenses;" (9) to the extent that any of these items do not constitute additional servicing compensation to a servicer, any payments on account of modification or assumption fees, late payment charges or Prepayment Premiums on the Assets; (10) all payments required to be deposited in the Collection Account with respect to any deductible clause in any blanket insurance policy described below under "--Hazard Insurance Policies;" (11) any amount required to be deposited by a servicer or the trustee in connection with losses realized on investments for the benefit of the servicer or the trustee, as the case may be, of funds held in the Collection Account; and (12) any other amounts required to be deposited in the Collection Account as provided in the related Agreement and described in the prospectus supplement. WITHDRAWALS. A servicer or the trustee may, from time to time as provided in the related Agreement, make withdrawals from the Collection Account for each trust fund for any of the following purposes, except as otherwise provided in the Agreement: (1) to make distributions to the securityholders on each Distribution Date; (2) to reimburse a servicer for unreimbursed amounts advanced as described under "Description of the Securities--Advances in Respect of Delinquencies," which reimbursement is to be made out of amounts received that were identified and applied by the servicer as late collections of interest (net of related servicing fees and Retained Interest) on and principal of the particular Assets for which the advances were made or out of amounts drawn under any form of credit support with respect to those Assets; (3) to reimburse a servicer for unpaid servicing fees earned and unreimbursed servicing expenses incurred with respect to Assets and properties acquired in respect of the Assets, which reimbursement is to be made out of amounts that represent Liquidation Proceeds and Insurance Proceeds collected on the particular Assets and properties, and net income collected on the particular properties, which fees were earned or expenses were incurred or out of amounts drawn under any form of credit support for those Assets and properties; (4) to reimburse a servicer for any advances described in clause (2) above and any servicing expenses described in clause (3) above which, in the servicer's good faith judgment, will not be recoverable from the amounts described in those clauses, which reimbursement is to be made from amounts collected on other Assets or, if and to the extent so provided by the related Agreement and described in the prospectus supplement, just from that portion of amounts collected on other Assets that is otherwise distributable on one or more classes of Subordinate Notes or Subordinate Certificates, as applicable, if any, remain outstanding, and otherwise any outstanding class of Notes or Certificates, as applicable, of the related series; (5) if and to the extent described in the prospectus supplement, to pay a servicer interest accrued on the advances described in clause (2) above and the servicing expenses described in clause (3) above while those advances and servicing expenses remain outstanding and unreimbursed; (6) to reimburse a servicer, the depositor, or any of their respective directors, officers, employees and agents, as the case may be, for expenses, costs and liabilities incurred by these parties, as and to the extent described below under "--Certain Matters Regarding Servicers, the Master Servicer and the Depositor;" (7) if and to the extent described in the prospectus supplement, to pay (or to transfer to a separate account for purposes of escrowing for the payment of) the trustee's fees; (8) to reimburse the trustee or any of its directors, officers, employees and agents, as the case may be, for expenses, costs and liabilities incurred by these parties, as and to the extent described below under "--Certain Matters Regarding the Trustee;" (9) to pay a servicer, as additional servicing compensation, interest and investment income earned in respect of amounts held in the Collection Account; (10) to pay the person so entitled any amounts deposited in the Collection Account that were identified and applied by the servicer as recoveries of Retained Interest; (11) to pay for costs reasonably incurred in connection with the proper management and maintenance of any Mortgaged Property acquired for the benefit of securityholders by foreclosure or by deed in lieu of foreclosure or otherwise, which payments are to be made out of income received on that property; (12) if one or more elections have been made to treat the trust fund or designated portions of the trust fund as a REMIC, to pay any federal, state or local taxes imposed on the trust fund or its assets or transactions, as and to the extent described under "Material Federal Income Tax Considerations--REMICs--Taxes That May Be Imposed on the REMIC Pool" or in the prospectus supplement, respectively; (13) to pay for the cost of an independent appraiser or other expert in real estate matters retained to determine a fair sale price for a defaulted mortgage loan or a property acquired in respect of a mortgage loan in connection with the liquidation of that mortgage loan or property; (14) to pay for the cost of various opinions of counsel obtained pursuant to the related Agreement for the benefit of securityholders; (15) to pay for the costs of recording the related Agreement if that recordation materially and beneficially affects the interests of securityholders, provided that the payment shall not constitute a waiver with respect to the obligation of the Warranting Party to remedy any breach of representation or warranty under the Agreement; (16) to pay the person so entitled any amounts deposited in the Collection Account in error, including amounts received on any Asset after its removal from the trust fund whether by reason of purchase or substitution as contemplated above under "--Assignment of Assets; Repurchase" and "--Representations and Warranties; Repurchases" or otherwise; (17) to make any other withdrawals permitted by the related Agreement; and (18) to clear and terminate the Collection Account at the termination of the trust fund. Other Collection Accounts. If specified in the prospectus supplement, the Agreement for any series of Notes or Certificates, as applicable, may provide for the establishment and maintenance of a separate collection account into which the servicer will deposit on a daily basis, or any other period as provided in the related Agreement, the amounts described under "--Deposits" above for one or more series of Notes or Certificates, as applicable. Any amounts on deposit in any of these collection accounts will be withdrawn from these collection accounts and deposited into the appropriate Collection Account by a time specified in the prospectus supplement. To the extent specified in the prospectus supplement, any amounts that could be withdrawn from the Collection Account as described under "--Withdrawals" above may also be withdrawn from any of these collection accounts. The prospectus supplement will set forth any restrictions for any of these collection accounts, including investment restrictions and any restrictions for financial institutions with which any of these collection accounts may be maintained. The servicer will establish and maintain with the indenture trustee an account, in the name of the indenture trustee on behalf of the holders of Notes, into which amounts released from the Collection Account for distribution to the holders of Notes will be deposited and from which all distributions to the holders of Notes will be made. Collection and Other Servicing Procedures. The servicer is required to make reasonable efforts to collect all scheduled payments under the Assets and will follow or cause to be followed those collection procedures that it would follow with respect to assets that are comparable to the Assets and held for its own account, provided that those procedures are consistent with (1) the terms of the related Agreement and any related hazard insurance policy or instrument of credit support, if any, included in the related trust fund described in this prospectus or under "Description of Credit Support," (2) applicable law and (3) the general servicing standard specified in the prospectus supplement or, if no standard is so specified, its normal servicing practices (in either case, the "Servicing Standard"). In connection, the servicer will be permitted in its discretion to waive any late payment charge or penalty interest in respect of a late payment on an Asset. Each servicer will also be required to perform other customary functions of a servicer of comparable assets, including maintaining hazard insurance policies as described in this prospectus and in any prospectus supplement, and filing and settling claims under these policies; maintaining, to the extent required by the Agreement, escrow or impoundment accounts of borrowers for payment of taxes, insurance and other items required to be paid by any borrower pursuant to the terms of the Assets; processing assumptions or substitutions in those cases where the servicer has determined not to enforce any applicable due-on-sale clause; attempting to cure delinquencies; supervising foreclosures or repossessions; inspecting and managing mortgaged properties or manufactured homes under some circumstances; and maintaining accounting records relating to the Assets. The servicer or any other entity specified in the prospectus supplement will be responsible for filing and settling claims in respect of particular Assets under any applicable instrument of credit support. See "Description of Credit Support." The servicer may agree to modify, waive or amend any term of any Asset in a manner consistent with the Servicing Standard so long as the modification, waiver or amendment will not (1) affect the amount or timing of any scheduled payments of principal or interest on the Asset or (2) in its judgment, materially impair the security for the Asset or reduce the likelihood of timely payment of amounts due on the Asset. The servicer also may agree to any modification, waiver or amendment that would so affect or impair the payments on, or the security for, an Asset if (1) in its judgment, a material default on the Asset has occurred or a payment default is reasonably foreseeable and (2) in its judgment, that modification, waiver or amendment is reasonably likely to produce a greater recovery with respect to the Asset on a present value basis than would liquidation. In the event of any modification, waiver or amendment of any Asset, the servicer will furnish a copy of that modification, waiver or amendment to the trustee (or its custodian). In the case of multifamily loans, a borrower's failure to make required mortgage loan payments may mean that operating income is insufficient to service the mortgage loan debt, or may reflect the diversion of that income from the servicing of the mortgage loan debt. In addition, a borrower under a multifamily loan that is unable to make mortgage loan payments may also be unable to make timely payment of all required taxes and otherwise to maintain and insure the related Mortgaged Property. In general, the servicer will be required to monitor any multifamily loan that is in default, evaluate whether the causes of the default can be corrected over a reasonable period without significant impairment of the value of related Mortgaged Property, initiate corrective action in cooperation with the borrower if cure is likely, inspect the related Multifamily Property and take those other actions as are consistent with the related Agreement. A significant period of time may elapse before the servicer is able to assess the success of servicer can make the initial determination of appropriate action, evaluate the success of corrective action, develop additional initiatives, institute foreclosure proceedings and actually foreclose may vary considerably depending on the particular multifamily loan, the Multifamily Property, the borrower, the presence of an acceptable party to assume the multifamily loan and the laws of the jurisdiction in which the Multifamily Property is located. REALIZATION UPON DEFAULTED ASSETS Generally, the servicer is required to monitor any Asset that is in default, initiate corrective action in cooperation with the borrower if cure is likely, inspect the Asset and take any other actions as are consistent with the Servicing Standard. A significant period of time may elapse before the servicer is able to assess the success of that corrective action or the need for additional initiatives. Any Agreement relating to a trust fund that includes mortgage loans or contracts may grant to the servicer and/or the holder or holders of some classes of Notes or Certificates, as applicable, a right of first refusal to purchase from the trust fund at a predetermined purchase price any mortgage loan or contract as to which a specified number of scheduled payments under the Agreement are delinquent. Any right of first refusal granted to the holder of an Offered Security will be described in the prospectus supplement. The prospectus supplement will also describe any similar right granted to any person if the predetermined purchase price is less than the Purchase Price described above under "--Representations and Warranties; Repurchases." If specified in the prospectus supplement, the servicer may offer to sell any defaulted mortgage loan or contract described in the preceding paragraph and not otherwise purchased by any person having a right of first refusal with respect to that defaulted mortgage loan or contract, if and when the servicer determines, consistent with the Servicing Standard, so that a sale would produce a greater recovery on a present value basis than would liquidation through foreclosure, repossession or similar proceedings. The related Agreement will provide that any offering be made in a commercially reasonable manner for a specified period and that the servicer accept the highest cash bid received from any person (including itself, an affiliate of the servicer or any securityholder) that constitutes a fair price for that defaulted mortgage loan or contract. If there is no bid that is determined to be fair, the servicer will proceed with respect to that defaulted mortgage loan or contract as described below. Any bid in an amount at least equal to the Purchase Price described above under "--Representations and Warranties; Repurchases" will in all cases be deemed fair. The 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 and may at any time repossess and realize upon any manufactured home, if that action is consistent with the Servicing Standard and a default on that mortgage loan or contract has occurred or, in the servicer's judgment, is imminent. If title to any Mortgaged Property is acquired by a trust fund as to which a REMIC election has been made, the servicer, on behalf of the trust fund, will be required to sell the Mortgaged Property within three years from the close of the calendar year of acquisition, unless (1) the Internal Revenue Service grants an extension of time to sell that property or (2) the trustee receives an opinion of independent counsel to the effect that the holding of the property by the trust fund longer than three years after the close of the calendar year of its acquisition 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 Notes or Certificates, as applicable, are outstanding. Subject to the foregoing, the servicer will be required to (A) solicit bids for any Mortgaged Property so acquired in that manner as will be reasonably likely to realize a fair price for that property and (B) accept the first (and, if multiple bids are contemporaneously received, the highest) cash bid received from any person that constitutes a fair price. The limitations imposed by the related Agreement and the REMIC provisions of the Code (if a REMIC election has been made for the related trust fund) on the ownership and management 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 Mortgage Loans--Foreclosure." If recovery on a defaulted Asset under any related instrument of credit support is not available, the servicer nevertheless will be obligated to follow or cause to be followed those normal practices and procedures as it deems necessary or advisable to realize upon the defaulted Asset. If the proceeds of any liquidation of the property securing the defaulted Asset are less than the outstanding principal balance of the defaulted Asset plus interest accrued on the defaulted Asset at the applicable interest rate, plus the total amount of expenses incurred by the servicer in connection with those proceedings and which are reimbursable under the Agreement, the trust fund will realize a loss in the amount of that difference. The servicer will be entitled to withdraw or cause to be withdrawn from the Collection Account out of the Liquidation Proceeds recovered on any defaulted Asset, before the distribution of those Liquidation Proceeds to securityholders, amounts representing its normal servicing compensation on the Security, unreimbursed servicing expenses incurred with respect to the Asset and any unreimbursed advances of delinquent payments made with respect to the Asset. If any property securing a defaulted Asset is damaged the servicer is not required to expend its own funds to restore the damaged property unless it determines (1) that restoration will increase the proceeds to securityholders on liquidation of the Asset after reimbursement of the servicer for its expenses and (2) that its expenses will be recoverable by it from related Insurance Proceeds or Liquidation Proceeds. The pooling and servicing agreement will require the trustee, if it has not received a distribution for any Mortgage Security or Agency Security by the fifth business day after the date on which that distribution was due and payable pursuant to the terms of that Agency Security, to request the issuer or guarantor, if any, of that Mortgage Security or Agency Security to make that payment as promptly as possible and legally permitted to take legal action against that issuer or guarantor as the trustee deems appropriate under the circumstances, including the prosecution of any claims in connection therewith. The reasonable legal fees and expenses incurred by the trustee in connection with the prosecution of this legal action will be reimbursable to the trustee out of the proceeds of that action and will be retained by the trustee before the deposit of any remaining proceeds in the Collection Account pending distribution of the Collection Account to securityholders of the related series. If the proceeds of any legal action are insufficient to reimburse the trustee for its legal fees and expenses, the trustee will be entitled to withdraw from the Collection Account an amount equal to its expenses, and the trust fund may realize a loss in that amount. As servicer of the Assets, a servicer, on behalf of itself, the trustee and the securityholders, will present claims to the borrower under each instrument of credit support, and will take those reasonable steps as are necessary to receive payment or to permit recovery under these instruments for defaulted Assets. If a servicer or its designee recovers payments under any instrument of credit support for any defaulted Assets, the servicer will be entitled to withdraw or cause to be withdrawn from the Collection Account out of those proceeds, before distribution of the Collection Account to securityholders, amounts representing its normal servicing compensation on that Asset, unreimbursed servicing expenses incurred for the Asset and any unreimbursed advances of delinquent payments made with respect to the Asset. See "Hazard Insurance Policies" and "Description of Credit Support." HAZARD INSURANCE POLICIES Mortgage Loans. Generally, each Agreement for a trust fund composed of mortgage loans will require the servicer to cause the borrower on each mortgage loan to maintain a hazard insurance policy (including flood insurance coverage, if obtainable, to the extent the property is located in a federally designated flood area, in an amount as is required under applicable guidelines) providing for the level of coverage that is required under the related Mortgage or, if any Mortgage permits its holder to dictate to the borrower the insurance coverage to be maintained on the related Mortgaged Property, then the level of coverage that is consistent with the Servicing Standard. That coverage will be in general in an amount equal to the lesser of the principal balance owing on that mortgage loan (but not less than the amount necessary to avoid the application of any co-insurance clause contained in the hazard insurance policy) and the amount necessary to fully compensate for any damage or loss to the improvements on the Mortgaged Property on a replacement cost basis or any other amount specified in the prospectus supplement. The ability of the 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 borrowers. All amounts collected by the servicer under any of these policies (except for amounts to be applied to the restoration or repair of the Mortgaged Property or released to the borrower in accordance with the servicer's normal servicing procedures, subject to the terms and conditions of the related Mortgage and mortgage note) will be deposited in the Collection Account in accordance with the related Agreement. The Agreement may provide that the servicer may satisfy its obligation to cause each borrower to maintain a hazard insurance policy by the servicer's maintaining a blanket policy insuring against hazard losses on the mortgage loans. If the blanket policy contains a deductible clause, the servicer will be required to deposit in the Collection Account from its own funds all sums that would have been deposited in the Collection Account but for that clause. 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 mortgage 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 of the policies are dictated by respective state laws, and most of these 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 other kinds of uninsured risks. The hazard insurance policies covering the Mortgaged Properties securing the mortgage loans will typically contain a coinsurance 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 to recover the full amount of any partial loss. If the insured's coverage falls below this specified percentage, the coinsurance clause generally provides that the insurer's liability in the event of partial loss does not exceed the lesser of (1) the replacement cost of the improvements less physical depreciation and (2) that proportion of the loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of those improvements. Each Agreement for a trust fund composed of mortgage loans will require the servicer to cause the borrower on each mortgage loan to maintain all other insurance coverage for the related Mortgaged Property as is consistent with the terms of the related Mortgage and the Servicing Standard, which insurance may typically include flood insurance (if the related Mortgaged Property was located at the time of origination in a federally designated flood area). Any cost incurred by the servicer in maintaining any 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 that cost will not be taken into account for purposes of calculating the distribution to be made to securityholders. Those costs may be recovered by the servicer from the Collection Account, with interest, as provided by the Agreement. Under the terms of the mortgage loans, borrowers will generally be required to present claims to insurers under hazard insurance policies maintained on the related Mortgaged Properties. The servicer, on behalf of the trustee and securityholders, is obligated to present or cause to be presented claims under any blanket insurance policy insuring against hazard losses on Mortgaged Properties securing the mortgage loans. However, the ability of the servicer to present or cause to be presented those claims is dependent upon the extent to which information in this regard is furnished to the servicer by borrowers. Contracts. Generally, the terms of the agreement for a trust fund composed of contracts will require the servicer to maintain for each contract one or more hazard insurance policies that provide, at a minimum, the same coverage as a standard form fire and extended coverage insurance policy that is customary for manufactured housing, issued by a company authorized to issue those policies in the state in which the manufactured home is located, and in an amount that is not less than the maximum insurable value of that manufactured home or the principal balance due from the borrower on the related contract, whichever is less; provided, however, that the amount of coverage provided by each hazard insurance policy must be sufficient to avoid the application of any co-insurance clause contained therein. When a manufactured home's location was, at the time of origination of the related contract, within a federally designated special flood hazard area, the servicer must cause flood insurance to be maintained, which coverage must be at least equal to the minimum amount specified in the preceding sentence or any lesser amount as may be available under the federal flood insurance program. Each hazard insurance policy caused to be maintained by the servicer must contain a standard loss payee clause in favor of the servicer and its successors and assigns. If any borrower is in default in the payment of premiums on its hazard insurance policy or policies, the servicer must pay those premiums out of its own funds, and may add separately the premiums to the borrower's obligation as provided by the contract, but may not add the premiums to the remaining principal balance of the contract. The servicer may maintain, in lieu of causing individual hazard insurance policies to be maintained for each manufactured home, and must maintain, to the extent that the related contract does not require the borrower to maintain a hazard insurance policy for the related manufactured home, one or more blanket insurance policies covering losses on the borrower's interest in the contracts resulting from the absence or insufficiency of individual hazard insurance policies. The servicer must pay the premium for that blanket policy on the basis described therein and must pay any deductible amount for claims under that policy relating to the contracts. FHA INSURANCE AND VA GUARANTEES FHA loans will be insured by the FHA as authorized under the Housing Act. Some FHA loans will be insured under various FHA programs including the standard FHA 203(b) program to finance the acquisition of one- to four-family housing units, the FHA 245 graduated payment mortgage program and the FHA Title I Program. These programs generally limit the principal amount and interest rates of the mortgage loans insured. The prospectus supplement for Notes or Certificates, as applicable, of each series evidencing interests in a trust fund including FHA loans will set forth additional information regarding the regulations governing the applicable FHA insurance programs. Except as otherwise specified in the prospectus supplement, the following describes FHA insurance programs and regulations as generally in effect for FHA loans. The insurance premiums for FHA loans are collected by lenders approved by the Department of Housing and Urban Development ("HUD") or by the servicer and are paid to the FHA. The regulations governing FHA single-family mortgage insurance programs provide that insurance benefits are payable either upon foreclosure (or other acquisition of possession) and conveyance of the mortgaged premises to the United States of America or upon assignment of the defaulted loan to the United States of America. For a defaulted FHA loan, the servicer is limited in its ability to initiate foreclosure proceedings. When it is determined, either by the servicer or HUD, that default was caused by circumstances beyond the borrower's control, the servicer is expected to make an effort to avoid foreclosure by entering, if feasible, into one of a number of available forms of forbearance plans with the borrower. Those plans may involve the reduction or suspension of regular mortgage payments for a specified period, with those payments to be made on or before the maturity date of the mortgage, or the recasting of payments due under the mortgage up to or, other than FHA loans originated under the FHA Title I Program, beyond the maturity date. In addition, when a default caused by those circumstances is accompanied by other criteria, HUD may provide relief by making payments to the servicer in partial or full satisfaction of amounts due under the FHA loan (which payments are to be repaid by the borrower to HUD) or by accepting assignment of the loan from the servicer. With some exceptions, at least three full monthly installments must be due and unpaid under the FHA loan, and HUD must have rejected any request for relief from the borrower before the servicer may initiate foreclosure proceedings. HUD has the option, in most cases, to pay insurance claims in cash or in debentures issued by HUD. Currently, claims are being paid in cash, and claims have not been paid in debentures since 1965. HUD debentures issued in satisfaction of FHA insurance claims bear interest at the applicable HUD debentures interest rate. To the extent specified in the prospectus supplement, the servicer of each single family FHA loan will be obligated to purchase any debenture issued in satisfaction of that FHA loan upon default for an amount equal to the principal amount of that debenture. Other than in relation to the FHA Title I Program, the amount of insurance benefits generally paid by the FHA is equal to the entire unpaid principal amount of the defaulted FHA loan adjusted to reimburse the servicer for some of its costs and expenses and to deduct amounts received or retained by the servicer after default. When entitlement to insurance benefits results from foreclosure (or other acquisition of possession) and conveyance to HUD, the servicer is compensated for no more than two-thirds of its foreclosure costs, and is compensated for interest accrued and unpaid before that date but in general only to the extent it was allowed pursuant to a forbearance plan approved by HUD. When entitlement to insurance benefits results from assignment of the FHA loan to HUD, the insurance payment includes full compensation for interest accrued and unpaid to the assignment date. The insurance payment itself, upon foreclosure of an FHA loan, bears interest from a date 30 days after the borrower's first uncorrected failure to perform any obligation to make any payment due under the mortgage and, upon assignment, from the date of assignment to the date of payment of the claim, in each case at the same interest rate as the applicable HUD debenture interest rate as described above. VA loans will be partially guaranteed by the VA under the Serviceman's Readjustment Act (a "VA Guaranty Policy"). For a defaulted VA loan, the servicer is, absent exceptional circumstances, authorized to announce its intention to foreclose only when the default has continued for three months. Generally, a claim for the guarantee is submitted after liquidation of the Mortgaged Property. The amount payable under the guarantee will be the percentage of the VA loan originally guaranteed applied to indebtedness outstanding as of the applicable date of computation specified in the VA regulations. Payments under the guarantee will be equal to the unpaid principal amount of that VA loan, interest accrued on the unpaid balance of that VA loan to the appropriate date of computation and limited expenses of the mortgagee, but in each case only to the extent that those amounts have not been recovered through liquidation of the Mortgaged Property. The amount payable under the guarantee may in no event exceed the amount of the original guarantee. FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE Each Agreement will require that the servicer obtain and maintain in effect a fidelity bond or similar form of insurance coverage (which may provide blanket coverage) or any combination of these insuring against loss occasioned by fraud, theft or other intentional misconduct of the officers, employees and agents of the servicer. The related Agreement will allow the servicer to self-insure against loss occasioned by the errors and omissions of the officers, employees and agents of the servicer so long as the criteria set forth in the Agreement are met. DUE-ON-SALE CLAUSES The mortgage 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 mortgage loan upon any sale, transfer or conveyance of the related Mortgaged Property. The servicer will generally enforce any due-on-sale clause to the extent it has knowledge of the conveyance or proposed conveyance of the underlying Mortgaged Property and it is entitled to do so under applicable law; provided, however, that the servicer will not take any action in relation to the enforcement of any due-on-sale clause that would: o adversely affect or jeopardize coverage under any applicable insurance policy or o materially increase the risk of default or delinquency on, or materially impair the security for, that mortgage loan. Any fee collected by or on behalf of the servicer for entering into an assumption agreement will be retained by or on behalf of the servicer as additional servicing compensation. See "Certain Legal Aspects of Mortgage Loans--Due-on-Sale Clauses." The contracts may also contain clauses requiring the consent of the mortgagee to any sale or other transfer of the related mortgaged property, or due-on-sale clauses. The servicer will generally permit that transfer so long as the transferee satisfies the servicer's then applicable underwriting standards. The purpose of those transfers is often to avoid a default by the transferring borrower. RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES The prospectus supplement for a series of Notes or Certificates, as applicable, will specify whether there will be any Retained Interest in the Assets, and, if so, the initial owner of this Retained Interest. 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 an Asset represents a specified portion of the interest payable on the Asset. The Retained Interest will be deducted from borrower payments as received and will not be part of the related trust fund. The servicer's primary servicing compensation for a series of Notes or Certificates, as applicable, will come from the periodic payment to it of a portion of the interest payment on each Asset or any other amount specified in the prospectus supplement. Since any Retained Interest and a servicer's primary compensation are percentages of the principal balance of each Asset, those amounts will decrease in accordance with the amortization of the Assets. The prospectus supplement for a series of Notes or Certificates, as applicable, evidencing interests in a trust fund that includes mortgage loans or contracts may provide that, as additional compensation, the servicer may retain all or a portion of assumption fees, modification fees, late payment charges or Prepayment Premiums collected from borrowers and any interest or other income that may be earned on funds held in the Collection Account or any account established by a servicer pursuant to the Agreement. The servicer may, to the extent provided in the prospectus supplement, pay from its servicing compensation expenses incurred in connection with its servicing and managing of the Assets, including payment of the fees and disbursements of the trustee and independent accountants, payment of expenses incurred in connection with distributions and reports to securityholders, and payment of any other expenses described in the prospectus supplement. Some other expenses, including expenses relating to defaults and liquidations on the Assets and, to the extent so provided in the prospectus supplement, interest on these expenses at the rate specified in the prospectus supplement may be borne by the trust fund. If and to the extent provided in the prospectus supplement, the servicer may be required to apply a portion of the servicing compensation otherwise payable to it in respect of any Due Period to interest shortfalls resulting from the voluntary prepayment of any Assets in the related trust fund during that period before their due dates. EVIDENCE AS TO COMPLIANCE Each Agreement relating to Assets that include mortgage loans or contracts, unless otherwise provided in the prospectus supplement, will provide that on or before a specified date in each year, beginning with the first of these dates at least six months after the related Cut-off Date, a firm of independent public accountants will furnish a statement to the trustee to the effect that, on the basis of the examination by that firm conducted substantially in compliance with either the Uniform Single Attestation Program for Mortgage Bankers, the Audit Program for Mortgages serviced for Freddie Mac or any other program used by the servicer, the servicing by or on behalf of the servicer of mortgage loans under agreements substantially similar to each other (including the related Agreement) was conducted in compliance with the terms of those agreements or that program except for any significant exceptions or errors in records that, in the opinion of the firm, either the Audit Program for Mortgages serviced for Freddie Mac, or paragraph 4 of the Uniform Single Attestation Program for Mortgage Bankers, or any other program, requires it to report. Each Agreement will also provide for delivery to the trustee, on or before a specified date in each year, of an officer's certificate of the servicer to the effect that the servicer has fulfilled its obligations under the Agreement throughout the preceding calendar year or other specified twelve-month period. CERTAIN MATTERS REGARDING SERVICERS, THE MASTER SERVICER AND THE DEPOSITOR The servicer or master servicer under each Agreement will be named in the prospectus supplement. The entities serving as servicer or master servicer may be affiliates of the depositor and may have other normal business relationships with the depositor or the depositor's affiliates. If applicable, reference in this prospectus to the servicer will also be deemed to be to the master servicer. Each Agreement will provide, in general, that: o The servicer may resign from its obligations and duties under the Agreement only upon a determination that its duties under the Agreement are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities carried on by it, the other activities of the servicer so causing that conflict being of a type and nature carried on by the servicer at the date of the Agreement. No resignation will become effective until the trustee or a successor servicer has assumed the servicer's obligations and duties under the Agreement. o Neither any servicer, the depositor nor any director, officer, employee, or agent of a servicer or the depositor will be under any liability to the related trust fund or securityholders for any action taken, or for refraining from the taking of any action, in good faith pursuant to the Agreement; provided, however, that neither a servicer, the depositor nor any other person will be protected against any breach of a representation, warranty or covenant made in the related Agreement, or against any liability specifically imposed by the Agreement, or against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of obligations or duties under the Agreement or by reason of reckless disregard of obligations and duties under the Agreement. o Any servicer, the depositor and any director, officer, employee or agent of a servicer or the depositor will be entitled to indemnification by the related trust fund and will be held harmless against any loss, liability or expense incurred in connection with any legal action relating to the Agreement or the Notes or Certificates, as applicable; provided, however, that that indemnification will not extend to any loss, liability or expense (1) specifically imposed by that Agreement or otherwise incidental to the performance of obligations and duties under the Agreement, including, in the case of a servicer, the prosecution of an enforcement action in respect of any specific mortgage loan or mortgage loans or contract or contracts (except as any loss, liability or expense will be otherwise reimbursable pursuant to that Agreement); (2) incurred in connection with any breach of a representation, warranty or covenant made in that Agreement; (3) incurred by reason of misfeasance, bad faith or gross negligence in the performance of obligations or duties under the Agreement, or by reason of reckless disregard of those obligations or duties; (4) incurred in connection with any violation of any state or federal securities law; or (5) imposed by any taxing authority if that loss, liability or expense is not specifically reimbursable pursuant to the terms of the related Agreement. o Neither any servicer nor the depositor will be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its respective responsibilities under the Agreement and which in its opinion may involve it in any expense or liability. Any servicer or the depositor may, however, in its discretion undertake any action which it may deem necessary or desirable with respect to the Agreement and the rights and duties of the parties to the Agreement and the interests of the securityholders under the Agreement. In that event, the legal expenses and costs of that action and any liability resulting will be expenses, costs and liabilities of the securityholders, and the servicer or the depositor, as the case may be, will be entitled to be reimbursed therefor and to charge the Collection Account. Any person into which the servicer or the depositor may be merged or consolidated, or any person resulting from any merger or consolidation to which the servicer or the depositor is a party, or any person succeeding to the business of the servicer or the depositor, may be the successor of the servicer or the depositor, as the case may be, under the terms of the related Agreement. SPECIAL SERVICERS If and to the extent specified in the prospectus supplement, a special servicer (a "Special servicer") may be a party to the related Agreement or may be appointed by the servicer or another specified party to perform specified duties in respect of servicing the related mortgage loans that would otherwise be performed by the servicer (for example, the workout and/or foreclosure of defaulted mortgage loans). The rights and obligations of any Special servicer will be specified in the prospectus supplement, and the servicer will be liable for the performance of a Special servicer only if, and to the extent, set forth in the prospectus supplement. EVENTS OF DEFAULT UNDER THE AGREEMENT Events of default under the related Agreement will generally include: o any failure by the servicer to distribute or cause to be distributed to securityholders, or to remit to the trustee for distribution to securityholders, any required payment that continues after a grace period, if any; o any failure by the servicer duly to observe or perform in any material respect any of its other covenants or obligations under the Agreement that continues unremedied for 30 days after written notice of that failure has been given to the servicer by the trustee or the depositor, or to the servicer, the depositor and the trustee by securityholders evidencing not less than 25% of the voting rights for that series; o any breach of a representation or warranty made by the servicer under the Agreement that materially and adversely affects the interests of securityholders and which continues unremedied for 30 days after written notice of that breach has been given to the servicer by the trustee or the depositor, or to the servicer, the depositor and the trustee by the holders of Notes or Certificates, as applicable, evidencing not less than 25% of the voting rights for that series; and o some events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings and actions by or on behalf of the servicer indicating its insolvency or inability to pay its obligations. Material variations to the foregoing events of default (other than to shorten cure periods or eliminate notice requirements) will be specified in the prospectus supplement. The trustee will, not later than the later of 60 days or any other period specified in the prospectus supplement after the occurrence of any event that constitutes or, with notice or lapse of time or both, would constitute an event of default and five days after specific officers of the trustee become aware of the occurrence of that event, transmit by mail to the depositor and all securityholders of the applicable series notice of that occurrence, unless that default has been cured or waived. RIGHTS UPON EVENT OF DEFAULT UNDER THE AGREEMENTS 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 Notes or Certificates, as applicable, evidencing not less than 51% (or any other percentage specified in the Agreement) of the voting rights for that series, the trustee will terminate all of the rights and obligations of the servicer under the Agreement and in and to the mortgage loans (other than as a securityholder or as the owner of any Retained Interest), whereupon the trustee will succeed to all of the responsibilities, duties and liabilities of the servicer under the Agreement (except that if the trustee is prohibited by law from obligating itself to make advances regarding delinquent Assets, or if the prospectus supplement so specifies, then the trustee will not be obligated to make those advances) and will be entitled to similar compensation arrangements. If the trustee is unwilling or unable so to act, it may or, at the written request of the holders of Notes or Certificates, as applicable, entitled to at least 51% (or any other percentage specified in the Agreement) of the voting rights for that series, it must 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 that appointment of at least $15,000,000 (or any other amount specified in the Agreement) to act as successor to the servicer under the Agreement. Pending that appointment, the trustee is obligated to act in that capacity. The trustee and any successor servicer may agree upon the servicing compensation to be paid, which in no event may be greater than the compensation payable to the servicer under the Agreement. The holders of Notes or Certificates, as applicable, representing at least 66 2/3% (or any other percentage specified in the Agreement) of the voting rights allocated to the respective classes of Notes or Certificates, as applicable, affected by any event of default will be entitled to waive that event of default; provided, however, that an Event of Default involving a failure to distribute a required payment to securityholders described in clause (1) under "Events of Default under the Agreements" may be waived only by all of the securityholders. Upon any waiver of an event of default, that event of default will cease to exist and will be deemed to have been remedied for every purpose under the Agreement. No securityholders will have the right under any Agreement to institute any proceeding with respect to the Agreement unless that holder previously has given to the trustee written notice of default and unless the holders of Notes or Certificates, as applicable, evidencing not less than 25% (or any other percentage specified in the Agreement) of the voting rights have made written request upon the trustee to institute that proceeding in its own name as trustee under the Agreement and have offered to the trustee reasonable indemnity, and the trustee for 60 days (or any other number of days specified in the Agreement) has neglected or refused to institute any 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 under the Agreement or to institute, conduct or defend any litigation under the Agreement or in relation to the Agreement at the request, order or direction of any of the securityholders covered by that Agreement, unless those securityholders have offered to the trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred. The manner of determining the voting rights of a Security or class or classes of Notes or Certificates, as applicable, will be specified in the Agreement. AMENDMENT In general, each Agreement may be amended by the parties to it, without the consent of any securityholders covered by the Agreement, to (1) cure any ambiguity or mistake; (2) correct, modify or supplement any provision in the Agreement that may be inconsistent with any other provision in the Agreement or with the prospectus supplement; (3) make any other provisions with respect to matters or questions arising under the Agreement that are not materially inconsistent with the provisions of the Agreement; or (4) comply with any requirements imposed by the Code; provided that, in the case of clause (3), that amendment will not adversely affect in any material respect the interests of any securityholders covered by the Agreement as evidenced either by an opinion of counsel to that effect or the delivery to the trustee of written notification from each rating agency that provides, at the request of the depositor, a rating for the Offered Notes or Offered Certificates, as applicable, of the related series to the effect that that amendment or supplement will not cause that rating agency to lower or withdraw the then current rating assigned to those Notes or Certificates, as applicable. In general, each Agreement may also be amended by the depositor, the servicer, if any, and the trustee, with the consent of the securityholders affected by the amendment evidencing not less than 51% (or any other percentage specified in the Agreement) of the voting rights, for any purpose; provided, however, no amendment may (1) reduce in any manner the amount of, or delay the timing of, payments received or advanced on Assets that are required to be distributed on any Security without the consent of the securityholder or (2) reduce the consent percentages described in this paragraph without the consent of all the securityholders covered by the Agreement then outstanding. However, for any series of Notes or Certificates, as applicable, as to which a REMIC election is to be made, the trustee will not consent to any amendment of the Agreement unless it has first have received an opinion of counsel to the effect that that amendment will not result in the imposition of a tax on the related trust fund or, if applicable, cause the related trust fund to fail to qualify as a REMIC, at any time that the related Notes or Certificates, as applicable, are outstanding. THE TRUSTEE The trustee under each Agreement will be named in the 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, with any servicer and its affiliates and with any master servicer and its affiliates. To the extent consistent with its fiduciary obligations as trustee, the trustee may delegate its duties to one or more agents as provided in the Agreement. DUTIES OF THE TRUSTEE The trustee will make no representations as to the validity or sufficiency of any Agreement, the Notes or Certificates, as applicable, or any 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 the master servicer or its designee in respect of the Notes or Certificates, as applicable, or the Assets, or deposited into or withdrawn from the Collection Account or any other account by or on behalf of the 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 Agreement, as applicable. However, upon receipt of the various certificates, reports or other instruments required to be furnished to it, the trustee is required to examine those documents and to determine whether they conform to the requirements of the Agreement. CERTAIN MATTERS REGARDING THE TRUSTEE The trustee and any director, officer, employee or agent of the trustee will be entitled to indemnification out of the Collection 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 (1) enforcing its rights and remedies and protecting the interests of the securityholders during the continuance of an Event of Default, (2) defending or prosecuting any legal action in respect of the related Agreement or series of Notes or Certificates, as applicable, (3) being the mortgagee of record for the mortgage loans in a trust fund and the owner of record for any Mortgaged Property acquired in respect thereof for the benefit of securityholders, or (4) acting or refraining from acting in good faith at the direction of the holders of the related series of Notes or Certificates, as applicable, entitled to not less than 25% (or any other percentage as is specified in the related Agreement for any particular matter) of the voting rights for that series; provided, however, that this 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 under the Agreement, or by reason of its reckless disregard of those obligations or duties, or as may arise from a breach of any representation, warranty or covenant of the trustee made in the Agreement. 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 of its resignation to the depositor, the servicer, if any, each rating agency, and all securityholders. Upon receiving that notice of resignation, the depositor is required promptly to appoint a successor trustee acceptable to the servicer, if any. If no successor trustee has been so appointed and has accepted appointment within 30 days after the giving of that 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 ceases to be eligible to continue as a trustee under the related Agreement, or if at any time the trustee becomes incapable of acting, or is adjudged bankrupt or insolvent, or a receiver of the trustee or of its property is appointed, or any public officer takes charge or control of the trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, or if a change in the financial condition of the trustee has adversely affected or will adversely affect the rating on any class of the Notes or Certificates, as applicable, then the depositor and/or a party specified in the related Agreement may remove the trustee and appoint a successor trustee acceptable to the master servicer, if any, according to the terms of the related Agreement. Securityholders of any series entitled to at least 51% (or any other percentage specified in the prospectus supplement) of the voting rights for that 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 will not become effective until acceptance of appointment by the successor trustee. MATERIAL TERMS OF THE INDENTURE GENERAL The following summary describes the material provisions that may appear in each indenture. The prospectus supplement for a series of Notes will describe any provision of the indenture relating to that series that materially differs from the description of that provision contained in this prospectus. The summaries do not purport to be complete and are subject to, and are qualified by reference to, all of the provisions of the indenture for a series of Notes. A form of an indenture has been filed as an exhibit to the Registration Statement of which this prospectus is a part. The depositor will provide a copy of the indenture (without exhibits) relating to any series of Notes without charge upon written request of a securityholder of that series addressed to ACE Securities Corp., 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211, Attention: Elizabeth S. Eldridge. EVENTS OF DEFAULT Events of default under the indenture for each series of Notes will generally include: o a default for thirty days (or any other number of days specified in the prospectus supplement) or more in the payment of any principal of or interest on a Note of that series, to the extent specified in the prospectus supplement; o failure to perform any other covenant of the depositor or the trust fund in the indenture that continues for a period of sixty days (or any other number of days specified in the prospectus supplement or the indenture) after notice of the failure is given in accordance with the procedures described in the prospectus supplement; o any representation or warranty made by the depositor or the trust fund in the indenture or in any certificate or other writing delivered pursuant to the indenture or in connection with the indenture with respect to or affecting that series having been incorrect in a material respect as of the time made, and that breach is not cured within sixty days (or any other number of days specified in the prospectus supplement) after notice of the breach is given in accordance with the procedures described in the prospectus supplement; o specified events of bankruptcy, insolvency, receivership or liquidation of the trust fund; or o any other event of default provided with respect to Notes of that series. If an event of default with respect to the Notes of any series at the time outstanding occurs and is continuing, subject to and in accordance with the terms of the indenture, either the indenture trustee or the holders of a majority of the then total outstanding amount of the Notes of that series may declare the principal amount (or, if the Notes of that series are Accrual Securities, that portion of the principal amount as may be specified in the terms of that series, as provided in the indenture) of all the Notes of that series to be due and payable immediately. That declaration may, under some circumstances, be rescinded and annulled by the securityholders of a majority in total outstanding amount of the Notes of that series. If, following an event of default with respect to any series of Notes, the Notes of that series have been declared to be due and payable, the indenture trustee may, in its discretion, notwithstanding that acceleration, elect to maintain possession of the collateral securing the Notes of that series and to continue to apply distributions on that collateral as if there had been no declaration of acceleration if that collateral continues to provide sufficient funds for the payment of principal of and interest on the Notes of that series as they would have become due if there had not been that declaration. In addition, the indenture trustee may not sell or otherwise liquidate the collateral securing the Notes of a series following an event of default, other than a default in the payment of any principal or interest on any Note of that series for thirty days or more, unless (1) the holders of 100% (or any other percentage specified in the indenture) of the then total outstanding amount of the Notes of that series consent to that sale; (2) the proceeds of that sale or liquidation are sufficient to pay in full the principal of and accrued interest, due and unpaid, on the outstanding Notes of that series at the date of that sale; or (3) the indenture trustee determines that that collateral would not be sufficient on an ongoing basis to make all payments on the Notes as those payments would have become due if the Notes had not been declared due and payable, and the indenture trustee obtains the consent of the holders of 66 2/3% (or any other percentage specified in the indenture) of the then total outstanding amount of the Notes of that series. If so specified in the prospectus supplement, only holders of particular classes of Notes will have the right to declare the Notes of that series to be immediately due and payable in the event of a payment default, as described above, and to exercise the remedies described above. If the indenture trustee liquidates the collateral in connection with an event of default involving a default for thirty days (or any other number of days specified in the indenture) or more in the payment of principal of or interest on the Notes of a series, the indenture provides that the indenture trustee will have a prior lien on the proceeds of any liquidation for unpaid fees and expenses. As a result, upon the occurrence of that event of default, the amount available for distribution to the securityholders would be less than would otherwise be the case. However, the indenture trustee may not institute a proceeding for the enforcement of its lien except in connection with a proceeding for the enforcement of the lien of the indenture for the benefit of the securityholders after the occurrence of that event of default. To the extent provided in the prospectus supplement, in the event the principal of the Notes of a series is declared due and payable, as described above, the holders of any Notes issued at a discount from par may be entitled to receive no more than an amount equal to the unpaid principal amount of the Notes less the amount of the discount that is unamortized. Subject to the provisions of the indenture relating to the duties of the indenture trustee, in case an event of default occurs and continues for a series of Notes, the indenture trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any of the securityholders of that series, unless those holders offer to the indenture trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that might be incurred by it in complying with that request or direction. Subject to those provisions for indemnification and some limitations contained in the indenture, the holders of a majority of the then total outstanding amount of the Notes of that series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee or exercising any trust or power conferred on the indenture trustee with respect to the Notes of that series, and the holders of a majority of the then total outstanding amount of the Notes of that series may, in some cases, waive any default with respect to the Notes, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the indenture that cannot be modified without the waiver or consent of all the holders of the outstanding Notes of that series affected. DISCHARGE OF INDENTURE The indenture will be discharged, subject to the provisions of the indenture, for a series of Notes (except for continuing rights specified in the indenture) upon the delivery to the indenture trustee for cancellation of all the Notes of that series or, with some limitations, upon deposit with the indenture trustee of funds sufficient for the payment in full of all of the Notes of that series. With some limitations, the indenture will provide that, if specified for the Notes of any series, the related trust fund will be discharged from any and all obligations in respect of the Notes of that series (except for obligations specified in the indenture including obligations relating to temporary Notes and exchange of Notes, to register the transfer of or exchange Notes of that series, to replace stolen, lost or mutilated Notes of that series, to maintain paying agencies and to hold monies for payment in trust) upon the deposit with the indenture trustee, in trust, of money and/or direct obligations of or obligations guaranteed by the United States of America which through the payment of interest and principal in respect of the Notes in accordance with their terms will provide money in an amount sufficient to pay the principal of and each installment of interest on the Notes of that series on the maturity date for those Notes and any installment of interest on those Notes in accordance with the terms of the indenture and the Notes of that series. In the event of any defeasance and discharge of Notes of that series, holders of Notes of that series would be able to look only to that money and/or those direct obligations for payment of principal and interest, if any, on their Notes until maturity. INDENTURE TRUSTEE'S ANNUAL REPORT The indenture trustee for each series of Notes will be required to mail each year to all related securityholders a brief report, as provided in the indenture, relating to its eligibility and qualification to continue as indenture trustee under the related indenture, any amounts advanced by it under the indenture, the amount, interest rate and maturity date of indebtedness owing by that Trust to the applicable indenture trustee in its individual capacity, the property and funds physically held by the indenture trustee in its capacity as indenture trustee and any action taken by it that materially affects the Notes and that has not been previously reported. THE INDENTURE TRUSTEE The indenture trustee for a series of Notes will be specified in the prospectus supplement. The indenture trustee for any series may resign at any time in accordance with the terms of the indenture, in which event the depositor or the appropriate party designated in the indenture will be obligated to appoint a successor trustee for that series. The depositor or the appropriate party designated in the indenture may also remove any indenture trustee if that indenture trustee ceases to be eligible to continue as the indenture trustee under the related indenture, if that indenture trustee becomes insolvent or for any other grounds specified in the indenture. In those circumstances the depositor or the appropriate party designated in the indenture will be obligated to appoint a successor trustee for the applicable series of Notes. Any resignation or removal of the indenture trustee and appointment of a successor trustee for any series of Notes does not become effective until acceptance of the appointment by the successor trustee for that series. The bank or trust company serving as indenture trustee may have a banking relationship with the depositor or any of its affiliates, a servicer or any of its affiliates or the master servicer or any of its affiliates. To the extent consistent with its fiduciary obligations as indenture trustee, the indenture trustee may delegate its duties to one or more agents as provided in the indenture and the Agreement. DESCRIPTION OF CREDIT SUPPORT GENERAL For any series of Notes or Certificates, as applicable, credit support may be provided for one or more classes of the series or the related Assets. Credit support may be in the form of: o the subordination of one or more classes of Notes or Certificates, as applicable,; o letters of credit; o insurance policies; o guarantees; o the establishment of one or more reserve funds; or o any other method of credit support described in the prospectus supplement, or any combination of the foregoing. Any form of credit support may be structured so as to be drawn upon by more than one series to the extent described in the prospectus supplement. The coverage provided by any credit support will be described in the prospectus supplement. Generally, that coverage will not provide protection against all risks of loss and will not guarantee repayment of the entire Security Balance of the Notes or Certificates, as applicable, and interest on the Security Balance. If losses or shortfalls occur that exceed the amount covered by credit support or that are not covered by credit support, securityholders will bear their allocable share of deficiencies. Moreover, if a form of credit support covers more than one series of Notes or Certificates, as applicable, (each, a "Covered Trust"), securityholders evidencing interests in any of those Covered Trusts will be subject to the risk that the credit support will be exhausted by the claims of other Covered Trusts before that Covered Trust receiving any of its intended share of that coverage. If credit support is provided for one or more classes of Notes or Certificates, as applicable, of a series, or the related Assets, the prospectus supplement will include a description of (a) the nature and amount of coverage under that credit support, (b) any conditions to payment under the prospectus supplement not otherwise described in this prospectus, (c) the conditions (if any) under which the amount of coverage under that credit support may be reduced and under which that credit support may be terminated or replaced and (d) the material provisions relating to that credit support. Additionally, the prospectus supplement will set forth information with respect to the obligor under any financial guaranty insurance policy, letter of credit, guarantee or similar instrument of credit support, including (1) a brief description of its principal business activities, (2) its principal place of business, place of incorporation and the jurisdiction under which it is chartered or licensed to do business, (3) if applicable, the identity of regulatory agencies that exercise primary jurisdiction over the conduct of its business and (4) its total assets, and its stockholders' or policyholders' surplus, if applicable, as of the date specified in the prospectus supplement. SUBORDINATE SECURITIES One or more classes of Notes or Certificates, as applicable, of a series may be Subordinate Notes or Subordinate Certificates, as applicable, if specified in the prospectus supplement. The rights of the holders of Subordinate Notes or Subordinate Certificates, as applicable, to receive distributions of principal and interest from the Collection Account on any Distribution Date will be subordinated to those rights of the holders of Senior Notes or Senior Certificates, as applicable. The subordination of a class may apply only in the event of (or may be limited to) particular types of losses or shortfalls. The prospectus supplement will set forth information concerning the amount of subordination of a class or classes of Subordinate Notes or Subordinate Certificates, as applicable, in a series, the circumstances in which that subordination will be applicable and the manner, if any, in which the amount of subordination will be effected. CROSS-SUPPORT PROVISIONS If the Assets for a series are divided into separate groups, each supporting a separate class or classes of Notes or Certificates, as applicable, of a series, credit support may be provided by cross-support provisions requiring that distributions be made on Senior Notes or Senior Certificates, as applicable, evidencing interests in one group of mortgage loans before distributions on Subordinate Notes or Subordinate Certificates, as applicable, evidencing interests in a different group of mortgage loans within the trust fund. The prospectus supplement for a series that includes a cross-support provision will describe the manner and conditions for applying those provisions. LIMITED GUARANTEE If specified in the prospectus supplement for a series of Notes or Certificates, as applicable, credit enhancement may be provided in the form of a limited guarantee issued by a guarantor named in the prospectus supplement. FINANCIAL GUARANTY INSURANCE POLICY OR SURETY BOND Credit enhancement may be provided in the form of a financial guaranty insurance policy or a surety bond issued by an insurer named in the policy or surety bond, if specified in the prospectus supplement. LETTER OF CREDIT Alternative credit support for a series of Notes or Certificates, as applicable, may be provided by the issuance of a letter of credit by the bank or financial institution specified in the prospectus supplement. The coverage, amount and frequency of any reduction in coverage provided by a letter of credit issued for a series of Notes or Certificates, as applicable, will be set forth in the prospectus supplement relating to that series. POOL INSURANCE POLICIES If specified in the prospectus supplement relating to a series of Notes or Certificates, as applicable, a pool insurance policy for the mortgage loans in the related trust fund will be obtained. The pool insurance policy will cover any loss (subject to the limitations described in the prospectus supplement) by reason of default to the extent a related mortgage loan is not covered by any primary mortgage insurance policy. The amount and principal terms of any pool insurance coverage will be set forth in the prospectus supplement. SPECIAL HAZARD INSURANCE POLICIES A special hazard insurance policy may also be obtained for the related trust fund, if specified in the prospectus supplement, in the amount set forth in the prospectus supplement. The special hazard insurance policy will, subject to the limitations described in the prospectus supplement, protect against loss by reason of damage to Mortgaged Properties caused by hazards not insured against under the standard form of hazard insurance policy for the respective states, in which the Mortgaged Properties are located. The amount and principal terms of any special hazard insurance coverage will be set forth in the prospectus supplement. BORROWER BANKRUPTCY BOND Losses resulting from a bankruptcy proceeding relating to a borrower affecting the mortgage loans in a trust fund for a series of Notes or Certificates, as applicable, will, if specified in the prospectus supplement, be covered under a borrower bankruptcy bond (or any other instrument that will not result in a downgrading of the rating of the Notes or Certificates, as applicable, of a series by the rating agency or agencies that rate that series). Any borrower bankruptcy bond or any other instrument will provide for coverage in an amount meeting the criteria of the rating agency or agencies rating the Notes or Certificates, as applicable, of the related series, which amount will be set forth in the prospectus supplement. The amount and principal terms of any borrower bankruptcy coverage will be set forth in the prospectus supplement. RESERVE FUNDS If so provided in the prospectus supplement for a series of Notes or Certificates, as applicable, deficiencies in amounts otherwise payable on those Notes or Certificates, as applicable, or specific classes of Notes or Certificates, as applicable, will be covered by one or more reserve funds in which cash, a letter of credit, Permitted Investments, a demand note or a combination of these will be deposited, in the amounts so specified in the prospectus supplement. The reserve funds for a series may also be funded over time by depositing a specified amount of the distributions received on the related Assets as specified in the prospectus supplement. Amounts on deposit in any reserve fund for a series, together with the reinvestment income on these amounts, if any, will be applied for the purposes, in the manner, and to the extent specified in the prospectus supplement. A reserve fund may be provided to increase the likelihood of timely distributions of principal of and interest on the Notes or Certificates, as applicable. If specified in the prospectus supplement, reserve funds may be established to provide limited protection against only some types of losses and shortfalls. Following each Distribution Date amounts in a reserve fund in excess of any amount required to be maintained in the reserve fund may be released from the reserve fund under the conditions and to the extent specified in the prospectus supplement and will not be available for further application to the Notes or Certificates, as applicable. Money deposited in any reserve funds will be invested in Permitted Investments, to the extent specified in the prospectus supplement. To the extent specified in the prospectus supplement, any reinvestment income or other gain from those investments will be credited to the related reserve fund for that series, and any loss resulting from those investments will be charged to the reserve fund. However, that income may be payable to any related servicer or another service provider or other entity. To the extent specified in the prospectus supplement, the reserve fund, if any, for a series will not be a part of the trust fund. Additional information concerning any reserve fund will be set forth in the prospectus supplement, including the initial balance of the reserve fund, the balance required to be maintained in the reserve fund, the manner in which the required balance will decrease over time, the manner of funding the reserve fund, the purposes for which funds in the reserve fund may be applied to make distributions to securityholders and use of investment earnings from the reserve fund, if any. OVERCOLLATERALIZATION If specified in the prospectus supplement, subordination provisions of a trust fund may be used to accelerate to a limited extent the amortization of one or more classes of Notes or Certificates, as applicable, relative to the amortization of the related Assets. The accelerated amortization is achieved by the application of excess interest to the payment of principal of one or more classes of Notes or Certificates, as applicable. This acceleration feature creates, for the Assets or groups of Assets, overcollateralization, which is the excess of the total principal balance of the related Assets, or a group of related Assets, over the principal balance of the related class or classes of Notes or Certificates, as applicable. This acceleration may continue for the life of the related Security, or may be limited. In the case of limited acceleration, once the required level of overcollateralization is reached, and subject to the provisions specified in the prospectus supplement, the limited acceleration feature may cease, unless necessary to maintain the required level of overcollateralization. CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS The following discussion contains summaries, which are general in nature, of legal aspects of loans secured by single-family or multi-family residential properties. Because these legal aspects are governed primarily 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. In this regard, the following discussion does not fully reflect federal regulations for FHA loans and VA loans. See "Description of The Trust Funds--FHA Loans and VA Loans," "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--FHA Insurance and VA Guarantees" and "Description of the Trust Funds--Assets." GENERAL All of the mortgage loans are 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 on 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 in this prospectus 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 that 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 borrower (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 borrower), 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, "borrower" 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 borrower 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 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 borrower 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 borrower. At origination of a mortgage loan involving a land trust, the borrower 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, some federal laws (including the Soldiers' and Sailors' Civil Relief Act of 1940) and, in some cases, in deed of trust transactions, the directions of the beneficiary. The mortgages that encumber multifamily properties may contain an assignment of rents and leases, pursuant to which the borrower assigns to the lender the borrower's right, title and interest as landlord under each lease and the income derived therefrom, while retaining a revocable license to collect the rents for so long as there is no default. If the borrower 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. 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, that 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 that lease. An instrument covering an interest in real property other than the fee estate requires special provisions in the instrument creating that interest or in the mortgage, deed of trust, security deed or deed to secure debt, to protect the mortgagee against termination of that interest before the mortgage, deed of trust, security deed or deed to secure debt is paid. The depositor, the Asset Seller or other entity specified in the prospectus supplement will make representations and warranties in the Agreement or representations and warranties will be assigned to the trustee for any mortgage loans secured by an interest in a leasehold estate. Those representation and warranties, if applicable, will be set forth in the prospectus supplement. COOPERATIVE LOANS If specified in the prospectus supplement, the mortgage loans may also consist of cooperative apartment loans ("Cooperative Loans") secured by security interests in shares issued by a 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 that it covers, the priority of which will depend on the terms of the particular security agreement as well as the order of recordation of the agreement in the appropriate recording office. That 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 in the building. 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 borrower, 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 (1) 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 (2) 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 that 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 the lender that 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 that confer exclusive rights to occupy specific units. Generally, a tenant-stockholder of a Cooperative must make a monthly payment to the Cooperative representing that tenant-stockholder's pro rata share of the Cooperative's payments for its blanket mortgage, real property taxes, maintenance expenses and other capital or ordinary expenses. An ownership interest in a Cooperative and accompanying occupancy rights are financed through a Cooperative 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. LAND SALE CONTRACTS Under an installment land sale contract for the sale of real estate (a "land sale contract") the contract seller (hereinafter referred to as the "contract lender") retains legal title to the property and enters into an agreement with the contract purchaser (hereinafter referred to as the "contract borrower") for the payment of the purchase price, plus interest, over the term of the land sale contract. Only after full performance by the borrower of the contract is the contract lender obligated to convey title to the real estate to the purchaser. As with mortgage or deed of trust financing, during the effective period of the land sale contract, the contract borrower is responsible for maintaining the property in good condition and for paying real estate taxes, assessments and hazard insurance premiums associated with the property. The method of enforcing the rights of the contract lender under an installment contract varies on a state-by-state basis depending on the extent to which state courts are willing, or able pursuant to state statute, to enforce the contract strictly according to its terms. The terms of land sale contracts generally provide that upon default by the contract borrower, the borrower loses his or her right to occupy the property, the entire indebtedness is accelerated, and the buyer's equitable interest in the property is forfeited. The contract lender in that situation does not have to foreclose to obtain title to the property, although in some cases a quiet title action is in order if the contract borrower has filed the land sale contract in local land records and an ejectment action may be necessary to recover possession. In a few states, particularly in cases of contract borrower default during the early years of a land sale contract, the courts will permit ejectment of the buyer and a forfeiture of his or her interest in the property. However, most state legislatures have enacted provisions by analogy to mortgage law protecting borrowers under land sale contracts from the harsh consequences of forfeiture. Under those statues, a judicial contract may be reinstated upon full payment of the default amount and the borrower may have a post-foreclosure statutory redemption right. In other states, courts in equity may permit a contract borrower with significant investment in the property under a land sale contract for the sale of real estate to share the proceeds of sale of the property after the indebtedness is repaid or may otherwise refuse to enforce the forfeiture clause. Nevertheless, generally speaking, the contract lender's procedures for obtaining possession and clear title under a land sale contract for the sale of real estate in a particular state are simpler and less time consuming and costly than are the procedures for foreclosing and obtaining clear title to a mortgaged property. 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 for 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 some 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 an interest of record in the real property. 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. Those 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 borrower from the legal effect of mortgage defaults, to the extent that the effect is perceived as harsh or unfair. Relying on those 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 borrower's default and the likelihood that the borrower will be able to reinstate the loan. In some cases, courts have substituted their judgment for the lender's and have required that lenders reinstate loans or recast payment schedules to accommodate borrowers 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 borrower failed to maintain the mortgaged property adequately or the borrower 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 borrower 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 borrower. 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 borrower 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, before the sale, the trustee under a deed of trust must record a notice of default and notice of sale and send a copy to the borrower 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 borrower 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 borrower 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 that property at the time of sale, due to, among other things, redemption rights that 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 that may be recovered by a lender. Thereafter, subject to the borrower'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 become obligated to pay taxes, obtain casualty insurance and to make those repairs at its own expense as are necessary to render the property suitable for sale. 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 on 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. 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, if 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, for those mortgage loans, if any, that are junior mortgage loans, if the lender purchases the property the lender's title will be subject to all senior mortgages, prior liens and specific governmental liens. 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 borrower is in default. Any additional proceeds are generally payable to the borrower. 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 those holders. RIGHTS OF REDEMPTION The purposes of a foreclosure action are to enable the mortgagee to realize upon its security and to bar the borrower, and all persons who have an interest in the property that 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 that is subordinate to that of the foreclosing mortgagee have an equity of redemption and may redeem the property by paying the entire debt with interest. In addition, in some states, when a foreclosure action has begun, the redeeming party must pay some of the costs of that 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 that exists before completion of the foreclosure, is not waivable by the borrower, must be exercised before 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 borrower 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 borrower pays only a portion of the sums due. The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed property. The 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 for more than three years from the close of the calendar year of its acquisition. For a series of Notes or Certificates, as applicable, for which an election is made to qualify the trust fund or a part of the trust fund as a REMIC, the Agreement will permit foreclosed property to be held for more than such three year period if the Internal Revenue Service grants an extension of time within which to sell the property or independent counsel renders an opinion to the effect that holding the property for that additional period is permissible under the REMIC Provisions. 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 bylaws, as well as the proprietary lease or occupancy agreement, and may be canceled by the Cooperative for failure by the tenant-stockholder to pay rent or other obligations or charges owed by that tenant-stockholder, including mechanics' liens against the cooperative apartment building incurred by that tenant-stockholder. The proprietary lease or occupancy agreement generally permit the Cooperative to terminate the lease or agreement in the event a borrower fails to make payments or defaults in the performance of covenants required under the proprietary lease or occupancy agreement. Typically, the lender and the Cooperative enter into a recognition agreement that 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, if the tenant-stockholder has defaulted under the proprietary lease or occupancy agreement, the Cooperative will take no action to terminate that lease or agreement until the lender has been provided with an opportunity to cure the default. The recognition agreement typically provides that if the proprietary lease or occupancy agreement is terminated, the Cooperative will recognize the lender's lien against proceeds from the sale of the Cooperative apartment, subject, however, to the Cooperative's right to sums due under that 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 on the Cooperative Loan. 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. 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 that 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 that apply to tenants who elected to remain in a building so converted. JUNIOR MORTGAGES Some of the mortgage loans may be secured by junior mortgages or deeds of trust, that are subordinate to first or other senior mortgages or deeds of trust held by other lenders. The rights of the trust fund as the holder of a junior deed of trust or a junior mortgage are subordinate in lien and in payment to those of the holder of the senior mortgage or deed of trust, including the prior rights of the senior mortgagee or beneficiary to receive and apply hazard insurance and condemnation proceeds and, upon default of the borrower, to cause a foreclosure on the property. Upon completion of the foreclosure proceedings by the holder of the senior mortgage or the sale pursuant to the deed of trust, the junior mortgagee's or junior beneficiary's lien will be extinguished unless the junior lienholder satisfies the defaulted senior loan or asserts its subordinate interest in a property in foreclosure proceedings. See "--Foreclosure" above. Furthermore, because the terms of the junior mortgage or deed of trust are subordinate to the terms of the first mortgage or deed of trust, in the event of a conflict between the terms of the first mortgage or deed of trust and the junior mortgage or deed of trust, the terms of the first mortgage or deed of trust will generally govern. Upon a failure of the borrower or trustor to perform any of its obligations, the senior mortgagee or beneficiary, subject to the terms of the senior mortgage or deed of trust, may have the right to perform the obligation itself. Generally, all sums so expended by the mortgagee or beneficiary become part of the indebtedness secured by the mortgage or deed of trust. To the extent a first mortgagee expends these sums, these sums will generally have priority over all sums due under the junior mortgage. ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS Statutes in some states limit the right of a beneficiary under a deed of trust or a mortgagee under a mortgage to obtain a deficiency judgment against the borrower following foreclosure or sale under a deed of trust. A deficiency judgment would be a personal judgment against the former borrower 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 borrower. In some other states, the lender has the option of bringing a personal action against the borrower on the debt without first exhausting that security; however, in some of these states, the lender, following judgment on the 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 that election, is that lenders will usually proceed against the security first rather than bringing a personal action against the borrower. Finally, other statutory provisions limit any deficiency judgment against the former borrower following a judicial sale to the excess of the outstanding debt over the fair market value of the property at the time of the public sale. The purpose of these statutes is generally to prevent a lender from obtaining a large deficiency judgment against the former borrower as a result of low or no bids at the judicial sale. In addition to anti-deficiency and related legislation, numerous other federal and state statutory provisions, including the federal bankruptcy laws and state laws affording relief to debtors, may interfere with or affect the ability of a secured mortgage lender to realize upon its security. For example, numerous statutory provisions under the United States Bankruptcy Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy Code"), may interfere with or affect the ability of the secured mortgage lender to obtain payment of a mortgage loan, to realize upon collateral and/or enforce a deficiency judgment. Under federal bankruptcy law, virtually all actions (including foreclosure actions and deficiency judgment proceedings) are automatically stayed upon the filing of a bankruptcy petition, and often no interest or principal payments are made during the course of the bankruptcy proceeding. In a case under the Bankruptcy Code, the secured party is precluded from foreclosing without authorization from the bankruptcy court. In addition, a court with federal bankruptcy jurisdiction may permit a debtor through his or her Chapter 11 or Chapter 13 plan to cure a monetary default in respect of a mortgage loan by paying arrearages within a reasonable time period and reinstating the original mortgage loan payment schedule even though the lender accelerated the mortgage loan and final judgment of foreclosure had been entered in state court (provided no foreclosure sale had yet occurred) before the filing of the debtor's petition. Some courts with federal bankruptcy jurisdiction have approved plans, based on the particular facts of the case, that affected the curing of a mortgage loan default by paying arrearages over a number of years. If a mortgage loan is secured by property not consisting solely of the debtor's principal residence, the Bankruptcy Code also permits that mortgage loan to be modified. These modifications may include reducing the amount of each monthly payment, changing the rate of interest, altering the repayment schedule, and reducing the lender's security interest to the value of the property, thus leaving the lender in the position of a general unsecured creditor for the difference between the value of the property and the outstanding balance of the mortgage loan. Some courts have permitted these modifications when the mortgage loan is secured both by the debtor's principal residence and by personal property. In the case of income-producing multifamily properties, federal bankruptcy law may also have the effect of interfering with or affecting the ability of the secured lender to enforce the borrower's assignment of rents and leases related to the mortgaged property. Under Section 362 of the Bankruptcy Code, the lender will be stayed from enforcing the assignment, and the legal proceedings necessary to resolve the issue could be time-consuming, with resulting delays in the lender's receipt of the rents. Some tax liens arising under the Code may in some circumstances provide priority over the lien of a mortgage or deed of trust. In addition, substantive requirements are imposed upon mortgage lenders in connection with the origination and the servicing of mortgage loans by numerous federal and some state consumer protection laws. These laws include the federal Truth-in-Lending Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act and related statutes. These federal laws impose specific statutory liabilities upon lenders who originate mortgage loans and who fail to comply with the provisions of the law. In some cases this liability may affect assignees of the mortgage loans. Generally, Article 9 of the UCC governs foreclosure on Cooperative shares and the related proprietary lease or occupancy agreement. Some courts have interpreted Section 9-504 of the UCC to prohibit a deficiency award unless the creditor establishes that the sale of the collateral (which, in the case of a Cooperative Loan, would be the shares of the Cooperative and the related proprietary lease or occupancy agreement) was conducted in a commercially reasonable manner. ENVIRONMENTAL CONSIDERATIONS A lender may be subject to unforeseen environmental risks when taking a security interest in real or personal property. Property subject to a security interest may be subject to federal, state, and local laws and regulations relating to environmental protection. These laws may regulate, among other things: emissions of air pollutants; discharges of wastewater or storm water; generation, transport, storage or disposal of hazardous waste or hazardous substances; operation, closure and removal of underground storage tanks; removal and disposal of asbestos-containing materials; and/or management of electrical or other equipment containing polychlorinated biphenyls ("PCBs"). Failure to comply with these laws and regulations may result in significant penalties, including civil and criminal fines. Under the laws of some states, environmental contamination on a property may give rise to a lien on the property to ensure the availability and/or reimbursement of cleanup costs. Generally all subsequent liens on that property are subordinated to the environmentally-related lien and, in some states, even prior recorded liens are subordinated to these liens ("Superliens"). In the latter states, the security interest of the trustee in a property that is subject to a Superlien could be adversely affected. Under the federal Comprehensive Environmental Response, Compensation and Liability Act, as amended ("CERCLA"), and under state law in some states, a secured party that takes a deed in lieu of foreclosure, purchases a mortgaged property at a foreclosure sale, operates a mortgaged property or undertakes particular types of activities that may constitute management of the mortgaged property may become liable in some circumstances for the cleanup costs of remedial action if hazardous wastes or hazardous substances have been released or disposed of on the property. These cleanup costs may be substantial. CERCLA imposes strict, as well as joint and several, liability for environmental remediation and/or damage costs on several classes of "potentially responsible parties," including current "owners and/or operators" of property, irrespective of whether those owners or operators caused or contributed to the contamination on the property. In addition, owners and operators of properties that generate hazardous substances that are disposed of at other "off-site" locations may be held strictly, jointly and severally liable for environmental remediation and/or damages at those off-site locations. Many states also have laws that are similar to CERCLA. Liability under CERCLA or under similar state law could exceed the value of the property itself as well as the total assets of the property owner. Although some provisions of the Asset Conservation Act (as defined in this prospectus) apply to trusts and fiduciaries, the law is somewhat unclear as to whether and under what precise circumstances cleanup costs, or the obligation to take remedial actions, could be imposed on a secured lender, such as the trust fund. Under the laws of some states and under CERCLA, a lender may be liable as an "owner or operator" for costs of addressing releases or threatened releases of hazardous substances on a mortgaged property if that lender or its agents or employees have "participated in the management" of the operations of the borrower, even though the environmental damage or threat was caused by a prior owner or current owner or operator or other third party. Excluded from CERCLA's definition of "owner or operator" is a person "who without participating in the management of . . . [the] facility, holds indicia of ownership primarily to protect his security interest" (the "secured-creditor exemption"). This exemption for holders of a security interest such as a secured lender applies only to the extent that a lender seeks to protect its security interest in the contaminated facility or property. Thus, if a lender's activities begin to encroach on the actual management of that 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, the lender may incur potential CERCLA liability in various circumstances, including among others, when it holds the facility or property as an investment (including leasing the facility or property to a third party), fails to market the property in a timely fashion or fails to properly address environmental conditions at the property or facility. The Resource Conservation and Recovery Act, as amended ("RCRA"), contains a similar secured-creditor exemption for those lenders who hold a security interest in a petroleum underground storage tank ("UST") or in real estate containing a UST, or that acquire title to a petroleum UST or facility or property on which a UST is located. As under CERCLA, a lender may lose its secured-creditor exemption and be held liable under RCRA as a UST owner or operator if that lender or its employees or agents participate in the management of the UST. In addition, if the lender takes title to or possession of the UST or the real estate containing the UST, under some circumstances the secured-creditor exemption may be deemed to be unavailable. 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's opinion suggested 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 were 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 these decisions could be inferred from the extent of its involvement in the facility's financial management. A subsequent decision by the United States Court of Appeals for the Ninth Circuit in re Bergsoe Metal Corp., apparently disagreeing with, but not expressly contradicting, the Fleet Factors court, held that a secured lender had no liability absent "some actual management of the facility" on the part of the lender. Court decisions have taken varying views of the scope of the secured-creditor exemption, leading to administrative and legislative efforts to provide guidance to lenders on the scope of activities that would trigger CERCLA and/or RCRA liability. Until recently, these efforts have failed to provide substantial guidance. On September 28, 1996, however, Congress enacted, and on September 30, 1996, the President signed into law the Asset Conservation Lender Liability and Deposit Insurance Protection Act of 1996 (the "Asset Conservation Act"). The Asset Conservation Act was intended to clarify the scope of the secured creditor exemption under both CERCLA and RCRA. The Asset Conservation Act more explicitly defined the kinds of "participation in management" that would trigger liability under CERCLA and specified activities that would not constitute "participation in management" or otherwise result in a forfeiture of the secured-creditor exemption before foreclosure or during a workout period. The Asset Conservation Act also clarified the extent of protection against liability under CERCLA in the event of foreclosure and authorized specific regulatory clarifications of the scope of the secured-creditor exemption for purposes of RCRA, similar to the statutory protections under CERCLA. However, since the courts have not yet had the opportunity to interpret the new statutory provisions, the scope of the additional protections offered by the Asset Conservation Act is not fully defined. It also is important to note that the Asset Conservation Act does not offer complete protection to lenders and that the risk of liability remains. If a secured lender does become liable, it may be entitled to bring an action for contribution against the owner or operator who created the environmental contamination or against some other liable party, but that person or entity may be bankrupt or otherwise judgment-proof. It is therefore possible that cleanup or other environmental liability costs could become a liability of the trust fund and occasion a loss to the trust fund and to securityholders in some circumstances. The new secured creditor amendments to CERCLA, also, would not necessarily affect the potential for liability in actions by either a state or a private party under other federal or state laws that may impose liability on "owners or operators" but do not incorporate the secured-creditor exemption. Traditionally, residential mortgage lenders have not taken steps to evaluate whether hazardous wastes or hazardous substances are present with respect to any mortgaged property before the origination of the mortgage loan or before foreclosure or accepting a deed-in-lieu of foreclosure. Neither the depositor nor any servicer makes any representations or warranties or assumes any liability with respect to: environmental conditions of the Mortgaged Property; the absence, presence or effect of hazardous wastes or hazardous substances on, near or emanating from the Mortgaged Property; the impact on securityholders of any environmental condition or presence of any substance on or near the Mortgaged Property; or the compliance of any Mortgaged Property with any environmental laws. In addition, no agent, person or entity otherwise affiliated with the depositor is authorized or able to make any representation, warranty or assumption of liability relative to any Mortgaged Property. DUE-ON-SALE CLAUSES The mortgage loans may contain due-on-sale clauses. These clauses generally provide that the lender may accelerate the maturity of the loan if the borrower sells, transfers or conveys the related Mortgaged Property. 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, for some loans the Garn-St. Germain Depository Institutions Act of 1982 (the "Garn-St. Germain Act") preempts state constitutional, statutory and case law that prohibits the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms, subject to limited exceptions. Due-on-sale clauses contained in mortgage loans originated by federal savings and loan associations of federal savings banks are fully enforceable pursuant to regulations of the United States Federal Home Loan Bank Board, as succeeded by the Office of Thrift Supervision, which preempt state law restrictions on the enforcement of those clauses. Similarly, "due-on-sale" clauses in mortgage loans made by national banks and federal credit unions are now fully enforceable pursuant to preemptive regulations of the Comptroller of the Currency and the National Credit Union Administration, respectively. The Garn-St. Germain Act also sets forth nine specific instances in which a mortgage lender covered by the act (including federal savings and loan associations and federal savings banks) may not exercise a "due-on-sale" clause, notwithstanding the fact that a transfer of the property may have occurred. These include intra-family transfers, some transfers by operation of law, leases of fewer than three years and the creation of a junior encumbrance. Regulations promulgated under the Garn-St. Germain Act also prohibit the imposition of a prepayment penalty upon the acceleration of a loan pursuant to a due-on-sale clause. The inability to enforce a "due-on-sale" clause may result in a mortgage that bears an interest rate below the current market rate being assumed by a new home buyer rather than being paid off, which may affect the average life of the mortgage loans and the number of mortgage loans which may extend to maturity. PREPAYMENT CHARGES Under some state laws, prepayment charges may not be imposed after a certain period of time following the origination of mortgage loans secured by liens encumbering owner-occupied residential properties, if those loans are paid before maturity. For Mortgaged Properties that are owner-occupied, it is anticipated that prepayment charges may not be imposed for many of the mortgage loans. The absence of a restraint on prepayment, particularly for fixed rate mortgage loans having higher mortgage rates, may increase the likelihood of refinancing or other early retirement of those loans. SUBORDINATE FINANCING Where a borrower encumbers mortgaged property with one or more junior liens, the senior lender is subjected to additional risks, such as: o The borrower may have difficulty repaying multiple loans. In addition, if the junior loan permits recourse to the borrower (as junior loans often do) and the senior loan does not, a borrower may be more likely to repay sums due on the junior loan than those on the senior loan. o 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 borrower and the senior lender agree to an increase in the principal amount of or the interest rate payable on the senior loan, the senior lender may lose its priority to the extent any existing junior lender is harmed or the borrower is additionally burdened. o If the borrower defaults on the senior loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security available to the senior lender and can interfere with 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. 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 will not apply to some types of residential first mortgage loans originated by lenders after March 31, 1980. A similar federal statute was in effect for mortgage loans made during the first three months of 1980. The Office of Thrift Supervision is authorized to issue rules and regulations and to publish interpretations governing implementation of Title V. 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. Some states have taken action to reimpose interest rate limits and/or to limit discount points or other charges. The depositor believes 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 before origination of those mortgage loans, any limitation under that state's usury law would not apply to those 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 that state action will be eligible for inclusion in a trust fund unless (1) the mortgage loan provides for the interest rate, discount points and charges as are permitted in that state or (2) the mortgage loan provides that its terms will be construed in accordance with the laws of another state under which the interest rate, discount points and charges would not be usurious and the borrower's counsel has rendered an opinion that the 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, thus permitting the borrower to cancel the recorded mortgage or deed of trust without any payment or prohibiting the lender from foreclosing. ALTERNATIVE MORTGAGE INSTRUMENTS Alternative mortgage instruments, including adjustable rate mortgage loans and early ownership mortgage loans, originated by non-federally chartered lenders have historically been subject to a variety of restrictions. Those restrictions differed from state to state, resulting in difficulties in determining whether a particular alternative mortgage instrument originated by a state-chartered lender was in compliance with applicable law. These difficulties were alleviated substantially as a result of the enactment of Title VIII of the Garn-St. Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any state law to the contrary, state-chartered banks may originate alternative mortgage instruments in accordance with regulations promulgated by the Comptroller of the Currency with respect to origination of alternative mortgage instruments by national banks; state-chartered credit unions may originate alternative mortgage instruments in accordance with regulations promulgated by the National Credit Union Administration with respect to origination of alternative mortgage instruments by federal credit unions; and all other non-federally chartered housing creditors, including state-chartered savings and loan associations, state-chartered savings banks and mutual savings banks and mortgage banking companies, may originate alternative mortgage instruments in accordance with the regulations promulgated by the Federal Home Loan Bank Board, predecessor to the Office of Thrift Supervision, with respect to origination of alternative mortgage instruments by federal savings and loan associations. Title VIII provides that any state may reject applicability of the provisions of Title VIII by adopting, before October 15, 1985, a law or constitutional provision expressly rejecting the applicability of those provisions. Some states have taken that action. 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 borrower who enters military service after the origination of the borrower's mortgage loan (including a borrower 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 the borrower's active duty status, unless a court orders otherwise upon application of the lender. The Relief Act applies to borrowers 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 borrowers 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 the servicer to collect full amounts of interest on some 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 Notes or Certificates, as applicable, and would not be covered by advances. These shortfalls will be covered by the credit support provided in connection with the Notes or Certificates, as applicable, only to the extent provided in the prospectus supplement. In addition, the Relief Act imposes limitations that would impair the ability of the servicer to foreclose on an affected mortgage loan during the borrower's period of active duty status, and, under some circumstances, during an additional three month period thereafter. Thus, if an affected 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, those 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: (1) its mortgage was executed and recorded before commission of the crime upon which the forfeiture is based, or (2) 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. CERTAIN LEGAL ASPECTS OF THE CONTRACTS The following discussion contains summaries, which are general in nature, of certain legal matters relating to the contracts. Because these legal aspects are governed primarily 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 contracts is situated. The summaries are qualified in their entirety by reference to the appropriate laws of the states in which contracts may be originated. GENERAL As a result of the assignment of the contracts to the trustee, the trustee will succeed collectively to all of the rights including the right to receive payment on the contracts, of the obligee under the contracts. Each contract evidences both (a) the obligation of the borrower to repay the loan evidenced thereby, and (b) the grant of a security interest in the manufactured home to secure repayment of the loan. Aspects of both features of the contracts are described more fully below. The contracts generally are "chattel paper" as defined in the UCC in effect in the states in which the manufactured homes initially were registered. Pursuant to the UCC, the sale of chattel paper is treated in a manner similar to perfection of a security interest in chattel paper. Under the agreement, the servicer will transfer physical possession of the contracts to the trustee. In addition, the servicer will make an appropriate filing of a UCC-1 financing statement in the appropriate states to give notice of the trustee's ownership of the contracts. The contracts will be stamped or marked otherwise to reflect their assignment from the depositor to the trustee only if provided in the prospectus supplement. Therefore, if, through negligence, fraud or otherwise, a subsequent purchaser were able to take physical possession of the contracts without notice of the assignment, the trustee's interest in contracts could be defeated. SECURITY INTERESTS IN THE MANUFACTURED HOMES The manufactured homes securing the contracts may be located in all 50 states, Security interests in manufactured homes may be perfected either by notation of the secured party's lien on the certificate of title or by delivery of the required documents and payment of a fee to the state motor vehicle authority, depending on state law. In some nontitle states, perfection pursuant to the provisions of the UCC is required. The asset seller may effect that notation or delivery of the required documents and fees, and obtain possession of the certificate of title, as appropriate under the laws of the state in which any manufactured home securing a manufactured housing conditional sales contract is registered. In the event the asset seller fails, due to clerical error, to effect that notation or delivery, or files the security interest under the wrong law, the asset seller may not have a first priority security interest in the manufactured home securing a contract. As manufactured homes have become larger and often have been attached to their sites without any apparent intention to move them, courts in many states have held that manufactured homes, under some circumstances, may become subject to real estate title and recording laws. As a result, a security interest in a manufactured home could be rendered subordinate to the interests of other parties claiming an interest in the home under applicable state real estate law. To perfect a security interest in a manufactured home under real estate laws, the holder of the security interest must file either a fixture filing under the provisions of the UCC or a real estate mortgage under the real estate laws of the state where the home is located. These filings must be made in the real estate records office of the county where the home is located. Substantially all of the contracts contain provisions prohibiting the borrower from permanently attaching the manufactured home to its site. So long as the borrower does not violate this agreement, a security interest in the manufactured home will be governed by the certificate of title laws or the UCC, and the notation of the security interest on the certificate of title or the filing of a UCC financing statement will be effective to maintain the priority of the security interest in the manufactured home. If, however, a manufactured home is permanently attached to its site, other parties could obtain an interest in the manufactured home that is prior to the security interest originally retained by the asset seller and transferred to the depositor. For a series of securities and if so described in the prospectus supplement, the servicer may be required to perfect a security interest in the manufactured home under applicable real estate laws. The warranting party will represent that as of the date of the sale to the depositor it has obtained a perfected first priority security interest by proper notation or delivery of the required documents and fees for substantially all of the manufactured homes securing the contracts. The depositor will cause the security interests in the manufactured homes to be assigned to the trustee on behalf of the securityholders. The depositor or the trustee will amend the certificates of title, or file UCC-3 statements, to identify the trustee as the new secured party, and will deliver the certificates of title to the trustee or note thereon the interest of the trustee only if specified in the prospectus supplement. Accordingly, the asset seller, or other originator of the contracts, will continue to be named as the secured party on the certificates of title relating to the manufactured homes. In some states, that assignment is an effective conveyance of the security interest without amendment of any lien noted on the related certificate of title and the new secured party succeeds to servicer's rights as the secured party. However, in some states, in the absence of an amendment to the certificate of title and the new secured party succeeds to servicer's rights as the secured party. However, in some states, in the absence of an amendment to the certificate of title, or the filing of a UCC-3 statement, the assignment of the security interest in the manufactured home may not be held effective or the security interest in the manufactured home may not be held effective or the security interests may not be perfected and in the absence of that notation or delivery to the trustee, the assignment of the security interest in the manufactured home may not be effective against creditors of the asset seller, or any other originator of the contracts, or a trustee in bankruptcy of the asset seller, or any other originator. In the absence of fraud, forgery or permanent affixation of the manufactured home to its site by the manufactured home owner, or administrative error by state recording officials, the notation of the lien of the asset seller, or other originator of the Contracts, on the certificate of title or delivery of the required documents and fees will be sufficient to protect the securityholders against the rights or subsequent purchasers of a manufactured home or subsequent lenders who take a security interest in the manufactured home. If there are any manufactured homes as to which the security interest assigned to the trustee is not perfected, that security interest would be subordinate to, among others, subsequent purchasers for value of manufactured homes and holders of perfected security interests. There also exists a risk in not identifying the trustee as the new secured party on the certificate of title that, through fraud or negligence, the security interest of the trustee could be released. If the owner of a manufactured home moves it to a state other than the state in which the manufactured home initially is registered, under the laws of most states the perfected security interest in the manufactured home would continue for four months after the relocation and thereafter only if and after the owner re-registers the manufactured home in that state. If the owner were to relocate a manufactured home to another state and not re-register the manufactured home in that state, and if steps are not taken to re-perfect the trustee's security interest in that state, the security interest in the manufactured home would cease to be perfected. A majority of states generally require surrender of a certificate of title to re-register a manufactured home; accordingly, the servicer must surrender possession if it holds the certificate of title to the manufactured home or, in the case of manufactured homes registered n states that provide for notation of lien, the asset seller, or other originator, would receive notice of surrender if the security interest in the manufactured home is noted on the certificate of title. Accordingly, the trustee would have the opportunity to re-perfect its security interest in the manufactured home in the state of relocation. In states that do not require a certificate of title for registration of a manufactured home, re-registration could defeat perfection. In the ordinary course of servicing the manufactured housing contracts, the servicer takes steps to effect re-perfection upon receipt of notice of re-registration or information from the borrower as to relocation. Similarly, when a borrower under a manufactured housing contract sells a manufactured home, the servicer must surrender possession of the certificate of title or, if it is noted as lienholder on the certificate of title, will receive notice as a result of its lien noted thereon and accordingly will have an opportunity to require satisfaction of the related manufactured housing conditional sales contract before release of the lien. Under the Agreement, the servicer is obligated to take those steps, at the servicer's expense, as are necessary to maintain perfection of security interests in the manufactured homes. Under the laws of most states, liens for repairs performed on a manufactured home and liens for personal property taxes take priority even over a perfected security interest. The warranting party will represent in the agreement that it has no knowledge of any of these liens for any manufactured home securing payment on any contract. However, these liens could arise at any time during the term of a contract. No notice will be given to the trustee or securityholders if a lien arises. ENFORCEMENT OF SECURITY INTERESTS IN THE MANUFACTURED HOMES The servicer on behalf of the trustee, to the extent required by the related agreement, may take action to enforce the trustee's security interest with respect to contracts in default by repossession and resale of the manufactured homes securing those defaulted contracts. So long as the manufactured home has not become subject to the real estate law, a creditor can repossess a manufactured home securing a contract by voluntary surrender, by "self-help" repossession that is "peaceful" or, in the absence of voluntary surrender and the ability to repossess without breach of the peace, by judicial process. The holder of a contract must give the debtor a number of days' notice, which varies from 10 to 30 days depending on that state, before beginning any repossession. The UCC and consumer protection laws in most states place restrictions on repossession sales, including requiring prior notice to the debtor and commercial reasonableness in effecting that sale. The law in most states also requires that the debtor be given notice of any sale before resale of the unit so that the debtor may redeem at or before that resale. In the event of repossession and resale of a manufactured home, the trustee would be entitled to be paid out of the sale proceeds before the proceeds could be applied to the payment of the claims of unsecured creditors or the holders of subsequently perfected security interests or, thereafter, to the debtor. Under the laws applicable in mot states, a creditor is entitled to obtain a deficiency judgment from a debtor for any deficiency on repossession and resale of the manufactured home securing the debtor's loan. However, some states impose prohibitions or limitations on deficiency judgments, and in many cases the defaulting borrower would have no assets with which to pay a judgment. Other statutory provisions, including federal and state bankruptcy and insolvency laws and general equitable principles, may limit or delay the ability of a lender to repossess and resell collateral or enforce a deficiency judgment. SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940 The terms of the Relief Act apply to a borrower on a Contract as described for a borrower on a mortgage loan under "Certain Legal Aspects of Mortgage Loans-Soldiers' and Sailors' Civil Act of 1940." CONSUMER PROTECTION LAWS The so-called Holder-in-Due-Course rule of the Federal Trade Commission is intended to defeat the ability of the transferor of a consumer credit contract that is the seller of goods which gave rise to the transaction, and some related lenders and assignees, to transfer the contract free of notice of claims by the debtor thereunder. The effect of this rule is to subject the assignee of the contract to all claims and defenses that the debtor could assert against the seller of goods. Liability under this rule is limited to amounts paid under a contract; however, the borrower also may be able to assert the rule to set off remaining amounts due as a defense against a claim brought by the trustee against the borrower. Numerous other federal and state consumer protection laws impose requirements applicable to the origination and lending pursuant to the contracts, including the Truth in Lending Act, the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer Credit Code. In the case of some of these laws, the failure to comply with their provisions may affect the enforceability of the related contract. TRANSFERS OF MANUFACTURED HOMES; ENFORCEABILITY OF "DUE-ON-SALE" CLAUSES The contracts, in general, prohibit the sale or transfer of the related manufactured homes without the consent of the servicer and permit the acceleration of the maturity of the contracts by the servicer upon any sale or transfer that is not consented to. Generally, it is expected that the servicer will permit most transfers of manufactured homes and not accelerate the maturity of the related contracts. In some cases, the transfer may be made by a delinquent borrower to avoid a repossession proceeding for a manufactured home. In the case of a transfer of a manufactured home after which the servicer desires to accelerate the maturity of the related contract, the servicer's ability to do so will depend on the enforceability under state law of the due-on-sale clauses applicable to the manufactured homes. Consequently, in some states the servicer may be prohibited from enforcing a due-on-sale clause in respect of some manufactured homes. APPLICABILITY OF USURY LAWS Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980, as amended (Title V), provides that, subject to the following conditions, state usury limitations will not apply to any loan that is secured by a first lien on certain kinds of manufactured housing. The contracts would be covered if they satisfy certain conditions, among other things, governing the terms of any prepayments, late charges and deferral fees and requiring a 30-day notice period before instituting any action leading to repossession of or foreclosure on the related unit. Title V authorized any state to re-impose limitations on interest rates and finance charges by adopting before April 1, 1983, a law or constitutional provision that expressly rejects application of the federal law. Fifteen states adopted a similar law before the April 1, 1983 deadline. In addition, even where Title V was not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on loans covered by Title V. The related asset seller will represent that all of the contracts comply with applicable usury law. MATERIAL FEDERAL INCOME TAX CONSIDERATIONS GENERAL The following discussion represents the opinion of Stroock & Stroock & Lavan LLP as to the material federal income tax consequences of the purchase, ownership and disposition of the Notes or Certificates, as applicable, offered under this prospectus. This opinion assumes compliance with all provisions of the Agreements pursuant to which the Notes or Certificates, as applicable, are issued. This discussion is directed solely to securityholders that hold the Notes or Certificates, as applicable, as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"), and does not purport to discuss all federal income tax consequences that may be applicable to particular categories of investors, some of which (such as banks, insurance companies and foreign investors) may be subject to special rules. Further, the authorities on which this discussion, and the opinions referred to below, are based are subject to change or differing interpretations, which could apply retroactively. In addition to the federal income tax consequences described in this prospectus, potential investors should consider the state and local tax consequences, if any, of the purchase, ownership and disposition of the Notes or Certificates, as applicable. See "State and Other Tax Considerations." The depositor recommends that securityholders consult their own tax advisors concerning the federal, state, local or other tax consequences to them of the purchase, ownership and disposition of the Notes or Certificates, as applicable, offered under this prospectus. The following discussion addresses securities of five general types: o securities ("REMIC Securities") representing interests in a trust fund, or a portion of a trust fund, that the trustee will elect to have treated as a real estate mortgage investment conduit ("REMIC") under Sections 860A through 860G (the "REMIC Provisions") of the Code; o securities ("FASIT Securities") representing interests in a trust fund, or a portion of a trust fund, that the trustee will elect to have treated as a financial asset securitization investment trust ("FASIT") under Sections 860H through 860L (the "FASIT Provisions") of the Code; o securities ("Grantor Trust Securities") representing interests in a trust fund (a "Grantor Trust Fund") as to which no election will be made; o securities ("Partnership Certificates") representing equity interests in a trust fund (a "Partnership Trust Fund") which is treated as a partnership for federal income tax purposes; and o securities ("Debt Securities") representing indebtedness of a Partnership Trust Fund or a trust fund which is disregarded as a separate entity for federal income tax purposes. The prospectus supplement for each series of Notes or Certificates, as applicable, will indicate which of the foregoing treatments will apply to that series and, if a REMIC election (or elections) will be made for the related trust fund, will identify all "regular interests" and "residual interests" in the REMIC or, if a FASIT election will be made for the related trust fund, will identify all "regular interests" and "ownership interests" in the FASIT. For purposes of this tax discussion, (1) references to a "securityholder" or a "holder" are to the beneficial owner of a Security, (2) references to "REMIC Pool" are to an entity or portion thereof as to which a REMIC election will be made and (3) to the extent specified in the prospectus supplement, references to "mortgage loans" include Contracts. Except to the extent specified in the prospectus supplement, no REMIC election will be made for Unsecured Home Improvement Loans. The following discussion is based in part upon the rules governing original issue discount that are set forth in Sections 1271 through 1275 of the Code and in the Treasury regulations promulgated thereunder (the "OID Regulations"), in part upon the REMIC Provisions and the Treasury regulations promulgated thereunder (the "REMIC Regulations"), and in part upon the FASIT Provisions. Although the FASIT Provisions of the Code became effective on September 1, 1997, the Treasury regulations issued with respect to those provisions are still in proposed form only. Accordingly, the discussion herein does not address the proposed FASIT regulations (which will be discussed in the related prospectus supplement if and to the extent they are relevant) and definitive guidance cannot be provided with respect to many aspects of the tax treatment of the holders of FASIT Securities. In addition, the OID Regulations do not adequately address some issues relevant to, and in some instances provide that they are not applicable to, securities such as the Notes or Certificates, as applicable. TAXABLE MORTGAGE POOLS Corporate income tax can be imposed on the net income of some entities issuing non-REMIC and non-FASIT debt obligations secured by real estate mortgages ("Taxable Mortgage Pools"). Any entity other than a REMIC or a FASIT (as defined in this prospectus) will be considered a Taxable Mortgage Pool if (1) substantially all of the assets of the entity consist of debt obligations and more than 50% of those obligations consist of "real estate mortgages," (2) that entity is the borrower under debt obligations with two or more maturities, and (3) under the terms of the debt obligations on which the entity is the borrower, payments on those obligations bear a relationship to payments on the obligations held by the entity. Furthermore, a group of assets held by an entity can be treated as a separate Taxable Mortgage Pool if the assets are expected to produce significant cash flow that will support one or more of the entity's issues of debt obligations. The depositor generally will structure offerings of non-REMIC and non-FASIT Securities to avoid the application of the Taxable Mortgage Pool rules. REMICS CLASSIFICATION OF REMICS For each series of REMIC Securities, assuming compliance with all provisions of the related pooling and servicing agreement, in the opinion of Stroock & Stroock & Lavan LLP, the related trust fund (or each applicable portion of the trust fund) will qualify as a REMIC and the REMIC Securities offered with respect thereto will be considered to evidence ownership of "regular interests" ("Regular Securities") or "residual interests" ("Residual Securities") in the REMIC within the meaning of the REMIC Provisions. In order for the REMIC Pool to qualify as a REMIC, there must be ongoing compliance on the part of the REMIC Pool with the requirements set forth in the Code. The REMIC Pool must fulfill an asset test, which requires that no more than a de minimis portion of the assets of the REMIC Pool, 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 REMIC Securities) 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 total adjusted basis of the nonqualified assets is less than 1% of the total adjusted basis of all the REMIC Pool's assets. An entity that fails to meet the safe harbor may nevertheless demonstrate that it holds no more than a de minimis amount of nonqualified assets. A REMIC Pool also must provide "reasonable arrangements" to prevent its residual interests from being held by "disqualified organizations" or agents of "disqualified organizations" and must furnish applicable tax information to transferors or agents that violate this requirement. The pooling and servicing agreement for each series of REMIC Securities will contain provisions meeting these requirements. See "--Taxation of Owners of Residual Securities--Tax-Related Restrictions on Transfer of Residual Securities--Disqualified Organizations" below. A qualified mortgage is any obligation that is principally secured by an interest in real property and that is either transferred to the REMIC Pool on the Startup Day or is purchased by the REMIC Pool within a three-month period thereafter pursuant to a fixed price contract in effect on the Startup Day. Qualified mortgages include whole mortgage loans and, generally, certificates of beneficial interest in a grantor trust that holds mortgage loans and regular interests in another REMIC, such as lower-tier regular interests in a tiered REMIC. The REMIC Regulations specify that loans secured by timeshare interests, shares held by a tenant stockholder in a cooperative housing corporation, and manufactured housing that qualifies as a "single family residence" under Code Section 25(e)(10) can be qualified mortgages. A qualified mortgage includes a qualified replacement mortgage, which is any property that would have been treated as a qualified mortgage if it were transferred to the REMIC Pool on the Startup Day and that is received either: (1) in exchange for any qualified mortgage within a three-month period from the Startup Day; or (2) in exchange for a "defective obligation" within a two-year period from the Startup Day. A "defective obligation" includes: (1) a mortgage in default or as to which default is reasonably foreseeable; (2) a mortgage as to which a customary representation or warranty made at the time of transfer to the REMIC Pool has been breached; (3) a mortgage that was fraudulently procured by the borrower; and (4) a mortgage that was not in fact principally secured by real property (but only if the mortgage is disposed of within 90 days of discovery). A mortgage loan that is "defective" as described in clause (4) above that is not sold or, if within two years of the Startup Day, exchanged, within 90 days of discovery, ceases to be a qualified mortgage after that 90-day period. Permitted investments include cash flow investments, qualified reserve assets, and foreclosure property. A cash flow investment is an investment, earning a return in the nature of interest, of amounts received on or with respect to qualified mortgages for a temporary period, not exceeding 13 months, until the next scheduled distribution to holders of interests in the REMIC Pool. A qualified reserve asset is any intangible property held for investment that is part of any reasonably required reserve maintained by the REMIC Pool to provide for payments of expenses of the REMIC Pool or amounts due on the regular or residual interests in the event of defaults (including delinquencies) on the qualified mortgages, lower than expected reinvestment returns, prepayment interest shortfalls and other contingencies. The reserve fund will be disqualified if more than 30% of the gross income from the assets in that fund for the year is derived from the sale or other disposition of property held for less than three months, unless required to prevent a default on the regular interests caused by a default on one or more qualified mortgages. A reserve fund must be reduced "promptly and appropriately" as payments on the mortgage loans are received. Foreclosure property is real property acquired by the REMIC Pool in connection with the default or imminent default of a qualified mortgage and generally may not be held for more than three taxable years after the taxable year of acquisition unless extensions are granted by the Secretary of the Treasury. In addition to the foregoing requirements, the various interests in a REMIC Pool also must meet specific requirements. All of the interests in a REMIC Pool must be either of the following: (1) one or more classes of regular interests or (2) a single class of residual interests on which distributions, if any, are made pro rata. o A regular interest is an interest in a REMIC Pool that is issued on the Startup Day with fixed terms, is designated as a regular interest, and unconditionally entitles the holder to receive a specified principal amount (or other similar amount), and provides that interest payments (or other similar amounts), if any, at or before maturity either are payable based on a fixed rate or a qualified variable rate, or consist of a specified, nonvarying portion of the interest payments on qualified mortgages. That specified portion may consist of a fixed number of basis points, a fixed percentage of the total interest, or a qualified variable rate, inverse variable rate or difference between two fixed or qualified variable rates on some or all of the qualified mortgages. The specified principal amount of a regular interest that provides for interest payments consisting of a specified, nonvarying portion of interest payments on qualified mortgages may be zero. o A residual interest is an interest in a REMIC Pool other than a regular interest that is issued on the Startup Day and that is designated as a residual interest. An interest in a REMIC Pool may be treated as a regular interest even if payments of principal for that interest are subordinated to payments on other regular interests or the residual interest in the REMIC Pool, and are dependent on the absence of defaults or delinquencies on qualified mortgages or permitted investments, lower than reasonably expected returns on permitted investments, unanticipated expenses incurred by the REMIC Pool or prepayment interest shortfalls. Accordingly, in the opinion of Stroock & Stroock & Lavan LLP, the Regular Securities of a series will constitute one or more classes of regular interests, and the Residual Securities for that series will constitute a single class of residual interests for each REMIC Pool. If an entity electing to be treated as a REMIC fails to comply with one or more of the ongoing requirements of the Code for that status during any taxable year, the Code provides that the entity will not be treated as a REMIC for that year and thereafter. In that event, that entity may be taxable as a corporation under Treasury regulations, and the related REMIC Securities may not be accorded the status or given the tax treatment described below. Although the Code authorizes the Treasury Department to issue regulations providing relief in the event of an inadvertent termination of REMIC status, none of these regulations have been issued. Any relief provided, moreover, may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the trust fund's income for the period in which the requirements for that status are not satisfied. The pooling and servicing agreement for each REMIC Pool will include provisions designed to maintain the trust fund's status as a REMIC under the REMIC Provisions. It is not anticipated that the status of any trust fund as a REMIC will be terminated. CHARACTERIZATION OF INVESTMENTS IN REMIC SECURITIES The REMIC Securities will be treated as "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code and assets described in Section 7701(a)(19)(C) of the Code in the same proportion that the assets of the REMIC Pool underlying these Notes or Certificates, as applicable, would be so treated. Moreover, if 95% or more of the assets of the REMIC Pool qualify for either of the foregoing treatments at all times during a calendar year, the REMIC Securities will qualify for the corresponding status in their entirety for that calendar year. If the assets of the REMIC Pool include Buydown Mortgage Loans, it is possible that the percentage of those assets constituting "loans . . . secured by an interest in real property which is . . . residential real property" for purposes of Code Section 7701(a)(19)(C)(v) may be required to be reduced by the amount of the related funds paid thereon (the "Buydown Funds"). No opinion is expressed as to the treatment of those Buydown Funds because the law is unclear as to whether the Buydown Funds represent an account held by the lender that reduces the lender's investment in the mortgage loan. This reduction of a holder's investment may reduce the assets qualifying for the 60% of assets test for meeting the definition of a "domestic building and loan association." Interest (including original issue discount) on the Regular Securities and income allocated to the class of Residual Securities will be interest described in Section 856(c)(3)(B) of the Code to the extent that the Notes or Certificates, as applicable, are treated as "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code. In addition, the Regular Securities generally will be "qualified mortgages" within the meaning of Section 860G(a)(3) of the Code if transferred to another REMIC on its Startup Day in exchange for regular or residual interests in the REMIC. The assets of the REMIC Pool will include, in addition to mortgage loans, payments on mortgage loans held pending distribution on the REMIC Securities and property acquired by foreclosure held pending sale, and may include amounts in reserve accounts. It is unclear whether property acquired by foreclosure held pending sale and amounts in reserve accounts would be considered to be part of the mortgage loans, or whether those assets (to the extent not invested in assets described in the foregoing sections) otherwise would receive the same treatment as the mortgage loans for purposes of all of the foregoing sections. The REMIC Regulations do provide, however, that payments on mortgage loans held pending distribution are considered part of the mortgage loans for purposes of Section 856(c)(4)(A) of the Code. Furthermore, foreclosure property generally will qualify as "real estate assets" under Section 856(c)(4)(A) of the Code. TIERED REMIC STRUCTURES For some series of REMIC Securities, two or more separate elections may be made to treat designated portions of the related trust fund as REMICs ("Tiered REMICs") for federal income tax purposes. Upon the issuance of any of these series of REMIC Securities, Stroock & Stroock & Lavan LLP will deliver its opinion that, assuming compliance with all provisions of the related pooling and servicing agreement, the Tiered REMICs will each qualify as a REMIC and the respective REMIC Securities issued by each Tiered REMIC will be considered to evidence ownership of Regular Securities or Residual Securities in the related REMIC within the meaning of the REMIC Provisions. Solely for purposes of determining whether the REMIC Securities will be "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code and "loans secured by an interest in real property" under Section 7701(a)(19)(C) of the Code, and whether the income on those Notes or Certificates, as applicable, is interest described in Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one REMIC. TAXATION OF OWNERS OF REGULAR SECURITIES (1) General Except as otherwise indicated herein, the Regular Securities will be treated for federal income tax purposes as debt instruments that are issued by the REMIC and not as beneficial interests in the REMIC or the REMIC's assets. In general, interest, original issue discount, and market discount on a Regular Security will be treated as ordinary income to a holder of the Regular Security (the "Regular Securityholder"), and principal payments on a Regular Security will be treated as a return of capital to the extent of the Regular Securityholder's basis in the Regular Security allocable thereto. Regular Securityholders must use the accrual method of accounting with regard to Regular Securities, regardless of the method of accounting otherwise used by that Regular Securityholder. Payments of interest on Regular Securities may be based on a fixed rate, a variable rate as permitted by the REMIC Regulations, or may consist of a specified portion of the interest payments on qualified mortgages where such portion does not vary during the period the Regular Security is outstanding. The definition of a variable rate for purposes of the REMIC Regulations is based on the definition of a qualified floating rate for purposes of the rules governing original issue discount set forth in the OID Regulations, with certain modifications and permissible variations. See "--Variable Rate Regular Securities" below for a discussion of the definition of a qualified floating rate for purposes of the OID Regulations. In contrast to the OID Regulations, for purposes of the REMIC Regulations, a qualified floating rate does not include any multiple of a qualified floating rate (also excluding multiples of qualified floating rates that themselves would constitute qualified floating rates under the OID Regulations), and the characterization of a variable rate that is subject to a cap, floor or similar restriction as a qualified floating rate for purposes of the REMIC Regulations will not depend upon the OID Regulations relating to caps, floors, and similar restrictions. See "--Variable Rate Regular Securities" below for discussion of the OID Regulations relating to caps, floors and similar restrictions. A qualified floating rate, as defined above for purposes of the REMIC Regulations (a "REMIC qualified floating rate"), qualifies as a variable rate for purposes of the REMIC Regulations if such REMIC qualified floating rate is set at a "current rate" as defined in the OID Regulations. In addition, a rate equal to the highest, lowest or an average of two or more REMIC qualified floating rates qualifies as a variable rate for REMIC purposes. A Regular Security may also have a variable rate based on a weighted average of the interest rates on some or all of the qualified mortgages held by the REMIC where each qualified mortgage taken into account has a fixed rate or a variable rate that is permissible under the REMIC Regulations. Further, a Regular Security may have a rate that is the product of a REMIC qualified floating rate or a weighted average rate and a fixed multiplier, is a constant number of basis points more or less than a REMIC qualified floating rate or a weighted average rate, or is the product, plus or minus a constant number of basis points, of a REMIC qualified floating rate or a weighted average rate and a fixed multiplier. An otherwise permissible variable rate for a Regular Security, described above, will not lose its character as such because it is subject to a floor or a cap, including a "funds available cap" as that term is defined in the REMIC Regulations. Lastly, a Regular Security will be considered as having a permissible variable rate if it has a fixed or otherwise permissible variable rate during one or more payment or accrual periods and different fixed or otherwise permissible variable rates during other payment or accrual periods. (2) Original Issue Discount Accrual Securities will be, and other classes of Regular Securities may be, issued with "original issue discount" within the meaning of Code Section 1273(a). Holders of any Class or Subclass of Regular Securities having original issue discount generally must include original issue discount in ordinary income for federal income tax purposes as it accrues, in accordance with a constant yield method that takes into account the compounding of interest, in advance of the receipt of the cash attributable to that income. 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"). Regular Securityholders should be aware, however, that the OID Regulations do not adequately address some of the issues relevant to prepayable securities, such as the Regular Securities. To the extent that those issues are not addressed in the regulations, the Seller intends to apply the methodology described in the Conference Committee Report to the 1986 Act. No assurance can be provided that the Internal Revenue Service will not take a different position as to those matters not currently addressed by the OID Regulations. Moreover, the OID Regulations include an anti-abuse rule allowing the Internal Revenue Service to apply or depart from the OID Regulations where necessary or appropriate to ensure a reasonable tax result because 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 discussion in the OID Regulations and the appropriate method for reporting interest and original issue discount for the Regular Securities. Each Regular Security will be treated as a single installment obligation for purposes of determining the original issue discount includible in a Regular Securityholder's income. The total amount of original issue discount on a Regular Security is the excess of the "stated redemption price at maturity" of the Regular Security over its "issue price." The issue price of a Class of Regular Securities offered pursuant to this prospectus generally is the first price at which a substantial amount of that Class is sold to the public (excluding bond houses, brokers and underwriters). Although unclear under the OID Regulations, it is anticipated that the trustee will treat the issue price of a Class as to which there is no substantial sale as of the issue date or that is retained by the depositor as the fair market value of the Class as of the issue date. The issue price of a Regular Security also includes any amount paid by an initial Regular Securityholder for accrued interest that relates to a period before the issue date of the Regular Security, unless the Regular Securityholder elects on its federal income tax return to exclude that amount from the issue price and to recover it on the first Distribution Date. The stated redemption price at maturity of a Regular Security always includes the original principal amount of the Regular Security, but generally will not include distributions of interest if those distributions constitute "qualified stated interest." Under the OID Regulations, qualified stated interest generally means interest payable at a single fixed rate or a qualified variable rate (as described below), provided that the interest payments are unconditionally payable at intervals of one year or less during the entire term of the Regular Security. Because there is no penalty or default remedy in the case of nonpayment of interest for a Regular Security, it is possible that no interest on any Class of Regular Securities will be treated as qualified stated interest. However, except as provided in the following three sentences or in the prospectus supplement, because the underlying mortgage loans provide for remedies in the event of default, it is anticipated that the trustee will treat interest for the Regular Securities as qualified stated interest. Distributions of interest on an Accrual Security, or on other Regular Securities for which deferred interest will accrue, will not constitute qualified stated interest, in which case the stated redemption price at maturity of those Regular Securities includes all distributions of interest as well as principal on the Regular Securities. Likewise, it is anticipated that the trustee will treat an interest-only Class or a Class on which interest is substantially disproportionate to its principal amount (a so-called "super-premium" Class) as having no qualified stated interest. Where the interval between the issue date and the first Distribution Date on a Regular Security is shorter than the interval between subsequent Distribution Dates, the interest attributable to the additional days will be included in the stated redemption price at maturity. Under a de minimis rule, original issue discount on a Regular Security will be considered to be zero if the original issue discount is less than 0.25% of the stated redemption price at maturity of the Regular Security multiplied by the weighted average maturity of the Regular Security. For this purpose, the weighted average maturity of the Regular Security 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 Regular Security and the denominator of which is the stated redemption price at maturity of the Regular Security. The Conference Committee Report to the 1986 Act provides that the schedule of those distributions should be determined in accordance with the assumed rate of prepayment of the mortgage loans (the "Prepayment Assumption") and the anticipated reinvestment rate, if any, relating to the Regular Securities. The Prepayment Assumption for a series of Regular Securities will be set forth in the prospectus supplement. Holders generally must report de minimis original issue discount pro rata as principal payments are received, and that income will generally be capital gain if the Regular Security is held as a capital asset. Under the OID Regulations, however, Regular Securityholders may elect to accrue all de minimis original issue discount as well as market discount and market premium, under the constant yield method. See "-Election to Treat All Interest Under the Constant Yield Method" below. A Regular Securityholder generally must include in gross income for any taxable year the sum of the "daily portions," as defined below, of the original issue discount on the Regular Security accrued during an accrual period for each day on which it holds the Regular Security, including the date of purchase but excluding the date of disposition. The trustee will treat the monthly period ending on the day before each Distribution Date as the accrual period. For each Regular Security, a calculation will be made of the original issue discount that accrues during each successive full accrual period (or shorter period from the date of original issue) that ends on the day before the related Distribution Date on the Regular Security. The Conference Committee Report to the 1986 Act states that the rate of accrual of original issue discount is intended to be based on the Prepayment Assumption. The original issue discount accruing in a full accrual period would be the excess, if any, of: (1) the sum of: (a) the present value of all of the remaining distributions to be made on the Regular Security as of the end of that accrual period and (b) the distributions made on the Regular Security during the accrual period that are included in the Regular Security's stated redemption price at maturity, over (2) the adjusted issue price of the Regular Security at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence is calculated based on: (1) the yield to maturity of the Regular Security at the issue date; and (2) the Prepayment Assumption. For these purposes, the adjusted issue price of a Regular Security at the beginning of any accrual period equals the issue price of the Regular Security, increased by the total amount of original issue discount for the Regular Security that accrued in all prior accrual periods and reduced by the amount of distributions included in the Regular Security's stated redemption price at maturity that were made on the Regular Security in those prior periods. The original issue discount accruing during any accrual period (as determined in this paragraph) will then be divided by the number of days in the period to determine the daily portion of original issue discount for each day in the period. For an initial accrual period shorter than a full accrual period, the daily portions of original issue discount must be determined according to an appropriate allocation under any reasonable method. Under the method described above, the daily portions of original issue discount required to be included in income by a Regular Securityholder generally will increase to take into account prepayments on the Regular Securities as a result of prepayments on the mortgage loans that exceed the Prepayment Assumption, and generally will decrease (but not below zero for any period) if the prepayments are slower than the Prepayment Assumption. An increase in prepayments on the mortgage loans for a series of Regular Securities can result in both a change in the priority of principal payments for some Classes of Regular Securities and either an increase or decrease in the daily portions of original issue discount for those Regular Securities. (3) Acquisition Premium A purchaser of a Regular Security having original issue discount at a price greater than its adjusted issue price but less than its stated redemption price at maturity will be required to include in gross income the daily portions of the original issue discount on the Regular Security reduced pro rata by a fraction, the numerator of which is the excess of its purchase price over the adjusted issue price and the denominator of which is the excess of the remaining stated redemption price at maturity over the adjusted issue price. Alternatively, a subsequent purchaser may elect to treat all that acquisition premium under the constant yield method, as described below under the heading "--Election to Treat All Interest Under the Constant Yield Method" below. (4) Variable Rate Regular Securities Regular Securities may provide for interest based on a variable rate. Under the OID Regulations, interest is treated as payable at a qualified variable rate if, generally, (1) the issue price does not exceed the original principal balance by more than a specified amount (2) it does not provide for any principal payments that are contingent, within the meaning of the OID Regulations, except as provided in (1), and (3) the interest compounds or is payable at least annually at current values of (a) one or more "qualified floating rates," (b) a single fixed rate and one or more qualified floating rates, (c) a single "objective rate," or (d) a single fixed rate and a single objective rate that is a "qualified inverse floating rate." A floating rate is a qualified floating rate if variations can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds. A multiple of a qualified floating rate is considered a qualified floating rate only if the rate is equal to either (a) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35 or (b) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate. That rate may also be subject to a fixed cap or floor, or a cap or floor that is not reasonably expected as of the issue date to affect the yield of the instrument significantly. An objective rate is any rate (other than a qualified floating rate) that is determined using a single fixed formula and that is based on objective financial or economic information, provided that the information is not (1) within the control of the issuer or a related party or (2) unique to the circumstances of the issuer or a related party. However, an objective rate does not include a rate if it is reasonably expected that the average value of such rate during the first half of the Regular Security's term will be either significantly less than or significantly greater than the average value of the rate during the final half of the Regular Security's term. A qualified inverse floating rate is a rate equal to a fixed rate minus a qualified floating rate that inversely reflects contemporaneous variations in the qualified floating rate; an inverse floating rate that is not a qualified inverse floating rate may nevertheless be an objective rate. A Class of Regular Securities may be issued under this prospectus that does not have a qualified variable rate under the foregoing rules, for example, a Class that bears different rates at different times during the period it is outstanding that it is considered significantly "front-loaded" or "back-loaded" within the meaning of the OID Regulations. It is possible that a Class may be considered to bear "contingent interest" within the meaning of the OID Regulations. The OID Regulations, as they relate to the treatment of contingent interest, are by their terms not applicable to Regular Securities. However, if final regulations dealing with contingent interest for Regular Securities apply the same principles as the OID Regulations, those regulations may lead to different timing of income inclusion than would be the case under the OID Regulations. Furthermore, application of those principles could lead to the characterization of gain on the sale of contingent interest Regular Securities as ordinary income. Investors should consult their tax advisors regarding the appropriate treatment of any Regular Security that does not pay interest at a fixed rate or qualified variable rate as described in this paragraph. The amount of original issue discount for a Regular Security bearing a qualified variable rate of interest will accrue in the manner described above under "--Original Issue Discount," with the yield to maturity and future payments on that Regular Security generally to be determined by assuming that interest will be payable for the life of the Regular Security based on the initial rate (or, if different, the value of the applicable variable rate as of the pricing date) for the relevant Class, if the Class bears interest at a qualified floating rate or qualified inverse floating rate, or based on a fixed rate which reflects the reasonably expected yield for the relevant Class, if the Class bears interest at an objective rate (other than a qualified inverse floating rate). Unless required otherwise by applicable final regulations, it is anticipated that the trustee will treat interest, other than variable interest on an interest-only or super-premium Class, as qualified stated interest at the qualified variable rate. However, the qualified stated interest allocable to an accrual period will be increased (or decreased) if the interest actually paid during the accrual period exceed (or is less than) the interest assumed to be paid under the rate just described. (5) Market Discount A subsequent purchaser of a Regular Security also may be subject to the market discount rules of Code Sections 1276 through 1278. Under these sections and the principles applied by the OID Regulations in the context of original issue discount, "market discount" is the amount by which the purchaser's original basis in the Regular Security (1) is exceeded by the remaining outstanding principal payments and interest payments other than qualified stated interest payments due on a Regular Security, or (2) in the case of a Regular Security having original issue discount, is exceeded by the adjusted issue price of that Regular Security at the time of purchase. The purchaser generally will be required to recognize ordinary income to the extent of accrued market discount on that Regular Security as distributions includible in the stated redemption price at maturity of the Regular Security are received, in an amount not exceeding that distribution. The market discount would accrue in a manner to be provided in Treasury regulations and should take into account the Prepayment Assumption. The Conference Committee Report to the 1986 Act provides that until these regulations are issued, the market discount would accrue either (1) on the basis of a constant interest rate, or (2) in the ratio of stated interest allocable to the relevant period to the sum of the interest for that period plus the remaining interest as of the end of that period, or in the case of a Regular Security issued with original issue discount, in the ratio of original issue discount accrued for the relevant period to the sum of the original issue discount accrued for that period plus the remaining original issue discount as of the end of that period. The purchaser also generally will be required to treat a portion of any gain on a sale or exchange of the Regular Security as ordinary income to the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market discount previously reported as ordinary income as partial distributions in reduction of the stated redemption price at maturity were received. The purchaser will be required to defer deduction of a portion of the excess of the interest paid or accrued on indebtedness incurred to purchase or carry a Regular Security over the interest distributable on the Regular Security. The deferred portion of the interest expense in any taxable year generally will not exceed the accrued market discount on the Regular Security for that year. Any deferred interest expense is, in general, allowed as a deduction not later than the year in which the related market discount income is recognized or the Regular Security is disposed of. As an alternative to the inclusion of market discount in income on the foregoing basis, the Regular Securityholder may elect to include market discount in income currently as it accrues on all market discount instruments acquired by the Regular Securityholder in that taxable year or thereafter, in which case the interest deferral rule will not apply. See "--Election to Treat All Interest Under the Constant Yield Method" below regarding an alternative manner in which that election may be deemed to be made. A person who purchases a Regular Security at a price lower than the remaining amounts includible in the stated redemption price at maturity of the security, but higher than its adjusted issue price, does not acquire the Regular Security with market discount, but will be required to report original issue discount, appropriately adjusted to reflect the excess of the price paid over the adjusted issue price. Market discount for a Regular Security will be considered to be zero if the market discount is less than 0.25% of the remaining stated redemption price at maturity of the Regular Security (or, in the case of a Regular Security having original issue discount, the adjusted issue price of that Regular Security) multiplied by the weighted average maturity of the Regular Security (presumably determined as described above in the third paragraph under "--Original Issue Discount" above) remaining after the date of purchase. It appears that de minimis market discount would be reported in a manner similar to de minimis original issue discount. See "--Original Issue Discount" above. Treasury regulations implementing the market discount rules have not yet been issued, and uncertainty exists with respect to many aspects of those rules. Due to the substantial lack of regulatory guidance with respect to the market discount rules, it is unclear how those rules will affect any secondary market that develops for a particular Class of Regular Securities. Prospective investors in Regular Securities should consult their own tax advisors regarding the application of the market discount rules to the Regular Securities and the elections to include market discount in income currently and to accrue market discount on the basis of the constant yield method. (6) Amortizable Premium A Regular Security purchased at a cost greater than its remaining stated redemption price at maturity generally is considered to be purchased at a premium. If the Regular Securityholder holds that Regular Security as a "capital asset" within the meaning of Code Section 1221, the Regular Securityholder may elect under Code Section 171 to amortize the premium under a constant yield method that reflects compounding based on the interval between payments on the Regular Security. The election will apply to all taxable debt obligations (including REMIC regular interests) acquired by the Regular Securityholder at a premium held in that taxable year or thereafter, unless revoked with the permission of the Internal Revenue Service. The Conference Committee Report to the 1986 Act indicates a Congressional intent that the same rules that apply to the accrual of market discount on installment obligations will also apply to amortizing bond premium under Code Section 171 on installment obligations as the Regular Securities, although it is unclear whether the alternatives to the constant interest method described above under "Market Discount" are available. Amortizable bond premium generally will be treated as an offset to interest income on a Regular Security, rather than as a separate deductible item. See "--Election to Treat All Interest Under the Constant Yield Method" below regarding an alternative manner in which the Code Section 171 election may be deemed to be made. (7) Election to Treat All Interest Under the Constant Yield Method A holder of a debt instrument such as a Regular Security may elect to treat all interest that accrues on the instrument using the constant yield method, with none of the interest being treated as qualified stated interest. For purposes of applying the constant yield method to a debt instrument subject to this election, (1) "interest" includes stated interest, original issue discount, de minimis original issue discount, market discount and de minimis market discount, as adjusted by any amortizable bond premium or acquisition premium and (2) the debt instrument is treated as if the instrument were issued on the holder's acquisition date in the amount of the holder's adjusted basis immediately after acquisition. It is unclear whether, for this purpose, the initial Prepayment Assumption would continue to apply or if a new prepayment assumption as of the date of the holder's acquisition would apply. A holder generally may make this election on an instrument by instrument basis or for a class or group of debt instruments. However, if the holder makes this election for a debt instrument with amortizable bond premium, the holder is deemed to have made elections to amortize bond premium currently as it accrues under the constant yield method for all premium bonds held by the holder in the same taxable year or thereafter. Alternatively, if the holder makes this election for a debt instrument with market discount, the holder is deemed to have made elections to report market discount income currently as it accrues under the constant yield method for all market discount bonds acquired by the holder in the same taxable year or thereafter. The election is made on the holder's federal income tax return for the year in which the debt instrument is acquired and is irrevocable except with the approval of the Internal Revenue Service. Investors should consult their own tax advisors regarding the advisability of making this election. (8) Treatment of Losses Regular Securityholders will be required to report income for Regular Securities on the accrual method of accounting, without giving effect to delays or reductions in distributions attributable to defaults or delinquencies on the mortgage loans, except to the extent it can be established that the losses are uncollectible. Accordingly, the holder of a Regular Security, particularly a Subordinate Security, may have income, or may incur a diminution in cash flow as a result of a default or delinquency, but may not be able to take a deduction (subject to the discussion below) for the corresponding loss until a subsequent taxable year. In this regard, investors are cautioned that while they may generally cease to accrue interest income if it reasonably appears that the interest will be uncollectible, the Internal Revenue Service may take the position that original issue discount must continue to be accrued in spite of its uncollectibility until the debt instrument is disposed of in a taxable transaction or becomes worthless in accordance with the rules of Code Section 166. To the extent the rules of Code Section 166 regarding bad debts are applicable, it appears that Regular Securityholders that are corporations or that otherwise hold the Regular Securities in connection with a trade or business should in general be allowed to deduct as an ordinary loss that loss with respect to principal sustained during the taxable year on account of any Regular Securities becoming wholly or partially worthless, and that, in general, Regular Securityholders that are not corporations and do not hold the Regular Securities in connection with a trade or business should be allowed to deduct as a short-term capital loss any loss sustained during the taxable year on account of a portion of any Regular Securities becoming wholly worthless. Although the matter is not free from doubt, non-corporate Regular Securityholders should be allowed a bad debt deduction at the time the principal balance of the Regular Securities is reduced to reflect losses resulting from any liquidated mortgage loans. The Internal Revenue Service, however, could take the position that non-corporate holders will be allowed a bad debt deduction to reflect those losses only after all the mortgage loans remaining in the trust fund have been liquidated or the applicable Class of Regular Securities has been otherwise retired. The Internal Revenue Service could also assert that losses on the Regular Securities are deductible based on some other method that may defer those deductions for all holders, such as reducing future cashflow for purposes of computing original issue discount. This may have the effect of creating "negative" original issue discount that would be deductible only against future positive original issue discount or otherwise upon termination of the Class. Regular Securityholders are urged to consult their own tax advisors regarding the appropriate timing, amount and character of any loss sustained for their Regular Securities. While losses attributable to interest previously reported as income should be deductible as ordinary losses by both corporate and non-corporate holders, the Internal Revenue Service may take the position that losses attributable to accrued original issue discount may only be deducted as capital losses in the case of non-corporate holders who do not hold the Regular Securities in connection with a trade or business. Special loss rules are applicable to banks and thrift institutions, including rules regarding reserves for bad debts. These taxpayers are advised to consult their tax advisors regarding the treatment of losses on Regular Securities. (9) Sale or Exchange of Regular Securities If a Regular Securityholder sells or exchanges a Regular Security, the Regular Securityholder will recognize gain or loss equal to the difference, if any, between the amount received and its adjusted basis in the Regular Security. The adjusted basis of a Regular Security generally will equal the original cost of the Regular Security to the seller, increased by any original issue discount or market discount previously included in the seller's gross income for the Regular Security and reduced by amounts included in the stated redemption price at maturity of the Regular Security that were previously received by the seller, by any amortized premium, and by any recognized losses. Except as described above regarding market discount, and except as provided in this paragraph, any gain or loss on the sale or exchange of a Regular Security realized by an investor who holds the Regular Security as a capital asset will be capital gain or loss and will be long-term or short-term depending on whether the Regular Security has been held for the long-term capital gain holding period (currently, more than one year). That gain will be treated as ordinary income (1) if a Regular Security 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 Regular Securityholder's net investment in the conversion transaction at 120% of the appropriate applicable federal rate in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income for any prior disposition of property that was held as part of that transaction; (2) in the case of a non-corporate taxpayer, to the extent that the taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary income rates; or (3) to the extent that the gain does not exceed the excess, if any, of (a) the amount that would have been includible in the gross income of the holder if its yield on that Regular Security were 110% of the applicable federal rate as of the date of purchase, over (b) the amount of income actually includible in the gross income of the holder for that Regular Security (the "110% yield rule"). In addition, gain or loss recognized from the sale of a Regular Security by some banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c). Long-term capital gains of noncorporate taxpayers generally are subject to a lower maximum tax rate (20%) than ordinary income of those taxpayers (39.6%) for property held for more than one year with further rate reductions for property held for more than five years. Currently, the maximum tax rate for corporations is the same for both ordinary income and capital gains. TAXATION OF OWNERS OF RESIDUAL SECURITIES (1) Taxation of REMIC Income Generally, the "daily portions" of REMIC taxable income or net loss will be includible as ordinary income or loss in determining the federal taxable income of holders of Residual Securities ("Residual Holders"), and will not be taxed separately to the REMIC Pool. The daily portions of REMIC taxable income or net loss of a Residual Holder are determined by allocating the REMIC Pool's taxable income or net loss for each calendar quarter ratably to each day in that quarter and by allocating that daily portion among the Residual Holders in proportion to their respective holdings of Residual Securities in the REMIC Pool on that day. REMIC taxable income is generally determined in the same manner as the taxable income of an individual using the accrual method of accounting, except that (1) the limitations on deductibility of investment interest expense and expenses for the production of income do not apply; (2) all bad loans will be deductible as business bad debts; and (3) the limitation on the deductibility of interest and expenses related to tax-exempt income will apply. The REMIC Pool's gross income includes interest, original issue discount income and market discount income, if any, on the mortgage loans, reduced by amortization of any premium on the mortgage loans, plus income from amortization of issue premium, if any, on the Regular Securities, plus income on reinvestment of cash flows and reserve assets, plus any cancellation of indebtedness income upon allocation of realized losses to the Regular Securities. The REMIC Pool's deductions include interest and original issue discount expense on the Regular Securities, servicing fees on the mortgage loans, other administrative expenses of the REMIC Pool and realized losses on the mortgage loans. The requirement that Residual Holders report their pro rata share of taxable income or net loss of the REMIC Pool will continue until there are no Notes or Certificates, as applicable, of any class of the related series outstanding. The taxable income recognized by a Residual Holder in any taxable year will be affected by, among other factors, the relationship between the timing of recognition of interest, original issue discount or market discount income or amortization of premium for the mortgage loans, on the one hand, and the timing of deductions for interest (including original issue discount) or income from amortization of issue premium on the Regular Securities, on the other hand. If an interest in the mortgage loans is acquired by the REMIC Pool at a discount, and one or more of these mortgage loans is prepaid, the prepayment may be used in whole or in part to make distributions in reduction of principal on the Regular Securities, and the discount on the mortgage loans that is includible in income may exceed the original issue discount deductions allowed with respect to the Regular Securities. When there is more than one Class of Regular Securities that distribute principal sequentially, this mismatching of income and deductions is particularly likely to occur in the early years following issuance of the Regular Securities when distributions in reduction of principal are being made in respect of earlier Classes of Regular Securities to the extent that those Classes are not issued with substantial discount or are issued at a premium. If taxable income attributable to that mismatching is realized, in general, losses would be allowed in later years as distributions on the later maturing Classes of Regular Securities are made. Taxable income may also be greater in earlier years than in later years as a result of the fact that interest expense deductions, expressed as a percentage of the outstanding principal amount of that series of Regular Securities, may increase over time as distributions in reduction of principal are made on the lower yielding Classes of Regular Securities, whereas, to the extent the REMIC Pool consists of fixed rate mortgage loans, interest income for any particular mortgage loan will remain constant over time as a percentage of the outstanding principal amount of that loan. Consequently, Residual Holders must have sufficient other sources of cash to pay any federal, state, or local income taxes due as a result of that mismatching or unrelated deductions against which to offset that income, subject to the discussion of "excess inclusions" below under "--Limitations on Offset or Exemption of REMIC Income." The timing of mismatching of income and deductions described in this paragraph, if present for a series of Notes or Certificates, as applicable, may have a significant adverse effect upon a Residual Holder's after-tax rate of return. A portion of the income of a Residual Holder may be treated unfavorably in three contexts: (1) it may not be offset by current or net operating loss deductions; (2) it will be considered unrelated business taxable income to tax-exempt entities; and (3) it is ineligible for any statutory or treaty reduction in the 30% withholding tax otherwise available to a foreign Residual Holder. See "--Limitations on Offset or Exemption of REMIC Income" below. In addition, a Residual Holder's taxable income during some periods may exceed the income reflected by those Residual Holders for those periods in accordance with generally accepted accounting principles. Investors should consult their own accountants concerning the accounting treatment of their investment in Residual Securities. (2) Basis and Losses The amount of any net loss of the REMIC Pool that may be taken into account by the Residual Holder is limited to the adjusted basis of the Residual Security as of the close of the quarter (or time of disposition of the Residual Security if earlier), determined without taking into account the net loss for the quarter. The initial adjusted basis of a purchaser of a Residual Security is the amount paid for that Residual Security. The adjusted basis will be increased by the amount of taxable income of the REMIC Pool reportable by the Residual Holder and will be decreased (but not below zero), first, by a cash distribution from the REMIC Pool and, second, by the amount of loss of the REMIC Pool reportable by the Residual Holder. Any loss that is disallowed on account of this limitation may be carried over indefinitely with respect to the Residual Holder as to whom the loss was disallowed and may be used by the Residual Holder only to offset any income generated by the same REMIC Pool. A Residual Holder will not be permitted to amortize directly the cost of its Residual Security as an offset to its share of the taxable income of the related REMIC Pool. However, if, in any year, cash distributions to a Residual Holder exceed its share of the REMIC's taxable income, the excess will constitute a return of capital to the extent of the holder's basis in its Residual Security. A return of capital is not treated as income for federal income tax purposes, but will reduce the tax basis of the Residual Holder (but not below zero). If a Residual Security's basis is reduced to zero, any cash distributions with respect to that Residual Security in any taxable year in excess of its share of the REMIC's income would be taxable to the holder as gain on the sale or exchange of its interest in the REMIC. A Residual Security may have a negative value if the net present value of anticipated tax liabilities exceeds the present value of anticipated cash flows. The REMIC Regulations appear to treat the issue price of the residual interest as zero rather than the negative amount for purposes of determining the REMIC Pool's basis in its assets. The preamble to the REMIC Regulations states that the Internal Revenue Service may provide future guidance on the proper tax treatment of payments made by a transferor of the residual interest to induce the transferee to acquire the interest, and Residual Holders should consult their own tax advisors in this regard. Further, to the extent that the initial adjusted basis of a Residual Holder (other than an original holder) in the Residual Security is greater than the corresponding portion of the REMIC Pool's basis in the mortgage loans, the Residual Holder will not recover a portion of the basis until termination of the REMIC Pool unless future Treasury regulations provide for periodic adjustments to the REMIC income otherwise reportable by the holder. The REMIC Regulations currently in effect do not so provide. See "--Treatment of Certain Items of REMIC Income and Expense--Market Discount" below regarding the basis of mortgage loans to the REMIC Pool and "--Sale or Exchange of a Residual Security" below regarding possible treatment of a loss upon termination of the REMIC Pool as a capital loss. (3) Treatment of Certain Items of REMIC Income and Expense Although it is anticipated that the trustee will compute REMIC income and expense in accordance with the Code and applicable regulations, the authorities regarding the determination of specific items of income and expense are subject to differing interpretations. The depositor makes no representation as to the specific method that will be used for reporting income with respect to the mortgage loans and expenses for the Regular Securities, and different methods could result in different timing or reporting of taxable income or net loss to Residual Holders or differences in capital gain versus ordinary income. Original Issue Discount and Premium. Generally, the REMIC Pool's deductions for original issue discount and income from amortization of premium will be determined in the same manner as original issue discount income on Regular Securities as described above under "--Taxation of Owners of Regular Securities--Original Issue Discount" and "--Variable Rate Regular Securities," without regard to the de minimis rule described therein, and "--Amortizable Premium." MARKET DISCOUNT. The REMIC Pool will have market discount income in respect of mortgage loans if, in general, the basis of the REMIC Pool in those mortgage loans is exceeded by their unpaid principal balances. The REMIC Pool's basis in those mortgage loans is generally the fair market value of the mortgage loans immediately after the transfer of the mortgage loans to the REMIC Pool. The REMIC Regulations provide that the basis is equal to the total of the issue prices of all regular and residual interests in the REMIC Pool. The market discount must be recognized currently as an item of ordinary income as it accrues, rather than being included in income upon the sale of mortgage loans or as principal on the mortgage loans is paid. Market discount income generally should accrue in the manner described above under "--Taxation of Owners of Regular Securities--Market Discount." Premium. Generally, if the basis of the REMIC Pool in the mortgage loans exceeds the unpaid principal balances of the mortgage loans, the REMIC Pool will be considered to have acquired those mortgage loans at a premium equal to the amount of that excess. As stated above, the REMIC Pool's basis in mortgage loans is generally the fair market value of the mortgage loans and is based on the total of the issue prices of the regular and residual interests in the REMIC Pool immediately after the transfer of the mortgage loans to the REMIC Pool. In a manner analogous to the discussion above under "--Taxation of Owners of Regular Securities--Amortizable Premium," a person that holds a mortgage loan as a capital asset under Code Section 1221 may elect under Code Section 171 to amortize premium on mortgage loans originated after September 27, 1985, under the constant yield method. Amortizable bond premium will be treated as an offset to interest income on the mortgage loans, rather than as a separate deduction item. Because substantially all of the borrowers on the mortgage loans are expected to be individuals, Code Section 171 will not be available for premium on mortgage loans originated on or before September 27, 1985. Premium for those mortgage loans may be deductible in accordance with a reasonable method regularly employed by the holder of those mortgage loans. The allocation of that premium pro rata among principal payments should be considered a reasonable method; however, the Internal Revenue Service may argue that the premium should be allocated in a different manner, such as allocating the premium entirely to the final payment of principal. (4) Limitations on Offset or Exemption of REMIC Income A portion (or all) of the REMIC taxable income includible in determining the federal income tax liability of a Residual Holder will be subject to special treatment. That portion, referred to as the "excess inclusion," is equal to the excess of REMIC taxable income for the calendar quarter allocable to a Residual Security over the daily accruals for that quarterly period of (1) 120% of the long-term applicable federal rate that would have applied to the Residual Security (if it were a debt instrument) on the Startup Day under Code Section 1274(d), multiplied by (2) the adjusted issue price of the Residual Security at the beginning of the quarterly period. For this purpose, the adjusted issue price of a Residual Security at the beginning of a quarter is the issue price of the Residual Security, plus the amount of those daily accruals of REMIC income described in this paragraph for all prior quarters, decreased by any distributions made with respect to the Residual Security before the beginning of that quarterly period. The portion of a Residual Holder's REMIC taxable income consisting of the excess inclusions generally may not be offset by other deductions, including net operating loss carryforwards, on the Residual Holder's return. However, net operating loss carryovers are determined without regard to excess inclusion income. Further, if the Residual Holder is an organization subject to the tax on unrelated business income imposed by Code Section 511, the Residual Holder's excess inclusions will be treated as unrelated business taxable income of the Residual Holder for purposes of Code Section 511. In addition, REMIC taxable income is subject to 30% withholding tax for persons who are not U.S. Persons (as defined below under "--Tax-Related Restrictions on Transfer of Residual Securities--Foreign Investors"), and the portion thereof attributable to excess inclusions is not eligible for any reduction in the rate of withholding tax (by treaty or otherwise). See "--Taxation of Certain Foreign Investors--Residual Securities" below. Finally, if a real estate investment trust or a regulated investment company owns a Residual Security, a portion (allocated under Treasury regulations yet to be issued) of dividends paid by the real estate investment trust or regulated investment company could not be offset by net operating losses of its shareholders, would constitute unrelated business taxable income for tax-exempt shareholders, and would be ineligible for reduction of withholding to persons who are not U.S. Persons. Provisions governing the relationship between excess inclusions and the alternative minimum tax provide that (i) alternative minimum taxable income for a Residual Holder is determined without regard to the special rule, discussed above, that taxable income cannot be less than excess inclusions, (ii) a Residual Holder's alternative minimum taxable income for a taxable year cannot be less than the excess inclusions for the year, and (iii) the amount of any alternative minimum tax net operating loss deduction must be computed without regard to any excess inclusions. The Internal Revenue Service has authority to promulgate regulations providing that if the aggregate value of the Residual Securities is not considered to be "significant," then the entire share of REMIC taxable income of a Residual Holder may be treated as excess inclusions subject to the foregoing limitations. This authority has not been exercised to date. (5) Tax-Related Restrictions on Transfer of Residual Securities DISQUALIFIED ORGANIZATIONS. If any legal or beneficial interest in a Residual Security is transferred to a Disqualified Organization (as defined below), a tax would be imposed in an amount equal to the product of (1) the present value of the total anticipated excess inclusions for that Residual Security for periods after the transfer and (2) the highest marginal federal income tax rate applicable to corporations. The REMIC Regulations provide that the anticipated excess inclusions are based on actual prepayment experience to the date of the transfer and projected payments based on the Prepayment Assumption. The present value rate equals the applicable federal rate under Code Section 1274(d) as of the date of the transfer for a term ending with the last calendar quarter in which excess inclusions are expected to accrue. That rate is applied to the anticipated excess inclusions from the end of the remaining calendar quarters in which they arise to the date of the transfer. That tax generally would be imposed on the transferor of the Residual Security, except that where the transfer is through an agent (including a broker, nominee, or other middleman) for a Disqualified Organization, the tax would instead be imposed on the agent. However, a transferor of a Residual Security would in no event be liable for the tax for a transfer if the transferee furnished to the transferor an affidavit stating that the transferee is not a Disqualified Organization and, as of the time of the transfer, the transferor does not have actual knowledge that the affidavit is false. Under the REMIC Regulations, an affidavit will be sufficient if the transferee furnishes (A) a social security number, and states under penalties of perjury that the social security number is that of the transferee, or (B) a statement under penalties of perjury that it is not a disqualified organization. "Disqualified Organization" means the United States, any state or political subdivision of the United States, any foreign government, any international organization, any agency or instrumentality of any of the foregoing (provided, that the term does not include an instrumentality if all of its activities are subject to tax and a majority of its board of directors in not selected by any governmental entity), any cooperative organization furnishing electric energy or providing telephone service to persons in rural areas as described in Code Section 1381(a)(2)(C), and any organization (other than a farmers' cooperative described in Code Section 531) that is exempt from taxation under the Code unless the organization is subject to the tax on unrelated business income imposed by Code Section 511. In addition, if a "Pass-Through Entity" (as defined below) has excess inclusion income for a Residual Security during a taxable year and a Disqualified Organization is the record holder of an equity interest in that entity, then a tax is imposed on the entity equal to the product of (1) the amount of excess inclusions that are allocable to the interest in the Pass-Through Entity during the period that interest is held by the Disqualified Organization, and (2) the highest marginal federal corporate income tax rate. That tax would be deductible from the ordinary gross income of the Pass-Through Entity for the taxable year. The Pass-Through Entity would not be liable for the tax if (1) it has received an affidavit from the record holder stating, under penalties of perjury, that it is not a Disqualified Organization, or providing the holder's taxpayer identification number and stating, under penalties of perjury, that the social security number is that of the record owner, and (2) during the period that person is the record holder of the Residual Security, the Pass-Through Entity does not have actual knowledge that the affidavit is false. "Pass-Through Entity" means any regulated investment company, real estate investment trust, common trust fund, partnership, trust or estate and corporations operating on a cooperative basis. Except as may be provided in Treasury regulations, any person holding an interest in a Pass-Through Entity as a nominee for another will, with respect to that interest, be treated as a Pass-Through Entity. If an "electing large partnership" holds a Residual Security, all interests in the electing large partnership are treated as held by Disqualified Organizations for purposes of the tax imposed upon a Pass-Through Entity by Section 860E(c) of the Code. The exception to this tax, otherwise available to a Pass-Through Entity that is furnished particular affidavits by record holders of interests in the entity and that does not know those affidavits are false, is not available to an electing large partnership. The pooling and servicing agreement for a series will provide that no legal or beneficial interest in a Residual Security may be transferred or registered unless (1) the proposed transferee furnished to the transferor and the trustee an affidavit providing its taxpayer identification number and stating that the transferee is the beneficial owner of the Residual Security and is not a Disqualified Organization and is not purchasing the Residual Security on behalf of a Disqualified Organization (i.e., as a broker, nominee or middleman) and (2) the transferor provides a statement in writing to the trustee that it has no actual knowledge that the affidavit is false. Moreover, the pooling and servicing agreement will provide that any attempted or purported transfer in violation of these transfer restrictions will be null and void and will vest no rights in any purported transferee. Each Residual Security for a series will bear a legend referring to those restrictions on transfer, and each Residual Holder will be deemed to have agreed, as a condition of ownership of the Residual Security, to any amendments to the related pooling and servicing agreement required under the Code or applicable Treasury regulations to effectuate the foregoing restrictions. Information necessary to compute an applicable excise tax must be furnished to the Internal Revenue Service and to the requesting party within 60 days of the request, and the Seller or the trustee may charge a fee for computing and providing that information. NONECONOMIC RESIDUAL INTERESTS. The REMIC Regulations would disregard some transfers of Residual Securities, in which case the transferor would continue to be treated as the owner of the Residual Securities and thus would continue to be subject to tax on its allocable portion of the net income of the REMIC Pool. Under the REMIC Regulations, a transfer of a "noneconomic residual interest" (as defined below) to a Residual Holder (other than a Residual Holder who is not a U.S. Person as defined below under "--Foreign Investors") is disregarded to all federal income tax purposes if a significant purpose of the transfer is to impede the assessment or collection of tax. A residual interest in a REMIC (including a residual interest with a positive value at issuance) is a "noneconomic residual interest" unless, at the time of the transfer, (1) the present value of the expected future distributions on the residual interest at least equals the product of the present value of the anticipated excess inclusions and the highest corporate income tax rate in effect for the year in which the transfer occurs, and (2) the transferor reasonably expects that the transferee will receive distributions from the REMIC at or after the time at which taxes accrue on the anticipated excess inclusions in an amount sufficient to satisfy the accrued taxes on each excess inclusion. The anticipated excess inclusions and the present value rate are determined in the same manner as set forth above under "--Disqualified Organizations." The REMIC Regulations explain that a significant purpose to impede the assessment or collection of tax exists if the transferor, at the time of the transfer, either knew or should have known that the transferee would be unwilling or unable to pay taxes due on its share of the taxable income of the REMIC. A safe harbor is provided if (1) the transferor conducted, at the time of the transfer, a reasonable investigation of the financial condition of the transferee and found that the transferee historically had paid its debts as they came due and found no significant evidence to indicate that the transferee would not continue to pay its debts as they came due in the future, (2) the transferee represents to the transferor that it understands that, as the holder of the non-economic residual interest, the transferee may incur liabilities in excess of any cash flows generated by the interest and that the transferee intends to pay taxes associated with holding the residual interest as they become due, and (3) either the formula test or the asset test (each as described below) is satisfied. The formula test is satisfied if the present value of the anticipated tax liabilities associated with holding the Residual Security does not exceed the sum of the present values of (1) any consideration given to the transferee to the acquire the Residual Security, (2) the expected future distributions on the Residual Security, and (3) the anticipated tax savings associated with holding the Residual Security as the REMIC generates losses. For purposes of this calculation, the present values generally are calculated using a discount rate equal to the applicable federal rate, and the transferee is assumed to pay tax at the highest corporate rate of tax. The asset test is satisfied if 1. at the time of the transfer of the Residual Security, and at the close of each of the transferee's two fiscal years preceding the year of transfer, the transferee's gross assets for financial reporting purposes exceed $100 million and its net assets for financial reporting purposes exceed $10 million, 2. the transferee is a taxable domestic C corporation, other than a RIC, REIT, REMIC or Subchapter T cooperative (an "Eligible Corporation"), that makes a written agreement that any subsequent transfer of the Residual Security will be to another Eligible Corporation in a transaction that satisfies the safe harbor described above, and the transferor does not know, or have reason to know, that the transferee will not honor such agreement, and 3. the facts and circumstances known to the transferor on or before the date of transfer do not reasonably indicate that the taxes associated with the Residual Security will not be paid. For purposes of requirement (1), the gross and net assets of a transferee do not include any obligations of a person related to the transferee or any other asset if a principal purpose for holding or acquiring the asset is to permit the transferee to satisfy the asset test. Further, requirement (2) will not be treated as satisfied in the case of any transfer or assignment of the Residual Security to a foreign branch of an Eligible Corporation or any other arrangement by which the Residual Security is at any time subject to net tax by a foreign country or possession of the United States. FOREIGN INVESTORS. The REMIC Regulations provide that the transfer of a Residual Security that has "tax avoidance potential" to a "foreign person" will be disregarded for all federal tax purposes. This rule appears intended to apply to a transferee who is not a "U.S. Person" (as defined below), unless the transferee's income is effectively connected with the conduct of a trade or business within the United States. A Residual Security is deemed to have tax avoidance potential unless, at the time of the transfer, the transferor reasonably expects that (1) the future distributions on the Residual Security will equal at least 30% of the anticipated excess inclusions after the transfer, and (2) such amounts will be distributed at or after the time at which the excess inclusions accrue and before the end of the next succeeding taxable year. A safe harbor in the REMIC Regulations provides that the reasonable expectation requirement will be satisfied if the above test would be met at all assumed prepayment rates for the mortgage loans from 50 percent to 200 percent of the Prepayment Assumption. If the non-U.S. Person transfers the Residual Security back to a U.S. Person, the transfer will be disregarded and the foreign transferor will continue to be treated as the owner unless arrangements are made so that the transfer does not have the effect of allowing the transferor to avoid tax on accrued excess inclusions. The prospectus supplement relating to the Certificates of a series may provide that a Residual Security may not be purchased by or transferred to any person that is not a U.S. Person or may describe the circumstances and restrictions pursuant to which the transfer may be made. The term "U.S. Person" means a citizen or resident of the United States, a corporation or partnership (or other entity properly treated as a partnership or as a corporation for federal income tax purposes) created or organized in or under the laws of the United States or of any state (including, for this purpose, the District of Columbia), an estate that is subject to U.S. federal income tax regardless of the source of its income, or 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 U.S. Persons have the authority to control all substantial decisions of the trust (or, to the extent provided in applicable Treasury regulations, trusts in existence on August 20, 1996, which are eligible to elect and do elect to be treated as U.S. Persons). (6) Sale or Exchange of a Residual Security Upon the sale or exchange of a Residual Security, the Residual Holder will recognize gain or loss equal to the excess, if any, of the amount realized over the adjusted basis (as described above under "--Taxation of Owners of Residual Securities--Basis and Losses") of the Residual Holder in the Residual Security at the time of the sale or exchange. Further, as described above under "--Taxation of Owners of Residual Securities--Basis and Losses", if a Residual Security's basis is reduced to zero, any cash distributions with respect to that Residual Security in any taxable year in excess of its share of the REMIC's income for that year would be taxable to the holder as gain on the sale or exchange of its interest in the REMIC. If a Residual Holder has an adjusted basis in its Residual Security when its interest in the REMIC Pool terminates, then it will recognize a capital loss (assuming the Residual Security was held as a capital asset) at that time in an amount equal to the remaining adjusted basis. Any gain on the sale of a Residual Security will be treated as ordinary income (1) if a Residual Security 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 Residual Holder's net investment in the conversion transaction at 120% of the appropriate applicable federal rate in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income for any prior disposition of property that was held as a part of that transaction or (2) in the case of a non-corporate taxpayer, to the extent that the taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary income rates. In addition, gain or loss recognized from the sale of a Residual Security by some banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c). Except as provided in Treasury regulations yet to be issued, the wash sale rules of Code Section 1091 will apply to dispositions of Residual Securities where the seller of the Residual Security, during the period beginning six months before the sale or disposition of the Residual Security and ending six months after the sale or disposition, acquires (or enters into any other transaction that results in the application of Code Section 1091) any residual interest in any REMIC or any interest in a "taxable mortgage pool" (such as a non-REMIC owner trust) that is economically comparable to a Residual Security. (7) Mark to Market Regulations Treasury regulations provide that a Residual Security acquired on or after January 4, 1995 is not treated as a security and thus may not be marked to market pursuant to Section 475 of the Code. TAXES THAT MAY BE IMPOSED ON THE REMIC POOL (1) Prohibited Transactions Income from transactions by the REMIC Pool, called prohibited transactions, will not be part of the calculation of income or loss includible in the federal income tax returns of Residual Holders, but rather will be taxed directly to the REMIC Pool at a 100% rate. Prohibited transactions generally include: (1) the disposition of a qualified mortgages other than for (a) substitution for a defective (including a defaulted) obligation within two years of the Startup Day (or repurchase in lieu of substitution of a defective (including a defaulted) obligation at any time) or for any qualified mortgage within three months of the Startup Day; (b) foreclosure, default, or imminent default of a qualified mortgage; (c) bankruptcy or insolvency of the REMIC Pool; or (d) a qualified (complete) liquidation; (2) the receipt of income from assets that are not the type of mortgages or investments that the REMIC Pool is permitted to hold; (3) the receipt of compensation for services; or (4) the receipt of gain from disposition of cash flow investments other than pursuant to a qualified liquidation. Notwithstanding (1) and (4) above, it is not a prohibited transaction to sell a qualified mortgage or cash flow investment held by a REMIC Pool to prevent a default on Regular Securities as a result of a default on qualified mortgages or to facilitate a clean-up call (generally, an optional termination to save administrative costs when no more than a small percentage of the Notes or Certificates, as applicable, is outstanding). The REMIC Regulations indicate that the modification of a mortgage loan generally will not be treated as a disposition if it is occasioned by a default or reasonably foreseeable default, an assumption of the mortgage loan, the waiver of a due-on-sale or due-on-encumbrance clause, or the conversion of an interest rate by a borrower pursuant to the terms of a convertible adjustable rate mortgage loan. (2) Contributions to the REMIC Pool After the Startup Day In general, the REMIC Pool will be subject to a tax at a 100% rate on the value of any property contributed to the REMIC Pool after the Startup Day. Exceptions are provided for cash contributions to the REMIC Pool (1) during the three months following the Startup Day, (2) made to a qualified reserve fund by a Residual Holder, (3) in the nature of a guarantee, (4) made to facilitate a qualified liquidation or clean-up call, and (5) as otherwise permitted in Treasury regulations yet to be issued. It is not anticipated that there will be any contributions to the REMIC Pool after the Startup Day. (3) Net Income from Foreclosure Property The REMIC Pool will be subject of federal income tax at the highest corporate rate on "net income from foreclosure property," determined by reference to the rules applicable to real estate investment trusts. Generally, property acquired by deed in lieu of foreclosure would be treated as "foreclosure property" until the close of the third calendar year after the year in which the REMIC Pool acquired that property, with possible extensions. Net income from foreclosure property generally means gain from the sale of a foreclosure property that is inventory property and gross income from foreclosure property other than qualifying rents and other qualifying income for a real estate investment trust. It is not anticipated that the REMIC Pool will have any taxable net income from foreclosure property. (4) Liquidation of the REMIC Pool If a REMIC Pool 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 Pool's final tax return a date on which that adoption is deemed to occur, and sells all of its assets (other than cash) within a 90-day period beginning on that date, the REMIC Pool will not be subject to the prohibited transaction rules on the sale of its assets, provided that the REMIC Pool credits or distributes in liquidation all of the sale proceeds plus its cash (other than amounts retained to meet claims) to holders of Regular Securities and Residual Holders within the 90-day period. (5) Administrative Matters The REMIC Pool will be required to maintain its books on a calendar year basis and to file federal income tax returns for federal income tax purposes in a manner similar to a partnership. The form for the income tax return is Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return. The trustee will be required to sign the REMIC Pool's returns. Treasury regulations provide that, except where there is a single Residual Holder for an entire taxable year, the REMIC Pool will be subject to the procedural and administrative rules of the Code applicable to partnerships, including the determination by the Internal Revenue Service of any adjustments to, among other things, items of REMIC income, gain, loss, deduction, or credit in a unified administrative proceeding. The master servicer will be obligated to act as "tax matters person," as defined in applicable Treasury regulations, for the REMIC Pool as agent of the Residual Holders holding the largest percentage interest in the Residual Securities. If the Code or applicable Treasury regulations do not permit the master servicer to act as tax matters person in its capacity as agent of the Residual Holder, the Residual Holder or any other person specified pursuant to Treasury regulations will be required to act as tax matters person. The tax matters person generally has responsibility for overseeing and providing notice to the other Residual Holders of administrative and judicial proceedings regarding the REMIC Pool's tax affairs, although other holders of the Residual Securities of the same series would be able to participate in those proceedings in appropriate circumstances. (6) Limitations on Deduction of Certain Expenses An investor who is an individual, estate, or trust will be subject to limitation with respect to some itemized deductions described in Code Section 67, to the extent that those itemized deductions, in total, do not exceed 2% of the investor's adjusted gross income. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership," 70% of that partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. In addition, Code Section 68 provides that itemized deductions otherwise allowable for a taxable year of an individual taxpayer will be reduced by the lesser or (1) 3% of the excess, if any, of adjusted gross income over $100,000 ($50,000 in the case of a married individual filing a separate return) (subject to adjustment for inflation), or (2) 80% of the amount of itemized deductions otherwise allowable for that year. In the case of a REMIC Pool, those deductions may include deductions under Code Section 212 for the Servicing Fee and all administrative and other expenses relating to the REMIC Pool, or any similar expenses allocated to the REMIC Pool for a regular interest it holds in another REMIC. Those investors who hold REMIC Securities either directly or indirectly through pass-through entities may have their pro rata share of those expenses allocated to them as additional gross income, but may be subject to that limitation on deductions. In addition, those expenses are not deductible at all for purposes of computing the alternative minimum tax, and may cause those investors to be subject to significant additional tax liability. Temporary Treasury regulations provide that the additional gross income and corresponding amount of expenses generally are to be allocated entirely to the holders of Residual Securities in the case of a REMIC Pool that would not qualify as a fixed investment trust in the absence of a REMIC election. For a REMIC Pool that would be classified as an investment trust in the absence of a REMIC election or that is substantially similar to an investment trust, any holder of a Regular Security that is an individual, trust, estate, or pass-through entity also will be allocated its pro rata share of those expenses and a corresponding amount of income and will be subject to the limitations or deductions imposed by Code Sections 67 and 68, as described above. The prospectus supplement will indicate if all those expenses will not be allocable to the Residual Securities. TAXATION OF CERTAIN FOREIGN INVESTORS (1) Regular Securities Interest, including original issue discount, distributable to Regular Securityholders who are non-resident aliens, foreign corporations, or other Non-U.S. Persons (as defined below), generally will be considered "portfolio interest" and, therefore, generally will not be subject to 30% United States withholding tax, provided that (1) the interest is not effectively connected with the conduct of a trade or business in the United States of the securityholder, (2) the Non-U.S. Person 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) and (3) that Non-U.S. Person complies to the extent necessary with certain certification requirements, which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is a Non-U.S. person. Each Regular Securityholder should consult its tax advisors regarding the tax documentation and certifications that must be provided to secure the exemption from United States withholding taxes. Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a Regular Security by a Non-U.S. Person generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Person and (ii) in the case of an individual Non-U.S. Person, the Non-U.S. Person is not present in the United States for 183 days or more in the taxable year. If the interest on the Regular Security is effectively connected with the conduct of a trade or business within the United States by that Non-U.S. Person, the Non-U.S. Person, although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected, will be subject to United States federal income tax at regular rates. Investors who are Non-U.S. Persons should consult their own tax advisors regarding the specific tax consequences to them of owning a Regular Security. The term "Non-U.S. Person" means any person who is not a U.S. Person. (2) Residual Securities The Conference Committee Report to the 1986 Act indicates that amounts paid to Residual Holders who are Non-U.S. Persons generally should be treated as interest for purposes of the 30% (or lower treaty rate) United States withholding tax. Treasury regulations provide that amount distributed to Residual Holders may qualify as "portfolio interest," subject to the conditions described in "Regular Securities" above, but only to the extent that (1) the mortgage loans were issued after July 18, 1984, and (2) the trust fund or segregated pool of assets in the trust fund (as to which a separate REMIC election will be made), to which the Residual Security relates, consists of obligations issued in "registered form" within the meaning of Code Section 163 (f) (1). Generally, mortgage loans will not be, but regular interests in another REMIC Pool will be, considered obligations issued in registered form. Furthermore, Residual Holders will not be entitled to any exemption from the 30% withholding tax (or lower treaty rate) to the extent of that portion of REMIC taxable income that constitutes an "excess inclusion." See "--Taxation of Owners of Residual Securities--Limitations on Offset or Exemption of REMIC Income" above. If the amounts paid to Residual Holders who are Non-U.S. Persons are effectively connected with the conduct of a trade or business within the United States by those Non-U.S. Persons, although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected, the amounts paid to those Non-U.S. Persons will be subject to United States federal income tax at regular rates. See "--Tax-Related Restrictions on Transfer of Residual Securities--Foreign Investors" above concerning the disregard of transfers having "tax avoidance potential." Investors who are Non-U.S. Persons should consult their own tax advisors regarding the specific tax consequences to them of owning Residual Securities. (3) Backup Withholding Distributions made on the REMIC Securities, and proceeds from the sale of the REMIC Securities to or through certain brokers, may be subject to a "backup" withholding tax under Code Section 3406 of 31% on "reportable payments" (including interest distributions, original issue discount, and, under some circumstances, principal distributions) if the Holder fails to comply with certain identification procedures, unless the Holder is otherwise an exempt recipient under applicable provisions of the Code, and, if necessary, demonstrates such status. Any amounts to be withheld from distribution on the REMIC Securities would be refunded by the Internal Revenue Service or allowed as a credit against the Regular Holder's federal income tax liability. FASITs CLASSIFICATION OF FASITS For each series of FASIT Securities, assuming compliance with all provisions of the related pooling and servicing agreement, in the opinion of Stroock & Stroock & Lavan LLP, the related trust fund (or each applicable portion of the trust fund) will qualify as a FASIT. The trust fund will qualify under the Code as a FASIT in which FASIT regular securities (the "FASIT Regular Securities") and the ownership interest security (the "FASIT Ownership Security") will constitute the "regular interests" and the "ownership interest," respectively, if (1) a FASIT election is in effect; (2) tests concerning (a) the composition of the FASIT's assets and (b) the nature of the securityholders' interests in the FASIT are met on a continuing basis; and (3) the trust fund is not a regulated investment company as defined in Section 851(a) of the Code. A segregated pool of assets may also qualify as a FASIT. (1) Asset Composition In order for the trust fund to be eligible for FASIT status, substantially all of the assets of the trust fund must consist of "permitted assets" as of the close of the third month beginning after the closing date and at all times thereafter. Permitted assets include: (1) cash or cash equivalents; (2) debt instruments with fixed terms that would qualify as regular interests if issued by a REMIC as defined in Section 860D of the Code (generally, instruments that provide for interest at a fixed rate, a qualifying variable rate, or a qualifying interest-only type rate); (3) foreclosure property; (4) some hedging instruments (generally, interest and currency rate swaps and credit enhancement contracts) that are reasonably required to guarantee or hedge against the FASIT's risks associated with being the obligor on FASIT interests; (5) contract rights to acquire qualifying debt instruments or qualifying hedging instruments; (6) FASIT regular interests; and (7) REMIC regular interests. Permitted assets do not include any debt instruments issued by the holder of the FASIT's ownership interest or by any person related to that holder. A debt instrument is a permitted asset only if the instrument is indebtedness for federal income tax purposes, including regular interests in a REMIC or regular interests issued by another FASIT, and it bears (1) fixed interest or (2) variable interest of a type that relates to qualified variable rate debt (as defined in Treasury regulations prescribed under section 860G(a)(1)(B)). Permitted hedges include interest rate or foreign currency notional principal contracts, letters of credit, insurance, guarantees against payment default and similar instruments to be provided in regulations, and which are reasonably required to guarantee or hedge against the FASIT's risks associated with being the obligor on interests issued by the FASIT. Foreclosure property is real property acquired by the FASIT in connection with the default or imminent default of a debt instrument, provided the depositor had no knowledge or reason to know as of the date the debt instrument was acquired by the FASIT that a default had occurred or would occur. (2) Interests in a FASIT In addition to the foregoing asset qualification requirements, the interests in a FASIT also must meet specific requirements. All of the interests in a FASIT must belong to either of the following: (1) one or more classes of regular interests or (2) a single class of ownership interest that is held by an Eligible Corporation (as defined in this prospectus). FASIT regular interests generally will be treated as debt for federal income tax purposes. FASIT ownership interests generally will not treated as debt for federal income tax purposes, but rather as representing rights and responsibilities with respect to the taxable income or loss of the related FASIT. The prospectus supplement for each Series of Notes or Certificates, as applicable, will indicate which securities of the Series will be designated as regular interests, and which, if any, will be designated as ownership interests. A FASIT interest generally qualifies as a regular interest if: (1) it is designated as a regular interest; (2) it has a stated maturity no greater than thirty years; (3) it entitles its holder to a specified principal amount; (4) the issue price of the interest does not exceed 125% of its stated principal amount; (5) the yield to maturity of the interest is less than the applicable Treasury rate published by the IRS plus 5%; and (6) if it pays interest, this interest is payable at either: (a) a fixed rate with respect to the principal amount of the regular interest or (b) a permissible variable rate with respect to the principal amount. Permissible variable rates for FASIT regular interests are the same as those for REMIC regular interests. See "REMICs--Taxation of Owners of Regular Securities--(1) General" for a discussion of permissible variable rates for REMIC regular interests. If an interest in a FASIT fails to meet one or more of the requirements set out in clauses (3), (4), or (5) in the immediately preceding paragraph, but otherwise meets all requirements to be treated as a FASIT, it may still qualify as a type of regular interest known as a "high-yield interest." In addition, if an interest in a FASIT fails to meet the requirement of clause (6), but the interest payable on the interest consists of a specified portion of the interest payments on permitted assets and that portion does not vary over the life of the security, the interest will also qualify as a high-yield interest. See "--Taxation of Owners of FASIT Regular Securities," "--Taxation of Owners of High-Yield Interests" and "--Taxation of FASIT Ownership Securities" below. (3) Consequences of Disqualification If the trust fund fails to comply with one or more of the Code's ongoing requirements for FASIT status during any taxable year, the Code provides that it's FASIT status may be lost for that year and thereafter. If FASIT status is lost, the treatment of the former FASIT and interests in the FASIT for U.S. federal income tax purposes is uncertain. Although the Code authorizes the Treasury to issue regulations that address situations where a failure to meet the requirements for FASIT status occurs inadvertently and in good faith, final regulations have not yet been issued. It is possible that disqualification relief might be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the FASIT's income for the period of time in which the requirements for FASIT status are not satisfied. TAXATION OF OWNERS OF FASIT REGULAR SECURITIES (1) General Payments received by holders of FASIT Regular Securities generally will be accorded the same tax treatment under the Code as payments received on other taxable debt instruments. Holders of FASIT Regular Securities must report income from these Notes or Certificates, as applicable, under an accrual method of accounting, even if they otherwise would have used the cash receipts and disbursements method. Except in the case of FASIT Regular Securities issued with original issue discount, interest paid or accrued on a FASIT Regular Security generally will be treated as ordinary income to the Holder and a principal payment on the security will be treated as a return of capital to the extent that the securityholder's basis is allocable to that payment. (2) Original Issue Discount; Market Discount; Acquisition Premium FASIT Regular Securities issued with original issue discount or acquired with market discount or acquisition premium generally will treat interest and principal payments on these Notes or Certificates, as applicable, in the same manner described for REMIC Regular Securities. See "--REMICs - Taxation of Owners of Regular Securities" above. (3) Sale or Exchange If the FASIT Regular Securities are sold, the holder generally will recognize gain or loss upon the sale in the manner described above for REMIC Regular Securities. See "--REMICs--Taxation of Owners of Regular Securities--Sale or Exchange of Regular Securities." TAXATION OF OWNERS OF HIGH-YIELD INTERESTS (1) General The treatment of high-yield interests is intended to ensure that the return on instruments issued by a FASIT yielding an equity-like return continues to have a corporate level tax. High-yield interests are subject to special rules regarding the eligibility of holders of this interest, and the ability of these holders to offset income derived from their FASIT Security with losses. High-yield interests may only be held by Eligible Corporations, other FASITs, and dealers in securities who acquire such interests such as inventory (together, "Eligible Holders"). o An "Eligible Corporation" is a taxable domestic C corporation that does not qualify as a regulated investment company, a real estate investment trust, a REMIC, or a cooperative. If a securities dealer (other than an Eligible Corporation) initially acquires a high-yield interest as inventory, but later begins to hold it for investment, the dealer will be subject to an excise tax equal to the income from the high-yield interest multiplied by the highest corporate income tax rate. In addition, transfers of high-yield interests to a person that is not an Eligible Holder will be disregarded for federal income tax purposes, and the transferor will continue to be treated as the holder of the high-yield interest. In addition, the FASIT Provisions contain an anti-abuse rule that imposes corporate income tax on income derived from a FASIT Regular Interest that is held by a pass-through entity (other than another FASIT) that issues debt or equity securities backed by the FASIT Regular Interest and that have an original yield to maturity that is both five percentage points above the applicable federal rate and more than the yield on the FASIT Regular Interest. The excise tax is limited to those arrangements that have a principal purpose of avoiding the ownership restriction relating to high-yield interests. (2) Treatment of Losses The holder of a high-yield interest may not use non-FASIT current losses or net operating loss carryforwards or carrybacks to offset any income derived from the high-yield interest, for either regular federal income tax purposes or for alternative minimum tax purposes. TAXATION OF FASIT OWNERSHIP SECURITY (1) General A FASIT Ownership Security represents the residual equity interest in a FASIT. As such, the holder of a FASIT Ownership Security determines its taxable income by taking into account all assets, liabilities, and items of income, gain, deduction, loss, and credit of a FASIT. The holder, however, does not take into account any item of income, gain or deduction allocable to a "prohibited transaction" as discussed below. In general, the character of the income to the holder of a FASIT Ownership Security will be the same as the character of the income to the FASIT, except that any tax-exempt interest income taken into account by the holder of a FASIT Ownership Security is treated as ordinary income. In determining that taxable income, the holder of a FASIT Ownership Security must determine the amount of interest, original issue discount, market discount, and premium recognized with respect to each debt instrument held by the FASIT according to a constant yield methodology and under an accrual method of accounting. In addition, a holder of a FASIT Ownership Security is subject to the same limitations on their ability to use losses to offset income from their FASIT Regular Securities as are holders of high-yield interest. See "--Taxation of Owners of High-Yield Interests" above. Rules similar to the wash sale rules applicable to REMIC Residual Securities also will apply to FASIT Ownership Security. Accordingly, losses on dispositions of a FASIT Ownership Security generally will be disallowed where within six months before or after the disposition, the seller of the Security acquires any other FASIT Ownership Security that is economically comparable to a FASIT Ownership Security. In addition, if any security that is sold or contributed to a FASIT by the holders of the related FASIT Ownership Security was required to be marked-to-market under Section 475 of the Code by the holder, then Section 475 of the Code will continue to apply to these securities, except that the amount realized under the mark-to-market rules cannot be less than the securities' value determined after applying special valuation rules contained in the FASIT Provisions. Those special valuation rules generally require that the value of debt instruments that are not traded on an established securities market be determined by calculating the present value of the reasonably expected payments under the instrument using a discount rate of 120% of the applicable federal rate, compounded semi-annually. (2) Prohibited Transaction The holder of a FASIT Ownership Security is required to pay a penalty excise tax equal to 100 percent of net income derived from: (1) an asset that is not a permitted asset; (2) any disposition of an asset other than a permitted disposition (as described below); (3) any income attributable to loans originated by the FASIT; and (4) compensation for services (other than fees for a waiver, amendment, or consent with respect to permitted assets other than foreclosure property). A permitted disposition is any disposition of any permitted asset: (1) arising from complete liquidation of a class of regular interest; (2) incident to the foreclosure, default (or imminent default) on the asset; (3) incident to the bankruptcy or insolvency of the FASIT; (4) necessary to avoid a default on any indebtedness of the a FASIT attributable to a default (or imminent default) on an asset of the FASIT; (5) to facilitate a clean-up call; or (6) to substitute a permitted debt instrument for another permitted debt instrument or in order to reduce over-collateralization by distributing a debt instrument contributed by the holder of the FASIT Ownership Security to such holder, but only if a principal purpose of acquiring the debt instrument which is disposed of was not the recognition of gain arising from an increase in its market value after its acquisition by the FASIT. Notwithstanding this rule, the holder of an Ownership Security may currently deduct its losses incurred in prohibited transactions in computing its taxable income for the year of the loss. A Series of Notes or Certificates, as applicable, for which a FASIT election is made generally will be structured in order to avoid application of the prohibited transactions tax. (3) Backup Withholding, Reporting and Tax Administration Holders of FASIT Securities will be subject to backup withholding to the same extent as holders of REMIC Securities. GRANTOR TRUST FUNDS CHARACTERIZATION. For each series of Grantor Trust Securities, Federal Tax Counsel will deliver its opinion that the Grantor Trust Fund will not be classified as an association taxable as a corporation and that the Grantor Trust Fund will be classified as a grantor trust under subpart E, Part I of subchapter J of the Code. In this case, beneficial owners of Grantor Trust Securities (referred to in this Prospectus as "Grantor Trust Securityholders") will be treated for federal income tax purposes as owners of a portion of the Grantor Trust Fund's assets as described below. TAXATION OF GRANTOR TRUST SECURITYHOLDERS. Subject to the discussion below under "Stripped Certificates" and "Subordinated Certificates," each Grantor Trust Securityholder will be treated as the owner of a pro rata undivided interest in the assets of the Grantor Trust Fund. Accordingly, and subject to the discussion below of the recharacterization of the servicing fee, each Grantor Trust Securityholder must include in income its pro rata share of the interest and other income from the assets of the Grantor Trust Fund, including any interest, original issue discount, market discount, prepayment fees, assumption fees, and late payment charges with respect to the assets, and, subject to limitations discussed below, may deduct its pro rata share of the fees and other deductible expenses paid by the Grantor Trust Fund, at the same time and to the same extent as these items would be included or deducted by the Grantor Trust Securityholder if the Grantor Trust Securityholder held directly a pro rata interest in the assets of the Grantor Trust Fund and received and paid directly the amounts received and paid by the Grantor Trust Fund. Any amounts received by a Grantor Trust Securityholder in lieu of amounts due with respect to any asset of the Grantor Trust Fund 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 Securityholder will be entitled to deduct its pro rata share of servicing fees, prepayment fees, assumption fees, any loss recognized upon an assumption and late payment charges retained by the servicer, provided that these amounts are reasonable compensation for services rendered to the Grantor Trust Fund. Grantor Trust Securityholders that are individuals, estates or trusts will be entitled to deduct their share of expenses only to the extent these expenses plus all other miscellaneous itemized deductions exceed two percent of the Grantor Trust Securityholder's adjusted gross income, and will be allowed no deduction for these expenses in determining their liabilities for alternative minimum tax. In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for the taxable year for an individual whose adjusted gross income exceeds a prescribed threshold amount will be reduced by the lesser of (1) 3% of the excess of adjusted gross income over the specified threshold amount or (2) 80% of the amount of itemized deductions otherwise allowable for the applicable taxable year. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership," 70% of the partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. The servicing compensation to be received by the servicer may be questioned by the IRS as exceeding a reasonable fee for the services being performed in exchange for the servicing compensation, and a portion of the servicing compensation could be recharacterized as an ownership interest retained by the servicer or other party in a portion of the interest payments to be made with respect to the Grantor Trust Fund's assets. In this event, a certificate might be treated as a Stripped Certificate subject to the stripped bond rules of Section 1286 of the Code, and either the original issue discount or the market discount rules. See the discussion below under "--Stripped Certificates". Except as discussed below under "Stripped Certificates" or "--Subordinated Certificates," this discussion assumes that the servicing fees paid to the servicer do not exceed reasonable servicing compensation. A purchaser of a Grantor Trust Security will be treated as purchasing an interest in each asset in the Grantor Trust Fund at a price determined by allocating the purchase price paid for the certificate among all asset of the Grantor Trust Fund in proportion to their fair market values at the time of the purchase of the certificate. To the extent that the portion of the purchase price of a Grantor Trust Security allocated to an asset of the Grantor Trust Fund is less than or greater than the stated redemption price at maturity of the asset, the interest in the asset will have been acquired at a discount or premium. See "--Market Discount" and "--Premium," below. The treatment of any discount on an asset of the Grantor Trust Fund will depend on whether the discount represents original issue discount or market discount. Except as indicated otherwise in the applicable Prospectus Supplement, it is not expected that any asset of the Grantor Trust Fund (other than a Stripped Agency Security or other instrument evidencing ownership of specific interest and/or principal of a particular bond) will have original issue discount (except as discussed below under "Stripped Certificates" or "Subordinated Certificates"). For the rules governing original issue discount, see "REMICs--Taxation of Owners of Regular Securities--Original Issue Discount" above. The information provided to Grantor Trust Securityholders will not include information necessary to compute the amount of discount or premium, if any, at which an interest in each asset of the Grantor Trust Fund is acquired. MARKET DISCOUNT. A Grantor Trust Securityholder that acquires an undivided interest in the Grantor Trust Fund's assets may be subject to the market discount rules of Sections 1276 through 1278 to the extent an undivided interest in an asset of the Grantor Trust Fund is considered to have been purchased at a "market discount". For a discussion of the market discount rules under the Code, see "REMICs--Taxation of Owners of Regular Securities--Market Discount" above. As discussed above, to the extent an asset of the Grantor Trust Fund is a Stripped Agency Security or other instrument evidencing ownership of specific interest and/or principal of a particular bond, it will be subject to the rules relating to original issue discount (in lieu of the rules relating to market discount). See "REMICs--Taxation of Owners of Regular Securities--Original Issue Discount" above. PREMIUM. To the extent a Grantor Trust Securityholder is considered to have purchased an undivided interest in an asset of the Grantor Trust Fund for an amount that is greater than the stated redemption price at maturity of the interest, the Grantor Trust Securityholder will be considered to have purchased the interest in the asset with "amortizable bond premium" equal in amount to the excess. For a discussion of the rules applicable to amortizable bond premium, see "REMICs--Taxation of Owners of Regular Securities--Amortizable Premium" above. STATUS OF THE GRANTOR TRUST SECURITIES. Except for that portion of a trust fund consisting of unsecured home improvement loans and except as qualified below, a Grantor Trust Security owned by a: o "domestic building and loan association" within the meaning of Code Section 7701(a)(19) will be considered to represent "loans . . . secured by an interest in real property" within the meaning of Code Section 7701(a)(19)(C)(v), provided that the real property securing the mortgage loans represented by that Grantor Trust Security is of the type described in that section of the Code. o real estate investment trust will be considered to represent "real estate assets" within the meaning of Code Section 856(c)(4)(A) to the extent that the assets of the related Grantor Trust Fund consist of qualified assets, and interest income on those assets will be considered "interest on obligations secured by mortgages on real property" to that extent within the meaning of Code Section 856(c)(3)(B). o REMIC will be considered to represent an "obligation (including any participation or certificate of beneficial ownership therein) which is principally secured by an interest in real property" within the meaning of Code Section 860G(a)(3)(A) to the extent that the assets of the related Grantor Trust Fund consist of "qualified mortgages" within the meaning of Code Section 860G(a)(3). An issue arises as to whether Buydown Mortgage Loans may be characterized in their entirety under the Code provisions cited in the first two bullet points of the immediately preceding paragraph or whether the amount qualifying for that treatment must be reduced by the amount of the Buydown Mortgage Funds. Further, although it is not entirely clear, Grantor Trust Certificates that are Stripped Certificates (as described below under "Stripped Certificates") should be treated as qualifying under the Code provisions cited in the bullet points above to the same extent as Grantor Trust Certificates that are not Stripped Certificate. Grantor Trust Securityholders are urged to consult their own tax advisors concerning the characterization of the securityholder's investment for federal income tax purposes. STRIPPED CERTIFICATES. Some classes of certificates may be subject to the stripped bond rules of Section 1286 of the Code and for purposes of this discussion will be referred to as "Stripped Certificates." In general, a Stripped Certificate will be subject to the stripped bond rules where there has been a separation of ownership of the right to receive some or all of the principal payments on a mortgage loan held by the Grantor Trust Fund from ownership of the right to receive some or all of the related interest payments. Generally, where a separation has occurred, under the stripped bond rules of Section 1286 of the Code, the holder of a right to receive a principal or interest payment on the bond is required to accrue into income, on a constant yield basis under rules governing original issue discount (see "REMICs--Taxation of Owners of Regular Securities--Original Issue Discount"), the difference between the holder's initial purchase price for the right to receive principal or interest, and the principal or interest payment to be received with respect to that right. However, a holder of a Stripped Certificate will account for any discount on the Stripped Certificate (other than an interest treated as a "stripped coupon") as market discount rather than original issue discount if either (i) the amount of original issue discount with respect to the Stripped Certificate was treated as zero under the original issue discount DE MINIMIS rule when the Stripped Certificate was stripped or (ii) no more than 100 basis points (including any amount of servicing in excess of reasonable servicing) is stripped off from the mortgage assets. Certificates will constitute Stripped Certificates and will be subject to these rules under various circumstances, including the following: o if any servicing compensation is deemed to exceed a reasonable amount; o if the company or any other party retains a retained yield with respect to the assets held by the Grantor Trust Fund; o if two or more classes of certificates are issued representing the right to non-pro rata percentages of the interest or principal payments on the Grantor Trust Fund's assets; or o if certificates are issued which represent the right to interest-only payments or principal-only payments. The tax treatment of the Stripped Certificates with respect to the application of the original issue discount provisions of the Code is currently unclear. However, the trustee intends to treat each Stripped Certificate as a single debt instrument issued on the day it is purchased for purposes of calculating any original issue discount. Original issue discount with respect to a Stripped Certificate must be included in ordinary gross income for federal income tax purposes as it accrues in accordance with the constant yield method that takes into account the compounding of interest and this accrual of income may be in advance of the receipt of any cash attributable to that income. See "REMICs--Taxation of Owners of Regular Securities--Original Issue Discount" above. For purposes of applying the original issue discount provisions of the Code, the issue price of a Stripped Certificate will be the purchase price paid by each holder of the Stripped Certificate and the stated redemption price at maturity may include the aggregate amount of all payments to be made with respect to the Stripped Certificate whether or not denominated as interest. The amount of original issue discount with respect to a Stripped Certificate may be treated as zero under the original issue discount DE MINIMIS rules described above. SUBORDINATED CERTIFICATES. In the event the Grantor Trust Fund issues two classes of Grantor Trust Securities that are identical except that one class is a subordinate class, with a relatively high certificate pass-through rate, and the other is a senior class, with a relatively low certificate pass-through rate (referred to in this Prospectus as the "Subordinate Certificates" and "Senior Certificates", respectively), the Grantor Trust Securityholders in the aggregate will be deemed to have acquired the following assets: (1) the principal portion of each mortgage loan plus a portion of the interest due on each mortgage loan (the "Grantor Trust Fund Stripped Bond"), and (2) a portion of the interest due on each mortgage loan equal to the difference between the Interest Rate on the Subordinate Certificates and the Interest Rate on the Senior Certificates, if any, which difference is then multiplied by the Subordinate Class Percentage (the "Grantor Trust Fund Stripped Coupon"). The "Subordinate Class Percentage" equals the initial aggregate principal amount of the Subordinate Certificates divided by the sum of the initial aggregate principal amount of the Subordinate Certificates and the Senior Certificates. The "Senior Class Percentage" equals the initial aggregate principal amount of the Senior Certificates divided by the sum of the initial aggregate principal amount of the Subordinate Certificates and the Senior Certificates. The Senior Certificateholders in the aggregate will own the Senior Class Percentage of the Grantor Trust Fund Stripped Bond and accordingly each Senior Certificateholder will be treated as owning its pro rata share of such asset. The Senior Certificateholders will not own any portion of the Grantor Trust Fund Stripped Coupon. The Subordinate Certificateholders in the aggregate own both the Subordinate Class Percentage of the Grantor Trust Fund Stripped Bond plus 100% of the Grantor Trust Fund Stripped Coupon, if any, and accordingly each Subordinate Certificateholder will be treated as owning its pro rata share in both assets. The Grantor Trust Fund Stripped Bond will be treated as a "stripped bond" and the Grantor Trust Fund Stripped Coupon will be treated as "stripped coupons" within the meaning of Section 1286 of the Code. Although not entirely clear, the interest income on the Subordinate Certificates and the portion of the servicing fee allocable to such certificates that does not constitute excess servicing will be treated by the Grantor Trust Fund as qualified stated interest, assuming the interest with respect to the mortgage loans held by the Grantor Trust Fund would otherwise qualify as qualified stated interest. Accordingly, except to the extent modified below, the income of the Subordinate Certificates will be reported in the same manner as described generally above for holders of Senior Certificates. If the Subordinate Certificateholders receive distribution of less than their share of the Grantor Trust Fund's receipts of principal or interest (the "Shortfall Amount") because of the subordination of the Subordinate Certificates, holders of Subordinate Certificates would probably be treated for federal income tax purposes as if they had o received as distributions their full share of receipts; o paid over to the Senior Certificateholders an amount equal to the Shortfall Amount; and o retained the right to reimbursement of the relevant amounts to the extent these amounts are otherwise available as a result of collections on the mortgage loans or amounts available from a reserve account or other form of credit enhancement, if any. Under this analysis, o Subordinate Certificateholders would be required to accrue as current income any interest income, original issue discount, or (to the extent paid on assets of the Grantor Trust Fund) accrued market discount of the Grantor Trust Fund that was a component of the Shortfall Amount, even though that amount was in fact paid to the Senior Certificateholders; o a loss would only be allowed to the Subordinate Certificateholders when their right to receive reimbursement of the Shortfall Amount became worthless (i.e., when it becomes clear that amount will not be available from any source to reimburse the loss); and o reimbursement of the Shortfall Amount prior to a claim of worthlessness would not be taxable income to Subordinate Certificateholders because the amount was previously included in income. Those results should not significantly affect the inclusion of income for Subordinate Certificateholders on the accrual method of accounting, but could accelerate inclusion of income to Subordinate Certificateholders on the cash method of accounting by, in effect, placing them on the accrual method. Moreover, the character and timing of loss deductions are unclear. Subordinate Certificateholders are strongly urged to consult their own tax advisors regarding the appropriate timing, amount and character of any losses sustained with respect to the Subordinate Certificates including any loss resulting from the failure to recover previously accrued interest or discount income. ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. The Treasury Regulations relating to original issue discount permit a Grantor Trust Securityholder to elect to accrue all interest, discount, including DE MINIMIS market or original issue discount, reduced by any premium, in income as interest, based on a constant yield method. If an election were to be made with respect to an interest in a mortgage loan with market discount, the Grantor Trust Securityholder 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 the Grantor Trust Securityholder acquires during the year of the election or afterward. See "--Market Discount" above. Similarly, a Grantor Trust Securityholder that makes this election for an interest in a mortgage loan 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 the Grantor Trust Securityholder owns at the beginning of the first taxable year to which the election applies or acquires afterward. See "--Premium" above. The election to accrue interest, discount and premium on a constant yield method with respect to a Grantor Trust Security is irrevocable. PREPAYMENTS. The Taxpayer Relief Act of 1997 (the "1997 Act") contains a provision requiring original issue discount on any pool of debt instruments the yield on which may be affected by reason of prepayments be calculated taking into account the Prepayment Assumption and requiring the discount to be taken into income on the basis of a constant yield to assumed maturity taking account of actual prepayments. The legislative history to the 1986 Act states that similar rules apply with respect to market discount and amortizable bond premium on debt instruments. SALE OR EXCHANGE OF A GRANTOR TRUST SECURITY. Sale or exchange of a Grantor Trust Security prior to its maturity will result in gain or loss equal to the difference, if any, between the amount realized, exclusive of amounts attributable to accrued and unpaid interest (which will be treated as ordinary income allocable to the related asset of the Grantor Trust Fund), and the owner's adjusted basis in the Grantor Trust Security. The adjusted basis generally will equal the seller's cost for the Grantor Trust Security, increased by the original issue discount and any market discount included in the seller's gross income with respect to the Grantor Trust Security, and reduced, but not below zero, by any premium amortized by the seller and by principal payments on the Grantor Trust Security previously received by the seller. The gain or loss will, except as discussed below, be capital gain or loss to an owner for which the assets of the Grantor Trust Fund represented by a Grantor Trust Security are "capital assets" within the meaning of Section 1221. A capital gain or loss will be long-term or short-term depending on whether or not the Grantor Trust Security has been owned for the long-term capital gain holding period, currently more than one year. Notwithstanding the foregoing, any gain realized on the sale or exchange of a Grantor Trust Security will be ordinary income to the extent of the seller's interest in accrued market discount on Grantor Trust Fund assets not previously taken into income. See "--Market Discount," above. Further, Grantor Trust Securities will be "evidences of indebtedness" within the meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a Grantor Trust Security by a bank or thrift institution to which such section applied will be treated as ordinary gain or loss. FOREIGN INVESTORS IN GRANTOR TRUST SECURITIES. A holder of a Grantor Trust Security who is not a "U.S. person" (as defined above at "REMICs--Tax Related Restrictions on Transfer of Residual Securities--Foreign Investors") and is not subject to federal income tax as a result of any direct or indirect connection to the United States other than its ownership of a Grantor Trust Security generally will not be subject to United States income or withholding tax in respect of payments of interest or original issue discount on its Grantor Trust Security to the extent attributable to debt obligations held by the Grantor Trust Fund that were originated after July 18, 1984, provided that the Grantor Trust Securityholder complies to the extent necessary with certain certification requirements which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is not a U.S. person. Interest or original issue discount on a Grantor Trust Security attributable to debt obligations held by the Grantor Trust Fund that were originated prior to July 19, 1984 will be subject to a 30% withholding tax (unless such tax is reduced or eliminated by an applicable tax treaty). All holders of Grantor Trust Securities should consult their tax advisors regarding the tax documentation and certifications that must be provided to secure any applicable exemptions from United States withholding taxes. Any capital gain realized on the sale or other taxable disposition of a Grantor Trust Security by a Non-U.S. Person (as defined above at "REMICs--Taxation of Certain Foreign Investors--Regular Securities") generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Person and (ii) in the case of an individual Non-U.S. Person, the Non-U.S. Person is not present in the United States for 183 days or more in the taxable year. If the interest, gain or income with respect to a Grantor Trust Security held by a Non-U.S. Person is effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Person (although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected), the holder generally will be subject to United States federal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the Non-U.S. Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its "effectively connected earnings and profits," within the meaning of the Code, for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty (as modified by the branch profits tax rules). BACKUP WITHHOLDING. Distributions made on the Grantor Trust Securities and proceeds from the sale of the Grantor Trust Securities will be subject to a "backup" withholding tax of 31% if, in general, the Grantor Trust Securityholder fails to comply with particular identification procedures, unless the holder is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld would be refunded by the IRS or allowable as a credit against the Grantor Trust Securityholder's federal income tax. PARTNERSHIP TRUST FUNDS AND DISREGARDED TRUST FUNDS CLASSIFICATION OF TRUST FUNDS For each series of Partnership Certificates or Debt Securities, Stroock & Stroock & Lavan LLP will deliver its opinion that the trust fund will not be a taxable mortgage pool or an association (or publicly traded partnership) taxable as a corporation for federal income tax purposes. This opinion will be based on the assumption that the terms of the related Agreement and related documents will be complied with, and on counsel's opinion that the nature of the income of the trust fund will exempt it from the rule that some publicly traded partnerships are taxable as corporations. TAXATION OF DEBT SECURITYHOLDERS The depositor will agree, and the securityholders will agree by their purchase of Debt Securities, to treat the Debt Securities as debt for federal income tax purposes. No regulations, published rulings, or judicial decisions exist that discuss the characterization for federal income tax purposes of securities with terms substantially the same as the Debt Securities. However, for each series of Debt Securities, Stroock & Stroock & Lavan LLP will deliver its opinion that the Debt Securities will be classified as indebtedness for federal income tax purposes. The discussion below assumes this characterization of the Debt Securities is correct. If, contrary to the opinion of counsel, the Internal Revenue Service successfully asserted that the Debt Securities were not debt for federal income tax purposes, the Debt Securities might be treated as equity interests in the trust fund. If so treated, the trust fund might be treated as a publicly traded partnership that would be taxable as a corporation unless it met particular qualifying income tests, and the resulting taxable corporation would not be able to reduce its taxable income by deductions for interest expense on Debt Securities recharacterized as equity. Treatment of the Debt Securities as equity interests in a partnership could have adverse tax consequences to some holders, even if the trust fund were not treated as a publicly traded partnership taxable as a corporation. For example, income allocable to foreign holders might be subject to United States tax and United States tax return filing and withholding requirements, income allocable to tax-exempt holders might constitute "unrelated business taxable income" (if some, but not all, of the Debt Securities were recharacterized as equity in a partnership), individual holders might be subject to limitations on their ability to deduct their share of trust fund expenses, and income from the trust fund's assets would be taxable to owners of Debt Securities without regard to whether cash distributions are made to such owners and without regard to the owners' method of tax accounting. Debt Securities generally will be subject to the same rules of taxation as Regular Securities issued by a REMIC, as described above, except that (1) income reportable on Debt Securities is not required to be reported under the accrual method unless the holder otherwise uses the accrual method and (2) the special 110% yield rule treating a portion of the gain on sale or exchange of a Regular Security as ordinary income is inapplicable to Debt Securities. See "--REMICs--Taxation of Owners of Regular Securities" and "--Sale or Exchange of Regular Securities." Further, for federal income tax purposes, (i) Debt Securities held by a thrift institution taxed as a domestic building and loan association will not constitute "loans . . . secured by an interest in real property" within the meaning of Section 7701(a)(19)(C)(v) of the Code; (ii) interest on Debt Securities held by a real estate investment trust will not be treated as "interest on obligations secured by mortgages on real property or on interests in real property "within the meaning of Code Section 856(c)(3)(B); (iii) Debt Securities held by a real estate investment trust will not constitute "real estate assets" or "Government securities" within the meaning of Section 856(c)(4)(A) of the Code; (iv) Debt Securities held by a regulated investment company will not constitute "Government securities" within the meaning of Section 851(b)(3)(A)(i) of the Code; and (v) Debt Securities will not constitute "qualified mortgages" with in the meaning of Section 860G(a)(3) of the Code for REMICs. TAXATION OF OWNERS OF PARTNERSHIP CERTIFICATES (1) Treatment of the Trust Fund as a Partnership The Partnership Trust Fund will agree, and the related owners of Partnership Certificates ("Partnership Certificate Owners") will agree by their purchase of Partnership Certificates, if there is more than one Partnership Certificate Owner, to treat the Partnership Trust Fund as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the Partnership Trust Fund, the partners of the partnership being the Partnership Certificate Owners, including, to the extent relevant, the depositor in its capacity as recipient of distributions from any reserve fund, and the Debt Securities, if any, being debt of the partnership, and if there is one Partnership Certificate Owner, to treat the Partnership Certificate Owner as the owner of the assets of the Partnership Trust Fund and to treat the Partnership Trust Fund as a disregarded entity. However, the proper characterization of the arrangement involving the Partnership Trust Fund, the Partnership Certificates, the Debt Securities and the depositor is not certain because there is no authority on transactions closely comparable to that contemplated in this prospectus. A variety of alternative characterizations are possible. For example, because the Partnership Certificates have certain features characteristic of debt, the Partnership Certificates might be considered debt of the Partnership Trust Fund. Generally, provided such Partnership Certificates are issued at or close to face value, any such characterization would not result in materially adverse tax consequences to holders of Partnership Certificates as compared to the consequences from treatment of the Partnership Certificates as equity in a partnership, described below. The following discussion assumes that the Partnership Certificates represent equity interests in a partnership. The following discussion also assumes that all payments on the Partnership Certificates are denominated in U.S. dollars, none of the Partnership Certificates have Interest Rates which would qualify as contingent interest under the Treasury regulations relating to original issue discount, and that a series of securities includes a single class of Partnership Certificates. If these conditions are not satisfied with respect to any given series of Partnership Certificates, additional tax considerations with respect to such Partnership Certificates will be disclosed in the applicable prospectus supplement. (2) Partnership Taxation As a partnership, the Partnership Trust Fund will not be subject to federal income tax. Rather, each Partnership Certificate Owner will be required to take into account separately the Partnership Certificate Owner's allocable share of income, gains, losses, deductions and credits of the Partnership Trust Fund, whether or not there is a corresponding cash distribution. Thus, cash basis holders will in effect be required to report income from the Partnership Certificates on the accrual basis and Partnership Certificate Owners may become liable for taxes on Partnership Trust Fund income even if they have not received cash from the Partnership Trust Fund to pay the taxes. The Partnership Trust Fund's income will consist primarily of interest and finance charges earned on the related mortgage loans, including appropriate adjustments for market discount, original issue discount and bond premium, and any gain upon collection or disposition of the mortgage loans. The Partnership Trust Fund's deductions will consist primarily of interest accruing with respect to the Debt Securities, servicing and other fees, and losses or deductions upon collection or disposition of mortgage loans. The tax items of a partnership are allocable to the partners in accordance with the Code, Treasury regulations and the partnership agreement (i.e., the Agreement and related documents). The Agreement will provide, in general, that the Partnership Certificate Owners will be allocated taxable income of the Partnership Trust Fund for each month equal to the sum of: o the interest or other income that accrues on the Partnership Certificates in accordance with their terms for the relevant month including, as applicable, interest accruing at the related Partnership Certificate Interest Rate for that month and interest on amounts previously due on the Partnership Certificates but not yet distributed; o any income of the Partnership Trust Fund attributable to discount on the related mortgage loans that corresponds to any excess of the principal amount of the Partnership Certificates over their initial issue price; o any prepayment premium payable to the Partnership Certificate Owners for the applicable month; and o any other amounts of income payable to the Partnership Certificate Owners for the applicable month. The allocation will be reduced by any amortization by the Partnership Trust Fund of premium on mortgage loans that corresponds to any excess of the issue price of Partnership Certificates over their principal amount. All remaining taxable income of the Partnership Trust Fund will be allocated to the depositor. Losses will generally be allocated in the manner in which they are borne. Based on the economic arrangement of the parties, the foregoing approach for allocating income of the Partnership Trust Fund should be permissible under applicable Treasury regulations, although no assurance can be given that the IRS would not require a greater amount of income to be allocated to Partnership Certificate Owners. Moreover, even under the foregoing method of allocation, Partnership Certificate Owners may be allocated income equal to the entire Partnership Certificate Interest Rate plus the other items described above, even though the Partnership Trust Fund might not have sufficient cash to make current cash distributions of the amount. In addition, because tax allocations and tax reporting will be done on a uniform basis for all Partnership Certificate Owners, but Partnership Certificate Owners may be purchasing Partnership Certificates at different times and at different prices, Partnership Certificate Owners may be required to report on their tax returns taxable income that is greater or less than the amount reported to them by the Partnership Trust Fund. Assuming Debt Securities are also issued, all or substantially all of the taxable income allocated to a Partnership Certificate Owner that is a pension, profit sharing or employee benefit plan or other tax-exempt entity, including an individual retirement account, will constitute "unrelated business taxable income" generally taxable to the holder under the Code. An individual taxpayer's share of expenses of the Partnership Trust Fund, including fees to the servicer, but not interest expense, would be miscellaneous itemized deductions and thus deductible only to the extent such expenses plus all other miscellaneous itemized deductions exceeds two percent of the individual's adjusted gross income. An individual taxpayer will be allowed no deduction for his share of expenses of the Partnership Trust Fund, other than interest, in determining his liability for alternative minimum tax. In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for the taxable year for an individual whose adjusted gross income exceeds a prescribed threshold amount will be reduced by the lesser of (1) 3% of the excess of adjusted gross income over the specified threshold amount or (2) 80% of the amount of itemized deductions otherwise allowable for the applicable taxable year. Accordingly, deductions might be disallowed to the individual in whole or in part and might result in the Partnership Certificate Owner being taxed on an amount of income that exceeds the amount of cash actually distributed to the holder over the life of the Partnership Trust Fund. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership," 70% of that partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. The Partnership Trust Fund intends to make all tax calculations relating to income and allocations to Partnership Certificate Owners on an aggregate basis to the extent relevant. If the IRS were to require that the calculations be made separately for each mortgage loan, the calculations may result in some timing and character differences under some circumstances. (3) Discount and Premium The purchase price paid by the Partnership Trust Fund for the related mortgage loans may be greater or less than the remaining principal balance of the mortgage loans at the time of purchase. If so, the mortgage loans will have been acquired at a premium or market discount, as the case may be. See "REMICs--Taxation of Owners of Regular Securities--Acquisition Premium" and "-- Market Discount" above. As indicated above, the Partnership Trust Fund will make this calculation on an aggregate basis, but it is possible that the IRS might require that it be recomputed on a mortgage loan-by-mortgage loan basis. Further, with respect to any asset of the Partnership Trust Fund that is a Stripped Agency Security or other instrument evidencing ownership of specific interest and/or principal of a particular bond, it will be subject to the rules relating to original issue discount with respect to such security or instrument (in lieu of the rules relating to market discount). See "REMICs--Taxation of Owners of Regular Securities--Original Issue Discount" above. If the Partnership Trust Fund acquires the mortgage loans at a market discount or premium, the Partnership Trust Fund will elect to include any market discount in income currently as it accrues over the life of the mortgage loans or to offset any premium against interest income on the mortgage loans. As indicated above, a portion of the market discount income or premium deduction may be allocated to Partnership Certificate Owners. (4) Section 708 Termination Under Section 708 of the Code, the Partnership Trust Fund will be deemed to terminate for federal income tax purposes if 50% or more of the capital and profits interests in the Partnership Trust Fund are sold or exchanged within a 12-month period. If a termination occurs under Section 708 of the Code, the Partnership Trust Fund will be considered to contribute its assets to a new Partnership Trust Fund, which would be treated as a new partnership, in exchange for Partnership Certificates in the new Partnership Trust Fund. The original Partnership Trust Fund will then be deemed to distribute the Partnership Certificates in the new Partnership Trust Fund to each of the owners of Partnership Certificates in the original Partnership Trust Fund in liquidation of the original Partnership Trust Fund. The Partnership Trust Fund will not comply with particular technical requirements that might apply when a constructive termination occurs. As a result, the Partnership Trust Fund may be subject to some tax penalties and may incur additional expenses if it is required to comply with those requirements. Furthermore, the Partnership Trust Fund might not be able to comply with these requirements due to lack of data. (5) Disposition of Partnership Certificates Generally, capital gain or loss will be recognized on a sale of Partnership Certificates in an amount equal to the difference between the amount realized and the seller's tax basis in the Partnership Certificates sold. Any gain or loss would be long-term capital gain or loss if the Partnership Certificate Owner's holding period exceeded one year. A Partnership Certificate Owner's tax basis in a Partnership Certificate will generally equal its cost, increased by its share of Partnership Trust Fund income allocable to the Partnership Certificate Owner and decreased by any distributions received or losses allocated with respect to the Partnership Certificate. In addition, both the tax basis in the Partnership Certificates and the amount realized on a sale of a Partnership Certificate would include the Partnership Certificate Owner's share, determined under Treasury Regulations, of the Debt Securities and other liabilities of the Partnership Trust Fund. A Partnership Certificate Owner acquiring Partnership Certificates at different prices will generally be required to maintain a single aggregate adjusted tax basis in the Partnership Certificates and, upon a sale or other disposition of some of the Partnership Certificates, allocate a portion of the aggregate tax basis to the Partnership Certificates sold, rather than maintaining a separate tax basis in each Partnership Certificate for purposes of computing gain or loss on a sale of that Partnership Certificate. If a Partnership Certificate Owner is required to recognize an aggregate amount of income (not including income attributable to disallowed itemized deductions described above) over the life of the Partnership Certificates that exceeds the aggregate cash distributions with respect to the Partnership Certificates, the excess will generally give rise to a capital loss upon the retirement of the Partnership Certificates. (6) Allocations Between Transferors and Transferees In general, the Partnership Trust Fund's taxable income and losses will be determined each Due Period and the tax items for a particular Due Period will be apportioned among the Partnership Certificate Owners in proportion to the principal amount of Partnership Certificates owned by them as of the close of the last day of that Due Period. As a result, a Partnership Certificate Owner purchasing Partnership Certificates may be allocated tax items, which will affect the purchaser's tax liability and tax basis, attributable to periods before the actual transaction. The use of a Due Period convention may not be permitted by existing Treasury regulations. If a Due Period convention is not allowed, or only applies to transfers of less than all of the partner's interest, taxable income or losses of the Partnership Trust Fund might be reallocated among the Partnership Certificate Owners. The Partnership Trust Fund's method of allocation between transferors and transferees may be revised to conform to a method permitted by future laws, regulations or other IRS guidance. (7) Section 731 Distributions In the case of any distribution to a Partnership Certificate Owner, no gain will be recognized to that Partnership Certificate Owner to the extent that the amount of any money distributed for that Partnership Certificate exceeds the adjusted basis of that Partnership Certificate Owner's interest in the Partnership Certificate. To the extent that the amount of money distributed exceeds that Partnership Certificate Owner's adjusted basis, gain will be currently recognized. In the case of any distribution to a Partnership Certificate Owner, no loss will be recognized except upon a distribution in liquidation of a Partnership Certificate Owner's interest. Any gain or loss recognized by a Partnership Certificate Owner generally will be capital gain or loss. (8) Section 754 Election In the event that a Partnership Certificate Owner sells its Partnership Certificates at a profit (or loss), the purchasing Partnership Certificate Owner will have a higher (or lower) basis in the Partnership Certificates than the selling Partnership Certificate Owner had. The tax basis of the Partnership Trust Fund's assets will not be adjusted to reflect that higher (or lower) basis unless the Partnership Trust Fund were to file an election under Section 754 of the Code. In order to avoid the administrative complexities that would be involved in keeping accurate accounting records, as well as potentially onerous information reporting requirements, the Partnership Trust Fund current does not intend to make an election under Section 754 of the Code. As a result, Partnership Certificate Owners might be allocated a greater or lesser amount of Partnership Trust Fund income than would be appropriate based on their own purchase price for Partnership Certificates. (9) Administrative Matters The trustee is required to keep or cause to be kept complete and accurate books of the Partnership Trust Fund. The trustee will file a partnership information return (IRS Form 1065) with the IRS for each taxable year of the Partnership Trust Fund and will report each Partnership Certificate Owner's allocable share of items of Partnership Trust Fund income and expense to Partnership Certificate Owners and the IRS on Schedule K-1. The Partnership Trust Fund will provide the Schedule K-1 information to nominees that fail to provide the Partnership Trust Fund with the information statement described below and the nominees will be required to forward this information to the beneficial owners of the Partnership Certificates. Generally, holders must timely file tax returns that are consistent with the information return filed by the Partnership Trust Fund or be subject to penalties unless the holder notifies the IRS of all the inconsistencies. Under Section 6031 of the Code, any person that holds Partnership Certificates as a nominee at any time during a calendar year is required to furnish the Partnership Trust Fund with a statement containing specific information on the nominee, the beneficial owners and the Partnership Certificates so held. The information includes (1) the name, address and taxpayer identification number of the nominee and (2) as to each beneficial owner o the name, address and identification number of such person, o whether such person is a United States person, a tax-exempt entity or a foreign government, an international organization, or any wholly owned agency or instrumentality of either of the foregoing, and o particular information on Partnership Certificates that were held, bought or sold on behalf of the person throughout the year. In addition, brokers and financial institutions that hold Partnership Certificates through a nominee are required to furnish directly to the Partnership Trust Fund information as to themselves and their ownership of Partnership Certificates. A clearing agency registered under Section 17A of the Exchange Act is not required to furnish any information statement to the Partnership Trust Fund. The information referred to above for any calendar year must be furnished to the Partnership Trust Fund on or before the following January 31. Nominees, brokers and financial institutions that fail to provide the Partnership Trust Fund with the information described above may be subject to penalties. Unless another designation is made, the depositor will be designated as the tax matters partner for each Partnership Trust Fund in the pooling and servicing greement and, as the tax matters partner, will be responsible for representing the Partnership Certificate Owners in some specific disputes with the IRS. The Code provides for administrative examination of a partnership as if the partnership were a separate and distinct taxpayer. Generally, the statute of limitations for partnership items does not expire before the later of three years after the date on which the partnership information return is filed or the last day for filing the return for the applicable year, determined without regard to extensions. Any adverse determination following an audit of the return of the Partnership Trust Fund by the appropriate taxing authorities could result in an adjustment of the returns of the Partnership Certificate Owners, and, under some circumstances, a Partnership Certificate Owner may be precluded from separately litigating a proposed adjustment to the items of the Partnership Trust Fund. An adjustment could also result in an audit of a Partnership Certificate Owner's returns and adjustments of items not related to the income and losses of the Partnership Trust Fund. A special audit system exists for qualifying large partnerships that have elected to apply a simplified flow-through reporting system under Sections 771 through 777 of the Code. Unless otherwise specified in the applicable prospectus supplement, a Partnership Trust Fund will not elect to apply the simplified flow-through reporting system. (10) Taxation of Certain Foreign Partnership Certificate Owners As used below, the term "Non-United States Owner" means a Partnership Certificate Owner that is not a U.S. Person, as defined under "REMICs--Taxation of Owners of Residual Securities--Tax Related Restrictions on Transfer of Residual Securities--Foreign Investors," above. It is not clear whether the Partnership Trust Fund would be considered to be engaged in a trade or business in the United States for purposes of federal withholding taxes with respect to Non-United States Owners because there is no clear authority dealing with that issue under facts substantially similar to those described in this Prospectus. Although it is not expected that the Partnership Trust Fund would be engaged in a trade or business in the United States for these purposes, the Partnership Trust Fund will withhold as if it were so engaged in order to protect the Partnership Trust Fund from possible adverse consequences of a failure to withhold. The Partnership Trust Fund expects to withhold on the portion of its taxable income that is allocable to Non-United States Owners pursuant to Section 1446 of the Code, as if the income were effectively connected to a U.S. trade or business, at a rate of 35% for Non-United States Owners that are taxable as corporations and 39.6% for all other Non-United States Owners. Subsequent adoption of Treasury regulations or the issuance of other administrative pronouncements may require the Partnership Trust Fund to change its withholding procedures. Each Non-United States Owner might be required to file a U.S. individual or corporate income tax return on its share of the income of the Partnership Trust Fund including, in the case of a corporation, a return in respect of the branch profits tax. Assuming the Partnership Trust Fund is not engaged in a U.S. trade or business, a Non-United States Owner would be entitled to a refund with respect to all or a portion of taxes withheld by the Partnership Trust Fund if, in particular, the Owner's allocable share of interest from the Partnership Trust Fund constituted "portfolio interest" under the Code. The interest, however, may not constitute "portfolio interest" if, among other reasons, the underlying obligation is not in registered form or if the interest is determined without regard to the income of the Partnership Trust Fund, in the later case, the interest being properly characterized as a guaranteed payment under Section 707(c) of the Code. If this were the case, Non-United States Owners would be subject to a United States federal income and withholding tax at a rate of 30 percent on the Partnership Trust Fund's gross income, without any deductions or other allowances for costs and expenses incurred in producing the income, unless reduced or eliminated pursuant to an applicable treaty. In this case, a Non-United States Owner would only be entitled to a refund for that portion of the taxes, if any, in excess of the taxes that should have been withheld with respect to the interest. (11) Backup Withholding Distributions made on the Partnership Certificates and proceeds from the sale of the Partnership Certificates will be subject to a "backup" withholding tax of 31% if, in general, the Partnership Certificate Owner fails to comply with particular identification procedures, unless the holder is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld would be refunded by the IRS or allowable as a credit against the Non-United States Owner's federal income tax. CONSEQUENCES FOR PARTICULAR INVESTORS The federal tax discussions above may not be applicable depending on a securityholder's particular tax situation. The depositor recommends that prospective purchasers consult their tax advisors for the tax consequences to them of the purchase, ownership and disposition of REMIC Securities, FASIT Securities, Grantor Trust Securities, Partnership Certificates and Debt Securities, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in federal or other tax laws. STATE AND OTHER TAX CONSIDERATIONS In addition to the federal income tax consequences described in "Material Federal Income Tax Considerations," potential investors should consider the state and local tax consequences of the acquisition, ownership, and disposition of the Notes or Certificates, as applicable, offered under this prospectus. State tax law may differ substantially from the corresponding federal tax law, and the discussion above does not purport to describe any aspect of the tax laws of any state or other jurisdiction. Therefore, prospective investors should consult their own tax advisors for the various tax consequences of investments in the Notes or Certificates, as applicable, offered under this prospectus. ERISA CONSIDERATIONS GENERAL A fiduciary of a pension, profit-sharing, retirement or other employee benefit plan subject to Title I of ERISA should consider the fiduciary standards under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") in the context of the plan's particular circumstances before authorizing an investment of a portion of such plan's assets in the Securities. Accordingly, pursuant to Section 404 of ERISA, such fiduciary should consider among other factors (i) whether the investment is for the exclusive benefit of plan participants and their beneficiaries; (ii) whether the investment satisfies the applicable diversification requirements; (iii) whether the investment is in accordance with the documents and instruments governing the plan; and (iv) whether the investment is prudent, considering the nature of the investment. Fiduciaries of plans also should consider ERISA's prohibition on improper delegation of control over, or responsibility for, plan assets. In addition, employee benefit plans or other retirement arrangements subject to ERISA, as well as individual retirement accounts, certain types of Keogh plans not subject to ERISA but subject to Section 4975 of the Code, or any entity (including insurance company separate or general accounts) whose underlying assets include plan assets by reason of such plans, arrangements or accounts investing in the entity (each, a "Plan") are prohibited from engaging in a broad range of transactions involving Plan assets and persons having certain specified relationships to a Plan ("parties in interest" and "disqualified persons"). Such transactions are treated as "prohibited transactions" under Sections 406 of ERISA and excise taxes and/or other penalties are imposed upon such persons under ERISA and/or Section 4975 of the Code unless an exemption applies. The depositor, Underwriter, each master servicer or other servicer, any insurer, the trustee, the indenture trustee and certain of their affiliates might be considered "parties in interest" or "disqualified persons" with respect to a Plan. If so, the acquisition, holding or disposition of Securities by or on behalf of such Plan could be considered to give rise to a "prohibited transaction" within the meaning of ERISA and the Code unless a statutory, regulatory or administrative exception or exemption is available. ERISA CONSIDERATIONS RELATING TO CERTIFICATES Plan Assets In 29 C.R.F ss.2510.3-101 (the "Plan Asset Regulations"), the U.S. Department of Labor ("DOL") has defined what constitutes "plan assets" for purposes of ERISA and Section 4975 of the Code. The Plan Asset Regulations provide that if a Plan makes an investment in an "equity interest" in an entity, an undivided portion of the assets of the entity will be considered the assets of such Plan unless certain exceptions set forth in such Regulations apply. The Certificates will be deemed an equity interest for purposes of the Plan Asset Regulations, and the depositor can give no assurance that the Certificates will qualify for any of the exceptions under the Plan Asset Regulations. As a result, (i) a Plan may be deemed to have acquired an interest in the Assets of the trust fund and not merely an interest in the Certificates, (ii) the fiduciary investment standards of ERISA could apply to such Assets and (iii) transactions occurring in the course of managing, operating and servicing the trust fund and its Assets might constitute prohibited transactions, unless a statutory, regulatory or administrative exemption applies. Prohibited Transaction Class Exemption 83-1 The DOL has issued an administrative exemption, Prohibited Transaction Class Exemption 83-1 ("PTCE 83-1"), which under certain conditions exempts from the application of the prohibited transaction rules of ERISA and the excise tax provisions of Section 4975 of the Code transactions involving a Plan in connection with the operation of a "mortgage pool" and the purchase, sale and holding of Certificates which are "mortgage pool pass-through certificates." A "mortgage pool" is defined as a fixed investment pool consisting solely of interest-bearing obligations secured by first or second mortgages or deeds of trust on single-family residential property, property acquired in foreclosure and undistributed cash. A "mortgage pool pass-through certificate" is defined as a Certificate which represents a beneficial undivided interest in a mortgage pool which entitles the holder to pass through payments of principal and interest from the mortgage loans. PTCE 83-1 requires that: (i) the depositor and the trustee maintain a system of insurance or other protection for the mortgage loans, the property securing such mortgage loans and for indemnifying holders of Certificates against reductions in pass-through payments due to defaults in loan payments or property damage in an amount at least equal to the greater of (x) 1% of the aggregate principal balance of the mortgage loans or (y) 1% of the principal balance of the largest covered pooled mortgage loans; (ii) the trustee may not be an affiliate of the depositor; and (iii) the payments made to, and retained by, the depositor in connection with the trust fund, together with all funds inuring to its benefit for administering the trust fund, represent no more than "adequate consideration" for selling the mortgage loans, plus reasonable compensation for services provided to the trust fund. In addition, PTCE 83-1 exempts the initial sale of Certificates to a Plan with respect to which the depositor, the insurer, the master servicer or other servicer or the trustee is a party in interest if the Plan does not pay more than fair market value for such Certificates and the rights and interests evidenced by such Certificates are not subordinated to the rights and interests evidenced by other Certificates of the same pool. PTCE 83-1 also exempts from the prohibited transaction rules any transactions in connection with the servicing and operation of the mortgage pool, provided that any payments made to the master servicer in connection with the servicing of the trust fund are made in accordance with a binding agreement, copies of which must be made available to prospective Plan investors. In the case of any Plan with respect to which the depositor, the master servicer, the insurer or the trustee is a fiduciary, PTCE 83-1 will only apply if, in addition to the other requirements: (i) the initial sale, exchange or transfer of Certificates is expressly approved by an independent fiduciary who has authority to manage and control those Plan assets being invested in Certificates; (ii) the Plan pays no more for the Certificates than would be paid in an arm's-length transaction; (iii) no investment management, advisory or underwriting fee, sales commission or similar compensation is paid to the depositor with regard to the sale, exchange or transfer of Certificates to the Plan; (iv) the total value of the Certificates purchased by such Plan does not exceed 25% of the amount issued and (v) at least 50% of the aggregate amount of Certificates is acquired by persons independent of the depositor, the trustee, the master servicer and the insurer. Before purchasing Certificates, a fiduciary of a Plan should confirm that the trust fund is a "mortgage pool," that the Certificates constitute "mortgage pool pass-through certificates" and that the conditions set forth in PTCE 83-1 would be satisfied. In addition to making its own determination as to the availability of the exemptive relief provided in PTCE 83-1, the Plan fiduciary should consider the availability of any other prohibited transaction exemptions. The Plan fiduciary should also consider its general fiduciary obligations under ERISA in determining whether to purchase any Certificates on behalf of a Plan pursuant to PTCE 83-1. Underwriter Exemption The DOL has granted to Deutsche Bank Alex. Brown an individual exemption, Prohibited Transaction Exemption 94-84, and to Deutsche Morgan Grenfell/C.J. Lawrence Inc., similar approval (FAN 97-03E), which were both amended by Prohibited Transaction Exemption 97-34 ("PTE 97-34") and further recently amended pursuant to Prohibited Transaction Exemption 2000-58 ("PTE 2000-58") (collectively, the "Exemption") which is applicable to Certificates which meet its requirements whenever the Underwriter or its affiliate is the sole underwriter, manager or co-manager of an underwriting syndicate or is the selling or placement agent. The Exemption generally exempts certain transactions from the application of certain of the prohibited transaction provisions of ERISA and the Code provided that the conditions set forth in the Exemption are satisfied. These transactions include the servicing, managing and operation of investment trusts holding fixed (generally non-revolving pools) of enumerated categories of assets which include: single and multi-family residential mortgage loans, home equity loans or receivables (including cooperative housing loans), manufactured housing loans and guaranteed government mortgage pool certificates and the purchase, sale and holding of Certificates which represent beneficial ownership interests in the assets of such trusts. GENERAL CONDITIONS OF EXEMPTION The Exemption sets forth general conditions which must be satisfied for a transaction involving the purchase, sale and holding of the Certificates to be eligible for exemptive relief thereunder. First, the acquisition of Certificates by Plans must be on terms 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 Assets held by the trust fund must be fully secured (other than one-to-four family residential mortgage loans and home equity loans or receivables backing certain types of Certificates, as described below). (Mortgage loans, loans, obligations and receivables will be collectively referred to herein as "loans."). Third, unless the Certificates are issued in "designated transactions" (as described below) and are backed by fully-secured loans, they may not be subordinated. Fourth, the Certificates at the time of acquisition by the Plan must generally be rated in one of the three (or in the case of designated transactions, four) highest generic rating categories by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., Moody's Investors Services, Inc. or Fitch, Inc. (each, a "Rating Agency"). Fifth, the trustee and the indenture trustee generally cannot be affiliates of any member of the "Restricted Group" which consists of any (i) underwriter as defined in the Exemption, (ii) the depositor, (iii) the master servicer, (iv) each servicer, (v) the insurer, (vi) the counterparty of any "interest swap" (as described below) held as an Asset of the trust fund and (vii) any obligor with respect to loans constituting more than 5% of the aggregate unamortized principal balance of the loans held in the trust fund as of the date of initial issuance of the Certificates. Sixth, the sum of all payments made to, and retained by, such underwriters must represent not more than reasonable compensation for underwriting the Certificates; the sum of all payments made to, and retained by, the depositor pursuant to the assignment of the loans to the related trust fund must represent not more than the fair market value of such loans; and the sum of all payments made to, and retained by, the master servicer and any servicer must represent not more than reasonable compensation for such person's services under the Agreement and reimbursement of such person's reasonable expenses in connection therewith. Seventh, (i) the investment pool must consist only of assets of the type enumerated in the Exemption and which have been included in other investment pools; (ii) Certificates evidencing interests in such other investment pools must have been rated in one of the three (or in the case of designated transactions, four) highest generic rating categories by one of the Rating Agencies for at least one year prior to a Plan's acquisition of Certificates; and (iii) Certificates evidencing interests in such other investment pools must have been purchased by investors other than Plans for at least one year prior to a Plan's acquisition of Certificates. Finally, the investing Plan must be an accredited investor as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act of 1933, as amended. The depositor assumes that only Plans which are accredited investors under the federal securities laws will be permitted to purchase the Certificates. RECENT AMENDMENTS TO EXEMPTION PTE 2000-58 (the "Amendment") recently amended the Exemption to make the acquisition of Certificates by Plans in an initial offering or in a secondary market transaction, the holding or transfer of Certificates and the servicing, management and operation of the trust fund and its Assets on or after November 13, 2000 eligible for exemptive relief to a broader range of Certificates. Prior to such amendment, the Exemption generally permitted Plans to purchase only unsubordindated Certificates rated within the highest three generic rating categories backed by secured collateral. Such Certificates had to be issued by a trust fund which was a grantor trust, REMIC or a FASIT whose corpus could not include certain types of Assets such as interest-rate swaps. TYPES OF TRUST FUNDS The Amendment has expanded the types of permitted trust funds to include owner-trusts, as well as grantor trusts, REMICs and FASITs. Owner-trusts are subject to certain restrictions in their governing documents to ensure that their Assets may not be reached by the creditors of the depositor in the event of bankruptcy or other insolvency and must provide certain legal opinions. DESIGNATED TRANSACTIONS In the case where the Certificates are backed by trust fund Assets which are residential, home equity, manufactured housing or multi-family loans which are described and defined in the Exemption as designated transactions ("Designated Transactions"), the Amendment permits the Certificates issued by the trust fund in such transactions to be rated in one of the highest four generic rating categories by a Rating Agency and/or to be subordinated. The Assets will qualify for Designated Transaction treatment under the Exemption unless otherwise specified in the prospectus supplement. In addition, one subset of Designated Transactions, residential (one- to-four family) and home equity loans, may be less than fully secured, provided that the rights and interests evidenced by Certificates issued in such Designated Transactions are: (a) not subordinated to the rights and interests evidenced by Securities of the same trust fund; (b) such Certificates acquired by the Plan have received a rating from a Rating Agency at the time of such acquisition that is in one of the two highest generic rating categories; and (c) any loan included in the corpus or Assets of the trust fund is secured by collateral whose fair market value on the closing date of the Designated Transactions is at least equal to 80% of the sum of: (i) the outstanding principal balance due under the loan which is held by the trust fund and (ii) the outstanding principal balance(s) of any other loan(s) of higher priority (whether or not held by the trust fund) which are secured by the same collateral. INSURANCE COMPANY GENERAL ACCOUNTS In the event that Certificates do not meet the requirements of the Exemption solely because they are Subordinate Certificates or fail to meet a minimum rating requirement under the Exemption, certain Plans may be eligible to purchase Certificates pursuant to Section III of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60") which permits insurance company general accounts as defined in PTCE 95-60 to purchase such Certificates if they otherwise meet all of the other requirements of the Exemption. PERMITTED ASSETS The Amendment permits an interest-rate swap to be an Asset of a trust fund which issues Certificates acquired by Plans in an initial offering or in the secondary market on or after November 13, 2000 and clarifies the requirements regarding yield supplement agreements. An interest-rate swap (or if purchased by or on behalf of the trust fund) an interest-rate cap contract (collectively, a "Swap" or "Swap Agreement") is a permitted trust fund Asset if it: (a) is an "eligible Swap;" (b) is with an "eligible counterparty;" (c) is purchased by a "qualified plan investor;" (d) meets certain additional specific conditions which depend on whether the Swap is a "ratings dependent Swap" or a "non-ratings dependent Swap" and (e) permits the trust fund to make termination payments to the Swap (other than currently scheduled payments) solely from excess spread or amounts otherwise payable to the servicer or depositor. An "eligible Swap" is one which: (a) is denominated in U.S. dollars; (b) pursuant to which the trust fund pays or receives, on or immediately prior to the respective payment or distribution date for the class of Certificates to which the Swap relates, a fixed rate of interest or a floating rate of interest based on a publicly available index (E.G., LIBOR or the U.S. Federal Reserve's Cost of Funds Index (COFI)), with the trust fund receiving such payments on at least a quarterly basis and obligated to make separate payments no more frequently than the counterparty, with all simultaneous payments being netted ("Allowable Interest Rate"); (c) has a notional amount that does not exceed either: (i) the principal balance of the class of Certificates to which the Swap relates, or (ii) the portion of the principal balance of such class represented by obligations ("Allowable Notional Amount"); (d) is not leveraged (I.E., payments are based on the applicable notional amount, the day count fractions, the fixed or floating rates permitted above, and the difference between the products thereof, calculated on a one-to-one ratio and not on a multiplier of such difference) ("Leveraged"); (e) has a final termination date that is either the earlier of the date on which the issuer terminates or the related class of Certificates are fully repaid and (f) does not incorporate any provision which could cause a unilateral alteration in the interest rate requirements described above or the prohibition against leveraging. An "eligible counterparty" means a bank or other financial institution which has a rating at the date of issuance of the Certificates, which is in one of the three highest long-term credit rating categories or one of the two highest short-term credit rating categories, utilized by at least one of the Rating Agencies rating the Certificates; provided that, if a counterparty is relying on its short-term rating to establish eligibility hereunder, such counterparty must either have a long-term rating in one of the three highest long-term rating categories or not have a long-term rating from the applicable Rating Agency. A "qualified plan investor" is a Plan or Plans where the decision to buy such class of Certificates is made on behalf of the Plan by an independent fiduciary qualified to understand the Swap transaction and the effect the Swap would have on the rating of the Certificates and such fiduciary is either (a) a "qualified professional asset manager" ("QPAM") under Prohibited Transaction Class Exemption 84-14 ("PTCE 84-14") (see below), (b) an "in-house asset manager" under Prohibited Transaction Class Exemption 96-23 ("PTCE 96-23") (see below) or (c) has total assets (both Plan and non-Plan) under management of at least $100 million at the time the Certificates are acquired by the Plan. In "ratings dependent Swaps" (where the rating of a class of Certificates is dependent on the terms and conditions of the Swap), the Swap Agreement must provide that if the credit rating of the counterparty is withdrawn or reduced by any Rating Agency below a level specified by the Rating Agency, the servicer must, within the period specified under the Swap Agreement: (a) obtain a replacement Swap Agreement with an eligible counterparty which is acceptable to the Rating Agency and the terms of which are substantially the same as the current Swap Agreement (at which time the earlier Swap Agreement must terminate); or (b) cause the Swap counterparty to establish any collateralization or other arrangement satisfactory to the Rating Agency such that the then current rating by the Rating Agency of the particular class of Certificates will not be withdrawn or reduced (and the terms of the Swap Agreement must specifically obligate the counterparty to perform these duties for any class of Certificates with a term of more than one year). In the event that the servicer fails to meet these obligations, Plan certificateholders must be notified in the immediately following periodic report which is provided to certificateholders but in no event later than the end of the second month beginning after the date of such failure. Sixty days after the receipt of such report, the exemptive relief provided under the Exemption will prospectively cease to be applicable to any class of Certificates held by a Plan which involves such ratings dependent Swap. "Non-ratings dependent Swaps" (those where the rating of the Certificates does not depend on the terms and conditions of the Swap) are subject to the following conditions. If the credit rating of the counterparty is withdrawn or reduced below the lowest level permitted above, the servicer will, within a specified period after such rating withdrawal or reduction: (a) obtain a replacement Swap Agreement with an eligible counterparty, the terms of which are substantially the same as the current Swap Agreement (at which time the earlier Swap Agreement must terminate); (b) cause the counterparty to post collateral with the trust fund in an amount equal to all payments owed by the counterparty if the Swap transaction were terminated; or (c) terminate the Swap Agreement in accordance with its terms. An "eligible yield supplement agreement" is any yield supplement agreement or similar arrangement (or if purchased by or on behalf of the trust fund) an interest rate cap contract to supplement the interest rates otherwise payable on obligations held by the trust fund ("EYS Agreement"). If the EYS Agreement has a notional principal amount and/or is written on an International Swaps and Derivatives Association, Inc. (ISDA) form, the EYS Agreement may only be held as an Asset of the trust fund with respect to Certificates purchased by Plans on or after April 7, 1998 if it meets the following conditions: (a) it is denominated in U.S. dollars; (b) it pays an Allowable Interest Rate; (c) it is not Leveraged; (d) it does not allow any of these three preceding requirements to be unilaterally altered without the consent of the trustee; (e) it is entered into between the trust fund and an eligible counterparty and (f) it has an Allowable Notional Amount. PRE-FUNDING ACCOUNTS The Exemption was amended by PTE 97-34 to extend exemptive relief to Certificates issued in transactions using pre-funding accounts whereby a portion of the loans backing the Certificates are transferred to the trust fund within a specified period following the closing date ("DOL Pre-Funding Period") (see below) instead of requiring that all such loans be either identified or transferred on or before the closing date. The relief is effective for transactions occurring on or after May 23, 1997 provided that the following conditions are met. First, the ratio of the amount allocated to the Pre-Funding Account to the total principal amount of the Certificates being offered ("Pre-Funding Limit") must not exceed twenty-five percent (25%). Second, all loans transferred after the closing date (referred to here as "additional loans") must meet the same terms and conditions for eligibility as the original loans used to create the trust fund, which terms and conditions have been approved by the Rating Agency. Third, the transfer of such additional loans to the trust fund during the DOL Pre-Funding Period must not result in the Certificates receiving a lower credit rating from the Rating Agency upon termination of the DOL Pre-Funding Period than the rating that was obtained at the time of the initial issuance of the Certificates by the trust fund. Fourth, solely as a result of the use of pre-funding, the weighted average annual percentage interest rate (the "average interest rate") for all of the loans in the trust fund at the end of the DOL Pre-Funding Period must not be more than 100 basis points lower than the average interest rate for the loans which were transferred to the trust fund on the closing date. Fifth, either: (i) the characteristics of the additional loans must be monitored by an insurer or other credit support provider which is independent of the depositor; or (ii) an independent accountant retained by the depositor must provide the depositor with a letter (with copies provided to the Rating Agency, the underwriter and the trustee) stating whether or not the characteristics of the additional loans conform to the characteristics described in the Prospectus, Prospectus Supplement, Private Placement Memorandum ("Offering Documents") and/or the Agreement. In preparing such letter, the independent accountant must use the same type of procedures as were applicable to the loans which were transferred as of the closing date. Sixth, the DOL Pre-Funding Period must end no later than three months or 90 days after the closing date or earlier, in certain circumstances, if the amount on deposit in the Pre-Funding Account is reduced below the minimum level specified in the Agreement or an event of default occurs under the Agreement. Seventh, amounts transferred to any Pre-Funding Account and/or Capitalized Interest Account used in connection with the pre-funding may be invested only in investments which are permitted by the Rating Agency and (i) are direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality thereof (provided that such obligations are backed by the full faith and credit of the United States); or (ii) have been rated (or the obligor has been rated) in one of the three highest generic rating categories by the Rating Agency ("Acceptable Investments"). Eighth, certain disclosure requirements must be met. REVOLVING POOL FEATURES The Exemption only covers Certificates backed by "fixed" pools of loans which require that all the loans must be transferred to the trust fund or identified at closing (or transferred within the DOL Pre-Funding Period, if pre-funding meeting the conditions described above is used). Accordingly, Certificates issued by trust funds which feature revolving pools of Assets will not be eligible for a purchase by Plans. However, Securities which are Notes backed by revolving pools of Assets may be eligible for purchase by Plans pursuant to certain other prohibited transaction exemptions. See discussion below in "ERISA Considerations Relating to Notes." LIMITATIONS ON SCOPE OF THE EXEMPTION If the general conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by ERISA and the Code in connection with the initial acquisition, transfer or holding, and the acquisition or disposition in the secondary market, of the Certificates by Plans. However, no exemption is provided from the restrictions of ERISA for the acquisition or holding of a Certificates on behalf of an "Excluded Plan" by any person who is a fiduciary with respect to the assets of such Excluded Plan. For those purposes, an Excluded Plan is a Plan sponsored by any member of the Restricted Group. Exemptive relief may also be provided for the acquisition, holding and disposition of Certificates by Plans if the fiduciary or its affiliate is the obligor with respect to 5% or less of the fair market value of the Loans in the trust fund provided that: (i) the Plan is not an Excluded Plan, (ii) each Plan's investment in each class of Certificates does not exceed 25% of the outstanding Certificates in the class, (iii) after the Plan's acquisition of the Certificates, no more than 25% of the assets over which the fiduciary has investment authority are invested in Certificates of a trust containing assets which are sold or serviced by the same entity and (iv) in the case of initial issuance (but not secondary market transactions), at least 50% of each class of Certificates and at least 50% of the aggregate interests in the trust fund are acquired by persons independent of the Restricted Group. ERISA CONSIDERATIONS RELATING TO NOTES Under the Plan Asset Regulations, the Assets of the trust fund would be treated as "plan assets" of a Plan for the purposes of ERISA and the Code only if the Plan acquires an "equity interest" in the trust fund and none of the exceptions contained in the Plan Asset Regulations is applicable. An equity interest is defined under the Plan Asset Regulations as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Assuming that the Notes are treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulations, then such Notes will be eligible for purchase by Plans. However, without regard to whether the Notes are treated as an "equity interest" for such purposes, the acquisition or holding of Notes by or on behalf of a Plan could be considered to give rise to a prohibited transaction if the trust fund or any of its affiliates is or becomes a party in interest or disqualified person with respect to such Plan, or in the event that a Note is purchased in the secondary market and such purchase constitutes a sale or exchange between a Plan and a party in interest or disqualified person with respect to such Plan. There can be no assurance that the trust fund or any of its affiliates will not be or become a party in interest or a disqualified person with respect to a Plan that acquires Notes. The Amendment to the Exemption permits trust funds which are grantor trusts, owner-trusts, REMICs or FASITs to issue Notes, as well as Certificates, provided a legal opinion is received to the effect that the noteholders have a perfected security interest in the trust fund's Assets. The exemptive relief provided under the Exemption for any prohibited transactions which could be caused as a result of the operation, management or servicing of the trust fund and its Assets would not be necessary with respect to Notes with no substantial equity features which are issued as obligations of the trust fund. However, effective for the acquisition, holding or transfer of Notes between a Plan and a party in interest which occurs on or after November 13, 2000, the Exemption would provide prohibited transaction exemptive relief, provided that the same conditions of the Exemption described above relating to Certificates are met with respect to the Notes. The same limitations of such exemptive relief relating to acquisitions of Certificates by fiduciaries with respect to Excluded Plans would also be applicable to the Notes as described herein in "LIMITATIONS ON SCOPE OF THE EXEMPTION." In the event that the Exemption is not applicable to the Notes, one or more other prohibited transactions exemptions may be available to Plans purchasing or transferring the Notes depending in part upon the type of Plan fiduciary making the decision to acquire the Notes and the circumstances under which such decision is made. These exemptions include, but are not limited to, Prohibited Transaction Class Exemption 90-1 (regarding investments by insurance company pooled separate accounts), Prohibited Transaction Class Exemption 91-38 (regarding investments by bank collective investments funds), PTCE 84-14 (regarding transactions effected by "qualified professional asset managers"), PTCE 95-60 (regarding investments by insurance company general accounts) and PTCE 96-23 (regarding transactions effected by "in-house asset managers") (collectively, the "Investor-Based Exemptions"). However, even if the conditions specified in these Investor-Based Exemptions are met, the scope of the relief provided under such Exemptions might or might not cover all acts which might be construed as prohibited transactions. EACH PROSPECTUS SUPPLEMENT WILL CONTAIN INFORMATION CONCERNING CONSIDERATIONS RELATING TO ERISA AND THE CODE THAT ARE APPLICABLE TO THE RELATED SECURITIES. BEFORE PURCHASING SECURITIES IN RELIANCE ON PTCE 83-1, THE EXEMPTION, THE INVESTOR-BASED EMEMPTIONS OR ANY OTHER EXEMPTION, A FIDUCIARY OF A PLAN SHOULD ITSELF CONFIRM THAT REQUIREMENTS SET FORTH IN SUCH EXEMPTION WOULD BE SATISFIED. ANY PLAN INVESTOR WHO PROPOSES TO USE "PLAN ASSETS" OF ANY PLAN TO PURCHASE SECURITIES OF ANY SERIES OR CLASS SHOULD CONSULT WITH ITS COUNSEL WITH RESPECT TO THE POTENTIAL CONSEQUENCES UNDER ERISA AND SECTION 4975 OF THE CODE OF THE ACQUISITION AND OWNERSHIP OF SUCH SECURITIES. Governmental plans and church plans as defined in ERISA are not subject to ERISA or Code Section 4975, although they may elect to be qualified under Section 401(a) of the Code and exempt from taxation under Section 501(a) of the Code and would then be subject to the prohibited transaction rules set forth in Section 503 of the Code. In addition, governmental plans may be subject to federal, state and local laws which are to a material extent similar to the provisions of ERISA or a Code Section 4975 ("Similar Law"). A fiduciary of a governmental plan should make its own determination as to the propriety of an investment in Securities under applicable fiduciary or other investment standards and the need for the availability of any exemptive relief under any Similar Law. LEGAL INVESTMENT The prospectus supplement will specify which classes of the Notes or Certificates, as applicable, if any, will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"). Generally, only classes of Offered Notes or Offered Certificates, as applicable, that (1) are rated in one of the two highest rating categories by one or more rating agencies and (2) are part of a series representing interests in, or secured by, a trust fund consisting of loans secured by first liens on real property and originated by particular types of originators specified in SMMEA, will be "mortgage related securities" for purposes of SMMEA. Those classes of Offered Notes or Offered Certificates, as applicable, qualifying as "mortgage related securities" 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 of the United States constitute legal investments for those entities. Pursuant to SMMEA, a number of states enacted legislation, on or before the October 3, 1991 cut-off for those enactments, limiting to varying extents the ability of some entities (in particular, insurance companies) to invest in mortgage related securities secured by liens on residential, or mixed residential and commercial, properties, in most cases by requiring the affected investors to rely solely upon existing state law, and not SMMEA. SMMEA also amended the legal investment authority of federally-chartered depository institutions as follows: federal savings and loan associations and federal savings banks may invest in, sell or otherwise deal in "mortgage related securities" without limitation as to the percentage of their assets represented thereby, federal credit unions may invest in these securities, and national banks may purchase these securities for their own account without regard to the limitations generally applicable to investment securities set forth in 12 U.S.C. ss.24 (Seventh), subject in each case to regulations that the applicable federal regulatory authority may prescribe. In this connection, the Office of the Comptroller of the Currency (the "OCC") has amended 12 C.F.R. Part 1 to authorize national banks to purchase and sell for their own account, without limitation as to a percentage of the bank's capital and surplus (but subject to compliance with general standards concerning "safety and soundness" and retention of credit information in 12 C.F.R. ss.1.5), some "Type IV securities," defined in 12 C.F.R. ss.1.2(l) to include some "residential mortgage related securities." As so defined, "residential mortgage-related security" means, in relevant part, "mortgage related security" within the meaning of SMMEA. The National Credit Union Administration ("NCUA") has adopted rules, codified at 12 C.F.R. Part 703, which permit federal credit unions to invest in "mortgage related securities" under some limited circumstances, other than stripped mortgage related securities, residual interests in mortgage related securities, and commercial mortgage related securities, unless the credit union has obtained written approval from the NCUA to participate in the "investment pilot program" described in 12 C.F.R. ss.703.140. Thrift institutions that are subject to the jurisdiction of the Office of Thrift Supervision (the "OTS") should consider the OTS' Thrift Bulletin 13a (December 1, 1998), "Management of Interest Rate Risk, Investment Securities, and Derivatives Activities," before investing in any of the Offered Notes or Offered Certificates, as applicable. All depository institutions considering an investment in the Certificates should review the "Supervisory Policy Statement on Investment Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of the Federal Financial Institutions Examination Council ("FFIEC"), which has been adopted by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the OCC and the OTS, effective May 26, 1998, and by the NCUA, effective October 1, 1998. The 1998 Policy Statement sets forth general guidelines which depository institutions must follow in managing risks (including market, credit, liquidity, operational (transaction), and legal risks) applicable to all securities (including mortgage pass-through securities and mortgage-derivative products) used for investment purposes. If specified in the prospectus supplement, other classes of Offered Notes or Offered Certificates, as applicable, offered pursuant to this prospectus will not constitute "mortgage related securities" under SMMEA. The appropriate characterization of those classes under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase these Offered Notes or Offered Certificates, as applicable, may be subject to significant interpretive uncertainties. Institutions whose investment activities are subject to regulation by federal or state authorities should review rules, policies and guidelines adopted from time to time by those authorities before purchasing any Offered Notes or Offered Certificates, as applicable, as some classes or subclasses may be deemed unsuitable investments, or may otherwise be restricted, under those rules, policies or guidelines (in some instances irrespective of SMMEA). The foregoing does not take into consideration the applicability of statutes, rules, regulations, orders, guidelines or agreements generally governing investments made by a particular investor, including, but not limited to, "prudent investor" provisions, percentage-of-assets limits provisions that may restrict or prohibit investment in securities that are not "interest bearing" or "income paying," and with regard to any Offered Notes or Offered Certificates, as applicable, issued in book-entry form, provisions that may restrict or prohibit investments in securities that are issued in book-entry form. Except as to the status of some classes of Offered Notes or Offered Certificates, as applicable, as "mortgage related securities," no representation is made as to the proper characterization of the Offered Notes or Offered Certificates, as applicable, for legal investment, financial institution regulatory, or other purposes, or as to the ability of particular investors to purchase any Offered Notes or Offered Certificates, as applicable, under applicable legal investment restrictions. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Offered Notes or Offered Certificates, as applicable,) may adversely affect the liquidity of the Offered Notes or Offered Certificates, as applicable. Accordingly, all investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities should consult with their own legal advisors in determining whether and to what extent the Offered Notes or Offered Certificates, as applicable, of any class constitute legal investments for them or are subject to investment, capital or other restrictions, and, if applicable, whether SMMEA has been overridden in any jurisdiction relevant to that investor. METHODS OF DISTRIBUTION The Notes or Certificates, as applicable, offered by this prospectus and by the supplements to this prospectus will be offered in series. The distribution of the Notes or Certificates, as applicable, may be effected from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices to be determined at the time of sale or at the time of commitment therefor. If specified in the prospectus supplement, the Notes or Certificates, as applicable, will be distributed in a firm commitment underwriting, subject to the terms and conditions of the underwriting agreement, by Deutsche Bank Securities Inc. ("DBSI") acting as underwriter with other underwriters, if any, named in the underwriting agreement. In that event, the prospectus supplement may also specify that the underwriters will not be obligated to pay for any Notes or Certificates, as applicable, agreed to be purchased by purchasers pursuant to purchase agreements acceptable to the depositor. In connection with the sale of the Notes or Certificates, as applicable, underwriters may receive compensation from the depositor or from purchasers of the Notes or Certificates, as applicable, in the form of discounts, concessions or commissions. The prospectus supplement will describe any compensation paid by the depositor. Alternatively, the prospectus supplement may specify that the Notes or Certificates, as applicable, will be distributed by DBSI acting as agent or in some cases as principal with respect to Notes or Certificates, as applicable, that it has previously purchased or agreed to purchase. If DBSI acts as agent in the sale of Notes or Certificates, as applicable, DBSI will receive a selling commission for each series of Notes or Certificates, as applicable, depending on market conditions, expressed as a percentage of the total principal balance of the related mortgage loans as of the Cut-off Date. The exact percentage for each series of Notes or Certificates, as applicable, will be disclosed in the prospectus supplement. To the extent that DBSI elects to purchase Notes or Certificates, as applicable, as principal, DBSI may realize losses or profits based upon the difference between its purchase price and the sales price. The prospectus supplement for any series offered other than through underwriters will contain information regarding the nature of that offering and any agreements to be entered into between the depositor and purchasers of Notes or Certificates, as applicable, of that series. The depositor will indemnify DBSI and any underwriters against particular civil liabilities, including liabilities under the Securities Act of 1933, or will contribute to payments DBSI and any underwriters may be required to make in respect of these civil liabilities. In the ordinary course of business, DBSI and the depositor may engage in various securities and financing transactions, including repurchase agreements to provide interim financing of the depositor's mortgage loans pending the sale of those mortgage loans or interests in those mortgage loans, including the Notes or Certificates, as applicable. DBSI performs management services for the depositor. The depositor anticipates that the Notes or Certificates, as applicable, will be sold primarily to institutional investors. Purchasers of Notes or Certificates, as applicable, including dealers, may, depending on the facts and circumstances of those purchases, be deemed to be "underwriters" within the meaning of the Securities Act of 1933 in connection with reoffers and sales by them of Notes or Certificates, as applicable. securityholders should consult with their legal advisors in this regard before any reoffer or sale of Notes or Certificates, as applicable. As to each series of Notes or Certificates, as applicable, only those classes rated in one of the four highest rating categories by any rating agency will be offered by this prospectus. Any lower rated or unrated class may be initially retained by the depositor, and may be sold by the depositor at any time to one or more institutional investors. ADDITIONAL INFORMATION The Depositor has filed with the Commission a registration statement on Form S-3 under the Securities Act of 1933, as amended, with respect to the Notes or Certificates, as applicable, (the "Registration Statement"). This prospectus, which forms a part of the Registration Statement, omits some of the information contained in the Registration Statement pursuant to the rules and regulations of the Commission. The Registration Statement and the exhibits to the Registration Statement can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at Regional Offices in the following locations: o Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and o New York Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of these materials can also be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains a site on the world wide web at "http://www.sec.gov" at which users can view and download copies of reports, proxy and information statements and other information filed electronically through the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system. The Depositor has filed the Registration Statement, including all exhibits to the Registration Statement, through the EDGAR system and therefore these materials should be available by logging onto the Commission's web site. The Commission maintains computer terminals providing access to the EDGAR system at each of the offices referred to above. Copies of the most recent Fannie Mae prospectus for Fannie Mae certificates and Fannie Mae's annual report and quarterly financial statements as well as other financial information are available from the Director of Investor Relations of Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016 (202-752-7115). The Depositor did not participate in the preparation of Fannie Mae's prospectus or its annual or quarterly reports or other financial information and, accordingly, makes no representation as to the accuracy or completeness of the information in those documents. Copies of the most recent Offering Circular for Freddie Mac certificates as well as Freddie Mac's most recent Information Statement and Information Statement supplement and any quarterly report made available by Freddie Mac may be obtained by writing or calling the Investor Inquiry Department of Freddie Mac at 8200 Jones Branch Drive, McLean, Virginia 22102 (outside Washington, D.C. metropolitan area, telephone 800-336-3672; within Washington, D.C. metropolitan area, telephone 703-759-8160). The Depositor did not participate in the preparation of Freddie Mac's Offering Circular, Information Statement or any supplement to the Information Statement or any quarterly report of the Information Statement and, accordingly, makes no representation as to the accuracy or completeness of the information in those documents. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE All documents subsequently filed by or on behalf of the trust fund referred to in the prospectus supplement with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this prospectus and prior to the termination of any offering of the Notes or Certificates, as applicable, issued by that trust fund will be deemed to be incorporated by reference in this prospectus and to be a part of this prospectus from the date of the filing of those documents. Any statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed to be modified or superseded for all purposes of this prospectus to the extent that a statement contained in this prospectus (or in the prospectus supplement) or in any other subsequently filed document that also is or is deemed to be incorporated by reference modifies or replaces that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. The Trustee on behalf of any trust fund will provide without charge to each person to whom this prospectus is delivered, upon request, a copy of any or all of the documents referred to above that have been or may be incorporated by reference in this prospectus (not including exhibits to the information that is incorporated by reference unless the exhibits are specifically incorporated by reference into the information that this prospectus incorporates). Requests for information should be directed to the corporate trust office of the Trustee specified in the prospectus supplement. LEGAL MATTERS Certain legal matters, including the federal income tax consequences to securityholders of an investment in the Notes or Certificates, as applicable, of a series, will be passed upon for the depositor by Stroock & Stroock & Lavan LLP, Washington, D.C. FINANCIAL INFORMATION A new trust fund will be formed for each series of Notes or Certificates, as applicable, and no trust fund will engage in any business activities or have any assets or obligations before the issuance of the related series of Notes or Certificates, as applicable. Accordingly, financial statements for a trust fund will generally not be included in this prospectus or in the prospectus supplement. RATING As a condition to the issuance of any class of Offered Notes or Offered Certificates, as applicable, they must not be rated lower than investment grade; that is, they must be rated in one of the four highest rating categories, by a rating agency. Ratings on mortgage pass-through certificates and mortgage-backed notes address the likelihood of receipt by securityholders of all distributions on the underlying mortgage loans. These ratings address the structural, legal and issuer-related aspects associated with the Notes or Certificates, as applicable, the nature of the underlying assets and the credit quality of the guarantor, if any. Ratings on mortgage pass-through certificates, mortgage-backed notes and other asset backed securities do not represent any assessment of the likelihood of principal prepayments by borrowers or of the degree by which prepayments might differ from those originally anticipated. As a result, securityholders 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. INDEX OF DEFINED TERMS 1986 Act......................................................99 1998 Policy Statement........................................149 Accrual Period................................................20 Accrual Securities............................................27 Accrued Security Interest.....................................30 Adjustable Rate Assets.........................................3 Agency Securities..............................................3 Agreement.....................................................44 ARM Loans......................................................7 Asset Conservation Act........................................85 Asset Group...................................................27 Asset Seller...................................................3 Available Distribution Amount.................................28 Balloon Payment Assets.........................................4 Bankruptcy Code...............................................82 Beneficial Owner..............................................37 Bi-weekly Assets...............................................4 Book-Entry Securities.........................................28 borrower......................................................74 Buy Down Assets................................................4 Buydown Funds.................................................98 Buydown Mortgage Loans........................................24 Buydown Period................................................24 Capitalized Interest Account..................................18 Cash Flow Agreement...........................................19 Cedel.........................................................37 CERCLA........................................................83 Certificates..................................................27 Charter Act...................................................13 Code..........................................................93 Collection Account............................................48 Commission.....................................................7 contract borrower.............................................76 contract lender...............................................76 Convertible Assets.............................................4 Cooperative...................................................75 Cooperative Corporation.......................................39 Cooperative Loans.............................................75 Cooperatives...................................................5 Covered Trust.................................................70 CPR...........................................................22 credit support................................................18 Crime Control Act.............................................88 Cut-off Date...................................................6 DBS..........................................................150 Debt Securities...............................................94 defective obligation..........................................96 Definitive Securities.........................................28 Determination Date............................................28 Disqualified Holder..........................................125 Disqualified Organization....................................113 Distribution Date.............................................20 DOL..........................................................143 DTC...........................................................37 Due Period....................................................29 EDGAR........................................................152 Eligible Corporation.........................................125 ERISA........................................................142 Euroclear.....................................................37 Euroclear Operator............................................39 European Depositaries.........................................40 excess servicing.............................................130 Exchange Act..................................................38 Excluded Plan................................................145 Exemption....................................................143 Fannie Mae.....................................................3 FASIT.........................................................94 FASIT Ownership Security.....................................121 FASIT Provisions..............................................94 FASIT Regular Securities.....................................121 FASIT Securities..............................................94 FDIC..........................................................48 FFIEC........................................................149 FHA............................................................6 Financial Intermediary........................................40 Fitch........................................................144 Freddie Mac....................................................3 Freddie Mac Act...............................................14 Freddie Mac Certificate Group.................................14 Garn-St. Germain Act..........................................85 GEM Assets.....................................................4 Ginnie Mae.....................................................3 GPM Assets.....................................................4 Grantor Trust Fund............................................94 Grantor Trust Securities......................................94 Home Equity Loans..............................................5 Housing Act...................................................11 HUD...........................................................58 Increasing Payment Asset.......................................4 Indirect Participants.........................................38 Insurance Proceeds............................................29 Interest Rate.................................................30 Interest Reduction Assets......................................4 land sale contract............................................76 Land Sale Contracts............................................5 Level Payment Assets...........................................3 Liquidation Proceeds..........................................29 Loan-to-Value Ratio............................................6 Lock-out Date..................................................8 Lock-out Period................................................8 Mark to Market Regulations...................................115 Mortgage Securities............................................3 Mortgaged Properties...........................................5 Mortgages......................................................6 NCUA.........................................................149 new partnership..............................................138 New Regulations..............................................119 Non-Equity Securities........................................146 Non-Pro Rata Security.........................................99 Nonrecoverable Advance........................................33 Non-U.S. Person..............................................119 Notes.........................................................27 OCC..........................................................149 Offered Securities............................................27 OID Regulations...........................................94, 99 old partnership..............................................138 Participants..................................................38 Parties in Interest..........................................143 Partnership Securities........................................94 Partnership Trust Fund........................................94 Pass-Through Entity..........................................113 PCBs..........................................................83 Permitted Investments.........................................49 Plans........................................................142 pooling and servicing agreement...............................44 Pre-Funded Amount.............................................17 Pre-Funding Account...........................................17 Pre-Funding Limit............................................147 Pre-Funding Period............................................17 prepayment....................................................22 Prepayment Assumption........................................100 PTCE.........................................................146 Purchase Price................................................46 RCRA..........................................................84 Record Date...................................................28 Refinance Loans................................................6 Registration Statement.......................................151 Regular Securities............................................95 Regular Securityholder........................................99 Related Proceeds..............................................33 Relevant Depositary...........................................40 Relief Act....................................................88 REMIC.........................................................93 REMIC Pool....................................................94 REMIC Regulations.............................................94 REMIC Securities..............................................43 REO Property..................................................34 Residual Securities...........................................95 Restricted Group.............................................144 Retained Interest.............................................60 Revolving Credit Line Loans....................................8 RICO..........................................................88 Rules.........................................................40 S&P..........................................................144 SBJPA of 1996.................................................98 secured-creditor exemption....................................84 Securities....................................................27 Security Balance..............................................31 Senior Securities.............................................27 Servicemen's Readjustment Act.................................17 Servicing Standard............................................52 Single Family Property.........................................5 SMMEA........................................................148 SPA...........................................................22 Special servicer..............................................62 Standard Securities..........................................127 Startup Day...................................................95 Step-up Rate Assets............................................4 Strip Securities..............................................27 Stripped Agency Securities....................................15 Stripped Securities..........................................127 Subordinate Securities........................................27 Subsequent Assets.............................................17 Superliens....................................................83 super-premium................................................100 Taxable Mortgage Pools........................................94 Terms and Conditions..........................................40 thrift institutions..........................................112 Tiered REMICs.................................................98 Title V.......................................................87 Title VIII....................................................87 U.S. Person..................................................114 UCC...........................................................38 UST...........................................................84 VA.............................................................6 VA Guaranty Policy............................................59 Value..........................................................6 Warranting Party..............................................47 Yield Considerations..........................................31 SUBJECT TO COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus dated [ ]) $[ ] (APPROXIMATE) ACE SECURITIES CORP. [ ] TRUST [ ] ASSET BACKED NOTES [ ] SERVICER The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the glossary of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The notes will represent obligations of the trust only and will not represent interests in or obligations of any other entity. This prospectus supplement may be used to offer and sell the notes only if accompanied by the prospectus. The trust will issue the following notes: ORIGINAL CLASS INTEREST PRICE UNDERWRITING PROCEEDS CLASS PRINCIPAL AMOUNT(1) RATE(2) TO PUBLIC DISCOUNT TO DEPOSITOR - ----- ------------------- -------- --------- -------- ------------ [ ] $[ ] [ ]% $[ ] [ ]% $[ ] - ------------------ (1) This amount is approximate, as described in this prospectus supplement. (2) The interest rate is subject to increase as described in this prospectus supplement This prospectus supplment and the accompanying prospectus relate only to the offering of the notes and not to the residual certificate that will be issued by the trust as described in the prospectus supplement. [Describe assets of trust fund.] NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE NOTES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. [Describe underwriting arrangements.] On or about [ ], delivery of the notes offered by this prospectus supplement will be made through the book-entry facilities of The Depository Trust Company. UNDERWRITER: DEUTSCHE BANC ALEX. BROWN The date of this prospectus supplement is [ ] IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the notes offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your notes, and (2) this prospectus supplement, which describes the specific terms of your notes. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the notes in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. ------------------------------------ Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the notes and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the notes will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. ------------------------------------ We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following tables of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. TABLES OF CONTENTS PROSPECTUS SUPPLEMENT PAGE ---- Summary of Terms...................................................S-4 Risk Factors.......................................................S-8 Description of the Trust..........................................S-12 Description of the Notes..........................................S-12 [The Insurance Policy.............................................S-17 Description of the Mortgage Pool..................................S-18 Additional Information............................................S-25 The Originator....................................................S-25 The Servicer......................................................S-25 Description of the Transfer and Servicing Agreements.......................................................S-26 Yield Considerations..............................................S-32 Material Federal Income Tax Considerations........................S-39 State and Local Income Tax Considerations.........................S-39 ERISA Considerations..............................................S-39 Legal Investment Considerations...................................S-40 Use of Proceeds...................................................S-40 Underwriting......................................................S-40 Experts...........................................................S-41 Legal Matters.....................................................S-41 Ratings...........................................................S-41 Glossary of Defined Terms.........................................S-43 Annex I...........................................................S-44 PROSPECTUS PAGE ---- Description of the Trust Funds.................................... Use of Proceeds................................................... Yield Considerations.............................................. The Depositor..................................................... Description of the Securities..................................... Description of the Agreements..................................... Description of Credit Support..................................... Certain Legal Aspects of Mortgage Loans........................... Material Federal Income Tax Considerations........................ State and Other Tax Considerations................................ ERISA Considerations.............................................. Legal Investment.................................................. Methods of Distribution........................................... Additional Information............................................ Incorporation of Certain Documents by Reference................... Legal Matters..................................................... Financial Information............................................. Rating............................................................ SUMMARY OF TERMS o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. O WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. O WHENEVER WE REFER TO A PERCENTAGE OF SOME OR ALL OF THE MORTGAGE LOANS IN THE TRUST, THAT PERCENTAGE HAS BEEN CALCULATED ON THE BASIS OF THE TOTAL PRINCIPAL BALANCE OF THOSE MORTGAGE LOANS AS OF [ ], UNLESS WE SPECIFY OTHERWISE. WE EXPLAIN IN THIS PROSPECTUS SUPPLEMENT UNDER "DESCRIPTION OF THE NOTES" HOW THE PRINCIPAL BALANCE OF A MORTGAGE LOAN IS DETERMINED. WHENEVER WE REFER IN THIS SUMMARY OF TERMS OR IN THE RISK FACTORS SECTION OF THIS PROSPECTUS SUPPLEMENT TO THE TOTAL PRINCIPAL BALANCE OF ANY MORTGAGE LOANS, WE MEAN THE TOTAL OF THEIR PRINCIPAL BALANCES DETERMINED BY THAT METHOD, UNLESS WE SPECIFY OTHERWISE. THE OFFERED NOTES ACE Securities Corp. [ ] Trust [ ] is offering the Class [ ] Asset Backed Notes as part of Series [ ]. The notes will be issued in book-entry form. SEE "DESCRIPTION OF THE NOTES -- GENERAL" IN THIS PROSPECTUS SUPPLEMENT FOR A DISCUSSION OF THE MINIMUM DENOMINATIONS AND THE INCREMENTAL DENOMINATIONS OF THE NOTES. The notes will represent obligations of the trust and will be secured by the assets of the trust, which consist primarily of [describe assets of the trust.] The notes will have an approximate total initial principal amount of $[ ]. Any difference between the total principal amount of the notes on the date they are issued and the approximate total principal amount of the notes on the date of this prospectus supplement will not exceed 5%. PAYMENTS ON THE NOTES Principal and interest on the notes will be payable on the [25]th day of each month, beginning in [ ]. However, if the [25]th day is not a business day, payments will be made on the next business day after the [25]th day of the month. INTEREST PAYMENTS Interest will accrue on the notes at the annual rate described in this prospectus supplement. SEE "DESCRIPTION OF THE NOTES -- PAYMENTS -- PAYMENTS OF INTEREST" IN THIS PROSPECTUS SUPPLEMENT. PRINCIPAL PAYMENTS The amount of principal payable on the notes will be determined by (1) funds actually received on the mortgage loans that are available to make payments on the notes, (2) the amount of interest received on the mortgage loans that is used to pay principal on the notes, calculated as described in this prospectus supplement, (3) [the amount of principal received on the mortgage loans that is released to the residual certificate, calculated as described in this prospectus supplement,] and (4) [ ]. Funds actually received on the mortgage loans may consist of expected, scheduled payments, and unexpected payments resulting from prepayments or defaults by borrowers, liquidation of defaulted mortgage loans, or repurchases of mortgage loans under the circumstances described in this prospectus supplement. WE EXPLAIN HOW PRINCIPAL IS PAID ON THE NOTES UNDER "DESCRIPTION OF THE NOTES -- PAYMENTS -- PAYMENTS OF PRINCIPAL" IN THIS PROSPECTUS SUPPLEMENT. The last possible day on which the principal of the notes could become payable in full is [ ] and is referred to as the maturity date. The notes could be paid in full before the maturity date. LIMITED RECOURSE The only source of cash available to make interest and principal payments on the notes will be the assets of the trust. The trust will have no other source of cash and no entity other than the trust will be required or expected to make any payments on the notes. ENHANCEMENT OF LIKELIHOOD OF PAYMENT ON THE NOTES [DESCRIBE ANY APPLICABLE FINANCIAL GUARANTY INSURANCE POLICY OR GUARANTEE.] [SUBORDINATION OF PAYMENTS No amounts will be paid to the holder of the residual certificate on any distribution date until all amounts due to the notes on that date have been paid and overcollateralization has reached the required level.] [OVERCOLLATERALIZATION On the closing date, the total principal balance of the mortgage loans is expected to exceed the total principal amount of the notes by approximately [ ]%. This condition is referred to as "overcollateralization." Any interest received on the mortgage loans in excess of the amount needed to pay interest on the notes and some expenses and fees of the trust will be used to reduce the total principal amount of the notes to a level set by [ ], until the mortgage loans have a total principal balance that exceeds the total outstanding principal amount of the notes by the amount required by [ ]. We cannot assure you that sufficient interest will be generated by the mortgage loans to increase overcollateralization to the level required by [ ], or to maintain it at that level. SEE "DESCRIPTION OF THE NOTES -- OVERCOLLATERALIZATION" IN THIS PROSPECTUS SUPPLEMENT.] THE MORTGAGE LOANS On the closing date, which is expected to be on or about [ ], the assets of the trust will consist primarily of [describe mortgage loans.] [Description of pre-funding account and additional mortgage loans as applicable.] SEE "DESCRIPTION OF THE MORTGAGE POOL" IN THIS PROSPECTUS SUPPLEMENT FOR A GENERAL DESCRIPTION OF THE MORTGAGE LOANS AND "THE ORIGINATOR" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF THE UNDERWRITING GUIDELINES APPLIED IN ORIGINATING THE MORTGAGE LOANS. [THE PRE-FUNDING ACCOUNT On the closing date, approximately $[ ] will be deposited by [ ] in a pre-funding account maintained by [ ]. It is intended that additional mortgage loans will be sold to the trust by the depositor from time to time, from [ ] until [ ], paid for with the funds on deposit in the pre-funding account. [Description of pre-funding account and additional mortgage loans as applicable.] SEE "DESCRIPTION OF THE NOTES -- PRE-FUNDING ACCOUNT" IN THIS PROSPECTUS SUPPLEMENT.] SERVICING OF THE MORTGAGE LOANS The mortgage loans will be serviced by [ ]. SEE "THE SERVICER" AND "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS" IN THIS PROSPECTUS SUPPLEMENT. OPTIONAL PURCHASE OF MORTGAGE LOANS [ ] will have the option to purchase all of the mortgage loans and the other assets of the trust, after the total principal balance of the mortgage loans declines to less than [ ]% of their initial total principal balance; if [ ] does not exercise that option, [ ] may purchase the mortgage loans and other assets of the trust. If the mortgage loans and other assets are purchased, the noteholders will be paid accrued interest, and principal equal to the outstanding principal amount of the notes. SEE "DESCRIPTION OF THE NOTES -- OPTIONAL REDEMPTION" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF THE PURCHASE PRICE TO BE PAID FOR THE MORTGAGE LOANS. TAX STATUS Stroock & Stroock & Lavan LLP, special federal tax counsel, will deliver an opinion of counsel that for federal income tax purposes, the notes will be treated as indebtedness and the trust will not be an association, or publicly traded partnership, taxable as a corporation or a taxable mortgage pool. SEE "MATERIAL FEDERAL INCOME TAX CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS FOR ADDITIONAL INFORMATION CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS TO THE NOTES. ERISA CONSIDERATIONS The Notes may be acquired by employee benefit plans and other retirement arrangements subject to certain conditions. SEE "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS FOR A MORE COMPLETE DISCUSSION OF THESE ISSUES. LEGAL INVESTMENT CONSIDERATIONS [The notes will not constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984.] There are other restrictions on the ability of some types of investors to purchase the notes that prospective investors should consider. SEE "LEGAL INVESTMENT CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS. RATINGS OF THE NOTES The notes will initially be rated "[ ]" by [Rating Agency], and "[ ]" by [Rating Agency]. These ratings are not recommendations to buy, sell or hold these notes. A rating may be changed or withdrawn at any time by the assigning rating agency. o The ratings do not address the possibility that, as a result of principal prepayments, the yield on your notes may be lower than anticipated. SEE "RATINGS" IN THIS PROSPECTUS SUPPLEMENT FOR A MORE COMPLETE DISCUSSION OF THE NOTE RATINGS. RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE NOTES. YOU SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS. UNPREDICTABILITY Borrowers may prepay their mortgage loans in whole AND EFFECT OF PREPAYMENTS or in part at any time; however, approximately [ ] of the mortgage loans require the payment of a prepayment penalty in connection with any voluntary prepayment during [ ]. The prepayment penalties may be waived by the servicer. A prepayment of a mortgage loan will usually result in a prepayment on the notes. o If you purchase your notes at a discount and principal is repaid slower than you anticipate, then your yield may be lower than you anticipate. o If you purchase your notes at a premium and principal is repaid faster than you anticipate, then your yield may be lower than you anticipate. The rate at which defaults and losses occur on the mortgage loans will affect the rate of payment of principal on the notes. We encourage you to review the information in this prospectus supplement about the underwriting guidelines applied in originating the mortgage loans, the credit quality of the mortgage loans and the collateral for the mortgage loans. SEE "YIELD CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF FACTORS THAT MAY INFLUENCE THE RATE AND TIMING OF PREPAYMENTS ON THE MORTGAGE LOANS. [The prepayment experience of the mortgage loans may differ significantly from that of first lien residential mortgage loans, or junior lien mortgage loans with a principal balance lower than the value of the related property.] [EFFECT OF CREATION AND We describe in this prospectus supplement the MAINTENANCE OF underwriting guidelines used in originating the OVERCOLLATERALIZATION ON mortgage loans, the collateral for the mortgage PAYMENTS OF PRINCIPAL loans and the servicing of the mortgage loans. ON THE NOTES These and other factors will affect the rate of defaults and losses on the mortgage loans, which in turn will affect the rate at which overcollateralization is created or maintained. When overcollateralization is less than the level required by [ ], a portion of interest collections on the mortgage loans will be used to make principal payments on the notes. This will accelerate the rate at which you receive payments of principal. When overcollateralization is greater than the level required by [ ], a portion of principal collections on the mortgage loans will be released to the residual certificate. This will slow the rate at which you receive payments of principal.] GEOGRAPHIC CONCENTRATION OF Approximately [ ]% of the mortgage MORTGAGE LOANS loans expected to be in the trust on the closing date are secured by properties in [California]. The rate of delinquencies and defaults, and therefore the rate of prepayments, on the mortgage loans may be higher than if fewer of the mortgage loans were concentrated in one state because the following conditions in [California] will have a disproportionate impact on the mortgage loans in general: o Weak economic conditions in [California] (which may or may not affect real property values) may affect the ability of borrowers to repay their mortgage loans on time; o Declines in the [California] residential real estate market may reduce the values of properties located in [California], which would result in an increase in the combined loan-to-value ratios; o Properties in [California] may be more susceptible than homes located in other parts of the country to some types of uninsurable hazards, such as earthquakes, as well as floods, mudslides and other natural disasters; and o Any increase in the market value of properties located in [California] would reduce the combined loan-to-value ratios of the mortgage loans and could, therefore, make alternative sources of financing available to the borrowers at lower interest rates, which could result in an increased rate of prepayment of the mortgage loans. Natural disasters affect regions of the United States from time to time, and may result in increased losses on mortgage loans in those regions, or in insurance payments that will constitute prepayments of those mortgage loans. FOR ADDITIONAL INFORMATION REGARDING THE GEOGRAPHIC DISTRIBUTION OF THE MORTGAGE LOANS IN THE TRUST, SEE THE APPLICABLE TABLE UNDER "DESCRIPTION OF THE MORTGAGE POOL" IN THIS PROSPECTUS SUPPLEMENT. [SOME OF THE LOANS IN THE The payment schedules for most of the mortgage MORTGAGE POOL ARE MORE loans in the pool require the borrower to pay off LIKELY TO DEFAULT THAN the principal balance of the loan gradually over OTHERS, AND HIGHER THAN the life of the loan. Some of the mortgage loans EXPECTED DEFAULTS ON in the pool, however, have payment schedules under THESE LOANS COULD REDUCE which the borrowers makes relatively small THE YIELD ON YOUR NOTES payments of principal over the life of the loan, and then must make a large final payment at maturity that pays off the entire principal balance outstanding. This final payment is usually much larger than the previous monthly payments. Because the borrower's ability to make this final payment usually depends on the ability to refinance the loan or sell the underlying property, the risk of default is greater than on other types of loans. High rates of default on these types of loans in the pool will result in greater losses on your notes. The ability of a borrower to refinance the type of loan described above or sell the mortgaged property will depend upon a number of factors, including: o the level of mortgage interest rates; o the borrower's equity in the mortgage property; o general economic conditions; and o the availability of credit. We cannot predict how these factors will affect the default rate of these mortgage loans in the pool. You should refer to "Description of the Mortgage Pool" for information on the percentage of loans in the mortgage pool that consists of these loans.] [EFFECT OF LACK OF PRIMARY Approximately [ ]% of the mortgage loans have MORTGAGE INSURANCE ON loan-to-value ratios greater than [ ]%. None of THE NOTES the mortgage loans are covered by a primar mortgage insurance policy. If borrowers default on their mortgage loans, there is a greater likelihood of losses than if the loans were insured. We cannot assure you that the applicable credit enhancement will be adequate to cover those losses. SEE "DESCRIPTION OF THE NOTES" IN THIS PROSPECTUS SUPPLEMENT.] REAL ESTATE MARKET MAY A decline in the real estate values or in economic AFFECT PERFORMANCE OF conditions generally could increase the rates of MORTGAGE LOANS delinquencies, foreclosures and losses on the mortgage loans to a level that is significantly higher than those experienced currently; and no assurance can be given that values of the properties securing the mortgage loans will not decline since the date of origination of the mortgage loan. If the credit enhancement described in this prospectus supplement is not enough to protect your notes from these losses, the yield on your notes may be reduced. [EARLY PRINCIPAL PAYMENT If the cash in the pre-funding account on the FROM CASH REMAINING closing date is not used to acquire additional IN PRE-FUNDING ACCOUNT mortgage loans by [ ], then that cash will be [paid to you on a proportionate basis with the other noteholders in reduction of the principal balance of your notes.] If the amount of that cash is substantial, you will receive a significant unexpected early payment of principal in (or before) [ ]. We cannot assure you that you will be able to reinvest that money in another investment with a comparable yield.] YOU WILL NOT RECEIVE Your ownership of the notes will be registered PHYSICAL NOTES, WHICH electronically with DTC. The lack of physical CAN CAUSE DELAYS IN notes could: DISTRIBUTIONS AND HAMPER YOUR ABILITY TO PLEDGE o result in payment delays on the notes because OR RESELL YOUR NOTES the indenture trustee will be sending distributions on the notes to DTC instead of directly to you; o make it difficult for you; to pledge your notes if physical notes are required by the party demanding the pledge; and o could hinder your ability to resell the notes because some investors may be unwilling to buy notes that are not in physical form. SEE "DESCRIPTION OF THE NOTES -- BOOK-ENTRY REGISTRATION" IN THIS PROSPECTUS SUPPLEMENT. LIMITED ABILITY TO The underwriter is not required to assist in RESELL NOTES resales of the notes, although it may do so. A secondary market for the notes may not develop. If a secondary market does develop, it might not continue or it might not be sufficiently liquid to allow you to resell any of your notes. The certificates will not be listed on any securities exchange. [Additional risk factors to be provided as applicable.] DESCRIPTION OF THE TRUST GENERAL ACE Securities Corp. [ ] Trust [ ] (the "Trust" or the "Issuer") will be a [statutory business trust] [common law trust] formed under the laws of [ ] pursuant to an amended and restated Trust Agreement (the "Trust Agreement") dated as of [ ] (the "Cut-off Date") between ACE Securities Corp. as depositor (the "Depositor") and [ ] as owner trustee (the "Owner Trustee"), for the transactions described in this prospectus supplement. The Trust will not engage in any activity other than acquiring, holding and managing the Mortgage Loans (as defined in this prospectus supplement) and the other assets of the Trust and proceeds from the Mortgage Loans and other assets, issuing the Securities (as defined in this prospectus supplement), making payments on the Securities, and engaging in related activities. On or about [ ] (the "Closing Date"), the Trust will purchase the Mortgage Loans from the Depositor pursuant to a Sale and Servicing Agreement (as amended and supplemented from time to time, the "Sale and Servicing Agreement") dated as of the Cut-off Date, among the Trust, the Depositor, the Servicer and [ ], as indenture trustee (the "Indenture Trustee"). The Trust's principal offices are located in [ ]. THE OWNER TRUSTEE [ ] will act not in its individual capacity but solely as the Owner Trustee under the Trust Agreement. [ ] is a [ ] banking corporation and its principal offices are located at [ ]. The compensation of the Owner Trustee will be paid by [ ]. THE RESIDUAL CERTIFICATE The equity interest in the Trust will be represented by a residual interest certificate (the "Residual Certificate"). The holder of the Residual Certificate (the "Residual Certificateholder," and together with the Noteholders (as defined in this prospectus supplement), the "Securityholders") will be entitled to receive [to be described as applicable]. DESCRIPTION OF THE NOTES GENERAL The Trust will issue the Class [ ] Notes (the "Notes") pursuant to an Indenture dated as of the Cut-off Date (the "Indenture") between the Issuer and the Indenture Trustee. The Trust will also issue the Residual Certificate pursuant to the Trust Agreement. The Notes and the Residual Certificate are referred to in this prospectus supplement as the "Securities." Only the Notes are offered by this prospectus supplement. The Notes will be secured by the Trust Estate (as defined below) pursuant to the Indenture. The "Trust Estate" will consist primarily of [describe as applicable]. The Notes will be issued in the approximate initial total principal amount specified on the cover page of this prospectus supplement (the "Original Class Principal Amount"). The total principal amount of the Notes outstanding at any time is referred to in this prospectus supplement as the "Class Principal Amount." The Residual Certificate will be issued without a principal amount or interest rate, and will be entitled only to the amounts that are described in this prospectus supplement. The Original Class Principal Amount of the Notes may be increased or decreased by up to 5% to the extent that the Cut-off Date Balance (as defined in this prospectus supplement) of the Mortgage Loans is increased or decreased as described under "Description of the Mortgage Pool" in this prospectus supplement. Payments on the Notes will be made on the [25th] day of each month or, if the [25th] day is not a Business Day, on the next succeeding Business Day, commencing in [ ] (each, a "Distribution Date"), to holders of Notes ("Noteholders") of record on the applicable Record Date. The "Record Date" for each Distribution Date will be the close of business on the last Business Day of the calendar month immediately before the month in which that Distribution Date occurs. o A "Business Day" is generally any day other than a Saturday or Sunday or a day on which banks in [New York] are closed. Payments on the Notes will be made to each registered holder entitled to these payments, either (1) by check mailed to the Noteholder's address as it appears on the books of the Indenture Trustee, or (2) at the request, submitted to the Indenture Trustee in writing not later than the related Record Date, of any Noteholder (at the Noteholder's expense) in immediately available funds; provided, that the final payment for any Note will be made only upon presentation and surrender of the Note at the Corporate Trust Office (as defined in this prospectus supplement) of the Indenture Trustee or the office of the Note Registrar (as defined in this prospectus supplement). See "-- The Indenture Trustee" in this prospectus supplement. [PRE-FUNDING ACCOUNT On the Closing Date approximately $[ ] (the "Pre-Funded Amount") will be deposited in an account (the "Pre-Funding Account") maintained by [ ]. During the period (the "Pre-Funding Period") from [ ] until [ ], the Pre-Funding Amount will be maintained in the Pre-Funding Account. The Pre-Funded Amount will be reduced during the Pre-Funding Period by the amount of Subsequent Mortgage Loans (as defined in this prospectus supplement) purchased by the Trust in accordance with the [Sale and Servicing Agreement]. During the Pre-Funding Period, the Pre-Funded Amount will be used only to purchase Subsequent Mortgage Loans. Immediately following the Pre-Funding Period, any Pre-Funded Amount remaining will be distributed to [to be provided as applicable]. Amounts on deposit in the Pre-Funding Account will be invested in [to be provided as applicable] and all investment earnings on amounts on deposit in the Pre-Funding Account will be distributed to [to be provided as applicable] following the Pre-Funding Period.] BOOK-ENTRY REGISTRATION GENERAL. The Notes (the "Book-Entry Notes") will be issued, maintained and transferred on the book-entry records of The Depository Trust Company ("DTC") in the United States [, or through Clearstream Luxembourg, societe anonyme ("Clearstream Luxembourg") or the Euroclear System ("Euroclear") in Europe] and through [its/their] participating organizations (each, a "Participant"). The Book-Entry Notes will be issued in minimum denominations in principal amount of $25,000 and integral multiples of $1 in excess of $25,000. Each Class of Book-Entry Notes will be represented by one or more certificates registered in the name of the nominee of DTC. ACE Securities Corp. (the "Depositor") has been informed by DTC that DTC's nominee will be Cede & Co. [Clearstream Luxembourg and Euroclear will hold omnibus positions on behalf of their Participants through customers' securities accounts in Clearstream Luxembourg's and Euroclear's names on the books of their respective depositaries, which in turn will hold positions in customers' securities accounts in the depositaries' names on the books of DTC.] No person acquiring an interest in a Book-Entry Note (each, a "Beneficial Owner") will be entitled to receive a certificate representing an interest (a "Definitive Note"), except as set forth below under "-- Definitive Notes" and in the prospectus under "Description of the Securities -- Book-Entry Registration and Definitive Securities -- Definitive Securities." Unless and until Definitive Notes are issued, it is anticipated that: o the only "Noteholder" of the Notes will be Cede & Co., as nominee of DTC, and Beneficial Owners will not be Noteholders as that term is used in the Indenture. o Beneficial Owners will receive all distributions of principal of, and interest on, the Offered Notes from the Indenture Trustee through DTC [, Clearstream Luxembourg or Euroclear, as applicable,] and [its/their] Participants. o while the Notes are outstanding, under the rules, regulations and procedures creating and affecting DTC [Clearstream Luxembourg and Euroclear] and [its/their] operations, DTC [Clearstream Luxembourg and Euroclear] [is/are] required to make book-entry transfers among Participants on whose behalf it acts with respect to the Notes and is required to receive and transmit distributions of principal of, and interest on, the Notes. Participants and indirect participants with whom Beneficial Owners have accounts with respect to Notes are similarly required to make book-entry transfers and receive and transmit distributions on behalf of their respective Beneficial Owners. Accordingly, although Beneficial Owners will not possess certificates, DTC [Clearstream Luxembourg and Euroclear] [has/have] in place a mechanism by which Beneficial Owners will receive distributions and will be able to transfer their interest. None of the Depositor, [ ] ("[ ]'), the Servicer , the Owner Trustee or the Indenture Trustee [or additional parties] (as those terms are defined in this prospectus supplement) will have any responsibility for any aspect of the records relating to or payments made on account of beneficial ownership interests of the Book-Entry Notes held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests. For a more complete description of book-entry registration and clearance and the rules and regulations governing DTC [,Clearstream Luxembourg and Euroclear], see "Description of the Securities -- Book-Entry Registration and Definitive Securities" in the prospectus". DEFINITIVE NOTES. Definitive Notes 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 Securities -- Book-Entry Registration and Definitive Securities -- Definitive Securities." Upon the occurrence of an event described in that section, the Trustee is required to direct DTC to notify Participants who have ownership of Book-Entry Notes as indicated on the records of DTC of the availability of Definitive Notes for their Book-Entry Notes. Upon surrender by DTC of the Definitive Notes representing the Book-Entry Notes and upon receipt of instructions from DTC for re-registration, the Trustee will re-issue the Book-Entry Notes as Definitive Notes in the respective principal amounts owned by individual Beneficial Owners, and thereafter the Trustee will recognize the holders of the Definitive Notes as Noteholders under the Indenture and the Sale and Servicing Agreement. PAYMENTS Payments on the Notes on each Distribution Date will be made from the Available Collection Amount. The Available Collection Amount will be determined as [to be provided as applicable.] o With respect to each Distribution Date, the "Due Period" is the calendar month immediately before that Distribution Date. PAYMENTS OF INTEREST. Interest on the Class Principal Amount of the Notes will accrue during each Accrual Period (as defined in this prospectus supplement) at the interest rate specified on the front cover of this prospectus supplement (the "Interest Rate") and will be payable to Noteholders on each Distribution Date, starting in [ ]. [If the Residual Certificateholder does not exercise its option to purchase the Mortgage Loans and the other assets of the Trust when it is first entitled to do so, as described under "--Optional Redemption" in this prospectus supplement, then with respect to each succeeding Distribution Date the Interest Rate will be increased [to be provided as applicable.]] See "-- Optional Redemption" in this prospectus supplement. Interest on the Notes will be calculated on the basis of a 360-day year of twelve 30-day months. o The "Accrual Period" for the Notes will be the calendar month immediately preceding the month in which the related Distribution Date occurs. Payments of interest on the Notes will be made from [to be provided as applicable]. PAYMENTS OF PRINCIPAL. Principal payments will be made to Noteholders on each Distribution Date in an amount generally equal to [to be provided as applicable]. o The "Principal Distribution Amount" for any Distribution Date will be equal to the sum of [to be provided as applicable]. PAYMENT PRIORITIES On each Distribution Date, the Available Funds will be applied in the following order of priority: [to be provided as applicable.] OVERCOLLATERALIZATION On the Closing Date the Cut-off Date Balance is expected to exceed the Original Class Principal Amount of the Notes by approximately $[ ]. The weighted average Net Mortgage Loan Rate (as defined below) of the Mortgage Loans is generally expected to be higher than the Interest Rate of the Notes, thus generating excess interest collections. To the extent described in this prospectus supplement, Excess Spread will be applied on any Distribution Date as [to be provided as applicable]. o The "Net Mortgage Loan Rate" for any Mortgage Loan equals [to be provided as applicable]. MATURITY DATE The Class Principal Amount of the Notes and all interest accrued and unpaid on the Notes will be payable in full on [ ] (the "Maturity Date"). See "--Rights of Noteholders Upon Occurrence of Event of Default" below. The actual final Distribution Date for the Notes could be substantially earlier than the Maturity Date. REPORTS TO NOTEHOLDERS On each Distribution Date the Indenture Trustee will make available to each Noteholder a statement containing the following information: o the amount of principal distributed on that date to Noteholders; o the amount of interest distributed on that date to Noteholders; o the amount of any outstanding Noteholders' Interest Carryforward Amount for the Notes after distributions on that date; o the Class Principal Amount of the Notes after distributions on that date; o the amount of the Servicing Fees paid with respect to that date; o the Total Loan Balance as of the related Distribution Date; o the number and total Principal Balance of Mortgage Loans (1) remaining outstanding, (2) delinquent by one, two, three or four or more monthly payments, (3) in foreclosure, and (4) with respect to REO Property; o any amount distributed to the holder of the Residual Certificate; and o other information to the extent provided in the Sale and Servicing Agreement. OPTIONAL REDEMPTION On any Distribution Date after the date on which the Total Loan Balance is less than [ ]% of the Cut-off Date Balance, [ ] will (subject to the terms of the Sale and Servicing Agreement) have the option to purchase the Mortgage Loans, any REO Property and any other assets of the Trust for the Termination Price. If [ ] does not exercise that option, [ ] will then have the same purchase option. If either purchase option is exercised, the Notes will be redeemed and the Residual Certificate and the Trust will be terminated (this event, an "Optional Redemption"). If the Residual Certificateholder does not exercise its option as described above when it is first entitled to do so, the Interest Rate of the Notes will be increased as described under "-- Payments of Interest" in this prospectus supplement. RIGHTS OF NOTEHOLDERS UPON OCCURRENCE OF EVENT OF DEFAULT Under the Indenture, a failure to pay the full amount of the Noteholders' Interest Distribution Amount within five days of the Distribution Date on which that payment is due (without regard to the amount of Available Funds) or failure to pay the entire outstanding principal amount of the Notes on the Maturity Date, will constitute an event of default (an "Event of Default"). Upon the occurrence of an Event of Default, the holders of Notes evidencing more than [ ]% of the Class Principal Amount of the Notes then outstanding may exercise their remedies under the Indenture. These remedies include [to be provided as applicable]. See "Description of the Agreements -- Material Terms of the Indenture" in the prospectus. THE INDENTURE TRUSTEE [ ], a [ ], will be the Indenture Trustee under the Indenture. The Indenture Trustee will be entitled to [describe applicable fees of the indenture trustee]. The Indenture Trustee's "Corporate Trust Office" is located at [ ], or any address as the Indenture Trustee may designate from time to time by notice to the Noteholders, the Depositor and the Servicer. [THE INSURANCE POLICY The following information has been provided by [ ] (the "Insurer") for inclusion in this prospectus supplement. Neither the Depositor nor the Underwriter makes any representation as to the accuracy or completeness of this information. The Insurer does not accept any responsibility for the accuracy or completeness of this prospectus supplement or any information or disclosure contained in this prospectus supplement, or omitted from this prospectus supplement, other than with respect to the accuracy of the information regarding the Note Guaranty Insurance Policy (the "Insurance Policy") and the Insurer set forth below under this heading "The Insurance Policy." Additionally, the Insurer makes no representation regarding the Notes or the advisability of investing in the Notes. THE INSURER [To be provided as applicable.] INSURER FINANCIAL INFORMATION [To be provided as applicable.] WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION ABOUT THE INSURER [To be provided as applicable.] FINANCIAL STRENGTH RATINGS OF THE INSURER [To be provided as applicable.] THE INSURANCE POLICY [To be provided as applicable.]] DESCRIPTION OF THE MORTGAGE POOL GENERAL The Mortgage Pool will consist of approximately [ ] Mortgage Loans with original terms to maturity of not more than [thirty] years, having a total Principal Balance as of the Cut-off Date of approximately $[ ] (the "Cut-off Date Balance"). The Mortgage Loans are secured by [to be provided as applicable] ("Mortgages"). All of the Mortgage Loans will be [description of Mortgage Loans.] Generally, the Mortgage Loans were originated or acquired by the Originator (as defined in this prospectus supplement) in one of the following ways: o [to be provided as applicable]. For a description of the underwriting criteria applicable to the Mortgage Loans, see "The Originator -- Underwriting Criteria" in this prospectus supplement. The Servicer will be required to service the Mortgage Loans pursuant to the Sale and Servicing Agreement and will be compensated for these services as described under "Description of the Transfer and Servicing Agreements -- Servicing" in this prospectus supplement. PAYMENTS ON THE MORTGAGE LOANS [To be provided as applicable.] CHARACTERISTICS OF THE MORTGAGE LOANS The Mortgage Loans are expected to have the following approximate total characteristics as of the Cut-off Date. Prior to the issuance of the Notes, Mortgage Loans may be removed from the Mortgage Pool as a result of incomplete documentation or otherwise, if the Depositor deems removal necessary or appropriate. In addition, a limited number of other home loans may be included in the Mortgage Pool prior to the issuance of the Notes. Wherever reference is made in this prospectus supplement to a percentage of some or all of the Mortgage Loans, the percentage is determined (unless otherwise specified) on the basis of the total principal balance of the related Mortgage Loans as of the Cut-off Date. Approximately [ ] of the Mortgage Loans provide for payment by the borrower of a prepayment premium in connection with full or partial prepayments of principal within [three to five years] of the date of origination of the loan, generally equal to [to be provided as applicable]. The Mortgage Loan Rates of the Mortgage Loans range from approximately [ ]% annually to [ ]% annually. The weighted average Mortgage Loan Rate of the Mortgage Loans is approximately [ ]% annually. The Principal Balances of the Mortgage Loans range from approximately $[ ] to $[ ]. The Mortgage Loans have an average Principal Balance of approximately $[ ]. The weighted average Combined Loan-to-Value Ratio at origination of the Mortgage Loans is approximately [ ]%. No more than approximately [ ]% of the Mortgage Loans are secured by Mortgaged Properties located in any one zip code area. The following tables set forth as of the Cut-off Date the number, total Principal Balance and percentage of the Mortgage Loans having the stated characteristics shown in the tables in each range. (The sum of the amounts of the total Principal Balances and the percentages in the following tables may not equal the totals due to rounding.) CUT-OFF DATE PRINCIPAL BALANCES PERCENTAGE OF RANGE OF MORTGAGE LOANS PRINCIPAL NUMBER OF TOTAL BY TOTAL BALANCES ($) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------ -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% The average Cut-off Date Principal Balance is approximately $ LOAN-TO-VALUE RATIOS RANGE OF PERCENTAGE OF ORIGINAL MORTGAGE LOANS LOAN-TO-VALUE NUMBER OF TOTAL BY TOTAL RATIOS (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------- -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% The weighted average original Loan-to-Value Ratio is approximately %. MORTGAGE RATES PERCENTAGE OF RANGE OF MORTGAGE LOANS MORTGAGE NUMBER OF TOTAL BY TOTAL RATES(%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------ -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% * Reflects current Mortgage Rates of Adjustable Rate Mortgage Loans. The weighted average Mortgage Rate is approximately % per annum. LOAN TYPES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL LOAN TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------ -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% ORIGINAL TERMS TO MATURITY PERCENTAGE OF RANGE OF MORTGAGE LOANS MATURITIES NUMBER OF TOTAL BY TOTAL (MONTHS) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------- -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% The weighted average original term to maturity is approximately months. REMAINING TERMS TO MATURITY PERCENTAGE OF REMAINING TERM MORTGAGE LOANS TO MATURITY NUMBER OF TOTAL BY TOTAL (MONTHS) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------- -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% The weighted average remaining term to maturity of the fully amortizing Mortgage Loans is approximately months. GEOGRAPHIC DISTRIBUTION PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL STATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------- -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% PROPERTY TYPES PERCENTAGE OF MORTGAGE LOANS PROPERTY NUMBER OF TOTAL BY TOTAL TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------- -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% LOAN PURPOSES PERCENTAGE OF MORTGAGE LOANS LOAN NUMBER OF TOTAL BY TOTAL PURPOSE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------- -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% OCCUPANCY STATUS PERCENTAGE OF MORTGAGE LOANS OCCUPANCY NUMBER OF TOTAL BY TOTAL STATUS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------- -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% DOCUMENTATION TYPES PERCENTAGE OF MORTGAGE LOANS DOCUMENTATION NUMBER OF TOTAL BY TOTAL TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------- -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% CREDIT GRADES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL CREDIT GRADE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------- -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% PREPAYMENT PENALTIES PERCENTAGE OF MORTGAGE LOANS PREPAYMENT NUMBER OF TOTAL BY TOTAL PENALTY MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------- -------------- ----------------- ----------------- $ % ______ _________________ ______ Total...... $ 100.00% [SUBSEQUENT MORTGAGE LOANS The obligation of the Trust to purchase additional Mortgage Loans (the "Subsequent Mortgage Loans") on [any] date, as specified in the [Sale and Servicing Agreement] (each, a "Subsequent Transfer Date") will be subject to the Subsequent Mortgage Loans meeting the following criteria: [to be provided as applicable]. These criteria will be based on the characteristics of the Subsequent Mortgage Loans on the related Subsequent Transfer Date. The characteristics of Subsequent Mortgage Loans may vary significantly from time to time, subject to the requirements described above, and may bear no particular relationship to the characteristics of the initial Mortgage Loans at any time. It is expected that a substantial portion of the Subsequent Mortgage Loans will be [to be provided as applicable.]] ADDITIONAL INFORMATION The description in this prospectus supplement of the Mortgage Pool and the Mortgaged Properties is based upon the Mortgage Pool as constituted at the close of business on the Cut-off Date. A Current Report on Form 8-K will be available to purchasers of the Notes and will be filed, together with the Sale and Servicing Agreement, the Indenture and the Trust Agreement, with the Securities and Exchange Commission (the "SEC") within fifteen days after the initial issuance of the Notes. In the event that Mortgage Loans are removed from or added to the Mortgage Pool as described in this prospectus supplement under "Description of the Mortgage Pool," the removal or addition, to the extent material, will be noted in the Current Report on Form 8-K. THE ORIGINATOR GENERAL [Describe the Originator.] UNDERWRITING CRITERIA The information contained in this prospectus supplement regarding the Originator's underwriting requirements and practices was obtained from publicly available information regarding asset-backed notes secured by loans made by the Originator that are similar to the Mortgage Loans and not from the Originator directly. As a result, there can be no assurance that the Mortgage Loans were originated, in whole or in part, in accordance with these underwriting requirements and practices, or that these underwriting requirements and practices were in effect when the Mortgage Loans were originated. [Describe Originator's underwriting guidelines.] THE SERVICER The following information has been provided by the Servicer. Neither the Depositor nor the Underwriter makes any representation as to the accuracy or completeness of this information. GENERAL [ ] (the "Servicer") will service the Mortgage Loans pursuant to the terms of the Sale and Servicing Agreement. [Description of the servicer.] DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS The following summary describes terms of the Sale and Servicing Agreement, the Indenture, the Trust Agreement, and the Administration Agreement (collectively, the "Transfer and Servicing Agreements"). The summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of the Transfer and Servicing Agreements. The following summary supplements, and to the extent inconsistent, replaces, the description of the general terms and provisions of the Transfer and Servicing Agreements under the headings "Description of the Agreements" in the prospectus. SALE AND ASSIGNMENT OF THE MORTGAGE LOANS On the Closing Date, [ ] will sell the Mortgage Loans (other than the right to receive some of the charges payable by borrowers) to the Depositor, and the Depositor will sell the Mortgage Loans (other than those amounts) to the Trust. The Trust will, concurrently, deliver or cause to be delivered the Securities to the Depositor. The Trust will pledge and assign the Mortgage Loans to the Indenture Trustee in exchange for the Notes. Each Mortgage Loan will be identified in a schedule appearing as an exhibit to the Sale and Servicing Agreement (the "Mortgage Loan Schedule"). [In addition, the Depositor will, as to each Mortgage Loan, deliver to a custodian appointed by the Indenture Trustee (the "Custodian") the following documents (together, with respect to each Mortgage Loan, a "Mortgage Loan File"): o the related Note endorsed to the order of the Indenture Trustee, or in blank, without recourse, o any assumption and modification agreements and the Mortgage with evidence of recording indicated on the Mortgage (except for any Mortgage not returned from the public recording office), o an assignment of the Mortgage in the name of the Indenture Trustee, or in blank, in recordable form, and o any intervening assignments of the Mortgage.] Assignments of the Mortgages to the Indenture Trustee will be recorded following the Closing Date in the real property records of the states in which the related Mortgaged Properties are located to protect the Indenture Trustee's interest in the Mortgage Loans against the claims of creditors of [ ] or subsequent purchasers. In the event that, with respect to any Mortgage Loan, the Depositor cannot deliver the assignment with evidence of recording on the Mortgage Loan concurrently with the conveyance of the Mortgage Loan under the Sale and Servicing Agreement because they have not yet been returned by the public recording office, the Depositor will deliver or cause to be delivered to the Custodian a certified true photocopy of the assignment. The Depositor will deliver or cause to be delivered to the Custodian any assignment with evidence of recording indicated on the assignment upon receipt of the assignment from the public recording office. The Custodian will review (or cause to be reviewed) each Mortgage Loan File within ninety days after the conveyance of the related Mortgage Loan to the Trust to ascertain that all required documents have been executed and received. Under the terms of the agreement (the "Mortgage Loan Sale Agreement") pursuant to which the Depositor will purchase the Mortgage Loans from [ ], and of the Sale and Servicing Agreement, the Custodian will conduct an initial review of the Mortgage Loan documents and will notify the Depositor and [ ] as to each Mortgage Loan document that either has not yet been delivered to the Depositor as required or appears to be not properly executed, not in conformity with the description of the Mortgage Loan on the Mortgage Loan schedule or otherwise defective. If any Mortgage Loan document is not delivered or any material defect in a document is not cured within the time period specified in the Mortgage Loan Sale Agreement, [ ] will be required to repurchase the affected Mortgage Loan for a price equal to the unpaid principal balance of the Mortgage Loan plus accrued interest on the Mortgage Loan (the "Repurchase Price") or, in some circumstances, to substitute another Mortgage Loan that satisfies the requirements specified in the Sale and Servicing Agreement. [ ] will make to the Depositor under the Mortgage Loan Sale Agreement representations and warranties that include representations and warranties similar to those summarized in the prospectus under the heading "Description of the Agreements -- Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements -- Representations and Warranties; Repurchases." The Depositor's rights under these representations and warranties will be assigned to the Indenture Trustee for the benefit of the Noteholders. In the event of a breach of any of these representations or warranties that materially and adversely affects the value of any Mortgage Loan or the interests of the Noteholders, [ ] will be obligated, within 60 days following its discovery of a breach or receipt of notice of a breach, to cure the breach or purchase the affected Mortgage Loan from the Trust for the Repurchase Price or, in some circumstances, to substitute another Mortgage Loan. No assurance can be given that, at any particular time, [ ] will be capable, financially or otherwise, of repurchasing defective Mortgage Loans or substituting additional Mortgage Loans for defective Mortgage Loans. TRUST FEES AND EXPENSES The Servicer is entitled to the Servicing Fee and reimbursement for specific expenses as described under "-- Servicing Compensation and Payment of Expenses" below. The fees and expenses of the Indenture Trustee, the Owner Trustee and the Custodian will be paid by [ ]. VOTING RIGHTS Voting rights of Securityholders under the Transfer and Servicing Agreements will be allocated among the Notes and the Residual Certificate as provided in the Transfer and Servicing Agreements. GENERAL SERVICING PROVISIONS The Mortgage Loans will be serviced by the Servicer in accordance with the provisions of the Sale and Servicing Agreement. [Describe servicing provisions as applicable.] NO DELINQUENCY ADVANCES In the event of a delinquency or default with respect to a Mortgage Loan, neither the Servicer nor any Subservicer (as defined below) will have any obligation to advance scheduled monthly payments of principal or interest with respect to the Mortgage Loan. SERVICING ADVANCES The Servicer or any Subservicer will make reasonable and customary expense advances with respect to the Mortgage Loans (each, a "Servicing Advance") and will be entitled to reimbursement for Servicing Advances as described in this prospectus supplement. Servicing Advances may include costs and expenses advanced for the preservation, restoration and protection of any Mortgaged Property, including advances to pay delinquent real estate taxes and assessments. Any Servicing Advances by the Servicer or any Subservicer will be reimbursable from late collections on the related Mortgage Loan, or with respect to any Liquidated Mortgage Loan from the related Liquidation Proceeds. Servicing Advances remaining outstanding will be reimbursed, to the extent of Available Funds, as described under "Description of the Notes -- Payment Priorities." INSURANCE COVERAGE The Servicer is required to obtain and thereafter maintain in effect a bond or similar form of insurance coverage (which may provide blanket coverage) insuring against loss occasioned by the errors and omissions of its officers and employees. EVIDENCE AS TO COMPLIANCE The Sale and Servicing Agreement will provide that each year a firm of independent accountants will furnish a statement to the Indenture Trustee to the effect that the firm has examined the necessary documents and records relating to the servicing of home loans by the Servicer and that, on the basis of that examination, the firm is of the opinion that the servicing has been conducted in accordance with applicable accounting standards, except for those exceptions that the firm believes to be immaterial and those exceptions set forth in the statement. SERVICING COMPENSATION AND PAYMENT OF EXPENSES The Servicer will be paid a monthly fee (the "Servicing Fee") with respect to each Mortgage Loan calculated at [ ]% annually (the "Servicing Fee Rate") on the outstanding principal balance of each Mortgage Loan. No Servicing Fee will be payable on a Liquidated Mortgage Loan unless the Servicer determines that additional collection efforts are warranted with respect to that Mortgage Loan. The Servicer will be entitled to reimbursement from collections on the Mortgage Loans for some of its expenses before any amounts are paid to Noteholders. SUBSERVICING The Servicer will be prohibited from assigning the responsibility for servicing the Mortgage Loans, except as permitted by the Sale and Servicing Agreement, but it may employ one or more subservicers ("Subservicers") as provided under the Sale and Servicing Agreement. If the Servicer chooses to employ Subservicers, the Servicer will remain liable for fulfillment of its obligations under the Sale and Servicing Agreement, and will be considered to have itself received any payment received by a Subservicer whether or not the Subservicer actually remits that payment. RESIGNATION OR REMOVAL OF THE SERVICER The Servicer will agree in the Sale and Servicing Agreement not to resign except with the consent of [ ], unless the Servicer delivers to [ ] an opinion of legal counsel to the effect that the Servicer is no longer permitted under applicable law to perform the duties of the Servicer under the Sale and Servicing Agreement. If the Servicer is in default under the Sale and Servicing Agreement, the Indenture Trustee or Noteholders having a majority of voting rights may remove the Servicer. [Events of default include: o failure by the Servicer to remit any required payment to the Indenture Trustee for one Business Day after receipt of written notice that the payment has not been made; o failure by the Servicer to deposit collections or other recoveries on the Mortgage Loans in the Collection Account on a daily basis in accordance with the Sale and Servicing Agreement; o failure by the Servicer to fulfill any other material requirement under the Sale and Servicing Agreement within the applicable time period; o failure by the Servicer to be qualified to service home loans for either Fannie Mae or Freddie Mac; o failure by the Servicer to maintain any applicable licenses in each jurisdiction where Mortgaged Properties are located; o failure by the Servicer to maintain a minimum net worth of $25,000,000; o insolvency of the Servicer; and o other events specified in the Sale and Servicing Agreement.] [If the Servicer is removed, the Indenture Trustee will immediately assume the role of Servicer under the Sale and Servicing Agreement unless another Servicer is appointed pursuant to the Sale and Servicing Agreement. The Indenture Trustee may continue to service the Mortgage Loans if it is legally qualified to do so or may appoint a successor Servicer as provided in the Sale and Servicing Agreement]. COLLECTION ACCOUNT, NOTE DISTRIBUTION ACCOUNT AND CERTIFICATE DISTRIBUTION ACCOUNT The Servicer is required to deposit in a segregated account (the "Collection Account") within [ ] Business Days of receipt all payments received on or after the Cut-off Date on account of principal and interest on the Mortgage Loans, all Net Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds, any amounts payable in connection with the repurchase or substitution of any Mortgage Loan and any amount required to be deposited in the Collection Account in connection with the redemption of the Notes. Withdrawals will be made from the Collection Account only for the purposes specified in the Sale and Servicing Agreement. The Collection Account may be maintained at any depository institution that satisfies the requirements specified in the Sale and Servicing Agreement. Amounts on deposit in the Collection Account will be invested as provided in the Sale and Servicing Agreement. All interest and any other investment earnings on amounts on deposit in the Collection Account will be paid to [ ]. Any net losses on these investments will be paid by [ ]. The Servicer will establish and maintain with the Paying Agent an account on behalf of the Noteholders, into which amounts released from the Collection Account for payment to the Noteholders will be deposited and from which all payments to the Noteholders will be made (the "Note Distribution Account"). The Servicer will also establish and maintain with the Paying Agent an account in the name of the Owner Trustee on behalf of the Residual Certificateholder, into which amounts released from the Collection Account for distribution to the Residual Certificateholder will be deposited and from which all distributions to the Residual Certificateholder will be made (the "Certificate Distribution Account"). On the [ ] day of each month, or if the [ ] day is not a Business Day, the preceding Business Day, the Servicer will remit the Available Funds to the Paying Agent for deposit into the Note Distribution Account and Certificate Distribution Account by making appropriate withdrawals from the Collection Account. On each Distribution Date, the Indenture Trustee will make withdrawals from the Note Distribution Account and Certificate Distribution Account for application as described under "Description of the Notes -- Payment Priorities" in this prospectus supplement. Amounts on deposit in the Note Distribution Account and Certificate Distribution Account will be invested as provided in the Sale and Servicing Agreement. All interest and any other investment earnings on amounts on deposit in the Note Distribution Account and Certificate Distribution Account will be retained by the Indenture Trustee as its compensation. Any net losses on these investments will be paid by the Indenture Trustee. THE OWNER TRUSTEE AND INDENTURE TRUSTEE The Owner Trustee, the Indenture Trustee and any of their respective affiliates may hold Securities in their own names or as pledgees. For the purpose of meeting the legal requirements of some jurisdictions, the Servicer, the Owner Trustee and the Indenture Trustee acting jointly (or in some instances, the Owner Trustee or the Indenture Trustee acting alone) will have the power to appoint co-trustees or separate trustees of all or any part of the Trust. In the event of an appointment of another trustee all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee by the Sale and Servicing Agreement and the Trust Agreement and upon the Indenture Trustee by the Indenture will be conferred or imposed upon the Owner Trustee and the Indenture Trustee, respectively, and in each case the separate trustee or co-trustee, jointly, or, in any jurisdiction in which the Owner Trustee or Indenture Trustee will be incompetent or unqualified to perform particular acts, singly upon the separate trustee or co-trustee, which will exercise and perform these rights, powers, duties and obligations solely at the direction of the Owner Trustee or the Indenture Trustee, as applicable. The Owner Trustee and the Indenture Trustee may resign at any time, in which event the Servicer will be obligated to appoint a successor to the Owner Trustee or the Indenture Trustee, as the case may be. The Servicer may also remove the Owner Trustee or the Indenture Trustee if either ceases to be eligible to continue as Owner Trustee or Indenture Trustee under the Trust Agreement or the Indenture, as the case may be, becomes legally unable to act or becomes insolvent. In these circumstances, the Servicer will be obligated to appoint a successor Owner Trustee or a successor Indenture Trustee, as applicable. Any resignation or removal of the Owner Trustee or Indenture Trustee and appointment of a successor Owner Trustee or Indenture Trustee will not become effective until acceptance of the appointment by the successor. The Trust Agreement and Indenture will provide that the Owner Trustee and Indenture Trustee will be entitled to indemnification by [ ] and the Depositor for, and will be held harmless against, any loss, liability or expense incurred by the Owner Trustee or Indenture Trustee not resulting from its own willful misfeasance, bad faith or negligence (other than by reason of a breach of any of its representations or warranties to be set forth in the Trust Agreement or Indenture, as the case may be). DUTIES OF THE OWNER TRUSTEE AND INDENTURE TRUSTEE The Owner Trustee will make no representations as to the validity or sufficiency of the Trust Agreement, the Residual Certificate (other than the execution and authentication of the Residual Certificate), the Notes or any Mortgage Loans or related documents, and will not be accountable for the use or application by the Depositor or the Servicer of any funds paid to the Depositor or the Servicer in respect of the Securities or the Mortgage Loans, or the investment of any monies by the Servicer before these monies are deposited into the Collection Account, the Note Distribution Account or the Certificate Distribution Account. So long as no Event of Default has occurred and is continuing, the Owner Trustee will be required to perform only those duties specifically required of it under the Trust Agreement. Generally, those duties will be limited to the receipt of the various certificates, reports or other instruments required to be furnished to the Owner Trustee under the Trust Agreement, in which case it will only be required to examine them to determine whether they conform to the requirements of the Trust Agreement. The Owner Trustee will not be charged with knowledge of a failure by the Servicer to perform its duties under the Sale and Servicing Agreement, which failure constitutes an Event of Default, unless the Owner Trustee has actual knowledge of any failure. The Owner Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Trust Agreement or to make any investigation of matters arising under the Trust Agreement or to institute, conduct or defend any litigation under the Trust Agreement or in relation to the Trust Agreement at the request, order or direction of the holder of the Residual Certificate, unless the Residual Certificateholder has offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred in or by the exercise of its rights or powers, an investigation by it of matters arising or the institution or defense of any litigation. Subject to the rights or consent of the Noteholders and Indenture Trustee, the Residual Certificateholder will not have any right under the Trust Agreement to institute any proceeding with respect to the Trust Agreement, unless the Residual Certificateholder previously has given to the Owner Trustee written notice of the occurrence of an Event of Default and (1) the Event of Default arises from the Servicer's failure to remit payments when due or (2) the holder of the Residual Certificate has made written request upon the Owner Trustee to institute a proceeding in its own name as the Owner Trustee under the Trust Agreement and have offered to the Owner Trustee reasonable indemnity, and the Owner Trustee for 30 days has neglected or refused to institute any proceedings. The Indenture Trustee will make no representations as to the validity or sufficiency of the Indenture, the Residual Certificate, the Notes (other than the execution and authentication of the Notes) or any Mortgage Loans or related documents, and will not be accountable for the use or application by the Depositor, the Servicer or the Owner Trustee of any funds paid to the Depositor, the Servicer or the Owner Trustee in respect of the Securities or the Mortgage Loans, or the investment of any monies by the Servicer before those monies are deposited into the Collection Account or the Note Distribution Account. So long as no Event of Default under the Indenture or the Sale and Servicing Agreement has occurred or is continuing, the Indenture Trustee will be required to perform only those duties specifically required of it under the Transfer and Servicing Agreements. Generally, those duties will be limited to the receipt of the various certificates, reports or other instruments required to be furnished to the Indenture Trustee under the Indenture, in which case it will only be required to examine them to determine whether they conform to the requirements of the Indenture. The Indenture Trustee will not be charged with knowledge of a failure by the Servicer to perform its duties under the Sale and Servicing Agreement, which failure constitutes an Event of Default under the Indenture or the Sale and Servicing Agreement, unless the Indenture Trustee obtains actual knowledge of any failure. The Indenture Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Indenture or to make any investigation of matters arising under the Indenture or to institute, conduct or defend any litigation under the Indenture or in relation to the Indenture at the request, order or direction of any of the Noteholders, unless those Noteholders have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred in or by an exercise of any of its rights or powers, an investigation of matters arising or the institution or defense of any litigation. No Noteholder will have any right under the Indenture to institute any proceeding with respect to the Indenture, unless the holder previously has given to the Indenture Trustee written notice of the occurrence of an Event of Default and (1) the Event of Default arises from the Servicer's failure to remit payments when due or (2) Noteholders evidencing not less than [ ]% of the Class Principal Amount of the Notes, acting together as a single class, have made written request upon the Indenture Trustee to institute a proceeding in its own name as the Indenture Trustee under the Indenture and have offered to the Indenture Trustee reasonable indemnity, and the Indenture Trustee for 30 days has neglected or refused to institute any proceedings. See "Description of the Notes -- Rights of Noteholders Upon Occurrence of Event of Default" in this prospectus supplement. YIELD CONSIDERATIONS GENERAL The yields to maturity (or to early termination) on the Notes will be affected by the rate of principal payments on the Mortgage Loans (including prepayments, which may include amounts received by virtue of purchase, condemnation, insurance or foreclosure) on the Mortgage Loans. Yields will also be affected by the extent to which Mortgage Loans bearing higher Mortgage Loan Rates prepay at a more rapid rate than Mortgage Loans with lower Mortgage Loan Rates, the amount and timing of borrower delinquencies and defaults resulting in Realized Losses, the application of Monthly Excess Cashflow, the purchase price paid for the Notes and other factors. Principal prepayments may be influenced by a variety of economic, geographic, demographic, social, tax, legal and other factors. These factors may include changes in borrowers' housing needs, job transfers, unemployment, borrowers' net equity, if any, in the mortgaged properties, servicing decisions, homeowner mobility, the existence and enforceability of "due-on-sale" clauses, seasoning of loans, market interest rates for similar types of loans and the availability of funds for the loans. Nearly all of the Mortgage Loans contain due-on-sale provisions and the Servicer will generally enforce these provisions unless (1) the Servicer, in a manner consistent with its servicing practices, permits the purchaser of the related Mortgaged Property to assume the Mortgage Loan, or (2) enforcement is not permitted by applicable law. In some cases, the Servicer may, in a manner consistent with its servicing practices, permit a borrower who is selling his principal residence and purchasing a new one to substitute the new Mortgaged Property as collateral for the related Mortgage Loan, or may simply release its lien on the existing collateral, leaving the related Mortgage Loan unsecured. In that event, the Servicer will generally require the borrower to make a partial prepayment in reduction of the principal balance of the Mortgage Loan to the extent that the borrower has received proceeds from the sale of the prior residence that will not be applied to the purchase of the new residence. Approximately [ ] of the Mortgage Loans are subject to prepayment penalties during the first [three to five years] after origination. Prepayment penalties may have the effect of reducing the amount or the likelihood of prepayments on the Mortgage Loans. A prepayment premium may be waived by the Servicer under some circumstances. The remaining Mortgage Loans may be prepaid in full or in part at any time without penalty. In general, if prevailing interest rates fall below the interest rates on the Mortgage Loans, the Mortgage Loans are likely to be subject to higher prepayments than if prevailing rates remain at or above the interest rates on the Mortgage Loans. Conversely, if prevailing interest rates rise above the interest rates on the Mortgage Loans, the rate of prepayment would be expected to decrease. The rate of principal payments on the Mortgage Loans will also be affected by the amortization schedules of the Mortgage Loans, the rate and timing of prepayments by the borrowers, liquidations of defaulted Mortgage Loans and repurchases of Mortgage Loans due to breaches of representations and warranties or defective documentation as described in this prospectus supplement. The timing of changes in the rate of prepayments, liquidations and purchases of the related Mortgage Loans may significantly affect the yield to an investor, even if the average rate of principal payments experienced over time is consistent with an investor's expectation. Because the rate and timing of principal payments on the Mortgage Loans will depend on future events and on a variety of factors (as described more fully in this prospectus supplement and in the prospectus under "Yield Considerations") no assurance can be given as to the rate or the timing of principal payments on the Notes. In general, the earlier a prepayment of principal of the related Mortgage Loans, the greater the effect on an investor's yield. The effect on an investor's yield of principal payments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the Notes may not be offset by a subsequent like decrease (or increase) in the rate of principal payments. From time to time, areas of the United States may be affected by flooding, severe storms, landslides, wildfires or other natural disasters. Any resulting Realized Losses could affect the rate of payment of principal no the Notes. To the extent that the insurance proceeds received with respect to any damaged Mortgage Properties are not applied to the restoration of those Mortgage Properties, the proceeds will be used to prepay the related Mortgage Loans in whole or in part. Any repurchases or repayments of the Mortgage Loans may reduce the weighted average lives of the Notes and will reduce the yields on the Notes to the extent they are purchased at a premium. In addition, any future limitations on the rights of borrowers to deduct interest payments on mortgage loans for federal income tax purposes may result in a higher rate of prepayment on the Mortgage Loans. The Depositor and [ ] make no representations as to the particular factors that will affect the prepayment of the Mortgage Loans, as to the relative importance of these factors, or as to the percentage of the principal balance of the Mortgage Loans that will be paid as of any date. Payments of principal at a faster rate than anticipated will decrease the yield on Notes purchased at a premium; payments of principal at a slower rate than anticipated will decrease the yield on Notes purchased at a discount. The effect on an investor's yield due to payments of principal occurring at a rate that is faster (or slower) than the rate anticipated by the investor during any period following the issuance of the Notes will not be entirely offset by a subsequent like reduction (or increase) in the rate of payments of principal during any subsequent period. The rate of delinquencies and defaults on the Mortgage Loans and of recoveries, if any, on defaulted Mortgage Loans and foreclosed properties will affect the rate and timing of principal payments on the Mortgage Loans, and, accordingly, the weighted average life of the Notes. Some factors may influence delinquencies and defaults, including origination and underwriting standards, loan-to-value ratios and delinquency history. In general, defaults on Mortgage Loans are expected to occur with greater frequency in their early years, although little data is available with respect to the rate of default on similar types of home loans. The rate of default on Mortgage Loans with high loan-to-value ratios, or on Mortgage Loans secured by junior liens, may be higher than that of home loans with lower loan-to-value ratios or secured by first liens on comparable properties. In addition, the rate and timing of prepayments, defaults and liquidations on the Mortgage Loans will be affected by the general economic condition of the area in which the related Mortgaged Properties are located or the related borrower is residing. See "Description of the Mortgage Pool" in this prospectus supplement. The risk of delinquencies and losses is greater and voluntary principal prepayments are less likely in regions where a weak or deteriorating economy exists, as may be evidenced by, among other factors, increasing unemployment or falling property values. Investors in the Notes will bear the risk of reinvestment of amounts received in respect of principal on the Notes at yields that may be lower than the yield on the Notes. The yields to investors in the Notes may be affected by the exercise by [ ] of its right to purchase the Mortgage Loans, as described under "Description of the Notes -- Optional Redemption" in this prospectus supplement, or the failure of [ ] to exercise that right. If the purchaser of a Note offered at a discount from its initial principal amount calculates its anticipated yield to maturity (or early termination) based on an assumed rate of payment of principal that is faster than that actually experienced on the related Mortgage Loans, the actual yield may be lower than that so calculated. Conversely, if the purchaser of a Note offered at a premium calculates its anticipated yield based on an assumed rate of payment of principal that is slower than that actually experienced on the related Mortgage Loans, the actual yield may be lower than that so calculated. The effective yield to holders of the Notes will be lower than the yield otherwise produced by the Interest Rate and the purchase price because monthly payments will not be payable until the [ ] day (or later) of the month following the Accrual Period. OVERCOLLATERALIZATION [Describe as applicable.] MATURITY DATE The Maturity Date of the Notes is as set forth under "Description of the Notes -- Maturity Date" in this prospectus supplement. The Maturity Date of the Notes was determined by [to be provided as applicable]. The actual maturity of the Notes may be significantly earlier than the Maturity Date. WEIGHTED AVERAGE LIFE The following information illustrates the effect of prepayments of the Mortgage Loans on the weighted average life of the Notes under stated assumptions and is not a prediction of the prepayment rate that might actually be experienced on the Mortgage Loans. Weighted average life refers to the average amount of time that will elapse from the date of issuance of a security to the date of distribution to the investor of each dollar distributed in net reduction of principal of the security (assuming no losses). The weighted average life of the Notes will be influenced by, among other things, the rate at which principal of the Mortgage Loans is paid, which may be in the form of scheduled amortization or prepayments (for this purpose, the term "prepayment" includes unscheduled reductions of principal, including without limitation those resulting from full or partial prepayments, refinancings, liquidations and write-offs due to defaults, casualties or other dispositions, substitutions and repurchases by or on behalf of [ ] or the Depositor) and [to be provided as applicable]. Prepayments on loans such as the Mortgage Loans are commonly measured relative to a prepayment standard or model. The model used in this prospectus supplement for the Mortgage Loans represents [to be provided as applicable]. [ ] does not purport to be either a historical description of the prepayment experience or any pool of loans or a prediction of the anticipated rate of prepayment of any pool of loans, including the Mortgage Loans. Neither the Depositor nor the Underwriter makes any representation about the appropriateness of the [ ] model. [The following table was prepared based on the following assumptions, among other things (collectively, the "Modeling Assumptions"): o the initial Class Principal Amount and the Interest Rate are as set forth on the cover of this prospectus supplement; o each scheduled payment of principal and interest on a Mortgage Loan is timely received on the last day of each month starting in [ ]; o principal prepayments are received in full on the last day of each month starting in [ ], and each prepayment includes 30 days of interest on the Mortgage Loan; o prepayments are received on the Mortgage Loans at the applicable constant rates indicated; o there are no defaults or delinquencies on the Mortgage Loans; o Distribution Dates occur on the [ ] day of each month, starting in [ ]; o there are no re-purchases or substitutions of the Mortgage Loans; o the Notes are issued on [ ]; and o the Mortgage Loans were aggregated into assumed Mortgage Loans having the following characteristics:] HOME NET HOME REMAINING HOME LOAN LOAN TERM TO LOAN PRINCIPAL INTEREST INTEREST MATURITY NUMBER BALANCE RATE RATE (IN MONTHS) ------------- -------------- ----------- ------------- ------------ The actual characteristics of the Mortgage Loans may, and the performance of the Mortgage Loans will, differ from the assumptions used in constructing the table below, which is hypothetical in nature and is provided only to give a general sense of how the principal cash flows might behave under varying prepayment scenarios. For example, it is not expected that the Mortgage Loans will prepay at a constant rate until maturity, that all of the Mortgage Loans will prepay at the same rate or that there will be no defaults or delinquencies on the Mortgage Loans. Moreover, the diverse remaining terms to maturity of the Mortgage Loans could produce slower or faster principal payments than indicated in the table in the [assumed prepayment rate] specified, even if the weighted average remaining term to maturity of the Mortgage Loans is as assumed. Any difference between those assumptions and the actual characteristics and performance of the Mortgage Loans or actual prepayment or loss experience will cause the percentages of Original Principal Amounts outstanding over time and the weighted average lives of the Notes to differ (which difference could be material) from the corresponding information in the table for each indicated [assumed prepayment rate]. Subject to the foregoing discussion and assumptions, the following tables indicate the weighted average lives of the Notes and set forth the percentages of the Original Principal Amount of the Notes that would be outstanding after each of the Distribution Dates shown at the indicated [assumed prepayment rate]. The weighted average life of the Notes is determined by (1) multiplying the net reduction, if any, of the Class Principal Amount by the number of years from the date of issuance of the Note to the related Distribution Date, (2) adding the results and (3) dividing the sum by the total of the net reductions of Class Principal Amount referred to in clause (1) and rounding to one decimal place. PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF THE NOTES OUTSTANDING AT THE FOLLOWING [PREPAYMENT RATES] Class [ ] ------------------------------------------------------ DISTRIBUTION DATE [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% - ----------------- ----- ----- ----- ----- ----- ----- ----- Initial Percentage........ 100 100 100 100 100 100 100 Weighted Average Life in Years With Optional Redemption................. Without Optional Redemption.............. - --------- * Based upon the assumption that [ ] does not exercise its option to repurchase the Mortgage Loans as described under "Description of the Notes -- Optional Redemption" in this prospectus supplement. MATERIAL FEDERAL INCOME TAX CONSIDERATIONS Upon the issuance of the notes, Stroock & Stroock & Lavan LLP, special federal tax counsel, will deliver an opinion of counsel that for federal income tax purposes, the Notes will be treated as indebtedness and the Trust will not be an association, or publicly traded partnership, taxable as a corporation or a taxable mortgage pool. [The Trust does not anticipate treating the Notes as having been issued with original issue discount.] [It is anticipated that the Notes will be treated as issued with original issue discount. The prepayment assumption that will be used in determining the rate of accrual of original issue discount with respect to the Notes is [ ]. However, this rate does not represent the rate at which prepayments have actually occurred and no representation is made as to the rate at which prepayments actually will occur in the future. All prospective purchasers of the Notes should see "Material Federal Income Tax Consideration--Partnership Trust Funds and Disregarded Trust Funds--Taxation of Debt Securityholders" in the accompanying prospectus for a summary of the anticipated federal income tax consequences of the purchase, ownership and disposition of the Notes. STATE AND LOCAL INCOME TAX CONSIDERATIONS In addition to the federal income tax matters described under "Material Federal Income Tax Considerations" above, prospective investors should consider the state and local income tax consequences of the acquisition, ownership and disposition of the Notes. State income tax law may differ substantially from the corresponding federal tax law, and this discussion does not purport to describe any aspect of the income tax laws of any state or locality. Therefore, prospective investors should consult their own tax advisors with respect to the various tax consequences of investments in the Notes. ERISA CONSIDERATIONS The Notes may be purchased by an employee benefit plan or an individual retirement account (a "Plan") subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"). A fiduciary of a Plan must determine that the purchase of a Note is consistent with its fiduciary duties under ERISA and does not result in a nonexempt prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Code. For additional information regarding treatment of the Notes under ERISA, See "ERISA Considerations" in the prospectus. LEGAL INVESTMENT CONSIDERATIONS [The Notes will [not] constitute "mortgage related securities" under the Secondary Mortgage Market Enhancement Act of 1984. Accordingly, many institutions with legal authority to invest in "mortgage related securities" may [not] be legally authorized to invest in the Notes.] There may be restrictions on the ability of some investors, including depository institutions, either to purchase the Notes or to purchase Notes representing more than a specified percentage of the investor's assets. Investors should consult their own legal, tax and accounting advisors in determining whether and to what extent the Notes constitute legal investments for the investors and the applicable tax, regulatory and accounting treatment of the Notes. See "Certain Legal Aspects of Mortgage Loans" in the prospectus. USE OF PROCEEDS The net proceeds from the sale of the Notes will be applied by the Depositor, or an affiliate of the Depositor, toward the purchase of the Mortgage Loans. The Mortgage Loans will be acquired by the Depositor from [ ] in a privately negotiated transaction. UNDERWRITING [Subject to the terms and conditions provided in the underwriting agreement and in a terms agreement (collectively, the "Underwriting Agreement") among the Depositor, [ ] and the Underwriter, the Depositor has agreed to sell to the Underwriter, and the Underwriter has agreed to purchase from the Depositor, all of the Notes. The Underwriter has advised the Depositor that the Underwriter intends to initially offer the Notes to the public at the price specified on the front cover of this prospectus supplement. After the initial public offering of the Notes, the public offering price may be changed. The Underwriting Agreement provides that the Depositor will indemnify the Underwriter against some civil liabilities, including liabilities under the Securities Act of 1933, as amended. Until the distribution of the Notes is completed, the rules of the SEC may limit the ability of the Underwriter and some selling group members to bid for and purchase the Notes. As an exception to these rules, the Underwriter is permitted to engage in transactions that stabilize the price of the Notes. These transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Notes. If the Underwriter creates a short position in the Notes in connection with the offering, that is, if they sell more Notes than the amount specified on the cover page of this prospectus supplement, the Underwriter may reduce that short position by purchasing Notes in the open market. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of those purchases. Neither the Depositor nor the Underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes. In addition, neither the Depositor nor the Underwriter makes any representation that the Underwriter will engage in these transactions or that these transactions, once begun, will not be discontinued without notice.] Expenses incurred by the Depositor in connection with this offering are expected to be approximately $[ ]. The Underwriter expects to make a secondary market in the Notes, but has no obligation to do so. There can be no assurance that any secondary market will develop, or, if it does develop, that it will continue. [ ] has entered into an agreement with the Depositor to purchase the Residual Certificate simultaneously with the purchase of the Notes. The Underwriter is an affiliate of [ ] and performs management services for the Depositor. The Underwriter has engaged in other transactions with, arranged other transactions for or performed other services for the Depositor and [ ] in the ordinary course of business. EXPERTS [To be provided as applicable]. LEGAL MATTERS Certain legal matters with respect to the Notes will be passed upon for the Depositor and for the Underwriter by [Stroock & Stroock & Lavan LLP, New York, New York]. RATINGS It is a condition to the issuance of the Notes that they be rated "[ ]" by [Rating Agency] and "[ ]" by [Rating Agency]. [Rating Agency] and [Rating Agency] are referred to in this prospectus supplement as the "Rating Agencies." A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. A securities rating addresses the likelihood of the receipt by holders of Notes of distributions in the amount of scheduled payments on the Mortgage Loans. The rating takes into consideration the characteristics of the Mortgage Loans and the structural, legal and tax aspects associated with the Notes. The ratings on the Notes do not represent any assessment of the likelihood or rate of principal prepayments. The ratings do not address the possibility that holders of Notes might suffer a lower than anticipated yield due to prepayments. The security ratings assigned to the Notes 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 either Rating Agency. The Depositor has not requested a rating of the Notes by any rating agency other than the Rating Agencies; there can be no assurance, however, as to whether any other rating agency will rate the Notes or, if it does, what rating would be assigned by the other rating agency. The rating assigned by the other rating agency to the Notes could be lower than the ratings assigned by the Rating Agencies. GLOSSARY OF DEFINED TERMS [To be provided.] ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in some limited circumstances, the globally offered ACE Securities Corp. [ ] Asset Backed Notes (the "Global Securities") will be available only in book-entry form. Investors in the Global Securities may hold the Global Securities through any of DTC, Clearstream Luxembourg or Euroclear. The Global Securities will be tradable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through Clearstream Luxembourg and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations and prior mortgage loan asset backed certificates issues. Secondary cross-market trading between Clearstream Luxembourg or Euroclear and DTC Participants holding Certificates will be effected on a delivery-against-payment basis through the respective Depositaries of Clearstream Luxembourg and Euroclear and as DTC Participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless those holders meet specific requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Clearstream Luxembourg and Euroclear will hold positions on behalf of their participants through their respective Depositaries, which in turn will hold the positions in accounts as DTC Participants. Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to prior mortgage loan asset backed certificates issues. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream Luxembourg or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds. SECONDARY MARKET TRADING Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC Participants will be settled using the procedures applicable to prior mortgage loan asset backed certificates issues in same-day funds. TRADING BETWEEN CLEARSTREAM LUXEMBOURG AND/OR EUROCLEAR PARTICIPANTS. Secondary market trading between Clearstream Luxembourg Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. TRADING BETWEEN DTC SELLER AND CLEARSTREAM LUXEMBOURG OR EUROCLEAR PURCHASER. When Global Securities are to be transferred from the account of a DTC Participant to the account of a Clearstream Luxembourg Participant or a Euroclear Participant, the purchaser will send instructions to Clearstream Luxembourg or Euroclear through a Clearstream Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. Clearstream Luxembourg or Euroclear will instruct the respective Depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last interest payment date to and excluding the settlement date, on the basis of either the actual number of days in the accrual period and a year assumed to consist of 360 days or a 360-day year of twelve 30-day months as applicable to the related class of Global Securities. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made by the respective Depositary of the DTC Participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream Luxembourg Participant's or Euroclear Participant's account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Global Securities will accrue from, the value date (that would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Clearstream Luxembourg or Euroclear cash debt will be valued instead as of the actual settlement date. Clearstream Luxembourg Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream Luxembourg or Euroclear. Under this approach, they may take on credit exposure to Clearstream Luxembourg or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream Luxembourg or Euroclear has extended a line of credit to them, Clearstream Luxembourg Participants or Euroclear Participants can elect not to preposition funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Clearstream Luxembourg Participants or Euroclear Participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of overdraft charges, although this result will depend on each Clearstream Luxembourg Participant's or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global Securities to the respective European Depositary for the benefit of Clearstream Luxembourg Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. TRADING BETWEEN CLEARSTREAM LUXEMBOURG OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time zone differences in their favor, Clearstream Luxembourg Participants and Euroclear Participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Clearstream Luxembourg or Euroclear through a Clearstream Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. In these cases Clearstream Luxembourg or Euroclear will instruct the respective Depositary, as appropriate, to deliver the Global Securities to the DTC Participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last interest payment to and excluding the settlement date on the basis of either the actual number of days in the accrual period and a year assumed to consist of 360 days or a 360-day year of twelve 30-day months as applicable to the related class of Global Securities. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected in the account of the Clearstream Luxembourg Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Clearstream Luxembourg Participant's or Euroclear Participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Clearstream Luxembourg Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft incurred over that one day period. If settlement is not completed on the intended value date (that is, the trade fails), receipt of the cash proceeds in the Clearstream Luxembourg Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream Luxembourg or Euroclear and that purchase Global Securities from DTC Participants for delivery to Clearstream Luxembourg Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: o borrowing through Clearstream Luxembourg or Euroclear for one day (until the purchase side of the day trade is reflected in their Clearstream Luxembourg or Euroclear accounts) in accordance with the clearing system's customary procedures; o borrowing the Global Securities in the U.S. from a DTC Participant no later than one day prior to the settlement, which would give the Global Securities sufficient time to be reflected in their Clearstream Luxembourg or Euroclear account in order to settle the sale side of the trade; or o staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Clearstream Luxembourg or Euroclear Participant. CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A beneficial owner of Global securities holding securities through Clearstream, Luxembourg or Euroclear, or through DTC will be subject to the 30% U.S. withholding tax that generally applies to payments of interest, including original issue discount, on registered debt issued by U.S. Persons or to 31% backup withholding, unless (1) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between the beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (2) the beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial owners of securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. If the information shown on Form W-8 BEN changes, a new Form W-8 must be filed within 30 days of the change. EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM W-8BEN). Non-U.S. Persons that are beneficial owners of securities residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate, depending on the treaty terms, by filing Form W-8BEN (including Part II thereof). If the treaty provides only for a reduced rate, the beneficial owner may still be entitled to complete exemption from withholding under item (1) above. EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain complete exemption from the withholding tax by filing Form W-9 (Request for Taxpayer Identification Number and Certification). U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a Global Security files by submitting the appropriate form to the person through whom it holds, the clearing agency, in the case of persons holding directly on the books of the clearing agency. Form W-8BEN and Form W-8ECI are generally effective for three calendar years from the close of the calendar year in which it is collected. The term "U.S. Person" means (1) a citizen or resident of the United States, (2) a corporation or partnership (or other entity properly classified as a corporation or partnership for U.S. Federal income tax purposes) organized in or under the laws of the United States or any state or the District of Columbia, (3) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or (4) 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. Notwithstanding the preceding sentence, to the extent provided in regulations, trusts in existence on August 20, 1996 and treated as United States persons prior to that date that elect to continue to be so treated also will be considered U.S. Persons. Treasury regulations provide certain presumptions regarding the entity classification and foreign or U.S. status of a holder that a payor generally must apply in the absence of appropriate documentation from the holder, and provide detailed documentation and procedures for holders claiming withholding tax exemptions through intermediaries. Prospective investors are urged to consult their tax advisors regarding the effect of these regulations on their ability to claim and the means for claiming exemptions from or reduced rates of U.S. withholding taxes. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global securities. Investors are advised to consult their own tax advisers for specific tax advice concerning their holding and disposing of the Global securities. $[ ] (APPROXIMATE) ACE SECURITIES CORP. [ ] TRUST [ ] ASSET BACKED NOTES [ ] SERVICER ------------------------- PROSPECTUS SUPPLEMENT ------------------------- DEUTSCHE BANC ALEX. BROWN The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus dated [ ]) $[ ] (APPROXIMATE) ACE SECURITIES CORP. [ ] TRUST [ ] PASS-THROUGH CERTIFICATES [ ] ORIGINATOR AND SERVICER ----------- CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The certificates will represent interests in the trustfund only and will not representinterests in or obligations of anyother entity. This prospectus supplement may be used to offer and sell the certificates only if accompanied by the prospectus. The trust fund will issue certificates including the following: CLASS INTEREST CLASS PRINCIPAL AMOUNT(1) RATE ----- ------------------- ----- [ ].................................. $[ ] [ ] [ ].................................. [ ] [ ] [ ].................................. [ ] [ ] ___________________ (1) These amounts are approximate, as described in this prospectus supplement. (2) Interest will accrue on the Class [ ] and [ ] Certificates at [described as applicable]. This prospectus supplement and the accompanying prospectus relate only to the offering of the certificates listed in the table above and not to the other classes of certificates that will be issued by the trust fund as described in this prospectus supplement. [Describe assets of trust fund.] NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. [Describe underwriting arrangements.] On or about [ ], delivery of the certificates offered by this prospectus supplement will be made through the book-entry facilities of [ ]. UNDERWRITER: DEUTSCHE BANC ALEX. BROWN The date of this prospectus supplement is [ ] IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the certificates offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your certificates, and (2) this prospectus supplement, which describes the specific terms of your certificates. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the certificates in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. ----------------------- Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the certificates and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the certificates will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. ----------------------- We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. TABLES OF CONTENTS PROSPECTUS SUPPLEMENT PAGE Summary of Terms............................................................S-4 Risk Factors................................................................S-8 Description of the Certificates............................................S-14 [The Insurance Policy......................................................S-22 Description of the Mortgage Pool...........................................S-23 Additional Information.....................................................S-32 [Originator/Servicer.......................................................S-33 The Pooling and Servicing Agreement........................................S-35 Yield Considerations.......................................................S-40 Material Federal Income Tax Considerations.................................S-45 State and Local Income Tax Considerations..................................S-45 Legal Investment Considerations............................................S-45 Use of Proceeds............................................................S-46 Underwriting...............................................................S-46 ERISA Considerations.......................................................S-46 Experts....................................................................S-46 Legal Matters..............................................................S-47 Ratings....................................................................S-47 Glossary of Defined Terms..................................................S-48 Annex I....................................................................S-49 PROSPECTUS PAGE ---- Description of the Trust Funds................................................. Use of Proceeds................................................................ Yield Considerations........................................................... The Depositor.................................................................. Description of the Securities.................................................. Description of the Agreements.................................................. Certain Legal Aspects of Mortgage Loans........................................ Material Federal Income Tax Considerations.............................................................. State and Other Tax Considerations............................................. ERISA Considerations........................................................... Legal Investment............................................................... Methods of Distribution........................................................ Additional Information......................................................... Incorporation of Certain Documents by Reference................................................................ Legal Matters.................................................................. Financial Information.......................................................... Rating......................................................................... Index of Defined Terms......................................................... SUMMARY OF TERMS O THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE CERTIFICATES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. O WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. o [WHENEVER WE REFER TO A PERCENTAGE OF SOME OR ALL OF THE MORTGAGE LOANS IN THE TRUST FUND OR IN ANY POOL, THAT PERCENTAGE HAS BEEN CALCULATED ON THE BASIS OF THE TOTAL PRINCIPAL BALANCE OF THOSE MORTGAGE LOANS AS OF [ ], UNLESS WE SPECIFY OTHERWISE. WE EXPLAIN IN THIS PROSPECTUS SUPPLEMENT UNDER "DESCRIPTION OF THE CERTIFICATES -- DISTRIBUTIONS OF PRINCIPAL" HOW THE PRINCIPAL BALANCE OF A MORTGAGE LOAN IS DETERMINED. WHENEVER WE REFER IN THIS SUMMARY OF TERMS OR IN THE RISK FACTORS SECTION OF THIS PROSPECTUS SUPPLEMENT TO THE TOTAL PRINCIPAL BALANCE OF ANY MORTGAGE LOANS, WE MEAN THE TOTAL OF THEIR PRINCIPAL BALANCES, UNLESS WE SPECIFY OTHERWISE.] THE OFFERED CERTIFICATES ACE Securities Corp.'s [ ] Pass-Through Certificates consist of the following classes: [ ]. Only the [ ] Certificates are being offered by this prospectus supplement. These certificates will be issued in book-entry form. SEE "DESCRIPTION OF THE CERTIFICATES -- GENERAL" IN THIS PROSPECTUS SUPPLEMENT FOR A DISCUSSION OF THE MINIMUM DENOMINATIONS AND THE INCREMENTAL DENOMINATIONS OF EACH CLASS OF CERTIFICATES. The certificates represent ownership interests in a trust fund, the assets of which consist primarily of [describe assets of trust fund.] The certificates will have an approximate total initial principal amount of $[ ]. Any difference between the total principal amount of the certificates on the date they are issued and the approximate total principal amount of the certificates on the date of this prospectus supplement will not exceed 5%. PAYMENTS ON THE CERTIFICATES Principal and interest on the certificates will be payable on the [25th] day of each month, beginning in [ ]. However, if the [25th] day is not a business day, distributions will be made on the next business day after the [25th] day of the month. INTEREST PAYMENTS Interest will accrue on each class of certificates, [other than the Class [ ] Certificate], at the applicable annual rates described in this prospectus supplement. SEE "DESCRIPTION OF THE CERTIFICATES -- DISTRIBUTIONS OF INTEREST" IN THIS PROSPECTUS SUPPLEMENT. PRINCIPAL PAYMENTS The amount of principal payable on the certificates, [other than the Class [ ] Certificate], will be determined by (1) funds actually received on the mortgage loans in [each] pool that are available to make payments on the certificates, (2) the amount of interest received or advanced on the mortgage loans that is used to pay principal on the certificates, calculated as described in this prospectus supplement, (3) [formulas that allocate a portion of principal payments received on the mortgage loans to each class of certificates, as described in this prospectus supplement,] and (4) [ ]. Funds actually received on the mortgage loans may consist of expected, scheduled payments, and unexpected payments resulting from prepayments or defaults by borrowers, liquidation of defaulted mortgage loans, or repurchases of mortgage loans under the circumstances described in this prospectus supplement. WE EXPLAIN HOW PRINCIPAL IS PAID ON THE CERTIFICATES UNDER "DESCRIPTION OF THE CERTIFICATES -- DISTRIBUTIONS OF PRINCIPAL" IN THIS PROSPECTUS SUPPLEMENT. [PREPAYMENT PENALTIES ON THE MORTGAGE LOANS The holder of the Class [ ] Certificate will be entitled to receive any prepayment penalties received on the mortgage loans. These amounts will not be available to make payments on other classes of certificates. SEE "DESCRIPTION OF THE CERTIFICATES" AND "DESCRIPTION OF THE MORTGAGE POOLS -- GENERAL" IN THIS PROSPECTUS SUPPLEMENT.] LIMITED RECOURSE The only source of cash available to make interest and principal payments on the certificates will be the assets of the trust fund. The trust fund will have no other source of cash and no entity other than the trust fund will be required or expected to make any payments on the certificates. ENHANCEMENT OF LIKELIHOOD OF PAYMENT ON THE CERTIFICATES [DESCRIBE ANY APPLICABLE FINANCIAL GUARANTY INSURANCE POLICY OR GUARANTEE.] [SUBORDINATION OF PAYMENTS The [ ] certificates will have a payment priority as a group over the Class [ ] Certificates both for payments of interest and payments of principal. No amounts will be paid to the Holder of the Class [ ] Certificate on any distribution date until all amounts due to the senior certificates and the Class [ ] Certificates on that date have been paid and overcollateralization has reached the required level.] [OVERCOLLATERALIZATION On the closing date, the total principal balance of the mortgage loans is expected to [approximately equal the total principal amount of the certificates]. Any interest received on the mortgage loans in excess of the amount needed to pay interest on the certificates and some of the expenses and fees of the trust fund will be used to reduce the total principal amount of the certificates to a level set by the rating agencies until the mortgage loans have a total principal balance that exceeds the total outstanding principal amount of the certificates by the amount required by the rating agencies. This condition is referred to as "overcollateralization." We cannot assure you that sufficient interest will be generated by the mortgage loans to create overcollateralization, to increase overcollateralization to the level required by the rating agencies, or to maintain it at that level. SEE "RISK FACTORS -- POTENTIAL INADEQUACY OF Credit ENHANCEMENT FOR THE CLASS [ ] CERTIFICATES" AND "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- SUBORDINATION" AND "-- OVERCOLLATERALIZATION" IN THIS PROSPECTUS SUPPLEMENT.] [ALLOCATION OF LOSSES As described in this prospectus supplement, amounts representing losses on the mortgage loans in excess of overcollateralization will be applied to reduce the principal amount of the Class [ ] Certificates until their principal amount has been reduced to zero. o If a loss has been allocated to reduce the principal amount of your Class [ ] Certificate, you will receive no payment in respect of that reduction at that time. o After overcollateralization has been created and has been increased to the required level, you will receive the amount of that loss if there are sufficient funds to pay you, as described in this prospectus supplement, but you will not receive any interest on that amount. After the principal amount of the Class [ ] Certificates has been reduced to zero, amounts representing losses on the mortgage loans will be paid to holders of the senior certificates by [ ], to the extent funds available are insufficient to cover these losses. SEE "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- ALLOCATION OF LOSSES" AND "THE INSURANCE POLICY" IN THIS PROSPECTUS SUPPLEMENT.] THE MORTGAGE LOANS On the closing date, which is expected to be on or about [ ], the assets of the trust fund will consist of [two] pools of mortgage loans with a total principal balance of approximately $[ ]. The mortgage loans will be secured by mortgages, deeds of trust, or other security instruments, all of which are referred to in this prospectus supplement as mortgages. [Description of mortgage loans.] [Description of pre-funding account and additional mortgage loans as applicable.] [The mortgage loans in the trust fund will not be insured or guaranteed by any government agency.] SEE "DESCRIPTION OF THE MORTGAGE POOLS" IN THIS PROSPECTUS SUPPLEMENT FOR A GENERAL DESCRIPTION OF THE MORTGAGE LOANS AND "[ORIGINATOR/SERVICER]" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF THE UNDERWRITING GUIDELINES APPLIED IN ORIGINATING THE MORTGAGE LOANS. [THE PRE-FUNDING ACCOUNT On the closing date, approximately $[ ] will be deposited by [ ] in a pre-funding account maintained by [ ]. It is intended that additional mortgage loans will be sold to the trust fund by the depositor from time to time, from [ ] until [ ], paid for with the funds on deposit in the pre-funding account. [Description of pre-funding account and additional mortgage loans as applicable.] SEE "DESCRIPTION OF THE CERTIFICATES --PRE-FUNDING ACCOUNT" IN THIS PROSPECTUS SUPPLEMENT.] SERVICING OF THE MORTGAGE LOANS The mortgage loans will be serviced by [ ]. SEE "[ORIGINATOR/SERVICER]" AND "THE POOLING AND SERVICING AGREEMENT" IN THIS PROSPECTUS SUPPLEMENT. OPTIONAL PURCHASE OF MORTGAGE LOANS [ ] will have the option to purchase all of the mortgage loans and the other property of the trust fund, [other than the insurance policy], after the total principal balance of the mortgage loans declines to less than [ ]% of their initial total principal balance; if [ ] does not exercise that option, [ ] may purchase the Mortgage Loans and other property of the trust fund. If the mortgage loans and other assets are purchased, the certificateholders will be paid accrued interest and principal equal to the outstanding principal amount of the certificates. SEE "DESCRIPTION OF THE CERTIFICATES -- OPTIONAL PURCHASE OF MORTGAGE LOANS; TERMINATION OF THE TRUST FUND" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF THE PURCHASE PRICE TO BE PAID FOR THE MORTGAGE LOANS. TAX STATUS [The Trust Fund will make one or more elections to treat certain assets of the trust as a real estate mortgage investment conduit (each, a "REMIC") for federal income tax purposes. The Class [ ] Certificates will represent regular interests in a REMIC and generally will be treated as debt instruments for federal income tax purposes. The Class [R] Certificates will represent the residual interest in each REMIC.] [Alternatively, grantor trust, partnership or FASIT status to be described as applicable.] SEE "MATERIAL FEDERAL INCOME TAX CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS FOR ADDITIONAL INFORMATION CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS TO THE CERTIFICATES. ERISA CONSIDERATIONS The Offered Certificates may be acquired by employee benefit plans and other retirement arrangements, subject to certain conditions. SEE "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS FOR A MORE COMPLETE DISCUSSION OF THESE ISSUES. LEGAL INVESTMENT CONSIDERATIONS [Only the Class [ ] Certificates] will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984. There are other restrictions on the ability of some types of investors to purchase the certificates that prospective investors should consider. SEE "LEGAL INVESTMENT CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT. RATINGS OF THE CERTIFICATES The certificates will initially have the following ratings from [ ]: [Rating [Rating CLASS AGENCY] AGENCY] ----- ------ ------ [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] These ratings are not recommendations to buy, sell or hold these certificates. A rating may be changed or withdrawn at any time by the assigning rating agency. o The ratings do not address the possibility that, as a result of principal prepayments, the yield on your certificates may be lower than anticipated. SEE "RATINGS" IN THIS PROSPECTUS SUPPLEMENT FOR A MORE COMPLETE DISCUSSION OF THE CERTIFICATE RATINGS. RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE CERTIFICATES. YOU SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS. [SOME OF THE LOANS IN THE MORTGAGE The payment schedules for most of the POOL ARE MORE LIKELY TO DEFAULT mortgage loans in the pool require the THAN OTHERS, AND HIGHER THAN borrower to pay off the principal EXPECTED DEFAULTS ON THESE LOANS balance of the loan gradually over the COULD REDUCE THE YIELD ON YOUR life of the loan. Some of the mortgage CERTIFICATES loans in the pool, however, have payment schedules under which the borrowers makes relatively small payments of principal over the life of the loan, and then must make a large final payment at maturity that pays off the entire principal balance outstanding. This final payment is usually much larger than the previous monthly payments. Because the borrower's ability to make this final payment usually depends on the ability to refinance the loan or sell the underlying property, the risk of default is greater than on other types of loans. High rates of default on these types of loans in the pool will result in greater losses on your certificates. The ability of a borrower to refinance the type of loan described above or sell the mortgaged property will depend upon a number of factors, including: o the level of mortgage interest rates; o the borrower's equity in the mortgage property; o general economic conditions; and o the availability of credit. We cannot predict how these factors will affect the default rate of these mortgage loans in the pool. You should refer to "Description of the Mortgage Pool" for information on the percentage of loans in the mortgage loan pool that consists of these loans.] [MORTGAGE LOAN INTEREST RATES MAY [LIBOR may increase or decrease at LIMIT INTEREST RATES ON THE different times and in different amounts CERTIFICATES than the index applicable to the adjustable rate mortgage loans.] [The trust fund will include a reserve fund whose primary asset will be [describe as applicable]]. SEE "DESCRIPTION OF THE CERTIFICATES -- THE RESERVE FUND" IN THIS PROSPECTUS SUPPLEMENT. FOR DETAILED INFORMATION ON THE INTEREST RATES OF THE MORTGAGE LOANS, SEE "DESCRIPTION OF THE MORTGAGE POOLS" IN THIS PROSPECTUS SUPPLEMENT.] [POTENTIAL INADEQUACY OF CREDIT The Class [ ] Certificates are not ENHANCEMENT FOR THE CLASS [ ] insured by any financial guaranty CERTIFICATES insurance policy. The overcollateralization feature described in this prospectus supplement is intended to enhance the likelihood that holders of Class [ ] Certificates will receive regular payments of interest and principal, but is limited in nature and may be insufficient to cover all losses on the mortgage loans or shortfalls in interest payments on the mortgage loans. In order to create, increase and maintain overcollateralization, it will be necessary that the mortgage loans generate more interest than is needed to pay interest on the certificates as well as fees and expenses of the trust fund and other amounts that are described in this prospectus supplement. We expect that the mortgage loans will generate more interest than is needed to pay those amounts, at least during some periods, because the weighted average of the interest rates on the mortgage loans will be higher, at the time the certificates are issued, than the weighted average of the interest rates on the certificates. We cannot assure you, however, that enough excess interest will be generated to reach the overcollateralization levels required by the rating agencies. The following factors will affect the amount of excess interest that the mortgage loans will generate: o PREPAYMENTS. Every time a mortgage loan with an interest rate higher than the weighted average of the interest rates on the certificates is prepaid, total excess interest after the date of prepayment will be reduced because that mortgage loan will no longer be outstanding and generating interest. The effect on your certificates of this reduction will be influenced by the amount of prepaid loans and the characteristics of the prepaid loans. Prepayment of a disproportionately high number of high interest rate mortgage loans would have a greater negative effect on future excess interest. o DEFAULTS. The rate of defaults on the mortgage loans may turn out to be higher than expected. Defaulted mortgage loans may be liquidated, and liquidated mortgage loans will no longer be outstanding and generating interest. o LEVEL OF LIBOR. If LIBOR increases, more money will be needed to pay interest to certificateholders, so less money will be available as excess interest.] [SPECIAL RISKS FOR THE CLASS [ ] The rights of holders of Class [ ] CERTIFICATES Certificates to receive payments of interest are subordinate to the rights of holders of senior certificates to receive payments of interest, and the rights of holders of Class [ ] Certificates to receive payments of principal are subordinate to the rights of holders of senior certificates to receive payments of principal. In addition, you should consider the following: o If you buy a Class [ ] Certificate and losses on the mortgage loans exceed excess interest and any overcollateralization that has been created, the principal amount of your certificate will be reduced proportionately with the principal amounts of the other Class [ ] Certificates by the amount of that excess; o If, after overcollateralization is created in the required amount, the mortgage loans generate interest in excess of the amount needed to pay interest and principal on the certificates and fees and expenses of the trust fund, the excess interest will be used to pay you and other holders of Class [ ] Certificates the amount of any reduction in the principal balances of the Class [ ] Certificates caused by application of losses. o We cannot assure you, however, that any excess interest will be generated and, in any event, no interest will be paid to you on the amount by which your principal balance was reduced because of the application of losses. SEE "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- SUBORDINATION" AND "-- ALLOCATION OF LOSSES" IN THIS PROSPECTUS SUPPLEMENT.] [EFFECT OF LACK OF PRIMARY MORTGAGE Approximately [ ]% of the mortgage loans INSURANCE ON THE CLASS [ ] have loan-to-value ratios greater than CERTIFICATES 80%. None of the mortgage loans are covered by a primary mortgage insurance policy. If borrowers default on their mortgage loans, there is a greater likelihood of losses than if the loans were insured. We cannot assure you that the applicable credit enhancement will be adequate to cover those losses. SEE "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- SUBORDINATION" AND "-- ALLOCATION OF LOSSES" IN THIS PROSPECTUS SUPPLEMENT.] UNPREDICTABILITY AND EFFECT OF Borrowers may prepay their mortgage PREPAYMENTS loans in whole or in part at any time; [however, approximately [ ]% of the mortgage loans require the payment of a prepayment penalty in connection with some voluntary prepayments, which may discourage these borrowers from prepaying their mortgage loans]. Prepayments of principal may also be caused by liquidations of or insurance payments on the mortgage loans. A prepayment of a mortgage loan will usually result in a prepayment on the certificates. The prepayment experience on the mortgage loans may affect the average life of the certificates. The rate of principal payments on the mortgage loans is from time to time influenced by a variety of economic, demographic, geographic, social, tax, legal and other factors. There can be no assurance as to the rate of prepayment on the mortgage loans or that the rate of payments will conform to the model described in this prospectus supplement. If prevailing interest rates fall significantly below the interest rates on the mortgage loans, principal prepayments are likely to be higher than if prevailing rates remain at or above the interest rates on the mortgage loans. As a result, the actual maturity of the certificates could occur significantly earlier than expected. Conversely, if prevailing interest rates rise significantly above the interest rates on the mortgage loans, principal prepayments are likely to be lower than if prevailing rates remain at or below the interest rates on the mortgage loans and the maturity of the certificates could occur significantly later than expected. In addition, some prepayments may result in the collection of less interest than would otherwise be the case in the month of prepayment. o If you purchase your certificates at a discount and principal is repaid more slowly than you anticipate, then your yield may be lower than you anticipate. o If you purchase your certificates at a premium and principal is repaid faster than you anticipate, then your yield may be lower than you anticipate. SEE "YIELD CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF FACTORS THAT MAY INFLUENCE THE RATE AND TIMING OF PREPAYMENTS ON THE MORTGAGE LOANS. GEOGRAPHIC CONCENTRATION OF Approximately [ ]% of the mortgage loans MORTGAGE LOANS expected to be in the pool on the closing date are secured by properties in [California]. Delinquencies, defaults and losses on the mortgage loans may be higher than if fewer of the mortgage loans were concentrated in one state because the following conditions in [California] will have a disproportionate impact on the mortgage loans in general: o Declines in the [California] residential real estate market may reduce the values of properties located in that state, which would result in an increase in the loan-to-value ratios. o Properties in [California] may be more susceptible than homes located in other parts of the country to some types of uninsured hazards, such as earthquakes, as well as floods, wildfires, mudslides and other natural disasters. Natural disasters affect regions of the United States from time to time, and may result in increased losses on mortgage loans in those regions, or in insurance payments that will constitute prepayments of those mortgage loans. FOR ADDITIONAL INFORMATION REGARDING THE GEOGRAPHIC DISTRIBUTION OF THE MORTGAGE LOANS IN EACH POOL, SEE THE APPLICABLE TABLE UNDER "DESCRIPTION OF THE MORTGAGE POOLS" IN THIS PROSPECTUS SUPPLEMENT. REAL ESTATE MARKET MAY AFFECT A decline in the real estate values or PERFORMANCE OF MORTGAGE LOANS in economic conditions generally could increase the rates of delinquencies, foreclosures and losses on the mortgage loans to a level that is significantly higher than those experienced currently; and no assurance can be given that values of the properties securing the mortgage loans will not decline since the date of origination of the mortgage loan. If the credit enhancement described in this prospectus supplement is not enough to protect your certificates from these losses, the yield on your certificates may be reduced. [EARLY PRINCIPAL PAYMENT FROM CASH If the cash in the pre-funding account REMAINING IN PRE-FUNDING ACCOUNT on the closing date is not used to acquire additional mortgage loans by [ ], then that cash will be [paid to you on a proportionate basis with the other certificateholders in reduction of the principal balance of your certificates.] If the amount of that cash is substantial, you will receive a significant unexpected early payment of principal in (or before) [ ]. We cannot assure you that you will be able to reinvest that money in another investment with a comparable yield.] YOU WILL NOT RECEIVE PHYSICAL Unless you are the purchaser of the CERTIFICATES,WHICH CAN CAUSE DELAYS residual certificates, your ownership of IN DISTRIBUTIONS AND HAMPER YOUR the certificates will be registered ABILITY TO PLEDGE OR RESELL YOUR electronically with DTC. The lack of CERTIFICATES physical certificates could: o result in payment delays on the certificates because the trustee will be sending distributions on the certificates to DTC instead of directly to you; o make it difficult for you to pledge your certificates if physical certificates are required by the party demanding the pledge; and o could hinder your ability to resell the certificates because some investors may be unwilling to buy certificates that are not in physical form. SEE "DESCRIPTION OF THE CERTIFICATES -- BOOK-ENTRY REGISTRATION" IN THIS PROSPECTUS SUPPLEMENT. LIMITED ABILITY TO RESELL The underwriter is not required to CERTIFICATES assist in resales of the certificates, although it may do so. A secondary market for any class of certificates may not develop. If a secondary market does develop, it might not continue or it might not be sufficiently liquid to allow you to resell any of your certificates. The certificates will not be listed on any securities exchange. [Additional risk factors to be provided as applicable.] DESCRIPTION OF THE CERTIFICATES GENERAL The [ ] Pass-Through Certificates will consist of the following Classes: [ ] (together, the "Certificates"). The [ ] Certificates are referred to in this prospectus supplement as the "Senior Certificates." Only the Class [ ] Certificates (the "Offered Certificates") are offered by this prospectus supplement. The Class [ ] Certificates are referred to in this prospectus supplement as the "LIBOR Certificates." The Class [ ] Certificates are referred to in this prospectus supplement as the "Subordinate Certificates." The Class R Certificate is also referred to as the "Residual Certificate." The Class [ ] Certificate will be issued as a single Certificate in fully registered, certificated form. The Certificates represent beneficial ownership interests in a trust fund (the "Trust Fund"), the assets of which consist primarily of (1) [describe mortgage loans] mortgage loans (the "Mortgage Loans"), (2) the assets that from time to time are identified as deposited in respect of the Mortgage Loans in the Collection Account and the Certificate Account (each as defined in this prospectus supplement), (3) property acquired by foreclosure of Mortgage Loans or deed in lieu of foreclosure, (4) any applicable insurance policies and all proceeds of these insurance policies, and (5) [describe other assets, as applicable]. Each Class of Offered Certificates will be issued in the respective approximate initial total principal amount set forth or described on the cover page of this prospectus supplement. The total principal amount of each Class of Offered Certificates is referred to in this prospectus supplement as the "Class Principal Amount" for that Class. The Class [ ] Certificate will be issued without a principal amount or interest rate, and will be entitled only to the amounts that are described in this prospectus supplement. The total Certificate Principal Amount (as defined in this prospectus supplement) of the Certificates and the initial Class Principal Amount of each Class of Offered Certificates may be increased or decreased by up to 5% to the extent that the Cut-off Date Balance (as defined in this prospectus supplement) of the Mortgage Loans is increased or decreased as described under "Description of the Mortgage Pools" in this prospectus supplement. Distributions on the Certificates will be made on the [25th] day of each month or, if the [25th] day is not a Business Day, on the next succeeding Business Day, commencing in [ ] (each, a "Distribution Date"), to Certificateholders of record on the applicable Record Date. The "Record Date" for each Distribution Date will be the close of business on the last Business Day of the calendar month immediately preceding the month in which that Distribution Date occurs. o A "Business Day" is generally any day other than a Saturday or Sunday or a day on which banks in New York or [California] are closed. Distributions on the Offered Certificates will be made to each registered holder entitled to the distributions, either (1) by check mailed to the Certificateholder's address as it appears on the books of the Trustee (as defined in this prospectus supplement), or (2) at the request, submitted to the Trustee in writing at least five Business Days prior to the related Record Date, of any holder of an Offered Certificate (at the holder's expense) in immediately available funds; provided, that the final distribution in respect of any Certificate will be made only upon presentation and surrender of the Certificate at the Corporate Trust Office (as defined in this prospectus supplement) of the Trustee. See "-- The Trustee" in this prospectus supplement. [PRE-FUNDING ACCOUNT On the Closing Date approximately $[ ] (the "Pre-Funded Amount") will be deposited in an account (the "Pre-Funding Account") maintained by [ ], which account shall be part of the trust fund. During the period (the "Pre-Funding Period") from [ ] until [ ], the Pre-Funding Amount will be maintained in the Pre-Funding Account. The Pre-Funded Amount will be reduced during the Pre-Funding Period by the amount of Subsequent Mortgage Loans (as defined in this prospectus supplement) deposited in the trust fund in accordance with the Pooling and Servicing Agreement. During the Pre-Funding Period, the Pre-Funded Amount will be used only to purchase Subsequent Mortgage Loans. Immediately following the Pre-Funding Period, any Pre-Funded Amount remaining will be distributed to [to be provided as applicable]. Amounts on deposit in the Pre-Funding Account will be invested in [to be provided as applicable] and all investment earnings on amounts on deposit in the Pre-Funding Account will be distributed to [to be provided as applicable] following the Pre-Funding Period.] BOOK-ENTRY REGISTRATION GENERAL. The Offered Certificates (the "Book-Entry Certificates") will be issued, maintained and transferred on the book-entry records of The Depository Trust Company ("DTC") in the United States [, or through Clearstream Luxembourg, societe anonyme ("Clearstream Luxembourg") or the Euroclear System ("Euroclear") in Europe] and through [its/their] participating organizations (each, a "Participant"). The Book-Entry Certificates will be issued in minimum denominations in principal amount of $25,000 and integral multiples of $1 in excess of $25,000. Each Class of Book-Entry Certificates will be represented by one or more certificates registered in the name of the nominee of DTC. ACE Securities Corp. (the "Depositor") has been informed by DTC that DTC's nominee will be Cede & Co. [Clearstream Luxembourg and Euroclear will hold omnibus positions on behalf of their Participants through customers' securities accounts in Clearstream Luxembourg's and Euroclear's names on the books of their respective depositaries, which in turn will hold positions in customers' securities accounts in the depositaries' names on the books of DTC.] No person acquiring an interest in a Book-Entry Certificate (each, a "Beneficial Owner") will be entitled to receive a certificate representing an interest (a "Definitive Certificate"), except as set forth below under "-- Definitive Certificates" and in the Prospectus under "Description of the Securities -- Book-Entry Registration and Definitive Securities -- Definitive Securities." Unless and until Definitive Certificates are issued, it is anticipated that: o the only "Certificateholder" of the Offered Certificates will be Cede & Co., as nominee of DTC, and Beneficial Owners will not be Certificateholders as that term is used in the Pooling and Servicing Agreement (as defined in this prospectus supplement). o Beneficial Owners will receive all distributions of principal of, and interest on, the Offered Certificates from the Trustee through DTC [, Clearstream Luxembourg or Euroclear, as applicable,] and [its/their] Participants. o while the Offered Certificates are outstanding, under the rules, regulations and procedures creating and affecting DTC [Clearstream Luxembourg and Euroclear] and [its/their] operations, DTC [Clearstream Luxembourg and Euroclear] [is/are] required to make book-entry transfers among Participants on whose behalf it acts with respect to the Offered Certificates and is required to receive and transmit distributions of principal of, and interest on, the Offered Certificates. Participants and indirect participants with whom Beneficial Owners have accounts with respect to Offered Certificates are similarly required to make book-entry transfers and receive and transmit distributions on behalf of their respective Beneficial Owners. Accordingly, although Beneficial Owners will not possess certificates, DTC [Clearstream Luxembourg and Euroclear] [has/have] in place a mechanism by which Beneficial Owners will receive distributions and will be able to transfer their interest. None of the Depositor, [ ], the Servicer or the Trustee [or additional parties] (as those terms are defined in this prospectus supplement) will have any responsibility for any aspect of the records relating to or payments made on account of beneficial ownership interests of the Book-Entry Certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests. For a more complete description of book-entry registration and clearance and the rules and regulations governing DTC [,Clearstream Luxembourg and Euroclear], see "Description of the Securities -- Book-Entry Registration and Definitive Securities" in the Prospectus [and "Global Clearance, Settlement and Tax Documentation Procedures" in Annex I to this Prospectus Supplement]. 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 Securities -- Book-Entry Registration and Definitive Securities -- Definitive Securities." Upon the occurrence of an event described in that section, the Trustee is required to direct DTC to notify Participants who have ownership of Book-Entry Certificates as indicated on the records of DTC of the availability of Definitive Certificates for their Book-Entry Certificates. Upon surrender by DTC of the Definitive Certificates representing the Book-Entry Certificates and upon receipt of instructions from DTC for re-registration, the Trustee will re-issue the Book-Entry Certificates as Definitive Certificates in the respective principal amounts owned by individual Beneficial Owners, and thereafter the Trustee will recognize the holders of the Definitive Certificates as Certificateholders under the Pooling and Servicing Agreement. DISTRIBUTIONS OF INTEREST The amount of interest distributable on each Distribution Date in respect of each Class of Certificates (other than the Class [ ] Certificate) will equal the sum of [to be provided as applicable]. Interest will accrue on the Offered Certificates on the basis of a 360-day year and the actual number of days in each Accrual Period. o The "Interest Rate" for each Class of Certificates will be the applicable annual rate described below. [If [ ] does not exercise its option to purchase the Mortgage Loans when it is first entitled to do so, as described under "-- Optional Purchase of Mortgage Loans; Termination of the Trust Fund" in this prospectus supplement, then with respect to each succeeding Distribution Date, the [ ] will be increased to %]. Subject to the preceding proviso, the Interest Rates for the Class [ ] Certificates will be the applicable annual rate determined as follows: o [To be provided as applicable]. o The "Net Mortgage Rate" for any Mortgage Loan equals the Mortgage Rate of the Mortgage Loan MINUS the Total Expense Rate (as defined in this prospectus supplement). o The "Total Expense Rate" for each Distribution Date is the sum of [the Servicing Fee Rate and the Trustee Fee Rate (each as defined in this prospectus supplement)]. The "Certificate Principal Amount" of any Offered Certificate for any date of determination will equal that Certificate Principal Amount on [ ] (the "Closing Date") as reduced by all amounts previously distributed on that Certificate in respect of principal and, in the case of a Class [ ] Certificate, any Applied Loss Amount (as defined in this prospectus supplement) previously allocated to that Certificate. For each Distribution Date, the "Accrual Period" applicable to each Class of Offered Certificates will be the period beginning on the immediately preceding Distribution Date (or on the Closing Date, in the case of the first Accrual Period) and ending on the day immediately preceding the related Distribution Date. o The "Interest Remittance Amount" for any Distribution Date will equal the sum of [to be provided as applicable]. On each Distribution Date, the Interest Remittance Amount will be distributed in the following order of priority: [To be provided as applicable.] When a principal prepayment in full is made on a Mortgage Loan, the borrower is charged interest only to the date of the prepayment, instead of for a full month, with a resulting reduction in interest payable for the month during which the prepayment is made. Prepayments in part will be applied as of the date of receipt. Full or partial prepayments (or proceeds of other liquidations) received in any Prepayment Period will be distributed to holders of Offered Certificates on the Distribution Date following that Prepayment Period. To the extent that, as a result of a full or partial prepayment, a borrower is not required to pay a full month's interest on the amount prepaid, a shortfall (a "Prepayment Interest Shortfall") in the amount available to make distributions of interest on the Certificates could result. A Prepayment Interest Shortfall will result from a prepayment in full only if that prepayment is received on or after the [16th] day of a calendar month. If a prepayment in full is received on or prior to the [15th] day of a calendar month, there will be an excess of interest over one month's interest for that Mortgage Loan ("Prepayment Interest Excess") available for distribution to Certificateholders on the related Distribution Date. The Servicer is obligated to fund Prepayment Interest Shortfalls that exceed Prepayment Interest Excess, but only in an amount up to the total of the Servicing Fees for the applicable Distribution Date. See "The Pooling and Servicing Agreement -- Prepayment Interest Shortfalls" in this prospectus supplement. Any of these payments by the Servicer is referred to in this prospectus supplement as "Compensating Interest." Any Prepayment Interest Shortfalls not funded by the Servicer ("Net Prepayment Interest Shortfalls") will reduce the Interest Remittance Amount available for distribution on the related Distribution Date. [DETERMINATION OF INDEX On the second Business Day preceding the beginning of each Accrual Period (each date, an "Index Determination Date"), the Trustee will determine the Index for that Accrual Period. On each Index Determination Date, the Index for the next succeeding Accrual Period will be established by the Trustee as follows: [To be provided as applicable.]] DISTRIBUTIONS OF PRINCIPAL Distributions of principal on the Class [ ] Certificates will be made primarily from [to be provided as applicable.] o The "Principal Distribution Amount" for [each Mortgage Pool for] any Distribution Date will be equal to the sum of [to be provided as applicable]. o The "Principal Remittance Amount" for [each Mortgage Pool for] any Distribution Date will be equal to the sum of [to be provided as applicable.] o The "Due Period" for any Distribution Date is the one-month period beginning on [the second day of the calendar month immediately preceding the month in which that Distribution Date occurs and ending on the first day of the month in which that Distribution Date occurs.] o The "Prepayment Period" for each Distribution Date is the one-month period beginning on the Cut-off Date, in the case of [the first Distribution Date, and on the day immediately following the close of the immediately preceding Prepayment Period, in the case of each subsequent Distribution Date, and ending on the [ ]th day (or if that day is not a Business Day, the immediately preceding Business Day) of the month in which that Distribution Date occurs]. On each Distribution Date, the Principal Distribution Amount will be distributed in the following order of priority: [To be provided as applicable]. CREDIT ENHANCEMENT Credit enhancement for the Offered Certificates consists of [the Insurance Policy, the subordination of the Subordinate Certificates, the priority of application of Realized Losses (as defined in this prospectus supplement) and overcollateralization], in each case as described in this prospectus supplement. [The Insurance Policy is described under "The Insurance Policy" below.] [SUBORDINATION. The rights of holders of the Class [ ] Certificates to receive distributions with respect to the Mortgage Loans will be subordinated, to the extent described in this prospectus supplement, to the rights of holders of the Senior Certificates, as described under "-- Distributions of Interest" and "-- Distributions of Principal." This subordination is intended to enhance the likelihood of regular receipt by holders of Senior Certificates of the full amount of interest and principal distributable on the Senior Certificates, and to afford holders of Senior Certificates limited protection against Realized Losses incurred on the Mortgage Loans. No amounts will be distributed to the holder of the Class [ ] Certificate until all amounts due to the holders of the Class [ ] Certificates have been distributed. The limited protection afforded to holders of Class [ ] Certificates by means of the subordination of Subordinate Certificates having a lower priority of distribution will be accomplished by the preferential right of holders of Offered Certificates to receive, prior to any distribution in respect of interest or principal, respectively, being made on any Distribution Date in respect of Certificates having a lower priority of distribution, the amounts of interest due them and principal available for distribution, respectively, on that Distribution Date.] [ALLOCATION OF LOSSES. If a Mortgage Loan becomes a Liquidated Mortgage Loan during any Prepayment Period, the related Net Liquidation Proceeds, to the extent allocable to principal, may be less than the outstanding principal balance of the Mortgage Loan. The amount of that insufficiency is a "Realized Loss." Realized Losses on Mortgage Loans will have the effect of reducing amounts distributable in respect of, first, the Class [ ] Certificate (both through the application of Monthly Excess Interest to fund the deficiency and through a reduction in the Overcollateralization Amount for the related Distribution Date), and second, the Class [ ] Certificates, before reducing amounts distributable in respect of the Senior Certificates. o A "Liquidated Mortgage Loan" is, in general, a defaulted Mortgage Loan as to which the Servicer has determined that all amounts that it expects to recover in respect of that Mortgage Loan have been recovered (exclusive of any possibility of a deficiency judgment). To the extent that Realized Losses occur, those Realized Losses will reduce the Total Loan Balance, and thus may reduce the Overcollateralization Amount. As described in this prospectus supplement, the Overcollateralization Amount is created, increased and maintained by application of Monthly Excess Cashflow to make distributions of principal on the Offered Certificates. If on any Distribution Date after giving effect to all Realized Losses incurred during the related Due Period and distributions of principal on that Distribution Date, the total Certificate Principal Amount of the Certificates exceeds the Total Loan Balance for that Distribution Date (this excess, an "Applied Loss Amount"), the Class Principal Amount of the Class [ ] Certificates will be reduced by that amount, until the Class Principal Amount of the Class [ ] Certificates has been reduced to zero. The Class Principal Amounts of the Senior Certificates will not be reduced by allocation of Applied Loss Amounts. Holders of Class [ ] Certificates will not receive any distributions in respect of Applied Loss Amounts, except to the extent of available Monthly Excess Cashflow as described below.] [OVERCOLLATERALIZATION. The weighted average Net Mortgage Rate of the Mortgage Loans is generally expected to be higher than the weighted average of the interest rates of the Certificates, thus generating excess interest collections. To the extent described in this prospectus supplement, Monthly Excess Interest will be applied on any Distribution Date in reduction of the Certificate Principal Amounts of the Offered Certificates. This application of interest collections as distributions of principal will cause the total Certificate Principal Amount of the Certificates to amortize more rapidly than the Total Loan Balance, creating, increasing and maintaining overcollateralization. However, Realized Losses will reduce overcollateralization, and could result in an Overcollateralization Deficiency. For each Distribution Date, the Monthly Excess Interest and any Excess Principal will be the "Monthly Excess Cashflow," which will be in the following order of priority: [To be provided as applicable.]] [THE RESERVE FUND The Reserve Fund will be an asset of the Trust Fund but not of the REMIC. The holder of the Residual Certificate will be the owner of the Reserve Fund, and amounts on deposit in the Reserve Fund will be invested at the direction of the holder of the Residual Certificate as provided in the Pooling and Servicing Agreement. The Reserve Fund will consist of [to be provided as applicable]. Withdrawals will be made from the Reserve Fund for the benefit of the Offered Certificates as described under "-- Overcollateralization" above. The only asset of the Reserve Fund on the Closing Date will be [to be provided as applicable.] If on any Distribution Date the sum of the amount on deposit in the Reserve Fund and the Overcollateralization Amount exceeds the Targeted Overcollateralization Amount, the excess will be released to the Residual Certificateholder, provided that the amount remaining in the Reserve Fund equals or exceeds the reserve fund requirement specified in the Pooling and Servicing Agreement.] FINAL SCHEDULED DISTRIBUTION DATE It is expected that scheduled distributions on the Mortgage Loans, assuming no defaults or losses that are not covered by the limited credit support described in this prospectus supplement, will be sufficient to make timely distributions of interest on the Offered Certificates and to reduce the Class Principal Amount of each Class of the Senior Certificates to zero not later than [ ] and of the Class [ ] Certificates not later than [ ]. As to each Class, the actual final Distribution Date may be earlier or later, and could be substantially earlier, than the applicable Final Scheduled Distribution Date. REPORTS TO CERTIFICATEHOLDERS On each Distribution Date the Trustee will make available to each Certificateholder a statement containing the following information: o the amount of principal distributed on that date to holders of each Class of Offered Certificates; o the amount of interest distributed on that date to holders of each Class of Offered Certificates; o the Interest Rate applicable to each Class of Offered Certificates; o the Class Principal Amount of each Class of Offered Certificates after distributions on that date; o the amount of the Servicing Fees and Trustee Fee paid with respect to that date; o the Total Loan Balance as of the related Distribution Date; o the amount of any Realized Losses on the Mortgage Loans during the immediately preceding calendar month and total Realized Losses since the Cut-off Date; o the number and aggregate Principal Balance of Mortgage Loans (1) remaining outstanding, (2) delinquent by one, two, three or four or more monthly payments, (3) in foreclosure, and (4) with respect to REO Property; o any amount distributed to the holder of the Residual Certificate; and o other information to the extent provided in the Pooling and Servicing Agreement. OPTIONAL PURCHASE OF MORTGAGE LOANS; TERMINATION OF THE TRUST FUND On any Distribution Date after the date on which the Total Loan Balance is less than [ ]% of the Cut-off Date Balance, the holder of the [ ] will (subject to the terms of the Pooling and Servicing Agreement) have the option to purchase the Mortgage Loans, any REO Property and any other related property for a price equal to the sum of (1) 100% of the total outstanding principal balance of the Mortgage Loans plus accrued interest on the Mortgage Loans at the applicable Mortgage Rate, (2) the fair market value of all other property being purchased, (3) any unpaid Servicing Fees and other amounts payable to the Servicer and the Trustee and (4) [ ]; provided, that the purchase price will not be less than the total Certificate Principal Amount of the Offered Certificates, plus accrued interest on the Offered Certificates. If the holder of the [ ] does not exercise that option, the [ ] will then have the same purchase option. If either purchase option is exercised, the Trust Fund will be terminated (this event, an "Optional Termination"). If the [ ] does not exercise its option as described above when it is first entitled to do so, [to be provided as applicable]. THE TRUSTEE [ ], a [ ] banking corporation, will be the Trustee under the Pooling and Servicing Agreement (the "Trustee"). The Trustee will be paid a monthly fee (the "Trustee Fee") calculated as a fixed percentage equal to [ ]% annually (the "Trustee Fee Rate") on the Total Loan Balance. As additional compensation, the Trustee will be entitled to [to be provided as applicable]. The Trustee's "Corporate Trust Office" for purposes of presentment and surrender of the Offered Certificates for the final distribution on the Offered Certificates and for all other purposes is located at [ ], or any address as the Trustee may designate from time to time by notice to the Certificateholders, the Depositor and the Servicer. [THE INSURANCE POLICY The following information has been supplied by [ ] (the "Insurer") for inclusion in this Prospectus Supplement. Accordingly, the Depositor, the Servicer and the Underwriter do not make any representation as to the accuracy and completeness of this information. The Insurer does not accept any responsibility for the accuracy or completeness of this Prospectus Supplement or any information or disclosure contained in this prospectus supplement, or omitted from this prospectus supplement, other than with respect to the accuracy of the information regarding the Certificate Guaranty Insurance Policy (the "Insurance Policy") and the Insurer set forth below under this heading "The Insurance Policy." Additionally, the Insurer makes no representation regarding the Certificates or the advisability of investing in the Certificates. THE INSURER [To be provided as applicable.] INSURER FINANCIAL INFORMATION [To be provided as applicable.] WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION ABOUT THE INSURER [To be provided as applicable.] FINANCIAL STRENGTH RATINGS OF THE INSURER [To be provided as applicable.] THE INSURANCE POLICY [To be provided as applicable.]] DESCRIPTION OF THE MORTGAGE POOL GENERAL The Mortgage Pool will consist of approximately [ ] [description of Mortgage Loans] Mortgage Loans with original terms to maturity from the first due date of the scheduled monthly payment (a "Monthly Payment") of not more than [30] years, having a total Principal Balance as of the Cut-off Date (after giving effect to Monthly Payments due on that date) of approximately $[ ] (the "Cut-off Date Balance"). The Mortgage Loans were originated or acquired by the originators described in this prospectus supplement generally in accordance with the underwriting guidelines described in this prospectus supplement. Wherever reference is made in this prospectus supplement to a percentage of some or all of the Mortgage Loans, the percentage is determined (unless otherwise specified) on the basis of the total Principal Balance of the related Mortgage Loans as of the Cut-off Date. All of the Mortgage Loans are secured by mortgages or deeds of trust or other similar security instruments creating [to be provided as applicable.] The Mortgage Loans to be included in the Mortgage Pool will be acquired by the Depositor from [ ] ("[ ]"), which acquired the Mortgage Loans from [ ]. See "[Originator/Servicer]" and "The Pooling and Servicing Agreement -- Assignment of Mortgage Loans" in this prospectus supplement. Pursuant to its terms, each Mortgage Loan, other than a loan secured by a condominium unit, is required to be covered by a standard hazard insurance policy in an amount generally equal to the lower of the unpaid principal amount of the Mortgage Loan or the replacement value of the improvements on the Mortgaged Property. Generally, a condominium association is responsible for maintaining hazard insurance covering the entire building. See "Description of Mortgage and Other Insurance Hazard -- Insurance on the Loans -- Standard Hazard Insurance Policies" in the Prospectus. [Approximately [ ]% of the Mortgage Loans have Loan-to-Value Ratios in excess of 80%. None of those Mortgage Loans or any other Mortgage Loans are covered by primary mortgage insurance policies. The "Loan-to-Value Ratio" of a Mortgage Loan at any time is the ratio of the principal balance of the Mortgage Loan at the date of determination to (a) in the case of a purchase, the lesser of the sale price of the Mortgaged Property and its appraised value at the time of sale, or (b) in the case of a refinance or modification, the appraised value of the Mortgaged Property at the time of refinance or modification.] [Approximately [ ]% of the Mortgage Loans are fully amortizing. Approximately [ ]% of the Mortgage Loans will have original terms to maturity that are shorter than their amortization schedules, leaving final payments ("Balloon Payments") due on their maturity dates that are significantly larger than other monthly payments (these loans, "Balloon Loans"). The Balloon Loans are generally expected to have original terms to maturity of [15] years. The ability of the borrower to repay a Balloon Loan at maturity frequently will depend on the borrower's ability to refinance the loan. Any loss on a Balloon Loan as a result of the borrower's inability to refinance the loan will be borne by Certificateholders, to the extent not covered by the applicable credit enhancement. Neither the Servicer nor the Trustee will make any Advances with respect to delinquent Balloon Payments.] ADJUSTABLE RATE MORTGAGE LOANS [Describe adjustment of adjustable rate Mortgage Loans, as applicable.] [THE INDEX The Index applicable to the determination of the Mortgage Rates for the Adjustable Rate Mortgage Loans will be [described as applicable].] THE MORTGAGE LOANS The Mortgage Loans are expected to have the following approximate total characteristics as of the Cut-off Date. Prior to the issuance of the Certificates, the Mortgage Loans may be removed from the Trust Fund as a result of incomplete documentation or otherwise, if the Depositor deems removal necessary or appropriate. In addition, a limited number of other mortgage loans may be included in the Trust Fund prior to the issuance of the Offered Certificates. Number of Mortgage Loans................................... Initial Pool Balance....................................... $ Mortgage Rates: % Weighted Average...................................... Range................................................. % to % Weighted Average Remaining Term to Maturity (in months).... The Principal Balances of the Mortgage Loans range from approximately $[ ] to approximately $[ ]. The Mortgage Loans have an average Principal Balance of approximately $[ ]. The weighted average Loan-to-Value Ratio at origination of the Mortgage Loans is approximately [ ]%. No more than approximately [ ]% of the Mortgage Loans are secured by Mortgaged Properties located in any one zip code area. The following tables set forth as of the Cut-off Date the number, total Principal Balance and percentage of the Mortgage Loans having the stated characteristics shown in the tables in each range. (The sum of the amounts of the percentages in the following tables may not equal the totals due to rounding.) CUT-OFF DATE PRINCIPAL BALANCES PERCENTAGE OF MORTGAGE LOANS RANGE OF NUMBER OF TOTAL BY TOTAL PRINCIPAL BALANCES ($) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ---------------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% The average Cut-off Date Principal Balance is approximately $ . LOAN-TO-VALUE RATIOS PERCENTAGE OF MORTGAGE LOANS RANGE OF ORIGINAL NUMBER OF TOTAL BY TOTAL LOAN-TO-VALUE RATIOS (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ---------------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% The weighted average original Loan-to-Value Ratio is approximately %. MORTGAGE RATES PERCENTAGE OF MORTGAGE LOANS RANGE OF NUMBER OF TOTAL BY TOTAL MORTGAGE RATES (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% - ------------ * Reflects current Mortgage Rates of Adjustable Rate Mortgage Loans. The weighted average Mortgage Rate is approximately % per annum. LOAN TYPES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL LOAN TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - --------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% ORIGINAL TERMS TO MATURITY PERCENTAGE OF MORTGAGE LOANS RANGE OF NUMBER OF TOTAL BY TOTAL MATURITIES (months) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% The weighted average original term to maturity is approximately months. REMAINING TERMS TO MATURITY PERCENTAGE OF MORTGAGE LOANS REMAINING TERM TO NUMBER OF TOTAL BY TOTAL MATURITY (months) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% The weighted average remaining term to maturity of the fully amortizing Mortgage Loans is approximately months. GEOGRAPHIC DISTRIBUTION PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL STATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ----- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% PROPERTY TYPES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL PROPERTY TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% LOAN PURPOSES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL LOAN PURPOSE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------ -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% OCCUPANCY STATUS PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL OCCUPANCY STATUS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ---------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% DOCUMENTATION TYPES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL DOCUMENTATION TYPES MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% CREDIT GRADES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL CREDIT GRADE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% PREPAYMENT PENALTIES PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL PREPAYMENT PENALTIES MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% MAXIMUM RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL MAXIMUM RATES MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% The weighted average Maximum Rate of the Adjustable Rate Mortgage Loans is approximately % per annum. MINIMUM RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS RANGE OF NUMBER OF TOTAL BY TOTAL MINIMUM RATES (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% The weighted average Minimum Rate of the Adjustable Rate Mortgage Loans is approximately % per annum. GROSS MARGINS OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS RANGE OF NUMBER OF TOTAL BY TOTAL GROSS MARGINS (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% The weighted average Gross Margin of the Adjustable Rate Mortgage Loans is approximately % per annum. NEXT ADJUSTMENT DATE OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL NEXT ADJUSTMENT DATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% INITIAL FIXED TERM/SUBSEQUENT ADJUSTABLE RATE TERM OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF INITIAL FIXED MORTGAGE LOANS TERM/SUBSEQUENT NUMBER OF TOTAL BY TOTAL ADJUSTABLE RATE TERM MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL PERIODIC CAP (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - ---------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% INITIAL CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS PERCENTAGE OF MORTGAGE LOANS NUMBER OF TOTAL BY TOTAL INITIAL CAP (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE - --------------- -------------- ----------------- ----------------- $ % Total....... ----- -------------- ----- $ 100.00% [SUBSEQUENT MORTGAGE LOANS The obligation of the Trust Fund to purchase additional Mortgage Loans (the "Subsequent Mortgage Loans") on [any] date, as specified in the Pooling and Servicing Agreement (each, a "Subsequent Transfer Date") will be subject to the Subsequent Mortgage Loans meeting the following criteria: [to be provided as applicable]. These criteria will be based on the characteristics of the Subsequent Mortgage Loans on the related Subsequent Transfer Date. The characteristics of Subsequent Mortgage Loans may vary significantly from time to time subject to the requirements described above, and may bear no particular relationship to the characteristics of the initial Mortgage Loans at any time. It is expected that a substantial portion of the Subsequent Mortgage Loans will be [to be provided as applicable.]] ADDITIONAL INFORMATION The description in this Prospectus Supplement of the Mortgage Pool and the Mortgaged Properties is based upon the Mortgage Pool as constituted at the close of business on the Cut-off Date, as adjusted for Monthly Payments due on or before that date. A Current Report on 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. In the event that Mortgage Loans are removed from or added to the Mortgage Pool as set forth in this prospectus supplement under "Description of the Mortgage Pool," the removal or addition, to the extent material, will be noted in the Current Report on Form 8-K. [ORIGINATOR/SERVICER The information in this section has been provided by [servicer]. None of the Depositor, [ ], the Trustee, the Insurer, the Underwriter or any of their respective affiliates has made or will make any representation as to the accuracy or completeness of this information. GENERAL [Description of the Originator/Servicer.] LENDING ACTIVITIES AND LOAN SALES [ ] originates real estate loans through its network of offices and loan origination centers. [ ] also participates in secondary market activities by originating and selling mortgage loans while continuing to service the majority of the loans sold. In other cases [ ]'s whole loan sale agreements provide for the transfer of servicing rights. [ ]'s primary lending activity is funding loans to enable borrowers to purchase or refinance residential real property, which loans are secured by first or second liens on the related real property. [ ]'s single-family real estate loans are predominantly "conventional" mortgage loans, meaning that they are not insured by the Federal Housing Administration or partially guaranteed by the U.S. Department of Veterans Affairs. The following table summarizes [ ]'s one- to four-family residential mortgage loan origination and sales activity for the periods shown below. Sales activity may include sales of mortgage loans purchased by [ ] from other loan originators. YEAR ENDED DECEMBER 31 THREE MONTHS ENDED MARCH 31, ---------------------- ---------------------------- ----- ----- ----- ----- ----- ----- ----- (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) ---------------------------------- ---------------------- Originated and $ $ $ $ $ $ $ purchased..... Sales......... $ $ $ $ $ $ $ - ------------------------------------------------------------------------------- LOAN SERVICING The Servicer services all of the mortgage loans it originates that are retained in its portfolio and continues to service at least a majority of the loans that have been sold to investors. Servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent borrowers, and supervising foreclosure in the event of unremedied defaults. The Servicer's servicing activities are audited periodically by applicable regulatory authorities. Some financial records of the Servicer relating to its loan servicing activities are reviewed annually as part of the audit of the Servicer's financial statements conducted by its independent accountants. UNDERWRITING GUIDELINES The Mortgage Loans were originated generally in accordance with guidelines (the "Underwriting Guidelines") established by [ ]. The Underwriting Guidelines are primarily intended to evaluate the value and adequacy of the mortgaged property as collateral and are also intended to consider the borrower's credit standing and repayment ability. On a case-by-case basis and only with the approval of two or more senior lending officers, [ ] may determine that, based upon compensating factors, a prospective borrower not strictly qualifying under the underwriting risk category guidelines described below warrants an underwriting exception. Compensating factors may include, but are not limited to, low loan-to-value ratio, low debt-to-income ratio, good credit history, stable employment and time in residence at the applicant's current address. It is expected that a substantial number of the Mortgage Loans will have been originated under underwriting exceptions. [Describe originator's underwriting guidelines.] SERVICING PRACTICES AND EXPERIENCE In general, when a borrower fails to make a required payment on a residential mortgage loan, [ ] attempts to cause the deficiency to be cured by corresponding with the borrower. In most cases deficiencies are cured promptly. Pursuant to [ ]'s customary procedures for residential mortgage loans serviced by it for its own account, [ ] generally mails a notice of intent to foreclose to the borrower after the loan has become 31 days past due (two payments due but not received) and, within one month thereafter, if the loan remains delinquent, typically institutes appropriate legal action to foreclose on the property securing the loan. If foreclosed, the property is sold at public or private sale and may be purchased by [ ]. In California, real estate lenders are generally unable as a practical matter to obtain a deficiency judgment against the borrower on a loan secured by single-family real estate. The following table sets forth the delinquency and loss experience at the dates indicated for residential (one- to four-family and multifamily) first lien mortgage loans serviced by the Servicer that were originated or purchased by the Servicer: [To be provided as applicable.] There can be no assurance that the delinquency and loss experience of the Mortgage Loans will correspond to the loss experience of the Servicer's mortgage portfolio set forth in the table above. The statistics shown above represent the delinquency and loss experience for the Servicer's total servicing portfolio only for the periods presented, whereas the total delinquency and loss experience on the Mortgage Loans will depend on the results over the life of the Trust Fund. The Servicer's portfolio includes mortgage loans with payment and other characteristics that are not representative of the payment and other characteristics of the Mortgage Loans. A substantial number of the Mortgage Loans may also have been originated based on Underwriting Guidelines that are less stringent than those generally applicable to the servicing portfolio reflected in the table. If the residential real estate market experiences an overall decline in property values, the actual rates of delinquencies, foreclosures and losses could be higher than those previously experienced by the Servicer. In addition, adverse economic conditions (which may or may not affect real property values) may affect the timely payment by borrowers of scheduled payments of principal and interest on the Mortgage Loans and, accordingly, the actual rates of delinquencies, foreclosures and losses on to the Mortgage Loans.] THE POOLING AND SERVICING AGREEMENT GENERAL The Certificates will be issued pursuant to a Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") dated as of [ ] among the Depositor, the Servicer and the Trustee. Reference is made to the Prospectus for important information in addition to that set forth in this Prospectus Supplement regarding the terms and conditions of the Pooling and Servicing Agreement and the Offered Certificates. Offered Certificates in certificated form will be transferable and exchangeable at the Corporate Trust Office of the Trustee. [ ] serve as Certificate Registrar and Paying Agent. ASSIGNMENT OF MORTGAGE LOANS The Depositor will assign the Mortgage Loans to the Trustee, together with all principal and interest received with respect to the Mortgage Loans on and after the Cut-off Date, other than Monthly Payments due on or before that date. Each Mortgage Loan will be identified in a schedule appearing as an exhibit to the Pooling and Servicing Agreement that will specify with respect to each Mortgage Loan, among other things, the original principal balance and the Principal Balance as of the close of business on the Cut-off Date, the Mortgage Rate, the Monthly Payment and the maturity date. The Trustee will, concurrently with the assignment to it of the property constituting the Trust Fund, authenticate and deliver the Certificates. [As to each Mortgage Loan, the following documents are generally required to be delivered to the Trustee or its custodian (the "Custodian") in accordance with the Pooling and Servicing Agreement: o the related original Mortgage Note endorsed without recourse to the Trustee or in blank; o the original Mortgage with evidence of recording indicated on the original Mortgage (or, if the original recorded Mortgage has not yet been returned by the recording office, a copy certified to be a true and complete copy of the Mortgage sent for recording), the original security agreement and related documents; o an original assignment of the Mortgage to the Trustee or in blank in recordable form and originals of all intervening assignments, if any, showing a complete chain of title from origination to the Trustee; o the policies of title insurance issued with respect to each Mortgage Loan; and o the originals of any assumption, modification, extension or guaranty agreements. Where necessary to protect the interest of the Trustee in the Mortgage Loans, the assignments of each Mortgage to the Trustee are required to be submitted for recording promptly after the Closing Date.] Under the terms of the agreements (the "Mortgage Loan Purchase Agreements") pursuant to which [ ] purchased the Mortgage Loans from [the Originator] and the Depositor purchased the Mortgage Loans from [ ], the Custodian [has conducted an initial review of the mortgage loan documents and has notified] the Depositor, [ ] and [the Originator] as to each mortgage loan document that either has not yet been delivered to the Depositor as required or appears to be not properly executed, not in conformity with the description of the Mortgage Loan on the Mortgage Loan schedule or otherwise defective. If any Mortgage Loan document is not delivered or any material defect in a document is not cured within the time period specified in the Mortgage Loan Purchase Agreements, [the Originator] will be required to repurchase the affected Mortgage Loan for a price equal to the unpaid principal balance of the Mortgage Loan plus accrued interest on the Mortgage Loan (the "Repurchase Price") or, in some circumstances, to substitute another mortgage loan. [[The Originator] has made to [ ] and the Depositor under the Mortgage Loan Purchase Agreements representations and warranties that include representations and warranties similar to those summarized in the Prospectus under the heading "Description of the Agreements -- Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements -- Representations and Warranties; Repurchases." [ ]'s and the Depositor's rights under these representations and warranties will be assigned to the Trustee for the benefit of Certificateholders. In the event of a breach of any of these representations or warranties that materially and adversely affects the value of any Mortgage Loan or the interests of Certificateholders or the Insurer, [the Originator] will be obligated, within 60 days following its discovery of a breach or receipt of notice of a breach to cure the breach or purchase the affected Mortgage Loan from the Trust Fund for the Repurchase Price or, in some circumstances, to substitute another mortgage loan.] To the extent that any Mortgage Loan as to which a representation or warranty has been breached is not repurchased by [the Originator] and a Realized Loss occurs on the Mortgage Loan, holders of Offered Certificates, in particular the Class [ ]Certificates, may incur a loss if the applicable credit enhancement is not sufficient to cover that loss. VOTING RIGHTS Voting rights of Certificateholders under the Pooling and Servicing Agreement will be allocated among the Classes of Certificates and among the Certificates of each Class as provided in the Pooling and Servicing Agreement. GENERAL SERVICING PROVISIONS The Mortgage Loans will be serviced by the Servicer in accordance with the provisions of the Pooling and Servicing Agreement. [The Servicer will be required to use reasonable efforts to collect all amounts due under each Mortgage Loan and to administer the Mortgage Loans in accordance with generally accepted servicing practices. See "[Originator/Servicer] -- Servicing Practices and Experience." The Servicer will be required to deposit all amounts collected and recovered with respect to the Mortgage Loans within three Business Days of receipt of those amounts in a separate account in the name of the Trustee (the "Collection Account"); on the [ ] day of each month, or if that date is not a Business Day, on the immediately following Business Day, the Servicer will be required to transfer the Interest Remittance Amount and the Principal Remittance Amount to a separate account maintained by the Trustee for the benefit of the Certificateholders (the "Certificate Account"). The Servicer will be prohibited under the Pooling and Servicing Agreement from making any material modification to the terms of a Mortgage Loan, including a change in the Mortgage Rate other than as provided in the Mortgage Note, deferral or forgiveness of a Monthly Payment or extension of the maturity date, unless the Mortgage Loan is in default or default is, in the judgment of the Servicer, reasonably foreseeable. The Servicer will also be prohibited from waiving any prepayment premium except in the case of a default or imminent default, and then may waive the prepayment premium only if the waiver would maximize amounts collected under the Mortgage Loan.] PREPAYMENT INTEREST SHORTFALLS When a borrower prepays a Mortgage Loan in full or in part between Monthly Payment dates, the borrower pays interest on the amount prepaid only from the last Monthly Payment date to the date of prepayment, with a resulting reduction in interest payable for the month during which the prepayment is made. [Any Prepayment Interest Shortfall resulting from a prepayment in full or in part is required to be paid by the Servicer, but only to the extent that the shortfall does not exceed the total of the Servicing Fees for the applicable Distribution Date.] ADVANCES [The Servicer will be obligated to make advances ("Advances") with respect to delinquent payments of principal of and interest on the Mortgage Loans (other than Balloon Payments), adjusted to the related Mortgage Rate less the Servicing Fee Rate, to the extent that those Advances, in its judgment, are recoverable from future payments and collections, insurance payments or proceeds of liquidation of a Mortgage Loan. The Trustee will be obligated to make any required Advance if the Servicer fails in its obligation to do so, to the extent provided in the Pooling and Servicing Agreement. The Servicer or the Trustee, as applicable, will be entitled to recover any Advances made by it with respect to a Mortgage Loan out of late payments on the Mortgage Loan or out of related liquidation proceeds and insurance proceeds or, if the Servicer determines that those Advances are not recoverable from those sources, then from collections on other Mortgage Loans. These reimbursements may result in Realized Losses. The purpose of making Advances is to maintain a regular cash flow to Certificateholders, rather than to guarantee or insure against losses. No party will be required to make any Advances with respect to reductions in the amount of the Monthly Payments on Mortgage Loans due to reductions made by a bankruptcy court in the amount of a Monthly Payment owed by a borrower or a reduction of the applicable Mortgage Rate by application of the Relief Act.] SERVICING ADVANCES The Servicer will be required to advance its own funds for particular purposes, including preserving and restoring Mortgaged Properties, payment of delinquent taxes and insurance premiums, managing and disposing of REO Properties, and legal proceedings. Advances for these and similar purposes are referred to as "Servicing Advances." The Servicer will be reimbursed for Servicing Advances made with respect to a Mortgage Loan out of late payments on the Mortgage Loan, to the extent provided in the Pooling and Servicing Agreement, or out of related liquidation proceeds and insurance proceeds, if the Servicer determines that Servicing Advances are not recoverable from those sources, then from collections and other recoveries on other Mortgage Loans. The Pooling and Servicing Agreement will require that the Servicer not make a Servicing Advance that is not expected to be recoverable from proceeds of the related Mortgage Loan unless, in the Servicer's judgment, making that Servicing Advance is in the best interests of the Certificateholders. COLLECTION OF TAXES AND INSURANCE PREMIUMS The Servicer will, to the extent required by the related loan documents, maintain escrow accounts for the collection of hazard insurance premiums as well as real estate taxes and similar items with respect to the Mortgage Loans, and will make Servicing Advances with respect to delinquencies in required escrow payments by the related borrowers. INSURANCE COVERAGE The Servicer is required to obtain and thereafter maintain in effect a bond or similar form of insurance coverage (which may provide blanket coverage) insuring against loss occasioned by the errors and omissions of their respective officers and employees. PURCHASES OF DEFAULTED MORTGAGE LOANS The Servicer may, but will not be obligated to, purchase any Mortgage Loan that becomes three months or more delinquent in payment or as to which the Servicer has started foreclosure proceedings, for a price equal to the unpaid principal balance plus interest accrued and unpaid. EVIDENCE AS TO COMPLIANCE The Pooling and Servicing Agreement will provide that each year a firm of independent accountants will furnish a statement to the Trustee to the effect that the firm has examined the necessary documents and records relating to the servicing of mortgage loans by the Servicer and that, on the basis of that examination, the firm is of the opinion that the servicing has been conducted in accordance with applicable accounting standards, except for those exceptions as the firm believes to be immaterial and those exceptions set forth in the statement. SERVICING COMPENSATION AND PAYMENT OF EXPENSES The Servicer will be paid a monthly fee (the "Servicing Fee") with respect to each Mortgage Loan calculated as [ ]% annually (the "Servicing Fee Rate") on the outstanding principal balance of each Mortgage Loan. The Servicer will also be entitled to receive, to the extent provided in the Pooling and Servicing Agreement, additional compensation, in the form of any interest or other income earned on funds it has deposited in the Collection Account pending remittance to the Trustee, as well as customary fees and charges paid by borrowers (other than prepayment premiums). [The Servicing Fee is subject to reduction as described above under "-- Prepayment Interest Shortfalls."] SUBSERVICING The Servicer will be prohibited from assigning the responsibility for servicing the Mortgage Loans, except as permitted by the Pooling and Servicing Agreement, but it may employ one or more subservicers. If the Servicer chooses to employ subservicers, the Servicer will remain liable for fulfillment of its obligations under the Pooling and Servicing Agreement, and will be considered to have itself received any payment received by a subservicer whether or not the subservicer actually remits that payment. RESIGNATION OR REMOVAL OF THE SERVICER The Servicer will agree in the Pooling and Servicing Agreement not to resign except with the consent of the Trustee, unless the Servicer delivers to the Trustee an opinion of legal counsel to the effect that the Servicer is no longer permitted under applicable law to perform the duties of the Servicer under the Pooling and Servicing Agreement. If the Servicer is in default under the Pooling and Servicing Agreement, or the Trustee or Certificateholders having a majority of Voting Rights may remove the Servicer. [Events of default include: o failure by the Servicer to remit any required payment, including any Advance, to the Trustee for one Business Day after receipt of written notice that the payment has not been made; o failure by the Servicer to make a required Servicing Advance for 60 days after receipt of written notice that the Servicing Advance has not been made; o failure by the Servicer to fulfill any other material requirement under the Pooling and Servicing Agreement within the applicable time period; o failure by the Servicer to be qualified to service mortgage loans for either Fannie Mae or Freddie Mac; o insolvency of the Servicer; and o other events specified in the Pooling and Servicing Agreement.] [If the Servicer is removed, the Trustee will immediately assume the role of Servicer under the Pooling and Servicing Agreement unless another Servicer is appointed pursuant to the Pooling and Servicing Agreement. The Trustee will solicit bids from prospective successor Servicers as provided in the Pooling and Servicing Agreement. If a qualifying bid is not received, the Trustee will continue to service the Mortgage Loans if it is legally qualified to do so until the Trustee appoints a successor Servicer as provided in the Pooling and Servicing Agreement. If the servicing rights are sold, any proceeds of the sale after deduction of expenses will be paid to the predecessor Servicer.] YIELD CONSIDERATIONS GENERAL The yields to maturity (or to early termination) on the Offered Certificates will be affected by the rate of principal payments on the Mortgage Loans (including prepayments, which may include amounts received by virtue of purchase, condemnation, insurance or foreclosure) on the Mortgage Loans. Yields will also be affected by the extent to which Mortgage Loans bearing higher Mortgage Rates prepay at a more rapid rate than Mortgage Loans with lower Mortgage Rates, the amount and timing of borrower delinquencies and defaults resulting in Realized Losses, the application of Monthly Excess Cashflow, the purchase price paid for the Offered Certificates and other factors. Principal prepayments may be influenced by a variety of economic, geographic, demographic, social, tax, legal and other factors. In general, if prevailing interest rates fall below the interest rates on the Mortgage Loans, the Mortgage Loans are likely to be subject to higher prepayments than if prevailing rates remain at or above the interest rates on the Mortgage Loans. Conversely, if prevailing interest rates rise above the interest rates on the Mortgage Loans, the rate of prepayment would be expected to decrease. Other factors affecting prepayment of the Mortgage Loans include factors such as changes in borrowers' housing needs, job transfers, unemployment, borrowers' net equity in the mortgaged properties, changes in the value of the mortgaged properties, mortgage market interest rates and servicing decisions. The Mortgage Loans generally have due-on-sale clauses. [Approximately [ ]% of the Mortgage Loans are subject to prepayment premiums during intervals ranging from one to five years following origination, as described under "Description of the Mortgage Pools" in this prospectus supplement. The prepayment premiums may have the effect of reducing the amount or the likelihood of prepayment of these Mortgage Loans during intervals when a prepayment premium would be payable.] The rate of principal payments on the Mortgage Loans will also be affected by the amortization schedules of the Mortgage Loans, the rate and timing of prepayments by the borrowers, liquidations of defaulted Mortgage Loans, repurchases of Mortgage Loans due to breaches of representations and warranties or defective documentation and exercise by the holder of the Residual Certificate of its right to purchase all of the Mortgage Loans as described in this prospectus supplement. The timing of changes in the rate of prepayments, liquidations and purchases of the related Mortgage Loans may significantly affect the yield to an investor, even if the average rate of principal payments experienced over time is consistent with an investor's expectation. Because the rate and timing of principal payments on the Mortgage Loans will depend on future events and on a variety of factors (as described more fully in this prospectus supplement and in the Prospectus under "Yield Considerations") no assurance can be given as to the rate or the timing of principal payments on the Offered Certificates. In general, the earlier a prepayment of principal of the related Mortgage Loans, the greater the effect on an investor's yield. The effect on an investor's yield of principal payments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the Certificates may not be offset by a subsequent like decrease (or increase) in the rate of principal payments. From time to time, areas of the United States may be affected by flooding, severe storms, landslides, wildfires or other natural disasters. [The Originator] will represent and warrant that as of the Closing Date each Mortgaged Property was free of material damage. In the event of an uncured breach of this representation and warranty that materially and adversely affects the value of a Mortgage Loan, [the Originator] will be required to repurchase the affected Mortgage Loan or, under some circumstances, substitute another mortgage loan. If any damage caused by earthquakes, flooding, storms, wildfires, or landslides (or other cause) occurs after the Closing Date, [the Originator] will not have any repurchase obligation. In addition, the standard hazard policies covering the Mortgaged Properties generally do not cover damage caused by earthquakes, flooding and landslides, and earthquake, flood or landslide insurance may not have been obtained with respect to the affected Mortgaged Properties. As a consequence, Realized Losses could result. To the extent that the insurance proceeds received with respect to any damaged Mortgage Properties are not applied to the restoration of those Mortgage Properties, the proceeds will be used to prepay the related Mortgage Loans in whole or in part. Any repurchases or repayments of the Mortgage Loans may reduce the weighted average lives of the Offered Certificates and will reduce the yields on the Offered Certificates to the extent they are purchased at a premium. Prepayments, liquidations and purchases of the Mortgage Loans will result in distributions to holders of the related Certificates of principal amounts that would otherwise be distributed over the remaining terms of those Mortgage Loans. The rate of defaults on the Mortgage Loans will also affect the rate and timing of principal payments on the Mortgage Loans. In general, defaults on mortgage loans are expected to occur with greater frequency in their early years. The yields on the Class [ ] Certificates may be adversely affected by Net Prepayment Interest Shortfalls on the Mortgage Loans. The yields to investors in the Offered Certificates may be affected by the purchase of defaulted Mortgage Loans by the Servicer and by the exercise by [ ] of its right to purchase the Mortgage Loans, as described under "Description of the Certificates -- Optional Purchase of Mortgage Loans; Termination of the Trust Fund" in this prospectus supplement, or the failure of [ ] to exercise that right. If the purchaser of an Offered Certificate offered at a discount from its initial principal amount calculates its anticipated yield to maturity (or early termination) based on an assumed rate of payment of principal that is faster than that actually experienced on the related Mortgage Loans, the actual yield may be lower than that so calculated. Conversely, if the purchaser of a Certificate offered at a premium calculates its anticipated yield based on an assumed rate of payment of principal that is slower than that actually experienced on the related Mortgage Loans, the actual yield may be lower than that so calculated. [The Interest Rates applicable to the Offered Certificates will be affected by the level of [ ] from time to time, and by the Mortgage Rates of the Mortgage Loans from time to time as described under "Risk Factors -- Mortgage Loan Interest Rates May Limit Interest Rates on the Certificates."] OVERCOLLATERALIZATION [Describe as applicable.] [SUBORDINATION OF THE CLASS [ ] CERTIFICATES As described in this prospectus supplement, the Senior Certificates are senior to the Class [ ]Certificates, and the Senior Certificates will have a preferential right to receive amounts in respect of interest to the extent of the Interest Remittance Amount and amounts in respect of principal to the extent of the Principal Distribution Amount for the related Mortgage Pool. As a result, the yield on the Class [ ]Certificates will be particularly sensitive to delinquencies and losses on the Mortgage Loans.] WEIGHTED AVERAGE LIFE Weighted average life refers to the average amount of time that will elapse from the date of issuance of a security to the date of distribution to the investor of each dollar distributed in net reduction of principal of the security (assuming no losses). The weighted average lives of the Offered Certificates will be influenced by, among other things, the rate at which principal of the related Mortgage Loans is paid, which may be in the form of scheduled amortization, prepayments or liquidations. Prepayments on mortgage loans are commonly measured relative to a [ ] prepayment standard or model. The model used in this Prospectus Supplement represents [ ]. [ ] does not purport to be either a historical description of the prepayment experience of any pool of mortgage loans or a prediction of the anticipated rate of prepayment of any mortgage loans, including the Mortgage Loans to be included in the Trust Fund. [The following tables were prepared based on the following assumptions, among other things (collectively, the "Modeling Assumptions"): o the initial Class Principal Amounts are as set forth on the cover of this Prospectus Supplement, and the Interest Rates are as described in this prospectus supplement; o each Monthly Payment of principal and interest is timely received on the first day of each month starting in [ ]; o principal prepayments are received in full on the first day of each month starting in [ ] and there are no Net Prepayment Interest Shortfalls; o prepayments are received on the Mortgage Loans at the [ ] rate; o there are no defaults or delinquencies on the Mortgage Loans; o Distribution Dates occur on the [ ]th day of each month, starting in [ ]; o there are no re-purchases or substitutions of the Mortgage Loans; o [the Mortgage Rates of the Adjustable Rate Mortgage Loans adjust semi-annually;] o [the value of the Index is [ ]%;] o [the value of LIBOR is %;] o the Certificates are issued on [ ]; o the sum of the Trustee Fee Rate and the Servicing Fee Rate is [ ]%; and o the Mortgage Loans were aggregated into assumed mortgage loans having the following characteristics:] ASSUMED MORTGAGE LOAN CHARACTERISTICS GROSS ORIGINAL REMAINING COUPON TERM TO TERM TO PRINCIPAL RATE(%) MATURITY MATURITY LOAN AGE GROSS LOAN TYPE BALANCE($) (MONTHS) (MONTHS) (MONTHS) (MONTHS) MARGIN(%) - --------- ---------- -------- -------- --------- -------- ----- The actual characteristics of the Mortgage Loans may, and the performance of the Mortgage Loans will, differ from the assumptions used in constructing the tables set forth below, which are hypothetical in nature and are provided only to give a general sense of how the principal cash flows might behave under varying prepayment scenarios. For example, it is not expected that the Mortgage Loans will prepay at a constant rate until maturity, that all of the Mortgage Loans will prepay at the same rate or that there will be no defaults or delinquencies on the Mortgage Loans. Moreover, the diverse remaining terms to maturity of the Mortgage Loans could produce slower or faster principal distributions than indicated, even if the weighted average remaining term to maturity of the Mortgage Loans is as assumed. Any difference between those assumptions and the actual characteristics and performance of the Mortgage Loans or actual prepayment or loss experience will cause the percentages of initial Class Principal Amounts outstanding over time and the weighted average lives of the Offered Certificates to differ (which difference could be material) from the corresponding [assumed prepayment rates]. Subject to the foregoing discussion and assumptions, the following tables indicate the weighted average lives of the Offered Certificates and set forth the percentages of the initial Class Principal Amounts of the Offered Certificates that would be outstanding after each of the Distribution Dates shown at the indicated [assumed prepayment rates]. The weighted average life of an Offered Certificate is determined by (1) multiplying the net reduction, if any, of the applicable Class Principal Amount by the number of years from the date of issuance of the Offered Certificate to the related Distribution Date, (2) adding the results and (3) dividing the sum by the total of the net reductions of Class Principal Amount described in (1) above. PERCENTAGE OF INITIAL CLASS PRINCIPAL AMOUNT OF THE CLASS [ ] CERTIFICATES OUTSTANDING UNDER THE FOLLOWING [PREPAYMENT RATES] DISTRIBUTION DATE [ ] [ ] [ ] [ ] [ ] [ ] - ----------------- --- --- --- --- --- --- Initial Percentage........ 100 100 100 100 100 100 Weighted Average Life in Years With Optional Termination................... Without Optional Termination................ - --------- * Based upon the assumption that [ ] exercises its option to repurchase the Mortgage Loans as described under "Description of the Certificates -- Optional Purchase of Mortgage Loans; Termination of the Trust Fund" in this prospectus supplement, except in the case of the "Weighted Average Life With Optional Termination." MATERIAL FEDERAL INCOME TAX CONSIDERATIONS For federal income tax purposes, one or more elections will be made to treat certain assets of the Trust Fund as a REMIC. Upon the issuance of the Offered Certificates, Stroock & Stroock & Lavan LLP ("Tax Counsel") will deliver its opinion to the effect that, assuming compliance with the Pooling and Servicing Agreement, for federal income tax purposes, each segregate pool of assets for which a REMIC election is made will qualify as a REMIC within the meaning of Section 860D of the Internal Revenue Code of 1986, as amended (the "Code"), and that the Offered Certificates will represent the ownership of regular interests in the REMIC. The Class [R] Certificates will represent the residual interest in each REMIC. All prospectus purchasers of Offered Certificates should see "Material Federal Income Tax Considerations--REMICs" in the accompanying prospectus. Because the Offered Certificates are considered REMIC regular interests, they generally are taxable as debt obligations under the Code, and interest paid or accrued on such certificates, including original issue discount with respect to any such certificate issued with original issue discount, will be taxable to holders of Offered Certificates in accordance with the accrual method of accounting. See "Material Federal Income Tax Considerations--REMICs--Taxation of Owners of Regular Securities" in the accompanying prospectus. The prepayment assumption that is used in determining the rate of accrual of original issue discount with respect to the Offered Certificates is [100% Prepayment Assumption], as defined below. However, this rate does not represent the rate at which prepayments have actually occurred and no representation is made as to the rate at which prepayments actually will occur in the future. The ["100% Prepayment Assumption] assumes a constant prepayment rate of ...] [Alternatively, grantor trust, partnership or FASIT status to be described as applicable.] STATE AND LOCAL INCOME TAX CONSIDERATIONS In addition to the federal income tax matters described under "Material Federal Income Tax Considerations" above, prospective investors should consider the state and local income tax consequences of the acquisition, ownership and disposition of the Offered Certificates. State and local income tax law may differ substantially from the corresponding federal tax law, and this discussion does not purport to describe any aspect of the income tax laws of any state or locality. Therefore, prospective investors should consult their own tax advisors with respect to the various tax consequences of investments in the Offered Certificates. LEGAL INVESTMENT CONSIDERATIONS [The [Senior Certificates] will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"), for so long as they are rated in one of the two highest rating categories by one or more nationally recognized rating agencies, and, as such, are legal investments for some entities to the extent provided in SMMEA.] These investments, however, will be subject to general regulatory considerations governing investment practices under state and federal laws. Institutions whose investment activities are subject to review by regulatory authorities may be or may become subject to restrictions, which may be retroactively imposed by the regulatory authorities, on the investment by those institutions in some mortgage related securities. In addition, several states have adopted or may adopt regulations that prohibit some state-chartered institutions from purchasing or holding similar types of securities. Accordingly, investors should consult their own legal advisors to determine whether and to what extent the Offered Certificates may be purchased by them. See "Legal Investment Considerations" in the Prospectus. USE OF PROCEEDS The net proceeds from the sale of the Certificates will be applied by the Depositor, or an affiliate of the Depositor, toward the purchase of the Mortgage Loans. The Mortgage Loans will be acquired by the Depositor from [ ] in a privately negotiated transaction. UNDERWRITING [Subject to the terms and conditions provided in the underwriting agreement and in a terms agreement (collectively, the "Underwriting Agreement") among the Depositor, [ ] and the Underwriter, the Depositor and [ ] have agreed to sell to the Underwriter, and the Underwriter has agreed to purchase from the Depositor, all of the Offered Certificates. The distribution of the Offered Certificates by the Underwriter will be effected in each case from time to time in one or more negotiated transactions, or otherwise, at varying prices to be determined, in each case, at the time of sale. The Underwriter may effect these transactions by selling the Certificates to or through dealers, and dealers may receive from the Underwriter, for whom they act as agent, compensation in the form of underwriting discounts, concessions or commissions. The Underwriter and any dealers that participate with the Underwriter in the distribution of the Certificates may be deemed to be an underwriter, and any discounts, commissions or concessions received by them, and any profit on the resale of the Certificates purchased by them, may be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended (the "Act"). The Underwriting Agreement provides that the Depositor will indemnify the Underwriter against some civil liabilities, including liabilities under the Act.] Expenses incurred by the Depositor in connection with this offering are expected to be approximately $[ ]. The Underwriter is an affiliate of the Depositor and [ ]. ERISA CONSIDERATIONS Employee benefit plans and other retirement arrangements that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code ("Plans") and any person utilizing the assets of a Plan, may be eligible to purchase the Offered Certificates, pursuant to a prohibited transaction exemption which has been issued to the Underwriter by the Department of Labor as described in "ERISA Considerations" in the Prospectus, except that if the rating of the Offered Certificates is lower than "BBB-" at the time of its acquisition by a Plan in the secondary market it may only be acquired by an insurance company general account if the exemptive relief granted by the Department of Labor for transactions involving insurance company general accounts in Prohibited Transaction Exemption 95-60, is available with respect to the investment. The Pooling and Servicing Agreement will include restrictions on the transfer of the Offered Certificates. A fiduciary of a Plan must determine that the purchase of a [Note] is consistent with its fiduciary duties under ERISA and does not result in a nonexempt prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Code. See "ERISA Considerations" in the accompanying Prospectus. EXPERTS [Describe as applicable.] LEGAL MATTERS Certain legal matters with respect to the Certificates will be passed upon for the Depositor and for the Underwriter by Stroock & Stroock & Lavan LLP. RATINGS It is a condition to the issuance of the [ ] Certificates that they be rated "[ ]" by [Rating Agency] and "[ ]" by [Rating Agency] (the "Rating Agencies "). It is a condition to the issuance of the Class [ ] Certificates that they be rated "[ ]" by [Rating Agency] and "[ ]" by [Rating Agency]. A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. A securities rating addresses the likelihood of the receipt by holders of Offered Certificates of distributions in the amount of scheduled payments on the Mortgage Loans. The rating takes into consideration the characteristics of the Mortgage Loans and the structural, legal and tax aspects associated with the Offered Certificates. The ratings on the Offered Certificates do not represent any assessment of the likelihood or rate of principal prepayments. The ratings do not address the possibility that holders of Offered Certificates might suffer a lower than anticipated yield due to prepayments. The security ratings assigned to 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 either Rating Agency. The Depositor has not requested a rating of the Offered Certificates by any rating agency other than the Rating Agencies; there can be no assurance, however, as to whether any other rating agency will rate the Offered Certificates or, if it does, what rating would be assigned by the other rating agency. The rating assigned by the other rating agency to the Offered Certificates could be lower than the ratings assigned by the Rating Agencies. GLOSSARY OF DEFINED TERMS [To be provided.] ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in some limited circumstances, the globally offered ACE Securities Corp. [ ] Pass-Through Certificates (the "Global Securities") will be available only in book-entry form. Investors in the Global Securities may hold the Global Securities through any of DTC, Clearstream Luxembourg or Euroclear. The Global Securities will be tradable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through Clearstream Luxembourg and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations and prior mortgage loan asset backed certificates issues. Secondary cross-market trading between Clearstream Luxembourg or Euroclear and DTC Participants holding Certificates will be effected on a delivery-against-payment basis through the respective Depositaries of Clearstream Luxembourg and Euroclear and as DTC Participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless those holders meet specific requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Clearstream Luxembourg and Euroclear will hold positions on behalf of their participants through their respective Depositaries, which in turn will hold the positions in accounts as DTC Participants. Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to prior mortgage loan asset backed certificates issues. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream Luxembourg or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds. SECONDARY MARKET TRADING Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC Participants will be settled using the procedures applicable to prior mortgage loan asset backed certificates issues in same-day funds. TRADING BETWEEN CLEARSTREAM LUXEMBOURG AND/OR EUROCLEAR PARTICIPANTS. Secondary market trading between Clearstream Luxembourg Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. TRADING BETWEEN DTC SELLER AND CLEARSTREAM LUXEMBOURG OR EUROCLEAR PURCHASER. When Global Securities are to be transferred from the account of a DTC Participant to the account of a Clearstream Luxembourg Participant or a Euroclear Participant, the purchaser will send instructions to Clearstream Luxembourg or Euroclear through a Clearstream Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. Clearstream Luxembourg or Euroclear will instruct the respective Depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last interest payment date to and excluding the settlement date, on the basis of either the actual number of days in the accrual period and a year assumed to consist of 360 days or a 360-day year of twelve 30-day months as applicable to the related class of Global Securities. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made by the respective Depositary of the DTC Participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream Luxembourg Participant's or Euroclear Participant's account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Global Securities will accrue from, the value date (that would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Clearstream Luxembourg or Euroclear cash debt will be valued instead as of the actual settlement date. Clearstream Luxembourg Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream Luxembourg or Euroclear. Under this approach, they may take on credit exposure to Clearstream Luxembourg or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream Luxembourg or Euroclear has extended a line of credit to them, Clearstream Luxembourg Participants or Euroclear Participants can elect not to preposition funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Clearstream Luxembourg Participants or Euroclear Participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of overdraft charges, although this result will depend on each Clearstream Luxembourg Participant's or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global Securities to the respective European Depositary for the benefit of Clearstream Luxembourg Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. TRADING BETWEEN CLEARSTREAM LUXEMBOURG OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time zone differences in their favor, Clearstream Luxembourg Participants and Euroclear Participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Clearstream Luxembourg or Euroclear through a Clearstream Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. In these cases Clearstream Luxembourg or Euroclear will instruct the respective Depositary, as appropriate, to deliver the Global Securities to the DTC Participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last interest payment to and excluding the settlement date on the basis of either the actual number of days in the accrual period and a year assumed to consist of 360 days or a 360-day year of twelve 30-day months as applicable to the related class of Global Securities. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected in the account of the Clearstream Luxembourg Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Clearstream Luxembourg Participant's or Euroclear Participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Clearstream Luxembourg Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft incurred over that one day period. If settlement is not completed on the intended value date (that is, the trade fails), receipt of the cash proceeds in the Clearstream Luxembourg Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream Luxembourg or Euroclear and that purchase Global Securities from DTC Participants for delivery to Clearstream Luxembourg Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: o borrowing through Clearstream Luxembourg or Euroclear for one day (until the purchase side of the day trade is reflected in their Clearstream Luxembourg or Euroclear accounts) in accordance with the clearing system's customary procedures; o borrowing the Global Securities in the U.S. from a DTC Participant no later than one day prior to the settlement, which would give the Global Securities sufficient time to be reflected in their Clearstream Luxembourg or Euroclear account in order to settle the sale side of the trade; or o staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Clearstream Luxembourg or Euroclear Participant. CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A beneficial owner of Global securities holding securities through Clearstream, Luxembourg or Euroclear, or through DTC will be subject to the 30% U.S. withholding tax that generally applies to payments of interest, including original issue discount, on registered debt issued by U.S. Persons or to 31% backup withholding, unless (1) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between the beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (2) the beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial owners of securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. If the information shown on Form W-8 BEN changes, a new Form W-8 must be filed within 30 days of the change. EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM W-8BEN). Non-U.S. Persons that are beneficial owners of securities residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate, depending on the treaty terms, by filing Form W-8BEN (including Part II thereof). If the treaty provides only for a reduced rate, the beneficial owner may still be entitled to complete exemption from withholding under item (1) above. U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a Global Security files by submitting the appropriate form to the person through whom it holds, the clearing agency, in the case of persons holding directly on the books of the clearing agency. Form W-8BEN and Form W-8ECI are generally effective for three calendar years from the close of the calendar year in which it is collected. The term "U.S. Person" means (1) a citizen or resident of the United States, (2) a corporation or partnership (or other entity properly classified as a corporation or partnership for U.S. Federal income tax purposes) organized in or under the laws of the United States or any state or the District of Columbia, (3) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or (4) 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. Notwithstanding the preceding sentence, to the extent provided in regulations, trusts in existence on August 20, 1996 and treated as United States persons prior to that date that elect to continue to be so treated also will be considered U.S. Persons. Treasury regulations provide certain presumptions regarding the entity classification and foreign or U.S. status of a holder that a payor generally must apply in the absence of appropriate documentation from the holder, and provide detailed documentation and procedures for holders claiming withholding tax exemptions through intermediaries. Prospective investors are urged to consult their tax advisors regarding the effect of these regulations on their ability to claim and the means for claiming exemptions from or reduced rates of U.S. withholding taxes. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global securities. Investors are advised to consult their own tax advisers for specific tax advice concerning their holding and disposing of the Global securities. $[ ] (APPROXIMATE) ACE SECURITIES CORP. [ ] TRUST [ ] PASS-THROUGH CERTIFICATES, [ ,] ORIGINATOR AND SERVICER ------------------------- PROSPECTUS SUPPLEMENT ------------------------- DEUTSCHE BANC ALEX. BROWN The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, [ ] PROSPECTUS ASSET BACKED CERTIFICATES ASSET BACKED NOTES (ISSUABLE IN SERIES) ACE SECURITIES CORP., DEPOSITOR THE TRUST FUNDS: Each trust fund will be established to hold assets transferred to it by Ace Securities Corp. The assets in each trust fund will generally consist of one or more of the following: o mortgage loans secured by one- to four-family residential properties; o mortgage pass-through notes or certificates issued or guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac; or o previously issued asset-backed or mortgage-backed notes or certificates backed by mortgage loans secured by residential properties or participations in those types of loans. The assets in your trust fund are specified in the prospectus supplement for that particular trust fund, while the types of assets that may be included in a trust fund, whether or not in your trust fund, are described in greater detail in this prospectus. THE SECURITIES: Ace Securities Corp. will sell the notes or certificates, as applicable, pursuant to a prospectus supplement. The notes or certificates, as applicable, will be grouped into one or more series, each having is own distinct designation. Each series will be issued in one or more classes and will evidence beneficial ownership of, or be secured by, the assets in the trust fund that the series relates to. A prospectus supplement for a series will specify all of the terms of the series and of each of the classes in the series. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is [ ]. TABLE OF CONTENTS PAGE DESCRIPTION OF THE TRUST FUNDS................................................3 USE OF PROCEEDS..............................................................16 YIELD CONSIDERATIONS.........................................................16 THE DEPOSITOR................................................................22 DESCRIPTION OF THE SECURITIES................................................23 DESCRIPTION OF THE AGREEMENTS................................................40 DESCRIPTION OF CREDIT SUPPORT................................................64 CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS......................................68 MATERIAL FEDERAL INCOME TAX CONSIDERATIONS...................................83 STATE AND OTHER TAX CONSIDERATIONS..........................................132 ERISA CONSIDERATIONS........................................................132 LEGAL INVESTMENT............................................................138 METHODS OF DISTRIBUTION.....................................................140 ADDITIONAL INFORMATION......................................................141 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................142 LEGAL MATTERS...............................................................143 FINANCIAL INFORMATION.......................................................143 RATING......................................................................143 INDEX OF DEFINED TERMS......................................................143 DESCRIPTION OF THE TRUST FUNDS ASSETS The primary assets of each trust fund (the "Assets") will include some or all of the following types of assets: o single family mortgage loans, which may include Home Equity Loans and Land Sale Contracts (each as defined in this prospectus); o any combination of "fully modified pass-through" mortgage-backed certificates guaranteed by the Government National Mortgage Association ("Ginnie Mae"), guaranteed mortgage pass-through securities issued by Fannie Mae ("Fannie Mae") and mortgage participation certificates issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac") (collectively, "Agency Securities"); o previously issued asset-backed certificates, collateralized mortgage obligations or participation certificates (each, and collectively, "Mortgage Securities") evidencing interests in, or collateralized by, mortgage loans or Agency Securities; or o a combination of mortgage loans, Agency Securities and/or Mortgage Securities. The mortgage loans will not be guaranteed or insured by ACE Securities Corp. or any of its affiliates. The mortgage loans will be guaranteed or insured by a governmental agency or instrumentality or other person only if and to the extent expressly provided in the prospectus supplement. The depositor will select each Asset to include in a trust fund from among those it has purchased, either directly or indirectly, from a prior holder (an "Asset Seller"), which may be an affiliate of the depositor and which prior holder may or may not be the originator of that mortgage loan. The Assets included in the trust fund for your series may be subject to various types of payment provisions: o "Level Payment Assets," which may provide for the payment of interest, and full repayment of principal, in level monthly payments with a fixed rate of interest computed on their declining principal balances; o "Adjustable Rate Assets," which may provide for periodic adjustments to their rates of interest to equal the sum of a fixed margin and an index; o "Buy Down Assets," which are Assets for which funds have been provided by someone other than the related borrowers to reduce the borrowers' monthly payments during the early period after origination of those Assets; o "Increasing Payment Assets," as described below; o "Interest Reduction Assets," which provide for the one-time reduction of the interest rate payable on these Assets; o "GEM Assets," which provide for (1) monthly payments during the first year after origination that are at least sufficient to pay interest due on these Assets, and (2) an increase in those monthly payments in later years at a predetermined rate resulting in full repayment over a shorter term than the initial amortization terms of those Assets; o "GPM Assets," which allow for payments during a portion of their terms which are or may be less than the amount of interest due on their unpaid principal balances, and this unpaid interest will be added to the principal balances of those Assets and will be paid, together with interest on the unpaid interest, in later years; o "Step-up Rate Assets" which provide for interest rates that increase over time; o "Balloon Payment Assets;" o "Convertible Assets" which are Adjustable Rate Assets subject to provisions pursuant to which, subject to limitations, the related borrowers may exercise an option to convert the adjustable interest rate to a fixed interest rate; and o "Bi-weekly Assets," which provide for payments to be made by borrowers on a bi-weekly basis. An "Increasing Payment Asset" is an Asset that provides for monthly payments that are fixed for an initial period to be specified in the prospectus supplement and which increase thereafter (at a predetermined rate expressed as a percentage of the monthly payment during the preceding payment period, subject to any caps on the amount of any single monthly payment increase) for a period to be specified in the prospectus supplement from the date of origination, after which the monthly payment is fixed at a level-payment amount so as to fully amortize the Asset over its remaining term to maturity. The scheduled monthly payment for an Increasing Payment Asset is the total amount required to be paid each month in accordance with its terms and equals the sum of (1) the borrower's monthly payments referred to in the preceding sentence and (2) payments made by the respective servicers pursuant to buy-down or subsidy agreements. The borrower's initial monthly payments for each Increasing Payment Asset are set at the level-payment amount that would apply to an otherwise identical Level Payment Asset having an interest rate some number of percentage points below the Asset Rate of that Increasing Payment Asset. The borrower's monthly payments on each Increasing Payment Asset, together with any payments made on the Increasing Payment Asset by the related servicers pursuant to buy-down or subsidy agreements, will in all cases be sufficient to allow payment of accrued interest on the Increasing Payment Asset at the related interest rate, without negative amortization. A borrower's monthly payments on an Increasing Payment Asset may, however, not be sufficient to result in any reduction of the principal balance of that Asset until after the period when those payments may be increased. The Notes or Certificates, as applicable (as defined in this prospectus) will be entitled to payment only from the assets of the related trust fund and will not be entitled to payments from the assets of any other trust fund established by the depositor. The assets of a trust fund may consist of certificates representing beneficial ownership interests in, or indebtedness of, another trust fund that contains the Assets, if specified in the prospectus supplement. MORTGAGE LOANS GENERAL Each mortgage loan will generally be secured by a lien on a one- to four-family residential property (including a manufactured home) or a security interest in shares issued by a cooperative housing corporation (a "Single Family Property"). Single Family Properties are sometimes referred to in this prospectus as "Mortgaged Properties." The mortgage loans will be secured by first and/or junior mortgages or deeds of trust or other similar security instruments creating a first or junior lien on Mortgaged Property. The Mortgaged Properties may also include: o Apartments owned by cooperative housing corporations ("Cooperatives"); and o Leasehold interests in properties, the title to which is held by third party lessors. The term of these leaseholds will exceed the term of the related mortgage note by at least five years or some other time period specified in the prospectus supplement. The mortgage loans may include: o Closed-end and/or revolving home equity loans or balances of these home equity loans ("Home Equity Loans"); and o Mortgage loans evidenced by contracts ("Land Sale Contracts") for the sale of properties pursuant to which the borrower promises to pay the amount due on the mortgage loans to the holder of the Land Sale Contract with fee title to the related property held by that holder until the borrower has made all of the payments required pursuant to that Land Sale Contract, at which time fee title is conveyed to the borrower. The originator of each mortgage loan will have been a person other than the depositor. The prospectus supplement will indicate if any originator is an affiliate of the depositor. The mortgage loans will be evidenced by mortgage notes secured by mortgages, deeds of trust or other security instruments (the "Mortgages") creating a lien on the Mortgaged Properties. The Mortgaged Properties will be located in any one of the fifty states, the District of Columbia, Guam, Puerto Rico or any other territory of the United States. If provided in the prospectus supplement, the mortgage loans may include loans insured by the Federal Housing Administration (the "FHA") or partially guaranteed by the Veteran's Administration (the "VA"). See "--FHA Loans and VA Loans" below. LOAN-TO-VALUE RATIO The "Loan-to-Value Ratio" of a mortgage loan at any particular 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 for Refinance Loans, is generally the lesser of (a) the appraised value determined in an appraisal obtained by the originator at origination of that loan and (b) the sales price for that property. "Refinance Loans" are loans made to refinance existing loans. Unless otherwise specified in the prospectus supplement, the Value of the Mortgaged Property securing a Refinance Loan is the appraised value of the Mortgaged Property 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 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. MORTGAGE LOAN INFORMATION IN THE PROSPECTUS SUPPLEMENTS Your prospectus supplement will contain information, as of the dates specified in that prospectus supplement and to the extent then applicable and specifically known to the depositor, with respect to the mortgage loans, including: o the total outstanding principal balance and the largest, smallest and average outstanding principal balance of the mortgage loans as of, unless otherwise specified in that prospectus supplement, the close of business on the first day of the month of formation of the related trust fund (the "Cut-off Date"); o the type of property securing the mortgage loans; o the weighted average (by principal balance) of the original and remaining terms to maturity of the mortgage loans; o the range of maturity dates of the mortgage loans; o the range of the Loan-to-Value Ratios at origination of the mortgage loans; o the mortgage rates or range of mortgage rates and the weighted average mortgage rate borne by the mortgage loans; o the state or states in which most of the Mortgaged Properties are located; o information regarding the prepayment provisions, if any, of the mortgage loans; o for mortgage loans with adjustable mortgage rates ("ARM Loans"), the index, the frequency of the adjustment dates, the range of margins added to the index, and the maximum mortgage rate or monthly payment variation at the time of any adjustment of and over the life of the ARM Loan; o information regarding the payment characteristics of the mortgage loans, including balloon payment and other amortization provisions; o the number of mortgage loans that are delinquent and the number of days or ranges of the number of days those mortgage loans are delinquent; and o the material underwriting standards used for the mortgage loans. If specific information respecting the mortgage loans is unknown to the depositor at the time the Notes or Certificates, as applicable, 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 that will be available to purchasers of the related Notes or Certificates, as applicable, at or before the initial issuance of that Security and will be filed as part of a Current Report on Form 8-K with the Securities and Exchange Commission (the "Commission") within fifteen days after that initial issuance. The characteristics of the mortgage loans included in a trust fund will not vary by more than five percent (by total principal balance as of the Cut-off Date) from the characteristics of the mortgage loans that are described in the prospectus supplement. The prospectus supplement will specify whether the mortgage loans include Home Equity Loans, which may be secured by Mortgages that are junior to other liens on the related Mortgaged Property. In addition, the prospectus supplement will specify whether the mortgage loans contain some mortgage loans evidenced by Land Sale Contracts. PAYMENT PROVISIONS OF THE MORTGAGE LOANS All of the mortgage loans will provide for payments of principal, interest or both, on due dates that occur monthly, quarterly or semi-annually or at some other interval as is specified in the prospectus supplement or for payments in another manner described in the prospectus supplement. Each mortgage loan may provide for no accrual of interest or for accrual of interest on the mortgage loan at a mortgage rate that is fixed over its term or that adjusts from time to time, or that may be converted from an adjustable to a fixed mortgage rate or a different adjustable mortgage rate, or from a fixed to an adjustable mortgage rate, from time to time pursuant to an election or as otherwise specified in the related mortgage note, in each case as described in the 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 rate or to reflect the occurrence of particular events or that adjust on the basis of other methodologies, and may provide for negative amortization or accelerated amortization, in each case as described in the 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 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 prospectus supplement. If the holders of any class or classes of Offered Notes or Offered Certificates, as applicable, are entitled to all or a portion of any Prepayment Premiums collected from the mortgage loans, the prospectus supplement will specify the method or methods by which any of these amounts will be allocated. See "--Assets" above. REVOLVING CREDIT LINE LOANS As more fully described in the prospectus supplement, the mortgage loans may consist, in whole or in part, of revolving Home Equity Loans or balances of these Home Equity Loans ("Revolving Credit Line Loans"). Interest on each Revolving Credit Line Loan, excluding introductory rates offered from time to time during promotional periods, may be computed and payable monthly on the average daily outstanding principal balance of that loan. From time to time before the expiration of the related draw period specified in a Revolving Credit Line Loan, principal amounts on that Revolving Credit Line Loan may be drawn down (up to a maximum amount as set forth in the prospectus supplement) or repaid. If specified in the prospectus supplement, new draws by borrowers under the Revolving Credit Line Loans will automatically become part of the trust fund described in the prospectus supplement. As a result, the total balance of the Revolving Credit Line Loans will fluctuate from day to day as new draws by borrowers are added to the trust fund and principal payments are applied to those balances and those amounts will usually differ each day, as more specifically described in the prospectus supplement. Under some circumstances, under a Revolving Credit Line Loan, a borrower may, during the related draw period, choose an interest only payment option, during which the borrower is obligated to pay only the amount of interest that accrues on the loan during the billing cycle, and may also elect to pay all or a portion of the principal. An interest only payment option may terminate at the end of the related draw period, after which the borrower must begin paying at least a minimum monthly portion of the average outstanding principal balance of the loan. AGENCY SECURITIES The Agency Securities will consist of any combination of Ginnie Mae certificates, Fannie Mae certificates and Freddie Mac certificates, which may include Stripped Agency Securities, as described below. GINNIE MAE Ginnie Mae is a wholly-owned corporate instrumentality of the United States within the Department of Housing and Urban Development. Section 306(g) of Title III of the Housing Act authorizes Ginnie Mae to guarantee the timely payment of the principal of and interest on certificates that are based on and backed by a pool of FHA loans, VA loans or by pools of other eligible residential loans. Section 306(g) of the Housing Act provides that "the full faith and credit of the United States is pledged to the payment of all amounts that may be required to be paid under any guaranty under this subsection." To meet its obligations under that guaranty, Ginnie Mae is authorized, under Section 306(d) of the National Housing Act of 1934 (the "Housing Act"), to borrow from the United States Treasury with no limitations as to amount, to perform its obligations under its guarantee. GINNIE MAE CERTIFICATES Each Ginnie Mae certificate will be a "fully modified pass-through" mortgage-backed certificate issued and serviced by an issuer approved by Ginnie Mae or Fannie Mae as a seller-servicer of FHA loans or VA loans, except as described below regarding Stripped Agency Securities (as defined below). The loans underlying Ginnie Mae certificates may consist of FHA loans, VA loans and other loans eligible for inclusion in loan pools underlying Ginnie Mae certificates. Ginnie Mae certificates may be issued under either or both of the Ginnie Mae I program and the Ginnie Mae II program, as described in the prospectus supplement. If the trust fund includes Ginnie Mae certificates, your prospectus supplement will include any material additional information regarding the Ginnie Mae guaranty program, the characteristics of the pool underlying those Ginnie Mae certificates, the servicing of the related pool, the payment of principal and interest on Ginnie Mae certificates and other relevant matters regarding the Ginnie Mae certificates. Except as otherwise specified in the prospectus supplement or as described below with respect to Stripped Agency Securities, each Ginnie Mae certificate will provide for the payment, by or on behalf of the issuer, to the registered holder of that Ginnie Mae certificate of monthly payments of principal and interest equal to the holder's proportionate interest in the total amount of the monthly principal and interest payments on each related FHA loan or VA loan, minus servicing and guaranty fees totaling the excess of the interest on that FHA loan or VA loan over the Ginnie Mae certificates' interest rate. In addition, each payment to a holder of a Ginnie Mae certificate will include proportionate pass-through payments to that holder of any prepayments of principal of the FHA loans or VA loans underlying the Ginnie Mae certificate and the holder's proportionate interest in the remaining principal balance in the event of a foreclosure or other disposition of any related FHA loan or VA loan. The Ginnie Mae certificates do not constitute a liability of, or evidence any recourse against, the issuer of the Ginnie Mae certificates, the depositor or any affiliates of the depositor, and the only recourse of a registered holder (for example, the trustee) is to enforce the guaranty of Ginnie Mae. Ginnie Mae will have approved the issuance of each of the Ginnie Mae certificates included in a trust fund in accordance with a guaranty agreement or contract between Ginnie Mae and the issuer of the Ginnie Mae certificates. Pursuant to that agreement, that issuer, in its capacity as servicer, is required to perform customary functions of a servicer of FHA loans and VA loans, including collecting payments from borrowers and remitting those collections to the registered holder, maintaining escrow and impoundment accounts of borrowers for payments of taxes, insurance and other items required to be paid by the borrower, maintaining primary hazard insurance, and advancing from its own funds to make timely payments of all amounts due on the Ginnie Mae certificate, even if the payments received by that issuer on the loans backing the Ginnie Mae certificate are less than the amounts due. If the issuer is unable to make payments on a Ginnie Mae certificate as they become due, it must promptly notify Ginnie Mae and request Ginnie Mae to make that payment. Upon that notification and request, Ginnie Mae will make those payments directly to the registered holder of the Ginnie Mae certificate. In the event no payment is made by the issuer and the issuer fails to notify and request Ginnie Mae to make that payment, the registered holder of the Ginnie Mae certificate has recourse against only Ginnie Mae to obtain that payment. The trustee or its nominee, as registered holder of the Ginnie Mae certificates included in a trust fund, is entitled to proceed directly against Ginnie Mae under the terms of the guaranty agreement or contract relating to the Ginnie Mae certificates for any amounts that are unpaid when due under each Ginnie Mae certificate. The Ginnie Mae certificates included in a trust fund may have other characteristics and terms, different from those described above so long as the Ginnie Mae certificates and underlying residential loans meet the criteria of the rating agency or agencies. The Ginnie Mae certificates and underlying residential loans will be described in the prospectus supplement. FANNIE MAE Fannie Mae is a federally chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, as amended (the "Charter Act"). Fannie Mae was originally established in 1938 as a United States government agency to provide supplemental liquidity to the mortgage market and was transformed into a stockholder-owned and privately managed corporation by legislation enacted in 1968. Fannie Mae provides funds to the mortgage market by purchasing mortgage loans from lenders. Fannie Mae acquires funds to purchase loans from many capital market investors, thus expanding the total amount of funds available for housing. Operating nationwide, Fannie Mae helps to redistribute mortgage funds from capital-surplus to capital-short areas. In addition, Fannie Mae issues mortgage-backed securities primarily in exchange for pools of mortgage loans from lenders. Fannie Mae receives fees for its guaranty of timely payment of principal and interest on its mortgage-backed securities. FANNIE MAE CERTIFICATES Fannie Mae certificates are Guaranteed Mortgage Pass-Through Certificates typically issued pursuant to a prospectus that is periodically revised by Fannie Mae. Fannie Mae certificates represent fractional undivided interests in a pool of mortgage loans formed by Fannie Mae. Each mortgage loan must meet the applicable standards of the Fannie Mae purchase program. Mortgage loans comprising a pool are either provided by Fannie Mae from its own portfolio or purchased pursuant to the criteria of the Fannie Mae purchase program. Mortgage loans underlying Fannie Mae certificates included in a trust fund will consist of conventional mortgage loans, FHA loans or VA loans. If the trust fund includes Fannie Mae certificates, your prospectus supplement will include any material additional information regarding the Fannie Mae program, the characteristics of the pool underlying the Fannie Mae certificates, the servicing of the related pool, payment of principal and interest on the Fannie Mae certificates and other relevant matters about the Fannie Mae certificates. Except as described below with respect to Stripped Agency Securities, Fannie Mae guarantees to each registered holder of a Fannie Mae certificate that it will distribute amounts representing that holder's proportionate share of scheduled principal and interest at the applicable interest rate provided for by that Fannie Mae certificate on the underlying mortgage loans, whether or not received, and that holder's proportionate share of the full principal amount of any prepayment or foreclosed or other finally liquidated mortgage loan, whether or not the related principal amount is actually recovered. The obligations of Fannie Mae under its guarantees are obligations solely of Fannie Mae and are not backed by, nor entitled to, the full faith and credit of the United States. If Fannie Mae were unable to satisfy those obligations, distributions to the holders of Fannie Mae certificates would consist solely of payments and other recoveries on the underlying loans and, accordingly, monthly distributions to the holders of Fannie Mae certificates would be affected by delinquent payments and defaults on those loans. Fannie Mae certificates evidencing interests in pools of mortgage loans formed on or after May 1, 1985 (other than Fannie Mae certificates backed by pools containing graduated payment mortgage loans or multifamily loans) are available in book-entry form only. For a Fannie Mae certificate issued in book-entry form, distributions on the Fannie Mae certificate will be made by wire, and for a fully registered Fannie Mae certificate, distributions will be made by check. The Fannie Mae certificates included in a trust fund may have other characteristics and terms, different from those described above, as long as the Fannie Mae certificates and underlying mortgage loans meet the criteria of the rating agency or agencies rating the Certificates. The Fannie Mae certificates and underlying mortgage loans will be described in the prospectus supplement. FREDDIE MAC Freddie Mac is a corporate instrumentality of the United States created pursuant to Title III of the Emergency Home Finance Act of 1970, as amended (the "Freddie Mac Act"). Freddie Mac was established primarily for the purpose of increasing the availability of mortgage credit for the financing of needed housing. It seeks to provide an enhanced degree of liquidity for residential mortgage investments primarily by assisting in the development of secondary markets for conventional mortgages. The principal activity of Freddie Mac currently consists of the purchase of first lien, conventional residential mortgage loans or participation interests in those mortgage loans and the resale of the mortgage loans so purchased in the form of mortgage securities, primarily Freddie Mac certificates. Freddie Mac is confined to purchasing, so far as practicable, mortgage loans and participation interests in mortgage loans which it deems to be of the quality, type and class as to meet generally the purchase standards imposed by private institutional mortgage investors. FREDDIE MAC CERTIFICATES Each Freddie Mac certificate represents an undivided interest in a pool of residential loans that may consist of first lien conventional residential loans, FHA loans or VA loans (the "Freddie Mac Certificate Group"). Each of these mortgage loans must meet the applicable standards set forth in the Freddie Mac Act. A Freddie Mac Certificate Group may include whole loans, participation interests in whole loans and undivided interests in whole loans and/or participations comprising another Freddie Mac Certificate Group. If the trust fund includes Freddie Mac certificates, your prospectus supplement will include any material additional information regarding the Freddie Mac guaranty program, the characteristics of the pool underlying that Freddie Mac certificate, the servicing of the related pool, payment of principal and interest on the Freddie Mac certificate and any other relevant matters about the Freddie Mac certificates. Except as described below with respect to Stripped Agency Securities, Freddie Mac guarantees to each registered holder of a Freddie Mac certificate the timely payment of interest on the underlying mortgage loans to the extent of the applicable interest rate on the registered holder's pro rata share of the unpaid principal balance outstanding on the underlying mortgage loans in the Freddie Mac Certificate Group represented by that Freddie Mac certificate, whether or not received. Freddie Mac also guarantees to each registered holder of a Freddie Mac certificate collection by that holder of all principal on the underlying mortgage loans, without any offset or deduction, to the extent of that holder's pro rata share of the principal, but does not, except if and to the extent specified in the prospectus supplement, guarantee the timely payment of scheduled principal. Pursuant to its guarantees, Freddie Mac also guarantees ultimate collection of scheduled principal payments, prepayments of principal and the remaining principal balance in the event of a foreclosure or other disposition of a mortgage loan. Freddie Mac may remit the amount due on account of its guarantee of collection of principal at any time after default on an underlying mortgage loan, but not later than 30 days following the latest of (1) foreclosure sale; (2) payment of the claim by any mortgage insurer; and (3) the expiration of any right of redemption, but in any event no later than one year after demand has been made upon the borrower for accelerated payment of principal. In taking actions regarding the collection of principal after default on the mortgage loans underlying Freddie Mac certificates, including the timing of demand for acceleration, Freddie Mac reserves the right to exercise its servicing judgment for the mortgage loans in the same manner as for mortgage loans that it has purchased but not sold. The length of time necessary for Freddie Mac to determine that a mortgage loan should be accelerated varies with the particular circumstances of each borrower, and Freddie Mac has not adopted servicing standards that require that the demand be made within any specified period. Freddie Mac certificates are not guaranteed by the United States or by any Federal Home Loan Bank and do not constitute debts or obligations of the United States or any Federal Home Loan Bank. The obligations of Freddie Mac under its guarantee are obligations solely of Freddie Mac and are not backed by, nor entitled to, the full faith and credit of the United States. If Freddie Mac were unable to satisfy those obligations, distributions to holders of Freddie Mac certificates would consist solely of payments and other recoveries on the underlying mortgage loans and, accordingly, monthly distributions to holders of Freddie Mac certificates would be affected by delinquent payments and defaults on those mortgage loans. The Freddie Mac certificates included in a trust fund may have other characteristics and terms, different from those described above, so long as the Freddie Mac certificates and underlying mortgage loans meet the criteria of the rating agency or agencies rating the Securities. The Freddie Mac certificates and underlying mortgage loans will be described in the prospectus supplement. STRIPPED AGENCY SECURITIES The Ginnie Mae certificates, Fannie Mae certificates or Freddie Mac certificates may be issued in the form of certificates ("Stripped Agency Securities") that represent an undivided interest in all or part of either the principal distributions (but not the interest distributions) or the interest distributions (but not the principal distributions), or in some specified portion of the principal or interest distributions (but not all of those distributions), on an underlying pool of mortgage loans or other Ginnie Mae certificates, Fannie Mae certificates or Freddie Mac certificates. Ginnie Mae, Fannie Mae or Freddie Mac, as applicable, will guarantee each Stripped Agency Security to the same extent as that entity guarantees the underlying securities backing the Stripped Agency Securities or to the extent described above for a Stripped Agency Security backed by a pool of mortgage loans, unless otherwise specified in the prospectus supplement. If the trust fund includes Stripped Agency Securities, your prospectus supplement will include any material additional information regarding the characteristics of the assets underlying the Stripped Agency Securities, the payments of principal and interest on the Stripped Agency Securities and other relevant matters about the Stripped Agency Securities. MORTGAGE SECURITIES The Mortgage Securities will represent beneficial interests in loans of the type that would otherwise be eligible to be mortgage loans or Agency Securities, or collateralized obligations secured by mortgage loans or Agency Securities. The Mortgage Securities will have been (1) issued by an entity other than the depositor or its affiliates; (2) acquired in bona fide secondary market transactions from persons other than the issuer of the Mortgage Securities or its affiliates; and (3) (a) offered and distributed to the public pursuant to an effective registration statement or (b) purchased in a transaction not involving any public offering from a person who is not an affiliate of the issuer of those securities at the time of sale (nor an affiliate of the issuer at any time during the preceding three months); provided a period of two years elapsed since the later of the date the securities were acquired from the issuer. Although individual Underlying Loans may be insured or guaranteed by the United States or an agency or instrumentality of the United States, they need not be, and Mortgage Securities themselves will not be so insured or guaranteed. Except as otherwise set forth in the prospectus supplement, Mortgage Securities will generally be similar to Notes or Certificates, as applicable, offered under this prospectus. The prospectus supplement for Notes or Certificates, as applicable, of each series evidencing interests in a trust fund including Mortgage Securities will include a description of the Mortgage Securities and any related credit enhancement, and the related mortgage loans or Agency Securities will be described together with any other mortgage loans or Agency Securities included in the trust fund of that series. As used in this prospectus, the terms "mortgage loans" include the mortgage loans underlying the Mortgage Securities in your trust fund. References in this prospectus to advances to be made and other actions to be taken by the master servicer in connection with the Assets may include any advances made and other actions taken pursuant to the terms of the applicable Mortgage Securities. FHA LOANS AND VA LOANS FHA loans will be insured by the FHA as authorized under the Housing Act, and the United States Housing Act of 1937, as amended. One- to four-family FHA loans will be insured under various FHA programs including the standard FHA 203-b programs to finance the acquisition of one- to four-family housing units and the FHA 245 graduated payment mortgage program. The FHA loans generally require a minimum down payment of approximately 5% of the original principal amount of the FHA loan. No FHA loan may have an interest rate or original principal balance exceeding the applicable FHA limits at the time of origination of that FHA loan. Mortgage loans that are FHA loans are insured by the FHA (as described in the prospectus supplement, up to an amount equal to 90% of the sum of the unpaid principal of the FHA loan, a portion of the unpaid interest and other liquidation costs) pursuant to Title I of the Housing Act. VA loans will be partially guaranteed by the VA under the Servicemen's Readjustment Act of 1944, as amended (the "Servicemen's Readjustment Act"). The Servicemen's Readjustment Act permits a veteran (or in some instances the spouse of a veteran) to obtain a mortgage loan guarantee by the VA covering mortgage financing of the purchase of a one- to four-family dwelling unit at interest rates permitted by the VA. The program has no mortgage loan limits, requires no down payment from the purchasers and permits the guarantee of mortgage loans of up to 30 years' duration. However, no VA loan will have an original principal amount greater than five times the partial VA guarantee for that VA loan. The maximum guarantee that may be issued by the VA under this program will be set forth in the prospectus supplement. PRE-FUNDING ACCOUNTS To the extent provided in a prospectus supplement, a portion of the proceeds of the issuance of Notes or Certificates, as applicable, may be deposited into an account maintained with the trustee (a "Pre-Funding Account"). In that case, the depositor will be obligated to sell at a predetermined price - and the trust fund for the related series of Notes or Certificates, as applicable, will be obligated to purchase - additional Assets (the "Subsequent Assets") from time to time, and as frequently as daily, within the period (not to exceed three months) specified in the prospectus supplement (the "Pre-Funding Period") after the issuance of the Notes or Certificates, as applicable, having a total principal balance approximately equal to the amount on deposit in the Pre-Funding Account (the "Pre-Funded Amount") for that series on the date of its issuance. The Pre-Funded Amount for a series will be specified in the prospectus supplement, and will not in any case exceed 50% of the total initial Security Balance of the related Notes or Certificates, as applicable. Any Subsequent Assets will be required to satisfy specific eligibility criteria more fully set forth in the prospectus supplement, which criteria will be consistent with the eligibility criteria of the Assets initially included in the trust fund, subject to those exceptions that are expressly stated in the prospectus supplement. In addition, specific conditions must be satisfied before the Subsequent Assets are transferred into the trust fund, for example, the delivery to the rating agencies and to the trustee of any required opinions of counsel. See "ERISA Considerations--Pre-Funding Accounts" for additional information regarding Pre-Funding Accounts. Except as set forth in the following sentence, the Pre-Funded Amount will be used only to purchase Subsequent Assets. Any portion of the Pre-Funded Amount remaining in the Pre-Funding Account at the end of the Pre-Funding Period will be used to prepay one or more classes of Notes or Certificates, as applicable, in the amounts and in the manner specified in the prospectus supplement. In addition, if specified in the prospectus supplement, the depositor may be required to deposit cash into an account maintained by the trustee (the "Capitalized Interest Account") for the purpose of assuring the availability of funds to pay interest on the Notes or Certificates, as applicable, during the Pre-Funding Period. Any amount remaining in the Capitalized Interest Account at the end of the Pre-Funding Period will be remitted as specified in the prospectus supplement. Amounts deposited in the Pre-Funding and Capitalized Interest Accounts will be permitted to be invested, pending application, only in eligible investments authorized by each applicable rating agency. ACCOUNTS Each trust fund will include one or more accounts, established and maintained on behalf of the securityholders into which the person or persons designated in the prospectus supplement will, to the extent described in this prospectus and in the prospectus supplement deposit all payments and collections received or advanced with respect to the Assets and other assets in the trust fund. This type of account may be maintained as an interest bearing or a non-interest bearing account, and funds held in that account may be held as cash or invested in some short-term, investment grade obligations, in each case as described in the prospectus supplement. See "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Collection Account and Related Accounts." CREDIT SUPPORT If so provided in the prospectus supplement, partial or full protection against some defaults and losses on the Assets in the related trust fund may be provided to one or more classes of Notes or Certificates, as applicable, in the related series in the form of subordination of one or more other classes of Notes or Certificates, as applicable, in that series or by one or more other types of credit support, for example, a letter of credit, insurance policy, guarantee, reserve fund or another type of credit support, or a combination of these (any of these types of coverage for the Notes or Certificates, as applicable, of any series, is referred to generally as "credit support"). The amount and types of coverage, the identification of the entity providing the coverage (if applicable) and related information for each type of credit support, if any, will be described in the prospectus supplement for a series of Notes or Certificates, as applicable. See "Description of Credit Support." CASH FLOW AGREEMENTS If so provided in the 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 other agreements, for example, interest rate swap agreements, interest rate cap or floor agreements, currency swap agreements or similar agreements provided to reduce the effects of interest rate or currency exchange rate fluctuations on the Assets or on one or more classes of Notes or Certificates, as applicable. (Currency swap agreements might be included in the trust fund if some or all of the Assets were denominated in a non-United States currency.) The principal terms of any related guaranteed investment contract or other agreement (any of these types of agreement, a "Cash Flow Agreement"), including provisions relating to the timing, manner and amount of payments under these documents and provisions relating to the termination of these documents, will be described in the prospectus supplement for the related series. In addition, the prospectus supplement will provide information with respect to the borrower under any Cash Flow Agreement. USE OF PROCEEDS The net proceeds to be received from the sale of the Notes or Certificates, as applicable, will be applied by the depositor to the purchase of Assets, or the repayment of the financing incurred in that purchase, and to pay for some of the expenses incurred in connection with that purchase of Assets and sale of Notes or Certificates, as applicable. The depositor expects to sell the Notes or Certificates, as applicable, from time to time, but the timing and amount of offerings of Notes or Certificates, as applicable, will depend on a number of factors, including the volume of Assets acquired by the depositor, prevailing interest rates, availability of funds and general market conditions. YIELD CONSIDERATIONS GENERAL The yield on any Offered Security will depend on the price paid by the securityholder, the Interest Rate of the Security, the receipt and timing of receipt of distributions on the Security and the weighted average life of the Assets in the related trust fund (which may be affected by prepayments, defaults, liquidations or repurchases). INTEREST RATE Notes or Certificates, as applicable, of any class within a series may have fixed, variable or adjustable Interest Rates, which may or may not be based upon the interest rates borne by the Assets in the related trust fund. The prospectus supplement for any series will specify the Interest Rate for each class of Notes or Certificates, as applicable, or, in the case of a variable or adjustable Interest Rate, the method of determining the Interest Rate; the effect, if any, of the prepayment of any Asset on the Interest Rate of one or more classes of Notes or Certificates, as applicable,; and whether the distributions of interest on the Notes or Certificates, as applicable, of any class will be dependent, in whole or in part, on the performance of any borrower under a Cash Flow Agreement. If specified in the prospectus supplement, the effective yield to maturity to each holder of Notes or Certificates, as applicable, entitled to payments of interest will be below that otherwise produced by the applicable Interest Rate and purchase price of that Security because, while interest may accrue on each Asset during a period (each, an "Accrual Period"), the distribution of that interest will be made on a day that may be several days, weeks or months following the period of accrual. TIMING OF PAYMENT OF INTEREST Each payment of interest on the Notes or Certificates, as applicable, entitled to distributions of interest (or addition to the Security Balance of a class of Accrual Securities) will be made by or on behalf of the trustee each month on the date specified in the related prospectus supplement (each date, a "Distribution Date"), and will include interest accrued during the Accrual Period for that Distribution Date. As indicated above under "--Interest Rate," if the Accrual Period ends on a date other than the day before a Distribution Date for the related series, the yield realized by the holders of those Notes or Certificates, as applicable, may be lower than the yield that would result if the Accrual Period ended on the day before the Distribution Date. PAYMENTS OF PRINCIPAL; PREPAYMENTS The yield to maturity on the Notes or Certificates, as applicable, will be affected by the rate of principal payments on the Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities), including principal prepayments resulting from both voluntary prepayments by the borrowers and involuntary liquidations. The rate at which principal prepayments occur will be affected by a variety of factors, including the terms of the Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities), 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 interest rates on the Assets in a particular trust fund (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities), those assets are likely to be the subject of higher principal prepayments than if prevailing rates remain at or above the rates borne by those assets. However, you should note that some Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities) may consist of loans with different interest rates. The rate of principal payment on Mortgage Securities will also be affected by the allocation of principal payments on the underlying assets among the Mortgage Securities or Agency Securities and other Mortgage Securities or Agency Securities of the same series. The rate of principal payments on the Assets in the related trust fund (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities) is likely to be affected by the existence of any Lock-out Periods and Prepayment Premium provisions of the mortgage loans underlying or comprising those Assets, and by the extent to which the servicer of any of these mortgage loans is able to enforce these 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 those provisions, with shorter Lock-out Periods or with lower Prepayment Premiums. If the purchaser of a Security 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 Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities), the actual yield to maturity will be lower than that so calculated. Conversely, if the purchaser of a Security 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 Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities), 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 Notes or Certificates, as applicable, the effect on yield on one or more classes of the Notes or Certificates, as applicable, of that series of prepayments of the Assets in the related trust fund may be mitigated or exacerbated by any provisions for sequential or selective distribution of principal to those classes. When a full prepayment is made on a mortgage loan, the borrower 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 or some other period specified in the prospectus supplement. Generally, the effect of prepayments in full will be to reduce the amount of interest paid in the following month to holders of Notes or Certificates, as applicable, 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. A partial prepayment of principal is applied so as to reduce the outstanding principal balance of the related mortgage loan as of its due date in the month in which the partial prepayment is received or some other date as is specified in the prospectus supplement. The timing of changes in the rate of principal payments on the Assets (or, in the case of Mortgage Securities and Agency Securities, the underlying assets related to the Mortgage Securities and Agency Securities) 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 loans and distributed on a Security, the greater the effect on that 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 particular period may not be offset by a similar decrease (or increase) in the rate of principal payments at a later time. The securityholder will bear the risk of not being able to reinvest principal received from a Security at a yield at least equal to the yield on that Security. PREPAYMENTS--MATURITY AND WEIGHTED AVERAGE LIFE The rates at which principal payments are received on the 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 Notes or Certificates, as applicable, may affect the ultimate maturity and the weighted average life of each class of that series. Prepayments on the mortgage loans comprising or underlying the 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 Notes or Certificates, as applicable, of the related series. If so provided in the prospectus supplement for a series of Notes or Certificates, as applicable, one or more classes of Notes or Certificates, as applicable, may have a final scheduled Distribution Date, which is the date on or before which the Security Balance of the class of Notes or Certificates, as applicable, is scheduled to be reduced to zero, calculated on the basis of the assumptions applicable to that series. 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 that security will be repaid to the investor. The weighted average life of a class of Notes or Certificates, as applicable, of a series will be influenced by the rate at which principal on the Assets is paid to that 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 Notes or Certificates, as applicable, may be affected by the varying maturities of the Assets in a trust fund. If any Assets in a particular trust fund have actual terms to maturity less than those assumed in calculating final scheduled Distribution Dates for the classes of Notes or Certificates, as applicable, of the related series, one or more classes of these Notes or Certificates, as applicable, may be fully paid before their respective final scheduled Distribution Dates, even in the absence of prepayments. Accordingly, the prepayment experience of the Assets will, to some extent, be a function of the mix of mortgage rates or Contract Rates and maturities of the mortgage loans comprising or underlying those 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 or the Standard Prepayment Assumption ("SPA") 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 those loans. SPA represents an assumed rate of prepayment each month relative to the then outstanding principal balance of a pool of loans. A prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum of the then outstanding principal balance of those loans in the first month of the life of the loans and an additional 0.2% per annum in each month thereafter until the thirtieth month. Starting in the thirtieth month and in each month thereafter during the life of the loans, 100% of SPA assumes a constant prepayment rate of 6% per annum each month. Neither CPR nor SPA 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 Assets. The prospectus supplement for each series of Notes or Certificates, as applicable, may contain tables, if applicable, setting forth the projected weighted average life of each class of Offered Notes or Certificates, as applicable, of that series and the percentage of the initial Security Balance of each class that would be outstanding on specified Distribution Dates based on the assumptions stated in the prospectus supplement, including assumptions that prepayments on the mortgage loans comprising or underlying the related Assets are made at rates corresponding to various percentages of CPR, SPA or some other standard specified in the prospectus supplement. These tables and assumptions are intended to illustrate the sensitivity of the weighted average life of the Notes or Certificates, as applicable, 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 Notes or Certificates, as applicable. It is unlikely that prepayment of any mortgage loans comprising or underlying the Assets for any series will conform to any particular level of CPR, SPA or any other rate specified in the prospectus supplement. OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE TYPE OF ASSET If specified in the prospectus supplement, a number of mortgage loans may have balloon payments due at maturity (which, based on the amortization schedule of those mortgage loans, may be a substantial amount), and because the ability of a borrower to make a balloon payment typically will depend on its ability either to refinance the loan or to sell the related Mortgaged Property, there is a risk that a number of Balloon Payment Assets may default at maturity. The ability to obtain refinancing will depend on a number of factors prevailing at the time refinancing or sale is required, including real estate values, the borrower's financial situation, prevailing mortgage loan interest rates, the borrower's equity in the related Mortgaged Property, tax laws and prevailing general economic conditions. Neither the depositor, the servicer, the master servicer, nor any of their affiliates will be obligated to refinance or repurchase any mortgage loan or to sell the Mortgaged Property except to the extent provided in the prospectus supplement. In the case of defaults, recovery of proceeds may be delayed by, among other things, bankruptcy of the borrower or adverse conditions in the market where the property is located. To minimize losses on defaulted mortgage loans, the servicer may modify mortgage loans that are in default or as to which a payment default is reasonably foreseeable. Any defaulted balloon payment or modification that extends the maturity of a mortgage loan will tend to extend the weighted average life of the Notes or Certificates, as applicable, and may thus lengthen the period of time elapsed from the date of issuance of a Security until it is retired. For some mortgage loans, including ARM Loans, the mortgage rate at origination may be below the rate that would result if the index and margin relating to the mortgage loan were applied at origination. Under the applicable underwriting standards, the borrower under each mortgage loan generally will be qualified on the basis of the mortgage rate in effect at origination. The repayment of any of these mortgage loans may therefore be dependent on the ability of the borrower to make larger level monthly payments following the adjustment of the mortgage rate. In addition, some mortgage loans may be subject to temporary buydown plans ("Buydown Mortgage Loans") pursuant to which the monthly payments made by the borrower during the early years of the mortgage loan will be less than the scheduled monthly payments on the mortgage loan (the "Buydown Period"). The periodic increase in the amount paid by the borrower of a Buydown Mortgage Loan during or at the end of the applicable Buydown Period may create a greater financial burden for the borrower, who might not have otherwise qualified for a mortgage, and may accordingly increase the risk of default for the related mortgage loan. The mortgage rates on some ARM Loans subject to negative amortization generally adjust monthly and their amortization schedules adjust less frequently. During a period of rising interest rates as well as immediately after origination (initial mortgage rates are generally lower than the sum of the applicable index at origination and the related margin over that index at which interest accrues), the amount of interest accruing on the principal balance of those mortgage loans may exceed the amount of the minimum scheduled monthly payment on the mortgage loans. As a result, a portion of the accrued interest on negatively amortizing mortgage loans may be added to the principal balance of those mortgage loans and will bear interest at the applicable mortgage rate. The addition of any deferred interest to the principal balance of any related class or classes of Notes or Certificates, as applicable, will lengthen the weighted average life of those Notes or Certificates, as applicable, and may adversely affect yield to holders of those Notes or Certificates, as applicable, depending on the price at which those Notes or Certificates, as applicable, were purchased. In addition, for some ARM Loans subject to negative amortization, during a period of declining interest rates, it might be expected that each minimum scheduled monthly payment on this type of mortgage loan would exceed the amount of scheduled principal and accrued interest on the principal balance of that mortgage loan, and since that excess will be applied to reduce the principal balance of the related class or classes of Notes or Certificates, as applicable, the weighted average life of those Notes or Certificates, as applicable, will be reduced and may adversely affect yield to holders of those Notes or Certificates, as applicable, depending on the price at which those Notes or Certificates, as applicable, were purchased. As may be described in the prospectus supplement, the related Agreement may provide that all or a portion of the principal collected on or with respect to the related mortgage loans may be applied by the related trustee to the acquisition of additional revolving credit line loans during a specified period (rather than used to fund payments of principal to securityholders during that period) with the result that the related Notes or Certificates, as applicable, possess an interest-only period, also commonly referred to as a revolving period, which will be followed by an amortization period. Any of these interest-only or revolving periods may, upon the occurrence of particular events to be described in the prospectus supplement, terminate before the end of the specified period and result in the earlier than expected amortization of the related Notes or Certificates, as applicable. In addition, and as may be described in the prospectus supplement, the related Agreement may provide that all or some of this collected principal may be retained by the trustee (and held in specific temporary investments, including mortgage loans) for a specified period before being used to fund payments of principal to securityholders. The result of the retention and temporary investment by the trustee of this principal would be to slow the amortization rate of the related Notes or Certificates, as applicable, relative to the amortization rate of the related mortgage loans, or to attempt to match the amortization rate of the related Notes or Certificates, as applicable, to an amortization schedule established at the time the Notes or Certificates, as applicable, are issued. Any similar feature applicable to any Notes or Certificates, as applicable, may end on the occurrence of events to be described in the prospectus supplement, resulting in the current funding of principal payments to the related securityholders and an acceleration of the amortization of these Notes or Certificates, as applicable. TERMINATION If specified in the prospectus supplement, a series of Notes or Certificates, as applicable, may be subject to optional early termination through the repurchase of the Assets in the related trust fund by the party specified in the prospectus supplement, on any date on which the total Security Balance of the Notes or Certificates, as applicable, of that series declines to a percentage specified in the prospectus supplement (generally not to exceed 10%) of the Initial Security Balance, under the circumstances and in the manner set forth therein. In addition, if so provided in the prospectus supplement, some classes of Notes or Certificates, as applicable, may be purchased or redeemed in the manner set forth therein. See "Description of the Securities--Termination." DEFAULTS The rate of defaults on the Assets will also affect the rate, timing and amount of principal payments on the Assets and thus the yield on the Notes or Certificates, as applicable. In general, defaults on mortgage loans are expected to occur with greater frequency in their early years. The rate of default on mortgage loans that are refinance or limited documentation mortgage loans, and on mortgage loans with high Loan-to-Value Ratios, may be higher than for other types of mortgage loans. Furthermore, the rate and timing of prepayments, defaults and liquidations on the mortgage loans will be affected by the general economic condition of the region of the country in which the related Mortgage Properties are located. The risk of delinquencies and loss is greater and prepayments are less likely in regions where a weak or deteriorating economy exists, as may be evidenced by, among other factors, increasing unemployment or falling property values. FORECLOSURES The number of foreclosures or repossessions and the principal amount of the mortgage loans comprising or underlying the Assets that are foreclosed or repossessed 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 Assets and that of the related series of Notes or Certificates, as applicable. REFINANCING At the request of a borrower, the servicer may allow the refinancing of a mortgage loan in any trust fund by accepting prepayments on the mortgage loan and permitting a new loan secured by a mortgage on the same property. In the event of that refinancing, the new loan would not be included in the related trust fund and, therefore, that refinancing would have the same effect as a prepayment in full of the related mortgage loan. A servicer may, from time to time, implement programs designed to encourage refinancing. These programs may include modifications of existing loans, general or targeted solicitations, the offering of pre-approved applications, reduced origination fees or closing costs, or other financial incentives. In addition, servicers may encourage the refinancing of mortgage loans, including defaulted mortgage loans, that would permit creditworthy borrowers to assume the outstanding indebtedness of those mortgage loans. DUE-ON-SALE CLAUSES Acceleration of mortgage payments as a result of transfers of 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 Assets, other than FHA loans and VA loans, may include "due-on-sale 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, transfer or conveyance of the related Mortgaged Property. For any mortgage loans, except as set forth in the prospectus supplement, the servicer will generally enforce any due-on-sale clause to the extent it has knowledge of the conveyance or proposed conveyance of the underlying Mortgaged Property and it is entitled to do so under applicable law; provided, however, that the servicer will not take any action in relation to the enforcement of any due-on-sale provision that would adversely affect or jeopardize coverage under any applicable insurance policy. See "Certain Legal Aspects of Mortgage Loans--Due-on-Sale Clauses" and "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--Due-on-Sale Provisions." THE DEPOSITOR ACE Securities Corp., the depositor, is a special purpose corporation incorporated in the State of Delaware on June 3, 1998. The principal executive offices of the depositor are located at 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211. Its telephone number is (704) 365-0569. The depositor does not have, nor is it expected in the future to have, any significant assets. The limited purposes of the depositor are, in general, to acquire, own and sell mortgage loans and financial assets; to issue, acquire, own, hold and sell securities and notes secured by or representing ownership interests in mortgage loans and other financial assets, collections on the mortgage loans and related assets; and to engage in any acts that are incidental to, or necessary, suitable or convenient to accomplish, these purposes. All of the shares of capital stock of the depositor are held by Altamont Holdings Corp., a Delaware corporation. DESCRIPTION OF THE SECURITIES GENERAL The Securities issued in each series will include either asset-backed certificates (the "Certificates") or asset-backed notes (the "Notes", and together with the Certificates, the "Securities"). The Certificates of each series (including any class of Certificates not offered by this prospectus) will represent the entire beneficial ownership interest in the trust fund created pursuant to the related Agreement. The Notes of each series will represent indebtedness of the related trust fund and will be issued and secured pursuant to an indenture. Each series of Notes or Certificates, as applicable, will consist of one or more classes of Notes or Certificates, as applicable, that may: o provide for the accrual of interest on the series of Notes or Certificates, as applicable, based on fixed, variable or adjustable rates; o be senior (collectively, "Senior Notes" or "Senior Certificates") or subordinate (collectively, "Subordinate Notes" or "Subordinate Certificates") to one or more other classes of Notes or Certificates, as applicable, in respect of distributions on the Notes or Certificates, as applicable,; o be entitled either to (A) principal distributions, with disproportionately low, nominal or no interest distributions or (B) interest distributions, with disproportionately low, nominal or no principal distributions (collectively, "Strip Securities"); o provide for distributions of accrued interest on the series of Notes or Certificates, as applicable, which begin only following the occurrence of specific events, that as the retirement of one or more other classes of Notes or Certificates, as applicable, of that series (collectively, "Accrual Securities"); o provide for payments of principal as described in the prospectus supplement, from all or only a portion of the Assets in that trust fund, to the extent of available funds, in each case as described in the prospectus supplement; and/or o provide for distributions based on a combination of two or more components of the Notes or Certificates, as applicable, with one or more of the characteristics described in this paragraph including a Strip Security component. If specified in the prospectus supplement, distributions on one or more classes of a series of Notes or Certificates, as applicable, may be limited to collections from a designated portion of the Assets in the related trust fund (each portion of the Assets, an "Asset Group"). Any of these classes may include classes of Offered Notes or Offered Certificates, as applicable. Each class of Notes or Certificates, as applicable, offered by this prospectus and the related prospectus supplement (the "Offered Notes" or "Offered Certificates") will be issued in minimum denominations corresponding to the Security Balances or, in the case of some classes of Strip Securities, notional amounts or percentage interests specified in the prospectus supplement. The transfer of any Offered Notes or Offered Certificates, as applicable, may be registered and those Notes or Certificates, as applicable, may be exchanged without the payment of any service charge payable in connection with that registration of transfer or exchange, but the depositor or the trustee or any agent of the depositor or the trustee may require payment of a sum sufficient to cover any tax or other governmental charge. One or more classes of Notes or Certificates, as applicable, of a series may be issued in fully registered, certificated form ("Definitive Notes" or "Definitive Certificates") or in book-entry form ("Book-Entry Notes" or "Book-Entry Certificates"), as provided in the prospectus supplement. See "Description of the Securities--Book-Entry Registration and Definitive Securities." Definitive Notes or Definitive Certificates, as applicable, will be exchangeable for other Notes or Certificates, as applicable, of the same class and series of a similar total Security Balance, notional amount or percentage interest but of different authorized denominations. DISTRIBUTIONS Distributions on the Notes or Certificates, as applicable, of each series will be made by or on behalf of the trustee on each Distribution Date as specified in the prospectus supplement from the Available Distribution Amount for that series and that Distribution Date. Distributions (other than the final distribution) will be made to the persons in whose names the Notes or Certificates, as applicable, are registered at the close of business on, unless a different date is specified in the prospectus supplement, 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 prospectus supplement (the "Determination Date"). All distributions for each class of Notes or Certificates, as applicable, on each Distribution Date will be allocated pro rata among the outstanding securityholders in that class or by random selection or as described in the prospectus supplement. Payments will be made either by wire transfer in immediately available funds to the account of a securityholder at a bank or other entity having appropriate facilities for these payments, if that securityholder has so notified the trustee or other person required to make those payments no later than the date specified in the prospectus supplement (and, if so provided in the prospectus supplement, holds Notes or Certificates, as applicable, in the requisite amount specified in the prospectus supplement), or by check mailed to the address of the person entitled to the payment as it appears on the Security Register; provided, however, that the final distribution in retirement of the Notes or Certificates, as applicable, will be made only upon presentation and surrender of the Notes or Certificates, as applicable, at the location specified in the notice to securityholders of that final distribution. AVAILABLE DISTRIBUTION AMOUNT All distributions on the Notes or Certificates, as applicable, of each series on each Distribution Date will be made from the Available Distribution Amount described below, subject to the terms described in the prospectus supplement. Generally, the "Available Distribution Amount" for each Distribution Date equals the sum of the following amounts: (1) the total amount of all cash on deposit in the related Collection Account as of the corresponding Determination Date, exclusive, unless otherwise specified in the prospectus supplement, of: (a) all scheduled payments of principal and interest collected but due on a date after the related Due Period (unless a different period is specified in the prospectus supplement, a "Due Period " for any Distribution Date will begin on the second day of the month in which the immediately preceding Distribution Date occurs, or the Cut-off Date in the case of the first Due Period, and will end on the first day of the month of the related Distribution Date), (b) all prepayments, together with related payments of the interest thereon and related Prepayment Premiums, all proceeds of any FHA insurance, VA Guaranty Policy or insurance policies to be maintained for each Asset (to the extent that proceeds are not applied to the restoration of the Asset or released in accordance with the normal servicing procedures of a servicer, subject to the terms and conditions applicable to the related Asset) (collectively, "Insurance Proceeds"), all other amounts received and retained in connection with the liquidation of Assets in default in the trust fund ("Liquidation Proceeds"), and other unscheduled recoveries received after the related Due Period, or other period specified in the prospectus supplement, (c) all amounts in the Collection Account that are due or reimbursable to the depositor, the trustee, an Asset Seller, a servicer, the master servicer or any other entity as specified in the prospectus supplement or that are payable in respect of particular expenses of the related trust fund, and (d) all amounts received for a repurchase of an Asset from the trust fund for defective documentation or a breach of representation or warranty received after the related Due Period, or other period specified in the prospectus supplement; (2) if the prospectus supplement so provides, interest or investment income on amounts on deposit in the Collection Account, including any net amounts paid under any Cash Flow Agreements; (3) all advances made by a servicer or the master servicer or any other entity as specified in the prospectus supplement for that Distribution Date; (4) if and to the extent the prospectus supplement so provides, amounts paid by a servicer or any other entity as specified in the prospectus supplement with respect to interest shortfalls resulting from prepayments during the related Prepayment Period; and (5) to the extent not on deposit in the related Collection Account as of the corresponding Determination Date, any amounts collected under, from or in respect of any credit support for that Distribution Date. As described below, unless otherwise specified in the prospectus supplement, the entire Available Distribution Amount will be distributed among the related Notes or Certificates, as applicable (including any Notes or Certificates, as applicable, not offered by this prospectus) on each Distribution Date, and accordingly will be released from the trust fund and will not be available for any future distributions. The prospectus supplement for a series of Notes or Certificates, as applicable, will describe any variation in the calculation or distribution of the Available Distribution Amount for that series. DISTRIBUTIONS OF INTEREST ON THE SECURITIES Each class of Notes or Certificates, as applicable (other than classes of Strip Securities which have no Interest Rate) may have a different Interest Rate, which will be a fixed, variable or adjustable rate at which interest will accrue on that class or a component of that class (the "Interest Rate" in the case of Certificates). The prospectus supplement will specify the Interest Rate for each class or component or, in the case of a variable or adjustable Interest Rate, the method for determining the Interest Rate. Interest on the Notes or Certificates, as applicable, will be calculated on the basis of a 360-day year consisting of twelve 30-day months unless the prospectus supplement specifies a different basis. Distributions of interest on the Notes or Certificates, as applicable, of any class will be made on each Distribution Date (other than any class of Accrual Securities, which will be entitled to distributions of accrued interest starting only on the Distribution Date, or under the circumstances, specified in the prospectus supplement, and any class of Strip Securities that are not entitled to any distributions of interest) based on the Accrued Security Interest for that class and that Distribution Date, subject to the sufficiency of the portion of the Available Distribution Amount allocable to that class on that Distribution Date. Before any interest is distributed on any class of Accrual Securities, the amount of Accrued Security Interest otherwise distributable on that class will instead be added to the Security Balance of that class on each Distribution Date. For each class of Notes or Certificates, as applicable, and each Distribution Date (other than some classes of Strip Securities), "Accrued Security Interest" will be equal to interest accrued during the related Accrual Period on the outstanding Security Balance of the class of Notes or Certificates, as applicable, immediately before the Distribution Date, at the applicable Interest Rate, reduced as described below. Accrued Security Interest on some classes of Strip Securities will be equal to interest accrued during the related Accrual Period on the outstanding notional amount of the Strip Security immediately before each Distribution Date, at the applicable Interest Rate, reduced as described below, or interest accrual in the manner described in the prospectus supplement. The method of determining the notional amount for a particular class of Strip Securities will be described in the prospectus supplement. Reference to notional amount is solely for convenience in some of the calculations and does not represent the right to receive any distributions of principal. Unless otherwise provided in the prospectus supplement, the Accrued Security Interest on a series of Notes or Certificates, as applicable, 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 before the due date in that accrual period on the mortgage loans comprising or underlying the Assets in the trust fund for that series. The particular manner in which these shortfalls are to be allocated among some or all of the classes of Notes or Certificates, as applicable, of that series will be specified in the prospectus supplement. The prospectus supplement will also describe the extent to which the amount of Accrued Security Interest that is otherwise distributable on (or, in the case of Accrual Securities, that may otherwise be added to the Security Balance of) a class of Offered Notes or Offered Certificates, as applicable, may be reduced as a result of any other contingencies, including delinquencies, losses and deferred interest on the mortgage loans comprising or underlying the Assets in the related trust fund. Unless otherwise provided in the prospectus supplement, any reduction in the amount of Accrued Security Interest otherwise distributable on a class of Notes or Certificates, as applicable, by reason of the allocation to that class of a portion of any deferred interest on the mortgage loans comprising or underlying the Assets in the related trust fund will result in a corresponding increase in the Security Balance of that class. See "Yield Considerations." DISTRIBUTIONS OF PRINCIPAL OF THE SECURITIES The Notes or Certificates, as applicable, of each series, other than some classes of Strip Securities, will have a "Security Balance" which, at any time, will equal the then maximum amount that the holder will be entitled to receive on principal out of the future cash flow on the Assets and other assets included in the related trust fund. The outstanding Security Balance of a Security will be reduced: o to the extent of distributions of principal on that Security from time to time and o if and to the extent provided in the prospectus supplement, by the amount of losses incurred on the related Assets. The outstanding Security Balance of a Security: o may be increased in respect of deferred interest on the related mortgage loans, to the extent provided in the prospectus supplement and o in the case of Accrual Securities, will be increased by any related Accrued Security Interest up until the Distribution Date on which distributions of interest are required to begin. If specified in the prospectus supplement, the initial total Security Balance of all classes of Notes or Certificates, as applicable, of a series will be greater than the outstanding total principal balance of the related Assets as of the applicable Cut-off Date. The initial total Security Balance of a series and each class of the series will be specified in the prospectus supplement. Distributions of principal will be made on each Distribution Date to the class or classes of Notes or Certificates, as applicable, in the amounts and in accordance with the priorities specified in the prospectus supplement. Some classes of Strip Securities with no Security Balance are not entitled to any distributions of principal. If specified in the related prospectus supplement, the trust fund may issue securities from time to time and use the proceeds of this issuance to make principal payments with respect to a series. REVOLVING PERIOD The applicable prospectus supplement may provide that all or a portion of the principal collections may be applied by the trustee to the acquisition of subsequent revolving credit line loans or asset-backed or mortgage backed securities during a specified period rather than used to distribute payments of principal to noteholders or certificateholders, as applicable, during that period. These notes or certificates, as applicable, would then possess an interest only period, also commonly referred to as a "Revolving Period", which will be followed by an "Amortization Period", during which principal will be paid. Any interest only or revolving period may terminate prior to the end of the specified period and result in the earlier than expected principal repayment of the notes or certificates, as applicable. COMPONENTS To the extent specified in the prospectus supplement, distribution on a class of Notes or Certificates, as applicable, may be based on a combination of two or more different components as described under "--General" above. To that extent, the descriptions set forth under "--Distributions of Interest on the Securities" and "--Distributions of Principal of the Securities" above also relate to components of the component class of Notes or Certificates, as applicable. References in those sections to Security Balance may refer to the principal balance, if any, of these components and reference to the Interest Rate may refer to the Interest Rate, if any, on these components. DISTRIBUTIONS ON THE SECURITIES OF PREPAYMENT PREMIUMS If so provided in the prospectus supplement, Prepayment Premiums that are collected on the mortgage loans in the related trust fund will be distributed on each Distribution Date to the class or classes of Notes or Certificates, as applicable, entitled to the distribution as described in the prospectus supplement. ALLOCATION OF LOSSES AND SHORTFALLS If so provided in the prospectus supplement for a series of Notes or Certificates, as applicable, consisting of one or more classes of Subordinate Notes or Subordinate Certificates, as applicable, on any Distribution Date in respect of which losses or shortfalls in collections on the Assets have been incurred, the amount of those losses or shortfalls will be borne first by a class of Subordinate Notes or Subordinate Certificates, as applicable, in the priority and manner and subject to the limitations specified in the prospectus supplement. See "Description of Credit Support" for a description of the types of protection that may be included in a trust fund against losses and shortfalls on Assets comprising that trust fund. The prospectus supplement for a series of Notes or Certificates, as applicable, will describe the entitlement, if any, of a class of Notes or Certificates, as applicable, whose Security Balance has been reduced to zero as a result of distributions or the allocation of losses on the related Assets to recover any losses previously allocated to that class from amounts received on the Assets. However, if the Security Balance of a class of Notes or Certificates, as applicable, has been reduced to zero as the result of principal distributions, the allocation of losses on the Assets, an optional termination or an optional purchase or redemption, that class will no longer be entitled to receive principal distributions from amounts received on the assets of the related trust fund, including distributions in respect of principal losses previously allocated to that class. ADVANCES IN RESPECT OF DELINQUENCIES If so provided in the prospectus supplement, the servicer or another entity described in the prospectus supplement 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 related Collection Account that are not included in the Available Distribution Amount for that Distribution Date, in an amount equal to the total of payments of (1) principal (other than any balloon payments) and (2) interest (net of related servicing fees and Retained Interest) that were due on the Assets in that trust fund during the related Due Period and were delinquent on the related Determination Date, subject to a good faith determination that the advances will be reimbursable from Related Proceeds (as defined below). In the case of a series of Notes or Certificates, as applicable, that includes one or more classes of Subordinate Notes or Subordinate Certificates, as applicable, and if so provided in the prospectus supplement, the servicer's (or another entity's) advance obligation may be limited only to the portion of those delinquencies necessary to make the required distributions on one or more classes of Senior Notes or Senior Certificates, as applicable, and/or may be subject to a good faith determination that advances will be reimbursable not only from Related Proceeds but also from collections on other Assets otherwise distributable on one or more classes of those Subordinate Notes or Subordinate Certificates, as applicable. 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 Notes or Certificates, as applicable, entitled to the payments, rather than to guarantee or insure against losses. Advances of the servicer's (or another entity's) funds will be reimbursable only out of related recoveries on the Assets (including amounts received under any form of credit support) respecting which those advances were made (as to any Assets, "Related Proceeds") and from any other amounts specified in the prospectus supplement, including out of any amounts otherwise distributable on one or more classes of Subordinate Notes or Subordinate Certificates, as applicable of that series; provided, however, that any advance will be reimbursable from any amounts in the related Collection Account before any distributions being made on the Notes or Certificates, as applicable, to the extent that the servicer (or some other entity) determines in good faith that that advance (a "Nonrecoverable Advance") is not ultimately recoverable from Related Proceeds or, if applicable, from collections on other Assets otherwise distributable on the Subordinate Notes or Subordinate Certificates, as applicable. If advances have been made by the servicer from excess funds in the related Collection Account, the servicer is required to replace these funds in that Collection Account on any future Distribution Date to the extent that funds in that Collection Account on that Distribution Date are less than payments required to be made to securityholders on that date. If specified in the prospectus supplement, the obligations of the 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 borrower on any surety bond will be set forth in the prospectus supplement. If and to the extent so provided in the prospectus supplement, the servicer (or another entity) will be entitled to receive interest at the rate specified in the prospectus supplement on its outstanding advances and will be entitled to pay itself this interest periodically from general collections on the Assets before any payment to securityholders or as otherwise provided in the related Agreement and described in the prospectus supplement. If specified in the prospectus supplement, the master servicer or the trustee will be required to make advances, subject to specific conditions described in the prospectus supplement, in the event of a servicer default. REPORTS TO SECURITYHOLDERS With each distribution to holders of any class of Notes or Certificates, as applicable, of a series, the servicer, the master servicer or the trustee, as provided in the prospectus supplement, will forward or cause to be forwarded to each holder, to the depositor and to any other parties as may be specified in the related Agreement, a statement containing the information specified in the prospectus supplement, or if no information is specified in the prospectus supplement, generally setting forth, in each case to the extent applicable and available: (1) the amount of that distribution to holders of Notes or Certificates, as applicable, of that class applied to reduce the Security Balance of the Notes or Certificates, as applicable,; (2) the amount of that distribution to holders of Notes or Certificates, as applicable, of that class allocable to Accrued Security Interest; (3) the amount of that distribution allocable to Prepayment Premiums; (4) the amount of related servicing compensation and any other customary information as is required to enable securityholders to prepare their tax returns; (5) the total amount of advances included in that distribution, and the total amount of unreimbursed advances at the close of business on that Distribution Date; (6) the total principal balance of the Assets at the close of business on that Distribution Date; (7) the number and total principal balance of mortgage 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 begun; (8) for any mortgage loan liquidated during the related Due Period, (a) the portion of the related liquidation proceeds payable or reimbursable to a servicer (or any other entity) in respect of that mortgage loan and (b) the amount of any loss to securityholders; (9) with respect to collateral acquired by the trust fund through foreclosure or otherwise (an "REO Property") relating to a mortgage loan and included in the trust fund as of the end of the related Due Period, the date of acquisition; (10) for each REO Property relating to a mortgage 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 following that Distribution Date (calculated as if that mortgage loan were still outstanding taking into account limited modifications to the terms of the mortgage loan specified in the Agreement), (c) the total amount of unreimbursed servicing expenses and unreimbursed advances in respect of the REO Property and (d) if applicable, the total amount of interest accrued and payable on related servicing expenses and related advances; (11) for any REO Property sold during the related Due Period (a) the total amount of sale proceeds, (b) the portion of those sales proceeds payable or reimbursable to the master servicer in respect of that REO Property or the related mortgage loan and (c) the amount of any loss to securityholders in respect of the related mortgage loan; (12) the total Security Balance or notional amount, as the case may be, of each class of Notes or Certificates, as applicable (including any class of Notes or Certificates, as applicable, not offered by this prospectus) at the close of business on that Distribution Date, separately identifying any reduction in that Security Balance due to the allocation of any loss and increase in the Security Balance of a class of Accrual Notes or Certificates, as applicable, if any Accrued Security Interest has been added to that balance; (13) the total amount of principal prepayments made during the related Due Period; (14) the amount deposited in the reserve fund, if any, on that Distribution Date; (15) the amount remaining in the reserve fund, if any, as of the close of business on that Distribution Date; (16) the total unpaid Accrued Security Interest, if any, on each class of Notes or Certificates, as applicable, at the close of business on that Distribution Date; (17) in the case of Notes or Certificates, as applicable, with a variable Interest Rate, the Interest Rate applicable to that Distribution Date, and, if available, the immediately succeeding Distribution Date, as calculated in accordance with the method specified in the prospectus supplement; (18) in the case of Notes or Certificates, as applicable, with an adjustable Interest Rate, for statements to be distributed in any month in which an adjustment date occurs, the adjustable Interest Rate applicable to that Distribution Date, if available, and the immediately succeeding Distribution Date as calculated in accordance with the method specified in the prospectus supplement; (19) as to any series that includes credit support, the amount of coverage of each instrument of credit support included as of the close of business on that Distribution Date; (20) during the Pre-Funding Period, the remaining Pre-Funded Amount and the portion of the Pre-Funding Amount used to acquire Subsequent Assets since the preceding Distribution Date; (21) during the Pre-Funding Period, the amount remaining in the Capitalized Interest Account; and (22) the total amount of payments by the borrowers of (a) default interest, (b) late charges and (c) assumption and modification fees collected during the related Due Period. Within a reasonable period of time after the end of each calendar year, the servicer, the master servicer or the trustee, as provided in the prospectus supplement, will furnish to each securityholder of record at any time during the calendar year the information required by the Code and applicable regulations under the Code to enable securityholders to prepare their tax returns. See "Description of the Securities--Book-Entry Registration and Definitive Securities." TERMINATION The obligations created by the related Agreement for each series of Notes or Certificates, as applicable, will terminate upon the payment to securityholders of that series of all amounts held in the Collection Accounts or by a servicer, the master servicer, if any, or the trustee and required to be paid to them pursuant to that Agreement following the earlier of (1) the final payment or other liquidation of the last Asset subject to the related Agreement or the disposition of all property acquired upon foreclosure of any mortgage loan subject to the Agreement and (2) the purchase of all of the assets of the trust fund by the party entitled to effect that termination, under the circumstances and in the manner set forth in the prospectus supplement. In no event, however, will the trust fund continue beyond the date specified in the prospectus supplement. Written notice of termination of the Agreement will be given to each securityholder, and the final distribution will be made only upon presentation and surrender of the Notes or Certificates, as applicable, at the location to be specified in the notice of termination. If specified in the prospectus supplement, a series of Notes or Certificates, as applicable, may be subject to optional early termination through the purchase of the Assets in the related trust fund by the party specified in the prospectus supplement, under the circumstances and in the manner set forth in the prospectus supplement. If so provided in the prospectus supplement, upon the reduction of the Security Balance of a specified class or classes of Notes or Certificates, as applicable, by a specified percentage, the party specified in the prospectus supplement will solicit bids for the purchase of all assets of the trust fund, or of a sufficient portion of those assets to retire that class or classes or purchase that class or classes at a price set forth in the prospectus supplement, in each case, under the circumstances and in the manner set forth in the prospectus supplement. That price will at least equal the outstanding Security Balances and any accrued and unpaid interest on the Security Balances (including any unpaid interest shortfalls for prior Distribution Dates). Any sale of the Assets of the trust fund will be without recourse to the trust fund or the securityholders. Any purchase or solicitation of bids may be made only when the total Security Balance of that class or classes declines to a percentage of the Initial Security Balance of those Notes or Certificates, as applicable (not to exceed 10%) specified in the prospectus supplement. In addition, if so provided in the prospectus supplement, some classes of Notes or Certificates, as applicable, may be purchased or redeemed in the manner set forth in the prospectus supplement at a price at least equal to the outstanding Security Balance of each class so purchased or redeemed and any accrued and unpaid interest on the Security Balance (including any unpaid interest shortfalls for prior Distribution Dates). OPTIONAL PURCHASES Subject to the provisions of the applicable Agreement, the depositor, the servicer or any other party specified in the prospectus supplement may, at that party's option, repurchase any mortgage loan that is in default or as to which default is reasonably foreseeable if, in the depositor's, the servicer's or any other party's judgment, the related default is not likely to be cured by the borrower or default is not likely to be averted, at a price equal to the unpaid principal balance of the mortgage loan plus accrued interest on the mortgage loan and under the conditions set forth in the prospectus supplement. BOOK-ENTRY REGISTRATION AND DEFINITIVE SECURITIES GENERAL If provided for in the prospectus supplement, one or more classes of the Offered Notes or Offered Certificates, as applicable, of any series will be issued as Book-Entry Notes or Book-Entry Certificates, as applicable, and each of these classes will be represented by one or more single Notes or Certificates, as applicable, registered in the name of a nominee for the depository, The Depository Trust Company ("DTC") and, if provided in the prospectus supplement, additionally through Clearstream Luxembourg, societe anonyme ("Clearstream Luxembourg") or the Euroclear System ("Euroclear"). Each class of Book-Entry Notes or Book-Entry Certificates, as applicable, will be issued in one or more certificates or notes, as the case may be, that equal the initial principal amount of the related class of Offered Notes or Offered Certificates, as applicable, and will initially be registered in the name of Cede & Co. No person acquiring an interest in a Book-Entry Note or Book-Entry Certificate, as applicable (each, a "Beneficial Owner") will be entitled to receive a Definitive Note or Definitive Certificate, as applicable, except as set forth below under "--Definitive Securities." Unless and until Definitive Notes or Definitive Certificates, as applicable, are issued for the Book-Entry Notes or Book-Entry Certificates, as applicable, under the limited circumstances described in the applicable prospectus supplement or this prospectus, all references to actions by securityholders with respect to the Book-Entry Notes or Book-Entry Certificates, as applicable, will refer to actions taken by DTC, Clearstream Luxembourg or Euroclear upon instructions from their Participants (as defined below), and all references in this prospectus to distributions, notices, reports and statements to securityholders with respect to the Book-Entry Notes or Book-Entry Certificates, as applicable, will refer to distributions, notices, reports and statements to DTC, Clearstream Luxembourg or Euroclear, as applicable, for distribution to Beneficial Owners by DTC in accordance with the procedures of DTC and if applicable, Clearstream Luxembourg and Euroclear. Beneficial Owners will hold their Book-Entry Notes or Book-Entry Certificates, as applicable, through DTC in the United States, or, if the Offered Notes or Offered Certificates, as applicable, are offered for sale globally, through Clearstream Luxembourg or Euroclear in Europe if they are participating organizations ("Participants") of those systems. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include some other organizations. Indirect access to the DTC, Clearstream Luxembourg and Euroclear systems 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"). 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 Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC was created to hold securities for its Participants, some of which (and/or their representatives) own DTC, and facilitate the clearance and settlement of securities transactions between its Participants through electronic book-entry changes in their accounts, thus eliminating the need for physical movement of securities. In accordance with its normal procedures, DTC is expected to record the positions held by each of its Participants in the Book-Entry Notes or Book-Entry Certificates, as applicable, whether held for its own account or as a nominee for another person. In general, beneficial ownership of Book-Entry Notes or Book-Entry Certificates, as applicable, will be subject to the rules, regulations and procedures governing DTC and its Participants as in effect from time to time. CLEARSTREAM LUXEMBOURG Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte, L-2967 Luxembourg ("Clearstream, Luxembourg"), was incorporated in 1970 as "Cedel S.A.", a company with limited liability under Luxembourg law (a societe anonyme). Cedel S.A. subsequently changed its name to Cedelbank. On January 10, 2000, Cedelbank's parent company, Cedel International, societe anonyme ("CI") merged its clearing, settlement and custody business with that of Deutsche Borse Clearing AG ("DBC"). The merger involved the transfer by CI of substantially all of its assets and liabilities (including its shares in CB) to a new Luxembourg company, New Cedel International, societe anonyme ("New CI"), which is 50% owned by CI and 50% owned by DBC's parent company Deutsche Borse AG. The shareholders of these two entities are banks, securities dealers and financial institutions. Cedel International currently has 92 shareholders, including U.S. financial institutions or their subsidiaries. No single entity may own more than 5 percent of Cedel International's stock. Further to the merger, the Board of Directors of New Cedel International decided to rename the companies in the group in order to give them a cohesive brand name. The new brand name that was chosen is "Clearstream". With effect from January 14, 2000 New CI has been renamed "Clearstream International, societe anonyme". On January 18, 2000, Cedelbank was renamed "Clearstream Banking, societe anonyme", and Cedel Global Services was renamed "Clearstream Services, societe anonyme". On January 17, 2000 DBC was renamed "Clearstream Banking AG". This means that there are now two entities in the corporate group headed by Clearstream International which share the name "Clearstream Banking", the entity previously named "Cedelbank" and the entity previously named "Deutsche Brse Clearing AG". Clearstream, Luxembourg holds securities for its customers ("Clearstream, Luxembourg Participants") and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg customers through electronic book-entry changes in accounts of Clearstream, Luxembourg customers, thereby eliminating the need for physical movement of certificates. Transactions may be settled by Clearstream, Luxembourg in any of 36 currencies, including United States Dollars. Clearstream, Luxembourg provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream, Luxembourg also deals with domestic securities markets in over 30 countries through established depository and custodial relationships. Clearstream, Luxembourg is registered as a bank in Luxembourg, and as such is subject to regulation by the Commission de Surveillance du Secteur Financier, "CSSF", which supervises Luxembourg banks. Clearstream, Luxembourg's customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg has approximately 2,000 customers located in over 80 countries, including all major European countries, Canada, and the United States. Indirect access to Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream, Luxembourg. Clearstream, Luxembourg has established an electronic bridge with Morgan Guaranty Trust Company of New York as the Operator of the Euroclear System (MGT/EOC) in Brussels to facilitate settlement of trades between Clearstream, Luxembourg and MGT/EOC. EUROCLEAR Euroclear was created in 1968 to hold securities for its Participants and to clear and settle transactions between its Participants through simultaneous electronic book-entry delivery against payment, thus eliminating the need for physical movement of securities and any risk from lack of simultaneous transfers of securities and cash. Transactions may be settled in any of 32 currencies, including United States dollars. Euroclear includes various other services, including securities lending and borrowing, and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. Euroclear is operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the "Cooperative Corporation"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative Corporation. The Cooperative Corporation establishes policy for Euroclear on behalf of its Participants. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Participant of Euroclear, either directly or indirectly. The Euroclear Operator is the Belgian branch of a New York banking corporation that is a member bank of the Federal Reserve System, and is regulated and examined by the Board of Governors of the Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific securities to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of its Participants, and has no record of or relationship with persons holding through Participants of Euroclear. Clearstream Luxembourg and Euroclear will hold omnibus positions on behalf of their Participants through customers' securities accounts in Clearstream Luxembourg's and Euroclear's names on the books of their respective depositaries which in turn will hold positions in customers' securities accounts in the depositaries names on the books of DTC. Citibank will act as depositary for Clearstream Luxembourg and The Chase Manhattan Bank will act as depositary for Euroclear (individually the "Relevant Depositary" and collectively, the "European Depositaries"). BENEFICIAL OWNERSHIP OF BOOK-ENTRY SECURITIES Except as described below, no Beneficial Owner will be entitled to receive a physical certificate representing a Certificate, or note representing a Note. Unless and until Definitive Notes or Definitive Certificates, as applicable, are issued, it is anticipated that the only "securityholder" of the Offered Notes or Offered Certificates, as applicable, will be Cede & Co., as nominee of DTC. Beneficial Owners will not be "Certificateholders" as that term is used in any Agreement, nor "Noteholders" as that term is used in any indenture. Beneficial Owners are only permitted to exercise their rights indirectly through Participants, DTC, Clearstream Luxembourg or Euroclear, as applicable. The Beneficial Owner's ownership of a Book-Entry Note or Book-Entry Certificate, as applicable, will be recorded on the records of the brokerage firm, bank, thrift institution or other financial intermediary (each, a "Financial Intermediary") that maintains the Beneficial Owner's account for that purpose. In turn, the Financial Intermediary's ownership of a Book-Entry Note or Book-Entry Certificate, as applicable, will be recorded on the records of DTC (or of a Participant that acts as agent for the Financial Intermediary, whose interest will in turn be recorded on the records of DTC, if the Beneficial Owner's Financial Intermediary is not a Participant of DTC and on the records of Clearstream Luxembourg or Euroclear, as appropriate). Beneficial Owners will receive all distributions of principal of, and interest on, the Offered Notes or Offered Certificates, as applicable, from the trustee through DTC and its Participants. While the Offered Notes or Offered Certificates, as applicable, are outstanding (except under the circumstances described below), under the rules, regulations and procedures creating and affecting DTC and its operations (the "Rules"), DTC is required to make book-entry transfers among Participants on whose behalf it acts with respect to the Offered Notes and Offered Certificates, as applicable, and is required to receive and transmit distributions of principal of, and interest on, the Offered Notes and Offered Certificates, as applicable. Participants and Indirect Participants with whom Beneficial Owners have accounts with respect to Offered Notes or Offered Certificates, as applicable, are similarly required to make book-entry transfers and receive and transmit distributions on behalf of their respective Beneficial Owners. Accordingly, although Beneficial Owners will not possess certificates or notes, the Rules provide a mechanism by which Beneficial Owners will receive distributions and will be able to transfer their interest. Beneficial Owners will not receive or be entitled to receive certificates or notes representing their respective interests in the Offered Notes or Offered Certificates, as applicable, except under the limited circumstances described below. Unless and until Definitive Notes or Definitive Certificates, as applicable, are issued, Beneficial Owners who are not Participants may transfer ownership of Offered Notes or Offered Certificates, as applicable, only through Participants and Indirect Participants by instructing the Participants and Indirect Participants to transfer Offered Notes or Offered Certificates, as applicable, by book-entry transfer, through DTC for the account of the purchasers of the Offered Notes or Offered Certificates, as applicable, which account is maintained with their respective Participants. Under the Rules and in accordance with DTC's normal procedures, transfer of ownership of Book-Entry Notes or Book-Entry Certificates, as applicable, will be executed through DTC and the accounts of the respective Participants at DTC will be debited and credited. Similarly, the Participants and Indirect Participants will make debits or credits, as the case may be, on their records on behalf of the selling and purchasing Beneficial Owners. Because of time zone differences, any credits of securities received in Clearstream Luxembourg or Euroclear as a result of a transaction with a Participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. These credits or any transactions in securities settled during this processing will be reported to the relevant Participants of Clearstream Luxembourg or Euroclear on that business day. Cash received in Clearstream Luxembourg or Euroclear as a result of sales of securities by or through a Participant of Clearstream Luxembourg or Euroclear to a Participant of DTC will be received with value on the DTC settlement date but will be available in the relevant Clearstream Luxembourg or Euroclear cash account only as of the business day following settlement in DTC. For information with respect to tax documentation procedures relating to the Notes or Certificates, as applicable, see "Material Federal Income Tax Considerations" in this prospectus and, if the Book-Entry Notes or Book-Entry Certificates, as applicable, are globally offered and the prospectus supplement so provides, see "Global Clearance, Settlement and Tax Documentation Procedures - -- Certain U.S. Federal Income Tax Documentation Requirements" in Annex I to the Note prospectus supplement. Transfers between Participants of DTC will occur in accordance with DTC Rules. Transfers between Participants of Clearstream Luxembourg or Euroclear will occur in accordance with their respective rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Participants of Clearstream Luxembourg or Euroclear, on the other, will be effected in DTC in accordance with the DTC Rules on behalf of the relevant European international clearing system by the Relevant Depositary; however, cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in that system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to the Relevant Depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same day funds settlement applicable to DTC. Participants of Clearstream Luxembourg or Euroclear may not deliver instructions directly to the European Depositaries. Distributions on the Book-Entry Notes or Book-Entry Certificates, as applicable, will be made on each Distribution Date by the Trustee to DTC. DTC will be responsible for crediting the amount of each distribution to the accounts of the applicable Participants of DTC in accordance with DTC's normal procedures. Each Participant of DTC will be responsible for disbursing the distribution to the Beneficial Owners of the Book-Entry Notes or Book-Entry Certificates, as applicable, that it represents and to each Financial Intermediary for which it acts as agent. Each Financial Intermediary will be responsible for disbursing funds to the Beneficial Owners of the Book-Entry Notes or Book-Entry Certificates, as applicable, that it represents. Under a book-entry format, Beneficial Owners of the Book-Entry Notes or Book-Entry Certificates, as applicable may experience some delay in their receipt of payments, because the distributions will be forwarded by the Trustee to Cede & Co. Any distributions on Notes or Certificates, as applicable, held through Clearstream Luxembourg or Euroclear will be credited to the cash accounts of Participants of Clearstream Luxembourg or Euroclear in accordance with the relevant system's rules and procedures, to the extent received by the Relevant Depositary. These distributions will be subject to tax reporting in accordance with relevant United States tax laws and regulations. See "Material Federal Income Tax Considerations -- REMICs -- Taxation of Certain Foreign Investors" in this prospectus. Because DTC can only act on behalf of Financial Intermediaries, the ability of a Beneficial Owner to pledge Book-Entry Notes or Book-Entry Certificates, as applicable, to persons or entities that do not participate in the depository system, or otherwise take actions in respect of Book-Entry Notes or Book-Entry Certificates, as applicable, may be limited due to the lack of physical securities for the Book-Entry Notes or Book-Entry Certificates, as applicable. In addition, issuance of the Book-Entry Notes or Book-Entry Certificates, as applicable, in book-entry form may reduce the liquidity of the securities in the secondary market since potential investors may be unwilling to purchase Notes or Certificates, as applicable, for which they cannot obtain physical securities. Monthly and annual reports will be provided to Cede & Co., as nominee of DTC, and may be made available by Cede & Co. to Beneficial Owners upon request, in accordance with the rules, regulations and procedures creating and affecting the depository, and to the Financial Intermediaries to whose DTC accounts the Book-Entry Notes or Book-Entry Certificates, as applicable, of Beneficial Owners are credited. Generally, DTC will advise the applicable trustee that unless and until Definitive Notes or Definitive Certificates, as applicable, are issued, DTC will take any action permitted to be taken by the holders of the Book-Entry Notes or Book-Entry Certificates, as applicable, under the Agreement or indenture, as applicable, only at the direction of one or more Financial Intermediaries to whose DTC accounts the Book-Entry Notes or Book-Entry Certificates, as applicable, are credited, to the extent that actions are taken on behalf of Financial Intermediaries whose holdings include the Book-Entry Notes or Book-Entry Certificates, as applicable. If the Book-Entry Notes or Book-Entry Certificates, as applicable, are globally offered, Clearstream Luxembourg or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a securityholder under the Agreement or indenture, as applicable, on behalf of a Participant of Clearstream Luxembourg or Euroclear only in accordance with its relevant rules and procedures and subject to the ability of the Relevant Depositary to effect those actions on its behalf through DTC. DTC may take actions, at the direction of the related Participants, with respect to some Offered Notes or Offered Certificates, as applicable, that conflict with actions taken with respect to other Offered Notes or Offered Certificates, as applicable. Although DTC, Clearstream Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Book-Entry Notes or Book-Entry Certificates, as applicable, among Participants of DTC, Clearstream Luxembourg and Euroclear, they are under no obligation to perform or continue to perform these procedures and the procedures may be discontinued at any time. None of the depositor, any master servicer, any servicer, the trustee, any securities registrar or paying agent or any of their affiliates will have any responsibility for any aspect of the records relating to or payments made on account of beneficial ownership interests of the Book-Entry Notes or Book-Entry Certificates, as applicable, or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests. DEFINITIVE SECURITIES Notes or Certificates, as applicable, initially issued in book-entry form will be issued as Definitive Notes or Definitive Certificates, as applicable, to Beneficial Owners or their nominees, rather than to DTC or its nominee only (1) if the depositor advises the trustee in writing that DTC is no longer willing or able to properly discharge its responsibilities as depository for the Notes or Certificates, as applicable, and the depositor is unable to locate a qualified successor, (2) if the depositor, at its option, elects to end the book-entry system through DTC or (3) in accordance with any other provisions described in the prospectus supplement. Upon the occurrence of any of the events described in the immediately preceding paragraph, DTC is required to notify all Participants of the availability through DTC of Definitive Notes or Definitive Certificates, as applicable, for the Beneficial Owners. Upon surrender by DTC of the security or securities representing the Book-Entry Notes or Book-Entry Certificates, as applicable, together with instructions for registration, the trustee will issue (or cause to be issued) to the Beneficial Owners identified in those instructions the Definitive Notes or Definitive Certificates, as applicable, to which they are entitled, and thereafter the trustee will recognize the holders of those Definitive Notes or Definitive Certificates, as applicable, as securityholders under the Agreement. DESCRIPTION OF THE AGREEMENTS AGREEMENTS APPLICABLE TO A SERIES REMIC SECURITIES, FASIT SECURITIES, GRANTOR TRUST SECURITIES Securities representing interests in a trust fund, or a portion of a trust fund, that the trustee will elect to have treated as a real estate mortgage investment conduit under Sections 860A through 860G of the Code ("REMIC Securities"), FASIT Securities (as defined in this prospectus), or Grantor Trust Securities (as defined in this prospectus) will be issued, and the related trust fund will be created, pursuant to a pooling and servicing agreement or trust agreement (in either case, generally referred to in this prospectus as the "pooling and servicing agreement") among the depositor, the trustee and the sole servicer or master servicer, as applicable. The Assets of that trust fund will be transferred to the trust fund and thereafter serviced in accordance with the terms of the pooling and servicing agreement. In the event there are multiple servicers of the Assets of that trust fund, or in the event the Securities consist of Notes, each servicer will perform its servicing functions pursuant to a related underlying servicing agreement. SECURITIES THAT ARE PARTNERSHIP INTERESTS FOR TAX PURPOSES AND NOTES Certificates, as applicable, that are intended to be treated as partnership interests for tax purposes will be issued, and the related trust fund will be created, pursuant to the pooling and servicing agreement or trust agreement. A series of Notes issued by a trust fund that is intended to be treated as a partnership or disregarded entity for tax purposes will be issued pursuant to an indenture between the related trust fund and an indenture trustee named in the prospectus supplement. The trust fund will be established either as a statutory business trust under the law of the State of Delaware or as a common law trust under the law of the State of New York pursuant to a trust agreement between the depositor and an owner trustee specified in the prospectus supplement relating to that series of Notes. The Assets securing payment on the Notes will be serviced in accordance with a sale and servicing agreement or servicing agreement. MATERIAL TERMS OF THE POOLING AND SERVICING AGREEMENTS AND UNDERLYING SERVICING AGREEMENTS GENERAL The following summaries describe the material provisions that may appear in each pooling and servicing agreement, sale and servicing agreement or servicing agreement (each an "Agreement"). The prospectus supplement for a series of Notes or Certificates, as applicable, will describe any provision of the Agreement relating to that series that materially differs from the description of those provisions contained in this prospectus. The summaries do not purport to be complete and are subject to, and are qualified by reference to, all of the provisions of the Agreement for each trust fund and the description of those provisions in the prospectus supplement. The provisions of each Agreement will vary depending on the nature of the Notes or Certificates, as applicable, to be issued under the Agreement and the nature of the related trust fund. As used in this prospectus for any series, the term "Security" refers to all of the Notes or Certificates, as applicable, of that series, whether or not offered by this prospectus and by the prospectus supplement, unless the context otherwise requires. A form of a pooling and servicing agreement has been filed as an exhibit to the Registration Statement of which this prospectus is a part. The depositor will provide a copy of the pooling and servicing agreement (without exhibits) relating to any series of Notes or Certificates, as applicable, without charge upon written request of a securityholder of that series addressed to ACE Securities Corp., 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211, Attention: Elizabeth S. Eldridge. The servicer or master servicer and the trustee for any series of Notes or Certificates, as applicable, will be named in the prospectus supplement. In the event there are multiple servicers for the Assets in a trust fund, a master servicer will perform some of the administration, calculation and reporting functions for that trust fund and will supervise the related servicers pursuant to a pooling and servicing agreement. For a series involving a master servicer, references in this prospectus to the servicer will apply to the master servicer where non-servicing obligations are described. If specified in the prospectus supplement, a manager or administrator may be appointed pursuant to the pooling and servicing agreement for any trust fund to administer that trust fund. ASSIGNMENT OF ASSETS; REPURCHASES At the time of issuance of any series of Notes or Certificates, as applicable, the depositor will assign (or cause to be assigned) to the designated trustee the Assets to be included in the related trust fund, together with all principal and interest to be received on or with respect to those 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 that assignment, deliver the Notes or Certificates, as applicable, to the depositor in exchange for the Assets and the other assets comprising the trust fund for that series. Each Asset will be identified in a schedule appearing as an exhibit to the related Agreement. That schedule will include detailed information to the extent available and relevant (1) in respect of each mortgage loan included in the related trust fund, including the city and state of the related Mortgaged Property and type of that property, the mortgage 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 Loan-to-Value Ratio as of the date indicated and payment and prepayment provisions, if applicable, and (2) in respect of each Mortgage Security and Agency Security, the original and outstanding principal amount, if any, and the interest rate on the Mortgage Security or Agency Security. For each mortgage loan, except as otherwise specified in the prospectus supplement, the depositor will deliver or cause to be delivered to the trustee (or to the custodian hereinafter referred to) particular loan documents, which will generally include the original mortgage note endorsed, without recourse, in blank or to the order of the trustee, the original Mortgage (or a certified copy of the original Mortgage) with evidence of recording indicated on the original Mortgage and an assignment of the Mortgage to the trustee in recordable form. However, a trust fund may include mortgage loans where the original mortgage note is not delivered to the trustee if the depositor 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 of the mortgage note has been lost or destroyed. For those mortgage loans, the trustee (or its nominee) may not be able to enforce the mortgage note against the related borrower. The Asset Seller or other entity specified in the prospectus supplement will be required to agree to repurchase, or substitute for, each of these mortgage loans that is subsequently in default if the enforcement thereof or of the related Mortgage is materially adversely affected by the absence of the original mortgage note. The related Agreement will generally require the depositor or another party specified in the prospectus supplement to promptly cause each of these assignments of Mortgage to be recorded in the appropriate public office for real property records, except in the State of California or in other states where, in the opinion of counsel acceptable to the trustee, recording is not required to protect the trustee's interest in the related mortgage loan against the claim of any subsequent transferee or any successor to or creditor of the depositor, the servicer, the relevant Asset Seller or any other prior holder of the mortgage loan. The trustee (or a custodian) will review the mortgage loan documents within a specified period of days after receipt of the mortgage loan documents, and the trustee (or a custodian) will hold those documents in trust for the benefit of the securityholders. If any of these documents are found to be missing or defective in any material respect, the trustee (or that custodian) will immediately notify the servicer and the depositor, and the servicer will immediately notify the relevant Asset Seller or other entity specified in the prospectus supplement. If the Asset Seller cannot cure the omission or defect within a specified number of days after receipt of that notice, then the Asset Seller or other entity specified in the prospectus supplement will be obligated, within a specified number of days of receipt of that notice, to either (1) repurchase the related mortgage loan from the trustee at a price equal to the sum of the unpaid principal balance of the mortgage loan, plus unpaid accrued interest at the interest rate for that Asset 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 servicing expenses that are payable to the servicer, or another price as specified in the prospectus supplement (the "Purchase Price") or (2) substitute a new mortgage loan. There can be no assurance that an Asset Seller or other named entity will fulfill this repurchase or substitution obligation, and neither the servicer nor the depositor will be obligated to repurchase or substitute for that mortgage loan if the Asset Seller or other named entity defaults on its obligation. This repurchase or substitution obligation constitutes the sole remedy available to the securityholders or the trustee for omission of, or a material defect in, a constituent document. To the extent specified in the prospectus supplement, in lieu of curing any omission or defect in the Asset or repurchasing or substituting for that Asset, the Asset Seller or other named entity may agree to cover any losses suffered by the trust fund as a result of that breach or defect. Notwithstanding the preceding three paragraphs, the documents for Home Equity Loans will be delivered to the trustee (or a custodian) only to the extent specified in the prospectus supplement. Generally these documents will be retained by the servicer, which may also be the Asset Seller. In addition, assignments of the related Mortgages to the trustee will be recorded only to the extent specified in the prospectus supplement. Mortgage Securities and Agency Securities will be registered in the name of the trustee or its nominee on the books of the issuer or guarantor or its agent or, in the case of Mortgage Securities and Agency Securities issued only in book-entry form, through the depository with respect to the Mortgage Securities and Agency Securities, in accordance with the procedures established by the issuer or guarantor for registration of those certificates, and distributions on those securities to which the trust fund is entitled will be made directly to the trustee. REPRESENTATIONS AND WARRANTIES; REPURCHASES To the extent provided in the prospectus supplement the depositor will, for each Asset, assign representations and warranties, as of a specified date (the person making those representations and warranties, the "Warranting Party") covering, by way of example, the following types of matters: o the accuracy of the information set forth for that Asset on the schedule of Assets appearing as an exhibit to the related Agreement; o in the case of a mortgage loan, the existence of title insurance insuring the lien priority of the mortgage loan; o the authority of the Warranting Party to sell the Asset; o the payment status of the Asset; o in the case of a mortgage loan, 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 o the existence of hazard and extended perils insurance coverage on the Mortgaged Property. Any Warranting Party shall be an Asset Seller or an affiliate of the Asset Seller or any other person acceptable to the depositor and will be identified in the prospectus supplement. Representations and warranties made in respect of an Asset may have been made as of a date before the applicable Cut-off Date. A substantial period of time may have elapsed between that date and the date of initial issuance of the related series of Notes or Certificates, as applicable, evidencing an interest in that Asset. In the event of a breach of any of these representations or warranties, the Warranting Party will be obligated to reimburse the trust fund for losses caused by that breach or either cure that breach or repurchase or replace the affected Asset 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 that representation and warranty only if the relevant event that causes that breach occurs before that date. That party would have no obligations if the relevant event that causes that breach occurs after that date. Each Agreement will provide that the servicer and/or trustee or another entity identified in the prospectus supplement will be required to notify promptly the relevant Warranting Party of any breach of any representation or warranty made by it in respect of an Asset that materially and adversely affects the value of that Asset or the interests in the prospectus supplement of the securityholders. If the Warranting Party cannot cure that breach within a specified period following the date on which that party was notified of that breach, then the Warranting Party will be obligated to repurchase that Asset from the trustee within a specified period from the date on which the Warranting Party was notified of that breach, at the Purchase Price therefor. If so provided in the prospectus supplement for a series, a Warranting Party, rather than repurchase an Asset as to which a breach has occurred, will have the option, within a specified period after initial issuance of that series of Notes or Certificates, as applicable, to cause the removal of that Asset from the trust fund and substitute in its place one or more other Assets, as applicable, in accordance with the standards described in the prospectus supplement. If so provided in the prospectus supplement for a series, a Warranting Party, rather than repurchase or substitute an Asset as to which a breach has occurred, will have the option to reimburse the trust fund or the securityholders for any losses caused by that breach. This reimbursement, repurchase or substitution obligation will constitute the sole remedy available to securityholders or the trustee for a breach of representation by a Warranting Party. Neither the depositor (except to the extent that it is the Warranting Party) nor the servicer will be obligated to purchase or substitute for an Asset if a Warranting Party defaults on its obligation to do so, and no assurance can be given that the Warranting Parties will carry out those obligations with respect to the Assets. A servicer will make representations and warranties regarding its authority to enter into, and its ability to perform its obligations under, the related Agreement. A breach of any representation of the servicer that materially and adversely affects the interests of the securityholders and which continues unremedied for the number of days specified in the Agreement after the discovery of the breach by the servicer or the receipt of written notice of that breach by the servicer from the trustee, the depositor or the holders of Notes or Certificates, as applicable, evidencing not less than 25% of the voting rights or other percentage specified in the related Agreement, will constitute an Event of Default under that Agreement. See "--Events of Default under the Agreement" and "--Rights Upon Event of Default under the Agreements." COLLECTION ACCOUNT AND RELATED ACCOUNTS GENERAL. The 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 Assets (collectively, the "Collection Account"), which must be an account or accounts that either: o 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 so that the securityholders have a claim with respect to the funds in the Collection Account or a perfected first priority security interest against any collateral securing those funds that is superior to the claims of any other depositors or general creditors of the institution with which the Collection Account is maintained, or o are maintained with a bank or trust company, and in a manner satisfactory to the rating agency or agencies rating any class of Notes or Certificates, as applicable, of that series. Investment of amounts in the Collection Account is limited to United States government securities and other investment grade obligations specified in the Agreement ("Permitted Investments"). A Collection Account may be maintained as an interest bearing or a non-interest bearing account and the funds held in the Collection Account may be invested pending each succeeding Distribution Date in short-term Permitted Investments. Any interest or other income earned on funds in the Collection Account will, unless otherwise specified in the prospectus supplement, be paid to the servicer or its designee as additional servicing compensation. The Collection Account may be maintained with an institution that is an affiliate of the servicer, if applicable, provided that that institution meets the standards imposed by the rating agency or agencies. If permitted by the rating agency or agencies, a Collection 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 the servicer or serviced or master serviced by it on behalf of others. DEPOSITS. A servicer or the trustee will deposit or cause to be deposited in the Collection Account for one or more trust funds on a daily basis, or any other period provided in the related Agreement, the following payments and collections received, or advances made, by the servicer or the trustee or on its behalf after the Cut-off Date (other than payments due on or before the Cut-off Date, and exclusive of any amounts representing a Retained Interest), except as otherwise provided in the Agreement: (1) all payments on account of principal, including principal prepayments, on the Assets; (2) all payments on account of interest on the Assets, including any default interest collected, in each case net of any portion retained by a servicer as its servicing compensation and net of any Retained Interest; (3) Liquidation Proceeds and Insurance Proceeds, together with the net proceeds on a monthly basis with respect to any Assets acquired for the benefit of securityholders; (4) any amounts paid under any instrument or drawn from any fund that constitutes credit support for the related series of Notes or Certificates, as applicable, as described under "Description of Credit Support;" (5) any advances made as described under "Description of the Securities--Advances in Respect of Delinquencies;" (6) any amounts paid under any Cash Flow Agreement, as described under "Description of the Trust Funds--Cash Flow Agreements;" (7) all proceeds of any Asset or, with respect to a mortgage loan, property acquired in respect of the mortgage loan purchased by the depositor, any Asset Seller or any other specified person as described above under "--Assignment of Assets; Repurchases" and "--Representations and Warranties; Repurchases," all proceeds of any defaulted mortgage loan purchased as described below under "--Realization Upon Defaulted Assets," and all proceeds of any Asset purchased as described under "Description of the Securities--Termination;" (8) any amounts paid by a servicer to cover interest shortfalls arising out of the prepayment of Assets in the trust fund as described below under "--Retained Interest; Servicing Compensation and Payment of Expenses;" (9) to the extent that any of these items do not constitute additional servicing compensation to a servicer, any payments on account of modification or assumption fees, late payment charges or Prepayment Premiums on the Assets; (10) all payments required to be deposited in the Collection Account with respect to any deductible clause in any blanket insurance policy described below under "--Hazard Insurance Policies;" (11) any amount required to be deposited by a servicer or the trustee in connection with losses realized on investments for the benefit of the servicer or the trustee, as the case may be, of funds held in the Collection Account; and (12) any other amounts required to be deposited in the Collection Account as provided in the related Agreement and described in the prospectus supplement. WITHDRAWALS. A servicer or the trustee may, from time to time as provided in the related Agreement, make withdrawals from the Collection Account for each trust fund for any of the following purposes, except as otherwise provided in the Agreement: (1) to make distributions to the securityholders on each Distribution Date; (2) to reimburse a servicer for unreimbursed amounts advanced as described under "Description of the Securities--Advances in Respect of Delinquencies," which reimbursement is to be made out of amounts received that were identified and applied by the servicer as late collections of interest (net of related servicing fees and Retained Interest) on and principal of the particular Assets for which the advances were made or out of amounts drawn under any form of credit support with respect to those Assets; (3) to reimburse a servicer for unpaid servicing fees earned and unreimbursed servicing expenses incurred with respect to Assets and properties acquired in respect of the Assets, which reimbursement is to be made out of amounts that represent Liquidation Proceeds and Insurance Proceeds collected on the particular Assets and properties, and net income collected on the particular properties, which fees were earned or expenses were incurred or out of amounts drawn under any form of credit support for those Assets and properties; (4) to reimburse a servicer for any advances described in clause (2) above and any servicing expenses described in clause (3) above which, in the servicer's good faith judgment, will not be recoverable from the amounts described in those clauses, which reimbursement is to be made from amounts collected on other Assets or, if and to the extent so provided by the related Agreement and described in the prospectus supplement, just from that portion of amounts collected on other Assets that is otherwise distributable on one or more classes of Subordinate Notes or Subordinate Certificates, as applicable, if any, remain outstanding, and otherwise any outstanding class of Notes or Certificates, as applicable, of the related series; (5) if and to the extent described in the prospectus supplement, to pay a servicer interest accrued on the advances described in clause (2) above and the servicing expenses described in clause (3) above while those advances and servicing expenses remain outstanding and unreimbursed; (6) to reimburse a servicer, the depositor, or any of their respective directors, officers, employees and agents, as the case may be, for expenses, costs and liabilities incurred by these parties, as and to the extent described below under "--Certain Matters Regarding Servicers, the Master Servicer and the Depositor;" (7) if and to the extent described in the prospectus supplement, to pay (or to transfer to a separate account for purposes of escrowing for the payment of) the trustee's fees; (8) to reimburse the trustee or any of its directors, officers, employees and agents, as the case may be, for expenses, costs and liabilities incurred by these parties, as and to the extent described below under "--Certain Matters Regarding the Trustee;" (9) to pay a servicer, as additional servicing compensation, interest and investment income earned in respect of amounts held in the Collection Account; (10) to pay the person so entitled any amounts deposited in the Collection Account that were identified and applied by the servicer as recoveries of Retained Interest; (11) to pay for costs reasonably incurred in connection with the proper management and maintenance of any Mortgaged Property acquired for the benefit of securityholders by foreclosure or by deed in lieu of foreclosure or otherwise, which payments are to be made out of income received on that property; (12) if one or more elections have been made to treat the trust fund or designated portions of the trust fund as a REMIC, to pay any federal, state or local taxes imposed on the trust fund or its assets or transactions, as and to the extent described under "Material Federal Income Tax Considerations--REMICs--Taxes That May Be Imposed on the REMIC Pool" or in the prospectus supplement, respectively; (13) to pay for the cost of an independent appraiser or other expert in real estate matters retained to determine a fair sale price for a defaulted mortgage loan or a property acquired in respect of a mortgage loan in connection with the liquidation of that mortgage loan or property; (14) to pay for the cost of various opinions of counsel obtained pursuant to the related Agreement for the benefit of securityholders; (15) to pay for the costs of recording the related Agreement if that recordation materially and beneficially affects the interests of securityholders, provided that the payment shall not constitute a waiver with respect to the obligation of the Warranting Party to remedy any breach of representation or warranty under the Agreement; (16) to pay the person so entitled any amounts deposited in the Collection Account in error, including amounts received on any Asset after its removal from the trust fund whether by reason of purchase or substitution as contemplated above under "--Assignment of Assets; Repurchase" and "--Representations and Warranties; Repurchases" or otherwise; (17) to make any other withdrawals permitted by the related Agreement; and (18) to clear and terminate the Collection Account at the termination of the trust fund. OTHER COLLECTION ACCOUNTS. If specified in the prospectus supplement, the Agreement for any series of Notes or Certificates, as applicable, may provide for the establishment and maintenance of a separate collection account into which the servicer will deposit on a daily basis, or any other period as provided in the related Agreement, the amounts described under "--Deposits" above for one or more series of Notes or Certificates, as applicable. Any amounts on deposit in any of these collection accounts will be withdrawn from these collection accounts and deposited into the appropriate Collection Account by a time specified in the prospectus supplement. To the extent specified in the prospectus supplement, any amounts that could be withdrawn from the Collection Account as described under "--Withdrawals" above may also be withdrawn from any of these collection accounts. The prospectus supplement will set forth any restrictions for any of these collection accounts, including investment restrictions and any restrictions for financial institutions with which any of these collection accounts may be maintained. The servicer will establish and maintain with the indenture trustee an account, in the name of the indenture trustee on behalf of the holders of Notes, into which amounts released from the Collection Account for distribution to the holders of Notes will be deposited and from which all distributions to the holders of Notes will be made. COLLECTION AND OTHER SERVICING PROCEDURES. The servicer is required to make reasonable efforts to collect all scheduled payments under the Assets and will follow or cause to be followed those collection procedures that it would follow with respect to assets that are comparable to the Assets and held for its own account, provided that those procedures are consistent with (1) the terms of the related Agreement and any related hazard insurance policy or instrument of credit support, if any, included in the related trust fund described in this prospectus or under "Description of Credit Support," (2) applicable law and (3) the general servicing standard specified in the prospectus supplement or, if no standard is so specified, its normal servicing practices (in either case, the "Servicing Standard"). In connection, the servicer will be permitted in its discretion to waive any late payment charge or penalty interest in respect of a late payment on an Asset. Each servicer will also be required to perform other customary functions of a servicer of comparable assets, including maintaining hazard insurance policies as described in this prospectus and in any prospectus supplement, and filing and settling claims under these policies; maintaining, to the extent required by the Agreement, escrow or impoundment accounts of borrowers for payment of taxes, insurance and other items required to be paid by any borrower pursuant to the terms of the Assets; processing assumptions or substitutions in those cases where the servicer has determined not to enforce any applicable due-on-sale clause; attempting to cure delinquencies; supervising foreclosures or repossessions; inspecting and managing Mortgaged Properties under some circumstances; and maintaining accounting records relating to the Assets. The servicer or any other entity specified in the prospectus supplement will be responsible for filing and settling claims in respect of particular Assets under any applicable instrument of credit support. See "Description of Credit Support." The servicer may agree to modify, waive or amend any term of any Asset in a manner consistent with the Servicing Standard so long as the modification, waiver or amendment will not (1) affect the amount or timing of any scheduled payments of principal or interest on the Asset or (2) in its judgment, materially impair the security for the Asset or reduce the likelihood of timely payment of amounts due on the Asset. The servicer also may agree to any modification, waiver or amendment that would so affect or impair the payments on, or the security for, an Asset if (1) in its judgment, a material default on the Asset has occurred or a payment default is reasonably foreseeable and (2) in its judgment, that modification, waiver or amendment is reasonably likely to produce a greater recovery with respect to the Asset on a present value basis than would liquidation. In the event of any modification, waiver or amendment of any Asset, the servicer will furnish a copy of that modification, waiver or amendment to the trustee (or its custodian). REALIZATION UPON DEFAULTED ASSETS Generally, the servicer is required to monitor any Asset that is in default, initiate corrective action in cooperation with the borrower if cure is likely, inspect the Asset and take any other actions as are consistent with the Servicing Standard. A significant period of time may elapse before the servicer is able to assess the success of that corrective action or the need for additional initiatives. Any Agreement relating to a trust fund that includes mortgage loans may grant to the servicer and/or the holder or holders of some classes of Notes or Certificates, as applicable, a right of first refusal to purchase from the trust fund at a predetermined purchase price any mortgage loan as to which a specified number of scheduled payments under the Agreement are delinquent. Any right of first refusal granted to the holder of an Offered Security will be described in the prospectus supplement. The prospectus supplement will also describe any similar right granted to any person if the predetermined purchase price is less than the Purchase Price described above under "--Representations and Warranties; Repurchases." If specified in the prospectus supplement, the servicer may offer to sell any defaulted mortgage loan described in the preceding paragraph and not otherwise purchased by any person having a right of first refusal with respect to that defaulted mortgage loan, if and when the servicer determines, consistent with the Servicing Standard, so that a sale would produce a greater recovery on a present value basis than would liquidation through foreclosure, repossession or similar proceedings. The related Agreement will provide that any offering be made in a commercially reasonable manner for a specified period and that the servicer accept the highest cash bid received from any person (including itself, an affiliate of the servicer or any securityholder) that constitutes a fair price for that defaulted mortgage loan. If there is no bid that is determined to be fair, the servicer will proceed with respect to that defaulted mortgage loan as described below. Any bid in an amount at least equal to the Purchase Price described above under "--Representations and Warranties; Repurchases" will in all cases be deemed fair. The 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 that action is consistent with the Servicing Standard and a default on that mortgage loan has occurred or, in the servicer's judgment, is imminent. If title to any Mortgaged Property is acquired by a trust fund as to which a REMIC election has been made, the servicer, on behalf of the trust fund, will be required to sell the Mortgaged Property within three years from the close of the calendar year of acquisition, unless (1) the Internal Revenue Service grants an extension of time to sell that property or (2) the trustee receives an opinion of independent counsel to the effect that the holding of the property by the trust fund longer than three years after the close of the taxable year of its acquisition 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 Notes or Certificates, as applicable, are outstanding. Subject to the foregoing, the servicer will be required to (A) solicit bids for any Mortgaged Property so acquired in that manner as will be reasonably likely to realize a fair price for that property and (B) accept the first (and, if multiple bids are contemporaneously received, the highest) cash bid received from any person that constitutes a fair price. The limitations imposed by the related Agreement and the REMIC provisions of the Code (if a REMIC election has been made for the related trust fund) on the ownership and management 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 Mortgage Loans--Foreclosure." If recovery on a defaulted Asset under any related instrument of credit support is not available, the servicer nevertheless will be obligated to follow or cause to be followed those normal practices and procedures as it deems necessary or advisable to realize upon the defaulted Asset. If the proceeds of any liquidation of the property securing the defaulted Asset are less than the outstanding principal balance of the defaulted Asset plus interest accrued on the defaulted Asset at the applicable interest rate, plus the total amount of expenses incurred by the servicer in connection with those proceedings and which are reimbursable under the Agreement, the trust fund will realize a loss in the amount of that difference. The servicer will be entitled to withdraw or cause to be withdrawn from the Collection Account out of the Liquidation Proceeds recovered on any defaulted Asset, before the distribution of those Liquidation Proceeds to securityholders, amounts representing its normal servicing compensation on the Security, unreimbursed servicing expenses incurred with respect to the Asset and any unreimbursed advances of delinquent payments made with respect to the Asset. If any property securing a defaulted Asset is damaged the servicer is not required to expend its own funds to restore the damaged property unless it determines (1) that restoration will increase the proceeds to securityholders on liquidation of the Asset after reimbursement of the servicer for its expenses and (2) that its expenses will be recoverable by it from related Insurance Proceeds or Liquidation Proceeds. The pooling and servicing agreement will require the trustee, if it has not received a distribution for any Mortgage Security or Agency Security by the fifth business day after the date on which that distribution was due and payable pursuant to the terms of that Agency Security, to request the issuer or guarantor, if any, of that Mortgage Security or Agency Security to make that payment as promptly as possible and legally permitted to take legal action against that issuer or guarantor as the trustee deems appropriate under the circumstances, including the prosecution of any claims in connection therewith. The reasonable legal fees and expenses incurred by the trustee in connection with the prosecution of this legal action will be reimbursable to the trustee out of the proceeds of that action and will be retained by the trustee before the deposit of any remaining proceeds in the Collection Account pending distribution of the Collection Account to securityholders of the related series. If the proceeds of any legal action are insufficient to reimburse the trustee for its legal fees and expenses, the trustee will be entitled to withdraw from the Collection Account an amount equal to its expenses, and the trust fund may realize a loss in that amount. As servicer of the Assets, a servicer, on behalf of itself, the trustee and the securityholders, will present claims to the borrower under each instrument of credit support, and will take those reasonable steps as are necessary to receive payment or to permit recovery under these instruments for defaulted Assets. If a servicer or its designee recovers payments under any instrument of credit support for any defaulted Assets, the servicer will be entitled to withdraw or cause to be withdrawn from the Collection Account out of those proceeds, before distribution of the Collection Account to securityholders, amounts representing its normal servicing compensation on that Asset, unreimbursed servicing expenses incurred for the Asset and any unreimbursed advances of delinquent payments made with respect to the Asset. See "--Hazard Insurance Policies" and "Description of Credit Support." HAZARD INSURANCE POLICIES MORTGAGE LOANS. Generally, each Agreement for a trust fund composed of mortgage loans will require the servicer to cause the borrower on each mortgage loan to maintain a hazard insurance policy (including flood insurance coverage, if obtainable, to the extent the property is located in a federally designated flood area, in an amount as is required under applicable guidelines) providing for the level of coverage that is required under the related Mortgage or, if any Mortgage permits its holder to dictate to the borrower the insurance coverage to be maintained on the related Mortgaged Property, then the level of coverage that is consistent with the Servicing Standard. That coverage will be in general in an amount equal to the lesser of the principal balance owing on that mortgage loan (but not less than the amount necessary to avoid the application of any co-insurance clause contained in the hazard insurance policy) and the amount necessary to fully compensate for any damage or loss to the improvements on the Mortgaged Property on a replacement cost basis or any other amount specified in the prospectus supplement. The ability of the 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 borrowers. All amounts collected by the servicer under any of these policies (except for amounts to be applied to the restoration or repair of the Mortgaged Property or released to the borrower in accordance with the servicer's normal servicing procedures, subject to the terms and conditions of the related Mortgage and mortgage note) will be deposited in the Collection Account in accordance with the related Agreement. The Agreement may provide that the servicer may satisfy its obligation to cause each borrower to maintain a hazard insurance policy by the servicer's maintaining a blanket policy insuring against hazard losses on the mortgage loans. If the blanket policy contains a deductible clause, the servicer will be required to deposit in the Collection Account from its own funds all sums that would have been deposited in the Collection Account but for that clause. 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 mortgage 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 of the policies are dictated by respective state laws, and most of these 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 other kinds of uninsured risks. The hazard insurance policies covering the Mortgaged Properties securing the mortgage loans will typically contain a coinsurance 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 to recover the full amount of any partial loss. If the insured's coverage falls below this specified percentage, the coinsurance clause generally provides that the insurer's liability in the event of partial loss does not exceed the lesser of (1) the replacement cost of the improvements less physical depreciation and (2) that proportion of the loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of those improvements. Each Agreement for a trust fund composed of mortgage loans will require the servicer to cause the borrower on each mortgage loan to maintain all other insurance coverage for the related Mortgaged Property as is consistent with the terms of the related Mortgage and the Servicing Standard, which insurance may typically include flood insurance (if the related Mortgaged Property was located at the time of origination in a federally designated flood area). Any cost incurred by the servicer in maintaining any 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 that cost will not be taken into account for purposes of calculating the distribution to be made to securityholders. Those costs may be recovered by the servicer from the Collection Account, with interest, as provided by the Agreement. Under the terms of the mortgage loans, borrowers will generally be required to present claims to insurers under hazard insurance policies maintained on the related Mortgaged Properties. The servicer, on behalf of the trustee and securityholders, is obligated to present or cause to be presented claims under any blanket insurance policy insuring against hazard losses on Mortgaged Properties securing the mortgage loans. However, the ability of the servicer to present or cause to be presented those claims is dependent upon the extent to which information in this regard is furnished to the servicer by borrowers. FHA INSURANCE AND VA GUARANTEES FHA loans will be insured by the FHA as authorized under the Housing Act. Some FHA loans will be insured under various FHA programs including the standard FHA 203(b) program to finance the acquisition of one- to four-family housing units, the FHA 245 graduated payment mortgage program and the FHA Title I Program. These programs generally limit the principal amount and interest rates of the mortgage loans insured. The prospectus supplement for Notes or Certificates, as applicable, of each series evidencing interests in a trust fund including FHA loans will set forth additional information regarding the regulations governing the applicable FHA insurance programs. Except as otherwise specified in the prospectus supplement, the following describes FHA insurance programs and regulations as generally in effect for FHA loans. The insurance premiums for FHA loans are collected by lenders approved by the Department of Housing and Urban Development ("HUD") or by the servicer and are paid to the FHA. The regulations governing FHA single-family mortgage insurance programs provide that insurance benefits are payable either upon foreclosure (or other acquisition of possession) and conveyance of the mortgaged premises to the United States of America or upon assignment of the defaulted loan to the United States of America. For a defaulted FHA loan, the servicer is limited in its ability to initiate foreclosure proceedings. When it is determined, either by the servicer or HUD, that default was caused by circumstances beyond the borrower's control, the servicer is expected to make an effort to avoid foreclosure by entering, if feasible, into one of a number of available forms of forbearance plans with the borrower. Those plans may involve the reduction or suspension of regular mortgage payments for a specified period, with those payments to be made on or before the maturity date of the mortgage, or the recasting of payments due under the mortgage up to or, other than FHA loans originated under the FHA Title I Program, beyond the maturity date. In addition, when a default caused by those circumstances is accompanied by other criteria, HUD may provide relief by making payments to the servicer in partial or full satisfaction of amounts due under the FHA loan (which payments are to be repaid by the borrower to HUD) or by accepting assignment of the loan from the servicer. With some exceptions, at least three full monthly installments must be due and unpaid under the FHA loan, and HUD must have rejected any request for relief from the borrower before the servicer may initiate foreclosure proceedings. HUD has the option, in most cases, to pay insurance claims in cash or in debentures issued by HUD. Currently, claims are being paid in cash, and claims have not been paid in debentures since 1965. HUD debentures issued in satisfaction of FHA insurance claims bear interest at the applicable HUD debentures interest rate. To the extent specified in the prospectus supplement, the servicer of each single family FHA loan will be obligated to purchase any debenture issued in satisfaction of that FHA loan upon default for an amount equal to the principal amount of that debenture. Other than in relation to the FHA Title I Program, the amount of insurance benefits generally paid by the FHA is equal to the entire unpaid principal amount of the defaulted FHA loan adjusted to reimburse the servicer for some of its costs and expenses and to deduct amounts received or retained by the servicer after default. When entitlement to insurance benefits results from foreclosure (or other acquisition of possession) and conveyance to HUD, the servicer is compensated for no more than two-thirds of its foreclosure costs, and is compensated for interest accrued and unpaid before that date but in general only to the extent it was allowed pursuant to a forbearance plan approved by HUD. When entitlement to insurance benefits results from assignment of the FHA loan to HUD, the insurance payment includes full compensation for interest accrued and unpaid to the assignment date. The insurance payment itself, upon foreclosure of an FHA loan, bears interest from a date 30 days after the borrower's first uncorrected failure to perform any obligation to make any payment due under the mortgage and, upon assignment, from the date of assignment to the date of payment of the claim, in each case at the same interest rate as the applicable HUD debenture interest rate as described above. VA loans will be partially guaranteed by the VA under the Serviceman's Readjustment Act (a "VA Guaranty Policy"). For a defaulted VA loan, the servicer is, absent exceptional circumstances, authorized to announce its intention to foreclose only when the default has continued for three months. Generally, a claim for the guarantee is submitted after liquidation of the Mortgaged Property. The amount payable under the guarantee will be the percentage of the VA loan originally guaranteed applied to indebtedness outstanding as of the applicable date of computation specified in the VA regulations. Payments under the guarantee will be equal to the unpaid principal amount of that VA loan, interest accrued on the unpaid balance of that VA loan to the appropriate date of computation and limited expenses of the mortgagee, but in each case only to the extent that those amounts have not been recovered through liquidation of the Mortgaged Property. The amount payable under the guarantee may in no event exceed the amount of the original guarantee. FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE Each Agreement will require that the servicer obtain and maintain in effect a fidelity bond or similar form of insurance coverage (which may provide blanket coverage) or any combination of these insuring against loss occasioned by fraud, theft or other intentional misconduct of the officers, employees and agents of the servicer. The related Agreement will allow the servicer to self-insure against loss occasioned by the errors and omissions of the officers, employees and agents of the servicer so long as the criteria set forth in the Agreement are met. DUE-ON-SALE CLAUSES The mortgage 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 mortgage loan upon any sale, transfer or conveyance of the related Mortgaged Property. The servicer will generally enforce any due-on-sale clause to the extent it has knowledge of the conveyance or proposed conveyance of the underlying Mortgaged Property and it is entitled to do so under applicable law; provided, however, that the servicer will not take any action in relation to the enforcement of any due-on-sale clause that would: o adversely affect or jeopardize coverage under any applicable insurance policy or o materially increase the risk of default or delinquency on, or materially impair the security for, that mortgage loan. Any fee collected by or on behalf of the servicer for entering into an assumption agreement will be retained by or on behalf of the servicer as additional servicing compensation. See "Certain Legal Aspects of Mortgage Loans--Due-on-Sale Clauses." The servicer will generally permit that transfer so long as the transferee satisfies the servicer's then applicable underwriting standards. The purpose of those transfers is often to avoid a default by the transferring borrower. RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES The prospectus supplement for a series of Notes or Certificates, as applicable, will specify whether there will be any Retained Interest in the Assets, and, if so, the initial owner of this Retained Interest. 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 an Asset represents a specified portion of the interest payable on the Asset. The Retained Interest will be deducted from borrower payments as received and will not be part of the related trust fund. The servicer's primary servicing compensation for a series of Notes or Certificates, as applicable, will come from the periodic payment to it of a portion of the interest payment on each Asset or any other amount specified in the prospectus supplement. Since any Retained Interest and a servicer's primary compensation are percentages of the principal balance of each Asset, those amounts will decrease in accordance with the amortization of the Assets. The prospectus supplement for a series of Notes or Certificates, as applicable, evidencing interests in a trust fund that includes mortgage loans may provide that, as additional compensation, the servicer may retain all or a portion of assumption fees, modification fees, late payment charges or Prepayment Premiums collected from borrowers and any interest or other income that may be earned on funds held in the Collection Account or any account established by a servicer pursuant to the Agreement. The servicer may, to the extent provided in the prospectus supplement, pay from its servicing compensation expenses incurred in connection with its servicing and managing of the Assets, including payment of the fees and disbursements of the trustee and independent accountants, payment of expenses incurred in connection with distributions and reports to securityholders, and payment of any other expenses described in the prospectus supplement. Some other expenses, including expenses relating to defaults and liquidations on the Assets and, to the extent so provided in the prospectus supplement, interest on these expenses at the rate specified in the prospectus supplement may be borne by the trust fund. If and to the extent provided in the prospectus supplement, the servicer may be required to apply a portion of the servicing compensation otherwise payable to it in respect of any Due Period to interest shortfalls resulting from the voluntary prepayment of any Assets in the related trust fund during that period before their due dates. EVIDENCE AS TO COMPLIANCE Each Agreement relating to Assets that include mortgage loans, unless otherwise provided in the prospectus supplement, will provide that on or before a specified date in each year, beginning with the first of these dates at least six months after the related Cut-off Date, a firm of independent public accountants will furnish a statement to the trustee to the effect that, on the basis of the examination by that firm conducted substantially in compliance with either the Uniform Single Attestation Program for Mortgage Bankers, the Audit Program for Mortgages serviced for Freddie Mac or any other program used by the servicer, the servicing by or on behalf of the servicer of mortgage loans under agreements substantially similar to each other (including the related Agreement) was conducted in compliance with the terms of those agreements or that program except for any significant exceptions or errors in records that, in the opinion of the firm, either the Audit Program for Mortgages serviced for Freddie Mac, or paragraph 4 of the Uniform Single Attestation Program for Mortgage Bankers, or any other program, requires it to report. Each Agreement will also provide for delivery to the trustee, on or before a specified date in each year, of an officer's certificate of the servicer to the effect that the servicer has fulfilled its obligations under the Agreement throughout the preceding calendar year or other specified twelve-month period. CERTAIN MATTERS REGARDING SERVICERS, THE MASTER SERVICER AND THE DEPOSITOR The servicer or master servicer under each Agreement will be named in the prospectus supplement. The entities serving as servicer or master servicer may be affiliates of the depositor and may have other normal business relationships with the depositor or the depositor's affiliates. If applicable, reference in this prospectus to the servicer will also be deemed to be to the master servicer. Each Agreement will provide, in general, that: o The servicer may resign from its obligations and duties under the Agreement only upon a determination that its duties under the Agreement are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities carried on by it, the other activities of the servicer so causing that conflict being of a type and nature carried on by the servicer at the date of the Agreement. No resignation will become effective until the trustee or a successor servicer has assumed the servicer's obligations and duties under the Agreement. o Neither any servicer, the depositor nor any director, officer, employee, or agent of a servicer or the depositor will be under any liability to the related trust fund or securityholders for any action taken, or for refraining from the taking of any action, in good faith pursuant to the Agreement; provided, however, that neither a servicer, the depositor nor any other person will be protected against any breach of a representation, warranty or covenant made in the related Agreement, or against any liability specifically imposed by the Agreement, or against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of obligations or duties under the Agreement or by reason of reckless disregard of obligations and duties under the Agreement. o Any servicer, the depositor and any director, officer, employee or agent of a servicer or the depositor will be entitled to indemnification by the related trust fund and will be held harmless against any loss, liability or expense incurred in connection with any legal action relating to the Agreement or the Notes or Certificates, as applicable,; provided, however, that that indemnification will not extend to any loss, liability or expense (1) specifically imposed by that Agreement or otherwise incidental to the performance of obligations and duties under the Agreement, including, in the case of a servicer, the prosecution of an enforcement action in respect of any specific mortgage loan or mortgage loans (except as any loss, liability or expense will be otherwise reimbursable pursuant to that Agreement); (2) incurred in connection with any breach of a representation, warranty or covenant made in that Agreement; (3) incurred by reason of misfeasance, bad faith or gross negligence in the performance of obligations or duties under the Agreement, or by reason of reckless disregard of those obligations or duties; (4) incurred in connection with any violation of any state or federal securities law; or (5) imposed by any taxing authority if that loss, liability or expense is not specifically reimbursable pursuant to the terms of the related Agreement. o Neither any servicer nor the depositor will be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its respective responsibilities under the Agreement and which in its opinion may involve it in any expense or liability. Any servicer or the depositor may, however, in its discretion undertake any action which it may deem necessary or desirable with respect to the Agreement and the rights and duties of the parties to the Agreement and the interests of the securityholders under the Agreement. In that event, the legal expenses and costs of that action and any liability resulting will be expenses, costs and liabilities of the securityholders, and the servicer or the depositor, as the case may be, will be entitled to be reimbursed therefor and to charge the Collection Account. Any person into which the servicer or the depositor may be merged or consolidated, or any person resulting from any merger or consolidation to which the servicer or the depositor is a party, or any person succeeding to the business of the servicer or the depositor, may be the successor of the servicer or the depositor, as the case may be, under the terms of the related Agreement. SPECIAL SERVICERS If and to the extent specified in the prospectus supplement, a special servicer (a "Special servicer") may be a party to the related Agreement or may be appointed by the servicer or another specified party to perform specified duties in respect of servicing the related mortgage loans that would otherwise be performed by the servicer (for example, the workout and/or foreclosure of defaulted mortgage loans). The rights and obligations of any Special servicer will be specified in the prospectus supplement, and the servicer will be liable for the performance of a Special servicer only if, and to the extent, set forth in the prospectus supplement. EVENTS OF DEFAULT UNDER THE AGREEMENT Events of default under the related Agreement will generally include: o any failure by the servicer to distribute or cause to be distributed to securityholders, or to remit to the trustee for distribution to securityholders, any required payment that continues after a grace period, if any; o any failure by the servicer duly to observe or perform in any material respect any of its other covenants or obligations under the Agreement that continues unremedied for 30 days after written notice of that failure has been given to the servicer by the trustee or the depositor, or to the servicer, the depositor and the trustee by securityholders evidencing not less than 25% of the voting rights for that series; o any breach of a representation or warranty made by the servicer under the Agreement that materially and adversely affects the interests of securityholders and which continues unremedied for 30 days after written notice of that breach has been given to the servicer by the trustee or the depositor, or to the servicer, the depositor and the trustee by the holders of Notes or Certificates, as applicable, evidencing not less than 25% of the voting rights for that series; and o some events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings and actions by or on behalf of the servicer indicating its insolvency or inability to pay its obligations. Material variations to the foregoing events of default (other than to shorten cure periods or eliminate notice requirements) will be specified in the prospectus supplement. The trustee will, not later than the later of 60 days or any other period specified in the prospectus supplement after the occurrence of any event that constitutes or, with notice or lapse of time or both, would constitute an event of default and five days after specific officers of the trustee become aware of the occurrence of that event, transmit by mail to the depositor and all securityholders of the applicable series notice of that occurrence, unless that default has been cured or waived. RIGHTS UPON EVENT OF DEFAULT UNDER THE AGREEMENTS 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 Notes or Certificates, as applicable, evidencing not less than 51% (or any other percentage specified in the Agreement) of the voting rights for that series, the trustee will terminate all of the rights and obligations of the servicer under the Agreement and in and to the mortgage loans (other than as a securityholder or as the owner of any Retained Interest), whereupon the trustee will succeed to all of the responsibilities, duties and liabilities of the servicer under the Agreement (except that if the trustee is prohibited by law from obligating itself to make advances regarding delinquent Assets, or if the prospectus supplement so specifies, then the trustee will not be obligated to make those advances) and will be entitled to similar compensation arrangements. If the trustee is unwilling or unable so to act, it may or, at the written request of the holders of Notes or Certificates, as applicable, entitled to at least 51% (or any other percentage specified in the Agreement) of the voting rights for that series, it must 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 that appointment of at least $15,000,000 (or any other amount specified in the Agreement) to act as successor to the servicer under the Agreement. Pending that appointment, the trustee is obligated to act in that capacity. The trustee and any successor servicer may agree upon the servicing compensation to be paid, which in no event may be greater than the compensation payable to the servicer under the Agreement. The holders of Notes or Certificates, as applicable, representing at least 66 2/3% (or any other percentage specified in the Agreement) of the voting rights allocated to the respective classes of Notes or Certificates, as applicable, affected by any event of default will be entitled to waive that event of default; provided, however, that an Event of Default involving a failure to distribute a required payment to securityholders described in clause (1) under "--Events of Default under the Agreements" may be waived only by all of the securityholders. Upon any waiver of an event of default, that event of default will cease to exist and will be deemed to have been remedied for every purpose under the Agreement. No securityholders will have the right under any Agreement to institute any proceeding with respect to the Agreement unless that holder previously has given to the trustee written notice of default and unless the holders of Notes or Certificates, as applicable, evidencing not less than 25% (or any other percentage specified in the Agreement) of the voting rights have made written request upon the trustee to institute that proceeding in its own name as trustee under the Agreement and have offered to the trustee reasonable indemnity, and the trustee for 60 days (or any other number of days specified in the Agreement) has neglected or refused to institute any 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 under the Agreement or to institute, conduct or defend any litigation under the Agreement or in relation to the Agreement at the request, order or direction of any of the securityholders covered by that Agreement, unless those securityholders have offered to the trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred. The manner of determining the voting rights of a Security or class or classes of Notes or Certificates, as applicable, will be specified in the Agreement. AMENDMENT In general, each Agreement may be amended by the parties to it, without the consent of any securityholders covered by the Agreement, to (1) cure any ambiguity or mistake; (2) correct, modify or supplement any provision in the Agreement that may be inconsistent with any other provision in the Agreement or with the prospectus supplement; (3) make any other provisions with respect to matters or questions arising under the Agreement that are not materially inconsistent with the provisions of the Agreement; or (4) comply with any requirements imposed by the Code; provided that, in the case of clause (3), that amendment will not adversely affect in any material respect the interests of any securityholders covered by the Agreement as evidenced either by an opinion of counsel to that effect or the delivery to the trustee of written notification from each rating agency that provides, at the request of the depositor, a rating for the Offered Notes or Offered Certificate, as applicable, of the related series to the effect that that amendment or supplement will not cause that rating agency to lower or withdraw the then current rating assigned to those Notes or Certificates, as applicable. In general, each Agreement may also be amended by the depositor, the servicer, if any, and the trustee, with the consent of the securityholders affected by the amendment evidencing not less than 51% (or any other percentage specified in the Agreement) of the voting rights, for any purpose; provided, however, no amendment may (1) reduce in any manner the amount of, or delay the timing of, payments received or advanced on Assets that are required to be distributed on any Security without the consent of the securityholder or (2) reduce the consent percentages described in this paragraph without the consent of all the securityholders covered by the Agreement then outstanding. However, for any series of Notes or Certificates, as applicable, as to which a REMIC election is to be made, the trustee will not consent to any amendment of the Agreement unless it has first have received an opinion of counsel to the effect that that amendment will not result in the imposition of a tax on the related trust fund or, if applicable, cause the related trust fund to fail to qualify as a REMIC, at any time that the related Notes or Certificates, as applicable, are outstanding. THE TRUSTEE The trustee under each Agreement will be named in the 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, with any servicer and its affiliates and with any master servicer and its affiliates. To the extent consistent with its fiduciary obligations as trustee, the trustee may delegate its duties to one or more agents as provided in the Agreement. DUTIES OF THE TRUSTEE The trustee will make no representations as to the validity or sufficiency of any Agreement, the Notes or Certificates, as applicable, or any 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 the master servicer or its designee in respect of the Notes or Certificates, as applicable, or the Assets, or deposited into or withdrawn from the Collection Account or any other account by or on behalf of the 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 Agreement, as applicable. However, upon receipt of the various certificates, reports or other instruments required to be furnished to it, the trustee is required to examine those documents and to determine whether they conform to the requirements of the Agreement. CERTAIN MATTERS REGARDING THE TRUSTEE The trustee and any director, officer, employee or agent of the trustee will be entitled to indemnification out of the Collection 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 (1) enforcing its rights and remedies and protecting the interests of the securityholders during the continuance of an Event of Default, (2) defending or prosecuting any legal action in respect of the related Agreement or series of Notes or Certificates, as applicable, (3) being the mortgagee of record for the mortgage loans in a trust fund and the owner of record for any Mortgaged Property acquired in respect thereof for the benefit of securityholders, or (4) acting or refraining from acting in good faith at the direction of the holders of the related series of Notes or Certificates, as applicable, entitled to not less than 25% (or any other percentage as is specified in the related Agreement for any particular matter) of the voting rights for that series; provided, however, that this 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 under the Agreement, or by reason of its reckless disregard of those obligations or duties, or as may arise from a breach of any representation, warranty or covenant of the trustee made in the Agreement. 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 of its resignation to the depositor, the servicer, if any, each rating agency, and all securityholders. Upon receiving that notice of resignation, the depositor is required promptly to appoint a successor trustee acceptable to the servicer, if any. If no successor trustee has been so appointed and has accepted appointment within 30 days after the giving of that 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 ceases to be eligible to continue as a trustee under the related Agreement, or if at any time the trustee becomes incapable of acting, or is adjudged bankrupt or insolvent, or a receiver of the trustee or of its property is appointed, or any public officer takes charge or control of the trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, or if a change in the financial condition of the trustee has adversely affected or will adversely affect the rating on any class of the Notes or Certificates, as applicable, then the depositor and/or a party specified in the related Agreement may remove the trustee and appoint a successor trustee acceptable to the master servicer, if any, according to the terms of the related Agreement. Securityholders of any series entitled to at least 51% (or any other percentage specified in the prospectus supplement) of the voting rights for that 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 will not become effective until acceptance of appointment by the successor trustee. MATERIAL TERMS OF THE INDENTURE GENERAl The following summary describes the material provisions that may appear in each indenture. The prospectus supplement for a series of Notes will describe any provision of the indenture relating to that series that materially differs from the description of that provision contained in this prospectus. The summaries do not purport to be complete and are subject to, and are qualified by reference to, all of the provisions of the indenture for a series of Notes. A form of an indenture has been filed as an exhibit to the Registration Statement of which this prospectus is a part. The depositor will provide a copy of the indenture (without exhibits) relating to any series of Notes without charge upon written request of a securityholder of that series addressed to ACE Securities Corp., 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211, Attention: Elizabeth S. Eldridge. EVENTS OF DEFAULT Events of default under the indenture for each series of Notes will generally include: o a default for thirty days (or any other number of days specified in the prospectus supplement) or more in the payment of any principal of or interest on a Note of that series, to the extent specified in the prospectus supplement; o failure to perform any other covenant of the depositor or the trust fund in the indenture that continues for a period of sixty days (or any other number of days specified in the prospectus supplement or the indenture) after notice of the failure is given in accordance with the procedures described in the prospectus supplement; o any representation or warranty made by the depositor or the trust fund in the indenture or in any certificate or other writing delivered pursuant to the indenture or in connection with the indenture with respect to or affecting that series having been incorrect in a material respect as of the time made, and that breach is not cured within sixty days (or any other number of days specified in the prospectus supplement) after notice of the breach is given in accordance with the procedures described in the prospectus supplement; o specified events of bankruptcy, insolvency, receivership or liquidation of the trust fund; or o any other event of default provided with respect to Notes of that series. If an event of default with respect to the Notes of any series at the time outstanding occurs and is continuing, subject to and in accordance with the terms of the indenture, either the indenture trustee or the holders of a majority of the then total outstanding amount of the Notes of that series may declare the principal amount (or, if the Notes of that series are Accrual Securities, that portion of the principal amount as may be specified in the terms of that series, as provided in the indenture) of all the Notes of that series to be due and payable immediately. That declaration may, under some circumstances, be rescinded and annulled by the securityholders of a majority in total outstanding amount of the Notes of that series. If, following an event of default with respect to any series of Notes, the Notes of that series have been declared to be due and payable, the indenture trustee may, in its discretion, notwithstanding that acceleration, elect to maintain possession of the collateral securing the Notes of that series and to continue to apply distributions on that collateral as if there had been no declaration of acceleration if that collateral continues to provide sufficient funds for the payment of principal of and interest on the Notes of that series as they would have become due if there had not been that declaration. In addition, the indenture trustee may not sell or otherwise liquidate the collateral securing the Notes of a series following an event of default, other than a default in the payment of any principal or interest on any Note of that series for thirty days or more, unless (1) the holders of 100% (or any other percentage specified in the indenture) of the then total outstanding amount of the Notes of that series consent to that sale; (2) the proceeds of that sale or liquidation are sufficient to pay in full the principal of and accrued interest, due and unpaid, on the outstanding Notes of that series at the date of that sale; or (3) the indenture trustee determines that that collateral would not be sufficient on an ongoing basis to make all payments on the Notes as those payments would have become due if the Notes had not been declared due and payable, and the indenture trustee obtains the consent of the holders of 66 2/3% (or any other percentage specified in the indenture) of the then total outstanding amount of the Notes of that series. If so specified in the prospectus supplement, only holders of particular classes of Notes will have the right to declare the Notes of that series to be immediately due and payable in the event of a payment default, as described above, and to exercise the remedies described above. If the indenture trustee liquidates the collateral in connection with an event of default involving a default for thirty days (or any other number of days specified in the indenture) or more in the payment of principal of or interest on the Notes of a series, the indenture provides that the indenture trustee will have a prior lien on the proceeds of any liquidation for unpaid fees and expenses. As a result, upon the occurrence of that event of default, the amount available for distribution to the securityholders would be less than would otherwise be the case. However, the indenture trustee may not institute a proceeding for the enforcement of its lien except in connection with a proceeding for the enforcement of the lien of the indenture for the benefit of the securityholders after the occurrence of that event of default. To the extent provided in the prospectus supplement, in the event the principal of the Notes of a series is declared due and payable, as described above, the holders of any Notes issued at a discount from par may be entitled to receive no more than an amount equal to the unpaid principal amount of the Notes less the amount of the discount that is unamortized. Subject to the provisions of the indenture relating to the duties of the indenture trustee, in case an event of default occurs and continues for a series of Notes, the indenture trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any of the securityholders of that series, unless those holders offer to the indenture trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that might be incurred by it in complying with that request or direction. Subject to those provisions for indemnification and some limitations contained in the indenture, the holders of a majority of the then total outstanding amount of the Notes of that series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee or exercising any trust or power conferred on the indenture trustee with respect to the Notes of that series, and the holders of a majority of the then total outstanding amount of the Notes of that series may, in some cases, waive any default with respect to the Notes, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the indenture that cannot be modified without the waiver or consent of all the holders of the outstanding Notes of that series affected. DISCHARGE OF INDENTURE The indenture will be discharged, subject to the provisions of the indenture, for a series of Notes (except for continuing rights specified in the indenture) upon the delivery to the indenture trustee for cancellation of all the Notes of that series or, with some limitations, upon deposit with the indenture trustee of funds sufficient for the payment in full of all of the Notes of that series. With some limitations, the indenture will provide that, if specified for the Notes of any series, the related trust fund will be discharged from any and all obligations in respect of the Notes of that series (except for obligations specified in the indenture including obligations relating to temporary Notes and exchange of Notes, to register the transfer of or exchange Notes of that series, to replace stolen, lost or mutilated Notes of that series, to maintain paying agencies and to hold monies for payment in trust) upon the deposit with the indenture trustee, in trust, of money and/or direct obligations of or obligations guaranteed by the United States of America which through the payment of interest and principal in respect of the Notes in accordance with their terms will provide money in an amount sufficient to pay the principal of and each installment of interest on the Notes of that series on the maturity date for those Notes and any installment of interest on those Notes in accordance with the terms of the indenture and the Notes of that series. In the event of any defeasance and discharge of Notes of that series, holders of Notes of that series would be able to look only to that money and/or those direct obligations for payment of principal and interest, if any, on their Notes until maturity. INDENTURE TRUSTEE'S ANNUAL REPORT The indenture trustee for each series of Notes will be required to mail each year to all related securityholders a brief report, as provided in the indenture, relating to its eligibility and qualification to continue as indenture trustee under the related indenture, any amounts advanced by it under the indenture, the amount, interest rate and maturity date of indebtedness owing by that Trust to the applicable indenture trustee in its individual capacity, the property and funds physically held by the indenture trustee in its capacity as indenture trustee and any action taken by it that materially affects the Notes and that has not been previously reported. THE INDENTURE TRUSTEE The indenture trustee for a series of Notes will be specified in the prospectus supplement. The indenture trustee for any series may resign at any time in accordance with the terms of the indenture, in which event the depositor or the appropriate party designated in the indenture will be obligated to appoint a successor trustee for that series. The depositor or the appropriate party designated in the indenture may also remove any indenture trustee if that indenture trustee ceases to be eligible to continue as the indenture trustee under the related indenture, if that indenture trustee becomes insolvent or for any other grounds specified in the indenture. In those circumstances the depositor or the appropriate party designated in the indenture will be obligated to appoint a successor trustee for the applicable series of Notes. Any resignation or removal of the indenture trustee and appointment of a successor trustee for any series of Notes does not become effective until acceptance of the appointment by the successor trustee for that series. The bank or trust company serving as indenture trustee may have a banking relationship with the depositor or any of its affiliates, a servicer or any of its affiliates or the master servicer or any of its affiliates. To the extent consistent with its fiduciary obligations as indenture trustee, the indenture trustee may delegate its duties to one or more agents as provided in the indenture and the Agreement. DESCRIPTION OF CREDIT SUPPORT GENERAL For any series of Notes or Certificates, as applicable, credit support may be provided for one or more classes of the series or the related Assets. Credit support may be in the form of: o the subordination of one or more classes of Notes or Certificates, as applicable; o letters of credit; o insurance policies; o guarantees; o the establishment of one or more reserve funds; or o any other method of credit support described in the prospectus supplement, or any combination of the foregoing. Any form of credit support may be structured so as to be drawn upon by more than one series to the extent described in the prospectus supplement. The coverage provided by any credit support will be described in the prospectus supplement. Generally, that coverage will not provide protection against all risks of loss and will not guarantee repayment of the entire Security Balance of the Notes or Certificates, as applicable, and interest on the Security Balance. If losses or shortfalls occur that exceed the amount covered by credit support or that are not covered by credit support, securityholders will bear their allocable share of deficiencies. Moreover, if a form of credit support covers more than one series of Notes or Certificates, as applicable (each, a "Covered Trust"), securityholders evidencing interests in any of those Covered Trusts will be subject to the risk that the credit support will be exhausted by the claims of other Covered Trusts before that Covered Trust receiving any of its intended share of that coverage. If credit support is provided for one or more classes of Notes or Certificates, as applicable, of a series, or the related Assets, the prospectus supplement will include a description of (a) the nature and amount of coverage under that credit support, (b) any conditions to payment under the prospectus supplement not otherwise described in this prospectus, (c) the conditions (if any) under which the amount of coverage under that credit support may be reduced and under which that credit support may be terminated or replaced and (d) the material provisions relating to that credit support. Additionally, the prospectus supplement will set forth information with respect to the obligor under any financial guaranty insurance policy, letter of credit, guarantee or similar instrument of credit support, including ( (1) a brief description of its principal business activities, (2) its principal place of business, place of incorporation and the jurisdiction under which it is chartered or licensed to do business, (3) if applicable, the identity of regulatory agencies that exercise primary jurisdiction over the conduct of its business and (4) its total assets, and its stockholders' or policyholders' surplus, if applicable, as of the date specified in the prospectus supplement. SUBORDINATE SECURITIES One or more classes of Notes or Certificates, as applicable, of a series may be Subordinate Notes or Subordinate Certificates, as applicable, if specified in the prospectus supplement. The rights of the holders of Subordinate Notes or Subordinate Certificates, as applicable, to receive distributions of principal and interest from the Collection Account on any Distribution Date will be subordinated to those rights of the holders of Senior Notes or Senior Certificates, as applicable. The subordination of a class may apply only in the event of (or may be limited to) particular types of losses or shortfalls. The prospectus supplement will set forth information concerning the amount of subordination of a class or classes of Subordinate Notes or Subordinate Certificates, as applicable, in a series, the circumstances in which that subordination will be applicable and the manner, if any, in which the amount of subordination will be effected. CROSS-SUPPORT PROVISIONS If the Assets for a series are divided into separate groups, each supporting a separate class or classes of Notes or Certificates, as applicable, of a series, credit support may be provided by cross-support provisions requiring that distributions be made on Senior Notes or Senior Certificates, as applicable, evidencing interests in one group of mortgage loans before distributions on Subordinate Notes or Subordinate Certificates, as applicable, evidencing interests in a different group of mortgage loans within the trust fund. The prospectus supplement for a series that includes a cross-support provision will describe the manner and conditions for applying those provisions. LIMITED GUARANTEE If specified in the prospectus supplement for a series of Notes or Certificates, as applicable, credit enhancement may be provided in the form of a limited guarantee issued by a guarantor named in the prospectus supplement. FINANCIAL GUARANTY INSURANCE POLICY OR SURETY BOND Credit enhancement may be provided in the form of a financial guaranty insurance policy or a surety bond issued by an insurer named in the policy or surety bond, if specified in the prospectus supplement. LETTER OF CREDIT Alternative credit support for a series of Notes or Certificates, as applicable, may be provided by the issuance of a letter of credit by the bank or financial institution specified in the prospectus supplement. The coverage, amount and frequency of any reduction in coverage provided by a letter of credit issued for a series of Notes or Certificates, as applicable, will be set forth in the prospectus supplement relating to that series. POOL INSURANCE POLICIES If specified in the prospectus supplement relating to a series of Notes or Certificates, as applicable, a pool insurance policy for the mortgage loans in the related trust fund will be obtained. The pool insurance policy will cover any loss (subject to the limitations described in the prospectus supplement) by reason of default to the extent a related mortgage loan is not covered by any primary mortgage insurance policy. The amount and principal terms of any pool insurance coverage will be set forth in the prospectus supplement. SPECIAL HAZARD INSURANCE POLICIES A special hazard insurance policy may also be obtained for the related trust fund, if specified in the prospectus supplement, in the amount set forth in the prospectus supplement. The special hazard insurance policy will, subject to the limitations described in the prospectus supplement, protect against loss by reason of damage to Mortgaged Properties caused by hazards not insured against under the standard form of hazard insurance policy for the respective states, in which the Mortgaged Properties are located. The amount and principal terms of any special hazard insurance coverage will be set forth in the prospectus supplement. BORROWER BANKRUPTCY BOND Losses resulting from a bankruptcy proceeding relating to a borrower affecting the mortgage loans in a trust fund for a series of Notes or Certificates, as applicable, will, if specified in the prospectus supplement, be covered under a borrower bankruptcy bond (or any other instrument that will not result in a downgrading of the rating of the Notes or Certificates, as applicable, of a series by the rating agency or agencies that rate that series). Any borrower bankruptcy bond or any other instrument will provide for coverage in an amount meeting the criteria of the rating agency or agencies rating the Notes or Certificates, as applicable, of the related series, which amount will be set forth in the prospectus supplement. The amount and principal terms of any borrower bankruptcy coverage will be set forth in the prospectus supplement. RESERVE FUNDS If so provided in the prospectus supplement for a series of Notes or Certificates, as applicable, deficiencies in amounts otherwise payable on those Notes or Certificates, as applicable, or specific classes of Notes or Certificates, as applicable, will be covered by one or more reserve funds in which cash, a letter of credit, Permitted Investments, a demand note or a combination of these will be deposited, in the amounts so specified in the prospectus supplement. The reserve funds for a series may also be funded over time by depositing a specified amount of the distributions received on the related Assets as specified in the prospectus supplement. Amounts on deposit in any reserve fund for a series, together with the reinvestment income on these amounts, if any, will be applied for the purposes, in the manner, and to the extent specified in the prospectus supplement. A reserve fund may be provided to increase the likelihood of timely distributions of principal of and interest on the Notes or Certificates, as applicable. If specified in the prospectus supplement, reserve funds may be established to provide limited protection against only some types of losses and shortfalls. Following each Distribution Date amounts in a reserve fund in excess of any amount required to be maintained in the reserve fund may be released from the reserve fund under the conditions and to the extent specified in the prospectus supplement and will not be available for further application to the Notes or Certificates, as applicable. Money deposited in any reserve funds will be invested in Permitted Investments, to the extent specified in the prospectus supplement. To the extent specified in the prospectus supplement, any reinvestment income or other gain from those investments will be credited to the related reserve fund for that series, and any loss resulting from those investments will be charged to the reserve fund. However, that income may be payable to any related servicer or another service provider or other entity. To the extent specified in the prospectus supplement, the reserve fund, if any, for a series will not be a part of the trust fund. Additional information concerning any reserve fund will be set forth in the prospectus supplement, including the initial balance of the reserve fund, the balance required to be maintained in the reserve fund, the manner in which the required balance will decrease over time, the manner of funding the reserve fund, the purposes for which funds in the reserve fund may be applied to make distributions to securityholders and use of investment earnings from the reserve fund, if any. OVERCOLLATERALIZATION If specified in the prospectus supplement, subordination provisions of a trust fund may be used to accelerate to a limited extent the amortization of one or more classes of Notes or Certificates, as applicable, relative to the amortization of the related Assets. The accelerated amortization is achieved by the application of excess interest to the payment of principal of one or more classes of Notes or Certificates, as applicable. This acceleration feature creates, for the Assets or groups of Assets, overcollateralization, which is the excess of the total principal balance of the related Assets, or a group of related Assets, over the principal balance of the related class or classes of Notes or Certificates, as applicable. This acceleration may continue for the life of the related Security, or may be limited. In the case of limited acceleration, once the required level of overcollateralization is reached, and subject to the provisions specified in the prospectus supplement, the limited acceleration feature may cease, unless necessary to maintain the required level of overcollateralization. CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS The following discussion contains summaries, which are general in nature, of legal aspects of loans secured by single-family residential properties. Because these legal aspects are governed primarily 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. In this regard, the following discussion does not fully reflect federal regulations for FHA loans and VA loans. See "Description of The Trust Funds--FHA Loans and VA Loans," "Description of the Agreements--Material Terms of the Pooling and Servicing Agreements and Underlying Servicing Agreements--FHA Insurance and VA Guarantees" and "Description of the Trust Funds--Assets." GENERAL All of the mortgage loans are 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 on 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 in this prospectus 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 that 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 borrower (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 borrower), 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, "borrower" 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 borrower 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 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 borrower 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 borrower. At origination of a mortgage loan involving a land trust, the borrower 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, some federal laws (including 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, that 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 that lease. An instrument covering an interest in real property other than the fee estate requires special provisions in the instrument creating that interest or in the mortgage, deed of trust, security deed or deed to secure debt, to protect the mortgagee against termination of that interest before the mortgage, deed of trust, security deed or deed to secure debt is paid. The depositor, the Asset Seller or other entity specified in the prospectus supplement will make representations and warranties in the Agreement or representations and warranties will be assigned to the trustee for any mortgage loans secured by an interest in a leasehold estate. Those representation and warranties, if applicable, will be set forth in the prospectus supplement. COOPERATIVE LOANS If specified in the prospectus supplement, the mortgage loans may also consist of cooperative apartment loans ("Cooperative Loans") secured by security interests in shares issued by a 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 that it covers, the priority of which will depend on the terms of the particular security agreement as well as the order of recordation of the agreement in the appropriate recording office. That 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 in the building. 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 borrower, 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 (1) 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 (2) 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 that 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 the lender that 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 that confer exclusive rights to occupy specific units. Generally, a tenant-stockholder of a Cooperative must make a monthly payment to the Cooperative representing that tenant-stockholder's pro rata share of the Cooperative's payments for its blanket mortgage, real property taxes, maintenance expenses and other capital or ordinary expenses. An ownership interest in a Cooperative and accompanying occupancy rights are financed through a Cooperative 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. LAND SALE CONTRACTS Under an installment land sale contract for the sale of real estate (a "land sale contract") the contract seller (hereinafter referred to as the "contract lender") retains legal title to the property and enters into an agreement with the contract purchaser (hereinafter referred to as the "contract borrower") for the payment of the purchase price, plus interest, over the term of the land sale contract. Only after full performance by the borrower of the contract is the contract lender obligated to convey title to the real estate to the purchaser. As with mortgage or deed of trust financing, during the effective period of the land sale contract, the contract borrower is responsible for maintaining the property in good condition and for paying real estate taxes, assessments and hazard insurance premiums associated with the property. The method of enforcing the rights of the contract lender under an installment contract varies on a state-by-state basis depending on the extent to which state courts are willing, or able pursuant to state statute, to enforce the contract strictly according to its terms. The terms of land sale contracts generally provide that upon default by the contract borrower, the borrower loses his or her right to occupy the property, the entire indebtedness is accelerated, and the buyer's equitable interest in the property is forfeited. The contract lender in that situation does not have to foreclose to obtain title to the property, although in some cases a quiet title action is in order if the contract borrower has filed the land sale contract in local land records and an ejectment action may be necessary to recover possession. In a few states, particularly in cases of contract borrower default during the early years of a land sale contract, the courts will permit ejectment of the buyer and a forfeiture of his or her interest in the property. However, most state legislatures have enacted provisions by analogy to mortgage law protecting borrowers under land sale contracts from the harsh consequences of forfeiture. Under those statues, a judicial contract may be reinstated upon full payment of the default amount and the borrower may have a post-foreclosure statutory redemption right. In other states, courts in equity may permit a contract borrower with significant investment in the property under a land sale contract for the sale of real estate to share the proceeds of sale of the property after the indebtedness is repaid or may otherwise refuse to enforce the forfeiture clause. Nevertheless, generally speaking, the contract lender's procedures for obtaining possession and clear title under a land sale contract for the sale of real estate in a particular state are simpler and less time consuming and costly than are the procedures for foreclosing and obtaining clear title to a mortgaged property. 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 for 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 some 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 an interest of record in the real property. 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. Those 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 borrower from the legal effect of mortgage defaults, to the extent that the effect is perceived as harsh or unfair. Relying on those 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 borrower's default and the likelihood that the borrower will be able to reinstate the loan. In some cases, courts have substituted their judgment for the lender's and have required that lenders reinstate loans or recast payment schedules to accommodate borrowers 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 borrower failed to maintain the mortgaged property adequately or the borrower 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 borrower 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 borrower. 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 borrower 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, before the sale, the trustee under a deed of trust must record a notice of default and notice of sale and send a copy to the borrower 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 borrower 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 borrower 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 that property at the time of sale, due to, among other things, redemption rights that 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 that may be recovered by a lender. Thereafter, subject to the borrower'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 become obligated to pay taxes, obtain casualty insurance and to make those repairs at its own expense as are necessary to render the property suitable for sale. 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 on 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. 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, if 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, for those mortgage loans, if any, that are junior mortgage loans, if the lender purchases the property the lender's title will be subject to all senior mortgages, prior liens and specific governmental liens. 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 borrower is in default. Any additional proceeds are generally payable to the borrower. 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 those holders. RIGHTS OF REDEMPTION The purposes of a foreclosure action are to enable the mortgagee to realize upon its security and to bar the borrower, and all persons who have an interest in the property that 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 that is subordinate to that of the foreclosing mortgagee have an equity of redemption and may redeem the property by paying the entire debt with interest. In addition, in some states, when a foreclosure action has begun, the redeeming party must pay some of the costs of that 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 that exists before completion of the foreclosure, is not waivable by the borrower, must be exercised before 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 borrower 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 borrower pays only a portion of the sums due. The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed property. The 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 for more than three years from the close of the calendar year of its acquisition. For a series of Notes or Certificates, as applicable, for which an election is made to qualify the trust fund or a part of the trust fund as a REMIC, the Agreement will permit foreclosed property to be held for more than such three year period if the Internal Revenue Service grants an extension of time within which to sell the property or independent counsel renders an opinion to the effect that holding the property for that additional period is permissible under the REMIC Provisions. 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 bylaws, as well as the proprietary lease or occupancy agreement, and may be canceled by the Cooperative for failure by the tenant-stockholder to pay rent or other obligations or charges owed by that tenant-stockholder, including mechanics' liens against the cooperative apartment building incurred by that tenant-stockholder. The proprietary lease or occupancy agreement generally permit the Cooperative to terminate the lease or agreement in the event a borrower fails to make payments or defaults in the performance of covenants required under the proprietary lease or occupancy agreeement. Typically, the lender and the Cooperative enter into a recognition agreement that 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, if the tenant-stockholder has defaulted under the proprietary lease or occupancy agreement, the Cooperative will take no action to terminate that lease or agreement until the lender has been provided with an opportunity to cure the default. The recognition agreement typically provides that if the proprietary lease or occupancy agreement is terminated, the Cooperative will recognize the lender's lien against proceeds from the sale of the Cooperative apartment, subject, however, to the Cooperative's right to sums due under that 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 on the Cooperative Loan. 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. 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 that 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 that apply to tenants who elected to remain in a building so converted. JUNIOR MORTGAGES Some of the mortgage loans may be secured by junior mortgages or deeds of trust, that are subordinate to first or other senior mortgages or deeds of trust held by other lenders. The rights of the trust fund as the holder of a junior deed of trust or a junior mortgage are subordinate in lien and in payment to those of the holder of the senior mortgage or deed of trust, including the prior rights of the senior mortgagee or beneficiary to receive and apply hazard insurance and condemnation proceeds and, upon default of the borrower, to cause a foreclosure on the property. Upon completion of the foreclosure proceedings by the holder of the senior mortgage or the sale pursuant to the deed of trust, the junior mortgagee's or junior beneficiary's lien will be extinguished unless the junior lienholder satisfies the defaulted senior loan or asserts its subordinate interest in a property in foreclosure proceedings. See "--Foreclosure" above. Furthermore, because the terms of the junior mortgage or deed of trust are subordinate to the terms of the first mortgage or deed of trust, in the event of a conflict between the terms of the first mortgage or deed of trust and the junior mortgage or deed of trust, the terms of the first mortgage or deed of trust will generally govern. Upon a failure of the borrower or trustor to perform any of its obligations, the senior mortgagee or beneficiary, subject to the terms of the senior mortgage or deed of trust, may have the right to perform the obligation itself. Generally, all sums so expended by the mortgagee or beneficiary become part of the indebtedness secured by the mortgage or deed of trust. To the extent a first mortgagee expends these sums, these sums will generally have priority over all sums due under the junior mortgage. ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS Statutes in some states limit the right of a beneficiary under a deed of trust or a mortgagee under a mortgage to obtain a deficiency judgment against the borrower following foreclosure or sale under a deed of trust. A deficiency judgment would be a personal judgment against the former borrower 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 borrower. In some other states, the lender has the option of bringing a personal action against the borrower on the debt without first exhausting that security; however, in some of these states, the lender, following judgment on the 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 that election, is that lenders will usually proceed against the security first rather than bringing a personal action against the borrower. Finally, other statutory provisions limit any deficiency judgment against the former borrower following a judicial sale to the excess of the outstanding debt over the fair market value of the property at the time of the public sale. The purpose of these statutes is generally to prevent a lender from obtaining a large deficiency judgment against the former borrower as a result of low or no bids at the judicial sale. In addition to anti-deficiency and related legislation, numerous other federal and state statutory provisions, including the federal bankruptcy laws and state laws affording relief to debtors, may interfere with or affect the ability of a secured mortgage lender to realize upon its security. For example, numerous statutory provisions under the United States Bankruptcy Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy Code"), may interfere with or affect the ability of the secured mortgage lender to obtain payment of a mortgage loan, to realize upon collateral and/or enforce a deficiency judgment. Under federal bankruptcy law, virtually all actions (including foreclosure actions and deficiency judgment proceedings) are automatically stayed upon the filing of a bankruptcy petition, and often no interest or principal payments are made during the course of the bankruptcy proceeding. In a case under the Bankruptcy Code, the secured party is precluded from foreclosing without authorization from the bankruptcy court. In addition, a court with federal bankruptcy jurisdiction may permit a debtor through his or her Chapter 11 or Chapter 13 plan to cure a monetary default in respect of a mortgage loan by paying arrearages within a reasonable time period and reinstating the original mortgage loan payment schedule even though the lender accelerated the mortgage loan and final judgment of foreclosure had been entered in state court (provided no foreclosure sale had yet occurred) before the filing of the debtor's petition. Some courts with federal bankruptcy jurisdiction have approved plans, based on the particular facts of the case, that affected the curing of a mortgage loan default by paying arrearages over a number of years. If a mortgage loan is secured by property not consisting solely of the debtor's principal residence, the Bankruptcy Code also permits that mortgage loan to be modified. These modifications may include reducing the amount of each monthly payment, changing the rate of interest, altering the repayment schedule, and reducing the lender's security interest to the value of the property, thus leaving the lender in the position of a general unsecured creditor for the difference between the value of the property and the outstanding balance of the mortgage loan. Some courts have permitted these modifications when the mortgage loan is secured both by the debtor's principal residence and by personal property. Some tax liens arising under the Code may in some circumstances provide priority over the lien of a mortgage or deed of trust. In addition, substantive requirements are imposed upon mortgage lenders in connection with the origination and the servicing of mortgage loans by numerous federal and some state consumer protection laws. These laws include the federal Truth-in-Lending Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act and related statutes. These federal laws impose specific statutory liabilities upon lenders who originate mortgage loans and who fail to comply with the provisions of the law. In some cases this liability may affect assignees of the mortgage loans. Generally, Article 9 of the UCC governs foreclosure on Cooperative shares and the related proprietary lease or occupancy agreement. Some courts have interpreted Section 9-504 of the UCC to prohibit a deficiency award unless the creditor establishes that the sale of the collateral (which, in the case of a Cooperative Loan, would be the shares of the Cooperative and the related proprietary lease or occupancy agreement) was conducted in a commercially reasonable manner. ENVIRONMENTAL CONSIDERATIONS A lender may be subject to unforeseen environmental risks when taking a security interest in real or personal property. Property subject to a security interest may be subject to federal, state, and local laws and regulations relating to environmental protection. These laws may regulate, among other things: emissions of air pollutants; discharges of wastewater or storm water; generation, transport, storage or disposal of hazardous waste or hazardous substances; operation, closure and removal of underground storage tanks; removal and disposal of asbestos-containing materials; and/or management of electrical or other equipment containing polychlorinated biphenyls ("PCBs"). Failure to comply with these laws and regulations may result in significant penalties, including civil and criminal fines. Under the laws of some states, environmental contamination on a property may give rise to a lien on the property to ensure the availability and/or reimbursement of cleanup costs. Generally all subsequent liens on that property are subordinated to the environmentally-related lien and, in some states, even prior recorded liens are subordinated to these liens ("Superliens"). In the latter states, the security interest of the trustee in a property that is subject to a Superlien could be adversely affected. Under the federal Comprehensive Environmental Response, Compensation and Liability Act, as amended ("CERCLA"), and under state law in some states, a secured party that takes a deed in lieu of foreclosure, purchases a mortgaged property at a foreclosure sale, operates a mortgaged property or undertakes particular types of activities that may constitute management of the mortgaged property may become liable in some circumstances for the cleanup costs of remedial action if hazardous wastes or hazardous substances have been released or disposed of on the property. These cleanup costs may be substantial. CERCLA imposes strict, as well as joint and several, liability for environmental remediation and/or damage costs on several classes of "potentially responsible parties," including current "owners and/or operators" of property, irrespective of whether those owners or operators caused or contributed to the contamination on the property. In addition, owners and operators of properties that generate hazardous substances that are disposed of at other "off-site" locations may be held strictly, jointly and severally liable for environmental remediation and/or damages at those off-site locations. Many states also have laws that are similar to CERCLA. Liability under CERCLA or under similar state law could exceed the value of the property itself as well as the total assets of the property owner. Although some provisions of the Asset Conservation Act (as defined in this prospectus) apply to trusts and fiduciaries, the law is somewhat unclear as to whether and under what precise circumstances cleanup costs, or the obligation to take remedial actions, could be imposed on a secured lender, such as the trust fund. Under the laws of some states and under CERCLA, a lender may be liable as an "owner or operator" for costs of addressing releases or threatened releases of hazardous substances on a mortgaged property if that lender or its agents or employees have "participated in the management" of the operations of the borrower, even though the environmental damage or threat was caused by a prior owner or current owner or operator or other third party. Excluded from CERCLA's definition of "owner or operator" is a person "who without participating in the management of . . . [the] facility, holds indicia of ownership primarily to protect his security interest" (the "secured-creditor exemption"). This exemption for holders of a security interest such as a secured lender applies only to the extent that a lender seeks to protect its security interest in the contaminated facility or property. Thus, if a lender's activities begin to encroach on the actual management of that 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, the lender may incur potential CERCLA liability in various circumstances, including among others, when it holds the facility or property as an investment (including leasing the facility or property to a third party), fails to market the property in a timely fashion or fails to properly address environmental conditions at the property or facility. The Resource Conservation and Recovery Act, as amended ("RCRA"), contains a similar secured-creditor exemption for those lenders who hold a security interest in a petroleum underground storage tank ("UST") or in real estate containing a UST, or that acquire title to a petroleum UST or facility or property on which a UST is located. As under CERCLA, a lender may lose its secured-creditor exemption and be held liable under RCRA as a UST owner or operator if that lender or its employees or agents participate in the management of the UST. In addition, if the lender takes title to or possession of the UST or the real estate containing the UST, under some circumstances the secured-creditor exemption may be deemed to be unavailable. 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's opinion suggested 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 were 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 these decisions could be inferred from the extent of its involvement in the facility's financial management. A subsequent decision by the United States Court of Appeals for the Ninth Circuit in re Bergsoe Metal Corp., apparently disagreeing with, but not expressly contradicting, the Fleet Factors court, held that a secured lender had no liability absent "some actual management of the facility" on the part of the lender. Court decisions have taken varying views of the scope of the secured-creditor exemption, leading to administrative and legislative efforts to provide guidance to lenders on the scope of activities that would trigger CERCLA and/or RCRA liability. Until recently, these efforts have failed to provide substantial guidance. On September 28, 1996, however, Congress enacted, and on September 30, 1996, the President signed into law the Asset Conservation Lender Liability and Deposit Insurance Protection Act of 1996 (the "Asset Conservation Act"). The Asset Conservation Act was intended to clarify the scope of the secured creditor exemption under both CERCLA and RCRA. The Asset Conservation Act more explicitly defined the kinds of "participation in management" that would trigger liability under CERCLA and specified activities that would not constitute "participation in management" or otherwise result in a forfeiture of the secured-creditor exemption before foreclosure or during a workout period. The Asset Conservation Act also clarified the extent of protection against liability under CERCLA in the event of foreclosure and authorized specific regulatory clarifications of the scope of the secured-creditor exemption for purposes of RCRA, similar to the statutory protections under CERCLA. However, since the courts have not yet had the opportunity to interpret the new statutory provisions, the scope of the additional protections offered by the Asset Conservation Act is not fully defined. It also is important to note that the Asset Conservation Act does not offer complete protection to lenders and that the risk of liability remains. If a secured lender does become liable, it may be entitled to bring an action for contribution against the owner or operator who created the environmental contamination or against some other liable party, but that person or entity may be bankrupt or otherwise judgment-proof. It is therefore possible that cleanup or other environmental liability costs could become a liability of the trust fund and occasion a loss to the trust fund and to securityholders in some circumstances. The new secured creditor amendments to CERCLA, also, would not necessarily affect the potential for liability in actions by either a state or a private party under other federal or state laws that may impose liability on "owners or operators" but do not incorporate the secured-creditor exemption. Traditionally, residential mortgage lenders have not taken steps to evaluate whether hazardous wastes or hazardous substances are present with respect to any mortgaged property before the origination of the mortgage loan or before foreclosure or accepting a deed-in-lieu of foreclosure. Neither the depositor nor any servicer makes any representations or warranties or assumes any liability with respect to: environmental conditions of the Mortgaged Property; the absence, presence or effect of hazardous wastes or hazardous substances on, near or emanating from the Mortgaged Property; the impact on securityholders of any environmental condition or presence of any substance on or near the Mortgaged Property; or the compliance of any Mortgaged Property with any environmental laws. In addition, no agent, person or entity otherwise affiliated with the depositor is authorized or able to make any representation, warranty or assumption of liability relative to any Mortgaged Property. DUE-ON-SALE CLAUSES The mortgage loans may contain due-on-sale clauses. These clauses generally provide that the lender may accelerate the maturity of the loan if the borrower sells, transfers or conveys the related Mortgaged Property. 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, for some loans the Garn-St. Germain Depository Institutions Act of 1982 (the "Garn-St. Germain Act") preempts state constitutional, statutory and case law that prohibits the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms, subject to limited exceptions. Due-on-sale clauses contained in mortgage loans originated by federal savings and loan associations of federal savings banks are fully enforceable pursuant to regulations of the United States Federal Home Loan Bank Board, as succeeded by the Office of Thrift Supervision, which preempt state law restrictions on the enforcement of those clauses. Similarly, "due-on-sale" clauses in mortgage loans made by national banks and federal credit unions are now fully enforceable pursuant to preemptive regulations of the Comptroller of the Currency and the National Credit Union Administration, respectively. The Garn-St. Germain Act also sets forth nine specific instances in which a mortgage lender covered by the act (including federal savings and loan associations and federal savings banks) may not exercise a "due-on-sale" clause, notwithstanding the fact that a transfer of the property may have occurred. These include intra-family transfers, some transfers by operation of law, leases of fewer than three years and the creation of a junior encumbrance. Regulations promulgated under the Garn-St. Germain Act also prohibit the imposition of a prepayment penalty upon the acceleration of a loan pursuant to a due-on-sale clause. The inability to enforce a "due-on-sale" clause may result in a mortgage that bears an interest rate below the current market rate being assumed by a new home buyer rather than being paid off, which may affect the average life of the mortgage loans and the number of mortgage loans which may extend to maturity. PREPAYMENT CHARGES Under some state laws, prepayment charges may not be imposed after a certain period of time following the origination of mortgage loans secured by liens encumbering owner-occupied residential properties, if those loans are paid before maturity. For Mortgaged Properties that are owner-occupied, it is anticipated that prepayment charges may not be imposed for many of the mortgage loans. The absence of a restraint on prepayment, particularly for fixed rate mortgage loans having higher mortgage rates, may increase the likelihood of refinancing or other early retirement of those loans. SUBORDINATE FINANCING Where a borrower encumbers mortgaged property with one or more junior liens, the senior lender is subjected to additional risks, such as: o The borrower may have difficulty repaying multiple loans. In addition, if the junior loan permits recourse to the borrower (as junior loans often do) and the senior loan does not, a borrower may be more likely to repay sums due on the junior loan than those on the senior loan. o 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 borrower and the senior lender agree to an increase in the principal amount of or the interest rate payable on the senior loan, the senior lender may lose its priority to the extent any existing junior lender is harmed or the borrower is additionally burdened. o If the borrower defaults on the senior loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security available to the senior lender and can interfere with 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. 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 will not apply to some types of residential first mortgage loans originated by lenders after March 31, 1980. A similar federal statute was in effect for mortgage loans made during the first three months of 1980. The Office of Thrift Supervision is authorized to issue rules and regulations and to publish interpretations governing implementation of Title V. 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. Some states have taken action to reimpose interest rate limits and/or to limit discount points or other charges. The depositor believes 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 before origination of those mortgage loans, any limitation under that state's usury law would not apply to those 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 that state action will be eligible for inclusion in a trust fund unless (1) the mortgage loan provides for the interest rate, discount points and charges as are permitted in that state or (2) the mortgage loan provides that its terms will be construed in accordance with the laws of another state under which the interest rate, discount points and charges would not be usurious and the borrower's counsel has rendered an opinion that the 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, thus permitting the borrower to cancel the recorded mortgage or deed of trust without any payment or prohibiting the lender from foreclosing. ALTERNATIVE MORTGAGE INSTRUMENTS Alternative mortgage instruments, including adjustable rate mortgage loans and early ownership mortgage loans, originated by non-federally chartered lenders have historically been subject to a variety of restrictions. Those restrictions differed from state to state, resulting in difficulties in determining whether a particular alternative mortgage instrument originated by a state-chartered lender was in compliance with applicable law. These difficulties were alleviated substantially as a result of the enactment of Title VIII of the Garn-St. Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any state law to the contrary, state-chartered banks may originate alternative mortgage instruments in accordance with regulations promulgated by the Comptroller of the Currency with respect to origination of alternative mortgage instruments by national banks; state-chartered credit unions may originate alternative mortgage instruments in accordance with regulations promulgated by the National Credit Union Administration with respect to origination of alternative mortgage instruments by federal credit unions; and all other non-federally chartered housing creditors, including state-chartered savings and loan associations, state-chartered savings banks and mutual savings banks and mortgage banking companies, may originate alternative mortgage instruments in accordance with the regulations promulgated by the Federal Home Loan Bank Board, predecessor to the Office of Thrift Supervision, with respect to origination of alternative mortgage instruments by federal savings and loan associations. Title VIII provides that any state may reject applicability of the provisions of Title VIII by adopting, before October 15, 1985, a law or constitutional provision expressly rejecting the applicability of those provisions. Some states have taken that action. 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 borrower who enters military service after the origination of the borrower's mortgage loan (including a borrower 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 the borrower's active duty status, unless a court orders otherwise upon application of the lender. The Relief Act applies to borrowers 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 borrowers 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 the servicer to collect full amounts of interest on some 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 Securities, and would not be covered by advances. These shortfalls will be covered by the credit support provided in connection with the Notes or Certificates, as applicable, only to the extent provided in the prospectus supplement. In addition, the Relief Act imposes limitations that would impair the ability of the servicer to foreclose on an affected mortgage loan during the borrower's period of active duty status, and, under some circumstances, during an additional three month period thereafter. Thus, if an affected 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, those 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: (1) its mortgage was executed and recorded before commission of the crime upon which the forfeiture is based, or (2) 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. MATERIAL FEDERAL INCOME TAX CONSIDERATIONS GENERAL The following discussion represents the opinion of Stroock & Stroock & Lavan LLP as to the material federal income tax consequences of the purchase, ownership and disposition of the Notes or Certificates, as applicable, offered under this prospectus. This opinion assumes compliance with all provisions of the Agreements pursuant to which the Notes or Certificates, as applicable, are issued. This discussion is directed solely to securityholders that hold the Notes or Certificates, as applicable, as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"), and does not purport to discuss all federal income tax consequences that may be applicable to particular categories of investors, some of which (such as banks, insurance companies and foreign investors) may be subject to special rules. Further, the authorities on which this discussion, and the opinions referred to below, are based are subject to change or differing interpretations, which could apply retroactively. In addition to the federal income tax consequences described in this prospectus, potential investors should consider the state and local tax consequences, if any, of the purchase, ownership and disposition of the Notes or Certificates, as applicable. See "State and Other Tax Considerations." The depositor recommends that securityholders consult their own tax advisors concerning the federal, state, local or other tax consequences to them of the purchase, ownership and disposition of the Notes or Certificates, as applicable, offered under this prospectus. The following discussion addresses securities of five general types: o securities ("REMIC Securities) representing interests in a trust fund, or a portion of a trust fund, that the trustee will elect to have treated as a real estate mortgage investment conduit ("REMIC") under Sections 860A through 860G (the "REMIC Provisions") of the Code; o securities ("FASIT Securities") representing interests in a trust fund, or a portion of a trust fund, that the trustee will elect to have treated as a financial asset securitization investment trust ("FASIT") under Sections 860H through 860L (the "FASIT Provisions") of the Code; o securities ("Grantor Trust Securities") representing interests in a trust fund (a "Grantor Trust Fund") as to which no election will be made; o securities ("Partnership Certificates ") representing equity interests in a trust fund (a "Partnership Trust Fund") which is treated as a partnership for federal income tax purposes; and o securities ("Debt Securities") representing indebtedness of a Partnership Trust Fund or a trust fund which is disregarded as a separate entity for federal income tax purposes. The prospectus supplement for each series of Notes or Certificates, as applicable, will indicate which of the foregoing treatments will apply to that series and, if a REMIC election (or elections) will be made for the related trust fund, will identify all "regular interests" and "residual interests" in the REMIC or, if a FASIT election will be made for the related trust fund, will identify all "regular interests" and "ownership interests" in the FASIT. For purposes of this tax discussion, (1) references to a "securityholder" or a "holder" are to the beneficial owner of a Security, (2) references to "REMIC Pool" are to an entity or portion thereof as to which a REMIC election will be made and (3) to the extent specified in the prospectus supplement, references to "mortgage loans" include Contracts. Except to the extent specified in the prospectus supplement, no REMIC election will be made for Unsecured Home Improvement Loans. The following discussion is based in part upon the rules governing original issue discount that are set forth in Sections 1271 through 1275 of the Code and in the Treasury regulations promulgated thereunder (the "OID Regulations"), in part upon the REMIC Provisions and the Treasury regulations promulgated thereunder (the "REMIC Regulations"), and in part upon the FASIT Provisions. Although the FASIT Provisions of the Code became effective on September 1, 1997, the Treasury regulations issued with respect to those provisions are still in proposed form only. Accordingly, the discussion herein does not address the proposed FASIT regulations (which will be discussed in the related prospectus supplement if and to the extent they are relevant) and definitive guidance cannot be provided with respect to many aspects of the tax treatment of the holders of FASIT Securities. In addition, the OID Regulations do not adequately address some issues relevant to, and in some instances provide that they are not applicable to, securities such as the Notes or Certificates, as applicable. TAXABLE MORTGAGE POOLS Corporate income tax can be imposed on the net income of some entities issuing non-REMIC and non-FASIT debt obligations secured by real estate mortgages ("Taxable Mortgage Pools"). Any entity other than a REMIC or a FASIT (as defined in this prospectus) will be considered a Taxable Mortgage Pool if (1) substantially all of the assets of the entity consist of debt obligations and more than 50% of those obligations consist of "real estate mortgages," (2) that entity is the borrower under debt obligations with two or more maturities, and (3) under the terms of the debt obligations on which the entity is the borrower, payments on those obligations bear a relationship to payments on the obligations held by the entity. Furthermore, a group of assets held by an entity can be treated as a separate Taxable Mortgage Pool if the assets are expected to produce significant cash flow that will support one or more of the entity's issues of debt obligations. The depositor generally will structure offerings of non-REMIC and non-FASIT Securities to avoid the application of the Taxable Mortgage Pool rules. REMICS CLASSIFICATION OF REMICS For each series of REMIC Securities, assuming compliance with all provisions of the related pooling and servicing agreement, in the opinion of Stroock & Stroock & Lavan LLP, the related trust fund (or each applicable portion of the trust fund) will qualify as a REMIC and the REMIC Securities offered with respect thereto will be considered to evidence ownership of "regular interests" ("Regular Securities") or "residual interests" ("Residual Securities") in the REMIC within the meaning of the REMIC Provisions. In order for the REMIC Pool to qualify as a REMIC, there must be ongoing compliance on the part of the REMIC Pool with the requirements set forth in the Code. The REMIC Pool must fulfill an asset test, which requires that no more than a de minimis portion of the assets of the REMIC Pool, 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 REMIC Securities) 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 total adjusted basis of the nonqualified assets is less than 1% of the total adjusted basis of all the REMIC Pool's assets. An entity that fails to meet the safe harbor may nevertheless demonstrate that it holds no more than a de minimis amount of nonqualified assets. A REMIC Pool also must provide "reasonable arrangements" to prevent its residual interests from being held by "disqualified organizations" or agents of "disqualified organizations" and must furnish applicable tax information to transferors or agents that violate this requirement. The pooling and servicing agreement for each series of REMIC Securities will contain provisions meeting these requirements. See "--Taxation of Owners of Residual Securities--Tax-Related Restrictions on Transfer of Residual Securities--Disqualified Organizations" below. A qualified mortgage is any obligation that is principally secured by an interest in real property and that is either transferred to the REMIC Pool on the Startup Day or is purchased by the REMIC Pool within a three-month period thereafter pursuant to a fixed price contract in effect on the Startup Day. Qualified mortgages include whole mortgage loans and, generally, certificates of beneficial interest in a grantor trust that holds mortgage loans and regular interests in another REMIC, such as lower-tier regular interests in a tiered REMIC. The REMIC Regulations specify that loans secured by timeshare interests, shares held by a tenant stockholder in a cooperative housing corporation, and manufactured housing that qualifies as a "single family residence" under Code Section 25(e)(10) can be qualified mortgages. A qualified mortgage includes a qualified replacement mortgage, which is any property that would have been treated as a qualified mortgage if it were transferred to the REMIC Pool on the Startup Day and that is received either: (1) in exchange for any qualified mortgage within a three-month period from the Startup Day; or (2) in exchange for a "defective obligation" within a two-year period from the Startup Day. A "defective obligation" includes: (1) a mortgage in default or as to which default is reasonably foreseeable; (2) a mortgage as to which a customary representation or warranty made at the time of transfer to the REMIC Pool has been breached; (3) a mortgage that was fraudulently procured by the borrower; and (4) a mortgage that was not in fact principally secured by real property (but only if the mortgage is disposed of within 90 days of discovery). A mortgage loan that is "defective" as described in clause (4) above that is not sold or, if within two years of the Startup Day, exchanged, within 90 days of discovery, ceases to be a qualified mortgage after that 90-day period. Permitted investments include cash flow investments, qualified reserve assets, and foreclosure property. A cash flow investment is an investment, earning a return in the nature of interest, of amounts received on or with respect to qualified mortgages for a temporary period, not exceeding 13 months, until the next scheduled distribution to holders of interests in the REMIC Pool. A qualified reserve asset is any intangible property held for investment that is part of any reasonably required reserve maintained by the REMIC Pool to provide for payments of expenses of the REMIC Pool or amounts due on the regular or residual interests in the event of defaults (including delinquencies) on the qualified mortgages, lower than expected reinvestment returns, prepayment interest shortfalls and other contingencies. The reserve fund will be disqualified if more than 30% of the gross income from the assets in that fund for the year is derived from the sale or other disposition of property held for less than three months, unless required to prevent a default on the regular interests caused by a default on one or more qualified mortgages. A reserve fund must be reduced "promptly and appropriately" as payments on the mortgage loans are received. Foreclosure property is real property acquired by the REMIC Pool in connection with the default or imminent default of a qualified mortgage and generally may not be held for more than three taxable years after the taxable year of acquisition unless extensions are granted by the Secretary of the Treasury. In addition to the foregoing requirements, the various interests in a REMIC Pool also must meet specific requirements. All of the interests in a REMIC Pool must be either of the following: (1) one or more classes of regular interests or (2) a single class of residual interests on which distributions, if any, are made pro rata. o A regular interest is an interest in a REMIC Pool that is issued on the Startup Day with fixed terms, is designated as a regular interest, and unconditionally entitles the holder to receive a specified principal amount (or other similar amount), and provides that interest payments (or other similar amounts), if any, at or before maturity either are payable based on a fixed rate or a qualified variable rate, or consist of a specified, nonvarying portion of the interest payments on qualified mortgages. That specified portion may consist of a fixed number of basis points, a fixed percentage of the total interest, or a qualified variable rate, inverse variable rate or difference between two fixed or qualified variable rates on some or all of the qualified mortgages. The specified principal amount of a regular interest that provides for interest payments consisting of a specified, nonvarying portion of interest payments on qualified mortgages may be zero. o A residual interest is an interest in a REMIC Pool other than a regular interest that is issued on the Startup Day and that is designated as a residual interest. An interest in a REMIC Pool may be treated as a regular interest even if payments of principal for that interest are subordinated to payments on other regular interests or the residual interest in the REMIC Pool, and are dependent on the absence of defaults or delinquencies on qualified mortgages or permitted investments, lower than reasonably expected returns on permitted investments, unanticipated expenses incurred by the REMIC Pool or prepayment interest shortfalls. Accordingly, in the opinion of Stroock & Stroock & Lavan LLP, the Regular Securities of a series will constitute one or more classes of regular interests, and the Residual Securities for that series will constitute a single class of residual interests for each REMIC Pool. If an entity electing to be treated as a REMIC fails to comply with one or more of the ongoing requirements of the Code for that status during any taxable year, the Code provides that the entity will not be treated as a REMIC for that year and thereafter. In that event, that entity may be taxable as a corporation under Treasury regulations, and the related REMIC Securities may not be accorded the status or given the tax treatment described below. Although the Code authorizes the Treasury Department to issue regulations providing relief in the event of an inadvertent termination of REMIC status, none of these regulations have been issued. Any relief provided, moreover, may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the trust fund's income for the period in which the requirements for that status are not satisfied. The pooling and servicing agreement for each REMIC Pool will include provisions designed to maintain the trust fund's status as a REMIC under the REMIC Provisions. It is not anticipated that the status of any trust fund as a REMIC will be terminated. CHARACTERIZATION OF INVESTMENTS IN REMIC SECURITIES The REMIC Securities will be treated as "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code and assets described in Section 7701(a)(19)(C) of the Code in the same proportion that the assets of the REMIC Pool underlying these Notes or Certificates, as applicable, would be so treated. Moreover, if 95% or more of the assets of the REMIC Pool qualify for either of the foregoing treatments at all times during a calendar year, the REMIC Securities will qualify for the corresponding status in their entirety for that calendar year. If the assets of the REMIC Pool include Buydown Mortgage Loans, it is possible that the percentage of those assets constituting "loans . . . secured by an interest in real property which is . . . residential real property" for purposes of Code Section 7701(a)(19)(C)(v) may be required to be reduced by the amount of the related funds paid thereon (the "Buydown Funds"). No opinion is expressed as to the treatment of those Buydown Funds because the law is unclear as to whether the Buydown Funds represent an account held by the lender that reduces the lender's investment in the mortgage loan. This reduction of a holder's investment may reduce the assets qualifying for the 60% of assets test for meeting the definition of a "domestic building and loan association." Interest (including original issue discount) on the Regular Securities and income allocated to the class of Residual Securities will be interest described in Section 856(c)(3)(B) of the Code to the extent that the Notes or Certificates, as applicable, are treated as "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code. In addition, the Regular Securities generally will be "qualified mortgages" within the meaning of Section 860G(a)(3) of the Code if transferred to another REMIC on its Startup Day in exchange for regular or residual interests in the REMIC. The assets of the REMIC Pool will include, in addition to mortgage loans, payments on mortgage loans held pending distribution on the REMIC Securities and property acquired by foreclosure held pending sale, and may include amounts in reserve accounts. It is unclear whether property acquired by foreclosure held pending sale and amounts in reserve accounts would be considered to be part of the mortgage loans, or whether those assets (to the extent not invested in assets described in the foregoing sections) otherwise would receive the same treatment as the mortgage loans for purposes of all of the foregoing sections. The REMIC Regulations do provide, however, that payments on mortgage loans held pending distribution are considered part of the mortgage loans for purposes of Section 856(c)(4)(A) of the Code. Furthermore, foreclosure property generally will qualify as "real estate assets" under Section 856(c)(4)(A) of the Code. TIERED REMIC STRUCTURES For some series of REMIC Securities, two or more separate elections may be made to treat designated portions of the related trust fund as REMICs ("Tiered REMICs") for federal income tax purposes. Upon the issuance of any of these series of REMIC Securities, Stroock & Stroock & Lavan LLP will deliver its opinion that, assuming compliance with all provisions of the related pooling and servicing agreement, the Tiered REMICs will each qualify as a REMIC and the respective REMIC Securities issued by each Tiered REMIC will be considered to evidence ownership of Regular Securities or Residual Securities in the related REMIC within the meaning of the REMIC Provisions. Solely for purposes of determining whether the REMIC Securities will be "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code and "loans secured by an interest in real property" under Section 7701(a)(19)(C) of the Code, and whether the income on those Notes or Certificates, as applicable, is interest described in Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one REMIC. TAXATION OF OWNERS OF REGULAR SECURITIES (1) General Except as otherwise indicated herein, the Regular Securities will be treated for federal income tax purposes as debt instruments that are issued by the REMIC and not as beneficial interests in the REMIC or the REMIC's assets. In general, interest, original issue discount, and market discount on a Regular Security will be treated as ordinary income to a holder of the Regular Security (the "Regular Securityholder"), and principal payments on a Regular Security will be treated as a return of capital to the extent of the Regular Securityholder's basis in the Regular Security allocable thereto. Regular Securityholders must use the accrual method of accounting with regard to Regular Securities, regardless of the method of accounting otherwise used by that Regular Securityholder. Payments of interest on Regular Securities may be based on a fixed rate, a variable rate as permitted by the REMIC Regulations, or may consist of a specified portion of the interest payments on qualified mortgages where such portion does not vary during the period the Regular Security is outstanding. The definition of a variable rate for purposes of the REMIC Regulations is based on the definition of a qualified floating rate for purposes of the rules governing original issue discount set forth in the OID Regulations, with certain modifications and permissible variations. See "--Variable Rate Regular Securities" below for a discussion of the definition of a qualified floating rate for purposes of the OID Regulations. In contrast to the OID Regulations, for purposes of the REMIC Regulations, a qualified floating rate does not include any multiple of a qualified floating rate (also excluding multiples of qualified floating rates that themselves would constitute qualified floating rates under the OID Regulations), and the characterization of a variable rate that is subject to a cap, floor or similar restriction as a qualified floating rate for purposes of the REMIC Regulations will not depend upon the OID Regulations relating to caps, floors, and similar restrictions. See "--Variable Rate Regular Securities" below for discussion of the OID Regulations relating to caps, floors and similar restrictions. A qualified floating rate, as defined above for purposes of the REMIC Regulations (a "REMIC qualified floating rate"), qualifies as a variable rate for purposes of the REMIC Regulations if such REMIC qualified floating rate is set at a "current rate" as defined in the OID Regulations. In addition, a rate equal to the highest, lowest or an average of two or more REMIC qualified floating rates qualifies as a variable rate for REMIC purposes. A Regular Security may also have a variable rate based on a weighted average of the interest rates on some or all of the qualified mortgages held by the REMIC where each qualified mortgage taken into account has a fixed rate or a variable rate that is permissible under the REMIC Regulations. Further, a Regular Security may have a rate that is the product of a REMIC qualified floating rate or a weighted average rate and a fixed multiplier, is a constant number of basis points more or less than a REMIC qualified floating rate or a weighted average rate, or is the product, plus or minus a constant number of basis points, of a REMIC qualified floating rate or a weighted average rate and a fixed multiplier. An otherwise permissible variable rate for a Regular Security, described above, will not lose its character as such because it is subject to a floor or a cap, including a "funds available cap" as that term is defined in the REMIC Regulations. Lastly, a Regular Security will be considered as having a permissible variable rate if it has a fixed or otherwise permissible variable rate during one or more payment or accrual periods and different fixed or otherwise permissible variable rates during other payment or accrual periods. (2) Original Issue Discount Accrual Securities will be, and other classes of Regular Securities may be, issued with "original issue discount" within the meaning of Code Section 1273(a). Holders of any Class or Subclass of Regular Securities having original issue discount generally must include original issue discount in ordinary income for federal income tax purposes as it accrues, in accordance with a constant yield method that takes into account the compounding of interest, in advance of the receipt of the cash attributable to that income. 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"). Regular Securityholders should be aware, however, that the OID Regulations do not adequately address some of the issues relevant to prepayable securities, such as the Regular Securities. To the extent that those issues are not addressed in the regulations, the Seller intends to apply the methodology described in the Conference Committee Report to the 1986 Act. No assurance can be provided that the Internal Revenue Service will not take a different position as to those matters not currently addressed by the OID Regulations. Moreover, the OID Regulations include an anti-abuse rule allowing the Internal Revenue Service to apply or depart from the OID Regulations where necessary or appropriate to ensure a reasonable tax result because 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 discussion in the OID Regulations and the appropriate method for reporting interest and original issue discount for the Regular Securities. Each Regular Security will be treated as a single installment obligation for purposes of determining the original issue discount includible in a Regular Securityholder's income. The total amount of original issue discount on a Regular Security is the excess of the "stated redemption price at maturity" of the Regular Security over its "issue price." The issue price of a Class of Regular Securities offered pursuant to this prospectus generally is the first price at which a substantial amount of that Class is sold to the public (excluding bond houses, brokers and underwriters). Although unclear under the OID Regulations, it is anticipated that the trustee will treat the issue price of a Class as to which there is no substantial sale as of the issue date or that is retained by the depositor as the fair market value of the Class as of the issue date. The issue price of a Regular Security also includes any amount paid by an initial Regular Securityholder for accrued interest that relates to a period before the issue date of the Regular Security, unless the Regular Securityholder elects on its federal income tax return to exclude that amount from the issue price and to recover it on the first Distribution Date. The stated redemption price at maturity of a Regular Security always includes the original principal amount of the Regular Security, but generally will not include distributions of interest if those distributions constitute "qualified stated interest." Under the OID Regulations, qualified stated interest generally means interest payable at a single fixed rate or a qualified variable rate (as described below), provided that the interest payments are unconditionally payable at intervals of one year or less during the entire term of the Regular Security. Because there is no penalty or default remedy in the case of nonpayment of interest for a Regular Security, it is possible that no interest on any Class of Regular Securities will be treated as qualified stated interest. However, except as provided in the following three sentences or in the prospectus supplement, because the underlying mortgage loans provide for remedies in the event of default, it is anticipated that the trustee will treat interest for the Regular Securities as qualified stated interest. Distributions of interest on an Accrual Security, or on other Regular Securities for which deferred interest will accrue, will not constitute qualified stated interest, in which case the stated redemption price at maturity of those Regular Securities includes all distributions of interest as well as principal on the Regular Securities. Likewise, it is anticipated that the trustee will treat an interest-only Class or a Class on which interest is substantially disproportionate to its principal amount (a so-called "super-premium" Class) as having no qualified stated interest. Where the interval between the issue date and the first Distribution Date on a Regular Security is shorter than the interval between subsequent Distribution Dates, the interest attributable to the additional days will be included in the stated redemption price at maturity. Under a de minimis rule, original issue discount on a Regular Security will be considered to be zero if the original issue discount is less than 0.25% of the stated redemption price at maturity of the Regular Security multiplied by the weighted average maturity of the Regular Security. For this purpose, the weighted average maturity of the Regular Security 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 Regular Security and the denominator of which is the stated redemption price at maturity of the Regular Security. The Conference Committee Report to the 1986 Act provides that the schedule of those distributions should be determined in accordance with the assumed rate of prepayment of the mortgage loans (the "Prepayment Assumption") and the anticipated reinvestment rate, if any, relating to the Regular Securities. The Prepayment Assumption for a series of Regular Securities will be set forth in the prospectus supplement. Holders generally must report de minimis original issue discount pro rata as principal payments are received, and that income will generally be capital gain if the Regular Security is held as a capital asset. Under the OID Regulations, however, Regular Securityholders may elect to accrue all de minimis original issue discount as well as market discount and market premium, under the constant yield method. See "-Election to Treat All Interest Under the Constant Yield Method" below. A Regular Securityholder generally must include in gross income for any taxable year the sum of the "daily portions," as defined below, of the original issue discount on the Regular Security accrued during an accrual period for each day on which it holds the Regular Security, including the date of purchase but excluding the date of disposition. The trustee will treat the monthly period ending on the day before each Distribution Date as the accrual period. For each Regular Security, a calculation will be made of the original issue discount that accrues during each successive full accrual period (or shorter period from the date of original issue) that ends on the day before the related Distribution Date on the Regular Security. The Conference Committee Report to the 1986 Act states that the rate of accrual of original issue discount is intended to be based on the Prepayment Assumption. The original issue discount accruing in a full accrual period would be the excess, if any, of: (1) the sum of: (a) the present value of all of the remaining distributions to be made on the Regular Security as of the end of that accrual period and (b) the distributions made on the Regular Security during the accrual period that are included in the Regular Security's stated redemption price at maturity, over (2) the adjusted issue price of the Regular Security at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence is calculated based on: (1) the yield to maturity of the Regular Security at the issue date; (2) the Prepayment Assumption. For these purposes, the adjusted issue price of a Regular Security at the beginning of any accrual period equals the issue price of the Regular Security, increased by the total amount of original issue discount for the Regular Security that accrued in all prior accrual periods and reduced by the amount of distributions included in the Regular Security's stated redemption price at maturity that were made on the Regular Security in those prior periods. The original issue discount accruing during any accrual period (as determined in this paragraph) will then be divided by the number of days in the period to determine the daily portion of original issue discount for each day in the period. For an initial accrual period shorter than a full accrual period, the daily portions of original issue discount must be determined according to an appropriate allocation under any reasonable method. Under the method described above, the daily portions of original issue discount required to be included in income by a Regular Securityholder generally will increase to take into account prepayments on the Regular Securities as a result of prepayments on the mortgage loans that exceed the Prepayment Assumption, and generally will decrease (but not below zero for any period) if the prepayments are slower than the Prepayment Assumption. An increase in prepayments on the mortgage loans for a series of Regular Securities can result in both a change in the priority of principal payments for some Classes of Regular Securities and either an increase or decrease in the daily portions of original issue discount for those Regular Securities. In the case of a Non-Pro Rata Security, it is anticipated that the trustee will determine the yield to maturity of that Security based upon the anticipated payment characteristics of the Class as a whole under the Prepayment Assumption. In general, the original issue discount accruing on each Non-Pro Rata Security in a full accrual period would be its allocable share of the original issue discount for the entire Class, as determined in accordance with the preceding paragraph. However, in the case of a distribution in retirement of the entire unpaid principal balance of any Non-Pro Rata Security (or portion of the unpaid principal balance), (a) the remaining unaccrued original issue discount allocable to the Security (or to that portion) will accrue at the time of the distribution, and (b) the accrual of original issue discount allocable to each remaining Security of that Class will be adjusted by reducing the present value of the remaining payments on that Class and the adjusted issue price of that Class to the extent attributable to the portion of the unpaid principal balance that was distributed. The depositor believes that the foregoing treatment is consistent with the "pro rata prepayment" rules of the OID Regulations, but with the rate of accrual of original issue discount determined based on the Prepayment Assumption for the Class as a whole. Investors are advised to consult their tax advisors as to this treatment. (3) Acquisition Premium A purchaser of a Regular Security having original issue discount at a price greater than its adjusted issue price but less than its stated redemption price at maturity will be required to include in gross income the daily portions of the original issue discount on the Regular Security reduced pro rata by a fraction, the numerator of which is the excess of its purchase price over the adjusted issue price and the denominator of which is the excess of the remaining stated redemption price at maturity over the adjusted issue price. Alternatively, a subsequent purchaser may elect to treat all that acquisition premium under the constant yield method, as described below under the heading "--Election to Treat All Interest Under the Constant Yield Method" below. (4) Variable Rate Regular Securities Regular Securities may provide for interest based on a variable rate. Under the OID Regulations, interest is treated as payable at a variable rate if, generally, (1) the issue price does not exceed the original principal balance by more than a specified amount and (2) the interest compounds or is payable at least annually at current values of (a) one or more "qualified floating rates," (b) a single fixed rate and one or more qualified floating rates, (c) a single "objective rate," or (d) a single fixed rate and a single objective rate that is a "qualified inverse floating rate." A floating rate is a qualified floating rate if variations can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds. A multiple of a qualified floating rate is considered a qualified floating rate only if the rate is equal to either (a) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35 or (b) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate. That rate may also be subject to a fixed cap or floor, or a cap or floor that is not reasonably expected as of the issue date to affect the yield of the instrument significantly. An objective rate is any rate (other than a qualified floating rate) that is determined using a single fixed formula and that is based on objective financial or economic information, provided that the information is not (1) within the control of the issuer or a related party or (2) unique to the circumstances of the issuer or a related party. However, an objective rate does not include a rate if it is reasonably expected that the average value of such rate during the first half of the Regular Security's term will be either significantly less than or significantly greater than the average value of the rate during the final half of the Regular Security's term. A qualified inverse floating rate is a rate equal to a fixed rate minus a qualified floating rate that inversely reflects contemporaneous variations in the qualified floating rate; an inverse floating rate that is not a qualified inverse floating rate may nevertheless be an objective rate. A Class of Regular Securities may be issued under this prospectus that does not have a qualified variable rate under the foregoing rules, for example, a Class that bears different rates at different times during the period it is outstanding that it is considered significantly "front-loaded" or "back-loaded" within the meaning of the OID Regulations. It is possible that a Class may be considered to bear "contingent interest" within the meaning of the OID Regulations. The OID Regulations, as they relate to the treatment of contingent interest, are by their terms not applicable to Regular Securities. However, if final regulations dealing with contingent interest for Regular Securities apply the same principles as the OID Regulations, those regulations may lead to different timing of income inclusion than would be the case under the OID Regulations. Furthermore, application of those principles could lead to the characterization of gain on the sale of contingent interest Regular Securities as ordinary income. Investors should consult their tax advisors regarding the appropriate treatment of any Regular Security that does not pay interest at a fixed rate or qualified variable rate as described in this paragraph. The amount of original issue discount for a Regular Security bearing a qualified variable rate of interest will accrue in the manner described above under "--Original Issue Discount," with the yield to maturity and future payments on that Regular Security generally to be determined by assuming that interest will be payable for the life of the Regular Security based on the initial rate (or, if different, the value of the applicable variable rate as of the pricing date) for the relevant Class, if the Class bears interest at a qualified floating rate or qualified inverse floating rate, or based on a fixed rate which reflects the reasonably expected yield for the relevant Class, if the Class bears interest at an objective rate (other than a qualified inverse floating rate). Unless required otherwise by applicable final regulations, it is anticipated that the trustee will treat interest, other than variable interest on an interest-only or super-premium Class, as qualified stated interest at the qualified variable rate. However, the qualified stated interest allocable to an accrual period will be increased (or decreased) if the interest actually paid during the accrual period exceed (or is less than) the interest assumed to be paid under the rate just described. (5) Market Discount A subsequent purchaser of a Regular Security also may be subject to the market discount rules of Code Sections 1276 through 1278. Under these sections and the principles applied by the OID Regulations in the context of original issue discount, "market discount" is the amount by which the purchaser's original basis in the Regular Security (1) is exceeded by the remaining outstanding principal payments and interest payments other than qualified stated interest payments due on a Regular Security, or (2) in the case of a Regular Security having original issue discount, is exceeded by the adjusted issue price of that Regular Security at the time of purchase. The purchaser generally will be required to recognize ordinary income to the extent of accrued market discount on that Regular Security as distributions includible in the stated redemption price at maturity of the Regular Security are received, in an amount not exceeding that distribution. The market discount would accrue in a manner to be provided in Treasury regulations and should take into account the Prepayment Assumption. The Conference Committee Report to the 1986 Act provides that until these regulations are issued, the market discount would accrue either (1) on the basis of a constant interest rate, or (2) in the ratio of stated interest allocable to the relevant period to the sum of the interest for that period plus the remaining interest as of the end of that period, or in the case of a Regular Security issued with original issue discount, in the ratio of original issue discount accrued for the relevant period to the sum of the original issue discount accrued for that period plus the remaining original issue discount as of the end of that period. The purchaser also generally will be required to treat a portion of any gain on a sale or exchange of the Regular Security as ordinary income to the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market discount previously reported as ordinary income as partial distributions in reduction of the stated redemption price at maturity were received. The purchaser will be required to defer deduction of a portion of the excess of the interest paid or accrued on indebtedness incurred to purchase or carry a Regular Security over the interest distributable on the Regular Security. The deferred portion of the interest expense in any taxable year generally will not exceed the accrued market discount on the Regular Security for that year. Any deferred interest expense is, in general, allowed as a deduction not later than the year in which the related market discount income is recognized or the Regular Security is disposed of. As an alternative to the inclusion of market discount in income on the foregoing basis, the Regular Securityholder may elect to include market discount in income currently as it accrues on all market discount instruments acquired by the Regular Securityholder in that taxable year or thereafter, in which case the interest deferral rule will not apply. See "--Election to Treat All Interest Under the Constant Yield Method" below regarding an alternative manner in which that election may be deemed to be made. A person who purchases a Regular Security at a price lower than the remaining amounts includible in the stated redemption price at maturity of the security, but higher than its adjusted issue price, does not acquire the Regular Security with market discount, but will be required to report original issue discount, appropriately adjusted to reflect the excess of the price paid over the adjusted issue price. Market discount for a Regular Security will be considered to be zero if the market discount is less than 0.25% of the remaining stated redemption price at maturity of the Regular Security (or, in the case of a Regular Security having original issue discount, the adjusted issue price of that Regular Security) multiplied by the weighted average maturity of the Regular Security (presumably determined as described above in the third paragraph under "--Original Issue Discount" above) remaining after the date of purchase. It appears that de minimis market discount would be reported in a manner similar to de minimis original issue discount. See "--Original Issue Discount" above. Treasury regulations implementing the market discount rules have not yet been issued, and uncertainty exists with respect to many aspects of those rules. Due to the substantial lack of regulatory guidance with respect to the market discount rules, it is unclear how those rules will affect any secondary market that develops for a particular Class of Regular Securities. Prospective investors in Regular Securities should consult their own tax advisors regarding the application of the market discount rules to the Regular Securities and the elections to include market discount in income currently and to accrue market discount on the basis of the constant yield method. (6) Amortizable Premium A Regular Security purchased at a cost greater than its remaining stated redemption price at maturity generally is considered to be purchased at a premium. If the Regular Securityholder holds that Regular Security as a "capital asset" within the meaning of Code Section 1221, the Regular Securityholder may elect under Code Section 171 to amortize the premium under a constant yield method that reflects compounding based on the interval between payments on the Regular Security. The election will apply to all taxable debt obligations (including REMIC regular interests) acquired by the Regular Securityholder at a premium held in that taxable year or thereafter, unless revoked with the permission of the Internal Revenue Service. The Conference Committee Report to the 1986 Act indicates a Congressional intent that the same rules that apply to the accrual of market discount on installment obligations will also apply to amortizing bond premium under Code Section 171 on installment obligations as the Regular Securities, although it is unclear whether the alternatives to the constant interest method described above under "Market Discount" are available. Amortizable bond premium generally will be treated as an offset to interest income on a Regular Security, rather than as a separate deductible item. See "--Election to Treat All Interest Under the Constant Yield Method" below regarding an alternative manner in which the Code Section 171 election may be deemed to be made. (7) Election to Treat All Interest Under the Constant Yield Method A holder of a debt instrument such as a Regular Security may elect to treat all interest that accrues on the instrument using the constant yield method, with none of the interest being treated as qualified stated interest. For purposes of applying the constant yield method to a debt instrument subject to this election, (1) "interest" includes stated interest, original issue discount, de minimis original issue discount, market discount and de minimis market discount, as adjusted by any amortizable bond premium or acquisition premium and (2) the debt instrument is treated as if the instrument were issued on the holder's acquisition date in the amount of the holder's adjusted basis immediately after acquisition. It is unclear whether, for this purpose, the initial Prepayment Assumption would continue to apply or if a new prepayment assumption as of the date of the holder's acquisition would apply. A holder generally may make this election on an instrument by instrument basis or for a class or group of debt instruments. However, if the holder makes this election for a debt instrument with amortizable bond premium, the holder is deemed to have made elections to amortize bond premium currently as it accrues under the constant yield method for all premium bonds held by the holder in the same taxable year or thereafter. Alternatively, if the holder makes this election for a debt instrument with market discount, the holder is deemed to have made elections to report market discount income currently as it accrues under the constant yield method for all market discount bonds acquired by the holder in the same taxable year or thereafter. The election is made on the holder's federal income tax return for the year in which the debt instrument is acquired and is irrevocable except with the approval of the Internal Revenue Service. Investors should consult their own tax advisors regarding the advisability of making this election. (8) Treatment of Losses Regular Securityholders will be required to report income for Regular Securities on the accrual method of accounting, without giving effect to delays or reductions in distributions attributable to defaults or delinquencies on the mortgage loans, except to the extent it can be established that the losses are uncollectible. Accordingly, the holder of a Regular Security, particularly a Subordinate Security, may have income, or may incur a diminution in cash flow as a result of a default or delinquency, but may not be able to take a deduction (subject to the discussion below) for the corresponding loss until a subsequent taxable year. In this regard, investors are cautioned that while they may generally cease to accrue interest income if it reasonably appears that the interest will be uncollectible, the Internal Revenue Service may take the position that original issue discount must continue to be accrued in spite of its uncollectibility until the debt instrument is disposed of in a taxable transaction or becomes worthless in accordance with the rules of Code Section 166. To the extent the rules of Code Section 166 regarding bad debts are applicable, it appears that Regular Securityholders that are corporations or that otherwise hold the Regular Securities in connection with a trade or business should in general be allowed to deduct as an ordinary loss that loss with respect to principal sustained during the taxable year on account of any Regular Securities becoming wholly or partially worthless, and that, in general, Regular Securityholders that are not corporations and do not hold the Regular Securities in connection with a trade or business should be allowed to deduct as a short-term capital loss any loss sustained during the taxable year on account of a portion of any Regular Securities becoming wholly worthless. Although the matter is not free from doubt, non-corporate Regular Securityholders should be allowed a bad debt deduction at the time the principal balance of the Regular Securities is reduced to reflect losses resulting from any liquidated mortgage loans. The Internal Revenue Service, however, could take the position that non-corporate holders will be allowed a bad debt deduction to reflect those losses only after all the mortgage loans remaining in the trust fund have been liquidated or the applicable Class of Regular Securities has been otherwise retired. The Internal Revenue Service could also assert that losses on the Regular Securities are deductible based on some other method that may defer those deductions for all holders, such as reducing future cashflow for purposes of computing original issue discount. This may have the effect of creating "negative" original issue discount that may be deductible only against future positive original issue discount or otherwise upon termination of the Class. Regular Securityholders are urged to consult their own tax advisors regarding the appropriate timing, amount and character of any loss sustained for their Regular Securities. While losses attributable to interest previously reported as income should be deductible as ordinary losses by both corporate and non-corporate holders, the Internal Revenue Service may take the position that losses attributable to accrued original issue discount may only be deducted as capital losses in the case of non-corporate holders who do not hold the Regular Securities in connection with a trade or business. Special loss rules may be applicable to banks and thrift institutions. These taxpayers are advised to consult their tax advisors regarding the treatment of losses on Regular Securities. (9) Sale or Exchange of Regular Securities If a Regular Securityholder sells or exchanges a Regular Security, the Regular Securityholder will recognize gain or loss equal to the difference, if any, between the amount received and its adjusted basis in the Regular Security. The adjusted basis of a Regular Security generally will equal the original cost of the Regular Security to the seller, increased by any original issue discount or market discount previously included in the seller's gross income for the Regular Security and reduced by amounts included in the stated redemption price at maturity of the Regular Security that were previously received by the seller, by any amortized premium, and by any recognized losses. Except as described above regarding market discount, and except as provided in this paragraph, any gain or loss on the sale or exchange of a Regular Security realized by an investor who holds the Regular Security as a capital asset will be capital gain or loss and will be long-term or short-term depending on whether the Regular Security has been held for the long-term capital gain holding period (currently, more than one year). That gain will be treated as ordinary income (1) if a Regular Security 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 Regular Securityholder's net investment in the conversion transaction at 120% of the appropriate applicable federal rate in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income for any prior disposition of property that was held as part of that transaction; (2) in the case of a non-corporate taxpayer, to the extent that the taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary income rates; or (3) to the extent that the gain does not exceed the excess, if any, of (a) the amount that would have been includible in the gross income of the holder if its yield on that Regular Security were 110% of the applicable federal rate as of the date of purchase, over (b) the amount of income actually includible in the gross income of the holder for that Regular Security (the "110% yield rule"). In addition, gain or loss recognized from the sale of a Regular Security by some banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c). Long-term capital gains of noncorporate taxpayers generally are subject to a lower maximum tax rate than ordinary income of those taxpayers for property held for more than one year, with further rate reductions for property held for more than five years. Currently, the maximum tax rate for corporations is the same for both ordinary income and capital gains. TAXATION OF OWNERS OF RESIDUAL SECURITIES (1) Taxation of REMIC Income Generally, the "daily portions" of REMIC taxable income or net loss will be includible as ordinary income or loss in determining the federal taxable income of holders of Residual Securities ("Residual Holders"), and will not be taxed separately to the REMIC Pool. The daily portions of REMIC taxable income or net loss of a Residual Holder are determined by allocating the REMIC Pool's taxable income or net loss for each calendar quarter ratably to each day in that quarter and by allocating that daily portion among the Residual Holders in proportion to their respective holdings of Residual Securities in the REMIC Pool on that day. REMIC taxable income is generally determined in the same manner as the taxable income of an individual using the accrual method of accounting, except that (1) the limitations on deductibility of investment interest expense and expenses for the production of income do not apply; (2) all bad loans will be deductible as business bad debts; and (3) the limitation on the deductibility of interest and expenses related to tax-exempt income will apply. The REMIC Pool's gross income includes interest, original issue discount income and market discount income, if any, on the mortgage loans, reduced by amortization of any premium on the mortgage loans, plus income from amortization of issue premium, if any, on the Regular Securities, plus income on reinvestment of cash flows and reserve assets, plus any cancellation of indebtedness income upon allocation of realized losses to the Regular Securities. The REMIC Pool's deductions include interest and original issue discount expense on the Regular Securities, servicing fees on the mortgage loans, other administrative expenses of the REMIC Pool and realized losses on the mortgage loans. The requirement that Residual Holders report their pro rata share of taxable income or net loss of the REMIC Pool will continue until there are no Notes or Certificates, as applicable, of any class of the related series outstanding. The taxable income recognized by a Residual Holder in any taxable year will be affected by, among other factors, the relationship between the timing of recognition of interest, original issue discount or market discount income or amortization of premium for the mortgage loans, on the one hand, and the timing of deductions for interest (including original issue discount) or income from amortization of issue premium on the Regular Securities, on the other hand. If an interest in the mortgage loans is acquired by the REMIC Pool at a discount, and one or more of these mortgage loans is prepaid, the prepayment may be used in whole or in part to make distributions in reduction of principal on the Regular Securities, and the discount on the mortgage loans that is includible in income may exceed the original issue discount deductions allowed with respect to the Regular Securities. When there is more than one Class of Regular Securities that distribute principal sequentially, this mismatching of income and deductions is particularly likely to occur in the early years following issuance of the Regular Securities when distributions in reduction of principal are being made in respect of earlier Classes of Regular Securities to the extent that those Classes are not issued with substantial discount or are issued at a premium. If taxable income attributable to that mismatching is realized, in general, losses would be allowed in later years as distributions on the later maturing Classes of Regular Securities are made. Taxable income may also be greater in earlier years than in later years as a result of the fact that interest expense deductions, expressed as a percentage of the outstanding principal amount of that series of Regular Securities, may increase over time as distributions in reduction of principal are made on the lower yielding Classes of Regular Securities, whereas, to the extent the REMIC Pool consists of fixed rate mortgage loans, interest income for any particular mortgage loan will remain constant over time as a percentage of the outstanding principal amount of that loan. Consequently, Residual Holders must have sufficient other sources of cash to pay any federal, state, or local income taxes due as a result of that mismatching or unrelated deductions against which to offset that income, subject to the discussion of "excess inclusions" below under "--Limitations on Offset or Exemption of REMIC Income." The timing of mismatching of income and deductions described in this paragraph, if present for a series of Notes or Certificates, as applicable, may have a significant adverse effect upon a Residual Holder's after-tax rate of return. A portion of the income of a Residual Holder may be treated unfavorably in three contexts: (1) it may not be offset by current or net operating loss deductions; (2) it will be considered unrelated business taxable income to tax-exempt entities; and (3) it is ineligible for any statutory or treaty reduction in the 30% withholding tax otherwise available to a foreign Residual Holder. See "--Limitations on Offset or Exemption of REMIC Income" below. In addition, a Residual Holder's taxable income during some periods may exceed the income reflected by those Residual Holders for those periods in accordance with generally accepted accounting principles. Investors should consult their own accountants concerning the accounting treatment of their investment in Residual Securities. (2) Basis and Losses The amount of any net loss of the REMIC Pool that may be taken into account by the Residual Holder is limited to the adjusted basis of the Residual Security as of the close of the quarter (or time of disposition of the Residual Security if earlier), determined without taking into account the net loss for the quarter. The initial adjusted basis of a purchaser of a Residual Security is the amount paid for that Residual Security. The adjusted basis will be increased by the amount of taxable income of the REMIC Pool reportable by the Residual Holder and will be decreased (but not below zero), first, by a cash distribution from the REMIC Pool and, second, by the amount of loss of the REMIC Pool reportable by the Residual Holder. Any loss that is disallowed on account of this limitation may be carried over indefinitely with respect to the Residual Holder as to whom the loss was disallowed and may be used by the Residual Holder only to offset any income generated by the same REMIC Pool. A Residual Holder will not be permitted to amortize directly the cost of its Residual Security as an offset to its share of the taxable income of the related REMIC Pool. However, if, in any year, cash distributions to a Residual Holder exceed its share of the REMIC's taxable income, the excess will constitute a return of capital to the extent of the holder's basis in its Residual Security. A return of capital is not treated as income for federal income tax purposes, but will reduce the tax basis of the Residual Holder (but not below zero). If a Residual Security's basis is reduced to zero, any cash distributions with respect to that Residual Security in any taxable year in excess of its share of the REMIC's income would be taxable to the holder as gain on the sale or exchange of its interest in the REMIC. A Residual Security may have a negative value if the net present value of anticipated tax liabilities exceeds the present value of anticipated cash flows. The REMIC Regulations appear to treat the issue price of the residual interest as zero rather than the negative amount for purposes of determining the REMIC Pool's basis in its assets. The preamble to the REMIC Regulations states that the Internal Revenue Service may provide future guidance on the proper tax treatment of payments made by a transferor of the residual interest to induce the transferee to acquire the interest, and Residual Holders should consult their own tax advisors in this regard. Further, to the extent that the initial adjusted basis of a Residual Holder (other than an original holder) in the Residual Security is greater than the corresponding portion of the REMIC Pool's basis in the mortgage loans, the Residual Holder will not recover a portion of the basis until termination of the REMIC Pool unless future Treasury regulations provide for periodic adjustments to the REMIC income otherwise reportable by the holder. The REMIC Regulations currently in effect do not so provide. See "--Treatment of Certain Items of REMIC Income and Expense--Market Discount" below regarding the basis of mortgage loans to the REMIC Pool and "--Sale or Exchange of a Residual Security" below regarding possible treatment of a loss upon termination of the REMIC Pool as a capital loss. (3) Treatment of Certain Items of REMIC Income and Expense Although it is anticipated that the trustee will compute REMIC income and expense in accordance with the Code and applicable regulations, the authorities regarding the determination of specific items of income and expense are subject to differing interpretations. The depositor makes no representation as to the specific method that will be used for reporting income with respect to the mortgage loans and expenses for the Regular Securities, and different methods could result in different timing or reporting of taxable income or net loss to Residual Holders or differences in capital gain versus ordinary income. ORIGINAL ISSUE DISCOUNT AND PREMIUM. Generally, the REMIC Pool's deductions for original issue discount and income from amortization of premium will be determined in the same manner as original issue discount income on Regular Securities as described above under "--Taxation of Owners of Regular Securities--Original Issue Discount" and "--Variable Rate Regular Securities," without regard to the de minimis rule described therein, and "--Amortizable Premium." MARKET DISCOUNT. The REMIC Pool will have market discount income in respect of mortgage loans if, in general, the basis of the REMIC Pool in those mortgage loans is exceeded by their unpaid principal balances. The REMIC Pool's basis in those mortgage loans is generally the fair market value of the mortgage loans immediately after the transfer of the mortgage loans to the REMIC Pool. The REMIC Regulations provide that the basis is equal to the total of the issue prices of all regular and residual interests in the REMIC Pool. The market discount must be recognized currently as an item of ordinary income as it accrues, rather than being included in income upon the sale of mortgage loans or as principal on the mortgage loans is paid. Market discount income generally should accrue in the manner described above under "--Taxation of Owners of Regular Securities--Market Discount." PREMIUM. Generally, if the basis of the REMIC Pool in the mortgage loans exceeds the unpaid principal balances of the mortgage loans, the REMIC Pool will be considered to have acquired those mortgage loans at a premium equal to the amount of that excess. As stated above, the REMIC Pool's basis in mortgage loans is generally the fair market value of the mortgage loans and is based on the total of the issue prices of the regular and residual interests in the REMIC Pool immediately after the transfer of the mortgage loans to the REMIC Pool. In a manner analogous to the discussion above under "--Taxation of Owners of Regular Securities--Amortizable Premium," a person that holds a mortgage loan as a capital asset under Code Section 1221 may elect under Code Section 171 to amortize premium on mortgage loans originated after September 27, 1985, under the constant yield method. Amortizable bond premium will be treated as an offset to interest income on the mortgage loans, rather than as a separate deduction item. Because substantially all of the borrowers on the mortgage loans are expected to be individuals, Code Section 171 will not be available for premium on mortgage loans originated on or before September 27, 1985. Premium for those mortgage loans may be deductible in accordance with a reasonable method regularly employed by the holder of those mortgage loans. The allocation of that premium pro rata among principal payments should be considered a reasonable method; however, the Internal Revenue Service may argue that the premium should be allocated in a different manner, such as allocating the premium entirely to the final payment of principal. (4) Limitations on Offset or Exemption of REMIC Income A portion (or all) of the REMIC taxable income includible in determining the federal income tax liability of a Residual Holder will be subject to special treatment. That portion, referred to as the "excess inclusion," is equal to the excess of REMIC taxable income for the calendar quarter allocable to a Residual Security over the daily accruals for that quarterly period of (1) 120% of the long-term applicable federal rate that would have applied to the Residual Security (if it were a debt instrument) on the Startup Day under Code Section 1274(d), multiplied by (2) the adjusted issue price of the Residual Security at the beginning of the quarterly period. For this purpose, the adjusted issue price of a Residual Security at the beginning of a quarter is the issue price of the Residual Security, plus the amount of those daily accruals of REMIC income described in this paragraph for all prior quarters, decreased by any distributions made with respect to the Residual Security before the beginning of that quarterly period. The portion of a Residual Holder's REMIC taxable income consisting of the excess inclusions generally may not be offset by other deductions, including net operating loss carryforwards, on the Residual Holder's return. However, net operating loss carryovers are determined without regard to excess inclusion income. Further, if the Residual Holder is an organization subject to the tax on unrelated business income imposed by Code Section 511, the Residual Holder's excess inclusions will be treated as unrelated business taxable income of the Residual Holder for purposes of Code Section 511. In addition, REMIC taxable income is subject to 30% withholding tax for persons who are not U.S. Persons (as defined below under "--Tax-Related Restrictions on Transfer of Residual Securities--Foreign Investors"), and the portion thereof attributable to excess inclusions is not eligible for any reduction in the rate of withholding tax (by treaty or otherwise). See "--Taxation of Certain Foreign Investors--Residual Securities" below. Finally, if a real estate investment trust or a regulated investment company owns a Residual Security, a portion (allocated under Treasury regulations yet to be issued) of dividends paid by the real estate investment trust or regulated investment company could not be offset by net operating losses of its shareholders, would constitute unrelated business taxable income for tax-exempt shareholders, and would be ineligible for reduction of withholding to persons who are not U.S. Persons. Provisions governing the relationship between excess inclusions and the alternative minimum tax provide that (i) alternative minimum taxable income for a Residual Holder is determined without regard to the special rule, discussed above, that taxable income cannot be less than excess inclusions, (ii) a Residual Holder's alternative minimum taxable income for a taxable year cannot be less than the excess inclusions for the year, and (iii) the amount of any alternative minimum tax net operating loss deduction must be computed without regard to any excess inclusions. The Internal Revenue Service has authority to promulgate regulations providing that if the aggregate value of the Residual Securities is not considered to be "significant," then the entire share of REMIC taxable income of a Residual Holder may be treated as excess inclusions subject to the foregoing limitations. This authority has not been exercised to date. (5) Tax-Related Restrictions on Transfer of Residual Securities DISQUALIFIED ORGANIZATIONS. If any legal or beneficial interest in a Residual Security is transferred to a Disqualified Organization (as defined below), a tax would be imposed in an amount equal to the product of (1) the present value of the total anticipated excess inclusions for that Residual Security for periods after the transfer and (2) the highest marginal federal income tax rate applicable to corporations. The REMIC Regulations provide that the anticipated excess inclusions are based on actual prepayment experience to the date of the transfer and projected payments based on the Prepayment Assumption. The present value rate equals the applicable federal rate under Code Section 1274(d) as of the date of the transfer for a term ending with the last calendar quarter in which excess inclusions are expected to accrue. That rate is applied to the anticipated excess inclusions from the end of the remaining calendar quarters in which they arise to the date of the transfer. That tax generally would be imposed on the transferor of the Residual Security, except that where the transfer is through an agent (including a broker, nominee, or other middleman) for a Disqualified Organization, the tax would instead be imposed on the agent. However, a transferor of a Residual Security would in no event be liable for the tax for a transfer if the transferee furnished to the transferor an affidavit stating that the transferee is not a Disqualified Organization and, as of the time of the transfer, the transferor does not have actual knowledge that the affidavit is false. Under the REMIC Regulations, an affidavit will be sufficient if the transferee furnishes (A) a social security number, and states under penalties of perjury that the social security number is that of the transferee, or (B) a statement under penalties of perjury that it is not a disqualified organization. "Disqualified Organization" means the United States, any state or political subdivision of the United States, any foreign government, any international organization, any agency or instrumentality of any of the foregoing (provided, that the term does not include an instrumentality if all of its activities are subject to tax and a majority of its board of directors in not selected by any governmental entity), any cooperative organization furnishing electric energy or providing telephone service to persons in rural areas as described in Code Section 1381(a)(2)(C), and any organization (other than a farmers' cooperative described in Code Section 531) that is exempt from taxation under the Code unless the organization is subject to the tax on unrelated business income imposed by Code Section 511. In addition, if a "Pass-Through Entity" (as defined below) has excess inclusion income for a Residual Security during a taxable year and a Disqualified Organization is the record holder of an equity interest in that entity, then a tax is imposed on the entity equal to the product of (1) the amount of excess inclusions that are allocable to the interest in the Pass-Through Entity during the period that interest is held by the Disqualified Organization, and (2) the highest marginal federal corporate income tax rate. That tax would be deductible from the ordinary gross income of the Pass-Through Entity for the taxable year. The Pass-Through Entity would not be liable for the tax if (1) it has received an affidavit from the record holder stating, under penalties of perjury, that it is not a Disqualified Organization, or providing the holder's taxpayer identification number and stating, under penalties of perjury, that the social security number is that of the record owner, and (2) during the period that person is the record holder of the Residual Security, the Pass-Through Entity does not have actual knowledge that the affidavit is false. "Pass-Through Entity" means any regulated investment company, real estate investment trust, common trust fund, partnership, trust or estate and corporations operating on a cooperative basis. Except as may be provided in Treasury regulations, any person holding an interest in a Pass-Through Entity as a nominee for another will, with respect to that interest, be treated as a Pass-Through Entity. If an "electing large partnership" holds a Residual Security, all interests in the electing large partnership are treated as held by Disqualified Organizations for purposes of the tax imposed upon a Pass-Through Entity by Section 860E(c) of the Code. The exception to this tax, otherwise available to a Pass-Through Entity that is furnished particular affidavits by record holders of interests in the entity and that does not know those affidavits are false, is not available to an electing large partnership. The pooling and servicing agreement for a series will provide that no legal or beneficial interest in a Residual Security may be transferred or registered unless (1) the proposed transferee furnished to the transferor and the trustee an affidavit providing its taxpayer identification number and stating that the transferee is the beneficial owner of the Residual Security and is not a Disqualified Organization and is not purchasing the Residual Security on behalf of a Disqualified Organization (i.e., as a broker, nominee or middleman) and (2) the transferor provides a statement in writing to the trustee that it has no actual knowledge that the affidavit is false. Moreover, the pooling and servicing agreement will provide that any attempted or purported transfer in violation of these transfer restrictions will be null and void and will vest no rights in any purported transferee. Each Residual Security for a series will bear a legend referring to those restrictions on transfer, and each Residual Holder will be deemed to have agreed, as a condition of ownership of the Residual Security, to any amendments to the related pooling and servicing agreement required under the Code or applicable Treasury regulations to effectuate the foregoing restrictions. Information necessary to compute an applicable excise tax must be furnished to the Internal Revenue Service and to the requesting party within 60 days of the request, and the Seller or the trustee may charge a fee for computing and providing that information. NONECONOMIC RESIDUAL INTERESTS. The REMIC Regulations would disregard some transfers of Residual Securities, in which case the transferor would continue to be treated as the owner of the Residual Securities and thus would continue to be subject to tax on its allocable portion of the net income of the REMIC Pool. Under the REMIC Regulations, a transfer of a "noneconomic residual interest" (as defined below) to a Residual Holder (other than a Residual Holder who is not a U.S. Person as defined below under "--Foreign Investors") is disregarded to all federal income tax purposes if a significant purpose of the transfer is to impede the assessment or collection of tax. A residual interest in a REMIC (including a residual interest with a positive value at issuance) is a "noneconomic residual interest" unless, at the time of the transfer, (1) the present value of the expected future distributions on the residual interest at least equals the product of the present value of the anticipated excess inclusions and the highest corporate income tax rate in effect for the year in which the transfer occurs, and (2) the transferor reasonably expects that the transferee will receive distributions from the REMIC at or after the time at which taxes accrue on the anticipated excess inclusions in an amount sufficient to satisfy the accrued taxes on each excess inclusion. The anticipated excess inclusions and the present value rate are determined in the same manner as set forth above under "--Disqualified Organizations." The REMIC Regulations explain that a significant purpose to impede the assessment or collection of tax exists if the transferor, at the time of the transfer, either knew or should have known that the transferee would be unwilling or unable to pay taxes due on its share of the taxable income of the REMIC. A safe harbor is provided if (1) the transferor conducted, at the time of the transfer, a reasonable investigation of the financial condition of the transferee and found that the transferee historically had paid its debts as they came due and found no significant evidence to indicate that the transferee would not continue to pay its debts as they came due in the future, (2) the transferee represents to the transferor that it understands that, as the holder of the non-economic residual interest, the transferee may incur liabilities in excess of any cash flows generated by the interest and that the transferee intends to pay taxes associated with holding the residual interest as they become due, and (3) either the formula test or the asset test (each as described below) is satisfied. The formula test is satisfied if the present value of the anticipated tax liabilities associated with holding the Residual Security does not exceed the sum of the present values of (1) any consideration given to the transferee to the acquire the Residual Security, (2) the expected future distributions on the Residual Security, and (3) the anticipated tax savings associated with holding the Residual Security as the REMIC generates losses. For purposes of this calculation, the present values generally are calculated using a discount rate equal to the applicable federal rate, and the transferee is assumed to pay tax at the highest corporate rate of tax. The asset test is satisfied if 1. at the time of the transfer of the Residual Security, and at the close of each of the transferee's two fiscal years preceding the year of transfer, the transferee's gross assets for financial reporting purposes exceed $100 million and its net assets for financial reporting purposes exceed $10 million, 2. the transferee is a taxable domestic C corporation, other than a RIC, REIT, REMIC or Subchapter T cooperative (an "Eligible Corporation"), that makes a written agreement that any subsequent transfer of the Residual Security will be to another Eligible Corporation in a transaction that satisfies the safe harbor described above, and the transferor does not know, or have reason to know, that the transferee will not honor such agreement, and 3. the facts and circumstances known to the transferor on or before the date of transfer do not reasonably indicate that the taxes associated with the Residual Security will not be paid. For purposes of requirement (1), the gross and net assets of a transferee do not include any obligations of a person related to the transferee or any other asset if a principal purpose for holding or acquiring the asset is to permit the transferee to satisfy the asset test. Further, requirement (2) will not be treated as satisfied in the case of any transfer or assignment of the Residual Security to a foreign branch of an Eligible Corporation or any other arrangement by which the Residual Security is at any time subject to net tax by a foreign country or possession of the United States. FOREIGN INVESTORS. The REMIC Regulations provide that the transfer of a Residual Security that has "tax avoidance potential" to a "foreign person" will be disregarded for all federal tax purposes. This rule appears intended to apply to a transferee who is not a "U.S. Person" (as defined below), unless the transferee's income is effectively connected with the conduct of a trade or business within the United States. A Residual Security is deemed to have tax avoidance potential unless, at the time of the transfer, the transferor reasonably expects that (1) the future distributions on the Residual Security will equal at least 30% of the anticipated excess inclusions after the transfer, and (2) such amounts will be distributed at or after the time at which the excess inclusions accrue and before the end of the next succeeding taxable year. A safe harbor in the REMIC Regulations provides that the reasonable expectation requirement will be satisfied if the above test would be met at all assumed prepayment rates for the mortgage loans from 50 percent to 200 percent of the Prepayment Assumption. If the non-U.S. Person transfers the Residual Security back to a U.S. Person, the transfer will be disregarded and the foreign transferor will continue to be treated as the owner unless arrangements are made so that the transfer does not have the effect of allowing the transferor to avoid tax on accrued excess inclusions. The prospectus supplement relating to the Certificates of a series may provide that a Residual Security may not be purchased by or transferred to any person that is not a U.S. Person or may describe the circumstances and restrictions pursuant to which the transfer may be made. The term "U.S. Person" means a citizen or resident of the United States, a corporation or partnership (or other entity properly treated as a partnership or as a corporation for federal income tax purposes) created or organized in or under the laws of the United States or of any state (including, for this purpose, the District of Columbia), an estate that is subject to U.S. federal income tax regardless of the source of its income, or 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 U.S. Persons have the authority to control all substantial decisions of the trust (or, to the extent provided in applicable Treasury regulations, trusts in existence on August 20, 1996, which are eligible to elect and do elect to be treated as U.S. Persons). (6) Sale or Exchange of a Residual Security Upon the sale or exchange of a Residual Security, the Residual Holder will recognize gain or loss equal to the excess, if any, of the amount realized over the adjusted basis (as described above under "--Taxation of Owners of Residual Securities--Basis and Losses") of the Residual Holder in the Residual Security at the time of the sale or exchange. Further, as described above under "--Taxation of Owners of Residual Securities--Basis and Losses", if a Residual Security's basis is reduced to zero, any cash distributions with respect to that Residual Security in any taxable year in excess of its share of the REMIC's income for that year would be taxable to the holder as gain on the sale or exchange of its interest in the REMIC. If a Residual Holder has an adjusted basis in its Residual Security when its interest in the REMIC Pool terminates, then it will recognize a capital loss (assuming the Residual Security was held as a capital asset) at that time in an amount equal to the remaining adjusted basis. Any gain on the sale of a Residual Security will be treated as ordinary income (1) if a Residual Security 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 Residual Holder's net investment in the conversion transaction at 120% of the appropriate applicable federal rate in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income for any prior disposition of property that was held as a part of that transaction or (2) in the case of a non-corporate taxpayer, to the extent that the taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary income rates. In addition, gain or loss recognized from the sale of a Residual Security by some banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c). Except as provided in Treasury regulations yet to be issued, the wash sale rules of Code Section 1091 will apply to dispositions of Residual Securities where the seller of the Residual Security, during the period beginning six months before the sale or disposition of the Residual Security and ending six months after the sale or disposition, acquires (or enters into any other transaction that results in the application of Code Section 1091) any residual interest in any REMIC or any interest in a "taxable mortgage pool" (such as a non-REMIC owner trust) that is economically comparable to a Residual Security. (7) Mark to Market Regulations Treasury regulations provide that a Residual Security acquired on or after January 4, 1995 is not treated as a security and thus may not be marked to market pursuant to Section 475 of the Code. TAXES THAT MAY BE IMPOSED ON THE REMIC POOL (1) Prohibited Transactions Income from transactions by the REMIC Pool, called prohibited transactions, will not be part of the calculation of income or loss includible in the federal income tax returns of Residual Holders, but rather will be taxed directly to the REMIC Pool at a 100% rate. Prohibited transactions generally include: (1) the disposition of a qualified mortgages other than for (a) substitution for a defective (including a defaulted) obligation within two years of the Startup Day (or repurchase in lieu of substitution of a defective (including a defaulted) obligation at any time) or for any qualified mortgage within three months of the Startup Day; (b) foreclosure, default, or imminent default of a qualified mortgage; (c) bankruptcy or insolvency of the REMIC Pool; or (d) a qualified (complete) liquidation; (2) the receipt of income from assets that are not the type of mortgages or investments that the REMIC Pool is permitted to hold; (3) the receipt of compensation for services; or (4) the receipt of gain from disposition of cash flow investments other than pursuant to a qualified liquidation. Notwithstanding (1) and (4) above, it is not a prohibited transaction to sell a qualified mortgage or cash flow investment held by a REMIC Pool to prevent a default on Regular Securities as a result of a default on qualified mortgages or to facilitate a clean-up call (generally, an optional termination to save administrative costs when no more than a small percentage of the Notes or Certificates, as applicable, is outstanding). The REMIC Regulations indicate that the modification of a mortgage loan generally will not be treated as a disposition if it is occasioned by a default or reasonably foreseeable default, an assumption of the mortgage loan, the waiver of a due-on-sale or due-on-encumbrance clause, or the conversion of an interest rate by a borrower pursuant to the terms of a convertible adjustable rate mortgage loan. (2) Contributions to the REMIC Pool After the Startup Day In general, the REMIC Pool will be subject to a tax at a 100% rate on the value of any property contributed to the REMIC Pool after the Startup Day. Exceptions are provided for cash contributions to the REMIC Pool (1) during the three months following the Startup Day, (2) made to a qualified reserve fund by a Residual Holder, (3) in the nature of a guarantee, (4) made to facilitate a qualified liquidation or clean-up call, and (5) as otherwise permitted in Treasury regulations yet to be issued. It is not anticipated that there will be any contributions to the REMIC Pool after the Startup Day. (3) Net Income from Foreclosure Property The REMIC Pool will be subject of federal income tax at the highest corporate rate on "net income from foreclosure property," determined by reference to the rules applicable to real estate investment trusts. Generally, property acquired by deed in lieu of foreclosure would be treated as "foreclosure property" until the close of the third calendar year after the year in which the REMIC Pool acquired that property, with possible extensions. Net income from foreclosure property generally means gain from the sale of a foreclosure property that is inventory property and gross income from foreclosure property other than qualifying rents and other qualifying income for a real estate investment trust. It is not anticipated that the REMIC Pool will have any taxable net income from foreclosure property. (4) Liquidation of the REMIC Pool If a REMIC Pool 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 Pool's final tax return a date on which that adoption is deemed to occur, and sells all of its assets (other than cash) within a 90-day period beginning on that date, the REMIC Pool will not be subject to the prohibited transaction rules on the sale of its assets, provided that the REMIC Pool credits or distributes in liquidation all of the sale proceeds plus its cash (other than amounts retained to meet claims) to holders of Regular Securities and Residual Holders within the 90-day period. (5) Administrative Matters The REMIC Pool will be required to maintain its books on a calendar year basis and to file federal income tax returns for federal income tax purposes in a manner similar to a partnership. The form for the income tax return is Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return. The trustee will be required to sign the REMIC Pool's returns. Treasury regulations provide that, except where there is a single Residual Holder for an entire taxable year, the REMIC Pool will be subject to the procedural and administrative rules of the Code applicable to partnerships, including the determination by the Internal Revenue Service of any adjustments to, among other things, items of REMIC income, gain, loss, deduction, or credit in a unified administrative proceeding. The master servicer will be obligated to act as "tax matters person," as defined in applicable Treasury regulations, for the REMIC Pool as agent of the Residual Holders holding the largest percentage interest in the Residual Securities. If the Code or applicable Treasury regulations do not permit the master servicer to act as tax matters person in its capacity as agent of the Residual Holder, the Residual Holder or any other person specified pursuant to Treasury regulations will be required to act as tax matters person. The tax matters person generally has responsibility for overseeing and providing notice to the other Residual Holders of administrative and judicial proceedings regarding the REMIC Pool's tax affairs, although other holders of the Residual Securities of the same series would be able to participate in those proceedings in appropriate circumstances. (6) Limitations on Deduction of Certain Expenses An investor who is an individual, estate, or trust will be subject to limitation with respect to some itemized deductions described in Code Section 67, to the extent that those itemized deductions, in total, do not exceed 2% of the investor's adjusted gross income. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership," 70% of that partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. In addition, Code Section 68 provides that itemized deductions otherwise allowable for a taxable year of an individual taxpayer will be reduced by the lesser or (1) 3% of the excess, if any, of adjusted gross income over $100,000 ($50,000 in the case of a married individual filing a separate return) (subject to adjustment for inflation), or (2) 80% of the amount of itemized deductions otherwise allowable for that year. In the case of a REMIC Pool, those deductions may include deductions under Code Section 212 for the Servicing Fee and all administrative and other expenses relating to the REMIC Pool, or any similar expenses allocated to the REMIC Pool for a regular interest it holds in another REMIC. Those investors who hold REMIC Securities either directly or indirectly through pass-through entities may have their pro rata share of those expenses allocated to them as additional gross income, but may be subject to that limitation on deductions. In addition, those expenses are not deductible at all for purposes of computing the alternative minimum tax, and may cause those investors to be subject to significant additional tax liability. Temporary Treasury regulations provide that the additional gross income and corresponding amount of expenses generally are to be allocated entirely to the holders of Residual Securities in the case of a REMIC Pool that would not qualify as a fixed investment trust in the absence of a REMIC election. For a REMIC Pool that would be classified as an investment trust in the absence of a REMIC election or that is substantially similar to an investment trust, any holder of a Regular Security that is an individual, trust, estate, or pass-through entity also will be allocated its pro rata share of those expenses and a corresponding amount of income and will be subject to the limitations or deductions imposed by Code Sections 67 and 68, as described above. The prospectus supplement will indicate if all those expenses will not be allocable to the Residual Securities. TAXATION OF CERTAIN FOREIGN INVESTORS (1) Regular Securities Interest, including original issue discount, distributable to Regular Securityholders who are non-resident aliens, foreign corporations, or other Non-U.S. Persons (as defined below), generally will be considered "portfolio interest" and, therefore, generally will not be subject to 30% United States withholding tax, provided that (1) the interest is not effectively connected with the conduct of a trade or business in the United States of the securityholder, (2) the Non-U.S. Person 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) and (3) that Non-U.S. Person complies to the extent necessary with certain certification requirements, which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is a Non-U.S. person. Each Regular Securityholder should consult its tax advisors regarding the tax documentation and certifications that must be provided to secure the exemption from United States withholding taxes. Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a Regular Security by a Non-U.S. Person generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Person and (ii) in the case of an individual Non-U.S. Person, the Non-U.S. Person is not present in the United States for 183 days or more in the taxable year. If the interest on the Regular Security is effectively connected with the conduct of a trade or business within the United States by that Non-U.S. Person, the Non-U.S. Person, although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected, will be subject to United States federal income tax at regular rates. Investors who are Non-U.S. Persons should consult their own tax advisors regarding the specific tax consequences to them of owning a Regular Security. The term "Non-U.S. Person" means any person who is not a U.S. Person. (2) Residual Securities The Conference Committee Report to the 1986 Act indicates that amounts paid to Residual Holders who are Non-U.S. Persons generally should be treated as interest for purposes of the 30% (or lower treaty rate) United States withholding tax. Treasury regulations provide that amount distributed to Residual Holders may qualify as "portfolio interest," subject to the conditions described in "Regular Securities" above, but only to the extent that (1) the mortgage loans were issued after July 18, 1984, and (2) the trust fund or segregated pool of assets in the trust fund (as to which a separate REMIC election will be made), to which the Residual Security relates, consists of obligations issued in "registered form" within the meaning of Code Section 163 (f) (1). Generally, mortgage loans will not be, but regular interests in another REMIC Pool will be, considered obligations issued in registered form. Furthermore, Residual Holders will not be entitled to any exemption from the 30% withholding tax (or lower treaty rate) to the extent of that portion of REMIC taxable income that constitutes an "excess inclusion." See "--Taxation of Owners of Residual Securities--Limitations on Offset or Exemption of REMIC Income" above. If the amounts paid to Residual Holders who are Non-U.S. Persons are effectively connected with the conduct of a trade or business within the United States by those Non-U.S. Persons, although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected, the amounts paid to those Non-U.S. Persons will be subject to United States federal income tax at regular rates. See "--Tax-Related Restrictions on Transfer of Residual Securities--Foreign Investors" above concerning the disregard of transfers having "tax avoidance potential." Investors who are Non-U.S. Persons should consult their own tax advisors regarding the specific tax consequences to them of owning Residual Securities. (3) Backup Withholding Distributions made on the REMIC Securities, and proceeds from the sale of the REMIC Securities to or through certain brokers, may be subject to a "backup" withholding tax under Code Section 3406 of 31% on "reportable payments" (including interest distributions, original issue discount, and, under some circumstances, principal distributions) if the Holder fails to comply with certain identification procedures, unless the Holder is otherwise an exempt recipient under applicable provisions of the Code, and, if necessary, demonstrates such status. Any amounts to be withheld from distribution on the REMIC Securities would be refunded by the Internal Revenue Service or allowed as a credit against the Regular Holder's federal income tax liability. FASITS CLASSIFICATION OF FASITS For each series of FASIT Securities, assuming compliance with all provisions of the related pooling and servicing agreement, in the opinion of Stroock & Stroock & Lavan LLP, the related trust fund (or each applicable portion of the trust fund) will qualify as a FASIT. The trust fund will qualify under the Code as a FASIT in which FASIT regular securities (the "FASIT Regular Securities") and the ownership interest security (the "FASIT Ownership Security") will constitute the "regular interests" and the "ownership interest," respectively, if (1) a FASIT election is in effect; (2) tests concerning (a) the composition of the FASIT's assets and (b) the nature of the securityholders' interests in the FASIT are met on a continuing basis; and (3) the trust fund is not a regulated investment company as defined in Section 851(a) of the Code. A segregated pool of assets may also qualify as a FASIT. (1) Asset Composition In order for the trust fund to be eligible for FASIT status, substantially all of the assets of the trust fund must consist of "permitted assets" as of the close of the third month beginning after the closing date and at all times thereafter. Permitted assets include: (1) cash or cash equivalents; (2) debt instruments with fixed terms that would qualify as regular interests if issued by a REMIC as defined in Section 860D of the Code (generally, instruments that provide for interest at a fixed rate, a qualifying variable rate, or a qualifying interest-only type rate); (3) foreclosure property; (4) some hedging instruments (generally, interest and currency rate swaps and credit enhancement contracts) that are reasonably required to guarantee or hedge against the FASIT's risks associated with being the obligor on FASIT interests; (5) contract rights to acquire qualifying debt instruments or qualifying hedging instruments; (6) FASIT regular interests; and (7) REMIC regular interests. Permitted assets do not include any debt instruments issued by the holder of the FASIT's ownership interest or by any person related to that holder. A debt instrument is a permitted asset only if the instrument is indebtedness for federal income tax purposes, including regular interests in a REMIC or regular interests issued by another FASIT, and it bears (1) fixed interest or (2) variable interest of a type that relates to qualified variable rate debt (as defined in Treasury regulations prescribed under section 860G(a)(1)(B)). Permitted hedges include interest rate or foreign currency notional principal contracts, letters of credit, insurance, guarantees against payment default and similar instruments to be provided in regulations, and which are reasonably required to guarantee or hedge against the FASIT's risks associated with being the obligor on interests issued by the FASIT. Foreclosure property is real property acquired by the FASIT in connection with the default or imminent default of a debt instrument, provided the depositor had no knowledge or reason to know as of the date the debt instrument was acquired by the FASIT that a default had occurred or would occur. (2) Interests in a FASIT In addition to the foregoing asset qualification requirements, the interests in a FASIT also must meet specific requirements. All of the interests in a FASIT must belong to either of the following: (1) one or more classes of regular interests or (2) a single class of ownership interest that is held by an Eligible Corporation (as defined in this prospectus). FASIT regular interests generally will be treated as debt for federal income tax purposes. FASIT ownership interests generally will not treated as debt for federal income tax purposes, but rather as representing rights and responsibilities with respect to the taxable income or loss of the related FASIT. The prospectus supplement for each Series of Notes or Certificates, as applicable, will indicate which securities of the Series will be designated as regular interests, and which, if any, will be designated as ownership interests. A FASIT interest generally qualifies as a regular interest if: (1) it is designated as a regular interest; (2) it has a stated maturity no greater than thirty years; (3) it entitles its holder to a specified principal amount; (4) the issue price of the interest does not exceed 125% of its stated principal amount; (5) the yield to maturity of the interest is less than the applicable Treasury rate published by the IRS plus 5%; and (6) if it pays interest, this interest is payable at either: (a) a fixed rate with respect to the principal amount of the regular interest or (b) a permissible variable rate with respect to the principal amount. Permissible variable rates for FASIT regular interests are the same as those for REMIC regular interests. See "REMICs--Taxation of Owners of Regular Securities--(1) General" for a discussion of permissible variable rates for REMIC regular interests. If an interest in a FASIT fails to meet one or more of the requirements set out in clauses (3), (4), or (5) in the immediately preceding paragraph, but otherwise meets all requirements to be treated as a FASIT, it may still qualify as a type of regular interest known as a "high-yield interest." In addition, if an interest in a FASIT fails to meet the requirement of clause (6), but the interest payable on the interest consists of a specified portion of the interest payments on permitted assets and that portion does not vary over the life of the security, the interest will also qualify as a high-yield interest. See "--Taxation of Owners of FASIT Regular Securities," "--Taxation of Owners of High-Yield Interests" and "--Taxation of FASIT Ownership Securities" below. (3) Consequences of Disqualification If the trust fund fails to comply with one or more of the Code's ongoing requirements for FASIT status during any taxable year, the Code provides that it's FASIT status may be lost for that year and thereafter. If FASIT status is lost, the treatment of the former FASIT and interests in the FASIT for U.S. federal income tax purposes is uncertain. Although the Code authorizes the Treasury to issue regulations that address situations where a failure to meet the requirements for FASIT status occurs inadvertently and in good faith, final regulations have not yet been issued. It is possible that disqualification relief might be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the FASIT's income for the period of time in which the requirements for FASIT status are not satisfied. TAXATION OF OWNERS OF FASIT REGULAR SECURITIES (1) General Payments received by holders of FASIT Regular Securities generally will be accorded the same tax treatment under the Code as payments received on other taxable debt instruments. Holders of FASIT Regular Securities must report income from these Notes or Certificates, as applicable, under an accrual method of accounting, even if they otherwise would have used the cash receipts and disbursements method. Except in the case of FASIT Regular Securities issued with original issue discount, interest paid or accrued on a FASIT Regular Security generally will be treated as ordinary income to the Holder and a principal payment on the security will be treated as a return of capital to the extent that the securityholder's basis is allocable to that payment. (2) Original Issue Discount; Market Discount; Acquisition Premium FASIT Regular Securities issued with original issue discount or acquired with market discount or acquisition premium generally will treat interest and principal payments on these Notes or Certificates, as applicable, in the same manner described for REMIC Regular Securities. See "--REMICs - Taxation of Owners of Regular Securities" above. (3) Sale or Exchange If the FASIT Regular Securities are sold, the holder generally will recognize gain or loss upon the sale in the manner described above for REMIC Regular Securities. See "--REMICs--Taxation of Owners of Regular Securities--Sale or Exchange of Regular Securities." TAXATION OF OWNERS OF HIGH-YIELD INTERESTS (1) General The treatment of high-yield interests is intended to ensure that the return on instruments issued by a FASIT yielding an equity-like return continues to have a corporate level tax. High-yield interests are subject to special rules regarding the eligibility of holders of this interest, and the ability of these holders to offset income derived from their FASIT Security with losses. High-yield interests may only be held by Eligible Corporations, other FASITs, and dealers in securities who acquire such interests as inventory (together, "Eligible Holders"). o An "Eligible Corporation" is a taxable domestic C corporation that does not qualify as a regulated investment company, a real estate investment trust, a REMIC, or a cooperative. If a securities dealer (other than an Eligible Corporation) initially acquires a high-yield interest as inventory, but later begins to hold it for investment, the dealer will be subject to an excise tax equal to the income from the high-yield interest multiplied by the highest corporate income tax rate. In addition, transfers of high-yield interests to a person that is not an Eligible Holder will be disregarded for federal income tax purposes, and the transferor will continue to be treated as the holder of the high-yield interest. In addition, the FASIT Provisions contain an anti-abuse rule that imposes corporate income tax on income derived from a FASIT Regular Interest that is held by a pass-through entity (other than another FASIT) that issues debt or equity securities backed by the FASIT Regular Interest and that have an original yield to maturity that is both five percentage points above the applicable federal rate and more than the yield on the FASIT Regular Interest. The excise tax is limited to those arrangements that have a principal purpose of avoiding the ownership restriction relating to high-yield interests. (2) Treatment of Losses The holder of a high-yield interest may not use non-FASIT current losses or net operating loss carryforwards or carrybacks to offset any income derived from the high-yield interest, for either regular federal income tax purposes or for alternative minimum tax purposes. TAXATION OF FASIT OWNERSHIP SECURITY (1) General A FASIT Ownership Security represents the residual equity interest in a FASIT. As such, the holder of a FASIT Ownership Security determines its taxable income by taking into account all assets, liabilities, and items of income, gain, deduction, loss, and credit of a FASIT. The holder, however, does not take into account any item of income, gain or deduction allocable to a "prohibited transaction" as discussed below. In general, the character of the income to the holder of a FASIT Ownership Security will be the same as the character of the income to the FASIT, except that any tax-exempt interest income taken into account by the holder of a FASIT Ownership Security is treated as ordinary income. In determining that taxable income, the holder of a FASIT Ownership Security must determine the amount of interest, original issue discount, market discount, and premium recognized with respect to each debt instrument held by the FASIT according to a constant yield methodology and under an accrual method of accounting. In addition, a holder of a FASIT Ownership Security is subject to the same limitations on their ability to use losses to offset income from their FASIT Regular Securities as are holders of high-yield interest. See "--Taxation of Owners of High-Yield Interests" above. Rules similar to the wash sale rules applicable to REMIC Residual Securities also will apply to FASIT Ownership Security. Accordingly, losses on dispositions of a FASIT Ownership Security generally will be disallowed where within six months before or after the disposition, the seller of the Security acquires any other FASIT Ownership Security that is economically comparable to a FASIT Ownership Security. In addition, if any security that is sold or contributed to a FASIT by the holders of the related FASIT Ownership Security was required to be marked-to-market under Section 475 of the Code by the holder, then Section 475 of the Code will continue to apply to these securities, except that the amount realized under the mark-to-market rules cannot be less than the securities' value determined after applying special valuation rules contained in the FASIT Provisions. Those special valuation rules generally require that the value of debt instruments that are not traded on an established securities market be determined by calculating the present value of the reasonably expected payments under the instrument using a discount rate of 120% of the applicable federal rate, compounded semi-annually. (2) Prohibited Transaction The holder of a FASIT Ownership Security is required to pay a penalty excise tax equal to 100 percent of net income derived from: (1) an asset that is not a permitted asset; (2) any disposition of an asset other than a permitted disposition (as described below); (3) any income attributable to loans originated by the FASIT; and (4) compensation for services (other than fees for a waiver, amendment, or consent with respect to permitted assets other than foreclosure property). A permitted disposition is any disposition of any permitted asset: (1) arising from complete liquidation of a class of regular interest; (2) incident to the foreclosure, default (or imminent default) on the asset; (3) incident to the bankruptcy or insolvency of the FASIT; (4) necessary to avoid a default on any indebtedness of the a FASIT attributable to a default (or imminent default) on an asset of the FASIT; (5) to facilitate a clean-up call; or (6) to substitute a permitted debt instrument for another permitted debt instrument or in order to reduce over-collateralization by distributing a debt instrument contributed by the holder of the FASIT Ownership Security to such holder, but only if a principal purpose of acquiring the debt instrument which is disposed of was not the recognition of gain (or the reduction of a loss) arising from an increase in its market value after its acquisition by the FASIT. Notwithstanding this rule, the holder of an Ownership Security may currently deduct its losses incurred in prohibited transactions in computing its taxable income for the year of the loss. A Series of Notes or Certificates, as applicable, for which a FASIT election is made generally will be structured in order to avoid application of the prohibited transactions tax. (3) Backup Withholding, Reporting and Tax Administration Holders of FASIT Securities will be subject to backup withholding to the same extent as holders of REMIC Securities. GRANTOR TRUST FUNDS CHARACTERIZATION. For each series of Grantor Trust Securities, Federal Tax Counsel will deliver its opinion that the Grantor Trust Fund will not be classified as an association taxable as a corporation and that the Grantor Trust Fund will be classified as a grantor trust under subpart E, Part I of subchapter J of the Code. In this case, beneficial owners of Grantor Trust Securities (referred to in this Prospectus as "Grantor Trust Securityholders") will be treated for federal income tax purposes as owners of a portion of the Grantor Trust Fund's assets as described below. TAXATION OF GRANTOR TRUST SECURITYHOLDERS. Subject to the discussion below under "Stripped Certificates" and "Subordinated Certificates," each Grantor Trust Securityholder will be treated as the owner of a pro rata undivided interest in the assets of the Grantor Trust Fund. Accordingly, and subject to the discussion below of the recharacterization of the servicing fee, each Grantor Trust Securityholder must include in income its pro rata share of the interest and other income from the assets of the Grantor Trust Fund, including any interest, original issue discount, market discount, prepayment fees, assumption fees, and late payment charges with respect to the assets, and, subject to limitations discussed below, may deduct its pro rata share of the fees and other deductible expenses paid by the Grantor Trust Fund, at the same time and to the same extent as these items would be included or deducted by the Grantor Trust Securityholder if the Grantor Trust Securityholder held directly a pro rata interest in the assets of the Grantor Trust Fund and received and paid directly the amounts received and paid by the Grantor Trust Fund. Any amounts received by a Grantor Trust Securityholder in lieu of amounts due with respect to any asset of the Grantor Trust Fund 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 Securityholder will be entitled to deduct its pro rata share of servicing fees, prepayment fees, assumption fees, any loss recognized upon an assumption and late payment charges retained by the servicer, provided that these amounts are reasonable compensation for services rendered to the Grantor Trust Fund. Grantor Trust Securityholders that are individuals, estates or trusts will be entitled to deduct their share of expenses only to the extent these expenses plus all other miscellaneous itemized deductions exceed two percent of the Grantor Trust Securityholder's adjusted gross income, and will be allowed no deduction for these expenses in determining their liabilities for alternative minimum tax. In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for the taxable year for an individual whose adjusted gross income exceeds a prescribed threshold amount will be reduced by the lesser of (1) 3% of the excess of adjusted gross income over the specified threshold amount or (2) 80% of the amount of itemized deductions otherwise allowable for the applicable taxable year. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership," 70% of the partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. The servicing compensation to be received by the servicer may be questioned by the IRS as exceeding a reasonable fee for the services being performed in exchange for the servicing compensation, and a portion of the servicing compensation could be recharacterized as an ownership interest retained by the servicer or other party in a portion of the interest payments to be made with respect to the Grantor Trust Fund's assets. In this event, a certificate might be treated as a Stripped Certificate subject to the stripped bond rules of Section 1286 of the Code, and either the original issue discount or the market discount rules. See the discussion below under "--Stripped Certificates". Except as discussed below under "Stripped Certificates" or "--Subordinated Certificates," this discussion assumes that the servicing fees paid to the servicer do not exceed reasonable servicing compensation. A purchaser of a Grantor Trust Security will be treated as purchasing an interest in each asset in the Grantor Trust Fund at a price determined by allocating the purchase price paid for the certificate among all asset of the Grantor Trust Fund in proportion to their fair market values at the time of the purchase of the certificate. To the extent that the portion of the purchase price of a Grantor Trust Security allocated to an asset of the Grantor Trust Fund is less than or greater than the stated redemption price at maturity of the asset, the interest in the asset will have been acquired at a discount or premium. See "--Market Discount" and "--Premium," below. The treatment of any discount on an asset of the Grantor Trust Fund will depend on whether the discount represents original issue discount or market discount. Except as indicated otherwise in the applicable Prospectus Supplement, it is not expected that any asset of the Grantor Trust Fund (other than a Stripped Agency Security or other instrument evidencing ownership of specific interest and/or principal of a particular bond) will have original issue discount (except as discussed below under "Stripped Certificates" or "Subordinated Certificates"). For the rules governing original issue discount, see "REMICs--Taxation of Owners of Regular Securities--Original Issue Discount" above. The information provided to Grantor Trust Securityholders will not include information necessary to compute the amount of discount or premium, if any, at which an interest in each asset of the Grantor Trust Fund is acquired. MARKET DISCOUNT. A Grantor Trust Securityholder that acquires an undivided interest in the Grantor Trust Fund's assets may be subject to the market discount rules of Sections 1276 through 1278 to the extent an undivided interest in an asset of the Grantor Trust Fund is considered to have been purchased at a "market discount". For a discussion of the market discount rules under the Code, see "REMICs--Taxation of Owners of Regular Securities--Market Discount" above. As discussed above, to the extent an asset of the Grantor Trust Fund is a Stripped Agency Security or other instrument evidencing ownership of specific interest and/or principal of a particular bond, it will be subject to the rules relating to original issue discount (in lieu of the rules relating to market discount). See "REMICs--Taxation of Owners of Regular Securities--Original Issue Discount" above. PREMIUM. To the extent a Grantor Trust Securityholder is considered to have purchased an undivided interest in an asset of the Grantor Trust Fund for an amount that is greater than the stated redemption price at maturity of the interest, the Grantor Trust Securityholder will be considered to have purchased the interest in the asset with "amortizable bond premium" equal in amount to the excess. For a discussion of the rules applicable to amortizable bond premium, see "REMICs--Taxation of Owners of Regular Securities--Amortizable Premium" above. STATUS OF THE GRANTOR TRUST SECURITIES. Except for that portion of a trust fund consisting of unsecured home improvement loans and except as qualified below, a Grantor Trust Security owned by a: o "domestic building and loan association" within the meaning of Code Section 7701(a)(19) will be considered to represent "loans . . . secured by an interest in real property" within the meaning of Code Section 7701(a)(19)(C)(v), provided that the real property securing the mortgage loans represented by that Grantor Trust Security is of the type described in that section of the Code. o real estate investment trust will be considered to represent "real estate assets" within the meaning of Code Section 856(c)(4)(A) to the extent that the assets of the related Grantor Trust Fund consist of qualified assets, and interest income on those assets will be considered "interest on obligations secured by mortgages on real property" to that extent within the meaning of Code Section 856(c)(3)(B). o REMIC will be considered to represent an "obligation (including any participation or certificate of beneficial ownership therein) which is principally secured by an interest in real property" within the meaning of Code Section 860G(a)(3)(A) to the extent that the assets of the related Grantor Trust Fund consist of "qualified mortgages" within the meaning of Code Section 860G(a)(3). An issue arises as to whether Buydown Mortgage Loans may be characterized in their entirety under the Code provisions cited in the first two bullet points of the immediately preceding paragraph or whether the amount qualifying for that treatment must be reduced by the amount of the Buydown Mortgage Funds. Further, although it is not entirely clear, Grantor Trust Certificates that are Stripped Certificates (as described below under "Stripped Certificates") should be treated as qualifying under the Code provisions cited in the bullet points above to the same extent as Grantor Trust Certificates that are not Stripped Certificate. Grantor Trust Securityholders are urged to consult their own tax advisors concerning the characterization of the securityholder's investment for federal income tax purposes. STRIPPED CERTIFICATES. Some classes of certificates may be subject to the stripped bond rules of Section 1286 of the Code and for purposes of this discussion will be referred to as "Stripped Certificates." In general, a Stripped Certificate will be subject to the stripped bond rules where there has been a separation of ownership of the right to receive some or all of the principal payments on a mortgage loan held by the Grantor Trust Fund from ownership of the right to receive some or all of the related interest payments. Generally, where a separation has occurred, under the stripped bond rules of Section 1286 of the Code, the holder of a right to receive a principal or interest payment on the bond is required to accrue into income, on a constant yield basis under rules governing original issue discount (see "REMICs--Taxation of Owners of Regular Securities--Original Issue Discount"), the difference between the holder's initial purchase price for the right to receive principal or interest, and the principal or interest payment to be received with respect to that right. However, a holder of a Stripped Certificate will account for any discount on the Stripped Certificate (other than an interest treated as a "stripped coupon") as market discount rather than original issue discount if either (i) the amount of original issue discount with respect to the Stripped Certificate was treated as zero under the original issue discount DE MINIMIS rule when the Stripped Certificate was stripped or (ii) no more than 100 basis points (including any amount of servicing in excess of reasonable servicing) is stripped off from the mortgage assets. Certificates will constitute Stripped Certificates and will be subject to these rules under various circumstances, including the following: o if any servicing compensation is deemed to exceed a reasonable amount; o if the company or any other party retains a retained yield with respect to the assets held by the Grantor Trust Fund; o if two or more classes of certificates are issued representing the right to non-pro rata percentages of the interest or principal payments on the Grantor Trust Fund's assets; or o if certificates are issued which represent the right to interest-only payments or principal-only payments. The tax treatment of the Stripped Certificates with respect to the application of the original issue discount provisions of the Code is currently unclear. However, the trustee intends to treat each Stripped Certificate as a single debt instrument issued on the day it is purchased for purposes of calculating any original issue discount. Original issue discount with respect to a Stripped Certificate must be included in ordinary gross income for federal income tax purposes as it accrues in accordance with the constant yield method that takes into account the compounding of interest and this accrual of income may be in advance of the receipt of any cash attributable to that income. See "REMICs--Taxation of Owners of Regular Securities--Original Issue Discount" above. For purposes of applying the original issue discount provisions of the Code, the issue price of a Stripped Certificate will be the purchase price paid by each holder of the Stripped Certificate and the stated redemption price at maturity may include the aggregate amount of all payments to be made with respect to the Stripped Certificate whether or not denominated as interest. The amount of original issue discount with respect to a Stripped Certificate may be treated as zero under the original issue discount DE MINIMIS rules described above. SUBORDINATED CERTIFICATES. In the event the Grantor Trust Fund issues two classes of Grantor Trust Securities that are identical except that one class is a subordinate class, with a relatively high certificate pass-through rate, and the other is a senior class, with a relatively low certificate pass-through rate (referred to in this Prospectus as the "Subordinate Certificates" and "Senior Certificates", respectively), the Grantor Trust Securityholders in the aggregate will be deemed to have acquired the following assets: (1) the principal portion of each mortgage loan plus a portion of the interest due on each mortgage loan (the "Grantor Trust Fund Stripped Bond"), and (2) a portion of the interest due on each mortgage loan equal to the difference between the Interest Rate on the Subordinate Certificates and the Interest Rate on the Senior Certificates, if any, which difference is then multiplied by the Subordinate Class Percentage (the "Grantor Trust Fund Stripped Coupon"). The "Subordinate Class Percentage" equals the initial aggregate principal amount of the Subordinate Certificates divided by the sum of the initial aggregate principal amount of the Subordinate Certificates and the Senior Certificates. The "Senior Class Percentage" equals the initial aggregate principal amount of the Senior Certificates divided by the sum of the initial aggregate principal amount of the Subordinate Certificates and the Senior Certificates. The Senior Certificateholders in the aggregate will own the Senior Class Percentage of the Grantor Trust Fund Stripped Bond and accordingly each Senior Certificateholder will be treated as owning its pro rata share of such asset. The Senior Certificateholders will not own any portion of the Grantor Trust Fund Stripped Coupon. The Subordinate Certificateholders in the aggregate own both the Subordinate Class Percentage of the Grantor Trust Fund Stripped Bond plus 100% of the Grantor Trust Fund Stripped Coupon, if any, and accordingly each Subordinate Certificateholder will be treated as owning its pro rata share in both assets. The Grantor Trust Fund Stripped Bond will be treated as a "stripped bond" and the Grantor Trust Fund Stripped Coupon will be treated as "stripped coupons" within the meaning of Section 1286 of the Code. Although not entirely clear, the interest income on the Subordinate Certificates and the portion of the servicing fee allocable to such certificates that does not constitute excess servicing will be treated by the Grantor Trust Fund as qualified stated interest, assuming the interest with respect to the mortgage loans held by the Grantor Trust Fund would otherwise qualify as qualified stated interest. Accordingly, except to the extent modified below, the income of the Subordinate Certificates will be reported in the same manner as described generally above for holders of Senior Certificates. If the Subordinate Certificateholders receive distribution of less than their share of the Grantor Trust Fund's receipts of principal or interest (the "Shortfall Amount") because of the subordination of the Subordinate Certificates, holders of Subordinate Certificates would probably be treated for federal income tax purposes as if they had o received as distributions their full share of receipts; o paid over to the Senior Certificateholders an amount equal to the Shortfall Amount; and o retained the right to reimbursement of the relevant amounts to the extent these amounts are otherwise available as a result of collections on the mortgage loans or amounts available from a reserve account or other form of credit enhancement, if any. Under this analysis, o Subordinate Certificateholders would be required to accrue as current income any interest income, original issue discount, or (to the extent paid on assets of the Grantor Trust Fund) accrued market discount of the Grantor Trust Fund that was a component of the Shortfall Amount, even though that amount was in fact paid to the Senior Certificateholders; o a loss would only be allowed to the Subordinate Certificateholders when their right to receive reimbursement of the Shortfall Amount became worthless (i.e., when it becomes clear that amount will not be available from any source to reimburse the loss); and o reimbursement of the Shortfall Amount prior to a claim of worthlessness would not be taxable income to Subordinate Certificateholders because the amount was previously included in income. Those results should not significantly affect the inclusion of income for Subordinate Certificateholders on the accrual method of accounting, but could accelerate inclusion of income to Subordinate Certificateholders on the cash method of accounting by, in effect, placing them on the accrual method. Moreover, the character and timing of loss deductions are unclear. Subordinate Certificateholders are strongly urged to consult their own tax advisors regarding the appropriate timing, amount and character of any losses sustained with respect to the Subordinate Certificates including any loss resulting from the failure to recover previously accrued interest or discount income. ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. The Treasury Regulations relating to original issue discount permit a Grantor Trust Securityholder to elect to accrue all interest, discount, including DE MINIMIS market or original issue discount, reduced by any premium, in income as interest, based on a constant yield method. If an election were to be made with respect to an interest in a mortgage loan with market discount, the Grantor Trust Securityholder 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 the Grantor Trust Securityholder acquires during the year of the election or afterward. See "--Market Discount" above. Similarly, a Grantor Trust Securityholder that makes this election for an interest in a mortgage loan 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 the Grantor Trust Securityholder owns at the beginning of the first taxable year to which the election applies or acquires afterward. See "--Premium" above. The election to accrue interest, discount and premium on a constant yield method with respect to a Grantor Trust Security is irrevocable. PREPAYMENTS. The Taxpayer Relief Act of 1997 (the "1997 Act") contains a provision requiring original issue discount on any pool of debt instruments the yield on which may be affected by reason of prepayments be calculated taking into account the Prepayment Assumption and requiring the discount to be taken into income on the basis of a constant yield to assumed maturity taking account of actual prepayments. The legislative history to the 1986 Act states that similar rules apply with respect to market discount and amortizable bond premium on debt instruments. SALE OR EXCHANGE OF A GRANTOR TRUST SECURITY. Sale or exchange of a Grantor Trust Security prior to its maturity will result in gain or loss equal to the difference, if any, between the amount realized, exclusive of amounts attributable to accrued and unpaid interest (which will be treated as ordinary income allocable to the related asset of the Grantor Trust Fund), and the owner's adjusted basis in the Grantor Trust Security. The adjusted basis generally will equal the seller's cost for the Grantor Trust Security, increased by the original issue discount and any market discount included in the seller's gross income with respect to the Grantor Trust Security, and reduced, but not below zero, by any premium amortized by the seller and by principal payments on the Grantor Trust Security previously received by the seller. The gain or loss will, except as discussed below, be capital gain or loss to an owner for which the assets of the Grantor Trust Fund represented by a Grantor Trust Security are "capital assets" within the meaning of Section 1221. A capital gain or loss will be long-term or short-term depending on whether or not the Grantor Trust Security has been owned for the long-term capital gain holding period, currently more than one year. Notwithstanding the foregoing, any gain realized on the sale or exchange of a Grantor Trust Security will be ordinary income to the extent of the seller's interest in accrued market discount on Grantor Trust Fund assets not previously taken into income. See "--Market Discount," above. Further, Grantor Trust Securities will be "evidences of indebtedness" within the meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a Grantor Trust Security by a bank or thrift institution to which such section applied will be treated as ordinary gain or loss. FOREIGN INVESTORS IN GRANTOR TRUST SECURITIES. A holder of a Grantor Trust Security who is not a "U.S. person" (as defined above at "REMICs--Tax Related Restrictions on Transfer of Residual Securities--Foreign Investors") and is not subject to federal income tax as a result of any direct or indirect connection to the United States other than its ownership of a Grantor Trust Security generally will not be subject to United States income or withholding tax in respect of payments of interest or original issue discount on its Grantor Trust Security to the extent attributable to debt obligations held by the Grantor Trust Fund that were originated after July 18, 1984, provided that the Grantor Trust Securityholder complies to the extent necessary with certain certification requirements which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is not a U.S. person. Interest or original issue discount on a Grantor Trust Security attributable to debt obligations held by the Grantor Trust Fund that were originated prior to July 19, 1984 will be subject to a 30% withholding tax (unless such tax is reduced or eliminated by an applicable tax treaty). All holders of Grantor Trust Securities should consult their tax advisors regarding the tax documentation and certifications that must be provided to secure any applicable exemptions from United States withholding taxes. Any capital gain realized on the sale or other taxable disposition of a Grantor Trust Security by a Non-U.S. Person (as defined above at "REMICs--Taxation of Certain Foreign Investors--Regular Securities") generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Person and (ii) in the case of an individual Non-U.S. Person, the Non-U.S. Person is not present in the United States for 183 days or more in the taxable year. If the interest, gain or income with respect to a Grantor Trust Security held by a Non-U.S. Person is effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Person (although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected), the holder generally will be subject to United States federal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the Non-U.S. Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its "effectively connected earnings and profits," within the meaning of the Code, for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty (as modified by the branch profits tax rules). BACKUP WITHHOLDING. Distributions made on the Grantor Trust Securities and proceeds from the sale of the Grantor Trust Securities will be subject to a "backup" withholding tax of 31% if, in general, the Grantor Trust Securityholder fails to comply with particular identification procedures, unless the holder is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld would be refunded by the IRS or allowable as a credit against the Grantor Trust Securityholder's federal income tax. PARTNERSHIP TRUST FUNDS AND DISREGARDED TRUST FUNDS CLASSIFICATION OF TRUST FUNDS For each series of Partnership Certificates or Debt Securities, Stroock & Stroock & Lavan LLP will deliver its opinion that the trust fund will not be a taxable mortgage pool or an association (or publicly traded partnership) taxable as a corporation for federal income tax purposes. This opinion will be based on the assumption that the terms of the related Agreement and related documents will be complied with, and on counsel's opinion that the nature of the income of the trust fund will exempt it from the rule that some publicly traded partnerships are taxable as corporations. TAXATION OF DEBT SECURITYHOLDERS The depositor will agree, and the securityholders will agree by their purchase of Debt Securities, to treat the Debt Securities as debt for federal income tax purposes. No regulations, published rulings, or judicial decisions exist that discuss the characterization for federal income tax purposes of securities with terms substantially the same as the Debt Securities. However, for each series of Debt Securities, Stroock & Stroock & Lavan LLP will deliver its opinion that the Debt Securities will be classified as indebtedness for federal income tax purposes. The discussion below assumes this characterization of the Debt Securities is correct. If, contrary to the opinion of counsel, the Internal Revenue Service successfully asserted that the Debt Securities were not debt for federal income tax purposes, the Debt Securities might be treated as equity interests in the trust fund. If so treated, the trust fund might be treated as a publicly traded partnership that would be taxable as a corporation unless it met particular qualifying income tests, and the resulting taxable corporation would not be able to reduce its taxable income by deductions for interest expense on Debt Securities recharacterized as equity. Treatment of the Debt Securities as equity interests in a partnership could have adverse tax consequences to some holders, even if the trust fund were not treated as a publicly traded partnership taxable as a corporation. For example, income allocable to foreign holders might be subject to United States tax and United States tax return filing and withholding requirements, income allocable to tax-exempt holders might constitute "unrelated business taxable income" (if some, but not all, of the Debt Securities were recharacterized as equity in a partnership), individual holders might be subject to limitations on their ability to deduct their share of trust fund expenses, and income from the trust fund's assets would be taxable to owners of Debt Securities without regard to whether cash distributions are made to such owners and without regard to the owners' method of tax accounting. Debt Securities generally will be subject to the same rules of taxation as Regular Securities issued by a REMIC, as described above, except that (1) income reportable on Debt Securities is not required to be reported under the accrual method unless the holder otherwise uses the accrual method and (2) the special 110% yield rule treating a portion of the gain on sale or exchange of a Regular Security as ordinary income is inapplicable to Debt Securities. See "--REMICs--Taxation of Owners of Regular Securities" and "--Sale or Exchange of Regular Securities." Further, for federal income tax purposes, (i) Debt Securities held by a thrift institution taxed as a domestic building and loan association will not constitute "loans . . . secured by an interest in real property" within the meaning of Section 7701(a)(19)(C)(v) of the Code; (ii) interest on Debt Securities held by a real estate investment trust will not be treated as "interest on obligations secured by mortgages on real property or on interests in real property "within the meaning of Code Section 856(c)(3)(B); (iii) Debt Securities held by a real estate investment trust will not constitute "real estate assets" or "Government securities" within the meaning of Section 856(c)(4)(A) of the Code; (iv) Debt Securities held by a regulated investment company will not constitute "Government securities" within the meaning of Section 851(b)(3)(A)(i) of the Code; and (v) Debt Securities will not constitute "qualified mortgages" with in the meaning of Section 860G(a)(3) of the Code for REMICs. TAXATION OF OWNERS OF PARTNERSHIP CERTIFICATES (1) Treatment of the Trust Fund as a Partnership The Partnership Trust Fund will agree, and the related owners of Partnership Certificates ("Partnership Certificate Owners") will agree by their purchase of Partnership Certificates, if there is more than one Partnership Certificate Owner, to treat the Partnership Trust Fund as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the Partnership Trust Fund, the partners of the partnership being the Partnership Certificate Owners, including, to the extent relevant, the depositor in its capacity as recipient of distributions from any reserve fund, and the Debt Securities, if any, being debt of the partnership, and if there is one Partnership Certificate Owner, to treat the Partnership Certificate Owner as the owner of the assets of the Partnership Trust Fund and to treat the Partnership Trust Fund as a disregarded entity. However, the proper characterization of the arrangement involving the Partnership Trust Fund, the Partnership Certificates, the Debt Securities and the depositor is not certain because there is no authority on transactions closely comparable to that contemplated in this prospectus. A variety of alternative characterizations are possible. For example, because the Partnership Certificates have certain features characteristic of debt, the Partnership Certificates might be considered debt of the Partnership Trust Fund. Generally, provided such Partnership Certificates are issued at or close to face value, any such characterization would not result in materially adverse tax consequences to holders of Partnership Certificates as compared to the consequences from treatment of the Partnership Certificates as equity in a partnership, described below. The following discussion assumes that the Partnership Certificates represent equity interests in a partnership. The following discussion also assumes that all payments on the Partnership Certificates are denominated in U.S. dollars, none of the Partnership Certificates have Interest Rates which would qualify as contingent interest under the Treasury regulations relating to original issue discount, and that a series of securities includes a single class of Partnership Certificates. If these conditions are not satisfied with respect to any given series of Partnership Certificates, additional tax considerations with respect to such Partnership Certificates will be disclosed in the applicable prospectus supplement. (2) Partnership Taxation As a partnership, the Partnership Trust Fund will not be subject to federal income tax. Rather, each Partnership Certificate Owner will be required to take into account separately the Partnership Certificate Owner's allocable share of income, gains, losses, deductions and credits of the Partnership Trust Fund, whether or not there is a corresponding cash distribution. Thus, cash basis holders will in effect be required to report income from the Partnership Certificates on the accrual basis and Partnership Certificate Owners may become liable for taxes on Partnership Trust Fund income even if they have not received cash from the Partnership Trust Fund to pay the taxes. The Partnership Trust Fund's income will consist primarily of interest and finance charges earned on the related mortgage loans, including appropriate adjustments for market discount, original issue discount and bond premium, and any gain upon collection or disposition of the mortgage loans. The Partnership Trust Fund's deductions will consist primarily of interest accruing with respect to the Debt Securities, servicing and other fees, and losses or deductions upon collection or disposition of mortgage loans. The tax items of a partnership are allocable to the partners in accordance with the Code, Treasury regulations and the partnership agreement (i.e., the Agreement and related documents). The Agreement will provide, in general, that the Partnership Certificate Owners will be allocated taxable income of the Partnership Trust Fund for each month equal to the sum of: o the interest or other income that accrues on the Partnership Certificates in accordance with their terms for the relevant month including, as applicable, interest accruing at the related Partnership Certificate Interest Rate for that month and interest on amounts previously due on the Partnership Certificates but not yet distributed; o any income of the Partnership Trust Fund attributable to discount on the related mortgage loans that corresponds to any excess of the principal amount of the Partnership Certificates over their initial issue price; o any prepayment premium payable to the Partnership Certificate Owners for the applicable month; and o any other amounts of income payable to the Partnership Certificate Owners for the applicable month. The allocation will be reduced by any amortization by the Partnership Trust Fund of premium on mortgage loans that corresponds to any excess of the issue price of Partnership Certificates over their principal amount. All remaining taxable income of the Partnership Trust Fund will be allocated to the depositor. Losses will generally be allocated in the manner in which they are borne. Based on the economic arrangement of the parties, the foregoing approach for allocating income of the Partnership Trust Fund should be permissible under applicable Treasury regulations, although no assurance can be given that the IRS would not require a greater amount of income to be allocated to Partnership Certificate Owners. Moreover, even under the foregoing method of allocation, Partnership Certificate Owners may be allocated income equal to the entire Partnership Certificate Interest Rate plus the other items described above, even though the Partnership Trust Fund might not have sufficient cash to make current cash distributions of the amount. In addition, because tax allocations and tax reporting will be done on a uniform basis for all Partnership Certificate Owners, but Partnership Certificate Owners may be purchasing Partnership Certificates at different times and at different prices, Partnership Certificate Owners may be required to report on their tax returns taxable income that is greater or less than the amount reported to them by the Partnership Trust Fund. Assuming Debt Securities are also issued, all or substantially all of the taxable income allocated to a Partnership Certificate Owner that is a pension, profit sharing or employee benefit plan or other tax-exempt entity, including an individual retirement account, will constitute "unrelated business taxable income" generally taxable to the holder under the Code. An individual taxpayer's share of expenses of the Partnership Trust Fund, including fees to the servicer, but not interest expense, would be miscellaneous itemized deductions and thus deductible only to the extent such expenses plus all other miscellaneous itemized deductions exceeds two percent of the individual's adjusted gross income. An individual taxpayer will be allowed no deduction for his share of expenses of the Partnership Trust Fund, other than interest, in determining his liability for alternative minimum tax. In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for the taxable year for an individual whose adjusted gross income exceeds a prescribed threshold amount will be reduced by the lesser of (1) 3% of the excess of adjusted gross income over the specified threshold amount or (2) 80% of the amount of itemized deductions otherwise allowable for the applicable taxable year. Accordingly, deductions might be disallowed to the individual in whole or in part and might result in the Partnership Certificate Owner being taxed on an amount of income that exceeds the amount of cash actually distributed to the holder over the life of the Partnership Trust Fund. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership," 70% of that partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. The Partnership Trust Fund intends to make all tax calculations relating to income and allocations to Partnership Certificate Owners on an aggregate basis to the extent relevant. If the IRS were to require that the calculations be made separately for each mortgage loan, the calculations may result in some timing and character differences under some circumstances. (3) Discount and Premium The purchase price paid by the Partnership Trust Fund for the related mortgage loans may be greater or less than the remaining principal balance of the mortgage loans at the time of purchase. If so, the mortgage loans will have been acquired at a premium or market discount, as the case may be. See "REMICs--Taxation of Owners of Regular Securities--Acquisition Premium" and "-- Market Discount" above. As indicated above, the Partnership Trust Fund will make this calculation on an aggregate basis, but it is possible that the IRS might require that it be recomputed on a mortgage loan-by-mortgage loan basis. Further, with respect to any asset of the Partnership Trust Fund that is a Stripped Agency Security or other instrument evidencing ownership of specific interest and/or principal of a particular bond, it will be subject to the rules relating to original issue discount with respect to such security or instrument (in lieu of the rules relating to market discount). See "REMICs--Taxation of Owners of Regular Securities--Original Issue Discount" above. If the Partnership Trust Fund acquires the mortgage loans at a market discount or premium, the Partnership Trust Fund will elect to include any market discount in income currently as it accrues over the life of the mortgage loans or to offset any premium against interest income on the mortgage loans. As indicated above, a portion of the market discount income or premium deduction may be allocated to Partnership Certificate Owners. (4) Section 708 Termination Under Section 708 of the Code, the Partnership Trust Fund will be deemed to terminate for federal income tax purposes if 50% or more of the capital and profits interests in the Partnership Trust Fund are sold or exchanged within a 12-month period. If a termination occurs under Section 708 of the Code, the Partnership Trust Fund will be considered to contribute its assets to a new Partnership Trust Fund, which would be treated as a new partnership, in exchange for Partnership Certificates in the new Partnership Trust Fund. The original Partnership Trust Fund will then be deemed to distribute the Partnership Certificates in the new Partnership Trust Fund to each of the owners of Partnership Certificates in the original Partnership Trust Fund in liquidation of the original Partnership Trust Fund. The Partnership Trust Fund will not comply with particular technical requirements that might apply when a constructive termination occurs. As a result, the Partnership Trust Fund may be subject to some tax penalties and may incur additional expenses if it is required to comply with those requirements. Furthermore, the Partnership Trust Fund might not be able to comply with these requirements due to lack of data. (5) Disposition of Partnership Certificates Generally, capital gain or loss will be recognized on a sale of Partnership Certificates in an amount equal to the difference between the amount realized and the seller's tax basis in the Partnership Certificates sold. Any gain or loss would be long-term capital gain or loss if the Partnership Certificate Owner's holding period exceeded one year. A Partnership Certificate Owner's tax basis in a Partnership Certificate will generally equal its cost, increased by its share of Partnership Trust Fund income allocable to the Partnership Certificate Owner and decreased by any distributions received or losses allocated with respect to the Partnership Certificate. In addition, both the tax basis in the Partnership Certificates and the amount realized on a sale of a Partnership Certificate would include the Partnership Certificate Owner's share, determined under Treasury Regulations, of the Debt Securities and other liabilities of the Partnership Trust Fund. A Partnership Certificate Owner acquiring Partnership Certificates at different prices will generally be required to maintain a single aggregate adjusted tax basis in the Partnership Certificates and, upon a sale or other disposition of some of the Partnership Certificates, allocate a portion of the aggregate tax basis to the Partnership Certificates sold, rather than maintaining a separate tax basis in each Partnership Certificate for purposes of computing gain or loss on a sale of that Partnership Certificate. If a Partnership Certificate Owner is required to recognize an aggregate amount of income (not including income attributable to disallowed itemized deductions described above) over the life of the Partnership Certificates that exceeds the aggregate cash distributions with respect to the Partnership Certificates, the excess will generally give rise to a capital loss upon the retirement of the Partnership Certificates. (6) Allocations Between Transferors and Transferees In general, the Partnership Trust Fund's taxable income and losses will be determined each Due Period and the tax items for a particular Due Period will be apportioned among the Partnership Certificate Owners in proportion to the principal amount of Partnership Certificates owned by them as of the close of the last day of that Due Period. As a result, a Partnership Certificate Owner purchasing Partnership Certificates may be allocated tax items, which will affect the purchaser's tax liability and tax basis, attributable to periods before the actual transaction. The use of a Due Period convention may not be permitted by existing Treasury regulations. If a Due Period convention is not allowed, or only applies to transfers of less than all of the partner's interest, taxable income or losses of the Partnership Trust Fund might be reallocated among the Partnership Certificate Owners. The Partnership Trust Fund's method of allocation between transferors and transferees may be revised to conform to a method permitted by future laws, regulations or other IRS guidance. (7) Section 731 Distributions In the case of any distribution to a Partnership Certificate Owner, no gain will be recognized to that Partnership Certificate Owner to the extent that the amount of any money distributed for that Partnership Certificate exceeds the adjusted basis of that Partnership Certificate Owner's interest in the Partnership Certificate. To the extent that the amount of money distributed exceeds that Partnership Certificate Owner's adjusted basis, gain will be currently recognized. In the case of any distribution to a Partnership Certificate Owner, no loss will be recognized except upon a distribution in liquidation of a Partnership Certificate Owner's interest. Any gain or loss recognized by a Partnership Certificate Owner generally will be capital gain or loss. (8) Section 754 Election In the event that a Partnership Certificate Owner sells its Partnership Certificates at a profit (or loss), the purchasing Partnership Certificate Owner will have a higher (or lower) basis in the Partnership Certificates than the selling Partnership Certificate Owner had. The tax basis of the Partnership Trust Fund's assets will not be adjusted to reflect that higher (or lower) basis unless the Partnership Trust Fund were to file an election under Section 754 of the Code. In order to avoid the administrative complexities that would be involved in keeping accurate accounting records, as well as potentially onerous information reporting requirements, the Partnership Trust Fund current does not intend to make an election under Section 754 of the Code. As a result, Partnership Certificate Owners might be allocated a greater or lesser amount of Partnership Trust Fund income than would be appropriate based on their own purchase price for Partnership Certificates. (9) Administrative Matters The trustee is required to keep or cause to be kept complete and accurate books of the Partnership Trust Fund. The trustee will file a partnership information return (IRS Form 1065) with the IRS for each taxable year of the Partnership Trust Fund and will report each Partnership Certificate Owner's allocable share of items of Partnership Trust Fund income and expense to Partnership Certificate Owners and the IRS on Schedule K-1. The Partnership Trust Fund will provide the Schedule K-1 information to nominees that fail to provide the Partnership Trust Fund with the information statement described below and the nominees will be required to forward this information to the beneficial owners of the Partnership Certificates. Generally, holders must timely file tax returns that are consistent with the information return filed by the Partnership Trust Fund or be subject to penalties unless the holder notifies the IRS of all the inconsistencies. Under Section 6031 of the Code, any person that holds Partnership Certificates as a nominee at any time during a calendar year is required to furnish the Partnership Trust Fund with a statement containing specific information on the nominee, the beneficial owners and the Partnership Certificates so held. The information includes (1) the name, address and taxpayer identification number of the nominee and (2) as to each beneficial owner o the name, address and identification number of such person, o whether such person is a United States person, a tax-exempt entity or a foreign government, an international organization, or any wholly owned agency or instrumentality of either of the foregoing, and o particular information on Partnership Certificates that were held, bought or sold on behalf of the person throughout the year. In addition, brokers and financial institutions that hold Partnership Certificates through a nominee are required to furnish directly to the Partnership Trust Fund information as to themselves and their ownership of Partnership Certificates. A clearing agency registered under Section 17A of the Exchange Act is not required to furnish any information statement to the Partnership Trust Fund. The information referred to above for any calendar year must be furnished to the Partnership Trust Fund on or before the following January 31. Nominees, brokers and financial institutions that fail to provide the Partnership Trust Fund with the information described above may be subject to penalties. Unless another designation is made, the depositor will be designated as the tax matters partner for each Partnership Trust Fund in the pooling and servicing greement and, as the tax matters partner, will be responsible for representing the Partnership Certificate Owners in some specific disputes with the IRS. The Code provides for administrative examination of a partnership as if the partnership were a separate and distinct taxpayer. Generally, the statute of limitations for partnership items does not expire before the later of three years after the date on which the partnership information return is filed or the last day for filing the return for the applicable year, determined without regard to extensions. Any adverse determination following an audit of the return of the Partnership Trust Fund by the appropriate taxing authorities could result in an adjustment of the returns of the Partnership Certificate Owners, and, under some circumstances, a Partnership Certificate Owner may be precluded from separately litigating a proposed adjustment to the items of the Partnership Trust Fund. An adjustment could also result in an audit of a Partnership Certificate Owner's returns and adjustments of items not related to the income and losses of the Partnership Trust Fund. A special audit system exists for qualifying large partnerships that have elected to apply a simplified flow-through reporting system under Sections 771 through 777 of the Code. Unless otherwise specified in the applicable prospectus supplement, a Partnership Trust Fund will not elect to apply the simplified flow-through reporting system. (10) Taxation of Certain Foreign Partnership Certificate Owners As used below, the term "Non-United States Owner" means a Partnership Certificate Owner that is not a U.S. Person, as defined under "REMICs--Taxation of Owners of Residual Securities--Tax Related Restrictions on Transfer of Residual Securities--Foreign Investors," above. It is not clear whether the Partnership Trust Fund would be considered to be engaged in a trade or business in the United States for purposes of federal withholding taxes with respect to Non-United States Owners because there is no clear authority dealing with that issue under facts substantially similar to those described in this Prospectus. Although it is not expected that the Partnership Trust Fund would be engaged in a trade or business in the United States for these purposes, the Partnership Trust Fund will withhold as if it were so engaged in order to protect the Partnership Trust Fund from possible adverse consequences of a failure to withhold. The Partnership Trust Fund expects to withhold on the portion of its taxable income that is allocable to Non-United States Owners pursuant to Section 1446 of the Code, as if the income were effectively connected to a U.S. trade or business, at a rate of 35% for Non-United States Owners that are taxable as corporations and 39.6% for all other Non-United States Owners. Subsequent adoption of Treasury regulations or the issuance of other administrative pronouncements may require the Partnership Trust Fund to change its withholding procedures. Each Non-United States Owner might be required to file a U.S. individual or corporate income tax return on its share of the income of the Partnership Trust Fund including, in the case of a corporation, a return in respect of the branch profits tax. Assuming the Partnership Trust Fund is not engaged in a U.S. trade or business, a Non-United States Owner would be entitled to a refund with respect to all or a portion of taxes withheld by the Partnership Trust Fund if, in particular, the Owner's allocable share of interest from the Partnership Trust Fund constituted "portfolio interest" under the Code. The interest, however, may not constitute "portfolio interest" if, among other reasons, the underlying obligation is not in registered form or if the interest is determined without regard to the income of the Partnership Trust Fund, in the later case, the interest being properly characterized as a guaranteed payment under Section 707(c) of the Code. If this were the case, Non-United States Owners would be subject to a United States federal income and withholding tax at a rate of 30 percent on the Partnership Trust Fund's gross income, without any deductions or other allowances for costs and expenses incurred in producing the income, unless reduced or eliminated pursuant to an applicable treaty. In this case, a Non-United States Owner would only be entitled to a refund for that portion of the taxes, if any, in excess of the taxes that should have been withheld with respect to the interest. (11) Backup Withholding Distributions made on the Partnership Certificates and proceeds from the sale of the Partnership Certificates will be subject to a "backup" withholding tax of 31% if, in general, the Partnership Certificate Owner fails to comply with particular identification procedures, unless the holder is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld would be refunded by the IRS or allowable as a credit against the Non-United States Owner's federal income tax. CONSEQUENCES FOR PARTICULAR INVESTORS The federal tax discussions above may not be applicable depending on a securityholder's particular tax situation. The depositor recommends that prospective purchasers consult their tax advisors for the tax consequences to them of the purchase, ownership and disposition of REMIC Securities, FASIT Securities, Grantor Trust Securities, Partnership Certificates and Debt Securities, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in federal or other tax laws. STATE AND OTHER TAX CONSIDERATIONS In addition to the federal income tax consequences described in "Material Federal Income Tax Considerations," potential investors should consider the state and local tax consequences of the acquisition, ownership, and disposition of the Notes or Certificates, as applicable, offered under this prospectus. State tax law may differ substantially from the corresponding federal tax law, and the discussion above does not purport to describe any aspect of the tax laws of any state or other jurisdiction. Therefore, prospective investors should consult their own tax advisors for the various tax consequences of investments in the Notes or Certificates, as applicable, offered under this prospectus. ERISA CONSIDERATIONS GENERAL A fiduciary of a pension, profit-sharing, retirement or other employee benefit plan subject to Title I of ERISA should consider the fiduciary standards under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") in the context of the plan's particular circumstances before authorizing an investment of a portion of such plan's assets in the Securities. Accordingly, pursuant to Section 404 of ERISA, such fiduciary should consider among other factors (i) whether the investment is for the exclusive benefit of plan participants and their beneficiaries; (ii) whether the investment satisfies the applicable diversification requirements; (iii) whether the investment is in accordance with the documents and instruments governing the plan; and (iv) whether the investment is prudent, considering the nature of the investment. Fiduciaries of plans also should consider ERISA's prohibition on improper delegation of control over, or responsibility for, plan assets. In addition, employee benefit plans or other retirement arrangements subject to ERISA, as well as individual retirement accounts, certain types of Keogh plans not subject to ERISA but subject to Section 4975 of the Code, or any entity (including insurance company separate or general accounts) whose underlying assets include plan assets by reason of such plans, arrangements or accounts investing in the entity (each, a "Plan") are prohibited from engaging in a broad range of transactions involving Plan assets and persons having certain specified relationships to a Plan ("parties in interest" and "disqualified persons"). Such transactions are treated as "prohibited transactions" under Sections 406 of ERISA and excise taxes and/or other penalties are imposed upon such persons under ERISA and/or Section 4975 of the Code unless an exemption applies. The depositor, Underwriter, each master servicer or other servicer, any insurer, the trustee, the indenture trustee and certain of their affiliates might be considered "parties in interest" or "disqualified persons" with respect to a Plan. If so, the acquisition, holding or disposition of Securities by or on behalf of such Plan could be considered to give rise to a "prohibited transaction" within the meaning of ERISA and the Code unless a statutory, regulatory or administrative exception or exemption is available. ERISA CONSIDERATIONS RELATING TO CERTIFICATES Plan Assets In 29 C.R.F ss.2510.3-101 (the "Plan Asset Regulations"), the U.S. Department of Labor ("DOL") has defined what constitutes "plan assets" for purposes of ERISA and Section 4975 of the Code. The Plan Asset Regulations provide that if a Plan makes an investment in an "equity interest" in an entity, an undivided portion of the assets of the entity will be considered the assets of such Plan unless certain exceptions set forth in such Regulations apply. The Certificates will be deemed an equity interest for purposes of the Plan Asset Regulations, and the depositor can give no assurance that the Certificates will qualify for any of the exceptions under the Plan Asset Regulations. As a result, (i) a Plan may be deemed to have acquired an interest in the Assets of the trust fund and not merely an interest in the Certificates, (ii) the fiduciary investment standards of ERISA could apply to such Assets and (iii) transactions occurring in the course of managing, operating and servicing the trust fund and its Assets might constitute prohibited transactions, unless a statutory, regulatory or administrative exemption applies. Prohibited Transaction Class Exemption 83-1 The DOL has issued an administrative exemption, Prohibited Transaction Class Exemption 83-1 ("PTCE 83-1"), which under certain conditions exempts from the application of the prohibited transaction rules of ERISA and the excise tax provisions of Section 4975 of the Code transactions involving a Plan in connection with the operation of a "mortgage pool" and the purchase, sale and holding of Certificates which are "mortgage pool pass-through certificates." A "mortgage pool" is defined as a fixed investment pool consisting solely of interest-bearing obligations secured by first or second mortgages or deeds of trust on single-family residential property, property acquired in foreclosure and undistributed cash. A "mortgage pool pass-through certificate" is defined as a Certificate which represents a beneficial undivided interest in a mortgage pool which entitles the holder to pass through payments of principal and interest from the mortgage loans. PTCE 83-1 requires that: (i) the depositor and the trustee maintain a system of insurance or other protection for the mortgage loans, the property securing such mortgage loans and for indemnifying holders of Certificates against reductions in pass-through payments due to defaults in loan payments or property damage in an amount at least equal to the greater of (x) 1% of the aggregate principal balance of the mortgage loans or (y) 1% of the principal balance of the largest covered pooled mortgage loans; (ii) the trustee may not be an affiliate of the depositor; and (iii) the payments made to, and retained by, the depositor in connection with the trust fund, together with all funds inuring to its benefit for administering the trust fund, represent no more than "adequate consideration" for selling the mortgage loans, plus reasonable compensation for services provided to the trust fund. In addition, PTCE 83-1 exempts the initial sale of Certificates to a Plan with respect to which the depositor, the insurer, the master servicer or other servicer or the trustee is a party in interest if the Plan does not pay more than fair market value for such Certificates and the rights and interests evidenced by such Certificates are not subordinated to the rights and interests evidenced by other Certificates of the same pool. PTCE 83-1 also exempts from the prohibited transaction rules any transactions in connection with the servicing and operation of the mortgage pool, provided that any payments made to the master servicer in connection with the servicing of the trust fund are made in accordance with a binding agreement, copies of which must be made available to prospective Plan investors. In the case of any Plan with respect to which the depositor, the master servicer, the insurer or the trustee is a fiduciary, PTCE 83-1 will only apply if, in addition to the other requirements: (i) the initial sale, exchange or transfer of Certificates is expressly approved by an independent fiduciary who has authority to manage and control those Plan assets being invested in Certificates; (ii) the Plan pays no more for the Certificates than would be paid in an arm's-length transaction; (iii) no investment management, advisory or underwriting fee, sales commission or similar compensation is paid to the depositor with regard to the sale, exchange or transfer of Certificates to the Plan; (iv) the total value of the Certificates purchased by such Plan does not exceed 25% of the amount issued and (v) at least 50% of the aggregate amount of Certificates is acquired by persons independent of the depositor, the trustee, the master servicer and the insurer. Before purchasing Certificates, a fiduciary of a Plan should confirm that the trust fund is a "mortgage pool," that the Certificates constitute "mortgage pool pass-through certificates" and that the conditions set forth in PTCE 83-1 would be satisfied. In addition to making its own determination as to the availability of the exemptive relief provided in PTCE 83-1, the Plan fiduciary should consider the availability of any other prohibited transaction exemptions. The Plan fiduciary should also consider its general fiduciary obligations under ERISA in determining whether to purchase any Certificates on behalf of a Plan pursuant to PTCE 83-1. Underwriter Exemption The DOL has granted to Deutsche Bank Alex. Brown an individual exemption, Prohibited Transaction Exemption 94-84, and to Deutsche Morgan Grenfell/C.J. Lawrence Inc., similar approval (FAN 97-03E), which were both amended by Prohibited Transaction Exemption 97-34 ("PTE 97-34") and further recently amended pursuant to Prohibited Transaction Exemption 2000-58 ("PTE 2000-58") (collectively, the "Exemption") which is applicable to Certificates which meet its requirements whenever the Underwriter or its affiliate is the sole underwriter, manager or co-manager of an underwriting syndicate or is the selling or placement agent. The Exemption generally exempts certain transactions from the application of certain of the prohibited transaction provisions of ERISA and the Code provided that the conditions set forth in the Exemption are satisfied. These transactions include the servicing, managing and operation of investment trusts holding fixed (generally non-revolving pools) of enumerated categories of assets which include: single and multi-family residential mortgage loans, home equity loans or receivables (including cooperative housing loans) and guaranteed government mortgage pool certificates and the purchase, sale and holding of Certificates which represent beneficial ownership interests in the assets of such trusts. GENERAL CONDITIONS OF EXEMPTION The Exemption sets forth general conditions which must be satisfied for a transaction involving the purchase, sale and holding of the Certificates to be eligible for exemptive relief thereunder. First, the acquisition of Certificates by Plans must be on terms 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 Assets held by the trust fund must be fully secured (other than one-to-four family residential mortgage loans and home equity loans or receivables backing certain types of Certificates, as described below). (Mortgage loans, loans, obligations and receivables will be collectively referred to herein as "loans."). Third, unless the Certificates are issued in "designated transactions" (as described below) and are backed by fully-secured loans, they may not be subordinated. Fourth, the Certificates at the time of acquisition by the Plan must generally be rated in one of the three (or in the case of designated transactions, four) highest generic rating categories by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., Moody's Investors Services, Inc. or Fitch, Inc. (each, a "Rating Agency"). Fifth, the trustee and the indenture trustee generally cannot be affiliates of any member of the "Restricted Group" which consists of any (i) underwriter as defined in the Exemption, (ii) the depositor, (iii) the master servicer, (iv) each servicer, (v) the insurer, (vi) the counterparty of any "interest swap" (as described below) held as an Asset of the trust fund and (vii) any obligor with respect to loans constituting more than 5% of the aggregate unamortized principal balance of the loans held in the trust fund as of the date of initial issuance of the Certificates. Sixth, the sum of all payments made to, and retained by, such underwriters must represent not more than reasonable compensation for underwriting the Certificates; the sum of all payments made to, and retained by, the depositor pursuant to the assignment of the loans to the related trust fund must represent not more than the fair market value of such loans; and the sum of all payments made to, and retained by, the master servicer and any servicer must represent not more than reasonable compensation for such person's services under the Agreement and reimbursement of such person's reasonable expenses in connection therewith. Seventh, (i) the investment pool must consist only of assets of the type enumerated in the Exemption and which have been included in other investment pools; (ii) Certificates evidencing interests in such other investment pools must have been rated in one of the three (or in the case of designated transactions, four) highest generic rating categories by one of the Rating Agencies for at least one year prior to a Plan's acquisition of Certificates; and (iii) Certificates evidencing interests in such other investment pools must have been purchased by investors other than Plans for at least one year prior to a Plan's acquisition of Certificates. Finally, the investing Plan must be an accredited investor as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act of 1933, as amended. The depositor assumes that only Plans which are accredited investors under the federal securities laws will be permitted to purchase the Certificates. RECENT AMENDMENTS TO EXEMPTION PTE 2000-58 (the "Amendment") recently amended the Exemption to make the acquisition of Certificates by Plans in an initial offering or in a secondary market transaction, the holding or transfer of Certificates and the servicing, management and operation of the trust fund and its Assets on or after November 13, 2000 eligible for exemptive relief to a broader range of Certificates. Prior to such amendment, the Exemption generally permitted Plans to purchase only unsubordindated Certificates rated within the highest three generic rating categories backed by secured collateral. Such Certificates had to be issued by a trust fund which was a grantor trust, REMIC or a FASIT whose corpus could not include certain types of Assets such as interest-rate swaps. TYPES OF TRUST FUNDS The Amendment has expanded the types of permitted trust funds to include owner-trusts, as well as grantor trusts, REMICs and FASITs. Owner-trusts are subject to certain restrictions in their governing documents to ensure that their Assets may not be reached by the creditors of the depositor in the event of bankruptcy or other insolvency and must provide certain legal opinions. DESIGNATED TRANSACTIONS In the case where the Certificates are backed by trust fund Assets which are residential, home equity or multi-family loans which are described and defined in the Exemption as designated transactions ("Designated Transactions"), the Amendment permits the Certificates issued by the trust fund in such transactions to be rated in one of the highest four generic rating categories by a Rating Agency and/or to be subordinated. The Assets will qualify for Designated Transaction treatment under the Exemption unless otherwise specified in the prospectus supplement. In addition, one subset of Designated Transactions, residential (one- to-four family) and home equity loans, may be less than fully secured, provided that the rights and interests evidenced by Certificates issued in such Designated Transactions are: (a) not subordinated to the rights and interests evidenced by Securities of the same trust fund; (b) such Certificates acquired by the Plan have received a rating from a Rating Agency at the time of such acquisition that is in one of the two highest generic rating categories; and (c) any loan included in the corpus or Assets of the trust fund is secured by collateral whose fair market value on the closing date of the Designated Transactions is at least equal to 80% of the sum of: (i) the outstanding principal balance due under the loan which is held by the trust fund and (ii) the outstanding principal balance(s) of any other loan(s) of higher priority (whether or not held by the trust fund) which are secured by the same collateral. INSURANCE COMPANY GENERAL ACCOUNTS In the event that Certificates do not meet the requirements of the Exemption solely because they are Subordinate Certificates or fail to meet a minimum rating requirement under the Exemption, certain Plans may be eligible to purchase Certificates pursuant to Section III of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60") which permits insurance company general accounts as defined in PTCE 95-60 to purchase such Certificates if they otherwise meet all of the other requirements of the Exemption. PERMITTED ASSETS The Amendment permits an interest-rate swap to be an Asset of a trust fund which issues Certificates acquired by Plans in an initial offering or in the secondary market on or after November 13, 2000 and clarifies the requirements regarding yield supplement agreements. An interest-rate swap (or if purchased by or on behalf of the trust fund) an interest-rate cap contract (collectively, a "Swap" or "Swap Agreement") is a permitted trust fund Asset if it: (a) is an "eligible Swap;" (b) is with an "eligible counterparty;" (c) is purchased by a "qualified plan investor;" (d) meets certain additional specific conditions which depend on whether the Swap is a "ratings dependent Swap" or a "non-ratings dependent Swap" and (e) permits the trust fund to make termination payments to the Swap (other than currently scheduled payments) solely from excess spread or amounts otherwise payable to the servicer or depositor. An "eligible Swap" is one which: (a) is denominated in U.S. dollars; (b) pursuant to which the trust fund pays or receives, on or immediately prior to the respective payment or distribution date for the class of Certificates to which the Swap relates, a fixed rate of interest or a floating rate of interest based on a publicly available index (E.G., LIBOR or the U.S. Federal Reserve's Cost of Funds Index (COFI)), with the trust fund receiving such payments on at least a quarterly basis and obligated to make separate payments no more frequently than the counterparty, with all simultaneous payments being netted ("Allowable Interest Rate"); (c) has a notional amount that does not exceed either: (i) the principal balance of the class of Certificates to which the Swap relates, or (ii) the portion of the principal balance of such class represented by obligations ("Allowable Notional Amount"); (d) is not leveraged (I.E., payments are based on the applicable notional amount, the day count fractions, the fixed or floating rates permitted above, and the difference between the products thereof, calculated on a one-to-one ratio and not on a multiplier of such difference) ("Leveraged"); (e) has a final termination date that is either the earlier of the date on which the issuer terminates or the related class of Certificates are fully repaid and (f) does not incorporate any provision which could cause a unilateral alteration in the interest rate requirements described above or the prohibition against leveraging. An "eligible counterparty" means a bank or other financial institution which has a rating at the date of issuance of the Certificates, which is in one of the three highest long-term credit rating categories or one of the two highest short-term credit rating categories, utilized by at least one of the Rating Agencies rating the Certificates; provided that, if a counterparty is relying on its short-term rating to establish eligibility hereunder, such counterparty must either have a long-term rating in one of the three highest long-term rating categories or not have a long-term rating from the applicable Rating Agency. A "qualified plan investor" is a Plan or Plans where the decision to buy such class of Certificates is made on behalf of the Plan by an independent fiduciary qualified to understand the Swap transaction and the effect the Swap would have on the rating of the Certificates and such fiduciary is either (a) a "qualified professional asset manager" ("QPAM") under Prohibited Transaction Class Exemption 84-14 ("PTCE 84-14") (see below), (b) an "in-house asset manager" under Prohibited Transaction Class Exemption 96-23 ("PTCE 96-23") (see below) or (c) has total assets (both Plan and non-Plan) under management of at least $100 million at the time the Certificates are acquired by the Plan. In "ratings dependent Swaps" (where the rating of a class of Certificates is dependent on the terms and conditions of the Swap), the Swap Agreement must provide that if the credit rating of the counterparty is withdrawn or reduced by any Rating Agency below a level specified by the Rating Agency, the servicer must, within the period specified under the Swap Agreement: (a) obtain a replacement Swap Agreement with an eligible counterparty which is acceptable to the Rating Agency and the terms of which are substantially the same as the current Swap Agreement (at which time the earlier Swap Agreement must terminate); or (b) cause the Swap counterparty to establish any collateralization or other arrangement satisfactory to the Rating Agency such that the then current rating by the Rating Agency of the particular class of Certificates will not be withdrawn or reduced (and the terms of the Swap Agreement must specifically obligate the counterparty to perform these duties for any class of Certificates with a term of more than one year). In the event that the servicer fails to meet these obligations, Plan certificateholders must be notified in the immediately following periodic report which is provided to certificateholders but in no event later than the end of the second month beginning after the date of such failure. Sixty days after the receipt of such report, the exemptive relief provided under the Exemption will prospectively cease to be applicable to any class of Certificates held by a Plan which involves such ratings dependent Swap. "Non-ratings dependent Swaps" (those where the rating of the Certificates does not depend on the terms and conditions of the Swap) are subject to the following conditions. If the credit rating of the counterparty is withdrawn or reduced below the lowest level permitted above, the servicer will, within a specified period after such rating withdrawal or reduction: (a) obtain a replacement Swap Agreement with an eligible counterparty, the terms of which are substantially the same as the current Swap Agreement (at which time the earlier Swap Agreement must terminate); (b) cause the counterparty to post collateral with the trust fund in an amount equal to all payments owed by the counterparty if the Swap transaction were terminated; or (c) terminate the Swap Agreement in accordance with its terms. An "eligible yield supplement agreement" is any yield supplement agreement or similar arrangement (or if purchased by or on behalf of the trust fund) an interest rate cap contract to supplement the interest rates otherwise payable on obligations held by the trust fund ("EYS Agreement"). If the EYS Agreement has a notional principal amount and/or is written on an International Swaps and Derivatives Association, Inc. (ISDA) form, the EYS Agreement may only be held as an Asset of the trust fund with respect to Certificates purchased by Plans on or after April 7, 1998 if it meets the following conditions: (a) it is denominated in U.S. dollars; (b) it pays an Allowable Interest Rate; (c) it is not Leveraged; (d) it does not allow any of these three preceding requirements to be unilaterally altered without the consent of the trustee; (e) it is entered into between the trust fund and an eligible counterparty and (f) it has an Allowable Notional Amount. PRE-FUNDING ACCOUNTS The Exemption was amended by PTE 97-34 to extend exemptive relief to Certificates issued in transactions using pre-funding accounts whereby a portion of the loans backing the Certificates are transferred to the trust fund within a specified period following the closing date ("DOL Pre-Funding Period") (see below) instead of requiring that all such loans be either identified or transferred on or before the closing date. The relief is effective for transactions occurring on or after May 23, 1997 provided that the following conditions are met. First, the ratio of the amount allocated to the Pre-Funding Account to the total principal amount of the Certificates being offered ("Pre-Funding Limit") must not exceed twenty-five percent (25%). Second, all loans transferred after the closing date (referred to here as "additional loans") must meet the same terms and conditions for eligibility as the original loans used to create the trust fund, which terms and conditions have been approved by the Rating Agency. Third, the transfer of such additional loans to the trust fund during the DOL Pre-Funding Period must not result in the Certificates receiving a lower credit rating from the Rating Agency upon termination of the DOL Pre-Funding Period than the rating that was obtained at the time of the initial issuance of the Certificates by the trust fund. Fourth, solely as a result of the use of pre-funding, the weighted average annual percentage interest rate (the "average interest rate") for all of the loans in the trust fund at the end of the DOL Pre-Funding Period must not be more than 100 basis points lower than the average interest rate for the loans which were transferred to the trust fund on the closing date. Fifth, either: (i) the characteristics of the additional loans must be monitored by an insurer or other credit support provider which is independent of the depositor; or (ii) an independent accountant retained by the depositor must provide the depositor with a letter (with copies provided to the Rating Agency, the underwriter and the trustee) stating whether or not the characteristics of the additional loans conform to the characteristics described in the Prospectus, Prospectus Supplement, Private Placement Memorandum ("Offering Documents") and/or the Agreement. In preparing such letter, the independent accountant must use the same type of procedures as were applicable to the loans which were transferred as of the closing date. Sixth, the DOL Pre-Funding Period must end no later than three months or 90 days after the closing date or earlier, in certain circumstances, if the amount on deposit in the Pre-Funding Account is reduced below the minimum level specified in the Agreement or an event of default occurs under the Agreement. Seventh, amounts transferred to any Pre-Funding Account and/or Capitalized Interest Account used in connection with the pre-funding may be invested only in investments which are permitted by the Rating Agency and (i) are direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality thereof (provided that such obligations are backed by the full faith and credit of the United States); or (ii) have been rated (or the obligor has been rated) in one of the three highest generic rating categories by the Rating Agency ("Acceptable Investments"). Eighth, certain disclosure requirements must be met. REVOLVING POOL FEATURES The Exemption only covers Certificates backed by "fixed" pools of loans which require that all the loans must be transferred to the trust fund or identified at closing (or transferred within the DOL Pre-Funding Period, if pre-funding meeting the conditions described above is used). Accordingly, Certificates issued by trust funds which feature revolving pools of Assets will not be eligible for a purchase by Plans. However, Securities which are Notes backed by revolving pools of Assets may be eligible for purchase by Plans pursuant to certain other prohibited transaction exemptions. See discussion below in "ERISA Considerations Relating to Notes." LIMITATIONS ON SCOPE OF THE EXEMPTION If the general conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by ERISA and the Code in connection with the initial acquisition, transfer or holding, and the acquisition or disposition in the secondary market, of the Certificates by Plans. However, no exemption is provided from the restrictions of ERISA for the acquisition or holding of a Certificates on behalf of an "Excluded Plan" by any person who is a fiduciary with respect to the assets of such Excluded Plan. For those purposes, an Excluded Plan is a Plan sponsored by any member of the Restricted Group. Exemptive relief may also be provided for the acquisition, holding and disposition of Certificates by Plans if the fiduciary or its affiliate is the obligor with respect to 5% or less of the fair market value of the Loans in the trust fund provided that: (i) the Plan is not an Excluded Plan, (ii) each Plan's investment in each class of Certificates does not exceed 25% of the outstanding Certificates in the class, (iii) after the Plan's acquisition of the Certificates, no more than 25% of the assets over which the fiduciary has investment authority are invested in Certificates of a trust containing assets which are sold or serviced by the same entity and (iv) in the case of initial issuance (but not secondary market transactions), at least 50% of each class of Certificates and at least 50% of the aggregate interests in the trust fund are acquired by persons independent of the Restricted Group. ERISA CONSIDERATIONS RELATING TO NOTES Under the Plan Asset Regulations, the Assets of the trust fund would be treated as "plan assets" of a Plan for the purposes of ERISA and the Code only if the Plan acquires an "equity interest" in the trust fund and none of the exceptions contained in the Plan Asset Regulations is applicable. An equity interest is defined under the Plan Asset Regulations as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Assuming that the Notes are treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulations, then such Notes will be eligible for purchase by Plans. However, without regard to whether the Notes are treated as an "equity interest" for such purposes, the acquisition or holding of Notes by or on behalf of a Plan could be considered to give rise to a prohibited transaction if the trust fund or any of its affiliates is or becomes a party in interest or disqualified person with respect to such Plan, or in the event that a Note is purchased in the secondary market and such purchase constitutes a sale or exchange between a Plan and a party in interest or disqualified person with respect to such Plan. There can be no assurance that the trust fund or any of its affiliates will not be or become a party in interest or a disqualified person with respect to a Plan that acquires Notes. The Amendment to the Exemption permits trust funds which are grantor trusts, owner-trusts, REMICs or FASITs to issue Notes, as well as Certificates, provided a legal opinion is received to the effect that the noteholders have a perfected security interest in the trust fund's Assets. The exemptive relief provided under the Exemption for any prohibited transactions which could be caused as a result of the operation, management or servicing of the trust fund and its Assets would not be necessary with respect to Notes with no substantial equity features which are issued as obligations of the trust fund. However, effective for the acquisition, holding or transfer of Notes between a Plan and a party in interest which occurs on or after November 13, 2000, the Exemption would provide prohibited transaction exemptive relief, provided that the same conditions of the Exemption described above relating to Certificates are met with respect to the Notes. The same limitations of such exemptive relief relating to acquisitions of Certificates by fiduciaries with respect to Excluded Plans would also be applicable to the Notes as described herein in "LIMITATIONS ON SCOPE OF THE EXEMPTION." In the event that the Exemption is not applicable to the Notes, one or more other prohibited transactions exemptions may be available to Plans purchasing or transferring the Notes depending in part upon the type of Plan fiduciary making the decision to acquire the Notes and the circumstances under which such decision is made. These exemptions include, but are not limited to, Prohibited Transaction Class Exemption 90-1 (regarding investments by insurance company pooled separate accounts), Prohibited Transaction Class Exemption 91-38 (regarding investments by bank collective investments funds), PTCE 84-14 (regarding transactions effected by "qualified professional asset managers"), PTCE 95-60 (regarding investments by insurance company general accounts) and PTCE 96-23 (regarding transactions effected by "in-house asset managers") (collectively, the "Investor-Based Exemptions"). However, even if the conditions specified in these Investor-Based Exemptions are met, the scope of the relief provided under such Exemptions might or might not cover all acts which might be construed as prohibited transactions. EACH PROSPECTUS SUPPLEMENT WILL CONTAIN INFORMATION CONCERNING CONSIDERATIONS RELATING TO ERISA AND THE CODE THAT ARE APPLICABLE TO THE RELATED SECURITIES. BEFORE PURCHASING SECURITIES IN RELIANCE ON PTCE 83-1, THE EXEMPTION, THE INVESTOR-BASED EMEMPTIONS OR ANY OTHER EXEMPTION, A FIDUCIARY OF A PLAN SHOULD ITSELF CONFIRM THAT REQUIREMENTS SET FORTH IN SUCH EXEMPTION WOULD BE SATISFIED. ANY PLAN INVESTOR WHO PROPOSES TO USE "PLAN ASSETS" OF ANY PLAN TO PURCHASE SECURITIES OF ANY SERIES OR CLASS SHOULD CONSULT WITH ITS COUNSEL WITH RESPECT TO THE POTENTIAL CONSEQUENCES UNDER ERISA AND SECTION 4975 OF THE CODE OF THE ACQUISITION AND OWNERSHIP OF SUCH SECURITIES. Governmental plans and church plans as defined in ERISA are not subject to ERISA or Code Section 4975, although they may elect to be qualified under Section 401(a) of the Code and exempt from taxation under Section 501(a) of the Code and would then be subject to the prohibited transaction rules set forth in Section 503 of the Code. In addition, governmental plans may be subject to federal, state and local laws which are to a material extent similar to the provisions of ERISA or a Code Section 4975 ("Similar Law"). A fiduciary of a governmental plan should make its own determination as to the propriety of an investment in Securities under applicable fiduciary or other investment standards and the need for the availability of any exemptive relief under any Similar Law. LEGAL INVESTMENT The prospectus supplement will specify which classes of the Notes or Certificates, as applicable, if any, will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"). Generally, only classes of Offered Notes or Offered Certificates, as applicable that (1) are rated in one of the two highest rating categories by one or more rating agencies and (2) are part of a series representing interests in, or secured by, a trust fund consisting of loans secured by first liens on real property and originated by particular types of originators specified in SMMEA, will be "mortgage related securities" for purposes of SMMEA. Those classes of Offered Notes or Offered Certificates, as applicable, qualifying as "mortgage related securities" 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 of the United States constitute legal investments for those entities. Pursuant to SMMEA, a number of states enacted legislation, on or before the October 3, 1991 cut-off for those enactments, limiting to varying extents the ability of some entities (in particular, insurance companies) to invest in mortgage related securities secured by liens on residential, or mixed residential and commercial, properties, in most cases by requiring the affected investors to rely solely upon existing state law, and not SMMEA. SMMEA also amended the legal investment authority of federally-chartered depository institutions as follows: federal savings and loan associations and federal savings banks may invest in, sell or otherwise deal in "mortgage related securities" without limitation as to the percentage of their assets represented thereby, federal credit unions may invest in these securities, and national banks may purchase these securities for their own account without regard to the limitations generally applicable to investment securities set forth in 12 U.S.C. ss.24 (Seventh), subject in each case to regulations that the applicable federal regulatory authority may prescribe. In this connection, the Office of the Comptroller of the Currency (the "OCC") has amended 12 C.F.R. Part 1 to authorize national banks to purchase and sell for their own account, without limitation as to a percentage of the bank's capital and surplus (but subject to compliance with general standards concerning "safety and soundness" and retention of credit information in 12 C.F.R. ss.1.5), some "Type IV securities," defined in 12 C.F.R. ss.1.2(l) to include some "residential mortgage related securities." As so defined, "residential mortgage-related security" means, in relevant part, "mortgage related security" within the meaning of SMMEA. The National Credit Union Administration ("NCUA") has adopted rules, codified at 12 C.F.R. Part 703, which permit federal credit unions to invest in "mortgage related securities" under some limited circumstances, other than stripped mortgage related securities, residual interests in mortgage related securities, and commercial mortgage related securities, unless the credit union has obtained written approval from the NCUA to participate in the "investment pilot program" described in 12 C.F.R. ss.703.140. Thrift institutions that are subject to the jurisdiction of the Office of Thrift Supervision (the "OTS") should consider the OTS' Thrift Bulletin 13a (December 1, 1998), "Management of Interest Rate Risk, Investment Securities, and Derivatives Activities," before investing in any of the Offered Notes or Offered Certificates, as applicable. All depository institutions considering an investment in the Certificates should review the "Supervisory Policy Statement on Investment Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of the Federal Financial Institutions Examination Council ("FFIEC"), which has been adopted by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the OCC and the OTS, effective May 26, 1998, and by the NCUA, effective October 1, 1998. The 1998 Policy Statement sets forth general guidelines which depository institutions must follow in managing risks (including market, credit, liquidity, operational (transaction), and legal risks) applicable to all securities (including mortgage pass-through securities and mortgage-derivative products) used for investment purposes. If specified in the prospectus supplement, other classes of Offered Notes or Offered Certificates, as applicable, offered pursuant to this prospectus will not constitute "mortgage related securities" under SMMEA. The appropriate characterization of those classes under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase these Offered Notes or Offered Certificates, as applicable, may be subject to significant interpretive uncertainties. Institutions whose investment activities are subject to regulation by federal or state authorities should review rules, policies and guidelines adopted from time to time by those authorities before purchasing any Offered Notes or Offered Certificates, as applicable, as some classes or subclasses may be deemed unsuitable investments, or may otherwise be restricted, under those rules, policies or guidelines (in some instances irrespective of SMMEA). The foregoing does not take into consideration the applicability of statutes, rules, regulations, orders, guidelines or agreements generally governing investments made by a particular investor, including, but not limited to, "prudent investor" provisions, percentage-of-assets limits provisions that may restrict or prohibit investment in securities that are not "interest bearing" or "income paying," and with regard to any Offered Notes or Offered Certificates, as applicable, issued in book-entry form, provisions that may restrict or prohibit investments in securities that are issued in book-entry form. Except as to the status of some classes of Offered Notes or Offered Certificates, as applicable, as "mortgage related securities," no representation is made as to the proper characterization of the Offered Notes or Offered Certificates, as applicable, for legal investment, financial institution regulatory, or other purposes, or as to the ability of particular investors to purchase any Offered Notes or Offered Certificates, as applicable, under applicable legal investment restrictions. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Offered Notes or Offered Certificates, as applicable) may adversely affect the liquidity of the Offered Notes or Offered Certificates, as applicable. Accordingly, all investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities should consult with their own legal advisors in determining whether and to what extent the Offered Notes or Offered Certificates, as applicable, of any class constitute legal investments for them or are subject to investment, capital or other restrictions, and, if applicable, whether SMMEA has been overridden in any jurisdiction relevant to that investor. METHODS OF DISTRIBUTION The Notes or Certificates, as applicable, offered by this prospectus and by the supplements to this prospectus will be offered in series. The distribution of the Notes or Certificates, as applicable, may be effected from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices to be determined at the time of sale or at the time of commitment therefor. If specified in the prospectus supplement, the Notes or Certificates, as applicable, will be distributed in a firm commitment underwriting, subject to the terms and conditions of the underwriting agreement, by Deutsche Banc Securities Inc. ("DBSI") acting as underwriter with other underwriters, if any, named in the underwriting agreement. In that event, the prospectus supplement may also specify that the underwriters will not be obligated to pay for any Notes or Certificates, as applicable, agreed to be purchased by purchasers pursuant to purchase agreements acceptable to the depositor. In connection with the sale of the Notes or Certificates, as applicable, underwriters may receive compensation from the depositor or from purchasers of the Notes or Certificates, as applicable, in the form of discounts, concessions or commissions. The prospectus supplement will describe any compensation paid by the depositor. Alternatively, the prospectus supplement may specify that the Notes or Certificates, as applicable, will be distributed by DBSI acting as agent or in some cases as principal with respect to Notes or Certificates, as applicable, that it has previously purchased or agreed to purchase. If DBSI acts as agent in the sale of Notes or Certificates, as applicable, DBSI will receive a selling commission for each series of Notes or Certificates, as applicable, depending on market conditions, expressed as a percentage of the total principal balance of the related mortgage loans as of the Cut-off Date. The exact percentage for each series of Notes or Certificates, as applicable, will be disclosed in the prospectus supplement. To the extent that DBSI elects to purchase Notes or Certificates, as applicable, as principal, DBSI may realize losses or profits based upon the difference between its purchase price and the sales price. The prospectus supplement for any series offered other than through underwriters will contain information regarding the nature of that offering and any agreements to be entered into between the depositor and purchasers of Notes or Certificates, as applicable, of that series. The depositor will indemnify DBSI and any underwriters against particular civil liabilities, including liabilities under the Securities Act of 1933, or will contribute to payments DBSI and any underwriters may be required to make in respect of these civil liabilities. In the ordinary course of business, DBSI and the depositor may engage in various securities and financing transactions, including repurchase agreements to provide interim financing of the depositor's mortgage loans pending the sale of those mortgage loans or interests in those mortgage loans, including the Notes or Certificates, as applicable. DBSI performs management services for the depositor. The depositor anticipates that the Notes or Certificates, as applicable, will be sold primarily to institutional investors. Purchasers of Notes or Certificates, as applicable, including dealers, may, depending on the facts and circumstances of those purchases, be deemed to be "underwriters" within the meaning of the Securities Act of 1933 in connection with reoffers and sales by them of Notes or Certificates, as applicable, securityholders should consult with their legal advisors in this regard before any reoffer or sale of Notes or Certificates, as applicable. As to each series of Notes or Certificates, as applicable, only those classes rated in one of the four highest rating categories by any rating agency will be offered by this prospectus. Any lower rated or unrated class may be initially retained by the depositor, and may be sold by the depositor at any time to one or more institutional investors. ADDITIONAL INFORMATION The Depositor has filed with the Commission a registration statement on Form S-3 under the Securities Act of 1933, as amended, with respect to the Securities (the "Registration Statement"). This prospectus, which forms a part of the Registration Statement, omits some of the information contained in the Registration Statement pursuant to the rules and regulations of the Commission. The Registration Statement and the exhibits to the Registration Statement can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at Regional Offices in the following locations: o Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and o New York Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of these materials can also be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains a site on the world wide web at "http://www.sec.gov" at which users can view and download copies of reports, proxy and information statements and other information filed electronically through the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system. The Depositor has filed the Registration Statement, including all exhibits to the Registration Statement, through the EDGAR system and therefore these materials should be available by logging onto the Commission's web site. The Commission maintains computer terminals providing access to the EDGAR system at each of the offices referred to above. Copies of the most recent Fannie Mae prospectus for Fannie Mae certificates and Fannie Mae's annual report and quarterly financial statements as well as other financial information are available from the Director of Investor Relations of Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016 (202-752-7115). The Depositor did not participate in the preparation of Fannie Mae's prospectus or its annual or quarterly reports or other financial information and, accordingly, makes no representation as to the accuracy or completeness of the information in those documents. Copies of the most recent Offering Circular for Freddie Mac certificates as well as Freddie Mac's most recent Information Statement and Information Statement supplement and any quarterly report made available by Freddie Mac may be obtained by writing or calling the Investor Inquiry Department of Freddie Mac at 8200 Jones Branch Drive, McLean, Virginia 22102 (outside Washington, D.C. metropolitan area, telephone 800-336-3672; within Washington, D.C. metropolitan area, telephone 703-759-8160). The Depositor did not participate in the preparation of Freddie Mac's Offering Circular, Information Statement or any supplement to the Information Statement or any quarterly report of the Information Statement and, accordingly, makes no representation as to the accuracy or completeness of the information in those documents. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE All documents subsequently filed by or on behalf of the trust fund referred to in the prospectus supplement with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this prospectus and prior to the termination of any offering of the Notes or Certificates, as applicable, issued by that trust fund will be deemed to be incorporated by reference in this prospectus and to be a part of this prospectus from the date of the filing of those documents. Any statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed to be modified or superseded for all purposes of this prospectus to the extent that a statement contained in this prospectus (or in the prospectus supplement) or in any other subsequently filed document that also is or is deemed to be incorporated by reference modifies or replaces that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. The Trustee on behalf of any trust fund will provide without charge to each person to whom this prospectus is delivered, upon request, a copy of any or all of the documents referred to above that have been or may be incorporated by reference in this prospectus (not including exhibits to the information that is incorporated by reference unless the exhibits are specifically incorporated by reference into the information that this prospectus incorporates). Requests for information should be directed to the corporate trust office of the Trustee specified in the prospectus supplement. LEGAL MATTERS Certain legal matters, including the federal income tax consequences to securityholders of an investment in the Notes or Certificates, as applicable, of a series, will be passed upon for the depositor by Stroock & Stroock & Lavan LLP. FINANCIAL INFORMATION A new trust fund will be formed for each series of Notes or Certificates, as applicable, and no trust fund will engage in any business activities or have any assets or obligations before the issuance of the related series of Notes or Certificates, as applicable. Accordingly, financial statements for a trust fund will generally not be included in this prospectus or in the prospectus supplement. RATING As a condition to the issuance of any class of Offered Notes or Offered Certificates, as applicable, they must not be rated lower than investment grade; that is, they must be rated in one of the four highest rating categories, by a rating agency. Ratings on mortgage pass-through certificates and mortgage-backed notes address the likelihood of receipt by securityholders of all distributions on the underlying mortgage loans. These ratings address the structural, legal and issuer-related aspects associated with the Notes or Certificates, as applicable, the nature of the underlying assets and the credit quality of the guarantor, if any. Ratings on mortgage pass-through certificates, mortgage-backed notes and other asset backed securities do not represent any assessment of the likelihood of principal prepayments by borrowers or of the degree by which prepayments might differ from those originally anticipated. As a result, securityholders 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. INDEX OF DEFINED TERMS 1998 Policy Statement........................................................134 Accrual Period................................................................15 Accrual Securities............................................................22 Accrued Security Interest.....................................................25 Adjustable Rate Assets.........................................................2 Agency Securities..............................................................2 Agreemen......................................................................36 ARM Loans......................................................................5 Asset Conservation Act........................................................74 Asset Group...................................................................22 Asset Seller...................................................................2 Assets.........................................................................2 Available Distribution Amount.................................................23 Balloon Payment Assets.........................................................3 Bankruptcy Code...............................................................72 Beneficial Owner..............................................................31 Bi-weekly Assets...............................................................3 Book-Entry Certificates.......................................................22 Book-Entry Notes............................. ............................... 22 borrower......................................................................63 Buy Down Assets................................................................2 Buydown Funds.................................................................83 Buydown Mortgage Loans........................................................19 Buydown Period................................................................19 Capitalized Interest Account..................................................13 Cash Flow Agreement...........................................................14 Clearstream Luxembourg........................................................31 CERCLA........................................................................73 Certificates..................................................................21 Charter Act....................................................................9 Code..........................................................................78 Collection Account............................................................40 Commission.....................................................................6 contract borrower.............................................................65 contract lender...............................................................65 Convertible Assets.............................................................3 Cooperative...................................................................64 Cooperative Corporation.......................................................32 Cooperative Loans.............................................................64 Cooperatives...................................................................4 Covered Trust.................................................................60 CPR...........................................................................17 credit support................................................................14 Crime Control Act.............................................................78 Cut-off Date...................................................................5 DBSI.........................................................................135 Debt Securities...............................................................79 defective obligation..........................................................81 Definitive Certificates.......................................................22 Definitive Notes..............................................................22 Determination Date............................................................23 Disqualified Holder..........................................................110 Disqualified Organization.....................................................98 Distribution Date.............................................................15 DOL..........................................................................128 DTC...........................................................................31 Due Period....................................................................23 EDGAR........................................................................136 Eligible Corporation.........................................................110 ERISA........................................................................127 Euroclear.....................................................................31 Euroclear Operator............................................................32 European Depositaries.........................................................33 excess servicing.............................................................115 Exchange Act..................................................................31 Excluded Plan................................................................130 Exemption....................................................................128 Fannie Mae.....................................................................2 FASIT.........................................................................79 FASIT Ownership Security.....................................................106 FASIT Provisions..............................................................79 FASIT Regular Securities.....................................................106 FASIT Securities..............................................................79 FDIC..........................................................................40 FFIEC........................................................................134 FHA............................................................................5 Financial Intermediary........................................................33 Fitch........................................................................129 Freddie Mac....................................................................2 Freddie Mac Act...............................................................10 Freddie Mac Certificate Group.................................................10 Garn-St. Germain Act..........................................................75 GEM Assets.....................................................................3 Ginnie Mae.....................................................................2 GPM Assets.....................................................................3 Grantor Trust Fund............................................................79 Grantor Trust Securities......................................................79 Home Equity Loans..............................................................4 Housing Act....................................................................7 HUD...........................................................................48 Increasing Payment Asset.......................................................3 Indirect Participants.........................................................31 Insurance Proceeds............................................................23 Interest Rate.................................................................24 Interest Reduction Assets......................................................3 land sale contract............................................................65 Land Sale Contracts............................................................4 Level Payment Assets...........................................................2 Liquidation Proceeds..........................................................23 Loan-to-Value Ratio............................................................5 Lock-out Date..................................................................6 Lock-out Period................................................................6 Mark to Market Regulations...................................................101 Mortgage Securities............................................................2 Mortgaged Properties...........................................................4 Mortgages......................................................................4 NCUA.........................................................................134 new partnership..............................................................123 New Regulations..............................................................104 Non-Equity Securities........................................................130 Non-Pro Rata Security.........................................................85 Nonrecoverable Advance........................................................27 Non-U.S. Person..............................................................104 Notes.........................................................................21 OCC..........................................................................133 Offered Securities............................................................22 OID Regulations...........................................................80, 84 old partnership..............................................................123 Participants..................................................................31 Parties in Interest..........................................................127 Partnership Securities........................................................79 Partnership Trust Fund........................................................79 Pass-Through Entity...........................................................99 PCBs..........................................................................73 Permitted Investments.........................................................40 Plans........................................................................127 pooling and servicing agreement...............................................36 Pre-Funded Amount.............................................................13 Pre-Funding Account...........................................................13 Pre-Funding Limit............................................................132 Pre-Funding Period............................................................13 prepayment....................................................................17 Prepayment Assumption.........................................................86 PTCE.........................................................................131 Purchase Price................................................................38 RCRA..........................................................................74 Record Date...................................................................23 Refinance Loans................................................................5 Registration Statement.......................................................136 Regular Securities............................................................80 Regular Securityholder........................................................84 Related Proceeds..............................................................27 Relevant Depositary...........................................................33 Relief Act....................................................................78 REMIC.........................................................................79 REMIC Pool....................................................................79 REMIC Regulations.............................................................80 REMIC Securities..............................................................36 REO Property..................................................................28 Residual Securities...........................................................80 Restricted Group.............................................................129 Retained Interest.............................................................50 Revolving Credit Line Loans....................................................7 RICO..........................................................................78 Rules.........................................................................33 S&P..........................................................................129 SBJPA of 1996.................................................................83 secured-creditor exemption....................................................73 Securities....................................................................21 Security Balance..............................................................25 Senior Securities.............................................................22 Servicemen's Readjustment Act.................................................13 Servicing Standard............................................................44 Single Family Property.........................................................4 SMMEA........................................................................133 SPA...........................................................................17 Special servicer..............................................................52 Standard Securities..........................................................112 Startup Day...................................................................80 Step-up Rate Assets............................................................3 Strip Securities..............................................................22 Stripped Agency Securities....................................................11 Stripped Securities..........................................................112 Subordinate Securities........................................................22 Subsequent Assets.............................................................13 Superliens....................................................................73 super-premium.................................................................85 Taxable Mortgage Pools........................................................80 Terms and Conditions..........................................................32 thrift institutions...........................................................97 Tiered REMICs.................................................................84 Title V.......................................................................76 Title VIII....................................................................77 U.S. Person..................................................................100 UCC...........................................................................31 UST...........................................................................74 VA ............................................................................5 VA Guaranty Policy............................................................49 Value..........................................................................5 Warranting Party..............................................................38 Yield Considerations..........................................................25 The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, [ ], 20[ ] PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED [ ], 20[ ]) [ ] CREDIT CARD MASTER NOTE TRUST [ ]-[ ] ACE SECURITIES CORP. Transferor [ ] Servicer CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The notes will represent interests in the trust fund only and will not represent interests in or obligations of any other entity. This prospectus supplement may be used to offer and sell the notes only if accompanied by the prospectus. The trust will issue the following classes of asset backed notes: CLASS A NOTES CLASS B NOTES CLASS C NOTES PRINCIPAL AMOUNT: $ $ $ INTEREST RATE: [Libor plus] [ ]% [Libor plus] [ ]% [Libor plus] [ ]% per year per year per year INTEREST PAYMENT Monthly on the [ ], Monthly on the [ ], Monthly on the [ ], DATES: beginning, [ ], beginning, [ ], beginning, [ ], 20[ ] 20[ ] 20[ ] EXPECTED PRINCIPAL PAYMENT DATE: [ ], 20[ ] [ ], 20[ ] [ ], 20[ ] LEGAL MATURITY DATE: [ ], 20[ ] [ ], 20[ ] [ ], 20[ ] PRICE TO PUBLIC: $ (or %) $ (or %) $ (or %) UNDERWRITING DISCOUNT: $ (or %) $ (or %) $ (or %) PROCEEDS TO ISSUER: $ (or %) $ (or %) $ (or %) The Class B notes are subordinated to the Class A notes. The Class C notes are subordinated to the Class A and Class B notes. We expect to issue your series of notes on or about, [ ] 20[ ]. We will deliver your series of notes in book-entry form. The notes are obligations of [ ] Credit Card Master Note Trust [ ]-[ ] only and are not obligations of ACE Backed Securities Corp., [ ], [ ] or any other person. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE NOTES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNDERWRITER: DEUTSCHE BANK ALEX. BROWN The date of this prospectus supplement is [ ], 20[ ] IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the securities offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your notes, and (2) this prospectus supplement, which describes the specific terms of your notes. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the notes in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the date stated on their respective covers. ____________________ Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the notes and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the notes will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. ____________________ We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. TABLE OF CONTENTS PAGE Transaction Summary............................................................. Summary Of Terms................................................................ Risk Factors.................................................................... [ ]'s Credit Card Portfolio..................................................... The Trust Portfolio............................................................. Maturity Considerations......................................................... The Originator.................................................................. The Servicer.................................................................... The Transferor.................................................................. Description Of Series Provisions................................................ Reports To Noteholders.......................................................... Erisa Considerations............................................................ Underwriting.................................................................... Legal Matters................................................................... Index Of Terms For Prospectus Supplement........................................ Annex I Other Series Issued And Outstanding.................................... PROSPECTUS PAGE Risk Factors.................................................................... The Trusts...................................................................... Trust Assets.................................................................... Series Enhancement.............................................................. Servicing of Receivables........................................................ Certain Matters Regarding the Servicer.......................................... Description of the Notes........................................................ Description of the Certificates................................................. Certain Information Regarding the Securities.................................... Description of the Trust Agreements or Pooling and Servicing Agreements......... Certain Legal Aspects of the Receivables........................................ The Depositor................................................................... Use of Proceeds................................................................. Material Federal Income Tax Consequences........................................ Owner Trusts.................................................................... Grantor Trusts.................................................................. Master Trust.................................................................... Certain State and Local Tax Consequences........................................ ERISA Considerations............................................................ Plan of Distribution............................................................ Legal Matters................................................................... Index of Defined Terms.......................................................... Annex I; Global Clearance, Settlement and Tax Documentation Procedures.......... TRANSACTION SUMMARY Trust: [ ] Credit Card Master Note Trust [ ]-[ ] Transferor: ACE Securities Corp. Originator: [ ] Servicer: [ ] Indenture Trustee: [ ] Owner Trustee: [ ] Closing Date: [ ] Clearance and Settlement: DTC/Clearstream Luxembourg/Euroclear Primary Trust Assets: Receivables originated in [MasterCard(R) and VISA(R)] accounts Servicing Fee Rate: [ ] %
CLASS A NOTES CLASS B NOTES CLASS C NOTES Anticipated Ratings (Moody's/Standard & Poor's/Fitch IBCA):* Aaa/AAA/AAA A2/A/A Baa2/BBB/BBB Credit Enhancement: subordination of subordination of spread account Class B and Class C Class C Interest Rate: [One-Month LIBOR] [One-Month LIBOR] [One-Month LIBOR] plus [ ]% per year plus [ ]% per year plus [ ]% per year Interest Accrual Method: [actual/360] [actual/360] [actual/360] Interest Payment Dates: monthly ([ th]) monthly ([ th]) monthly ([ th]) [Interest Rate Index [2 London business [2 London business [2 London business Reset Date:] days before each days before each days before each interest payment interest payment interest payment date] date] date] First Interest Payment Date: [ ], 20[ ] [ ], 20[ ] [ ], 20[ ] Expected Principal Payment Date: [ ], 20[ ] [ ], 20[ ] [ ], 20[ ] Commencement of Accumulation Period (subject to adjustment): [ ], 20[ ] [ ], 20[ ] [ ], 20[ ] Legal Final Maturity Date: [ ], 20[ ] [ ], 20[ ] [ ], 20[ ] [ ], 20[ ] [ ], 20[ ] [ ], 20[ ]
_______________ * It is a condition to issuance that one of these ratings be obtained. SUMMARY OF TERMS o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. o WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. THE ISSUER The notes will be issued by [ ] Credit Card Master Note Trust [ ]-[ ], a Delaware statutory business trust, pursuant to an indenture supplement to an indenture, each between the trust and the indenture trustee. The indenture trustee is [ ]. THE SERIES [ ]-[ ] NOTES INTEREST The Class A notes will bear interest at [one-month LIBOR as determined each month] plus [ ]% per annum. The Class B notes will bear interest at [one-month LIBOR as determined each month] plus [ ]% per annum. The Class C notes will bear interest at [one-month LIBOR as determined each month] plus [ ]% per annum. For each class of the Series [ ]-[ ] notes, interest will be calculated as follows: o Principal balance, multiplied by o Number of days in prior monthly interest period, multiplied by o applicable interest rate, divided by o 360. Each interest period begins on and includes a distribution date and ends on but excludes the next distribution date. However, the first interest period will begin on and include the closing date. Interest on the Series [ ]-[ ] notes will be paid on each distribution date, which will be [ ] and the [ th] day of each following month if the [ th] is a business day and, if not, the following business day. SEE "DESCRIPTION OF SERIES PROVISIONS -- INTEREST PAYMENTS" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF HOW AND WHEN LIBOR WILL BE DETERMINED. PRINCIPAL Principal of the Class A notes, the Class B notes and the Class C notes is expected to be paid in full on the [ ] distribution date. However: o no principal will be paid on the Class B notes until the Class A notes are paid in full; and o no principal will be paid on the Class C notes until the Class A and Class B notes are paid in full. We are scheduled to begin accumulating collections of principal receivables starting on, [ ] for payment to the Series [ ]-[ ] noteholders on the expected principal payment date, but we may begin accumulating at a later date. Principal of the Series [ ]-[ ] notes may be paid earlier or later than the expected principal payment date. You will not be entitled to any premium for early or late payment of principal. If specified adverse events known as pay out events occur, principal may be paid earlier than expected. If collections of the credit card receivables are less than expected or are collected more slowly than expected, then principal payments may be delayed. If the Series [ ]-[ ] notes are not paid on the expected principal payment date, collections of principal receivables will continue to be used to pay principal on the Series [ ]-[ ] notes until the notes are paid or until [..], whichever occurs first. [ ] is the legal maturity date for Series [ ]-[ ] . FOR MORE INFORMATION ABOUT PRINCIPAL PAYMENTS, SEE "MATURITY CONSIDERATIONS," "DESCRIPTION OF SERIES PROVISIONS -- PRINCIPAL PAYMENTS" AND "-- ALLOCATION PERCENTAGES" IN THIS PROSPECTUS SUPPLEMENT. CREDIT ENHANCEMENT SUBORDINATION Credit enhancement for the Class A notes is provided by the subordination of the Class B notes and the Class C notes. Credit enhancement for the Class B notes is provided by the subordination of the Class C notes. SPREAD ACCOUNT A spread account will provide credit enhancement for the Class C notes. The spread account initially will not be funded. After the Series [ ]-[ ] notes are issued, deposits into the spread account will be made each month from available finance charge collections and, if necessary and available, excess finance charge collections from other series in group one up to the required spread account amount as described in this prospectus supplement under "Description of Series Provisions -- Spread Account." The spread account will be used to make payments on the Class C notes if collections of receivables allocated to the Class C notes are insufficient to make required payments. Credit enhancement for your series is for your series' benefit only, and you are not entitled to the benefits of credit enhancement available to other series. FOR MORE INFORMATION ABOUT CREDIT ENHANCEMENT, SEE "DESCRIPTION OF SERIES PROVISIONS -- REALLOCATED PRINCIPAL COLLECTIONS," "-- APPLICATION OF COLLECTIONS" AND "-- DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS" IN THIS PROSPECTUS SUPPLEMENT. EVENTS OF DEFAULT The Series [ ]-[ ] notes are subject to specified events of default described under "Description of Series Provisions -- Events of Default" in this prospectus supplement and "The Indenture -- Events of Default; Rights upon Event of Default" in the accompanying prospectus. These include, among other things, the failure to pay interest for [ ] days after it is due or to pay principal on the legal maturity date. In case any event of default occurs and continues with respect to the Series [ ]-[ ] notes, the indenture trustee or holders of more than 50% of the then-outstanding principal balance of the Series [ ]-[ ] notes may declare the principal amount of the notes to be immediately due and payable. That declaration may, be rescinded by holders of more than 50% of the then-outstanding principal balance of the Series [ ]-[ ] notes. After an event of default and the acceleration of the Series [ ]-[ ] notes, funds on deposit in the collection account, the principal funding account, the reserve account and, with respect to the Class C notes, the spread account will be applied to pay principal of and interest on the Series [ ]-[ ] notes to the extent permitted by law. Principal collections and finance charge collections allocated to Series [ ]-[ ] will be applied to make monthly principal and interest payments on the Series [ ]-[ ] notes until the earlier of the date those notes are paid in full or the legal final maturity of those notes. If the Series [ ]-[ ] notes are accelerated or the issuer fails to pay the principal of the Series [ ]-[ ] notes on the legal maturity, once conditions described in the prospectus under "The Indenture -- Events of Default; Rights upon Event of Default" are satisfied, the indenture trustee may, if legally permitted, or will at the direction of holders of at least 66 2/3% of the principal amount of each class of Series [ ]-[ ] notes: o institute proceedings in its own name for the collection of all amounts then payable on the Series [ ]-[ ] notes; o take any other appropriate action to protect and enforce the rights and remedies of the indenture trustee and the Series [ ]-[ ] noteholders; or o foreclose on a portion of the trust's assets by causing the trust to sell an interest in the assets of the trust by issuing a foreclosure certificate to the holders of the notes or to a third party selected by the indenture trustee or by holders of more than 50% of the then-outstanding principal balance of the Series [ ]-[ ] notes. A foreclosure certificate is an investor certificate issued by the trust representing ownership of the interest in the assets of the trust securing the Series [ ]-[ ] notes. A foreclosure certificate held by a noteholder or a third party will be subject to restrictions on transfer described under "The Indenture - -- Events of Default; Rights upon Event of Default" in the accompanying prospectus. OTHER INTERESTS IN THE TRUST OTHER SERIES OF NOTES The trust will issue other series of notes secured by the assets of the trust from time to time in the future. A summary of the outstanding series is in "Annex I: Other Series Issued and Outstanding" included at the end of this prospectus supplement. The issuance of future series will occur without prior review or consent by you or any other noteholder. THE TRANSFEROR INTEREST The interest in the trust not securing your series or any other series is the transferor interest. The transferor interest is owned by the transferor. The transferor may, however, sell all or a portion of its interest in the transferor interest. The transferor interest does not provide credit enhancement for your series or any other series. THE RECEIVABLES The primary assets of the trust are receivables in [MasterCard(R) and VISA(R)]* revolving credit card accounts. The receivables consist of principal receivables and finance charge receivables. _______________ * MasterCard(R) and VISA(R) are federally registered service marks of MasterCardInternational Inc. and VISA U.S.A., Inc., respectively. The following information is as of [ ]: o Receivables in the trust: $ [ ] o Accounts designated to the trust: [] For more information, see "The Trust Portfolio" in this prospectus supplement. ALLOCATIONS OF COLLECTIONS The servicer will collect payments on the receivables and will deposit those collections in an account. It will keep track of those collections that are finance charge receivables and those that are principal receivables. Each month, the servicer will allocate collections received among: o your series; o other series outstanding; and o the transferor interest in the trust. The amount allocated to your series will be determined based mainly upon the size of the invested amount of your series compared to the total amount of principal receivables in the trust. At the time of issuance of the Series [ ]-[ ] notes, the invested amount for Series [ ]-[ ] will be $[ ]. You are entitled to receive payments of interest and principal only from collections of receivables and other trust assets allocated to your series. If the invested amount of your series declines, amounts allocated and available for payment to your series and to you may be reduced. For a description of the allocation calculations and the events which may lead to these reductions, see "Description of Series Provisions -- Allocation Percentages" and "-- Reallocated Principal Collections" in this prospectus supplement. APPLICATION OF COLLECTIONS FINANCE CHARGE COLLECTIONS The trust will apply your series' share of collections of finance charge receivables each month in the following order of priority: o to pay interest on the Class A notes; o to pay interest on the Class B notes; o to pay the servicing fee; o to pay interest on the Class C notes; o to cover your series' allocation of defaulted receivables; o to cover reductions in your series' invested amount resulting from investor charge-offs allocated to your series and from reallocated principal collections, in each case that have not been reimbursed; o to fund, in limited circumstances, a reserve account to cover interest payment shortfalls for Class A and Class B during the accumulation period; o to make a deposit, if needed, to the spread account for Class C up to the required spread account amount; and o to other series in group one or to the holders of the transferor certificates. FOR A MORE DETAILED DESCRIPTION OF THESE APPLICATIONS, SEE "DESCRIPTION OF SERIES PROVISIONS -- APPLICATION OF COLLECTIONS" IN THIS PROSPECTUS SUPPLEMENT. PRINCIPAL COLLECTIONS The trust will apply your series' share of principal collections each month as follows: o During the revolving period, no principal will be paid to you or accumulated in a trust account. Instead, your series' share of principal collections will be treated as shared principal collections and may be available to make principal payments for other series in group one. o The accumulation period is scheduled to begin on, [ ], but may begin at a later date. During the accumulation period, your series' share of principal collections will be deposited in a trust account, up to a controlled deposit amount. On the expected principal payment date, amounts on deposit in that account will be paid first to the Class A noteholders, then to the Class B noteholders and then to the Class C noteholders. o If a pay out event (described below) that applies to Series [ ]-[ ] or to all series occurs, the early amortization period will begin. During the early amortization period, your series' share of principal collections will be paid first to the Class A noteholders, then to the Class B noteholders and then to the Class C noteholders. o During any of the above periods, principal collections allocated to your series, may be reallocated, if necessary, to make required interest payments on the Class A notes and the Class B notes not made from available finance charge collections, excess finance charge collections available from other series in group one or funds in the reserve account. However, for any monthly period, the sum of these reallocated principal collections cannot exceed [ ]% of the initial invested amount of your series, as reduced due to the writing off of receivables or for previously reallocated principal collections, in each case that have not been reimbursed. o Any remaining principal collections will first be made available to other series in group one and then be paid to the holders of the transferor certificates or deposited in the special funding account. FOR A MORE DETAILED DESCRIPTION OF THESE APPLICATIONS, SEE "DESCRIPTION OF SERIES PROVISIONS -- APPLICATION OF COLLECTIONS" IN THIS PROSPECTUS SUPPLEMENT. PAY OUT EVENTS The documents under which the Series [ ]-[ ] notes will be issued include a list of adverse events known as pay out events. If a pay out event that applies to Series [ ]-[ ] or to all series occurs, the trust will use collections of principal receivables allocated to Series [ ]-[ ] each month to pay principal on the Series [ ]-[ ] notes. Pay out events may occur if the transferor fails to make required payments or deposits, violates other covenants and agreements or makes representations and warranties that are materially incorrect. The following also are pay out events: o The yield on the trust portfolio less the amount of receivables that are written off as uncollectible allocated to Series [ ]-[ ], averaged over three months is less than the weighted average interest rate for Series [ ]-[ ], calculated by taking into account the interest rate for the Class A notes, the Class B notes and the Class C notes, plus the servicing fee rate for Series [ ]-[ ]; o The Class A notes, the Class B notes or the Class C notes are not paid in full on their expected principal payment dates; o Bankruptcy, insolvency or similar events relating to the transferor (including any additional transferor) or the servicer; o The transferor (including any additional transferor) is unable to transfer receivables to the trust as required under the transfer and servicing agreement; o The transferor does not transfer receivables in additional accounts to the trust within 5 business days of when required under the transfer and servicing agreement; o Specified defaults of the servicer; o The trust becomes subject to regulation as an "investment company" under the Investment Company Act of 1940; or o An event of default occurs for the Series [ ]-[ ] notes. FOR A MORE DETAILED DISCUSSION OF THE PAY OUT EVENTS, SEE "DESCRIPTION OF SERIES PROVISIONS -- PAY OUT EVENTS" IN THIS PROSPECTUS SUPPLEMENT AND "DESCRIPTION OF THE NOTES -- PAY OUT EVENTS" IN THE ACCOMPANYING PROSPECTUS. OPTIONAL REDEMPTION The trust has the option to repurchase your notes when the outstanding principal amount for your series has been reduced to 10% or less of the initial principal amount (as increased by the principal amount of any notes of your series issued after the closing date). See "Description of the Notes -- Final Payment of Principal; Termination" in the accompanying prospectus. DENOMINATIONS Beneficial interests in the [ ]-[ ] notes may be purchased in minimum denominations of $1,000 and multiples of $1,000 in excess of that amount. REGISTRATION, CLEARANCE AND SETTLEMENT The Series [ ]-[ ] notes will be in book-entry form and will be registered in the name of Cede & Co., as the nominee of The Depository Trust Company. Except in limited circumstances, you will not receive a definitive instrument representing your notes. See "Description of the Notes -- Definitive Notes" in the accompanying prospectus. You may elect to hold your Series [ ]-[ ] notes through The Depository Trust Company, in the United States, or Clearstream, Luxembourg or the Euroclear System, in Europe. Transfers will be made in accordance with the rules and operating procedures of those clearing systems. See "Description of the Notes -- Book-Entry Registration" in the accompanying prospectus. TAX STATUS Subject to important considerations described under "Material Federal Income Tax Consequences" in the accompanying prospectus, Stroock & Stroock Lavan LLP, as special tax counsel to the trust, is of the opinion that under existing law your Series [ ]-[ ] notes will be characterized as debt for federal income tax purposes and the trust will not be an association or publicly traded partnership, taxable as a corporation for federal income tax purposes. By your acceptance of a Series [ ]-[ ] note, you will agree to treat your Series [ ]-[ ] notes as debt for federal, state and local income and franchise tax purposes. [The trust does not anticipate treating the Series [ ]-[ ] notes as being issued with original issue discount.] See "Material Federal Income Tax Consequences" in the accompanying prospectus (and, in particular, the portion thereof relating to "Trusts Which Are Not Treated as Grantor Trusts -- Tax Consequences to Note Owners" for additional information concerning the application of federal income tax laws. ERISA CONSIDERATIONS Subject to important considerations described under "ERISA Considerations" in this prospectus supplement and in the accompanying prospectus, the Series 200_-__ notes are eligible for purchase by persons investing assets of employee benefit plans or individual retirement accounts. A fiduciary or other person contemplating purchasing the Series 200_-__ notes on behalf of or with plan assets of any plan or account should consult with its counsel regarding whether the purchase or holding of the Series 200_-__ notes could give rise to a transaction prohibited or not otherwise permissible under ERISA or Section 4975 of the Internal Revenue Code. RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE NOTES. YOU MAY HAVE DIFFICULTY SELLING YOUR NOTES............................. The notes will not be listed on any securities exchange. As a result, if you wish to sell your notes, you will have to find a purchaser that is willing to purchase your notes. The underwriter intends to make a secondary market for the offered notes. The underwriter may do so by offering to buy the notes from investors that wish to sell. However, the underwriter will not be obligated to make offers to buy the notes and may stop making offers at any time. In addition, the prices offered, if any, may not reflect prices that other potential purchasers, were they to be given the opportunity, would be willing to pay. There have been times in the past where there have been very few buyers of similar asset backed securities, and there may be times again in the future. As a result, you may not be able to sell your notes when you wish to do so or you may not be able to obtain the price you wish to receive. [GEOGRAPHIC CONCENTRATION MAY AFFECT PERFORMANCE..................... Discuss any geographic risks, if applicable] [CONCENTRATION OF CREDIT RISK.......... Discuss impact on noteholders of material concentration of credit risk, if applicable.] THE SUBORDINATED NOTES HAVE A GREATER RISK OF LOSS THAN THE OTHER NOTES............................ The class C notes will not be paid any distributions of interest until the class B notes receive their interest distributions and will not receive any distributions of principal until the class B notes receive their principal distributions. The class B notes will not be paid any distributions of interest until the class A notes receive their interest distributions and will not receive any distributions of principal until the class A notes receive their principal distributions. If the available funds are insufficient to make all of the required distributions on the class A, class B and class C notes, the class C notes will not and class B notes may not receive all of their distributions. In addition, losses due to defaults will be allocated first to the class C notes and second to the class B notes to the extent not covered by excess interest at that time. Any allocation of a loss to class B notes or class C notes will reduce the amount of interest and, to the extent not reimbursed from future excess interest, principal they will receive. As a result of the foregoing, the class C notes and the class B notes will be affected to a larger degree by any losses on the receivables. THE TRUST ASSETS ARE THE ONLY SOURCE OF PAYMENTS ON THE NOTES............... All distributions on the notes will be made from payments by borrowers under the receivables. The trust has no other assets [other than [ ]] to make distributions on the notes. The receivables are NOT insured or guaranteed by any person. The notes represent obligations of the trust and will not be insured or guaranteed by any entity. The trust is the only person that is obligated to make distributions on the notes. The notes are NOT insured by any governmental agency. NOTE RATING............................ The rating of the notes will depend on an assessment by the rating agencies of the receivables. The rating by the rating agencies of the notes is not a recommendation for you to purchase, hold or sell the notes, and the rating does not comment as to the market price or suitability for a particular investor. There is no assurance that the ratings will remain in place for any given period of time or that the ratings will not be lowered or withdrawn by the rating agencies. The ratings do not address the possibility that offered noteholders might realize a lower than anticipated yield. The ratings of the offered notes do not address the possibility of the imposition of United States withholding tax with respect to non-U.S. persons. No rating of the originator, the servicer or the company is required to maintain the rating of the offered notes. THE NOTES ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS.......... The notes are not suitable investments for any investor that requires a regular or predictable schedule of payments or payment on any specific date. The notes are complex investments that should be considered only by investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment, default and market risk, the tax consequences of an investment, and the interaction of these factors. [ ]'S CREDIT CARD PORTFOLIO The following discussion describes terms and characteristics that generally apply to the accounts in the portfolio from which the accounts in the trust portfolio were selected. The accounts selected for the trust portfolio do not represent [ ]'s entire portfolio. Additional accounts consist of eligible accounts which may or may not currently be in existence and which may be selected using different criteria from those used in selecting the accounts already included in the trust portfolio. See "Description of the Notes -- Addition of Trust Assets" in the accompanying prospectus. Consequently, actual loss and delinquency, revenue and monthly payment rate experience with respect to the initial accounts and the additional accounts may be different from the experience for the trust portfolio described in this prospectus supplement. BILLING AND PAYMENTS Each credit card account may have different billing and payment structures, including different periodic finance charges and fees. The following information reflects the typical billing and payment characteristics of the accounts. [To be inserted] DELINQUENCY AND LOSS EXPERIENCE An account is contractually delinquent if the minimum payment is not received by the appropriate due date indicated on the customer's statement. [To be inserted] The following tables set forth the aggregate delinquency and loss experience for cardholder payments on the credit card accounts in [ ]'s portfolio for each of the three calendar years in the period ended [ ], and in the trust portfolio for the period ended [ ]. Any particular segment of [ ]'s portfolio may have delinquency and gross charge-off characteristics different from those of [ ]'s portfolio. As of the beginning of the day on [ ], the receivables in the trust portfolio represented approximately [ ]% of [.. ]'s portfolio. Because the trust portfolio is only a portion of [ ]'s portfolio, actual delinquency and loss experience with respect to the receivables may be different from that set forth below for [...... ]'s portfolio. We cannot assure you that the future delinquency and loss experience for the receivables in either [ ]'s portfolio or trust portfolio will be similar to the historical experience set forth below. DELINQUENCY AS PERCENTAGE OF [ ]'S PORTFOLIO (Dollars in Thousands)
Year Ended ------------------------------------------------------------------------------- Number of At Month End Delinquent Days [ ] [ ] [ ] [ ] ---------------- -------------------------- --------------------------- -------------------------- ------------------------ PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT ---------- ------ ---------- ------ ---------- ------ ---------- ------ 30 to 59 Days.......... 60 to 80 days.......... 90 Days or Greater..... Totals.................
LOSS EXPERIENCE FOR [ ]'S PORTFOLIO (Dollars in Thousands)
[Three] Months [Three] Months Year Ended Ended Ended ---------------------------------------------- [ ] [ ] [ ] [ ] [ ] -------------- -------------- ----------- ----------- ----------- Average Receivables Outstanding............ Gross Losses............. Gross Losses as a Percentage of Average Receivables Outstanding............ Recoveries............... Net Losses............... Net Losses as a Percentage of Average Receivables Outstanding............
REVENUE EXPERIENCE The following table sets forth the revenues from the cardholder payments on the credit card accounts in [ ]'s portfolio for each of the periods shown. REVENUE EXPERIENCE FOR [...]'S PORTFOLIO (Dollars in Thousands)
[Three] Months [Three] Months Year Ended Ended Ended ---------------------------------------------- [ ] [ ] [ ] [ ] [ ] -------------- -------------- ----------- ----------- ----------- Average Receivables Outstanding Finance Charges and Fees....... Yield from Finance Charges and Fees....... Interchange.............. Yield from Interchange... Yield from Finance Charges Fees and Interchange............
There can be no assurance that the yield experience with respect to the trust portfolio will be comparable to that set forth above for the [ ]'s portfolio. In addition, revenue from the trust portfolio will depend on the types of fees and charges assessed on the accounts, and could be adversely affected by future changes made by [ ] in fees and charges or by other factors. INTERCHANGE Creditors participating in the VISA(R) and MasterCard(R) associations receive fees ("Interchange") as partial compensation for taking credit risk, absorbing fraud losses and funding receivables for a limited period prior to initial billing. Under the VISA(R) and MasterCard(R) systems, a portion of Interchange in connection with cardholder charges for goods and services is collected by banks that issue credit cards by applying a discount to the amount paid by these banks to the banks that clear the related transactions for merchants. Interchange will be allocated to the trust on a monthly basis based on an equivalent percentage that the transferor receives each month [ ]'s portfolio. RECOVERIES Pursuant to the terms of the transfer and servicing agreement, the transferor will be required to transfer to the trust all of the recoveries that are reasonably estimated by the servicer on receivables in charged-off accounts of the trust, including amounts received by the transferor or the servicer from the purchaser or transferee with respect to the sale or other disposition of receivables in defaulted accounts ("Recoveries"). Collections of recoveries will be treated as collections of finance charge receivables and included as part of the Portfolio Yield. PAYMENT RATES The following table sets forth the highest and lowest cardholder monthly payment rates on the credit card accounts during any month in the periods shown and the average cardholder monthly payment rates for all months in the periods shown, in each case calculated as a percentage of total opening monthly account balances during the periods shown. Payment rates shown in the table are based on amounts which would be deemed payments of principal receivables and finance charge receivables with respect to the accounts. CARDHOLDER MONTHLY PAYMENT RATES(1) YEAR ENDED DECEMBER 31, [ ] [ ] [ ] Lowest Month % % % Highest Month % % % Monthly Average % % % _______________ (1) For each of the three calendar years in the period ended [ ], information is presented for credit card accounts in the originator's portfolio. For the [ ], this information is presented for credit card accounts in the trust portfolio. Generally, cardholders must make a monthly minimum payment equal to 2.0% of the statement balance plus any past due amounts. However, the cardholder is usually required to make at least a monthly minimum payment of $15 plus any past due amounts. The minimum monthly payment typically will be increased to 3.0% of the statement balance plus any past due amounts if the account becomes greater than 60 days delinquent. In the case of delinquency, however, the cardholder is usually required to make at least a monthly payment of $25 plus any past due amounts. We cannot assure you that the cardholder monthly payment rates in the future will be similar to the historical experience set forth above. In addition, the amount of collections of receivables may vary from month to month due to seasonal variations, general economic conditions and payment habits of individual cardholders. THE TRUST PORTFOLIO The receivables conveyed to the trust arise in accounts selected from [ ]'s portfolio at the time the trust was established, and in additional accounts selected since that time, on the basis of criteria set forth in the transfer and servicing agreement (the "Trust Portfolio"). The transferor has the right to designate additional accounts for the trust portfolio and to transfer to the trust all receivables of those additional accounts, whether the receivables already exist or arise after the designation, if conditions are satisfied. For a discussion of these conditions, see "Description of the Notes -- Addition of Trust Assets" in the accompanying prospectus. In addition, the transferor will be required to designate additional accounts, to the extent available, (a) to maintain the Transferor Interest so that, during any period of 30 consecutive days, the Transferor Interest averaged over that period equals or exceeds the Required Transferor Interest for the same period and (b) to maintain, for so long as notes of any series remain outstanding, an aggregate amount of principal receivables in the trust portfolio equal to or greater than the Required Minimum Principal Balance (as adjusted for any series having a paired series as described in the related indenture supplement). The "Transferor Interest" on any date is equal to the difference between: (a) the sum of (1) the product of (x) total amount of principal receivables in the trust portfolio on immediately prior day and (x) 1 minus the Discount Percentage and (2) the special funding account balance, minus (b) the total adjusted invested amounts of all series of notes then outstanding. The "Required Transferor Interest" is the product of : o Required Transferor Percentage; o Total amount of principal receivables in the trust portfolio; and o 1 minus the Discount Percentage. The "Required Transferor Percentage" initially is [ ]%, but may be reduced if conditions set forth in the transfer and servicing agreement are satisfied, including receipt of written confirmation that reducing the Required Transferor Percentage will not result in the reduction or withdrawal by any rating agency of its rating of any outstanding series or class. The "Discount Percentage" on the closing date is [ ]%. The "Required Minimum Principal Balance" on any date is, for all outstanding series, unless otherwise provided in the related indenture supplement for a series having a paired series, the sum of the initial invested amounts for each series outstanding on that date plus the Required Transferor Interest on that date minus the amounts on deposit in the special funding account. The transferor also has the right to designate removed accounts and to require the indenture trustee to transfer all receivables in the removed accounts back to the transferor, whether the receivables already exist or arise after the designation, if conditions are satisfied. For a discussion of these conditions, see "Description of the Notes -- Removal of Accounts" in the accompanying prospectus. Throughout the term of the trust, the accounts from which the receivables arise will be the accounts designated by the transferor at the time the trust is established plus any additional accounts minus any removed accounts. As a result, the composition of the trust assets is expected to change over time. For a general description of the receivables in the trust, see "The Trust Portfolio" in the accompanying prospectus. The following is selected information about the receivables: o The receivables in the trust portfolio, as of the beginning of the day on [ ], included $[ ] of principal receivables and $[ ] of finance charge receivables. o The accounts designated for the trust portfolio had an average principal receivable balance of $[ ] and an average credit limit of $[ ]. o The percentage of the aggregate total receivable balance to the aggregate total credit limit was [ ]%. The average age of the accounts was approximately months. o As of the beginning of the day on, [ ], cardholders whose accounts are designated for the trust portfolio had billing addresses in all 50 states and the District of Columbia. The following tables summarize the trust portfolio by various criteria as of the beginning of the day on, [ ]. Because the future composition of the trust portfolio may change over time, these tables are not necessarily indicative of the composition of the trust portfolio at any subsequent time. COMPOSITION BY ACCOUNT BALANCE TRUST PORTFOLIO (as of [ ]) (Dollars in Thousands) Receivables Account Balance Range Outstanding - ------------------------- Credit Balance................ No Balance.................... More than $0 and less than or equal to $1,500............. $1,500.01 - $5,000............ $5,000 - $10,000.............. Over $10,000.................. COMPOSITION BY CREDIT LIMIT TRUST PORTFOLIO (as of [ ]) (Dollars in Thousands) Receivables Account Balance Range Outstanding - ------------------------- Less than or equal to $1,500.. $1,500.01 - $5,000............ $5,000 - $10,000.............. Over $10,000.................. COMPOSITION BY PAYMENT STATUS TRUST PORTFOLIO (as of [ ]) (Dollars in Thousands) Receivables Account Balance Range Outstanding - ------------------------- Current to 29 days............ Past due 30 - 59 days......... Past due 60 - 89 days......... Past due 90+ days............. Total......................... COMPOSITION BY ACCOUNT AGE TRUST PORTFOLIO (as of [ ]) (Dollars in Thousands) Receivables Account Balance Range Outstanding - ------------------------- Not more than 6 months........ Over 6 months to 12 months.... Over 1 year to 2 years........ Over 2 years to 3 years....... Over 3 years to 4 years....... Over 4 years.................. Total......................... COMPOSITION BY ACCOUNTHOLDER BILLING ADDRESS TRUST PORTFOLIO (as of [ ]) (Dollars in Thousands) Location - -------- Alaska......................... Arizona........................ Arkansas....................... California..................... Colorado....................... Connecticut.................... Delaware....................... District of Columbia........... Florida........................ Georgia........................ Hawaii......................... Idaho.......................... Illinois....................... Indiana........................ Iowa........................... Kansas......................... Kentucky....................... Louisiana...................... Maine.......................... Maryland....................... Massachusetts.................. Michigan....................... Minnesota...................... Mississippi.................... Missouri....................... Montana........................ Nebraska....................... Nevada......................... New Hampshire.................. New Jersey..................... New Mexico..................... New York....................... North Carolina................. North Dakota................... Ohio........................... Oklahoma....................... Oregon......................... Pennsylvania................... Rhode Island................... South Carolina................. South Dakota................... Tennessee...................... Texas.......................... Utah........................... Vermont........................ Virginia....................... Washington..................... West Virginia.................. Alabama........................ Wyoming........................ Other.......................... MATURITY CONSIDERATIONS You are expected to receive payment of principal in full on [ ], the "Expected Principal Payment Date." You may, however, receive payments of principal earlier than the expected principal payment date if a pay out event occurs and the early amortization period begins. The holders of the Class B notes will not begin to receive payments of principal until the final principal payment on the Class A notes has been made. The holders of the Class C notes will not begin to receive payments of principal until the final principal payments on the Class A notes and Class B notes have been made. CONTROLLED ACCUMULATION PERIOD Principal for payment to the Series [ ]-[ ] noteholders will accumulate during the controlled accumulation period in the principal funding account established by the indenture trustee. The controlled accumulation period is scheduled to begin at the close of business on [ ], but may be delayed based on recent payment rate experience, as discussed under "Description of Series Provisions -- Postponement of the Controlled Accumulation Period" in this prospectus supplement. On each distribution date during the controlled accumulation period, an amount will be deposited into the principal funding account equal to, for each monthly period, the least of: o Available Principal Collections; o the Controlled Deposit Amount; and o the Adjusted Invested Amount prior to any deposits on that day. We expect, but cannot assure you, that the amounts available in the principal funding account on the expected principal payment date will be sufficient to pay in full the outstanding principal balance of the Class A notes, the Class B notes and the Class C notes. If these amounts are not available on the expected principal payment date, a pay out event will occur and the early amortization period will begin. EARLY AMORTIZATION PERIOD If a pay out event occurs during either the revolving period or the controlled accumulation period, the early amortization period will begin. If a pay out event occurs during the controlled accumulation period, on the next distribution date any amount on deposit in the principal funding account will be paid to the Class A noteholders and, after the outstanding principal balance of the Class A notes has been paid in full, any remaining amount will be paid to the Class B noteholders and, after the outstanding principal balance of the Class B notes has been paid in full, any remaining amount will be paid to the Class C noteholders, up to the outstanding principal balance of the Class C notes. In addition, if the outstanding principal balance of the Class A notes has not been paid in full, Available Principal Collections will be paid to the Class A noteholders on each distribution date until the earlier of: o the date the Class A notes are paid in full; and o [ ], called the "Series [ ]-[ ] Termination Date". After the Class A notes have been paid in full, and if the Series [ ]-[ ] termination date or the trust termination date has not occurred, Available Principal Collections will be paid to the Class B noteholders on each distribution date until the earlier of: o the date the Class B notes are paid in full; and o the Series [ ]-[ ] termination date. After the Class B notes have been paid in full, and if the Series [ ]-[ ] termination date or the trust termination date has not occurred, Available Principal Collections will be paid to the Class C noteholders on each distribution date until the earlier of: o the date the Class C notes are paid in full; and o the Series [ ]-[ ] termination date. THE ORIGINATOR The "Originator" is [ ]. [Insert description of the Originator.] THE SERVICER The "Servicer" is [ ]. [Insert description of the Servicer.] THE TRANSFEROR ACE Securities Corp., the transferor, is a special purpose corporation incorporated in the State of Delaware on June 3, 1998. The principal executive offices of the depositor are located at 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211. Its telephone number is (704) 365-0569. The depositor does not have, nor is it expected in the future to have, any significant assets. The limited purposes of the depositor are, in general, to acquire, own and sell loans and financial assets; to issue, acquire, own, hold and sell securities and notes secured by or representing ownership interests in loans and other financial assets, collections on the loans and related assets; and to engage in any acts that are incidental to, or necessary, suitable or convenient to accomplish, these purposes. All of the shares of capital stock of the depositor are held by Altamont Holdings Corp., a Delaware corporation. DESCRIPTION OF SERIES PROVISIONS The following is a summary of the material provisions of the Series [ ]-[ ] notes. This summary is not a complete description of the terms of the Series [ ]-[ ] notes. You should refer to "Description of the Notes" in the accompanying prospectus as well as to the transfer and servicing agreement, the indenture and the Series [ ]-[ ] indenture supplement for a complete description. The form of each of the transfer and servicing agreement, the indenture and an indenture supplement has been filed with the SEC as an exhibit to the registration statement relating to the notes. The Class A notes, Class B notes and Class C notes comprise the "Series [ ]-[ ] Notes" and will be issued under the indenture, as supplemented by the indenture supplement relating to the Series [ ]-[ ] notes (the "Series [ ]-[ ] Indenture Supplement"), in each case between the trust and the indenture trustee. As described under "Description of the Notes--New Issuances" in the accompanying prospectus, the transferor may cause the owner trustee, on behalf of the trust, and the indenture trustee to execute further indenture supplements in order to issue additional series. The "Closing Date" for Series [ ]-[ ] is [ ]. The Series [ ]-[ ] notes will be issued in denominations of $1,000 and integral multiples of $1,000 and will be available only in book-entry form, registered in the name of Cede, as nominee of DTC. As described under "Description of the Notes--General," "-- Book-Entry Registration" and "-- Definitive Notes" in the accompanying prospectus, unless and until definitive notes are issued, you will be able to transfer your notes only through the facilities of DTC. You will receive payments and notices through DTC and its participants. Payments of interest and principal will be made on each distribution date on which those amounts are due to the noteholders in whose names Series [ ]-[ ] notes were registered on the last day of the calendar month preceding that distribution date (each, a "Record Date"). INTEREST PAYMENTS The Class A notes will accrue interest from and including the closing date through but excluding [ ], and for each following interest period, at a rate of [ ]% per annum above LIBOR for the related LIBOR determination date with respect to each interest period (the "Class A Note Interest Rate"). The Class B notes will accrue interest from and including the closing date through but excluding [ ], and for each following interest period, at a rate of [ ]% per annum above LIBOR for the related LIBOR determination date with respect to each interest period (the "Class B Note Interest Rate"). The Class C notes will accrue interest from and including the closing date through but excluding [ ], and for each following interest period, at a rate of [ ]% per annum above LIBOR for the related LIBOR determination date with respect to each interest period (the "Class C Note Interest Rate"). The indenture trustee will determine LIBOR for each interest period two London business days before the related interest period commences. We refer to each of these determination dates as a "LIBOR Determination Date." For purposes of calculating LIBOR, a "London Business Day" is any business day on which dealings in deposits in United States dollars are transacted in the London interbank market. An "Interest Period" begins on and includes a distribution date and ends on but excludes the next distribution date. However, the first interest period will begin on and include the closing date. "LIBOR" means, for any LIBOR determination date, the rate for deposits in United States dollars for a one-month period which appears on Telerate Page 3750 as of 11:00 a.m., London time, on that date. If that rate does not appear on Telerate Page 3750, the rate for that LIBOR determination date will be determined based on the rates at which deposits in United States dollars are offered by four major banks selected by the servicer at approximately 11:00 a.m., London time, on that day to prime banks in the London interbank market for a one-month period. The indenture trustee will request the principal London office of each of those banks to provide a quotation of its rate. If at least two quotations are provided, the rate for that LIBOR determination date will be the arithmetic mean of the quotations. If fewer than two quotations are provided, the rate for that LIBOR determination date will be the arithmetic mean of the rates quoted by major banks in New York City, selected by the servicer, at approximately 11:00 a.m., New York City time, on that day for loans in United States dollars to leading European banks for a one-month period. "Telerate Page 3750" means the display page currently so designated on the Bridge Telerate Capital Markets Report (or any other page as may replace that page on that service for the purpose of displaying comparable rates or prices). The Class A note interest rate, the Class B note interest rate and the Class C note interest rate applicable to the then current and immediately preceding interest period may be obtained by telephoning the indenture trustee at its corporate trust office at [ ]. Interest on the notes will be calculated on the basis of the actual number of days in the related interest period and a 360-day year. Interest will be paid on each "Distribution Date," which will be [ ] and the [ th] day of each following month (or, if the [ th] day is not a business day, the following business day). For purposes of this prospectus supplement and the accompanying prospectus, a "Business Day" is, unless otherwise indicated, any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York, Delaware or any other state in which the principal executive offices of the bank, the owner trustee, the indenture trustee or other account owner, as the case may be, are located, are authorized or obligated by law, executive order or governmental decree to be closed. Interest payments on the Class A notes, the Class B notes and the Class C notes on any distribution date will be calculated on the outstanding principal balance of the Class A notes, the Class B notes and the Class C notes, as applicable, as of the preceding record date, except that interest for the first distribution date will accrue at the applicable note interest rate on the initial outstanding principal balance of the Class A notes, the Class B notes and the Class C notes, as applicable, from the closing date. Interest due on the Class A notes, the Class B notes and the Class C notes but not paid on any distribution date will be payable on the following distribution date, together with additional interest on that amount at the applicable note interest rate. We refer to this additional interest as "Class A Additional Interest," "Class B Additional Interest" and "Class C Additional Interest," as applicable. Additional interest will accrue on the same basis as interest on the Series [ ]-[ ] notes, and will accrue from the distribution date on which the overdue interest became due, to but excluding the distribution date on which the additional interest is paid. Interest payments on the Series [ ]-[ ] notes on any distribution date will be paid from Available Finance Charge Collections for the related monthly period and, to the extent Available Finance Charge Collections are insufficient to pay the interest, from Excess Finance Charge Collections and Reallocated Principal Collections (to the extent available) for the related monthly period. Interest payments on the Class C notes on any distribution date will also be paid from available amounts on deposit in the spread account to the extent needed. "Available Finance Charge Collections" means, with respect to any monthly period, an amount equal to the sum of: (a) the Investor Percentage of collections of finance charge receivables deposited in the collection account for that monthly period; (b) an amount equal to the Principal Funding Investment Proceeds, if any, for the related distribution date; and (c) amounts, if any, to be withdrawn from the reserve account which are required to be included in Available Finance Charge Collections pursuant to the Series [ ]-[ ] indenture supplement for the related distribution date. Each "Monthly Period" will be the period from and including the first day of a calendar month to and including the last day of that calendar month (other than the initial monthly period, which will commence on and include the closing date and end on and include, 20[ ]). PRINCIPAL PAYMENTS Principal payments on the Series [ ]-[ ] notes will be paid from "Available Principal Collections" which, for any monthly period, equal: (a) the Investor Percentage of collections of principal receivables deposited in the collection account for that monthly period; minus (b) the amount of Reallocated Principal Collections for that monthly period; plus (c) any Shared Principal Collections from other series in group one and any Shared Transferor Principal Collections allocated to your series. REVOLVING PERIOD The "Revolving Period" for the Series [ ]-[ ] notes begins on the closing date and ends on the earlier of the date the controlled accumulation period or the early amortization period begins. During the revolving period, the Investor Percentage of collections of principal receivables will, subject to limitations, including the allocation of any Reallocated Principal Collections for that monthly period, be treated as Shared Principal Collections and used to pay principal to other series in group one or will be paid to the holders of the transferor certificates. CONTROLLED ACCUMULATION PERIOD The "Controlled Accumulation Period" for the Series [ ]-[ ] notes is scheduled to begin on [ ], but may be postponed, as discussed under "Description of Series Provisions -- Postponement of the Controlled Accumulation Period" in this prospectus supplement, and ends on the earliest of: o the beginning of the early amortization period; o the payment in full of the Invested Amount; and o the Series [ ]-[ ] termination date. If a pay out event occurs before the controlled accumulation period begins, there will be no controlled accumulation period and the early amortization period will begin. On each distribution date relating to the controlled accumulation period, the indenture trustee will deposit in the principal funding account an amount equal to the least of (a) Available Principal Collections with respect to that distribution date, (b) the applicable Controlled Deposit Amount and (c) the Adjusted Invested Amount prior to any deposits on that date. Amounts in the principal funding account will be paid: o first to Class A noteholders, up to the outstanding principal balance of the Class A notes; o then to Class B noteholders, up to the outstanding principal balance of the Class B notes; and o then to Class C noteholders, up to the outstanding principal balance of the Class C notes; in each case, on the expected principal payment date unless paid earlier due to the commencement of the early amortization period. During the controlled accumulation period, the portion of Available Principal Collections not applied for the payment of principal on the Class A notes, the Class B notes or the Class C notes on a distribution date generally will be treated as Shared Principal Collections. EARLY AMORTIZATION PERIOD The "Early Amortization Period" for the Series [ ]-[ ] notes will begin on the day on which a pay out event with respect to Series [ ]-[ ] occurs and ends on the earlier of: o the payment in full of the Invested Amount; and o the Series [ ]-[ ] termination date. On each distribution date relating to the early amortization period, the Class A noteholders will be entitled to receive Available Principal Collections for the related monthly period in an amount up to the outstanding principal balance of the Class A notes. After payment in full of the outstanding principal balance of the Class A notes, the Class B noteholders will be entitled to receive, on each distribution date relating to the early amortization period, Available Principal Collections for the related monthly period in an amount up to the outstanding principal balance of the Class B notes. After payment in full of the outstanding principal balance of the Class B notes, the Class C noteholders will be entitled to receive on each distribution date relating to the early amortization period, Available Principal Collections for the related monthly period in an amount up to the outstanding principal balance of the Class C notes. See "-- Pay Out Events" below for a discussion of events that might lead to the commencement of the early amortization period. POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD The controlled accumulation period is scheduled to last [ ] months. However, the servicer may elect to extend the revolving period and postpone the controlled accumulation period by providing a notice to the indenture trustee. The servicer can make this election only if the number of months needed to fund the principal funding account based on expected principal collections needed to pay principal on the Series [ ]-[ ] notes is less than [.......] months. On each determination date beginning in [ ] and ending when the controlled accumulation period begins, the servicer will review the amount of expected principal collections and determine the number of months expected to be required to fully fund the principal funding account by the expected principal payment date and may elect to postpone the controlled accumulation period. In making its decision, the servicer is required to assume that the principal payment rate will be no greater than the lowest monthly payment rate for the prior 12 months and will consider the amount of principal expected to be allocable to noteholders of all other series which are expected to be amortizing or accumulating principal during the controlled accumulation period for Series [ ]-[ ]. In no case will the controlled accumulation period be reduced to less than one month. The method for determining the number of months required to fully fund the principal funding account may be changed upon receipt of written confirmation that the change will not result in the reduction or withdrawal by any rating agency of its rating of any outstanding series or class. SUBORDINATION The Class B notes and the Class C notes are subordinated to the Class A notes. Interest payments will be made on the Class A notes prior to being made on the Class B notes and the Class C notes. Interest payments will be made on the Class B notes prior to being made on the Class C notes. Principal payments on the Class B notes will not begin until the Class A notes have been paid in full. Principal payments on the Class C notes will not begin until the Class A notes and the Class B notes have been paid in full. If principal collections allocated to your series are reallocated to pay the interest on the Class A notes, the principal amount of the Class B notes and the Class C notes may not be repaid. If principal collections allocated to your series are reallocated to pay interest on the Class B notes, the principal amount of the Class C notes may not be repaid. If a foreclosure certificate is sold after an event of default, the net proceeds of that sale which are available to pay principal on the Series [ ]-[ ] notes would be paid first to the Class A notes before any remaining net proceeds would be available for payments due to the Class B notes or the Class C notes. ALLOCATION PERCENTAGES Pursuant to the indenture, with respect to each monthly period, the servicer will allocate among the Invested Amount, the invested amount for all other series issued and outstanding and the Transferor Interest, all amounts collected on finance charge receivables, all amounts collected on principal receivables and all Defaulted Amounts with respect to that monthly period. These amounts will be allocated based on the Investor Percentage. "Investor Percentage," for any monthly period, means (a) for Defaulted Amounts at anytime and for collections of finance charge receivables and principal receivables during the revolving period, the Floating Investor Percentage and (b) for collections of finance charge receivables and principal receivables during the controlled accumulation period and early amortization period, the Fixed Investor Percentage. FLOATING ALLOCATION DEFINITIONS Defaulted Amounts at any time and collections of finance charge receivables and principal receivables during the revolving period will be allocated to the Invested Amount based on the Floating Investor Percentage. The "Floating Investor Percentage" means, with respect to any monthly period, the percentage equivalent of a fraction: (a) the numerator of which is the Adjusted Invested Amount as of the close of business on the last day of the preceding monthly period (or with respect to the first monthly period, the initial Invested Amount); and (b) the denominator of which is the greater of: (1) the sum of (A) the product of (x) the aggregate amount of principal receivables in the trust as of the close of business on the last day of the preceding monthly period (or with respect to the first monthly period, the aggregate amount of principal receivables in the trust as of the close of business on the closing date) and (y) one minus the Discount Percentage and (B) the principal amount on deposit in the special funding account as of the close of business on the last day of the preceding monthly period (or with respect to the first monthly period, as of the closing date) and (2) the sum of the numerators used to calculate the investor percentages for allocations with respect to finance charge receivables, Defaulted Amounts or principal receivables, as applicable, for all outstanding series on the date of determination. The denominator used in the calculation of Floating Investor Percentage, however, will be adjusted as follows, with respect to any monthly period in which an addition date occurs or in which a removal date occurs on which, if any series has been paid in full, principal receivables in an aggregate amount approximately equal to the initial invested amount of that series are removed from the trust, the amount in clause (b)(1)(A) above shall be: (1) the product of (x) the aggregate amount of principal receivables in the trust as of the close of business on the last day of the prior monthly period and (y) one minus the Discount Percentage, for the period from and including the first day of the prior monthly period to but excluding the related addition date or removal date; and (2) the product of (x) the aggregate amount of principal receivables in the trust as of the close of business on the related addition date or removal date after adjusting for the aggregate amount of principal receivables added to or removed from the trust on the related addition date or removal date, as the case may be, and (y) one minus the Discount Percentage, for the period from and including the related addition date or removal date to and including the last day of that monthly period. FIXED ALLOCATION DEFINITIONS Collections of finance charge receivables and principal receivables during the controlled accumulation period and early amortization period will be allocated to the Invested Amount based on the Fixed Investor Percentage. The "Fixed Investor Percentage" means, with respect to any monthly period, the percentage equivalent of a fraction: (a) the numerator of which is the Invested Amount as of the close of business on the last day of the revolving period; and (b) the denominator of which is the greater of: (1) the sum of (A) the product of (x) the aggregate amount of principal receivables in the trust as of the close of business on the last day of the prior monthly period (or with respect to the first monthly period, the aggregate amount of principal receivables in the trust as of the closing date) and (y) one minus the Discount Percentage and (B) the principal amount on deposit in the special funding account as of the close of business on the last day of the preceding monthly period (or with respect to the first monthly period, as of the closing date) and (2) the sum of the numerators used to calculate the investor percentages for allocations with respect to principal receivables or finance charge receivables, as applicable, for all outstanding series on the date of determination. The denominator used in the calculation of Fixed Investor Percentage, however, will be adjusted as follows, with respect to any monthly period in which an addition date occurs or in which a removal date occurs on which, if any series has been paid in full, principal receivables in an aggregate amount approximately equal to the initial invested amount of that series are removed from the trust, the amount in clause (b)(1)(A) above shall be: (1) the product of (x) the aggregate amount of principal receivables in the trust as of the close of business on the last day of the prior monthly period and (y) one minus the Discount Percentage, for the period from and including the first day of the prior monthly period to but excluding the related addition date or removal date; and (2) the product of (x) the aggregate amount of principal receivables in the trust as of the close of business on the related addition date or removal date after adjusting for the aggregate amount of principal receivables added to or removed from the trust on the related addition date or removal date, as the case may be, and (y) one minus the Discount Percentage, for the period from and including the related addition date or removal date to and including the last day of that monthly period. INVESTED AMOUNT DEFINITIONS "Invested Amount," for any date of determination, means an amount equal to (a) the initial outstanding principal amount of the Series [ ]-[ ] notes (as increased by the principal balance of any [ ]-[ ] notes issued after the closing date), minus (b) the amount of principal previously paid to the Series [ ]-[ ] noteholders, minus (c) the amount of unreimbursed Investor Charge-Offs and Reallocated Principal Collections. "Adjusted Invested Amount," for any date of determination, means the (a) the Invested Amount as of that date, minus (b) the amount on deposit in the principal funding account for that date. REALLOCATED PRINCIPAL COLLECTIONS On each distribution date, if the sum of Class A interest, Class B interest and the monthly servicing fee cannot be paid from Available Finance Charge Collections and Excess Finance Charge Collections as described below under "--Application of Collections," then collections of principal receivables allocated to the Invested Amount will be treated as collections of finance charge receivables and will be available to pay these amounts, in an amount equal to the Reallocated Principal Collections, and the Invested Amount will be reduced accordingly. A reduction in the Invested Amount will reduce the allocation of finance charge and principal collections to your series. "Reallocated Principal Collections" means, for any monthly period, Available Principal Collections used to pay interest on the Class A notes and the Class B notes or used to pay the monthly servicing fee in an amount equal to the lesser of: o the Monthly Principal Reallocation Amount for that monthly period; and o the Invested Amount after giving effect to any Investor Charge-Offs for that distribution date. "Monthly Principal Reallocation Amount" means, for any monthly period, the sum of: o the lower of: o the excess of the amounts needed to pay current and past due Class A Monthly Interest and Class A Additional Interest as described under " --Application of Collections -- Payment of Interest, Fees and Other Items" below over the Available Finance Charge Collections allocated to cover these amounts; and o [ ]% of the initial Invested Amount minus the amount of unreimbursed Investor Charge-Offs and unreimbursed Reallocated Principal Collections; plus the lower of: o the sum of (A) the excess of the amounts needed to pay current and past due Class B Monthly Interest and Class B Additional Interest as described under "--Application of Collections -- Payments of Interest, Fees and Other Items" below over the Available Finance Charge Collections allocated to cover these amounts and (B) the excess of the monthly servicing fee over the Available Finance Charge Collections allocated to cover these amounts; and o [ ]% of the initial Invested Amount minus the amount of unreimbursed Investor Charge-Offs and unreimbursed Reallocated Principal Collections. APPLICATION OF COLLECTIONS PAYMENT OF INTEREST, FEES AND OTHER ITEMS On each distribution date, the servicer will direct the indenture trustee to apply Available Finance Charge Collections and Excess Finance Charge Collections on deposit in the collection account in the following order: o an amount equal to the Class A Monthly Interest plus Class A Additional Interest due for the related distribution date, and past due for any prior distribution dates, will be paid to the Class A noteholders on that distribution date; o an amount equal to the Class B Monthly Interest plus Class B Additional Interest due for the related distribution date, and past due for any prior distribution dates, will be paid to the Class B noteholders on that distribution date; o an amount equal to the monthly servicing fee due for the related distribution date, and past due for any prior distribution date, will be paid to the servicer; o an amount equal to the Class C Monthly Interest plus Class C Additional Interest due for the related distribution date, and past due for any prior distribution dates, will be paid to the Class C noteholders on that distribution date; o an amount equal to the Investor Default Amount, if any, for the related monthly period, will be treated as Available Principal Collections; o an amount equal to the sum of the Investor Charge-Offs and the amount of unreimbursed Reallocated Principal Collections will be treated as Available Principal Collections; o on and after the reserve account funding date, an amount equal to the excess, if any, of the Required Reserve Account Amount over the amount then on deposit in the reserve account will be deposited into the reserve account; o an amount equal to the excess, if any, of the Required Spread Account Amount over the amount then on deposit in the spread account will be deposited into the spread account; o all remaining amounts will be treated as Excess Finance Charge Collections and will be available to cover any shortfalls in finance charge collections for other outstanding series in group one and, after payment of these shortfalls, the remaining amount will be paid to the holders of the transferor certificates. In the event that Available Finance Charge Collections and Excess Finance Charge Collections for any monthly period are insufficient to pay Class C Monthly Interest when due, a draw will be made from amounts available in the spread account and will be paid to the Class C noteholders on the related distribution date. "Class A Monthly Interest" with respect to any distribution date will equal the product of (a) the Class A note interest rate for the related interest period, (b) the actual number of days in that interest period divided by 360 and (c) the outstanding principal balance of the Class A notes as of the close of business on the last day of the prior monthly period or, with respect to the first distribution date, the outstanding principal balance of the Class A notes as of the closing date. "Class B Monthly Interest" with respect to any distribution date will equal the product of (a) the Class B note interest rate for the related interest period, (b) the actual number of days in that interest period divided by 360 and (c) the outstanding principal balance of the Class B notes as of the close of business on the last day of the prior monthly period or, with respect to the first distribution date, the outstanding principal balance of the Class B notes as of the closing date. "Class C Monthly Interest" with respect to any distribution date will equal the product of (a) the Class C note interest rate for the related interest period, (b) the actual number of days in that interest period divided by 360 and (c) the outstanding principal balance of the Class C notes as of the close of business on the last day of the prior monthly period or, with respect to the first distribution date, the outstanding principal balance of the Class C notes as of the closing date. "Monthly Interest" with respect to any distribution date will equal the sum of the Class A Monthly Interest, the Class B Monthly Interest and the Class C Monthly Interest for that distribution date. "Payments of Principal" On each distribution date, the servicer will direct the indenture trustee to apply Available Principal Collections on deposit in the collection account in the following priority: (a) on each distribution date with respect to the revolving period, all Available Principal Collections will be treated as Shared Principal Collections and applied as described under "Description of Series Provisions -Shared Principal Collections and Transferor Principal Collections" in this prospectus supplement and "Description of the Notes -Shared Principal Collections and Transferor Principal Collections" in the accompanying prospectus; (b) on each distribution date with respect to the controlled accumulation period and the early amortization period, all Available Principal Collections will be distributed or deposited in the following priority: (1) during the controlled accumulation period, an amount equal to Monthly Principal will be deposited in the principal funding account; (2) during the early amortization period, an amount equal to the Monthly Principal will be distributed to the paying agent for payment to the Class A noteholders until the outstanding principal balance of the Class A notes has been paid in full; (3) during the early amortization period, an amount equal to Monthly Principal will, after the outstanding principal balance of the Class A notes has been paid in full, be distributed to the paying agent for payment to the Class B noteholders until the outstanding principal balance of the Class B notes has been paid in full; and (4) during the early amortization period, an amount equal to Monthly Principal will, after the outstanding principal balances of the Class A notes and the Class B notes have been paid in full, be distributed to the paying agent for payment to the Class C noteholders until the outstanding principal balance of the Class C notes has been paid in full; (c) on each distribution date with respect to the controlled accumulation period and the early amortization period, the balance of Available Principal Collections not applied pursuant to (b) above, if any, will be treated as Shared Principal Collections and applied as described under "Description of Series Provisions -Shared Principal Collections and Transferor Principal Collections" in this prospectus supplement and "Description of the Notes -Shared Principal Collections and Transferor Principal Collections" in the accompanying prospectus. "Monthly Principal" with respect to any distribution date will equal the least of o the Available Principal Collections on deposit in the collection account with respect to that distribution date, o for each distribution date with respect to the controlled accumulation period, the Controlled Deposit Amount for that distribution date and o the Adjusted Invested Amount (as adjusted for any Investor Charge-Offs and Reallocated Principal Collections on that distribution date) prior to any deposits into the principal funding account on that distribution date. "Controlled Deposit Amount" means, for any distribution date, the sum of (1) the Controlled Accumulation Amount for that distribution date, plus (2) the Accumulation Shortfall, if any. "Controlled Accumulation Amount" means for any distribution date with respect to the controlled accumulation period, $[....]. However, if the commencement of the controlled accumulation period is postponed as described above under "--Postponement of Controlled Accumulation Period," the Controlled Accumulation Amount may be higher than the amount stated above for each distribution date with respect to the controlled accumulation period and will be determined by the servicer in accordance with the Series [ ]-[ ] indenture supplement based on the principal payment rates for the accounts and on the invested amounts of other series (other than excluded series) which are scheduled to be in their revolving periods and then scheduled to create Shared Principal Collections during the controlled accumulation period. "Accumulation Shortfall" means: (a) on the first distribution date during the controlled accumulation period, the excess, if any, of the Controlled Accumulation Amount for that distribution date over the amount deposited in the principal funding account on that distribution date; and (b) on each subsequent distribution date during the controlled accumulation period, the excess, if any, of the applicable Controlled Accumulation Amount for that subsequent distribution date plus any Accumulation Shortfall for the prior distribution date over the amount deposited in the principal funding account on that subsequent distribution date. SHARED EXCESS FINANCE CHARGE COLLECTIONS Finance charge collections -and other amounts treated like finance charge collections -in excess of the amount required to make payments or deposits for your series will be made available to other series included in group one whose allocation of finance charge collections is not sufficient to make its required payments or deposits. We call these collections "Excess Finance Charge Collections." If your series requires more finance charge collections than allocated through the Investor Percentage, it will have access to finance charge collections -and other amounts treated like finance charge collections -from other series in group one. Each series that is part of group one and has a shortfall will receive a share of the total amount of Excess Finance Charge Collections available for that month based on the amount of shortfall for that series divided by the total shortfall for all series for that same month. SHARED PRINCIPAL COLLECTIONS AND TRANSFEROR PRINCIPAL COLLECTIONS Collections of principal receivables for any monthly period allocated to the Invested Amount will first be used to cover, during the controlled accumulation period, deposits of the applicable Controlled Deposit Amount to the principal funding account, and during the early amortization period, payments to the noteholders. The servicer will determine the amount of collections of principal receivables for any monthly period allocated to the Invested Amount remaining after covering required payments to the noteholders and any similar amount remaining for any other series in group one ("Shared Principal Collections"). The servicer will allocate the Shared Principal Collections to cover any scheduled or permitted principal distributions to noteholders and deposits to principal funding accounts, if any, for any series in group one which have not been covered out of the collections of principal receivables allocable to the other series in group one and other amounts for those series ("Principal Shortfalls"). Shared Principal Collections will not be used to cover investor charge-offs for any series. If Principal Shortfalls exceed Shared Principal Collections for any monthly period, Shared Principal Collections will be allocated pro rata among the applicable series in group one based on the relative amounts of Principal Shortfalls. To the extent that Shared Principal Collections exceed Principal Shortfalls, the balance will, subject to limitations, be paid to the holders of the transferor certificates. In addition, the servicer will, under the terms of the indenture, determine the amount of collections of principal receivables for any monthly period allocated to the Transferor Interest but not due to the holder of any supplemental certificate and other amounts payable to the transferor with respect to collections of principal receivables ("Shared Transferor Principal Collections"). Shared Transferor Principal Collections will be applied, if necessary, to cover payments of principal due to noteholders during the controlled accumulation period and the early amortization period that have not been covered out of collections of principal receivables allocated to Series [ ]-[ ] and other amounts and Shared Principal Collections. To the extent Principal Shortfalls for series designated to receive Shared Transferor Principal Collections exceed Shared Principal Collections allocable to each of these series and Shared Transferor Principal Collections, for any monthly period, Shared Transferor Principal Collections will be allocated pro rata among the applicable series in group one based on the remaining Principal Shortfalls for each of these series. DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS The Investor Default Amount represents the series' share of losses from the trust portfolio. On each distribution date, the servicer will calculate the "Investor Default Amount" by multiplying: o the Floating Investor Percentage for that month, by o the "Defaulted Amount," which is the total amount of principal receivables (other than ineligible receivables) in the trust that were charged-off for that month. If the Investor Default Amount exceeds the amount of finance charge collections allocated to fund this amount for the prior month, then the Invested Amount will be reduced by the excess. The Invested Amount will also be reduced by the amount of any Reallocated Principal Collections used to cover any Investor Default Amounts. In no event, however, will the Invested Amount be reduced below zero. Reductions in the Invested Amount from both of these items may be reimbursed from subsequent finance charge collections allocated for reimbursement, if available. If the Invested Amount is reduced to zero, your series will not receive any further allocations of finance charge and principal collections. PRINCIPAL FUNDING ACCOUNT The indenture trustee will establish and maintain with an eligible institution a segregated trust account held for the benefit of the noteholders to serve as the "Principal Funding Account." During the controlled accumulation period, the indenture trustee at the direction of the servicer will transfer Available Principal Collections from the collection account to the principal funding account as described under "-Application of Collections" in this prospectus supplement. Funds on deposit in the principal funding account will be invested to the following distribution date by the indenture trustee at the direction of the servicer in eligible investments. Investment earnings (net of investment losses and expenses) on funds on deposit in the principal funding account (the "Principal Funding Investment Proceeds") will be deposited in the collection account and included in Available Finance Charge Collections for the related interest period. If, for any distribution date, the Principal Funding Investment Proceeds are less than the sum of: (a) the product of o the balance of the principal funding account, up to the outstanding principal balance of the Class A notes, on the record date immediately preceding that distribution date, o the Class A note interest rate for the related interest period and o the number of days in the related interest period divided by 360, plus (b) the product of o the balance of the principal funding account in excess of the outstanding principal balance of the Class A notes on the record date immediately preceding that distribution date, o the Class B note interest rate for the related interest period and o the number of days in the related interest period divided by 360, then the indenture trustee will withdraw the shortfall, called the "Reserve Draw Amount," to the extent required and available, from the reserve account and deposit it in the collection account for use as Available Finance Charge Collections. RESERVE ACCOUNT The indenture trustee will establish and maintain with an eligible institution a segregated trust account held for the benefit of the noteholders to serve as the "Reserve Account." The reserve account is established to assist with the subsequent distribution of interest on the notes during the controlled accumulation period and on the first distribution date with respect to the early amortization period. On each distribution date from and after the reserve account funding date, but prior to the termination of the reserve account, the indenture trustee, acting pursuant to the servicer's instructions, will apply Available Finance Charge Collections and Excess Finance Charge Collections allocated to the Series [ ]-[ ] notes (to the extent described above under "-Application of Collections -Payment of Interest, Fees and Other Items") to increase the amount on deposit in the reserve account (to the extent that amount is less than the Required Reserve Account Amount). The "Reserve Account Funding Date" will be the distribution date with respect to the monthly period which commences no later than three months prior to the commencement of the controlled accumulation period, or an earlier date as the servicer may determine. The "Required Reserve Account Amount" for any distribution date on or after the reserve account funding date will be equal to (a) [ ]% of the outstanding principal balance of the Class A notes or (b) any other amount designated by the transferor; except that if the designation is of a lesser amount, the transferor will provide the servicer and the indenture trustee with written confirmation that the designation will not result in the reduction or withdrawal by any rating agency of its rating of any outstanding series or class and the transferor will deliver to the indenture trustee a certificate of an authorized officer of the transferor to the effect that, based on the facts known to that officer at the time, in the reasonable belief of the transferor, the designation will not cause a pay out event or an event that, after the giving of notice or the lapse of time, would cause a pay out event to occur with respect to Series [ ]-[ ]. On each distribution date, after giving effect to any deposit to be made to, and any withdrawal to be made from, the reserve account on that distribution date, the indenture trustee will withdraw from the reserve account an amount equal to the excess, if any, of the amount on deposit in the reserve account over the Required Reserve Account Amount, will deposit the excess in the spread account to the extent that funds available in the spread account are less than the Required Spread Account Amount and will distribute any remaining excess to the holders of the transferor certificates. Any amounts withdrawn from the reserve account and deposited in the spread account as described above will be available for distribution only to the holders of the Class C notes. Any amounts withdrawn from the reserve account and distributed to the holders of the transferor certificates as described above will not be available for distribution to the noteholders. So long as the reserve account is not terminated as described below, all amounts on deposit in the reserve account on any distribution date (after giving effect to any deposits to, or withdrawals from, the reserve account to be made on that distribution date) will be invested to the following distribution date by the indenture trustee at the direction of the servicer in eligible investments. The interest and other investment income (net of investment expenses and losses) earned on these investments will be retained in the reserve account (to the extent the amount on deposit is less than the Required Reserve Account Amount) or deposited in the collection account and treated as Available Finance Charge Collections. On or before each distribution date with respect to the controlled accumulation period and on the first distribution date with respect to the early amortization period, a withdrawal will be made from the reserve account, and the amount of this withdrawal will be deposited in the collection account and included as Available Finance Charge Collections, as provided in the Series [ ]-[ ] indenture supplement, for that distribution date in an aggregate amount equal to the least of (a) the amount then on deposit in the reserve account with respect to that distribution date, (b) the Required Reserve Account Amount and (c) the reserve draw amount with respect to that distribution date. However, the amount of the withdrawal will be reduced to the extent that funds otherwise would be available to be deposited in the reserve account on that distribution date. The reserve account will be terminated upon the earliest to occur of: o the first distribution date for the early amortization period; o the expected principal payment date; and o the termination of the trust. Upon the termination of the reserve account, all amounts on deposit in the reserve account (after giving effect to any withdrawal from the reserve account on that date as described above) will be deposited in the spread account to the extent that funds available in the spread account are less than the Required Spread Account Amount and any remaining amounts will be distributed to the holders of the transferor certificates. Any amounts withdrawn from the reserve account and deposited in the spread account as described above will be available for distribution only to the holders of the Class C notes. Any amounts withdrawn from the reserve account and distributed to the holders of the transferor certificates as described above will not be available for distribution to the noteholders. SPREAD ACCOUNT The servicer will establish and maintain with an eligible institution the spread account as a segregated account held as security for the benefit of the Class C noteholders (the "Spread Account"). Amounts on deposit in the spread account will be used (a) to fund shortfalls in interest payments on the Class C notes and (b) on the Series [ ]-[ ] termination date, to fund any shortfall in payment of the outstanding principal balance of the Class C notes. The spread account initially will not be funded, but will be funded by (a) Available Finance Charge Collections and Excess Finance Charge Collections, as described above under "-Application of Collections -Payment of Interest, Fees and Other Items," and (b) amounts, if any, withdrawn from the reserve account to be treated as Available Finance Charge Collections, as described above under "-Reserve Account," and deposited into the spread account on any distribution date to the extent that the funds available in the spread account are less than the Required Spread Account Amount on that distribution date. The "Required Spread Account Amount" will be determined on each distribution date, and, in general, for any date of determination, will be equal to the product of (a) the Spread Account Percentage in effect on the date of determination and (b) the initial Invested Amount. However, as long as no event of default for your series has occurred and is continuing, the Required Spread Account Amount will not exceed the outstanding principal balance of the Class C Notes minus the excess, if any, of the principal funding account balance over the sum of the outstanding principal balances of the Class A notes and the Class B notes on the date of determination. Once an event of default for your series occurs and is continuing, the Required Spread Account Amount for any distribution date will automatically increase to the sum of (a) the amount on deposit in the spread account on that distribution date plus (b) Available Finance Charge Collections and Excess Finance Charge Collections for that distribution date available immediately after funding the reserve account plus (c) amounts withdrawn from the reserve account to be treated as Available Finance Charge Collections, as described above under "-Reserve Account." However, following an event of default for your series, if the maturity of your notes is not accelerated, the increase in the Required Spread Account Amount will be limited to an amount equal to the outstanding principal amount of your series of notes. "Spread Account Percentage" will be determined as follows: IF THE QUARTERLY EXCESS SPREAD PERCENTAGE IS GREATER THEN, THE SPREAD ACCOUNT THAN OR EQUAL TO: AND LESS THAN: PERCENTAGE WILL EQUAL: [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% However, if a pay out event (other than a pay out event resulting from the occurrence of an event of default) for Series [ ]-[ ] has occurred, the Spread Account Percentage will be [ ]%. After the Spread Account Percentage has been increased above zero as specified in the table above, it will remain at the specified percentage until: (a) further increased to a higher required percentage as specified above, or (b) the distribution date on which the Quarterly Excess Spread Percentage has increased to a level above that for the then current Spread Account Percentage, in which case the Spread Account Percentage will be decreased to the appropriate percentage as specified above (or, if the Quarterly Excess Spread Percentage is greater than or equal to [ ]%, the Spread Account Percentage will be zero and the Required Spread Account Amount will be zero). However, if a pay out event (other than a pay out event resulting from the occurrence of an event of default) with respect to Series [ ]-[ ] has occurred, the Spread Account Percentage will equal [ ]% (as provided in the definition of Spread Account Percentage above) and may not be subsequently reduced. The "Quarterly Excess Spread Percentage" will be determined as follows: For the [Month 1] 20[ ] distribution date: The Modified Excess Spread Percentage. For the [Month 2] 20[ ] distribution date: The Modified Excess Spread Percentage for the first monthly period, plus the Excess Spread Percentage for the [Month 1] 20[ ] monthly period . For the [Month 3] 20[ ] distribution date: The Modified Excess Spread Percentage for the first monthly period, plus the Excess Spread Percentage for the [Month 1] 20[ ]monthly period, plus the Excess Spread Percentage for the [Month 2] 20[ ] monthly period. For each following distribution date: The sum of the Excess Spread Percentages for the 3 prior monthly periods. The "Excess Spread Percentage" for any monthly period will be determined as follows: o during the controlled accumulation period, but only if the amount on deposit in the reserve account is greater than or equal to the Required Reserve Account Amount: o Available Finance Charge Collections for that monthly period available immediately after covering Class A's portion of the Investor Default Amount times 12, divided by o The Adjusted Invested Amount on the first day of that monthly period o in all other cases: o Available Finance Charge Collections for that monthly period available immediately after covering Class A's portion of the Investor Default Amount times 12, divided by o The Invested Amount on the first day of that monthly period. The "Modified Excess Spread Percentage" will be calculated for the first monthly period in accordance with the Series [ ]-[ ] indenture supplement based on collections of finance charge receivables for that monthly period in relation to the amount of interest and servicing fee accrued for the first distribution date. Funds on deposit in the spread account will be invested at the direction of the servicer in eligible investments. For purposes of the spread account, the reference in the definition of eligible investments to a rating in the "highest rating category" refers to a rating of at least A-2 by Standard & Poor's, P-2 by Moody's or F2 by Fitch. Investment earnings (net of losses and investment expenses) will, except as otherwise indicated in this prospectus supplement, not be deposited into the spread account and will be paid to the holders of the transferor certificates. However, after an event of default relating to your series of notes, these investment earnings will be available for payment to holders of the Class C notes. SPREAD ACCOUNT DISTRIBUTIONS If on any distribution date, the interest to be paid on the Class C notes exceeds the amount allocated to pay that interest, the indenture trustee, at the instruction of the servicer, will withdraw from the spread account the lesser of (1) the amount on deposit in the spread account (including investment earnings to the extent necessary to fund that excess) and (2) the amount of the excess, and will deposit that amount into the collection account for payment of interest on the Class C notes. On the Series [ ]-[ ] termination date, funds available in the spread account (after giving effect to any withdrawals to be made as discussed in the preceding paragraph) will be used to fund any shortfall in the payment of the outstanding principal balance of the Class C notes. Funds on deposit in the spread account on any distribution date in excess of the Required Spread Account Amount on that date will be paid to the holders of the transferor certificates. On the date on which all amounts due to the Class C noteholders from the spread account have been paid in full, all amounts, if any, then remaining in the spread account will be distributed to the holders of the transferor certificates. ISSUANCE OF ADDITIONAL NOTES The Series [ ]-[ ] indenture supplement provides that, from time to time during the revolving period, the transferor may, subject to conditions described below, cause the trust to issue additional notes of Series [ ]-[ ](each issuance, an "Additional Issuance"). When issued, the additional notes of each class will be identical in all respects to the other outstanding notes of that class and will be equally and ratably entitled to the benefits of the transfer and servicing agreement, the indenture and the Series [ ]-[ ] indenture supplement without preference, priority or distinction. In connection with each additional issuance, the outstanding principal amounts of each class of notes and the series enhancement will be increased proportionately. The additional series enhancement provided in connection with an additional issuance may take the form of a letter of credit, the establishment of a cash collateral account, the purchase of interest rate caps or swaps and/or another form of series enhancement, provided that the form and amount of additional series enhancement will not cause a reduction or withdrawal by any rating agency of its rating of any outstanding series or class. Following an additional issuance, the respective portions of the series enhancement that are for the benefit of the noteholders will remain the same, as a percentage of the total series enhancement, as the respective proportions in effect on the closing date. The Controlled Accumulation Amount also will be increased proportionately to reflect the principal amount of additional notes. In order to issue additional notes, several conditions must be satisfied, including: o notice to the indenture trustee, the owner trustee, the servicer and any series enhancer of the issuance and the date upon which it is to occur; o after giving effect to the additional issuance, the total amount of principal receivables must at least equal the Required Minimum Principal Balance, and the Transferor Interest must equal or exceed the Required Transferor Interest; o delivery to the indenture trustee of any additional series enhancement agreement related to the additional issuance, executed by each of the parties to the series enhancement agreement; o delivery to the indenture trustee of written confirmation that the additional issuance will not result in the reduction or withdrawal by any rating agency of its rating of any outstanding series or class; o delivery to the indenture trustee of a certificate of an authorized officer of the transferor to the effect that, in the transferor's reasonable belief, the issuance will not have a material adverse effect on the interests of the noteholders at the date of issuance or at any future date; o as of the date of the additional issuance, all amounts due to the Series [ ]-[ ] noteholders must have been paid, and there must not be any unreimbursed Investor Charge-Offs; o the excess of the principal amount of the additional notes over their issue price shall not exceed the maximum amount permitted under the Code without the creation of original issue discount; and o delivery by the transferor to the indenture trustee of an opinion of counsel acceptable to the indenture trustee that, for federal income tax purposes, (1) the issuance will not adversely affect the tax characterization as debt of notes of any outstanding series or class that were characterized as debt at the time of their issuance; (2) the new issuance will not cause the trust to be deemed to be an association (or publicly traded partnership) taxable as a corporation; and (3) the new issuance will not cause or constitute an event in which gain or loss would be recognized by any noteholder. There are no restrictions on the timing or amount of any additional issuance, provided that the conditions described above are met. As of the date of any additional issuance, the Invested Amount will be increased to reflect the initial principal balance of the additional notes of each class. PAIRED SERIES Your series of notes may be paired with one or more series of notes issued at a later time once the controlled accumulation period or the early amortization period for your series begins. We call each of these later issued series a "Paired Series." All or a portion of a paired series may be pre-funded with an initial deposit to a funding account that is for the sole benefit of the paired series; in the alternative, a paired series may have a principal amount that can be increased. Once your series is paid in full, if there have been no unreimbursed investor charge-offs for any paired series, the invested amount of the paired series will be increased by an amount up to the full Invested Amount of your series. The issuance of the paired series will be subject to the conditions described under "Description of the Notes -New Issuances" in the accompanying prospectus. We cannot assure you that the terms of any paired series will not have an impact on the calculation of the Investor Percentage or the timing or amount of payments received by you as a Series [ ]-[ ] noteholder. The extent to which the timing or amount of payments received by you may be affected will depend on many factors, only one of which is a change in the calculation of the Investor Percentage. PAY OUT EVENTS As described above, the revolving period will continue through [ ], 200 (unless that date is postponed as described under "-Postponement of Controlled Accumulation Period" in this prospectus supplement), unless a pay out event occurs prior to that date. A "Pay Out Event" refers to any of the following events: (a) failure by the transferor (1) to make any payment or deposit on the date required under the transfer and servicing agreement, the indenture or the [ ]-[ ] indenture supplement (or within the applicable grace period which shall not exceed five days) or (2) to observe or perform in any material respect any other covenants or agreements of the transferor set forth in the transfer and servicing agreement, the indenture or the [ ]-[ ] indenture supplement, which failure has a material adverse effect on the Series [ ]-[ ] noteholders and which continues unremedied for a period of 60 days after written notice of the failure, requiring the same to be remedied, and continues to materially and adversely affect the interests of the noteholders for the designated period; (b) any representation or warranty made by the transferor in the transfer and servicing agreement, the indenture or the Series [ ]-[ ] indenture supplement, or any information required to be given by the transferor to the indenture trustee to identify the accounts proves to have been incorrect in any material respect when made or delivered and which continues to be incorrect in any material respect for a period of 60 days after written notice of the failure, requiring the same to be remedied, and as a result of which the interests of the noteholders are materially and adversely affected and continue to be materially and adversely affected for the designated period; except that a pay out event pursuant to this subparagraph (b) will not occur if the transferor has accepted reassignment of the related receivable or all related receivables, if applicable, during the designated period in accordance with the provisions of the transfer and servicing agreement; (c) a failure by the transferor to convey receivables in additional accounts or participations to the trust within 5 business days after the date required by the transfer and servicing agreement; (d) any servicer default occurs which would have a material adverse effect on the Series [ ]-[ ] noteholders; (e) the average of the Portfolio Yields for any three consecutive monthly periods is less than the average of the Base Rates for the same monthly periods; (f) insufficient moneys are available to pay in full the outstanding principal balances of all the Series [ ]-[ ] notes on the expected principal payment date; (g) bankruptcy, insolvency, liquidation, conservatorship, receivership or similar events relating to the transferor (including any additional transferor) or the originator; (h) the transferor is unable for any reason to transfer receivables to the trust in accordance with the provisions of the transfer and servicing agreement; (i) the trust becomes subject to regulation as an "investment company" within the meaning of the Investment Company Act of 1940, as amended; or (j) an event of default for Series [ ]-[ ] occurs under the indenture. In the case of any event described in clause (a), (b), (d) or (f) above, a pay out event will be deemed to have occurred with respect to the notes only if, after any applicable grace period, either the indenture trustee or the Series [ ]-[ ] noteholders evidencing interests aggregating not less than 50% of the aggregate unpaid principal amount of the Series [ ]-[ ] notes, by written notice to the transferor and the servicer (and to the indenture trustee if given by the Series [ ]-[ ] noteholders), declare that a pay out event has occurred with respect to the Series [ ]-[ ] notes as of the date of the notice. In the case of any event described in clause (g), (h) or (i), a pay out event with respect to all series then outstanding, and in the case of any event described in clause (c), (e) or (j), a pay out event with respect to only the Series [ ]-[ ] notes, will occur without any notice or other action on the part of the indenture trustee or the Series [ ]-[ ] noteholders immediately upon the occurrence of the event. On the date on which a pay out event is deemed to have occurred, the early amortization period will begin. See "Description of the Notes -Pay Out Events" in the accompanying prospectus for an additional discussion of the consequences of an insolvency, conservatorship or receivership of the transferor. The term "Base Rate" means, with respect to any monthly period, the annualized percentage equivalent of a fraction: o the numerator of which is the sum of the Monthly Interest and the Monthly Servicing Fee, each for the related distribution date; and o the denominator of which is the Invested Amount as of the close of business on the last day of that monthly period. The term "Portfolio Yield" means, with respect to any monthly period, the annualized percentage equivalent of a fraction: o the numerator of which is the sum of collections of finance charge receivables, Excess Finance Charge Collections, Principal Funding Investment Proceeds and amounts withdrawn from the reserve account, if any, deposited in the collection account and allocable to the Series [ ]-[ ] notes for that monthly period, calculated on a cash basis after subtracting the Investor Default Amount for that monthly period; and o the denominator of which is the Invested Amount as of the close of business on the last day of that monthly period. EVENTS OF DEFAULT The events of default for Series [ ]-[ ], as well as the rights and remedies available to the indenture trustee and the Series [ ]-[ ] noteholders when an event of default occurs, are described under "The Indenture -Events of Default; Rights Upon Event of Default" in the accompanying prospectus. If an event of default for Series [ ]-[ ] occurs, the indenture trustee or the holders of a majority of the then-outstanding principal balance of the Series [ ]-[ ] notes may declare the Series [ ]-[ ] notes to be immediately due and payable. If the Series [ ]-[ ] notes are accelerated, you may receive principal prior to the expected principal payment date for your notes. SERVICING COMPENSATION AND PAYMENT OF EXPENSES The share of the servicing fee allocable to the Invested Amount with respect to any distribution date (the "Monthly Servicing Fee") will be equal to one-twelfth of the product of (a) [ ]% and (b) (1) the Adjusted Invested Amount as of the last day of the monthly period preceding that distribution date, minus (2) the product of the amount, if any, on deposit in the special funding account as of the last day of the monthly period preceding that distribution date and the Investor Percentage of collections of finance charge receivables with respect to that monthly period. However, with respect to the first distribution date, the monthly servicing fee will equal $[ ]. The servicer will pay from its servicing compensation expenses incurred in connection with servicing the receivables including, without limitation, payment of the fees and disbursements of the indenture trustee and independent certified public accountants and other fees which are not expressly stated in the transfer and servicing agreement, the indenture or the Series [ ]-[ ] indenture supplement to be payable by the trust or the noteholders other than federal, state and local income and franchise taxes, if any, of the trust. REPORTS TO NOTEHOLDERS On each distribution date, the paying agent, on behalf of the indenture trustee will forward to each noteholder of record, a statement prepared by the servicer setting forth the items described in "Description of the Notes -Reports to Noteholders" in the accompanying prospectus. ERISA CONSIDERATIONS The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Code impose requirements on employee benefit plans and other plans and arrangements, including individual retirement accounts and annuities, Keogh plans and collective investment funds or insurance company general or separate accounts in which the plans, accounts or arrangements are invested, that are subject to the fiduciary responsibility provisions of ERISA and/or Section 4975 of the Code (collectively, "Plans"), and on persons who are fiduciaries with respect to Plans, in connection with the investment of "plan assets" of any Plan ("Plan Assets"). ERISA generally imposes on Plan fiduciaries general fiduciary requirements, including those of investment prudence and diversification and the requirement that a Plan's investments be made in accordance with the documents governing the Plan. ERISA and Section 4975 of the Code prohibit a broad range of transactions involving Plan Assets and persons ("parties in interest" under ERISA and "disqualified persons" under the Code, collectively, "Parties In Interest") who have specified relationships to a Plan or its Plan Assets, unless a statutory or administrative exemption is available. Parties in Interest that participate in a prohibited transaction may be subject to a penalty imposed under ERISA and/or an excise tax imposed pursuant to Section 4975 of the Code, unless a statutory or administrative exemption is available. These prohibited transactions generally are set forth in Section 406 of ERISA and Section 4975 of the Code. Subject to the considerations described below and in the accompanying Prospectus, the notes are eligible for purchase with Plan Assets of any Plan. Any fiduciary or other Plan investor considering whether to purchase the notes with Plan Assets of any Plan should determine whether that purchase is consistent with its fiduciary duties and whether that purchase would constitute or result in a non-exempt prohibited transaction under ERISA and/or Section 4975 of the Code because any of the transferor, the servicer, the indenture trustee, the owner trustee or any other party may be Parties in Interest with respect to the investing Plan and may be deemed to be benefiting from the issuance of the notes. If the transferor or the servicer is a Party in Interest with respect to the prospective Plan investor, any fiduciary or other Plan investor considering whether to purchase or hold the notes should consult with its counsel regarding the availability of exemptive relief under U.S. Department of Labor ("DOL") Prohibited Transaction Class Exemption ("PTCE") 96-23 (relating to transactions determined by "in-house asset managers"), 95-60 (relating to transactions involving insurance company general accounts), 91-38 (relating to transactions involving bank collective investment funds), 90-1 (relating to transactions involving insurance company pooled separate accounts) or 84-14 (relating to transactions determined by independent "qualified professional asset managers") or any other prohibited transaction exemption issued by the DOL. A purchaser of the notes should be aware, however, that even if the conditions specified in one or more of the above-referenced exemptions are met, the scope of the exemptive relief provided by the exemption might not cover all acts which might be construed as prohibited transactions. In addition, under DOL Regulation Section 2510.3-101 (the "Plan Asset Regulation"), the purchase with Plan Assets of equity interests in the issuer could, in specified circumstances, cause the receivables and other assets of the issuer to be deemed Plan Assets of the investing Plan which, in turn, would subject the issuer and its assets to the fiduciary responsibility provisions of ERISA and the prohibited transaction provisions of ERISA and Section 4975 of the Code. Nevertheless, because the notes (a) are expected to be treated as indebtedness under local law and will, in the opinion of Special Tax Counsel, be treated as debt, rather than equity, for federal tax purposes (see "Federal Income Tax Consequences -Tax Characterization of the Trust and the Notes - -Treatment of the Notes as Debt" in the accompanying prospectus), and (b) should not be deemed to have any "substantial equity features," purchases of the notes with Plan Assets should not be treated as equity investments and, therefore, the receivables and other assets included as assets of the issuer should not be deemed to be Plan Assets of the investing Plans. Those conclusions are based, in part, upon the traditional debt features of the notes, including the reasonable expectation of purchasers of the notes that the notes will be repaid when due, as well as the absence of conversion rights, warrants and other typical equity features. The notes may not be purchased or held by any Plan, or any person investing Plan Assets of any Plan, if any of the transferor, the servicer, the indenture trustee, the owner trustee or any of their respective affiliates (a) has investment or administrative discretion with respect to the Plan Assets used to effect the purchase; (b) has authority or responsibility to give, or regularly gives, investment advice with respect to the Plan Assets, for a fee and pursuant to an agreement or understanding that the advice (1) will serve as a primary basis for investment decisions with respect to the Plan Assets, and (2) will be based on the particular investment needs of that Plan; or (c) unless PTCE 95-60, 91-38 or 90-1 is applicable, is an employer maintaining or contributing to that Plan. Each purchaser or holder of the notes or any interest in the notes will be deemed to have represented by its purchase and holding that it is not subject to the foregoing limitation. Any fiduciary or other Plan investor considering whether to purchase any notes on behalf of or with Plan Assets of any Plan should consult with its counsel and refer to this prospectus supplement for guidance regarding the ERISA considerations applicable to the notes offered by this prospectus supplement and the accompanying prospectus. UNDERWRITING Subject to the terms and conditions set forth in an underwriting agreement as supplemented by a terms agreement relating to the Class A notes (together, the "Class A Underwriting Agreement") between the transferor and the Class A underwriters named below (the "Class A Underwriters"), the terms and conditions set forth in an underwriting agreement as supplemented by a terms agreement relating to the Class B notes (together, the "Class B Underwriting Agreement") between the transferor and the Class B underwriters named below (the "Class B Underwriters") and the terms and conditions set forth in an underwriting agreement as supplemented by a terms agreement relating the Class C notes (together, the "Class C Underwriting Agreement" and, together with the Class A underwriting agreement and the Class B underwriting agreement, the "Underwriting Agreement") between the transferor and the Class C underwriters named below (the "Class C Underwriters" and, together with the Class A underwriters and the Class B underwriters, the "UNDERWRITERS"), the transferor has agreed to sell to the underwriters, and each of the underwriters has severally agreed to purchase, the principal amount of the notes set forth opposite its name: UNDERWRITERS PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF CLASS A NOTES OF CLASS B NOTES OF CLASS C NOTES Total.................. $ In the Class A underwriting agreement, the Class A underwriters have agreed, subject to the terms and conditions set forth in that agreement, to purchase all of the Class A notes offered hereby if any of the Class A notes are purchased. In the Class B underwriting agreement, the Class B underwriters have agreed, subject to the terms and conditions set forth in that agreement, to purchase all of the Class B notes offered hereby if any of the Class B notes are purchased. In the Class C underwriting agreement, the Class C underwriters have agreed, subject to the terms and conditions set forth in that agreement, to purchase all of the Class C notes offered hereby if any of the Class C notes are purchased. The Class A underwriters propose initially to offer the Class A notes to the public at [ ]% of their principal amount and to dealers at that price less concessions not in excess of [ ]% of the principal amount of the Class A notes. The Class A underwriters may allow, and the dealers may reallow, concessions not in excess of [ ]% of the principal amount of the Class A notes to brokers and dealers. After the initial public offering, the public offering price and other selling terms may be changed by the Class A underwriters. The Class B underwriters propose initially to offer the Class B notes to the public at [ ]% of their principal amount and to dealers at that price less concessions not in excess of [ ]% of the principal amount of the Class B notes. The Class B underwriters may allow, and the dealers may reallow, concessions not in excess of [ ]% of the principal amount of the Class B notes to brokers and dealers. After the initial public offering, the public offering price and other selling terms may be changed by the Class B underwriters. The Class C underwriters propose initially to offer the Class C notes to the public at [ ]% of their principal amount and to dealers at that price less concessions not in excess of [ ]% of the principal amount of the Class C notes. The Class C underwriters may allow, and the dealers may reallow, concessions not in excess of [ ]% of the principal amount of the Class C notes to brokers and dealers. After the initial public offering, the public offering price and other selling terms may be changed by the Class C underwriters. We will receive proceeds of approximately $[] from the sale of the notes (representing [ ]% of the principal amount of each Class A note, [ ]% of the principal amount of each Class B note and [ ]% of the principal amount of each Class C note) after paying the underwriting discount of $[] (representing [ ]% of the principal amount of each Class A note, [ ]% of the principal amount of each Class B note and [ ]% of the principal amount of each Class C note). Additional offering expenses are estimated to be $[]. The transferor will indemnify the underwriters against liabilities, including liabilities under the Securities Act, or contribute to payments the underwriters may be required to make. The underwriters may engage in over-allotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids with respect to the notes in accordance with Regulation M under the Exchange Act. Over-allotment transactions involve syndicate sales in excess of the offering size, which creates a syndicate short position. Stabilizing transactions permit bids to purchase the notes so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the notes in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the notes originally sold by that syndicate member are purchased in a syndicate covering transaction. Over-allotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids may cause the prices of the notes to be higher than they would otherwise be in the absence of those transactions. Neither the transferor nor the underwriters represent that the underwriters will engage in any of these transactions or that those transactions, once commenced, will not be discontinued without notice at any time. The transferor is an affiliate of the underwriters. LEGAL MATTERS Certain legal matters relating to the issuance of the notes will be passed upon for the transferor and the underwriters by Stroock & Stroock Lavan LLP, New York, New York, special counsel to the transferor. INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT Terms Page Accumulation Shortfall........................................................37 Additional Issuance...........................................................45 Adjusted Invested Amount......................................................33 Available Finance Charge Collections..........................................27 Available Principal Collections...............................................28 Base Rate.....................................................................49 Business Day..................................................................27 Class A Additional Interest...................................................27 Class A Monthly Interest......................................................35 Class A Note Interest Rate....................................................26 Class A Underwriters..........................................................52 Class A Underwriting Agreement................................................52 Class B Additional Interest...................................................27 Class B Monthly Interest......................................................36 Class B Note Interest Rate....................................................26 Class B Underwriters..........................................................52 Class B Underwriting Agreement................................................52 Class C Additional Interest...................................................27 Class C Monthly Interest......................................................36 Class C Note Interest Rate....................................................26 Class C Underwriters..........................................................52 Class C Underwriting Agreement................................................52 Closing Date..................................................................25 Controlled Accumulation Amount................................................37 Controlled Accumulation Period................................................28 Controlled Deposit Amount.....................................................37 Defaulted Amount..............................................................39 Discount Percentage...........................................................19 Distribution Date.............................................................27 Early Amortization Period.....................................................29 ERISA.........................................................................50 Excess Finance Charge Collections.............................................38 Excess Spread Percentage......................................................44 Expected Principal Payment Date...............................................23 Fixed Investor Percentage.....................................................32 Floating Investor Percentage..................................................31 Interchange...................................................................17 Interest Period...............................................................26 Invested Amount...............................................................33 Investor Default Amount.......................................................39 LIBOR Determination Date......................................................26 London Business Day...........................................................26 Modified Excess Spread Percentage.............................................44 Monthly Interest..............................................................36 Monthly Period................................................................28 Monthly Principal.............................................................37 Monthly Principal Reallocation Amount.........................................34 Monthly Servicing Fee.........................................................50 Originator....................................................................24 Paired Series.................................................................47 Parties In Interest...........................................................50 Pay Out Event.................................................................47 Payments of Principal.........................................................36 Plan Asset Regulation.........................................................51 Plan Assets...................................................................50 Plans.........................................................................50 Portfolio Yield...............................................................49 Principal Funding Account.....................................................39 Principal Funding Investment Proceeds.........................................39 Principal Shortfalls..........................................................38 Quarterly Excess Spread Percentage............................................43 Reallocated Principal Collections.............................................34 Record Date...................................................................26 Recoveries....................................................................18 Required Minimum Principal Balance............................................19 Required Reserve Account Amount...............................................40 Required Spread Account Amount................................................42 Required Transferor Interest..................................................19 Required Transferor Percentage................................................19 Reserve Account...............................................................40 Reserve Account Funding Date..................................................40 Reserve Draw Amount...........................................................40 Revolving Period..............................................................28 Series 200[ ]-[ ] Termination Date............................................24 Series 200_-__ Indenture Supplement...........................................25 Series 200_-__ Notes..........................................................25 Servicer......................................................................24 Shared Principal Collections..................................................38 Shared Transferor Principal Collections.......................................39 Spread Account................................................................42 Spread Account Percentage.....................................................43 Telerate Page 3750............................................................27 Transferor Interest...........................................................19 Trust Portfolio...............................................................18 Underwriting Agreement........................................................52 ANNEX I OTHER SERIES ISSUED AND OUTSTANDING The table below sets forth the principal characteristics of the other series previously issued by the trust that are currently outstanding, all of which are in group one. For more specific information with respect to any series, any prospective investor should contact [ ] at [ ]. [ ] will provide, without charge, to any prospective purchaser of the notes, a copy of the disclosure documents for any previous publicly-issued series. [1. Series [ ]-[ ] Current Class A Invested Amount......$ Class A note interest rate...........[one-month] LIBOR plus []% per annum Initial Class B Invested Amount......$ Current Class B Invested Amount......$ Class B note interest rate...........[one-month] LIBOR plus []% per annum Initial Class C Invested Amount......$ Current Class C Invested Amount......$ Class C note interest rate...........[one-month] LIBOR plus []% per annum [Controlled Accumulation Amount......$*] [Expected principal payment date.....[] distribution date] Annual servicing fee percentage......[]% per annum [Enhancement for the Class A notes...Subordination of Class B and Class C notes] [Enhancement for the Class B notes...Subordination of Class C notes] [Enhancement for the Class C notes...spread account] Series 200_-__ termination date......[] distribution date Series Issuance Date................. , 20[] Initial Class A Invested Amount......$ ______________ * Subject to change if the commencement of the accumulation period or controlled accumulation period, as applicable, is delayed.] The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus date [ ]) $[ ] (APPROXIMATE) ACE SECURITIES CORP. ACE SECURITIES CORP. CARD ACCOUNT MASTER LOAN TRUST [ ]-[ ] ASSET BACKED CERTIFICATES [ ] Seller [ ] Servicer CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The certificates will represent interests in the trust fund only and will not represent interests in or obligations of any other entity. This prospectus supplement may be used to offer and sell the certificates only if accompanied by the prospectus. The sources for payment of the certificates are among other assets, a portfolio of [consumer] [corporate] [revolving] [credit card] [charge card][debit card] receivables generated or to be generated from time to time in a portfolio of [consumer] [corporate] [revolving] [credit card] [charge card][debit card] accounts [owned by the Seller]. Interest [and principal] on the certificates are scheduled to be paid [monthly] on the [ ] day of the month. The first scheduled distribution will be made in [ ]. The Trust will issue: FINAL SCHEDULED PRINCIPAL CERTIFICATE DISTRIBUTION CERTIFICATES BALANCE RATE DATE - ------------ --------- ----------- --------------- A $[ ] [ ]% [ ] B $[ ] [ ]% [ ] Deutsche Banc Alex. Brown will purchase the certificates from the trust at approximately [ ]% of the principal amount of the certificates. Deutsche Banc Alex. Brown will offer the certificates from time to time in negotiated transactions or at varying prices which will be determined at the time of sale. The aggregate proceeds to the trust, before deducting expenses payable by or on behalf of the trust estimated at $[ ], will be approximately $[ ]. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE NOTES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNDERWRITER: DEUTSCHE BANK ALEX. BROWN The date of this prospectus supplement is [ ], 20[ ] IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the certificates offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your certificates, and (2) this prospectus supplement, which describes the specific terms of your certificates. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the certificates in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. ____________________ Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the certificates and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the certificates will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. ____________________ We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. Table of Contents PROSPECTUS SUPPLEMENT Summary of Terms..............................................................S- Risk Factors..................................................................S- Maturity Considerations.......................................................S- Master Trust Considerations...................................................S- The Identified Pool...........................................................S- Use of Proceeds...............................................................S- The Seller....................................................................S- The Servicer..................................................................S- The Depositor.................................................................S- Description of the Certificates...............................................S- Erisa Considerations..........................................................S- Legal Investment Considerations...............................................S- Underwriting..................................................................S- Legal Matters.................................................................S- Ratings.......................................................................S- Index of Defined Terms........................................................S- PROSPECTUS Risk Factors.................................................................... The Trusts...................................................................... Trust Assets.................................................................... Series Enhancement.............................................................. Servicing of Receivables........................................................ Certain Matters Regarding the Service........................................... Description of the Notes........................................................ Description of the Certificates................................................. Certain Information Regarding the Securities.................................... Description of the Trust Agreements or Pooling and Servicing Agreements.............................................. Certain Legal Aspects of the Receivables........................................ The Depositor................................................................... Use of Proceeds................................................................. Material Federal Income Tax Consequences........................................ Owner Trusts.................................................................... Grantor Trusts.................................................................. Master Trust.................................................................... Certain State and Local Tax Considerations...................................... ERISA Considerations............................................................ Plan of Distribution............................................................ Legal Matters................................................................... Index of Defined Terms.......................................................... Annex I......................................................................... SUMMARY OF TERMS o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE CERTIFICATES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. o WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. ISSUER ACE Securities Corp. Card Account Master Trust [ ]. SELLER AND ORIGINATOR [ ]. DEPOSITOR ACE Securities Corp., a special purpose Delaware corporation. ACE Securities Corp. will sell the home equity loans to the issuing trust. SERVICER [ ]. TRUSTEE [ ]. CLOSING DATE [ ]. CUT-OFF DATE The close of business on [ ] DISTRIBUTION DATE The [ ] day of each [month] [quarter] [semi-annual period] or if it is not a business day, then the next succeeding business day. The first distribution date for interest will be in [ ]. The first distribution date with respect to principal is expected to occur in [ ]. RECORD DATE With respect to any distribution date, the last business day of the month immediately preceding the calendar month in which a distribution date occurs. THE CERTIFICATES GENERAL On the closing date, the trust will issue the certificates. Each certificate represents an undivided ownership interest in the trust. DENOMINATION The certificates will be offered for purchase in denominations of $[ ] and multiples thereof. BOOK-ENTRY REGISTRATION We will issue the certificates in book-entry form. You will hold your interests through a depository. While the certificates are book-entry they will be registered in the name of the applicable depository, or in the name of the nominee of the depository. Transfers within any depository system will be in accordance with the usual rules and operating procedures of that system. DISTRIBUTIONS TO CERTIFICATEHOLDERS GENERAL You will be entitled to receive payments of interest on each distribution date. The amount of principal you will be entitled to receive will vary. If you hold a certificate on the applicable record date, you will be entitled to receive payments on the related distribution date. INTEREST The interest rate on any distribution date for a certificate will be the interest rate set forth in this prospectus supplement. You can use the following formula to calculate your current interest payment on any distribution date: N - ------ x IR x PB = your interest payment 360 N= [30], [the number of days from the last distribution date (or in the case of the initial distribution date, from [ ]) until the current distribution date]. IR= the applicable per annum interest rate. PB= the principal balance of immediately prior to any distributions on each distribution date. PRINCIPAL On each distribution date, the trustee will distribute principal of the classes of certificates depending on the amortization period and in the manner and priority discussed under the caption "Description of the Certificates - Distributions" in this prospectus supplement. AMORTIZATION PERIOD [CONTROLLED AMORTIZATION PERIOD Unless a rapid amortization period begins, the certificates will have a controlled amortization period. During a controlled amortization period, collections of principal receivables that are allocable to the percentage interest of a series of certificates will be used to make principal distributions in scheduled amounts to the certificateholders entitled to those distributions. The amount to be distributed on any distribution date during the controlled amortization period will be limited to: o an amount equal to [ ], plus o any existing deficit controlled amortization amount arising from prior payment dates. The controlled amortization period will commence at the close of business on [ ] and continue until the earliest of: o the commencement of the rapid amortization period; o payment in full of the certificates; and o the series termination date]. [PRINCIPAL AMORTIZATION PERIOD Unless a rapid amortization period begins, the certificates will have an amortization period during which collections of principal receivables allocable to the percentage interest of the certificates will be used on each payment date to make principal distributions to the holders of the certificates then entitled to distributions. The principal amortization period will commence at the close of business on [ ] and continue until the earliest of: o the commencement of the rapid amortization period; o payment in full of the certificates; and o the series termination date]. [ACCUMULATION PERIOD Unless a rapid amortization period begins, the certificates will have an accumulation period. During an accumulation period, collections of principal receivables allocable to the percentage interest of such certificates will be deposited on the business day immediately prior to each payment date in a principal funding account. The principal funding account is established for the benefit of the holders of the certificates. Amounts on deposit in the principal funding account will be used to make distributions of principal to the holders on the scheduled payment date. The amount to be deposited in the principal funding account on any transfer date will be limited to an amount equal to [ ]. The accumulation period will commence at the close of business on [ ] and continue until the earliest of: o the commencement of the rapid amortization period; o payment in full of the certificates; and o the series termination date]. [RAPID AMORTIZATION PERIOD The rapid amortization period shall run from the day on which an amortization event has occurred, to the earlier of the date on which certificates have been paid in full or the related series termination date. During the rapid amortization period, collections of principal receivables allocable to the percentage interest of a series of certificates will be distributed as principal payments to the holders of the certificates on each payment date. During the rapid amortization period, distributions of principal to holders of the certificates will not be subject to any controlled deposit amount or controlled distribution amount. In addition, upon the commencement of the rapid amortization period, any funds on deposit in a principal funding account will be paid to the holders of certificates on the first payment date in the rapid amortization period. TRUST PROPERTY The trust property is held by the trustee for the benefit of the certificateholders. The trust property includes: o among other assets, a portfolio of [consumer] [corporate] [revolving] [credit card] [charge card] [debit card] receivables generated or to be generated from time to time in a portfolio of [consumer] [corporate] [revolving] [credit card] [charge card] [debit card] accounts [owned by the seller]; o payments on the receivables after the cut-off date (other than payments of interest due on or prior to [ ]); o certain rights of the depositor under a loan purchase agreement; o amounts on deposit in the accounts specified in this prospectus supplement; and o proceeds of the foregoing. THE RECEIVABLES On the closing date, the trust will purchase receivables having an aggregate principal balance of approximately $[ ] as of the initial cut-off date, from the depositor pursuant to the agreement. On and after the closing date, pursuant to the agreement, the depositor will sell, if available, and the trust will purchase, additional receivables from time to time during the funding period specified in this prospectus supplement. We expect the amount of additional receivables to be purchased with moneys in the pre-funding account to have an aggregate principal balance equal to approximately $[ ]. The statistical information presented in this prospectus supplement is with respect to the initial receivables as of the initial cut-off date. Certain of the initial receivables may not be purchased by the trust and other receivables may be purchased by the trust on the closing date. The initial receivables have been selected, and the subsequent receivables will be selected, from the receivables owned or originated by the seller based on the criteria specified in the pooling and servicing agreement and described in this prospectus supplement. After the transfer of subsequent receivables to the trust, the characteristics of the entire pool of receivables included in the trust may vary significantly from those of the initial receivables. The initial receivables will have the following characteristics as of the cut-off date: o number of receivables: [ ] o aggregate principal balance: $[ ] o average principal balance: $[ ] o maximum principal balance: $____ o minimum principal balance: $[ ] o latest maturity date: [ ] o weighted average current interest rate: o current interest rates range: [ ]% to [ ]% o weighted average gross margin: [ ]% (approximate) o gross margin range: [ ]% to [ ]% o weighted average maximum interest rate: o maximum interest rate range: [ ]% to [ ]% o weighted average minimum interest rate: o minimum interest rate range: [ ]% to [ ]% o weighted average remaining term: vmonths (approximate) o remaining term range: [ ]months to [ ] months CREDIT ENHANCEMENT Credit enhancement refers to a mechanism that is intended to protect the holders of certain classes of certificates against losses due to defaults by the borrowers under the home equity loans. The certificates have the benefit of [four] types of credit enhancement: o [a cash collateral account], o [ ] o [ ] o with respect to the class A certificates, subordination of the class B certificates; and OPTIONAL TERMINATION On any date when the adjusted invested amount is less than or equal to [ ]% of the invested amount on the closing date and to the extent certain conditions specified in the agreement are satisfied, the [depositor] [seller] will have the right to purchase the invested amount from the trust. FEDERAL TAX CONSEQUENCES Stroock & Stroock & Lavan LLP has acted as counsel to the depositor and is of the opinion that for federal income tax purposes: o The certificates will be treated as indebtedness, and o The trust will not be classified as an association, or publicly traded partnership, taxable as a corporation. [The trust does not anticipate treating the certificates as being issued with original issue discount.] By your acceptance of a certificate, you will agree to treat your Series [ ]-[ ] certificates as indebtedness for federal, state and local income and franchise tax purposes. See "Material Federal Income Tax Consequences--Certain Certificates Treated As Indebtedness" in the accompanying prospectus for additional information concerning the application of federal income tax laws. ERISA CONSIDERATIONS An employee benefit plan subject to the requirements of the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974, as amended, or ERISA, or the provisions of Section 4975 of the Internal Revenue Code of 1986 as amended, contemplating the purchase of the class A certificates should consult its counsel before making a purchase, and the fiduciary and such legal advisors should consider whether the class A certificates will satisfy all of the requirements of the "publicly offered securities" exemption described herein and the possible application of other ERISA prohibited transaction exemptions described herein. Although the depositor expects that the "publicly offered securities" exemption or the other ERISA prohibited transaction exemptions will apply to certain purchases of the class A certificates by employee benefit plans, there can be no assurance that such exemption will apply to all purchases of the class A certificates by such plans. The class B certificates are not eligible for purchase by plans. SEE "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT. CERTIFICATE RATING Before the certificates can be issued, the trust must obtain the following ratings: CLASS A CERTIFICATES o [the highest rating category by [ ]] CLASS B CERTIFICATES o [One of the four highest rating category by [ ]] RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE NOTES. YOU MAY HAVE DIFFICULTY SELLING YOUR CERTIFICATES.............. The certificates will not be listed on any securities exchange. As a result, if you wish to sell your certificates, you will have to find a purchaser that is willing to purchase your certificates. The underwriter intends to make a secondary market for the offered certificates. The underwriter may do so by offering to buy the offered certificates from investors that wish to sell. However, the underwriter will not be obligated to make offers to buy the offered certificates and may stop making offers at any time. In addition, the prices offered, if any, may not reflect prices that other potential purchasers, were they to be given the opportunity, would be willing to pay. There have been times in the past where there have been very few buyers of similar asset backed securities, and there may be times again in the future. As a result, you may not be able to sell your certificates when you wish to do so or you may not be able to obtain the price you wish to receive. [GEOGRAPHIC CONCENTRATION MAY AFFECT PERFORMANCE..................... Discuss any geographic risks, if applicable] [CONCENTRATION OF CREDIT RISK.......... Discuss impact on Certificateholders of material concentration of credit risk, if applicable.] THE SUBORDINATED CERTIFICATES HAVE A GREATER RISK OF LOSS THAN THE OTHER CERTIFICATES..................... The class B certificates will not be paid any distributions of interest until the class A certificates receive their interest distributions and will not receive any distributions of principal until the class A certificates receive their principal distributions. If the available funds are insufficient to make all of the required distributions on the class A, and class B certificates, the class B certificates will not receive all of their distributions. In addition, losses due to defaults by [ ], will be allocated first to the class B certificates to the extent not covered by excess interest at that time. Any allocation of a loss to class B certificates will reduce the amount of interest and, to the extent not reimbursed from future excess interest, principal they will receive. As a result of the foregoing, the class B certificates will be affected to a larger degree by any losses on the receivables. In addition, following the exercise of the clean-up call, the class B certificates and consequently, may not receive amounts with respect to any losses allocated to the class B certificates that have not been previously reimbursed. THE TRUST ASSETS ARE THE ONLY SOURCE OF PAYMENTS ON THE CERTIFICATES........ All distributions on the certificates will be made from payments by borrowers under the receivables. The trust has no other assets [other than [ ]] to make distributions on the certificates. The receivables are NOT insured or guaranteed by any person. The trust is the only person that is obligated to make distributions on the certificates. The certificates are NOT insured by any governmental agency. CERTIFICATE RATING..................... The rating of the certificates will depend on an assessment by the rating agencies of the receivables. The rating by the rating agencies of the certificates is not a recommendation for you to purchase, hold or sell the certificates, and the rating does not comment as to the market price or suitability for a particular investor. There is no assurance that the ratings will remain in place for any given period of time or that the ratings will not be lowered or withdrawn by the rating agencies. The ratings do not address the possibility that offered certificateholders might realize a lower than anticipated yield. The ratings of the offered certificates do not address the possibility of the imposition of United States withholding tax with respect to non-U.S. persons. No rating of the originator, the servicer or the company is required to maintain the rating of the offered certificates. THE CERTIFICATES ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS.......... The certificates are not suitable investments for any investor that requires a regular or predictable schedule of payments or payment on any specific date. The offered certificates are complex investments that should be considered only by investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment, default and market risk, the tax consequences of an investment, and the interaction of these factors. [THE RECEIVABLES, THE PRE-FUNDING ACCOUNT AND THE RISK OF PREPAYMENT..... On the closing date, the depositor will transfer to the trust the approximately $[ ] of initial receivables and the approximately $[ ] pre-funded amount on deposit in the pre-funding account. If the principal amount of eligible receivables originated by [seller] and acquired by the depositor during the funding period is less than the pre-funded amount, the depositor will have insufficient receivables to sell to the trust on the subsequent transfer dates, resulting in a prepayment of principal to the Certificateholders as described in the following paragraph. [To the extent that amounts on deposit in the pre-funding account have not been fully applied to the conveyance of subsequent receivables to the trust by the end of the funding period, you will receive, on the distribution date on or immediately following the last day of the funding period, a prepayment of principal from amounts remaining in the pre- funding account. We anticipate that the principal amount of subsequent receivables sold to the trust will not be exactly equal to the amount on deposit in the pre-funding account and that therefore there will be at least a nominal amount of principal prepaid to you.] [RISKS ATTENDANT TO INVESTMENTS IN INTEREST-ONLY OR PRINCIPAL-ONLY CERTIFICATES........................... [If certificates are interest-only or principal-only certificates, discuss risks attendant to these types of certificates.]] MATURITY CONSIDERATIONS The Pooling and Servicing Agreement (the "Agreement") and the series supplement to the Agreement (the "Series Supplement" or a "Supplement") provide that holders of Class A Certificates (the "Class A Certificateholders") will not receive payments of principal until the first Distribution Date with respect to the Controlled Amortization Period, which is the [ ] Distribution Date, unless a Pay Out Event shall occur. Class A Certificateholders will receive payments of principal on the [ ] day of each [month] [quarter] [semi-annual period] or if it is not a business day, then the next succeeding business day (the "Distribution Date") following the Monthly Period in which a Pay Out Event occurs (each Distribution Date following a Pay Out Event, a "Special Payment Date") until the Class A Invested Amount has been paid in full or until [ ] (the "Termination Date"). The "Monthly Period" is [the calendar month preceding the Distribution Date]. The holders of Class B Certificates (the "Class B Certificateholders", and together with the Class A Certificateholders, the "Certificateholders")) will not begin to receive payments of principal until the final principal payment on the Class A Certificates has been made. On each Distribution Date with respect to the Class A Accumulation Period, amounts equal to the lesser of: o Available Principal Collections for the related Monthly Period on deposit in the Collection Account, o the sum of the applicable Controlled Accumulation Amount for the Monthly Period and any applicable Deficit Controlled Accumulation Amount, (the "Controlled Deposit Amount") and o the Class A Adjusted Invested Amount will be deposited in the Principal Funding Account until the Principal Funding Account Balance is equal to the Class A Invested Amount. After the Class A Invested Amount has been paid in full, on each Distribution Date with respect to the Class B Accumulation Period amounts equal to the lesser of: o Available Principal Collections for the related Monthly Period on deposit in the Collection Account, o the applicable Controlled Deposit Amount, and o the Class B Adjusted Invested Amount will be deposited in the Principal Funding Account until the Principal Funding Account Balance equals the Class B Invested Amount. See "Description Of The Certificates -- Principal Payments" for a discussion of circumstances under which the commencement of an Accumulation Period may be delayed. On each Distribution Date during the Controlled Amortization Period, the Certificateholders will be entitled to receive monthly payments of principal, until the Certificates have been paid in full, in an amount equal to the lesser of: o Available Principal Collections for the related Monthly Period on deposit in the Collection Account, o the sum of the applicable Controlled Distribution Amount and any applicable Deficit Controlled Amortization Amount, and o the Invested Amount. The [Seller] [Depositor] may, at or after the time at which the [Controlled Amortization Period] [Accumulation Period] commences for Series 200[ ]- [ ] cause the Trust to issue another Series, or some portion of another Series, to the extent that the full principal amount of the other Series is not otherwise outstanding at that time, as a Paired Series with respect to Series 200[ ]- [ ] to be used to finance the increase in the Seller's Interest caused by the accumulation of principal in the Principal Funding Account with respect to Series 200[ ]- [ ]. No assurances can be given as to whether the other Series will be issued and, if issued, the terms of the newly issued Series. Because the terms of the Certificates may vary from the terms of the other series, the Pay Out Events with respect to the series may vary from the Pay Out Events with respect to Series 200[ ]- [ ] and may include Pay Out Events which are unrelated to the status of the Seller, or the Servicer or the Receivables, such as Pay Out Events related to the continued availability and rating of specific providers of enhancement to the other Series. If a Pay Out Event does occur with respect to any Paired Series prior to the payment in full of the Certificates, the final payment of principal to the Certificateholders may be delayed. Should a Pay Out Event occur with respect to the Certificates and the Rapid Amortization Period commence, o any amount on deposit in the Principal Funding Account will be paid to the Certificateholders on the first Special Payment Date, and the Certificateholders will be entitled to receive Available Principal Collections on each Distribution Date with respect to the Rapid Amortization Period or following the Expected Final Payment Date, as the case may be, as described in this prospectus supplement until the Class A Invested Amount and Class B Invested Amount are paid in full or until the Termination Date occurs, and o any amount on deposit in the Excess Funding Account will be released and treated as Shared Principal Collections to the extent needed to cover principal payments due to or for the benefit of any Series entitled to the benefits of Shared Principal Collections. In addition, on the first Special Payment Date following the occurrence of a Pay Out Event, after giving effect to any payment of principal on that date, (a) an amount equal to the lesser of: (i) the Available Shared Collateral Amount, after giving effect to any withdrawal from the Cash Collateral Account on that date of amounts to fund the Class A Required Amount and the Class B Required Amount, and (ii) the unpaid principal amount of the Class A Certificates, less the Principal Funding Account Balance allocable to the Class A Certificates, will be withdrawn from the Cash Collateral Account and distributed to the Class A Certificateholders as a payment of principal of the Class A Certificates, and (b) an amount equal to the lesser of: (i) the remainder of the Available Cash Collateral Amount, and (ii) the unpaid principal amount of the Class B Certificates, less the Principal Funding Account Balance, if any, allocable to the Class B Certificates, will be withdrawn from the Cash Collateral Account and distributed to the Class B Certificateholders as a payment of principal of the Class B Certificates. The ability of Certificateholders to receive payments of principal on the applicable Expected Final Payment Date on each Distribution Date during the Controlled Amortization Period depends on the payment rates on the Receivables, the amount of outstanding Receivables, delinquencies, charge-offs and new borrowings on the Accounts, the potential issuance by the Trust of additional Series and the availability of Shared Principal Collections. The amount of outstanding Receivables and the delinquencies, charge-offs and new borrowings on the Accounts may vary from month to month due to seasonal variations, the availability of other sources of credit, legal factors, general economic conditions and spending and borrowing habits of individual accountholders. Monthly payment rates on the Receivables may vary because, among other things, accountholders may fail to make a required minimum payment, may only make payments as low as the minimum required amount or may make payments as high as the entire outstanding balance. Monthly payment rates may also vary due to seasonal purchasing and payment habits of accountholders and to changes in any terms of rebate programs in which accountholders participate. The Depositor cannot predict, and no assurance can be given, as to the accountholder monthly payment rates that will actually occur in any future period, as to the actual rate of payment of principal of the Certificates or whether the terms of any previously or subsequently issued Series might have an impact on the amount or timing of any payment of principal. The foregoing factors will affect both the Class A Certificates and the Class B Certificates. There can be no assurance that collections of Principal Receivables with respect to the Trust, and thus the rate at which Certificateholders could expect to receive payments of principal on the Certificates during the Rapid Amortization Period or the rate at which the Principal Funding Account could be funded during the Accumulation Period, or the rate at which payments of principal will be made during the Controlled Amortization Period, will be similar to the historical experience set forth in the "Accountholder Monthly Payment Rates for the Identified Pool" table under "The Identified Pool" in this prospectus supplement. The Depositor may shorten the Class A Accumulation Period and, in that event, there can be no assurance that there will be sufficient time to accumulate all amounts necessary to pay the Class A Invested Amount on the Class A Expected Final Payment Date. The Trust, as a master trust, may issue additional Series from time to time, and there can be no assurance that the terms of any additional Series might not have an impact on the timing or amount of payments received by Certificateholders. Further, if a Pay Out Event occurs, the average life and maturity of the Class A Certificates and Class B Certificates, respectively, could be significantly reduced. Due to the reasons set forth above, there can be no assurance that deposits in the Principal Funding Account will be made in accordance with the applicable Controlled Accumulation Amount that payments of principal will be made in accordance with the applicable Controlled Amortization Amount or that the actual number of months elapsed from the date of issuance of the Class A Certificates and the Class B Certificates to their respective final Distribution Dates will equal the expected number of months. MASTER TRUST CONSIDERATIONS IMPACT OF ADDITIONAL SERIES The Trust, as a master trust, may issue additional Series from time to time. While the terms of any Series will be specified in a Supplement, the provisions of a Supplement and, therefore, the terms of any additional Series, will not be subject to prior review by, or consent of, holders of the Certificates of any previously issued Series. These terms may include methods for determining applicable investor percentages and allocating collections, provisions creating different or additional security or other credit enhancement for the Series ("Series Enhancement"), provisions subordinating the Series to another Series or other Series, if the Supplement relating to the Series so permits, to the Series, and any other amendment or supplement to the Agreement which is made applicable only to the Series. The obligation of the Trustee to issue any new Series is subject to the following conditions, among others: o the [Seller] [Depositor] shall have received written notice that the new issuance will not result in any Rating Agency's reducing or withdrawing its rating of the Certificates of any outstanding Series (any reduction or withdrawal is referred to in this prospectus supplement as a "Ratings Effect"), and o the [Seller] [Depositor] shall have delivered to the Trustee and specific providers of Series Enhancement a certificate of an authorized officer to the effect that, based on the facts known to the officer at the time, in the reasonable belief of the [Seller] [Depositor], the new issuance will not at the time of its occurrence cause a Pay Out Event or an event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event, to occur with respect to any Series. There can be no assurance, however, that the terms of any other Series, including any Series later issued, might not have an impact on the timing or amount of payments received by a Certificateholder. IMPACT OF DISCOUNT OPTION Pursuant to the Agreement, the [Seller] [Depositor] has the option from time to time to designate a fixed or variable percentage of Receivables that otherwise would be treated as Principal Receivables to be treated as Finance Charge Receivables. Any designation would result in an increase in the amount of Finance Charge Receivables and a slower payment rate of collections in respect of Principal Receivables than otherwise would occur. Pursuant to the Agreement, the [Seller] [Depositor] can make a designation without notice to or the consent of Certificateholders. Subsequently, pursuant to the Agreement, the [Seller] [Depositor] may, without notice to or the consent of Certificateholders, reduce or eliminate the percentage of Receivables subject to this designation. The [Seller] [Depositor] must provide 30 days prior written notice to the Servicer, the Trustee, any provider of Series Enhancement and each Rating Agency of any designation or reduction of Principal Receivables to be treated as Finance Charge Receivables, and the designation or reduction will become effective only if: o the [Seller] [Depositor] shall have delivered to the Trustee and specific providers of Series Enhancement a certificate of an authorized officer to the effect that, based on the facts known to the officer at the time, in the reasonable belief of the [Seller] [Depositor], the designation or reduction would not at the time of its occurrence cause a Pay Out Event or an event that, after the giving of notice or the lapse of time would constitute a Pay Out Event, to occur with respect to any Series, o the [Seller] [Depositor] shall have received written notice from each Rating Agency that the designation or reduction will not have a Ratings Effect, and o in the case of a reduction or withdrawal, the [Seller] [Depositor] shall have delivered to the Trustee a certificate of an authorized officer to the effect that, in the reasonable belief of the [Seller] [Depositor], the reduction or withdrawal shall not have adverse regulatory implications for the [Seller] [Depositor]. IMPACT OF ADDITION OF TRUST ASSETS The [Seller] [Depositor] expects, and in some cases will be obligated to designate additional Accounts, the Receivables in which will be conveyed to the Trust. These additional Accounts may include accounts originated using criteria different from those which were applied to the Accounts previously included in the Trust because the additional Accounts were originated at a different date or were part of a portfolio of accounts which were not part of the Seller's portfolio at the time Accounts were previously conveyed to the Trust or which were acquired from other institutions. Moreover, additional Accounts may or may not be accounts of the same type as those previously included in the Trust. Consequently, there can be no assurance that the additional Accounts will be of the same credit quality as the Accounts previously included in the Trust. In addition, the additional Accounts may consist of accounts which have characteristics different from the characteristics of Accounts previously included in the Trust, including lower periodic rate finance charges and other fees and charges, which may have the effect of reducing the average yield on the portfolio of Accounts included in the Trust, different payment rates and higher loss or delinquency experience, which may have the effect of reducing the average yield on the portfolio of accounts included in the Trust. The designation of additional Accounts will be subject to the satisfaction of particular conditions, including that: o the [Seller] [Depositor] shall have received written notice from each Rating Agency that the addition will not have a Ratings Effect, and o the [Seller] [Depositor] shall have delivered to the Trustee and specific providers of Series Enhancement a certificate of an authorized officer to the effect that, based on the facts known to the officer at the time, in the reasonable belief of the [Seller] [Depositor], the addition will not at the time of its occurrence cause a Pay Out Event or an event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event, to occur with respect to any Series. Although the addition of participations will require an amendment to the Pooling and Servicing Agreement, no consent of Certificateholders will be required for any amendment. THE IDENTIFIED POOL A pool of [consumer] [corporate] [revolving] [credit] [charge] [debit] card accounts owned by the Seller was identified (the "Identified Pool"), from which the Accounts included in the Trust as of the Cut-Off Date (the "Trust Portfolio") were selected based on the eligibility criteria specified in the Agreement. Set forth below is certain information with respect to the Identified Pool. There can be no assurance that the yield, loss and delinquency experience with respect to the Receivables will be comparable to that set forth below with respect to the entire Identified Pool. DELINQUENCY AND LOSS EXPERIENCE The following tables set forth the delinquency and loss experience for the Identified Pool for each of the periods shown. Because the Trust Portfolio is only a portion of the Identified Pool, actual delinquency and loss experience with respect to the Receivables is expected to be different from that set forth below for the Identified Pool. Delinquency as Percentage of the Identified Pool (Dollars in Thousands)
Year Ended ------------------------------------------------------------------------------- Number of At Month End Delinquent Days ____ 31, [ ] [ ] [ ] [ ] ---------------- --------------------------- --------------------------- -------------------------- ------------------------ PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT ---------- ------ ---------- ------ ---------- ------ ---------- ------ 30 to 59 Days.......... 60 to 80 days.......... 90 Days or Greater..... Totals.................
Loss Experience for the Identified Pool (Dollars in Thousands)
Three Months Three Months Year Ended Ended Ended ---------------------------------------------- [ ] [ ] [ ] [ ] [ ] -------------- -------------- ----------- ----------- ----------- Average Receivables Outstanding............ Gross Losses............. Gross Losses as a Percentage of Average Receivables Outstanding............ Recoveries............... Net Losses............... Net Losses as a Percentage of Average Receivables Outstanding............
REVENUE EXPERIENCE The following table sets forth the revenues from the Finance Charges and Fees billed and Interchange received with respect to the Identified Pool for each of the periods shown. Revenue Experience for the Identified Pool (Dollars in Thousands)
Three Months Three Months Year Ended Ended Ended ---------------------------------------------- [ ] [ ] [ ] [ ] [ ] -------------- -------------- ----------- ----------- ----------- Average Receivables Outstanding Finance Charges and Fees....... Yield from Finance Charges and Fees....... Interchange.............. Yield from Interchange... Yield from Finance Charges Fees and Interchange............
There can be no assurance that the yield experience with respect to the Receivables will be comparable to that set forth above for the Identified Pool. In addition, revenue from the Receivables will depend on the types of fees and charges assessed on the Accounts, and could be adversely affected by future changes made by the Seller in such fees and charges or by other factors. PAYMENT RATES The following table sets forth the highest and lowest accountholder monthly payment rates for the Identified Pool during any single month in each of the periods shown and the average accountholder monthly payment rates for all months during each of the periods shown, in each case calculated as a percentage of average monthly account balances during the periods shown. Monthly payment rates shown in the table are based on amounts which would be payments of Principal Receivables and Finance Charge Receivables with respect to the Accounts. VISA and MasterCard are registered trademarks of VISA USA, Inc. and MasterCard International Incorporated, respectively. 1 [private label] [other] credit card accounts, of which [ ]% were standard accounts and [ ]% were premium accounts. The following tables summarize the Trust Portfolio by various criteria as of [ ]. References to "Receivables Outstanding" in the following tables include both Finance Charge Receivables and Principal Receivables. Because the future composition of the Trust Portfolio may change over time, these tables are not necessarily indicative of the composition of the Trust Portfolio at any subsequent time. Composition by Account Balance Trust Portfolio (as of [ ]) (Dollars in Thousands) Receivables Account Balance Range Outstanding - ------------------------- Credit Balance................ No Balance.................... More than $0 and less than or equal to $1,500............. $1,500.01 - $5,000............ $5,000 - $10,000.............. Over $10,000.................. Composition by Credit Limit Trust Portfolio (as of [ ]) (Dollars in Thousands) Receivables Account Balance Range Outstanding - ------------------------- Less than or equal to $1,500...................... $1,500.01 - $5,000............ $5,000 - $10,000.............. Over $10,000.................. Composition by Payment Status Trust Portfolio (as of [ ]) (Dollars in Thousands) Receivables Account Balance Range Outstanding - ------------------------- Current to 29 days............ Past due 30 - 59 days......... Past due 60 - 89 days......... Past due 90+ days............. Total......................... Composition by Account Age Trust Portfolio (as of [ ]) (Dollars in Thousands) Receivables Account Balance Range Outstanding - ------------------------- Not more than 6 months........ Over 6 months to 12 months.... Over 1 year to 2 years........ Over 2 years to 3 years....... Over 3 years to 4 years....... Over 4 years.................. Total......................... Composition by Accountholder Billing Address Trust Portfolio (as of [ ]) (Dollars in Thousands) LOCATION - -------- Alaska......................... Arizona........................ Arkansas....................... California..................... Colorado....................... Connecticut.................... Delaware....................... District of Columbia........... Florida........................ Georgia........................ Hawaii......................... Idaho.......................... Illinois....................... Indiana........................ Iowa........................... Kansas......................... Kentucky....................... Louisiana...................... Maine.......................... Maryland....................... Massachusetts.................. Michigan....................... Minnesota...................... Mississippi.................... Missouri....................... Montana........................ Nebraska....................... Nevada......................... New Hampshire.................. New Jersey..................... New Mexico..................... New York....................... North Carolina................. North Dakota................... Ohio........................... Oklahoma....................... Oregon......................... Pennsylvania................... Rhode Island................... South Carolina................. South Dakota................... Tennessee...................... Texas.......................... Utah........................... Vermont........................ Virginia....................... Washington..................... West Virginia.................. Alabama........................ Wyoming........................ Other.......................... USE OF PROCEEDS The net proceeds from the sale of the Certificates will be paid to the Depositor. The Depositor will use the net proceeds to pay the Seller the purchase price of the Receivables [and the Seller will use the net proceeds for general corporate purposes.] THE SELLER The "Seller" is [ ]. [Insert description of the Seller.] THE SERVICER The "Servicer" is [ ]. [Insert description of the Servicer, if different from the Seller.] THE DEPOSITOR ACE Securities Corp., the depositor, is a special purpose corporation incorporated in the State of Delaware on June 3, 1998. The principal executive offices of the depositor are located at 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211. Its telephone number is (704) 365-0569. The depositor does not have, nor is it expected in the future to have, any significant assets. The limited purposes of the depositor are, in general, to acquire, own and sell loans and financial assets; to issue, acquire, own, hold and sell securities and notes secured by or representing ownership interests in loans and other financial assets, collections on the loans and related assets; and to engage in any acts that are incidental to, or necessary, suitable or convenient to accomplish, these purposes. All of the shares of capital stock of the depositor are held by Altamont Holdings Corp., a Delaware corporation. DESCRIPTION OF THE CERTIFICATES Pursuant to the Agreement and the Series Supplement, ACE Securities Corp. Card Account Master Trust [ ]- [ ] (the "Trust") will issue Class A Certificates (the "Class A Certificates") and Class B Certificates (the "Class B Certificates", and together with the Class A Certificates, the "Certificates" or the "Securities") which are a separate series (the "Series") of securities issued under the Prospectus. The following summary describes the material terms of the Certificates, the Agreement and the Series Supplement. The summaries do not purport to be complete descriptions of all of the terms of the Certificates, the Agreement and the Series Supplement and therefore are subject to, and qualified in their entirety by reference to, all the provisions of the Certificates, the Agreement and the Series Supplement. Reference should be made to the Prospectus for additional information concerning the Certificates, the Agreement and the Series Supplement. The final expected Payment Date for the Class A Certificates is [ ] (the "Class A Expected Final Payment Date") and the final expected Payment Date for the Class B Certificates is [ ] (the "Class B Expected Final Payment Date" and together with the Class A Expected Final Payment Date, the "Expected Final Payment Date"). Interest Payments Interest on the Class A Certificates and the Class B Certificates will accrue from the [Issuance Date] [Closing Date] on the Class A Invested Amount and Class B Invested Amount, respectively, at the Class A Certificate Rate and Class B Certificate Rate, respectively. ").] Interest with respect to the Certificates will be distributed on the [ ] day of each [month] [quarter] [semi-annual period] (an "Interest Period") (or if such a day is not a business day, the next succeeding business day) commencing on [ ] and on each [ ] thereafter (each a "Distribution Date"). The "Class A Certificate Rate" for an Interest Period will be a rate per annum equal to [insert Class A Certificate Rate formula] for a period of [one] [three] [six] months [or following a Pay Out Event, for a period of one month]. The "Class B Certificate Rate" for an Interest Period will be a rate per annum equal to [insert Class B Certificate Rate formula] for a period of [one] [three] [six] months [or following a Pay Out Event, for a period one month.]. Interest will be distributed on [ ] the [ ] day of each month (the "Interest Payment Date"), and on each subsequent Interest Payment Date, or if any of these days is not a business day, the next succeeding business day, commencing on the [ ] Distribution Date, to Certificateholders in whose names the Certificates were registered at the close of business on the last day of the calendar month preceding the date of payment (a "Record Date"). Interest for any Interest Payment Date or Special Payment Date will accrue from and including the preceding Interest Payment Date or Special Payment Date, or in the case of the first Interest Payment Date, from and including the [Issuance Date] [Closing Date], to but excluding the Interest Payment Date or Special Payment Date. Interest payments or deposits with respect to the Class A Certificates for each Distribution Date will be calculated on the Class A Invested Amount as of the preceding Record Date, or in the case of the initial Distribution Date, on the initial Class A Invested Amount, based upon the Class A Certificate Rate. Interest payments or deposits with respect to each Distribution Date will be calculated on the basis of [the actual number of days in the period from and including the preceding Distribution Date, or in the case of the initial Distribution Date the Closing Date, to but excluding the Distribution Date and a 360-day year] [a 360-day year of twelve 30-day months]. On each Distribution Date, Class A Monthly Interest and Class A Monthly Interest previously due but not deposited in the Interest Funding Account or distributed in respect of Class A Certificates will be: a) paid to Class A Certificateholders from Class A Available Funds if the Distribution Date is an Interest Payment Date or Special Payment Date, or b) deposited in an Eligible Deposit Account in the name of the [ ] (the "Trustee") and for the benefit of the Certificateholders (the "Interest Funding Account"), if the Distribution Date is not an Interest Payment Date or a Special Payment Date. "Eligible Deposit Account" means either: o a segregated account with an eligible institution, or o a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States or any one of the states of the United States or the District of Columbia, or any domestic branch of a foreign bank, having corporate trust powers and acting as trustee for funds deposited in the account, so long as any of the securities of the depository institution have a credit rating from each Rating Agency in one of its generic rating categories which signifies investment grade. To the extent Class A Available Funds allocated to the Class A Certificateholders' Interest for the Monthly Period are insufficient to pay the interest, Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ], amounts, if any, on deposit in the Cash Collateral Account up to the Available Shared Collateral Amount and Reallocated Principal Receivables will be used to make these payments. "Class A Available Funds" means, with respect to any Monthly Period, an amount equal to the sum of: a) the Class A Floating Percentage of collections of Finance Charge Receivables allocated to the Certificates with respect to the Monthly Period, including any investment earnings and other amounts that are to be treated as collections of Finance Charge Receivables in accordance with the Agreement and the Series Supplement, but excluding the portion of collections of Finance Charge Receivables attributable to Interchange that is allocable to Servicer Interchange; b) [if the Monthly Period relates to a Distribution Date that occurs prior to the Class B Principal Commencement Date,] the Principal Funding Investment Proceeds, if any, with respect to the related Distribution Date; [and] c) amounts, if any, to be withdrawn from the Reserve Account which are required to be included in Class A Available Funds pursuant to the Series Supplement with respect to the Distribution Date; [and d) Excess Spread, if any, for the Monthly Period.] [Interest payments on the Class B Certificates for each Payment Date will be calculated on the Class B Invested Amount as of the preceding Record Date, or in the case of the initial Interest Payment Date, on the initial Class B Invested Amount, based upon the Class B Certificate Rate. Interest will be calculated on the basis of [the actual number of days in the period from and including the preceding Distribution Date or in the case of the initial Distribution Date the Closing Date, to but excluding the Distribution Date and 360-day year] [a 360-day year of twelve 30-day months]. On each Distribution Date, Class B Monthly Interest and Class B Monthly Interest previously due but not distributed to Class B Certificateholders will be paid from Class B Available Funds for the related Distribution Date and, if necessary, from Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] and amounts, if any, on deposit in the Cash Collateral Account up to the Available Cash Collateral Amount. ["Class B Available Funds" (together with the Class A Available Funds, the "Available Funds") means, with respect to any Monthly Period, an amount equal to the sum of: a) the Class B Floating Percentage of collections of Finance Charge Receivables allocated to the Certificates with respect to the Monthly Period, including any investment earnings and other amounts that are to be treated as collections of Finance Charge Receivables in accordance with the Agreement, but excluding the portion of collections of Finance Charge Receivables attributable to Interchange that is allocable to Servicer Interchange; b) if the Monthly Period relates to a Distribution Date that occurs on or after the Class B Principal Commencement Date, the Principal Funding Investment Proceeds, if any, with respect to the related Distribution Date; [and] c) amounts, if any, to be withdrawn from the Reserve Account which are required to be included in Class B Available Funds pursuant to the Series Supplement with respect to the Distribution Date; [and d) Excess Spread, if any, for the Monthly Period].] Principal Payments The "Revolving Period" begins on the close of business on [ ] (the "Cut-Off Date"), and ends on the day before the commencement of the [Controlled Amortization Period] [Accumulation Period] or, if earlier, the Rapid Amortization Period. During the Revolving Period no principal payments will be made to Certificateholders. [On each Distribution Date during the Revolving Period, unless a reduction in the Required Cash Collateral Amount has occurred, collections of Principal Receivables allocable to the Certificateholders' Interest and the Collateral Indebtedness Interest will, subject to limitations, including the allocation of any Reallocated Principal Collections with respect to the related Monthly Period to pay the Required Amount, be paid to the Seller to purchase additional Receivables in order to maintain the Invested Amount, and if necessary, be treated as Shared Principal Collections. If a reduction in the Required Cash Collateral Amount has occurred, collections of Principal Receivables allocable to the Collateral Indebtedness Amount will be applied in accordance with a collateral agreement to reduce the Collateral Indebtedness Amount to the Required Cash Collateral Amount.] [Unless a Pay Out Event occurs and the Rapid Amortization Period commences, the Certificates will have an accumulation period (the "Accumulation Period"), which will commence at the close of business on [ ]; provided, that subject to the conditions set forth in this prospectus supplement, the day on which the Revolving Period ends and the Accumulation Period begins may be delayed to no later than the close of business on [ ]. The Accumulation Period will end on the earliest of: (a) the commencement of the Rapid Amortization Period, (b) payment in full of the Invested Amount, and (c) the Termination Date. During the Accumulation Period, until the Certificates are paid in full, collections of Principal Receivables and certain other amounts allocable to the Certificateholders' Interest will be deposited on each Distribution Date in a trust account (the "Principal Funding Account") and used to make principal distributions to the Certificateholders when due.] [During the Accumulation Period, on or prior to the respective Expected Final Payment Dates, principal will be deposited in the Principal Funding Account as described below and on the Class A Expected Final Payment Date will be distributed to Class A Certificateholders up to the Class A Invested Amount [and then to Class B Certificateholders on the Class B Expected Final Payment Date up to the Class B Invested Amount]. During any Rapid Amortization Period, which will begin upon the occurrence of a Pay Out Event, and until the Termination Date occurs, principal will be paid [first] to the Class A Certificateholders until the Class A Invested Amount has been paid in full[, and then to the Class B Certificateholders until the Class B Invested Amount has been paid in full].] The "Controlled Amortization Period" is scheduled to commence at the close of business on the last day of the [ ]. The Controlled Amortization Period will end on the earliest of" (a) the commencement of the Rapid Amortization Period, (b) the payment in full of the Invested Amount, or (c) the Termination Date. [During the Controlled Amortization Period, which is scheduled to begin on [ ], and during any Rapid Amortization Period, which will begin upon the occurrence of a Pay Out Event, and until the Termination Date, principal will be paid to the Certificateholders on each Distribution Date until the Invested Amount has been paid in full.] [On each Distribution Date during the Controlled Amortization Period, unless a Rapid Amortization Period commences, the Certificateholders will be entitled to receive [for each related Monthly Period since the previous Interest Payment Date] the lesser of: o collections of Principal Receivables received during each Controlled Amortization Period allocated to the Series 200[ ]- [ ] Certificates [Shared Principal Collections allocated to Series 200[ ]- [ ]], [and o miscellaneous payments allocated to Series 200[ ]- [ ] other amounts].] [On each Distribution Date with respect to the "Class A Accumulation Period", amounts equal to the least of: o Available Investor Principal Collections for the related Distribution Date on deposit in the Collection Account, o the applicable Controlled Deposit Amount for the Distribution Date, and o the Class A Adjusted Invested Amount, will be deposited in the Principal Funding Account until the Principal Funding Account Balance is equal to the Class A Invested Amount. Amounts on deposit in the Principal Funding Account will be paid to the Class A Certificateholders on the Class A Expected Final Payment Date. [After the Class A Invested Amount has been paid in full, on each Distribution Date with respect to the "Class B Accumulation Period" an amount equal to the least of: o Available Investor Principal Collections for the related Distribution Date on deposit in the Collection Account, minus the portion of Available Investor Principal Collections applied to Class A Monthly Principal on the Distribution Date, o the applicable Controlled Deposit Amount for the Monthly Period, and o the Class B Adjusted Invested Amount will be deposited in the Principal Funding Account until the Principal Funding Account Balance equals the Class B Invested Amount. Amounts on deposit in the Principal Funding Account in respect of the Class B Certificates will be paid to the Class B Certificateholders on the Class B Expected Final Payment Date].] [If a Pay Out Event occurs with respect to Series 200[ ]- [ ] during the Accumulation Period, the Rapid Amortization Period will commence and any amount on deposit in the Principal Funding Account will be paid [first] to the Class A Certificateholders on the first Special Payment Date [and then, to the extent the Class A Invested Amount is paid in full, to the Class B Certificateholders]. If, on any Expected Final Payment Date, monies on deposit in the Principal Funding Account are insufficient to pay the scheduled principal amount, a Pay Out Event will occur and the Rapid Amortization Period will commence. [After payment in full of the Class A Invested Amount, the Class B Certificateholders will be entitled to receive an amount equal to the Class B Invested Amount].] The "Rapid Amortization Period" is the period beginning with the occurrence of any Pay Out Event and ending on the earlier of: (a) the day after the Payment Date on which the Invested Amount has been paid in full, and (b) the Termination Date. "Available Principal Collections" means, with respect to any Monthly Period, an amount equal to [the sum of: a) ]an amount equal to the Principal Allocation Percentage of all collections of Principal Receivables received during the Monthly Period, minus the amount of Reallocated Principal Collections with respect to the Monthly Period used to fund the Class A Required Amount, [plus b) the amount of miscellaneous payments, if any, for the Monthly Period allocated to Series 200[ ]- [ ],] [plus c) any Shared Principal Collections with respect to other Series that are allocated to Series 200[ ]- [ ],] [plus d) any other amounts which pursuant to the Series Supplement are to be treated as Available Investor Principal Collections with respect to the related Distribution Date]. [The Accumulation Period is scheduled to commence at the close of business on [ ]; however, the [Depositor] [Seller] may, upon notice to [the Trustee,] [the Seller,] [the Servicer,] [the Depositor,] [each Rating Agency] [and the Cash Collateral Holder] elect to postpone the commencement of the Accumulation Period, and extend the length of the Revolving Period. The Depositor may make an election only if the Accumulation Period Length (determined as described below) is less than [ ]. On each Determination Date until the Accumulation Period begins, the [Depositor] [Seller] [Servicer] will determine the "Accumulation Period Length"), which is the number of months expected to be required to fully fund the Principal Funding Account no later than the Expected Final Payment Date, based on: o expected Monthly Period collections of Principal Receivables expected to be distributable to the Certificateholders of all Series, excluding other Series, assuming a principal payment rate no greater than the lowest Monthly Principal payment rate on the Receivables for the preceding twelve months, and o the amount of principal expected to be distributable to Certificateholders of all Series, excluding other Series, which are not expected to be in their revolving period during the Accumulation Period. If the Accumulation Period Length is less than [ ], the [Depositor] [Seller] may, at its option, postpone the commencement of the Accumulation Period so that the number of months included in the Accumulation Period will be equal to or exceed the Accumulation Period Length. The effect of the foregoing calculation is to permit the reduction of the length of the Accumulation Period based on the Invested Amounts of other Series which are expected to be in their revolving periods during the Accumulation Period or on increases in the principal payment rate occurring after the Series Issuance Date. The [Depositor] [Seller] may not postpone or further postpone the commencement date of the Accumulation Period after a Pay Out Event, as defined with respect to each other outstanding Series, shall have occurred and is continuing with respect to any other outstanding Series. The length of the Accumulation Period will not be less than one month. If the commencement of the Accumulation Period is delayed in accordance with the foregoing, and if a Pay Out Event occurs after the date originally scheduled as the commencement of the Accumulation Period, then it is probable that the Certificateholders would receive some of their principal later than if the Accumulation Period had not been delayed.] On each Distribution Date with respect to the Rapid Amortization Period until the Class A Invested Amount has been paid in full or the Termination Date occurs, the Class A Certificateholders will be entitled to receive Available Investor Principal Collections in an amount up to the Class A Invested Amount. [After payment in full of the Class A Invested Amount, the Class B Certificateholders will be entitled to receive on each Distribution Date, Available Principal Collections until the earlier of the date on which the Class B Invested Amount is paid in full or the Termination Date.] In addition, on the first Special Payment Date following the occurrence of a Pay Out Event, after giving effect to any payment of principal on that date, principal payments will be made to the Class A Certificateholders [and the Class B Certificateholders] from amounts on deposit in the Cash Collateral Account. [On the Distribution Date following the Class A Expected Final Payment (the "Class B Principal Commencement Date"), unless a Pay Out Event has occurred, a withdrawal will be made from the Cash Collateral Account to pay principal with respect to the Class B Certificates to the extent that the amount initially invested in Class B (the "Class B Initial Invested Amount") minus the sum of the aggregate amount of principal payments previously distributed to Class B Certificateholders or deposited in the Principal Funding Account in respect of the Class B Certificates exceeds the Class B Invested Amount on the last day of the related Monthly Period, determined after giving effect to any change made to the Class B Invested Amount as a result of unreimbursed charge-offs on the following Distribution Date.] [During the Rapid Amortization Period, collections of Principal Receivables allocable to the Collateral Indebtedness will be deposited in the Cash Collateral Account. Amounts will be retained in the Cash Collateral Account at its required level and be made available to cover shortfalls with respect to the Certificates. [In addition, on the first Special Payment Date following the occurrence of any Pay Out Event, after giving effect to any payment of principal on that date as described under "Application of Collections--Payments of Principal," principal payments will be made to the Certificateholders from amounts on deposit in the Cash Collateral Account as described under "Cash Collateral Account" below.]] [Subordination of the Class B Certificates] [The Class B Certificateholders' Interest will be subordinated, other than with respect to the Initial Class B Collateral Amount, to the extent necessary to fund specified payments with respect to the Class A Certificates. Some principal payments otherwise allocable to the Class B Certificateholders may be reallocated to the Class A Certificateholders and the Class B Invested Amount may be decreased. To the extent the Class B Invested Amount is reduced, the percentage of collections of Finance Charge Receivables allocated to the Class B Certificateholders in subsequent Monthly Periods will be reduced. Moreover, to the extent the amount of the reduction in the Class B Invested Amount is not reimbursed, the amount of principal and interest distributable to the Class B Certificateholders will be reduced.] Allocation Percentages Pursuant to the Agreement, the [Seller] [Servicer] will allocate among the Certificateholders' Interest, the certificateholders' interest for all other Series of certificates issued and outstanding and the Seller's Interest [and the Collateral Interest], all collections of Finance Charge Receivables and Principal Receivables and the Defaulted Amount with respect to each Monthly Period. Collection of Finance Charge Receivables and the Defaulted Amount with respect to any Monthly Period will be allocated to Series 200[ ]- [ ] based on the Floating Allocation Percentage. The "Floating Allocation Percentage" means, with respect to any Monthly Period, the percentage equivalent, which percentage shall never exceed 100%, of a fraction, the numerator of which is the sum of the Adjusted Invested Amount and the Collateral Invested Amount, if any, as of the last day of the preceding Monthly Period, or with respect to the first Monthly Period, the Initial Invested Amount as of the Issuance Date, and the denominator of which is the sum of the total amount of the Principal Receivables in the Trust as of the day, or with respect to the first Monthly Period, the total amount of Principal Receivables in the Trust on the Cut-Off Date, and the principal amount on deposit in an account (the "Excess Funding Account"), the [Seller] [Servicer] [Depositor] will establish and maintain in the name of the Trustee, on behalf of the Trust as an Eligible Account held for the benefit of the Certificateholders. [These amounts so allocated will be further allocated between the Class A Certificateholders and the Class B Certificateholders in accordance with the Class A Floating Percentage and the Class B Floating Percentage, respectively. The "Class A Floating Percentage" means, with respect to any Monthly Period, the percentage equivalent, which percentage shall never exceed 100%, of a fraction, the numerator of which is equal to the Class A Adjusted Investment Amount as of the close of business on the last day of the preceding Monthly Period, or with respect to the first Monthly Period, as of the Issuance Date, and the denominator of which is equal to the Adjusted Invested Amount as of the close of business on the day, or with respect to the first Monthly Period, the Initial Invested Amount. The "Class B Floating Percentage" means, with respect to any Monthly Period, the percentage equivalent, which percentage shall never exceed 100%, of a fraction, the numerator of which is equal to the Class B Adjusted Invested Amount as of the close of business on the day, or with respect to the first Monthly Period, the Initial Invested Amount.] Collections of Principal Receivables will be allocated to Series 200[ ]- [ ] based on the Principal Allocation Percentage. The "Principal Allocation Percentage" means, with respect to any Monthly Period, the percentage equivalent, which percentage shall never exceed 100%, of a fraction, the numerator of which is: (a) during the Revolving Period, the Invested Amount as of the last day of the immediately preceding Monthly Period, or, in the case of the first Monthly Period, the Issuance Date, and (b) during the [Controlled Amortization Period] [Accumulation Period] or the Rapid Amortization Period, the Invested Amount as of the last day of the Revolving Period, and the denominator of which is the greater of: (1) the sum of the total amount of Principal Receivables in the Trust as of the last day of the immediately preceding Monthly Period and the principal amount on deposit in the Excess Funding Account as of the last day, or, in the case of the first Monthly Period, the Cut-Off Date, and (2) the sum of the numerators used to calculate the principal allocation percentages for all Series outstanding as of the date as to which a determination is being made; provided, however, that because the Certificates offered by this prospectus supplement are subject to being paired with a future Series, if a Pay Out Event occurs with respect to the Paired Series during the [Controlled Amortization Period] [Accumulation Period] with respect to Series 200[ ]- [ ], [the Depositor] [the Seller] [the Servicer] may, by written notice delivered to [the Trustee] [and] [the Seller] [and] [the Servicer], designate a different numerator for the foregoing fraction, provided that the numerator is not less than the Adjusted Invested Amount as of the last day of the revolving period for the Paired Series and [the Depositor] [the Seller] [the Servicer] shall have received written notice from each Rating Agency that the designation will not have a Ratings Effect, and [the Depositor] [the Seller] [the Servicer] shall have delivered to the Trustee a certificate of an authorized officer to the effect that, based on the facts known to the officer at the time, in the reasonable belief of [the Depositor] [the Seller] [the Servicer], the designation will not cause a Pay Out Event or an event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event, to occur with respect to Series 200[ ]- [ ]. [Amounts so allocated to the Certificateholders will be further allocated between the Class A Certificateholders and the Class B Certificateholders based on the Class A Principal Percentage and the Class B Principal Percentage, respectively. The "Class A Principal Percentage" means, with respect to any Monthly Period: o during the Revolving Period, the percentage equivalent, which shall never exceed 100%, of a fraction, the numerator of which is equal to the Class A Invested Amount as of the last day of the immediately preceding Monthly Period, or, in the case of the first Monthly Period, the amount initially invested in Class A (the "Class A Initial Invested Amount"), and the denominator of which is equal to the Invested Amount as of the day, or, in the case of the first Monthly Period, the Initial Invested Amount, and o during the [Controlled Amortization Period] [Accumulation Period] or the Rapid Amortization Period, the percentage equivalent, which shall never exceed 100%, of a fraction, the numerator of which is the Class A Invested Amount as of the last day of the Revolving Period, and the denominator of which is the Invested Amount as of the last day. The "Class B Principal Percentage" means, with respect to any Monthly Period, o during the Revolving Period, the percentage equivalent, which percentage shall never exceed 100%, of a fraction, the numerator of which is the Class B Invested Amount as of the last day of the immediately preceding Monthly Period, or, in the case of the first Monthly Period, the Class B Initial Invested Amount, and the denominator of which is the Invested Amount as of that day, or, in the case of the first Monthly Period, the Initial Invested Amount, and o during the [Controlled Amortization Period] [Accumulation Period] or the Rapid Amortization Period, the percentage equivalent, which percentage shall never exceed 100%, of a fraction, the numerator of which is the Class B Invested Amount as of the last day of the Revolving Period, and the denominator of which is the Invested Amount as of that last day.] As used in this prospectus supplement, the following terms have the meanings indicated: "Class A Invested Amount" for any date means an amount equal to: (a) the Class A Initial Invested Amount, minus (b) the aggregate amount of principal payments made to the Class A Certificateholders on or prior to the date, minus (c) the excess, if any, of the aggregate amount of Class A Investor Charge-Offs for all prior Distribution Dates over the aggregate amount of any reimbursements of Class A Investor Charge-Offs for all Distribution Dates prior to that date. ["Class B Invested Amount" for any date means an amount equal to: (a) the Initial Class B Invested Amount, minus (b) the aggregate amount of principal payments made to Class B Certificateholders on or prior to the date, other than principal payments made from the proceeds of amounts received from the Cash Collateral Account for the purpose of reimbursing previous reductions in the Class B Invested Amount, minus (c) the excess, if any, of the aggregate amount of Class B Investor Charge-Offs for all prior Distribution Dates over the aggregate amount of any reimbursement of Class B Investor Charge-Offs for all Distribution Dates preceding the date, minus (d) the amount of Reallocated Principal Receivables for all prior Distribution Dates which have been used to fund the Class A Required Amount with respect to the Distribution Dates, excluding any Reallocated Principal Receivables that have resulted in a reduction of the Collateral Invested Amount, minus (e) an amount equal to the amount by which the Class B Invested Amount has been reduced to fund the Class A Default Amount on all prior Distribution Dates as described under "Class A Investor Charge-Offs ", plus (f) the amount of Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] and available on all prior Distribution Dates for the purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e).] "Class A Adjusted Invested Amount", for any date of determination, means an amount equal to: (a) then current Class A Invested Amount, minus (b) the funds on deposit in the Principal Funding Account of the date. ["Class B Adjusted Invested Amount"(together with the Class A Adjusted Invested Amount, the "Adjusted Invested Amount"), for any date of determination, means: (a) if the date occurs prior to the Class B Principal Commencement Date, an amount equal to the Class B Invested Amount, and (b) if the date occurs on or after the Class B Principal Commencement Date, an amount equal to the Class B Invested Amount minus the funds on deposit in the Principal Funding Account on the date.] ["Collateral Indebtedness Amount" means an amount equal to: (a) the initial Collateral Indebtedness Amount, minus (b) the aggregate amount of deposits made to the Cash Collateral Account from Principal Collections, minus (c) the aggregate amount of Reallocated Principal Collections allocable to the Collateral Indebtedness Amount for all prior Distribution Dates which have been used to fund the Required Amount, minus (d) an amount equal to the aggregate amount by which the Collateral Indebtedness Amount has been reduced to fund the Investor Default Amount on all prior Distribution Dates as described under "-- Defaulted Receivables; Investor Charge-Offs", minus (e) an amount equal to the product of the Collateral Floating Percentage and the Investor Default Amount (the "Collateral Defaulted Amount") with respect to any Distribution Date that is not funded out of Available Funds [and Excess Finance Charges allocated to Series 200[ ]- [ ] and available for the purpose on the related Distribution Date], plus (f) the aggregate amount of Available Funds [and Excess Finance Charges] allocated and available to reimburse amounts deducted pursuant to the foregoing clauses (c), (d) and (e) provided, however, that the Collateral Indebtedness Amount may not be reduced below zero.] ["Collateral Invested Amount" means for any date, an amount equal to: (a) the amount withdrawn from the Cash Collateral Account and applied to the payment of principal of the Certificates on the first Special Payment Date following an Pay Out Event, minus (b) the aggregate amount of principal payments made to the Collateral Interest Holder prior to the date, minus (c) the amount by which the Collateral Invested Amount has been reduced to fund the Class A Default Amount [and the Class B Default Amount] on all prior Distribution Dates as described below, minus (d) the amount by which the Collateral Invested Amount has been reduced by Reallocated Principal Receivables applied to reimburse the Required Amount, plus (e) the aggregate amount of Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] and available on all prior Distribution Dates for the purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d). In the absence of the occurrence of a Pay Out Event and a related withdrawal from the Cash Collateral Account to pay principal of the Certificates, the Collateral Invested Amount will be zero.] ["Invested Amount", for any date, means an amount equal to the sum of: (a) the Class A Invested Amount, (b) the Class B Invested Amount,] and (c) [the Collateral Invested Amount].] (d) [Principal Funding Account] [The [Seller] [Servicer] [Depositor] will establish and maintain in the name of the Trustee, on behalf of the Trust, the Principal Funding Account, as an Eligible Account held for the benefit of the Certificateholders. During the Accumulation Period, the Servicer will transfer collections from one or more accounts, established and maintained on behalf of the related Certificateholders and, into which payments are made on or with respect to the related Receivables (each, a "Collection Account"), in respect of Principal Receivables, Shared Principal Collections allocated to Series 200[ ]- [ ], [miscellaneous payments allocated to Series 200[ ]- [ ]] and other amounts described in this prospectus supplement, to be treated in the same manner as collections of Principal Receivables, to the Principal Funding Account. [Unless a Pay Out Event has occurred with respect to the Certificates, all amounts on deposit in the Principal Funding Account (the "Principal Funding Account Balance") on any Distribution Date, after giving effect to any deposits to, or withdrawals from the Principal Funding Account to be made on the Distribution Date, will be invested until the following Distribution Date by the Trustee at the direction of [the Seller] [the Servicer] [the Depositor] in investments specified in the Pooling and Servicing Agreement and limited to investments which meet the criteria of each Rating Agency from time to time as being consistent with its then-current ratings of the Certificates (the "Eligible Investments"). On each Distribution Date with respect to the Accumulation Period [, on or prior to the Class B Expected Final Payment Date,] the interest and other investment income, net of investment expenses and losses, earned on the investments (the "Principal Funding Investment Proceeds") will be withdrawn from the Principal Funding Account and will be treated as a portion of Class A Available Funds, [prior to the Class B Principal Commencement Date and, after, as a portion of Class B Available Funds]. If the investments with respect to any Distribution Date yield less than the applicable Certificate Rate, the Principal Funding Investment Proceeds with respect to the Distribution Date will be less than the Covered Amount for the following Distribution Date. It is intended that any shortfall will be funded from Class A Available Funds [or Class B Available Funds, as the case may be], including a withdrawal from the Reserve Account, if necessary, [or a withdrawal from the Cash Collateral Account] [other sources]. The Available Reserve Account Amount at any time will be limited and there can be no assurance that sufficient funds will be available to fund any shortfall. The "Covered Amount" shall mean: (a) for any Distribution Date with respect to the Class A Accumulation Period or the first Special Payment Date, [if the related Special Payment Date occurs prior to the Class B Principal Commencement Date,] an amount equal to one [twelfth] [quarter] [half] of the product of, (1) the Class A Certificate Rate, and (2) the Principal Funding Account Balance, if any, as of the preceding Distribution Date, [and (b) for any Distribution Date with respect to the Class B Accumulation Period or the first Special Payment Date, if this Special Payment Date occurs on or after the Class B Principal Commencement Date, an amount equal to one [twelfth] [quarter] [half] of the product of, (1) the Class B Certificate Rate, and (2) the Principal Funding Account Balance, if any, as of the preceding Distribution Date]. [Reserve Account] The [Seller] [Servicer] [Depositor] will establish and maintain in the name of the Trustee, on behalf of the Trust, an Eligible Deposit Account for the benefit of the Certificateholders (the "Reserve Account"). The Reserve Account is established to assure the subsequent distribution of interest on the Certificates as provided in this prospectus supplement during the Accumulation Period. On each Distribution Date from and after the Reserve Account Funding Date, but prior to the termination of the Reserve Account, the Trustee, acting pursuant to the [Servicer's] [Seller's] [Depositor's] instructions, will apply Excess Spread and Excess Finance Charges allocated to Series 200[ ]-[ ] (to the extent described below under "Application of Collections--Payment of Interest, Fees and Other Items") to increase the amount on deposit in the Reserve Account, to the extent the amount is less than the Required Reserve Account Amount. [In addition, on each Distribution Date, the [Seller] [Depositor] will have the option, but will not be required, to make a deposit in the Reserve Account, to the extent that the amount on deposit in the Reserve Account is less than the Required Reserve Account Amount.] [The "Reserve Account Funding Date" will be the Distribution Date with respect to the Monthly Period which commences no later than three months prior to the Distribution Date with respect to the Monthly Period which commences the Class A Accumulation Period or an earlier date as the Servicer may designate. The "Required Reserve Account Amount" for any Distribution Date on or after the Reserve Account Funding Date will be equal to the product of [ ]% of the Class A Invested Amount as of the preceding Distribution Date and the Reserve Account Factor as of the Distribution Date, or a lower amount approved by each Rating Agency. On each Distribution Date, after giving effect to any deposit to be made to, and any withdrawal to be made from, the Reserve Account on the Distribution Date, the Trustee will withdraw from the Reserve Account an amount equal to the excess, if any, of the amount on deposit in the Reserve Account over the Required Reserve Account Amount and shall distribute the excess to, or at the direction of, [the Seller] [the Depositor]. The "Reserve Account Factor for any Distribution Date will be equal to the percentage, not to exceed 100%, equivalent of a fraction, the numerator of which is the number of Monthly Periods scheduled to be included in the Accumulation Period, which may have been postponed at the option of the [Seller] [Depositor] [Servicer], as of the Distribution Date and the denominator of which is [ ] .] [Provided that the Reserve Account has not terminated as described below, all amounts on deposit in the Reserve Account on any Distribution Date, after giving effect to any deposits to, or withdrawals from, the Reserve Account to be made on the Distribution Date, will be invested until the following Distribution Date by the Trustee at the direction of the [Seller] [Servicer] [Depositor] in Eligible Investments. The interest and other investment income, net of investment expenses and losses, earned on the investments will be retained in the Reserve Account, to the extent the amount on deposit in the Reserve Account is less than the Required Reserve Account Amount, or deposited in the Collection Account and treated as collections of Finance Charge Receivables.] [On or before each Distribution Date with respect to the Accumulation Period, on or prior to the Class A Expected Final Payment Date, and on the first Special Payment Date, a withdrawal will be made from the Reserve Account, and the amount of the withdrawal will be deposited in the Collection Account and included in Class A Available Funds, prior to the Class B Principal Commencement Date, and, then, in Class B Available Funds,] in an amount equal to the lesser of: (a) the Available Reserve Account Amount with respect to the Distribution Date or Special Payment Date, and (b) the excess, if any, of the Covered Amount with respect to the Distribution Date or Special Payment Date over the Principal Funding Investment Proceeds with respect to the Distribution Date or Special Payment Date; provided that the amount of the withdrawal shall be reduced to the extent that funds otherwise would be available to be deposited in the Reserve Account on the Distribution Date or Special Payment Date. On each Distribution Date, the amount available to be withdrawn from the Reserve Account (the "Available Reserve Account Amount") will be equal to the lesser of the amount on deposit in the Reserve Account, before giving effect to any deposit to be made to the Reserve Account on the Distribution Date, and the Required Reserve Account Amount for the Distribution Date.] [The Reserve Account will be terminated following the earlier to occur of: (a) the termination of the Trust pursuant to the Agreement, (b) the date on which the Certificates are paid in full, and (c) if the Accumulation Period has not commenced, the occurrence of a Pay Out Event with respect to Series 200[ ]- [ ] or, if the Accumulation Period has commenced, the earlier of the first Special Payment Date and the [Class B] Expected Final Payment Date. Upon the termination of the Reserve Account, all amounts on deposit in the Reserve Account, after giving effect to any withdrawal from the Reserve Account on the date as described above, will be distributed to, or at the direction of, the Depositor. Any amounts withdrawn from the Reserve Account and distributed to, or at the direction of, the Depositor as described above will not be available for distribution to the Certificateholders.] Reallocation of Cash Flows; Class B Invested Amount With respect to each Distribution Date, on each Determination Date, the Servicer will determine the "Class A Required Amount," which will be equal to the amount, if any, by which, the sum of: (a) Class A [Monthly] [Quarterly] [Semi-Annual] Interest for the Distribution Date, (b) any Class A [Monthly] [Quarterly] [Semi-Annual] Interest previously due but not paid to Class A Certificateholders on a prior Distribution Date, (c) any Class A additional Interest, (d) the Class A Servicing Fee for the Distribution Date and any unpaid Class A Servicing Fee, and (e) the Class A Default Amount, if any, for the Distribution Date, exceeds the Class A Available Funds. If the Class A Required Amount is greater than zero, Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] and available for that purpose will be used to fund the Class A Required Amount with respect to the Distribution Date. If the Excess Spread and Excess Finance Charges available with respect to the Distribution Date are less than the Class A Required Amount, then amounts, if any, on deposit in the Cash Collateral Account available to pay amounts in respect of the Class A Certificates will then be used to fund the remaining Class A Required Amount. [If the Excess Spread and Excess Finance Charges and amounts available from the Cash Collateral Account are insufficient to fund the Class A Required Amount, then collections of Principal Receivables allocable to the Class B Certificates for the related Monthly Period will then be used to fund the remaining Class A Required Amount ("Reallocated Principal Receivables").] If Reallocated Principal Receivables with respect to the related Monthly Period, together with Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] and amounts available from the Cash Collateral Account, are insufficient to fund the Class A Required Amount for the related Monthly Period, then the Collateral Invested Amount, if any, will be reduced by the amount of the excess, but not by more than the Class A Default Amount for the Distribution Date. In the event that the reduction would cause the Collateral Invested Amount to be a negative number, the Collateral Invested Amount will be reduced to zero, and the Class B Invested Amount will be reduced by the amount by which the Collateral Invested Amount would have been reduced below zero, but not by more than the excess of the Class A Default Amount, if any, for the Distribution Date over the amount of the reduction, if any, of the Collateral Invested Amount with respect to the Distribution Date. In the event that the reduction would cause the Class B Invested Amount to be a negative number, then the Class B Invested Amount will be reduced to zero, and the Class A Invested Amount will be reduced by the amount by which the Class B Invested Amount would have been reduced below zero, but not by more than the excess, if any, of the Class A Default Amount for the Distribution Date over the amount of the reductions, if any, of the Collateral Invested Amount and the Class B Invested Amount with respect to the Distribution Date as described above. Any reduction in the Class A Invested Amount will have the effect of slowing or reducing the return of principal and interest to the Class A Certificateholders. In this case, the Class A Certificateholders will bear directly the credit and other risks associated with their undivided interest in the Trust. [The "Class B Required Amount" (and together with the Class A Required Amount, the "Required Amount") means, with respect to any Distribution Date, the amount, if any, by which the sum of: (a) current and overdue Class B Monthly Interest, (b) current and overdue Class B Additional Interest, (c) current and overdue Class B Servicing Fee, and (d) the Class B Default Amount exceeds Class B Available Funds. If the Class B Required Amount is greater than zero, then Excess Spread and Excess Finance Charges allocable to the Series 200[ ]- [ ], and not required to pay the Class A Required Amount or reimburse Class A Charge-Offs, will be applied to fund the deficiency. [If Excess Spread and Excess Finance Charges allocable to Series 200[ ]-[ ] with respect to the Distribution Date and not required to pay the Class A Required Amount are less than the Class B Required Amount, then the amounts, if any, on deposit in the Cash Collateral Account and available to make payments with respect to the Class B Certificates with respect to that Distribution Date will be withdrawn and applied to fund the Class B Required Amount.] If [amounts, if any, in deposit in the Cash Collateral Account and available to make payments with respect to the Class B Certificates with respect to the Distribution Date (together with] Excess Spread and Excess Finance Charges with respect to the Distribution Date [)] are insufficient to fund the remaining Class B Required Amount, then the [Collateral] Invested Amount, if any, will be reduced by the amount of the deficiency, but not more than the Class B Default Amount for the relevant Monthly Period. If the reduction would cause the [Collateral] Invested Amount to be reduced below zero, then the Class B Invested amount will be reduced by the amount by which the [Collateral] Invested Amount would have been reduced below zero, but not by more than the excess of the Class B Default Amount for the related Monthly Period over the reduction in the [Collateral] Invested Amount with respect to the Monthly Period, (this reduction, a "Class B Charge-Off"). In the event of a reduction of the Class B Invested Amount, the amount of principal and interest available to fund payments with respect to the Class B Certificates will be decreased.] Reductions of the Class A or Class B Invested Amount shall subsequently be reimbursed and the Class A [or Class B] Invested Amount will be increased on each Distribution Date by the amount, if any, of Excess Spread and Excess Finance Charges. See "Application of Collections -- Excess Spread; Excess Finance Charges". When reductions of the Class A and Class B Invested Amount have been fully reimbursed, reductions of the [Collateral] Invested Amount shall be reimbursed and the [Collateral] Invested Amount increased in a similar manner. Application of Collections Payment of Interest, Fees and Other Items. On each Distribution Date, the Trustee, acting pursuant to the [Seller's] [Servicer's] instructions, will apply the Class A Available Funds [and Class B Available Funds] (see "--Interest Payments" above) on deposit in the Collection Account in the following priority: (a) On each Distribution Date, an amount equal to the Class A Available Funds with respect to the Distribution Date will be distributed in the following priority: (1) an amount equal to Class A Monthly Interest for the Distribution Date, plus the amount of any Class A Monthly Interest previously due but not distributed to the Class A Certificateholders on a prior Distribution Date, plus any additional interest with respect to interest amounts that were due but not distributed to the Class A Certificateholders on a prior Distribution Date at a rate equal to the Class A Certificate Rate [plus [ ]% per annum ("Class A Additional Interest"),] will be: [(A)] distributed to Class A Certificateholders [if the Distribution Date is an Interest Payment Date, or (B) deposited in the Interest Funding Account, if the Distribution Date is not an Interest Payment Date or Special Payment Date for distribution to Class A Certificateholders on the next Interest Payment Date or Special Payment Date]; (2) an amount equal to the Class A Servicing Fee for the Distribution Date, plus the amount of any Class A Servicing Fee previously due but not distributed to the Servicer on a prior Distribution Date, will be distributed to the Servicer, unless the amount has been netted against deposits to the Collection Account; (3) an amount equal to the Class A Default Amount for the Distribution Date will be treated as a portion of Available Investor Principal Collections for the Distribution Date; and (4) the balance, if any, shall constitute Excess Spread and shall be allocated and distributed as described under "--Excess Spread; Excess Finance Charges" below. [(b) On each Distribution Date, an amount equal to the Class B Available Funds with respect to the Distribution Date will be distributed in the following priority:] [(1) an amount equal to Class B Monthly Interest for the Distribution Date, plus the amount of any Class B Monthly Interest previously due but not distributed to the Class B Certificateholders on a prior Distribution Date, plus any additional interest with respect to interest amounts that were due but not distributed to the Class B Certificateholders on a prior Distribution Date at a rate equal to the Class B Certificate Rate plus [ ]% per annum ("Class B Additional Interest"), will be:] [(A)] distributed to Class B Certificateholders [if the Distribution Date is an Interest Payment Date, or (B) deposited in the Interest Funding Account, if the Distribution Date is not an Interest Payment Date or Special Payment Date for distribution to Class B Certificateholders on the next Interest Payment Date or Special Payment Date];] [(2) an amount equal to the Class B Servicing Fee for the Distribution Date, plus the amount of any Class B Servicing Fee previously due but not distributed to the Servicer on a prior Distribution Date, will be distributed to the Servicer, unless the amount has been netted against deposits to the Collection Account; and] [(3) the balance, if any, shall constitute Excess Spread and shall be allocated and distributed as described under "--Excess Spread; Excess Finance Charges" below.] "Class A Monthly Interest" means, with respect to any Distribution Date, an amount equal to the product of: (a) a fraction, the numerator of which is the actual number of days in the period from and including the prior Distribution Date to but excluding Distribution Date and the denominator of which is 360, (b) the Class A Certificate Rate, and (c) the Class A Invested Amount as of the preceding Record Date. ["Class B Monthly Interest" means, with respect to any Distribution Date, an amount equal to the product of: (a) a fraction, the numerator of which is the actual number of days in the period from and including the prior Distribution Date to but excluding that Distribution Date and the denominator of which is 360, (b) the Class B Certificate Rate, and (c) the Class B Invested Amount as of the preceding Record Date.] "Excess Spread" means, with respect to any Distribution Date, an amount equal to the sum of the amounts described in clause (a)(4) above [and clause (b)(3) above,] [in the definition of Class A Monthly Interest [and Class B Monthly Interest]]. Excess Spread; Excess Finance Charges. On each Distribution Date, the Trustee, acting pursuant to the Servicer's instructions, will apply Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] with respect to the related Monthly Period to make the following distributions in the following priority to the extent funds are available: [(a)] an amount equal to the Class A Required Amount, if any, with respect to the Distribution Date will be used to fund any deficiency pursuant to clauses (a) (1), (2) and (3) above in the order of priority; [(b)] [an amount equal to the aggregate amount of Class A Investor Charge-Offs which have not been previously reimbursed, after giving effect to the allocation on the Distribution Date of other amounts applied for that purpose, will be treated as a portion of Available Investor Principal Collections for the Distribution Date as described under "--Payments of Principal" below;] [(c)] [an amount equal to the Class B Required Amount, if any, with respect to the Distribution Date will be used first; (1) to fund any deficiency pursuant to clauses (b) (1) and (2) above under "--Payment of Interest, Fees and Other Items" in the order of priority, and (2) second to pay any Class B Default Amount with respect to the Distribution Date]; [(d)] [an amount equal to the aggregate by which the Class B Invested Amount has been reduced pursuant to clauses (4), (5) and (6) of the definition of "Class B Invested Amount" under "--Allocation Percentages" above, but not in excess of the aggregate amount of the reductions which have not been previously reimbursed, shall be treated as a portion of Available Investor Principal Collections for the Distribution Date;] [(e)] [an amount equal to the "Cash Collateral Fee" as described in the [Loan] Agreement among the [Depositor] [Seller], [ ] (the "Cash Collateral Depositor") and the Trustee for the Distribution Date shall be distributed to the Cash Collateral Depositor for application in accordance with the [Loan] Agreement;] [(f)] [an amount equal to the aggregate amount by which the Collateral Invested Amount has been reduced pursuant to clauses (c) and (d) of the definition of "Collateral Invested Amount" under "--Allocation Percentages" above, but not in excess of the aggregate amount of the reductions which have not been previously reimbursed, shall be treated as a portion of Available Principal Collections for the Distribution Date;] [(g)] [an amount equal to the Monthly Servicing Fee due but not paid to the Servicer on the Distribution Date or a prior Distribution Date shall be paid to the Servicer;] [(h)] [an amount up to the excess, if any, of the Required Cash Collateral Amount over the remaining Available Cash Collateral Amount shall be deposited into the Cash Collateral Account;] [(i)] [on each Distribution Date from and after the Reserve Account Funding Date, but prior to the date on which the Reserve Account terminates, an amount up to the excess, if any, of the Required Reserve Account Amount over the Available Reserve Account Amount shall be deposited into the Reserve Account;] [(j)] [an amount equal to the aggregate of any other amounts then due to the Collateral Interest Holder pursuant to the [Loan] Agreement, to the extent these amounts are payable pursuant to the [Loan] Agreement out of Excess Spread and Excess Finance Charges, shall be distributed to the Collateral Interest Holder for application in accordance with the [Loan] Agreement; and [(k)] the balance, if any, will constitute a portion of Excess Finance Charges for the Distribution Date and will be available for allocation to other Series in the Group [ ] or to the [Seller] [Depositor] as described in "Description of the Certificates -- Sharing of Excess Finance Charges" in the Prospectus. Payments of Principal. On each Distribution Date, the Trustee, acting pursuant to the [Seller's] [Servicer's] instructions, will distribute Available Principal Collections (see "--Principal Payments" above) on deposit in the Collection Account in the following priority: (a) on each Distribution Date with respect to the Revolving Period, all Available Principal Collections will be distributed [or deposited] in the following priority: [(1)] [an amount equal to the excess, if any, of the Collateral Invested Amount over the Required Collateral Invested Amount will be paid to the Collateral Interest Holder; and] [(2)] [the balance] [these Available Principal Collections] will be treated as Shared Principal Collections and applied in accordance with the Agreement and the Series Supplement.] (b) on each Distribution Date with respect to the [Controlled Amortization Period] [Accumulation Period] or the Rapid Amortization Period, all Available Principal Collections will be distributed [or deposited] in the following priority: [(1)] [an amount equal to Class A Monthly Principal, up to the Class A Adjusted Invested Amount on the Distribution Date will be distributed to Class A Certificateholders [if the Distribution Date is a Principal Distribution Date or deposited in the Principal Funding Account if the Distribution Date is not a Principal Distribution Date], during the Class A Accumulation Period, or distributed to the Class A Certificateholders, during the Rapid Amortization Period[; and]] [(2) for each Distribution Date after the Class A Adjusted Invested Amount has been paid in full, an amount equal to Class B Monthly Principal, up to the Class B Adjusted Invested Amount on the Distribution Date, will be distributed to Class B Certificateholders if the Distribution Date is a Principal Distribution Date or deposited in the Principal Funding Account if the Distribution Date is not a Principal Distribution Date, during the Class B Accumulation Period, or distributed to the Class B Certificateholders, during the Rapid Amortization Period;] [(c)] [an amount equal to Class A Monthly Principal, up to the Class A Adjusted Invested Amount on the Distribution Date will be deposited in the Principal Funding Account, during the Class A Accumulation Period, or distributed to the Class A Certificateholders, during the Rapid Amortization Period;] [(d)] [for each Distribution Date beginning on the Class B Principal Commencement Date, an amount equal to Class B Monthly Principal for the Distribution Date, up to the Class B Adjusted Invested Amount on that Distribution Date, will be deposited in the Principal Funding Account, during the Class B Accumulation Period, or distributed to the Class B Certificateholders, during the Rapid Amortization Period;] (e) for each Distribution Date with respect to the Rapid Amortization Period, beginning with the Distribution Date on which the Invested Amount is paid in full, an amount equal to the balance, if any, of the Available Principal Collections then on deposit in the Collection Account, to the extent of the Collateral Invested Amount, if any, shall be distributed to the Collateral Interest Holder for application in accordance with the [Loan] Agreement; and (f) for each Distribution Date, after giving effect to paragraphs (c), (d) and (e) above, an amount equal to the balance, if any, of the Available Principal Collections will be allocated to Shared Principal Collections and applied in accordance with the Agreement. "Class A Monthly Principal" with respect to any Distribution Date relating to the Class A [Controlled Amortization Period] [Accumulation Period] or the Rapid Amortization Period will equal the lesser of: (a) the Available Principal Collections on deposit in the Collection Account with respect to the Distribution Date, (b) for each Distribution Date with respect to the Class A [Controlled Amortization Period] [Accumulation Period], [and on or prior to the Class A Expected Final Payment Date,] the [Controlled Distribution Amount] [Controlled Deposit Amount] for the Distribution Date, and (c) the Class A Adjusted Invested Amount on that Distribution Date. ["Class B Monthly Principal" with respect to any Distribution Date relating to the Class B [Controlled Amortization Period] [Accumulation Period] or the Rapid Amortization Period, after the Class A Certificates have been paid in full, will equal the lesser of: (a) the Available Principal Collections on deposit in the Collection Account with respect to the Distribution Date, minus the portion of the Available Principal Collections applied to Class A Monthly Principal on the Distribution Date, (b) for each Distribution Date with respect to the Class B [Controlled Amortization Period] [Accumulation Period], [and on or prior to the Class B Expected Final Payment Date,] the [Controlled Distribution Amount] [Controlled Deposit Amount] for the Distribution Date, and (c) the Class B Adjusted Invested Amount on the Distribution Date.] ["Controlled Accumulation [Amortization] Amount" means: [(a)] for any Distribution Date with respect to the Class A Accumulation Period, $ [ ] ; provided, however, that, if the commencement of the Class A Accumulation Period is delayed as described above under "--Principal Payments", the Accumulation Amount for each Distribution Date may be different for each Distribution Date with respect to the Class A Accumulation Period and will be determined by the [Seller] [Servicer] [Depositor] in accordance with the [Agreement] [and the Series Supplement] based on the principal payment rates for the Accounts and on the Invested Amounts of other Principal Sharing Series that are scheduled to be in their revolving periods and then scheduled to create Shared Principal Collections during the Class A Accumulation Period[; and (b) for any Distribution Date with respect to the Class B Accumulation Period, an amount equal to $ [ ] [the Class B Invested Amount] as of the Class B Principal Commencement Date].] ["Deficit Controlled Accumulation Amount" means: (a) on the first Distribution Date with respect to the Class A Accumulation Period [or the Class B Accumulation Period,] the excess, if any, of the Controlled Accumulation Amount for the Distribution Date over the amount [deposited in the Principal Funding Account on the Distribution Date] [distributed from the Collection Account as Class A Monthly Principal [or Class B Monthly Principal, as the case may be,] for the Distribution Date, and (b) on each subsequent Distribution Date with respect to the Class A Accumulation Period [or the Class B Accumulation Period,] the excess, if any, of the Controlled Deposit Amount for a subsequent Distribution Date plus any Deficit Controlled Accumulation Amount for the prior Distribution Date over the amount [deposited in the Principal Funding Account on the Distribution Date] [distributed from the Collection Account as Class A Monthly Principal [or Class B Monthly Principal, as the case may be,] for the subsequent Distribution Date].]] "Controlled Distribution Amount") is equal to the sum of the Controlled Amortization Amount and any existing Deficit Controlled Amortization Amount. ["Controlled Deposit Amount" means, for any Distribution Date with respect to the Accumulation Period, an amount equal to the sum of: (a) the Controlled Accumulation Amount for the Distribution Date, and (b) any Deficit Controlled Accumulation Amount for the immediately preceding Distribution Date.] ["Shared Principal Collections" means, Collections of Principal Receivables and certain other amounts otherwise allocable to other Series, to the extent such collections are not needed to make payments to or deposits for the benefit of the certificateholders of such other Series, [will] [may] be applied to cover principal payments due to or for the benefit of the holders of the Certificates.] [Cash Collateral Account] [The Trust will have the benefit of the Cash Collateral Account for the benefit of the Certificateholders [and the Collateral Interest Holder], as their interests appear in the Series Supplement, and in the case of the Collateral Interest Holder, in the [Loan] Agreement, which interest, in the case of the Collateral Interest Holder, will be subordinated to the interests of the Certificateholders as provided in the Series Supplement. The "Cash Collateral Account" will be one or more Eligible Deposit Accounts. Funds on deposit in the Cash Collateral Account will be invested in specified Eligible Investments that mature on or before the business day immediately preceding the next Distribution[, accrued since the preceding Distribution Date on funds on deposit in the Cash Collateral Account shall be paid to the Collateral Interest Holder for application in accordance with the [Loan] Agreement].] [The Cash Collateral Account will be funded on the Issuance Date in the amount of $[ ] (the "Initial Cash Collateral Amount"), [of which not less than $[ ] (the "Initial Shared Collateral Amount") will be for the benefit of both the Class A Certificates and the Class B Certificates and the remaining $[ ] (the "Initial Class B Collateral Amount") will be for the exclusive benefit of the Class B Certificates], which amount will include the proceeds of an advance to be made by one or more lenders to be selected by the [Depositor] (the lender or lenders, the "Collateral Interest Holders"). The advance will be repaid pursuant to the [Loan] Agreement. The Cash Collateral Account will be terminated following the earliest to occur of: (a) the date on which the Certificates are paid in full, (b) the date on which the entire Available Cash Collateral Amount is distributed to the Certificateholders as a result of the occurrence of any Pay Out Event, (c) the Termination Date, and (d) the termination of the Trust pursuant to the Agreement.] [On each Distribution Date, the amount available to be withdrawn from the Cash Collateral Account (the "Available Cash Collateral Amount") will be equal to the lesser of the amount on deposit in the Cash Collateral Account, before giving effect to any deposit to be made to, or withdrawal from, the Cash Collateral Account on the related Distribution Date, or the Required Cash Collateral Amount.] [The "Required Cash Collateral Amount" means, with respect to any Distribution Date, the lesser of: (a) [the sum of] [the Required Shared Collateral Amount] [and] [the Initial Class B Collateral Amount] as of the Distribution Date, and (b) the adjusted Invested Amount as of the Distribution Date.] [The "Required Shared Collateral Amount means, with respect to any Distribution Date, the product of: (a) the Adjusted Invested Amount as of the Distribution Date after taking into account distributions made on that date, and (b) [ ]% or any higher percentage specified by each Rating Agency; provided, however, that: (1) if there are any withdrawals from the Cash Collateral Account to fund the Class A Required Amount [or the Class B Required Amount,] or a Pay Out Event occurs with respect to Series 200[ ]- [ ], then the Required Shared Collateral Amount for any Distribution Date shall equal the Required Shared Collateral Amount on the Distribution Date immediately preceding a withdrawal from the Cash Collateral Account or Pay Out Event, and (2) notwithstanding the foregoing, the Required Shared Collateral Amount with respect to any Distribution Date will not be less than $[ ].] [The Required Shared Collateral Amount [and the Initial Class B Collateral Amount] may be reduced without the consent of the Certificateholders, if the [Depositor] [Seller] shall have received written notice from each Rating Agency that the reduction will not have a Ratings Effect and the [Depositor] [Seller] shall have delivered to the Trustee a certificate of an authorized officer to the effect that, based on the facts known to the officer at the time, in the reasonable belief of the [Depositor] [Seller], the reduction will not cause a Pay Out Event or an event that, after the giving of notice of the lapse of time, would constitute a Pay Out Event, to occur with respect to Series 200[ ]- [ ].] [On each Distribution Date, one or more withdrawals will be made from the Cash Collateral Account in an amount up to the Available Shared Collateral Amount, to fund the following amounts in the following priority:] [(a)] the excess, if any, of the Class A Required Amount with respect to the related Distribution Date over the amount of Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] and available to fund the Class A Required Amount will be used first to fund any deficiency in current Class A Monthly Interest, overdue Class A Monthly Interest and any current or overdue Class A Additional Interest, second to fund any deficiency in the Class A Servicing Fee and any overdue Class A Servicing Fee and third to pay the Class A Default Amount, if any, for the Distribution Date[; and] [(b) the excess, if any, of the Class B Required Amount with respect to the related Distribution Date over the amount of Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] and available to fund the Class B Required Amount will be used first to fund any deficiency in current Class B Monthly Interest, overdue Class B Monthly Interest and any current or overdue Class B Additional Interest, second to fund any deficiency in the Class B Servicing Fee and any overdue Class B Servicing Fee, and third to pay the Class B Default Amount, if any, for the Distribution Date.] On each Distribution Date, the "Available Shared Collateral Amount" shall equal the lesser of: (a) the Required Shared Collateral Amount, and (b) the excess, if any, of the amount on deposit in the Cash Collateral Account for the relevant Distribution Date over the Initial Class B Collateral Amount. On the first Special Payment Date following a Pay Out Event described in clause (e) under "--Pay Out Events" after giving effect to any payment of principal on the date described under "--Application of Collections - -- Payments of Principal", the Available Shared Collateral Amount, after giving effect to any withdrawal from the Cash Collateral Account on the date to fund the Required Amount, will be applied to pay principal of the Class A Certificates [and the remainder of the Available Cash Collateral Amount will be applied to pay principal of the Class B Certificates]. [On each Distribution Date commencing with the Class B Principal Commencement Date, unless a Pay Out Event has occurred, a withdrawal will be made from the Cash Collateral Account, to the extent of the Available Cash Collateral Amount, in an amount equal to the excess, if any, of the Class B Initial Invested Amount, minus the sum of the aggregate amount of principal payments previously deposited to the Principal Funding Account or distributed in respect of the Class B Certificates, over the Class B Invested Amount on the last day of the related Monthly Period, determined after giving effect to any changes to be made in the Class B Invested Amount pursuant to clauses (c), (d), (e) or (f) of the definition of "Class B Invested Amount" under "--Allocation Percentages" on the following Distribution Date.] [In the event of: (a) a sale of the Receivables and an early termination of the Trust due to an Insolvency event, (b) an optional repurchase of the Certificateholders' Interest by the [Depositor] [Seller] [Servicer], (c) a sale of a portion of the Receivables in connection with the Termination Date, (d) a repurchase or sale of the Certificateholders' Interest and the certificateholders' interest of all other Series in connection with a Servicer Default, or, (e) a reassignment of the Certificateholders' Interest and the certificateholders' interest of all other Series in connection with a breach by the [Seller] [Depositor] [Servicer] of related representations and warranties, any Available Cash Collateral Amount on the related Distribution Date, after giving effect to all other withdrawals from the Cash Collateral Account on the Distribution Date as described above, will be withdrawn from the Cash Collateral Account and the proceeds withdrawn from the Cash Collateral Account will be distributed to Class B Certificateholders to the extent of all previous reductions of the Class B Invested Amount pursuant to clauses (c), (d) or (e) of the definition of "Class B Invested Amount" under "--Allocation Percentages" above.] On each Distribution Date, the [Seller] [Servicer] or the Trustee, acting pursuant to the [Seller's] [Servicer's] instructions, will apply Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] (to the extent described above under "--Application of Collections -- Excess Spread; Excess Finance Charges") to increase the amount on deposit in the Cash Collateral Account to the extent that amount is less than the Required Cash Collateral Amount. In addition, if on any Distribution Date the amount on deposit in the Cash Collateral Account exceeds the Required Cash Collateral Amount, this excess will be withdrawn and paid to the Collateral Interest Holder for application in accordance with the [Loan] Agreement. Defaulted Receivables Charge-Offs On each Determination Date, the Servicer will calculate the Investor Default Amount for the preceding Monthly Period. The term "Investor Default Amount" means, for any Monthly Period, the product of: (a) the Floating Allocation Percentage with respect to the related Monthly Period, and (b) the Defaulted Amount for that Monthly Period. [A portion of the Investor Default Amount will be allocated to the Class A Certificateholders (the "Class A Default Amount") on each Distribution Date in an amount equal to the product of the Class A Floating Percentage applicable during the related Monthly Period and the Investor Default Amount for that Monthly Period. A portion of the Investor Default Amount will be allocated to the Class B Certificateholders (the "Class B Default Amount") in an amount equal to the product of the Class B Floating Percentage applicable during the related Monthly Period and the Investor Default Amount for that Monthly Period. An amount equal to the Class A Default Amount for each Monthly Period will be paid from Class A Available Funds, Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] or from amounts available under the Cash Collateral Account and Reallocated Principal Receivables and applied as described above in "--Application of Collections -- Payment of Interest, Fees and Other Items" and "--Reallocation of Cash Flows; Class B Invested Amount". An amount equal to the Class B Default Amount for each Monthly Period will be paid from Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] or from amounts, if any, available under the Cash Collateral Account and applied as described above in "--Application of Collections -- Payment of Interest, Fees and Other Items".] On each Distribution Date, if the Class A Required Amount for that Distribution Date exceeds the sum of Excess Spread and Excess Finance Charges allocable to Series 200[ ]- [ ], then amounts, if any, on deposit in the Cash Collateral Account up to the Available Shared Collateral Amount and Reallocated Principal Receivables, the Collateral Invested Amount, if any, will be reduced by the amount of the excess, but not by more than the Class A Default Amount for the related Distribution Date. [In the event that a reduction would cause the Collateral Invested Amount to be a negative number, the Collateral Invested Amount will be reduced to zero, and the Class B Invested Amount will be reduced by the amount by which the Collateral Invested Amount would have been reduced below zero, but not by more than the excess, if any, of the Class A Default Amount for the Distribution Date over the amount of the reduction, if any, of the Collateral Invested Amount with respect to the Distribution Date. In the event that a reduction would cause the Class B Invested Amount to be a negative number, the Class B Invested Amount will be reduced to zero, and the Class A Invested Amount will be reduced by the amount by which the Class B Invested Amount would have been reduced below zero, but not by more than the excess, if any, of the Class A Default Amount for the Distribution Date over the amount of the reductions, if any, of the Collateral Invested Amount and the Class B Invested Amount with respect to the Distribution Date as described above (a "Class A Charge-Off"),] which will have the effect of slowing or reducing the return of principal to the Class A Certificateholders.] If the Class A Invested Amount has been reduced by the amount of any Class A Charge-Offs, it will subsequently be increased on any Distribution Date, but not by an amount in excess of the aggregate Class A Charge-Offs, by the amount of Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] and available for that purpose. [On each Distribution Date, if the Class B Required Amount for that Distribution Date exceeds the sum of Excess Spread and Excess Finance Charges allocable to Series 200[ ]- [ ] and not required to pay the Class A Required Amount and amounts, if any, on deposit in the Cash Collateral Account which are allocated and available to fund the amount, then the Collateral Invested Amount, if any, will be reduced by the amount of any excess. In the event that a reduction would cause the Collateral Invested Amount to be a negative number, the Collateral Invested Amount will be reduced to zero, and the Class B Invested Amount will be reduced by the amount by which the Collateral Invested Amount would have been reduced below zero, but not by more than the excess, if any, of the Class B Default Amount for the relevant Distribution Date over the amount of the reduction, if any, of the Collateral Invested Amount with respect to the Distribution Date.] [If on any Distribution Date Reallocated Principal Receivables for that Distribution Date are applied to fund the Required Amount, the Collateral Invested Amount, if any, will be reduced by the amount of the Reallocated Principal Receivables. In the event the reductions would cause the Collateral Investment Amount to be a negative number, the Collateral Invested Amount shall be reduced to zero, and the Class B Invested Amount will be reduced by the amount by which the Collateral Invested Amount would have been reduced below zero.] [The Class B Invested Amount will subsequently be reimbursed, but not in excess of the aggregate unreimbursed Class B Charge-Offs, on any Distribution Date by the amount of Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] and available for that purpose.] [Any reductions of the Collateral Invested Amount shall subsequently be reimbursed and the Collateral Invested Amount increased, but not by any amount in excess of the aggregate reductions of the Collateral Invested Amount, on any Distribution Date by the amount of Excess Spread and Excess Finance Charges allocated to Series 200[ ]- [ ] and available for that purpose as described under "--Application of Collections -- Payment of Interest, Fees and Other Items".] Issuance of Additional Certificates The Series Supplement provides that from time to time during the Revolving Period, the [Depositor] [Seller] may, subject to specific conditions described below, cause the Trustee to issue additional Certificates, each an "Issuance". When issued, the additional Certificates [of each class] will be identical in all respects to the other outstanding Certificates [of that class] and will be equally and ratably entitled to the benefits of the Agreement and the Series Supplement without preference, priority or distinction. In connection with each additional Issuance, the outstanding principal amounts of the Class A Certificates [and the Class B Certificates] and the aggregate amount of Credit Enhancement will all be increased pro rata. The additional Credit Enhancement provided in connection with an additional Issuance may take the form of an increase in the Required Cash Collateral Amount or another form of Credit Enhancement, provided that the form and amount of additional Credit Enhancement will not cause a Ratings Effect. Following an additional Issuance, the [Controlled Amortization Amount] [Controlled Accumulation Amounts] of each Class will be increased proportionately to reflect the principal amount of additional Certificates. Additional Certificates may be issued only upon the satisfaction of specific conditions provided in the Series Supplement, including the following: (a) on or before the fifth business day immediately preceding the date on which the additional Certificates are to be issued, the [Depositor] [Seller] shall have given the Trustee, [the Seller,] [the Servicer,] each Rating Agency and any provider of Credit Enhancement written notice of the issuance and the date upon which it is to occur; (b) after giving effect to the additional Issuance, the total amount of Principal Receivables shall be at least equal to the Required Principal Balance; (c) the [Depositor] [Seller] shall have delivered to the Trustee an amended Series Supplement, executed by each of the parties to the agreement; (d) the [Depositor] [Seller] shall have received written notice from each Rating Agency that this additional Issuance will not have a Ratings Effect; (e) the [Depositor] [Seller] shall have delivered to the Trustee a certificate of an authorized officer to the effect that, based on the facts known to the officer at the time, in the reasonable belief of the [Depositor] [Seller], the additional Issuance will not cause a Pay Out Event or an event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event, to occur with respect to Series 200[ ]- [ ]; (f) as of the date of the additional Issuance and taking the additional Issuance into account, the amount of Credit Enhancement with respect to Series 200[ ]- [ ], together with any additional Credit Enhancement, shall not be less than the amount required so that the additional issuance will not result in a Ratings Effect; (g) as of the date of the additional Issuance, all amounts due and owing to the holders of Certificates shall have been paid, and there shall not be any unreimbursed Class A Charge-Offs [or Class B Charge-Offs]; (h) the excess of the principal amount of the additional Certificates over their issue price shall not exceed the maximum amount permitted under the Code without the creation of original issue discount; (i) the [Seller's] remaining interest in Principal Receivables shall not be less than [ ]% of the total amount of Principal Receivables, in each case as of the date upon which the additional Issuance is to occur after giving effect to the issuance; (j) the [Depositor] [Seller] shall have delivered to the Trustee, each Rating Agency and any provider of Credit Enhancement, a Tax opinion with respect to the additional Issuance; (k) the [Depositor] [Seller] shall have obtained additional Credit Enhancement for the benefit of the holders of Certificates, provided that the ratio of the sum of the Required Cash Collateral Amount and the amount of the additional Credit Enhancement to the Invested Amount, after giving effect to the additional Issuance, shall be greater than or equal to the ratio of the Required Cash Collateral Amount to the Invested Amount, before giving effect to the additional Issuance; (l) the [Depositor] [Seller] shall have delivered to each Rating Agency: (1) an opinion of counsel to the effect that the Issuance will not violate applicable Federal Securities laws, and (2) any other documents as the Rating Agencies may request; and (m) the ratio of the [Controlled Amortization Amount] [Controlled Accumulation Amount], after giving effect to the Additional Issuance, to the Invested Amount, after giving effect to the Additional Issuance, shall be equal to the ratio of the [Controlled Amortization Amount] [Controlled Accumulated Amount], before giving effect to the Additional Issuance, to the Invested Amount, before giving effect to the Additional Issuance. There are no restrictions on the time or amount of any Additional Issuance, provided that the conditions described above are met. As of the date of any Additional Issuance, the Class A Invested Amount [and the Class B Invested Amount] will be increased to reflect the initial principal balance of the Additional Certificates of the respective classes. [Paired Series] [The Series 200[ ]- [ ] Certificates may be paired with one or more other Series (each a "Paired Series"). Each Paired Series either will be prefunded with an initial deposit to a prefunding account in an amount up to the initial principal balance of each Paired Series and primarily from the proceeds of the sale of the Paired Series or will have a variable principal amount. Any prefunding account will be held for the benefit of the Paired Series and not for the benefit of Certificateholders. As funds are accumulated in the Principal Funding Account, either: (a) in the case of a prefunded Paired Series, an equal amount of funds on deposit in any prefunding account for that prefunded Paired Series will be released, which funds will be distributed to the Seller, or (b) in the case of a Paired Series having a variable principal amount, an interest in that variable Paired Series, in an equal or lesser amount may be sold by the Trust, and the proceeds distributed to the Seller, and, in either case, the Invested Amount in the Trust of the Paired Series will increase by up to a corresponding amount. Upon payment in full of Series 200[ ]- [ ], assuming that there have been no unreimbursed charge-offs with respect to any related Paired Series, the aggregate Invested Amount of the related Paired Series will have been increased by an amount up to an aggregate amount equal to the Series 200[ ]- [ ] Invested Amount paid to the Certificateholders. There can be no assurance, however, that the terms of any Paired Series might not have an impact on the timing or amount of payments received by Certificateholders. See "Maturity Considerations" in this prospectus supplement.] Required Principal Balance; Addition to Accounts The obligation of the Trustee to authenticate certificates of a new Series and to execute and deliver the related Series Supplement shall be subject to the conditions described in the Prospectus and to the additional condition that, as of the Series Issuance Date and after giving effect to the issuance, the aggregate amount of Principal Receivables in the Trust equals or exceeds the Required Principal Balance. The "Required Principal Balance means, as of any date of determination, the sum of: (a) the initial Invested Amount (see the relevant Supplement) of each Series outstanding on that date, other than any Series or portion of a Series (an "Excluded Series") which is designated in the relevant Supplement as then being an Excluded Series, minus (b) the principal amount on deposit in the Excess Funding Account on that date; provided, however, that if at any time the only Series outstanding are Excluded Series and a Pay Out Event has occurred with respect to one or more Series, the Required Principal Balance shall mean the sum of: (a) the "Invested Amount" (see the relevant Supplement) of each Excluded Series as of the earliest date on which any Pay Out Event is deemed to have occurred, minus (b) the principal amount on deposit in the Excess Funding Account; and provided further that the Required Principal Balance may be reduced to a lesser amount without the consent of the Certificateholders, if the [Depositor] [Seller] shall have received written notice from each Rating Agency that the reduction will not have a Ratings Effect. If, as of the close of business on the last business day of any Monthly Period, the aggregate amount of Principal Receivables in the Trust is less than the Required Principal Balance on that date, the [Depositor] [Seller] shall on or before the [ ] business day following that day, unless the amount of Principal Receivables in the Trust equals or exceeds the Required Principal Balance as of the close of business on any day after the last business day of the Monthly Period and prior to the tenth business day, make an addition to the Trust so that, after giving effect to the addition, the amount of Principal Receivables in the Trust is at least equal to the Required Principal Balance. Pay Out Events The "Pay Out Events" with respect to the Certificates will include each of the events specified in the Prospectus and the following: (a) failure on the part of the [Depositor] [Seller] [Servicer], (1) to make any payment or deposit required by it under the Agreement or the Series Supplement within [ ] business days after the day a payment or deposit is required to be made; or (2) to observe or perform any of its other covenants or agreements set forth in the Agreement or the Series Supplement, which failure has a material adverse effect on the Series 200[ ]- [ ] Certificateholders and which continues unremedied for a period of [ ] days, or for a longer period, not in excess of [ ] days, as may be reasonably necessary to remedy the failure; provided that the failure is capable of remedy within [ ] days or less and the [Seller] [Servicer] [Depositor] delivers an officer's certificate to the effect that the [Seller] [Servicer] [Depositor] has commenced, or will promptly commence and diligently pursue, all reasonable efforts to remedy the failure, after the earlier to occur of the discovery of the failure by the [Seller] [Servicer] [Depositor] or written notice; (b) any representation or warranty made by [Seller] [Servicer] [Depositor] in the Agreement or the Series Supplement or any information required to be given by the [Depositor] [Seller] [Servicer] to the Trustee to identify the Accounts proves to have been incorrect in any material respect when made and continues to be incorrect in any material respect for a period of [ ] days, or for a longer period, not in excess of [ ] days, as may be reasonably necessary to remedy the breach; provided that the misrepresentation is capable of remedy within [ ] days or less and the [Seller] [Servicer] [Depositor] delivers an officer's certificate to the effect that the [Seller] [Servicer] [Depositor] has commenced or will promptly commence and diligently pursue, all reasonable efforts to remedy the misrepresentation, after the earlier to occur of discovery of the breach by the [Seller] [Servicer] [Depositor] or written notice and as a result of which the interests of the Certificateholders are materially and adversely affected; provided, however, that a Pay Out Event shall not be deemed to occur if the [Seller] [Servicer] [Depositor] has repurchased the related Receivables or all Receivables, if applicable, during the period in accordance with the provisions of the Agreement; (c) a failure by the [Depositor] [Seller] to make an addition to the Trust within five business days after the day on which it is required to make an addition pursuant to the Agreement or the Series Supplement; (d) the occurrence of any Servicer Default with respect to the Certificates; (e) the average Portfolio Yield for any three consecutive Monthly Periods is less than the average of the Base Rates with respect to Series 200[ ]- [ ] for the Monthly Periods; (f) the failure to pay in full the Class A Invested Amount on the Class A Expected Final Payment Date[, or the Class B Invested Amount on the Class B Expected Final Payment Date]; and (g) the [Depositor] [Seller] is unable for any reason to transfer Receivables to the Trust in accordance with the Agreement or the Series Supplement. Then, in the case of any event described in subparagraph (a), (b) or (d), after the applicable grace period, if any, set forth in those subparagraphs, either the Trustee or the holders of Certificates evidencing more than 50% of the aggregate unpaid principal amount of Series 200[ ]- [ ] by notice then given in writing to the [Seller] [Servicer] [Depositor], and to the Trustee if given by the Certificateholders, may declare that a Pay Out Event has occurred with respect to Series 200[ ]- [ ] as of the date of notice, and, in the case of any event described in subparagraph (c), (e), (f) or (g), a Pay Out Event shall occur with respect to Series 200[ ]- [ ], without any notice or other action on the part of the Trustee immediately upon the occurrence of the event. For purposes of the Pay Out Event described in clause (e) above, the terms "Base Rate" and "Portfolio Yield" will be defined as follows with respect to the Certificates: "Base Rate" means, with respect to any Monthly Period, the annualized percentage equivalent of a fraction, the numerator of which is equal to the sum of Class A Monthly Interest, [Class B Monthly Interest] and the Monthly Servicing Fee with respect to Series 200[ ]- [ ] for the related Distribution Date and the denominator of which is the Invested Amount as of the last day of the preceding Monthly Period. "Portfolio Yield" means, with respect to any Monthly Period, the annualized percentage equivalent of a fraction, the numerator of which is equal to: (a) the Floating Allocation Percentage of collections of Finance Charge Receivables, including any investment earnings and other amounts that are to be treated as Finance Charge Receivables in accordance with the Agreement, for the Monthly Period calculated on a billed basis, plus (b) the amount of Principal Funding Investment Proceeds for the related Distribution Date, plus (c) the amount of funds withdrawn from the Reserve Account and which are required to be included as Class A Available Funds [or Class B Available Funds], in each case for the Distribution Date with respect to the relevant Monthly Period, minus (d) the Investor Default Amount for the Distribution Date with respect to the Monthly Period, and the denominator of which is the Invested Amount as of the last day of the preceding Monthly Period. If the proceeds of any sale of the Receivables following the occurrence of an Insolvency event with respect to the [Depositor] [Seller] [Servicer] allocated to the Class A Invested Amount and the proceeds of any collections on the Receivables in the Collection Account are not sufficient to pay in full the remaining amount due on the Class A Certificates, then the Class A Certificateholders will suffer a corresponding loss [and no proceeds will be available to the Class B Certificateholders]. Servicing Compensation and Payment of Expenses The share of the Servicing Fee allocable to Series 200[ ]- [ ] with respect to any Distribution Date (the "Monthly Servicing Fee") shall be equal to one twelfth of the product of: (a) [ ]% (the "Servicing Fee Rate"), and (b) the sum of the Adjusted Invested Amount and the Collateral Invested Amount, if any, as of the last day of the Monthly Period preceding the Distribution Date (the amount calculated pursuant to this clause (b) is referred to as the "Servicing Base Amount"); provided, however, that the Monthly Servicing Fee with respect to the first Distribution Date will be $[ ] [equal to the Servicing Fee accrued on the Initial Invested Amount at the Servicing Fee Rate for the period from the Issuance Date to but excluding the first Distribution Date calculated on the basis of the actual number of days in the period from the Issuance Date to the first Distribution Date and a 360-day year]. On each Distribution Date, but only if [ ] or the Trustee is the Servicer, Interchange with respect to the related Monthly Period that is on deposit in the Collection Account shall be withdrawn from the Collection Account and paid to the Servicer as payment of a portion of the Monthly Servicing Fee with respect to the Monthly Period. The "Servicer Interchange" for any Monthly Period for which [ ] or the Trustee is the Servicer will be equal to the product of: (a) the Floating Allocation Percentage for the Monthly Period, and (b) the portion of Finance Charge Receivables allocated to the Trust with respect to the Monthly Period that is attributed to Interchange; provided, however, that Servicer Interchange for a Monthly Period shall not exceed one twelfth of the product of: (1) the sum of the Invested Amount and the Collateral Investment amount, if any, as of the last day of the Monthly Period, and (2) [ ]%. In the case of any insufficiency of Servicer Interchange on deposit in the Collection Account, a portion of the Monthly Servicing Fee with respect to the Monthly Period will not be paid to the extent of that insufficiency and in no event shall the Trust, the Trustee or the Certificateholders be liable for the share of the Servicing Fee to be paid out of the Servicer Interchange. [The share of the Monthly Servicing Fee allocable to the Class A Certificateholders, after giving effect to the distribution of any Servicer Interchange to the Servicer, with respect to any Distribution Date (the "Class A Servicing Fee") shall be equal to one twelfth of the product of: (a) the Class A Floating Percentage, (b) [ ]%, or if [ ] or the Trustee is not the Servicer, [ ]% (the "Net Servicing Fee Rate"), and (c) the Servicing Base Amount; provided, however, with respect to the first Distribution Date, the Class A Servicing Fee shall be equal to the Class A Certificateholders' share of the Monthly Servicing Fee for the period from the Issuance Date to but excluding the first Distribution Date. [The share of the Monthly Servicing Fee allocable to the Class B Certificateholders, after giving effect to any distribution of Servicer Interchange to the Servicer, with respect to any Distribution Date (the "Class B Servicing Fee", and together with the Class A Servicing Fee, the "Servicing Fee") shall be equal to one twelfth of the product of: (a) the Class B Floating Percentage, (b) the Net Servicing Fee Rate, and (c) the Servicing Base Amount; provided, however, with respect to the first Distribution Date, the Class B Servicing Fee shall be equal to the Class B Certificateholders' share of the Monthly Servicing Fee for the period from the Series Issuance Date to but excluding the first Distribution Date. The remainder of the Servicing Fee shall be paid by the [Depositor] [Seller] or the certificateholders of other Series, as provided in the related Supplements, or, to the extent of any insufficiency of the Servicer Interchange as described above, not be paid and in no event shall the Trust, the Trustee or the Certificateholders be liable for the share of the Servicing Fee to be paid by the [Depositor] [the Seller] or the Certificateholders of any other Series or to be paid out of the Servicer Interchange. The Class A Servicing Fee and the Class B Servicing Fee shall be payable to the Servicer solely to the extent amounts are available for distribution of the servicing fees.] Series Termination If on the Distribution Date which is two months prior to the Termination Date, the Invested Amount or the Collateral Invested Amount, if any, in each case after giving effect to all changes in these amounts on that date, exceeds zero, the Servicer will, within the 40-day period beginning on that date, solicit bids for the sale of interests in the Principal Receivables or particular Principal Receivables, together in each case with the related Finance Charge Receivables, in an amount equal to the sum of the Invested Amount and the Collateral Invested Amount, if any, at the close of business on the last day of the Monthly Period preceding the Termination Date, after giving effect to all distributions required to be made on the Termination Date. The [Depositor] [Seller], provided that the sum of the Invested Amount and the Collateral Invested Amount, if any, is less than or equal to [ ]% of the Initial Invested Amount, and the Collateral Interest Holder will be entitled to participate in, and to receive notice of each bid submitted in connection with, the bidding. Upon the expiration of the 40-day period, the Trustee will determine: o which bid is the highest cash purchase offer (the "Highest Bid"), and o the amount (the "Available Final Distribution Amount") which otherwise would be available in the Collection Account on the Termination Date for distribution to the Certificateholders and the Collateral Interest Holder. The Servicer will sell the Receivables on the Termination Date to the bidder who provided the Highest Bid and will deposit the proceeds of the sale in the Collection Account for allocation, together with the Available Final Distribution Amount, to the Certificateholders' Interest. Reports No later than the third business day prior to each Distribution Date, the Servicer will forward to the Trustee, [the Collateral Interest Holder] [the Cash Collateral Depositor] [the Depositor] the Paying Agent and each Rating Agency a statement (the "Monthly Report") prepared by the Servicer setting forth information with respect to the Trust and the Certificates, including: (a) the aggregate amount of Principal Receivables and Finance Charge Receivables in the Trust as of the end of the Monthly Period; (b) the Class A Invested Amount [and] [the Class B Invested Amount] [and] [the Collateral Invested Amount] at the close of business on the last day of the preceding Monthly Period; (c) the Floating Allocation Percentage and, during the [Controlled Amortization Period] [Accumulation Period] or Rapid Amortization Period with respect to the Series, the Principal Allocation Percentage with respect to the Certificates; (d) the amount of collections of Principal Receivables and Finance Charge Receivables processed during the related Monthly Period and the portion of these Receivables allocated to the Certificateholders' Interest; (e) the aggregate outstanding balance of Accounts which were 30, 60, and 90 days or more delinquent as of the end of the Monthly Period; (f) the Defaulted Amount with respect to the Monthly Period and the portion of this Defaulted Amount allocated to the Certificateholders' Interest [and the Collateral Interest Holder]; (g) the amount, if any, of Class A Charge-Offs [and Class B Charge-Offs]; (h) the Monthly Servicing Fees; (i) the Portfolio Yield for the Monthly Period; (j) the amount to be withdrawn from the Cash Collateral Account, if any, to fund the Class A Required Amount [or the Class B Required Amount] for the Distribution Date; (k) the Available Cash Collateral Amount, the Available Shared Collateral Amount and the Required Cash Collateral with respect to Series 200[ ]- [ ], and (l) Reallocated Principal Receivables. ERISA CONSIDERATIONS Employee benefit plans and other retirement arrangements (including individual retirement accounts) which are subject to Title I of the Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of the Code may not purchase the Certificates. LEGAL INVESTMENT CONSIDERATIONS The appropriate characterization of the Securities under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase Securities, may be subject to significant interpretive uncertainties. All investors whose investment authority is subject to legal restrictions should consult their own legal advisors to determine whether, and to what extent, the Securities will constitute legal investments for them. UNDERWRITING Subject to the terms and conditions set forth in the "Underwriting Agreement" between the Depositor and the underwriters named below (the "Underwriters"), the Depositor has agreed to sell to the Underwriters, and each of the Underwriters has severally agreed to purchase, the principal amount of the Class A Certificates [and Class B Certificates] set forth opposite its name (the "Underwritten Certificates"): Principal Amount of Principal Amount of Underwriter Class A Certificates Class B Certificates - ----------- -------------------- -------------------- Deutsche Banc Alex. Brown...... [Other underwriter]............ Total.......................... The Underwriting Agreement provides that the obligations of the Underwriters to pay for and accept delivery of the Underwritten Certificates are subject to the approval of related legal matters by their counsel and to other conditions. All of the Certificates offered by this prospectus supplement will be issued if any are issued. Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all the Underwritten Certificates offered by this prospectus supplement, if any are taken. The Underwriters propose initially to offer the Class A Certificates to the public at the price set forth on the cover page of this prospectus supplement and to some dealers at price less concessions not in excess of [ ] % of the principal amount of the Class A Certificates. The Underwriters may allow, and dealers may reallow, concessions not in excess of [ ] % of the principal amount of the Class A Certificates to specific brokers and dealers. After the initial public offering, the public offering price and other selling terms may be changed by the Underwriters. [The Underwriters propose initially to offer the Class B Certificates to the public at the price set forth on the cover page of this prospectus supplement and to some dealers at price less concessions not in excess of [ ]% of the principal amount of the Class B Certificates. The Underwriters may allow, and dealers may reallow, concessions not in excess of [ ]% of the principal amount of the Class B Certificates to some brokers and dealers. After the initial public offering, the public offering price and other selling terms may be changed by the Underwriters.] The Depositor will indemnify the Underwriters against specific liabilities, including liabilities under the Securities Act of 1933, or contribute to payments the Underwriters may be required to make. In the ordinary course of their respective businesses, the Underwriters and their respective affiliates have engaged and may engage in investment banking and/or commercial banking transactions with the Depositor and its affiliates. If and to the extent required by applicable law or regulation, this prospectus supplement and the Prospectus will also be used by the Underwriter after the completion of the offering in connection with offers and sales related to market-making transactions in the offered Certificates in which the Underwriter acts as principal. Sales will be made at negotiated prices determined at the time of sale. LEGAL MATTERS Some related legal matters with respect to the Certificates will be passed upon by [ ], New York, New York. RATINGS It is a condition to issuance that the Class A Certificates be rated in the highest rating category by [Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc.] [Moody's Investors Service, Inc.], referred to as the "Rating Agencies". [It is a condition to issuance that the Class B Certificates be rated in one of the three highest rating categories by a Rating Agency.] A securities rating addresses the likelihood of the receipt by Certificateholders of distributions on the Securities. The rating takes into consideration the characteristics of the Securities and the structural, legal and tax aspects associated with the Certificates. The ratings on the Certificates do not, however constitute statements regarding the possibility that Certificateholders might realize a lower than anticipated yield. A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. Each securities rating should be evaluated independently of similar ratings on different securities. Index of Defined Terms Accumulation Period.........................................................S-27 Accumulation Period Length..................................................S-30 Adjusted Invested Amount....................................................S-36 Agreement...................................................................S-13 Available Cash Collateral Amount............................................S-50 Available Final Distribution Amount.........................................S-64 Available Funds.............................................................S-27 Available Principal Collections.............................................S-30 Available Reserve Account Amount............................................S-40 Available Shared Collateral Amount..........................................S-52 Base Rate...................................................................S-61 Cash Collateral Account.....................................................S-50 Cash Collateral Depositor...................................................S-46 Cash Collateral Fee.........................................................S-46 Certificateholders..........................................................S-13 Certificates................................................................S-24 Class A Accumulation Period.................................................S-29 Class A Additional Interest.................................................S-43 Class A Adjusted Invested Amount............................................S-35 Class A Available Funds.....................................................S-26 Class A Certificate Rate....................................................S-25 Class A Certificateholders..................................................S-13 Class A Certificates........................................................S-24 Class A Charge-Off..........................................................S-54 Class A Default Amount......................................................S-54 Class A Floating Percentage.................................................S-33 Class A Initial Invested Amount.............................................S-34 Class A Invested Amount.....................................................S-35 Class A Investor Charge-Offs................................................S-35 Class A Monthly Interest....................................................S-44 Class A Monthly Principal...................................................S-48 Class A Principal Percentage................................................S-34 Class A Required Amount.....................................................S-41 Class A Servicing Fee.......................................................S-62 Class B Accumulation Period.................................................S-29 Class B Additional Interest.................................................S-44 Class B Adjusted Invested Amount............................................S-36 Class B Available Funds.....................................................S-27 Class B Certificate Rate....................................................S-25 Class B Certificateholders..................................................S-13 Class B Certificates........................................................S-24 Class B Charge-Off..........................................................S-42 Class B Default Amount......................................................S-54 Class B Floating Percentage.................................................S-33 Class B Initial Invested Amount.............................................S-31 Class B Invested Amount.....................................................S-35 Class B Monthly Interest....................................................S-44 Class B Monthly Principal...................................................S-48 Class B Principal Commencement Date.........................................S-31 Class B Principal Percentage................................................S-34 Class B Required Amount.....................................................S-42 Class B Servicing Fee.......................................................S-63 Collateral Defaulted Amount.................................................S-36 Collateral Indebtedness Amount..............................................S-36 Collateral Interest Holders.................................................S-50 Collateral Invested Amount..................................................S-37 Collection Account..........................................................S-37 Controlled Accumulation [Amortization] Amount...............................S-49 Controlled Amortization Period..............................................S-28 Controlled Deposit Amount...................................................S-49 Controlled Distribution Amount..............................................S-49 Covered Amount..............................................................S-38 Cut-Off Date................................................................S-27 Deficit Controlled Accumulation Amount......................................S-49 Distribution Date.......................................................S-13, 25 Eligible Investments........................................................S-38 Excess Funding Account......................................................S-32 Excess Spread...............................................................S-45 Excluded Series.............................................................S-58 Finance Charge Receivables..................................................S-17 Floating Allocation Percentage..............................................S-32 Highest Bid.................................................................S-64 Identified Pool.............................................................S-18 Initial Cash Collateral Amount..............................................S-50 Initial Class B Collateral Amount...........................................S-50 Initial Shared Collateral Amount............................................S-50 Interest Funding Account....................................................S-25 Interest Payment Date.......................................................S-25 Interest Period.............................................................S-25 Invested Amount.............................................................S-37 Investor Default Amount.....................................................S-53 Issuance....................................................................S-55 Monthly Period..............................................................S-13 Monthly Report..............................................................S-64 Monthly Servicing Fee.......................................................S-61 Net Servicing Fee Rate......................................................S-62 Paired Series...............................................................S-57 Pay Out Events..............................................................S-59 Portfolio Yield.............................................................S-61 Principal Allocation Percentage.............................................S-33 Principal Funding Account...................................................S-28 Principal Funding Account Balance...........................................S-38 Principal Funding Investment Proceeds.......................................S-38 Rating Agencies.............................................................S-66 Ratings Effect..............................................................S-17 Reallocated Principal Receivables...........................................S-41 Record Date.................................................................S-25 Required Amount.............................................................S-42 Required Cash Collateral Amount.............................................S-51 Required Principal Balance..................................................S-58 Required Reserve Account Amount.............................................S-39 Required Share Collateral Account...........................................S-51 Reserve Account.............................................................S-39 Reserve Account Factor......................................................S-39 Reserve Account Funding Date................................................S-39 Revolving Period............................................................S-27 Securities..................................................................S-24 Seller......................................................................S-23 Series......................................................................S-24 Series Enhancement..........................................................S-16 Series Supplement...........................................................S-13 Servicer....................................................................S-24 Servicing Base Amount.......................................................S-62 Servicing Fee...............................................................S-63 Servicing Fee Rate..........................................................S-61 Special Payment Date........................................................S-13 Supplement..................................................................S-13 Termination Date............................................................S-13 Trust.......................................................................S-24 Trust Portfolio.............................................................S-18 Trustee.....................................................................S-25 Underwriters................................................................S-65 Underwriting Agreement......................................................S-65 Underwritten Certificates...................................................S-65 ====================================== ======================================== $[ ] CARD ACCOUNT RECEIVABLES TRUSTS $[ ] [ ]% Floating Rate Adjustable Rate Variable Rate Asset Backed Certificates, Class A $[ ] [ ]% Floating Rate Adjustable Rate Variable Rate Asset Backed Certificates, Class B ACE SECURITIES CORP. (DEPOSITOR) PROSPECTUS SUPPLEMENT [ ] DEUTSCHE BANC ALEX. BROWN ====================================== ======================================== The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, [ ] PROSPECTUS CARD RECEIVABLE ASSET-BACKED CERTIFICATES AND ASSET-BACKED NOTES (ISSUABLE IN SERIES) ACE SECURITIES CORP. DEPOSITOR THE TRUSTS: Each trust will be established to hold assets transferred to it by ACE Securities Corp. The assets in each trust will generally consist of one or more of the following: 1. One or more pools of: o receivables arising from time to time in the ordinary course of business in one or more portfolios of credit card, charge card or other types of accounts, o participation certificates evidencing participation interests in one or more portfolios of credit card, charge card or other types of accounts, o government securities, o private securities evidencing ownership interests in or secured by one or more portfolios of credit card, charge card or other types of accounts; 2. All monies due under the above assets (which may be net of amounts payable to the servicer); and 3. Funds or accounts established for the related trust or one or more forms of enhancement. The assets in your trust are specified in the prospectus supplement for that particular trust, while the types of assets that may be included in a trust, whether or not in your trust, are described in greater detail in this prospectus. THE SECURITIES: ACE Securities Corp. will sell the securities pursuant to a prospectus supplement. The securities will be grouped into one or more series, each having its own distinct designation. Each series will be issued in one or more classes and will evidence beneficial ownership of, or be secured by, the assets in the trust that the series relates to. A prospectus supplement for a series will specify all of the terms of the series and of each of the classes in the series. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE OFFERED SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. MAKING ANY CONTRARY REPRESENTATION IS A CRIMINAL OFFENSE. The date of this Prospectus is [ ] TABLE OF CONTENTS PAGE Risk Factors................................................................ The Trusts.................................................................. Trust Assets................................................................ Series Enhancement.......................................................... Servicing of Receivables.................................................... Certain Matters Regarding the Servicer...................................... Description of the Notes.................................................... Description of the Certificates............................................. Certain Information Regarding the Securities................................ Description of the Trust Agreements or Pooling and Servicing Agreements..... Certain Legal Aspects of the Receivables.................................... The Depositor............................................................... Use of Proceeds............................................................. Material Federal Income Tax Consequences.................................... Owner Trusts................................................................ Grantor Trusts.............................................................. Master Trust................................................................ Certain State and Local Tax Considerations.................................. ERISA Considerations........................................................ Plan of Distribution........................................................ Legal Matters............................................................... Index of Defined Terms...................................................... Annex I; Global Clearance, Settlement and Tax Documentation Procedures...... RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE CERTIFICATES. YOU SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS SUPPLEMENT. LIMITED LIQUIDITY MAY RESULT IN DELAYS IN YOUR ABILITY TO SELL SECURITIES OR LOWER RETURNS There will be no market for the securities of any series prior to their issuance, and there can be no assurance that a secondary market will develop. If a secondary market does develop, there can be no assurance that it will provide holders with liquidity of investment or that the market will continue for the life of the securities of the related series. Deutsche Banc Alex. Brown presently expects to make a secondary market in the securities, but has no obligation to do so. Absent a secondary market for the securities you may experience a delay if you choose to sell your securities or the price you receive may be less than you would receive for a comparable liquid security. LIMITED ASSETS FOR PAYMENTS - NO RECOURSE TO DEPOSITOR, SELLER OR SERVICER The depositor does not have, nor is it expected to have, any significant assets. The securities of a series will be payable solely from the assets of the trust for that series. Except for any related insurance policies or credit support, there will be no recourse to the depositor or any other person for any default on the notes or any failure to receive distributions on the certificates with respect to any series. Consequently, holders of securities of each series must rely solely upon payments with respect to the assets constituting the trust fund for a series of securities, including, if applicable, any amounts available pursuant to any enhancement for that series, for the payment of principal of and interest on the securities of that series. The only obligations, if any, of the depositor with respect to the securities of any series will be with respect to its breach of specific representations and warranties. The depositor does not have, and is not expected in the future to have, any significant assets with which to meet any obligation to repurchase assets with respect to which there has been a breach of any representation or warranty. If, for example, the depositor were required to repurchase a receivable, its only sources of funds to make the repurchase would be from funds obtained from the enforcement of a corresponding obligation, if any, on the part of the originator of the receivable, the servicer or the seller, as the case may be, or from a reserve fund established to provide funds for repurchases. If the depositor does not have sufficient assets and no other party is obligated to repurchase defective assets, you may experience a loss. LIMITS ON ENHANCEMENT MAY RESULT IN LOSSES TO YOU Although we intend the enhancement for the securities to reduce the risk of delinquent payments or losses to holders of a series of securities entitled to the benefit of the enhancement, the amount of the enhancement will be limited, as set forth in the related prospectus supplement. In addition, the amount available will decline and could be depleted prior to the payment in full of the related series of securities, and losses on the primary assets could result in losses to holders of those securities. TIMING AND RATE OF PREPAYMENTS MAY RESULT IN LOWER YIELD The yield to maturity experienced by a holder of securities may be affected by the rate and timing of payments of principal of the receivables or of the underlying receivables relating to the private securities. The receivables or underlying receivables may be paid at any time and we can not assure you that there will be new receivables created in the related accounts or that new receivables will be added to the related trust or underlying trust. The rate and timing of principal payments of the securities of a series will be affected by a number of factors, including the following: o the extent of repayments, o the manner of allocating principal payments among the classes of securities of a series as specified in the related prospectus supplement, and o the exercise of any right of optional termination. Prepayments may also result from repurchases of receivables or underlying receivables, as applicable, due to material breaches of the seller's or the depositor's representations or warranties. Interest payable on the securities of a series on a distribution date will include all interest accrued during the period specified in the related prospectus supplement. In the event interest accrues during the calendar month prior to a distribution date, the effective yield to holders will be reduced from the yield that would otherwise be obtainable if interest payable on the security were to accrue through the day immediately preceding each distribution date, and the effective yield at par to holders will be less than the indicated coupon rate. RISK OF EARLY AMORTIZATION The continuation of the revolving period for any series will depend on the continued generation of new receivable for the related trust. A decline in the amount of receivables may result in the commencement of a rapid amortization period with respect to the related series. Receivables are generally prepaid upon the retail sale of the underlying consumer or commercial product. In these events, you would bear the risk of reinvestment of the principal amount of your securities. The seller's or depositor's interest will need to be maintained at a minimum level equal to an amount specified in the related prospectus supplement. If it falls below the minimum level, the seller or depositor will be required to transfer additional accounts to the Trust. In addition, subject to some exceptions, which if applicable, will be set forth in the related prospectus supplement, a rapid amortization period will commence if the seller or depositor fails to transfer these additional accounts to the trust. POSSIBLE ADVERSE IMPACT OF FUTURE SERIES Each trust that is a master trust may issue new series from time to time. The terms of any new series will not be subject to your prior review or consent. The terms may include methods for determining applicable investor percentages and allocating collections, provisions creating different or additional security or other series enhancements, provisions subordinating the series to other series or subordinating other series if the supplement relating to this series so permits) to the new series, and any other amendment or supplement to the transaction documents which is made applicable only to the new series. The obligation of the trustee to issue any new series is subject to the condition that the issuance will not result in any rating agency reducing or withdrawing its then existing rating of your securities. You can not be certain, however, that the issuance of any other series, from time to time, might not have an impact on the timing or amount of payments received by you. RISKS OF SUBORDINATED SECURITIES To the extent specified in the applicable prospectus supplement, distributions of interest on and principal of one or more classes of securities of a series may be subordinated in priority of payment to interest and principal due on one or more other classes of securities of the related series. Any subordinated securities will be affected to a greater degree by any losses on the underlying loans relating to the private securities. BOOK-ENTRY REGISTRATION-- BENEFICIAL OWNERS NOT RECOGNIZED BY TRUST Issuance of the securities in book-entry form may reduce the liquidity of these securities in the secondary trading market since investors may be unwilling to purchase securities for which they cannot obtain physical certificates. Since transactions in the securities can be effected only through The Depository Trust Company and any other entities set forth in the related prospectus supplement, your ability to pledge a security to persons or entities that do not participate in The Depository Trust Company or any other entities or otherwise to take actions in respect of the related securities may be limited due to lack of a physical certificate representing the securities. You may experience some delay in the receipt of distributions of interest and principal on the securities since the distributions will be forwarded by the trustee to The Depository Trust Company and The Depository Trust Company will credit the distributions to the accounts of its participants which will then credit them to your account either directly or indirectly through indirect participants. THE TRUSTS ACE Securities Corp., a Delaware corporation (the "Depositor") will establish a trust or master trust (the "Trust") pursuant to a Trust Agreement or a Master Trust Agreement (a "Trust Agreement"). The Trustee of each Trust will be a commercial bank, savings and loan association or trust company identified as the Trustee (the "Trustee") in the related prospectus supplement. The property of the Trust will include Base Assets and may also include Series Enhancements and other assets specified in the related prospectus supplement. Each Trust will issue one or more series (each, a "Series") of asset backed notes (the "Notes") or asset backed certificates (the "Certificates", and together with the Notes, the "Securities"), that will include one or more Classes of Certificates or one or more Classes of Notes (each, a "Class"). Any Notes included in a Series will be issued pursuant to an indenture (the "Indenture") entered into between the related Trust and an indenture trustee (the "Indenture Trustee"). The Indenture Trustee will also be a commercial bank, savings and loan association or trust company identified as the Indenture Trustee in the related prospectus supplement. A form of Trust Agreement, a form of the Pooling and Servicing Agreement and a form of the Series Supplement to the Pooling and Servicing Agreement and a form of Indenture have each been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. If applicable, the Trust Agreement, the Pooling and Servicing Agreement, the Series Supplement and the Indenture (collectively the "Agreements"), relating to a particular Series of Notes or Certificates, as applicable, will be filed as an exhibit to a report on Form 8-K to be filed with the Securities and Exchange Commission (the "Commission") within 15 days following the issuance of this Series of Notes or Certificates, as applicable. TRUST ASSETS The assets of the Trust for a Series of Certificates will include some or all of the Base Assets described below and may include Series Enhancements with respect to these Series and other assets described in the related prospectus supplement. The "Base Assets" for a Series will consist of one or more of the following types of assets; provided that each Series will contain the assets described in clause (a) or (b) below: (a) receivables arising from time to time in the ordinary course of business in one or more portfolios of credit card, charge card or other types of accounts (the "Receivables") and/or participations ("Participations") in Receivables, (b) securities backed by Receivables ("CRB Securities"), (c) Government Securities; and (d) Private Label Custody Receipt Securities. The Base Assets for a Series may be purchased by the Depositor from the Seller identified in the related prospectus supplement or, with respect to CRB Securities, may be purchased by the Depositor in the open market or in privately negotiated transactions, which may include transactions with affiliates of the Depositor, and then, in each case, will be transferred by the Depositor to the Trust in exchange for Notes or Certificates, as applicable, issued by the Trust. Alternatively, the Trust may purchase some or all of the Base Assets in the open market or in privately negotiated transactions with cash obtained by the Trust in exchange for the issuance of Notes or Certificates, as applicable, of the Trust to the Depositor. If so specified in the related prospectus supplement, the assets of the Trust for a Series may include monies or government securities on deposit in a Pre-Funding Account" established with the Trustee, or the Indenture Trustee, which monies or government securities are to be used for the purchase of additional Base Assets during a funding period specified in the related prospectus supplement. The following is a brief description of the Base Assets expected to be included in Trusts. Specific information regarding the Base Assets with respect to a Series of Notes or Certificates, as applicable, will be provided in the related prospectus supplement and, to the extent not contained in the related prospectus supplement, in a report on Form 8-K to be filed with the Commission within 15 days after the initial issuance of the Notes or Certificates, as applicable. Receivables and Participations The Base Assets for a Series may consist, in whole or in part, of Receivables arising from time to time in the ordinary course of business in a portfolio of consumer, corporate, revolving, credit card, charge and or debit card accounts (collectively, the "Accounts"). The Receivables may be payable in U.S. dollars or in any other foreign currency. The Accounts will consist of the initial accounts (the "Initial Accounts") described below, as well as any additional accounts (the "Additional Accounts") added to the Trust from time to time as provided below, but will not include any Receivables in particular Accounts removed from the Trusts (the "Removed Accounts") as provided below. A seller or sellers designated in the related prospectus supplement (collectively, the "Seller") will initially convey to the related Trust, or will convey to the Depositor, which will promptly reconvey to the Trust all Receivables existing on the series cut-off date specified in the related prospectus supplement (the "Series Cut-Off Date") in the Initial Accounts, together with all Receivables arising in these Initial Accounts from time to time after the Series Cut-Off Date until the termination of the Trust. After the Series Cut-Off Date, a Seller may convey to the related Trust, which conveyance may be through the Depositor, Receivables arising in Additional Accounts, in each case in accordance with the provisions of the applicable Pooling and Servicing Agreement. In addition, pursuant to the related Pooling and Servicing Agreement, a Seller in some circumstances will be obligated to designate Additional Accounts, together with the Receivables arising in these Additional Accounts, to convey to the related Trust. The Seller will convey to the Trust all Receivables arising in any of the Additional Accounts, whether the Receivables are then existing or later created. The addition to a Trust of Receivables arising in Additional Accounts or Participations will be subject to conditions set forth in the applicable Pooling and Servicing Agreement. Pursuant to the related Pooling and Servicing Agreement and Series Supplement, the Depositor will also have the right, subject to specified limitations and conditions, but not the obligation, to remove the Receivables in any Account that becomes a Removed Account. The amount of Receivables in a Trust will fluctuate from day to day as new Receivables are generated or added to the Trust and as existing Receivables are collected, charged-off as uncollectible, removed or otherwise adjusted. If so specified in the related prospectus supplement, a Seller will be able to include Participations in the related Trust in lieu of or in addition to Receivables. CREDIT CARD ACCOUNTS AND RECEIVABLES. "Credit Card Receivables" are Receivables arising under credit card accounts ("Credit Card Accounts"), including Finance Charge Receivables and Principal Receivables. In addition, certain Interchange attributed to cardholder charges for merchandise and services in the Accounts may be treated as Finance Charge Receivables. Recoveries of charged-off Finance Charge Receivables will be treated as collections of Finance Charge Receivables and recoveries of charged-off Principal Receivables will be applied against charge-offs of Principal Receivables. From time to time, subject to certain conditions, certain of the amounts described above which are included in Principal Receivables may be treated as Finance Charge Receivables. "Interchange" consists of certain fees received by a credit card issuer from the VISA and MasterCard International associations as partial compensation for taking credit risk, absorbing fraud losses and funding receivables for a limited period prior to initial billing. Under the VISA and MasterCard International systems, a portion of the Interchange in connection with cardholder charges for merchandise and services is passed from banks which clear the transactions for merchants to credit card-issuing banks. VISA and MasterCard International may from time to time change the amount of Interchange reimbursed to banks issuing their credit cards. CHARGE CARD ACCOUNTS AND RECEIVABLES. "Charge Card Receivables" are receivables arising under customer charge accounts ("Charge Card Accounts"), and generally represent amounts charged on designated Accounts for merchandise and services, and all annual membership fees and certain other administrative fees billed to the designated Accounts. Receivables arising under Charge Card Accounts are generally not subject to monthly finance charges. There are distinctions between Credit Card Accounts and Charge Card Accounts. Credit Card Accounts offer revolving credit plans to customers. Charge Card Accounts generally have no pre-set spending limit and are designed for use as a convenient method of payment for the purchase of merchandise and services. Charge Card Accounts generally cannot be used as a means of financing such purchases. Accordingly, the full balance of a month's purchases is billed to cardmembers and is due upon receipt of the billing statement. By contrast, revolving credit plans allow customers to make a minimum monthly payment and to borrow the remaining outstanding balance from the credit card issuer up to a predetermined limit. As a result of these payment requirement differences, the Charge Card Accounts have a high monthly payment rate and balances which turn over rapidly relative to their charge volume when compared to Credit Card Accounts. Another distinction between Charge Card Accounts and Credit Card Accounts is that Charge Card Account balances are generally not subject to monthly finance charges. As described above, the full Account balance is billed monthly and is due upon receipt of the billing statement. Cardmembers do not have the option of using their Charge Card Accounts to extend payment and to pay a finance charge on the remaining outstanding balance. Credit Card Accounts, by contrast, do allow customers to pay a specified minimum portion of an outstanding amount and to finance the balance at a finance charge rate determined by the credit card issuer. (Because Charge Card Account balances are not assessed finance charges, for the purpose of providing yield to the Trust, a portion of Collections on Receivables in Charge Card Accounts received in any Monthly Period equal to the product of Collections and a yield factor which may be specified in the related Prospectus Supplement (the "Yield Factor") will generally be treated as Yield Collections). Each related Prospectus Supplement, where applicable, will describe the Yield Calculation for a specific portfolio of Charge Card Accounts. Additional Information Relating to Receivables The related prospectus supplement for each Series will provide information with respect to any Receivables that constitute Base Assets as of the Series Cut-off Date, including, among other things, the aggregate principal balance of the Receivables and whether the Receivables are Credit Card Receivables or Charge Card Receivables. The eligibility criteria which shall apply with respect to the inclusion of Receivables in the Base Assets for a Series will be specified in the related prospectus supplement. The information provided in the related prospectus supplement with respect to the Receivables will include, among other things: (a) underwriting criteria; (b) the loss and delinquency experience for the portfolio of Receivables; (c) the composition of the portfolio by account balance; and (d) the geographic distribution of Accounts and Receivables. The related prospectus supplement will also specify any other limitations on the types or characteristics of Receivables included in the Base Assets for a Series. If information of the nature described above respecting the Receivables included in the Base Assets of a Series is not known to the Seller at the time the Notes or Certificates, as applicable, of the Series are initially offered, approximate or more general information of the nature described above will be provided in the related prospectus supplement and additional information will be set forth in a Current Report on Form 8-K to be available to investors on the date of issuance of the related Notes or Certificates, as applicable, and to be filed with the Commission within 15 days after the initial issuance of these Notes or Certificates, as applicable. CRB Securities Base Assets for a Series may consist, in whole or in part, of receivables backed securities consisting of Certificates evidencing an undivided interest in, or Notes or loans secured by, Receivables generated in Accounts. These certificates, notes or loans will have previously been offered and distributed to the public pursuant to an effective registration statement registered under the Securities Act of 1933, as amended (the "Securities Act"), or will be so registered, offered and distributed concurrently with the offering of the related Series of Notes or Certificates, as applicable. CRB Securities will have been issued pursuant to a pooling and servicing agreement, a master pooling and servicing agreement, a sale and servicing agreement, a trust agreement, indenture or similar agreement (a "CRB Agreement"). The CRB Securities represent an undivided interest in or obligation of a trust formed pursuant to a CRB Agreement (a "CRB Trust"). The seller/servicer of the underlying Receivables will have entered into the CRB Agreement with the trustee under this CRB Agreement (the "CRB Trustee"). Receivables underlying a CRB Security will be serviced by a servicer (the "CRB Servicer") directly or by one or more sub-servicers who may be subject to the supervision of the CRB Servicer. The issuer of the CRB Securities (the "CRB Issuer") will be a financial institution, corporation or other entity engaged generally in the business of issuing credit or charge cards; any form of store, merchandiser or service provider that issues credit or charge card; or a limited purpose corporation organized for the purpose of, among other things, establishing trusts and acquiring and selling receivables to these trusts, and selling beneficial interests in these trusts, or one of these trusts. If so specified in the related prospectus supplement, the CRB Issuer may be an affiliate of the Depositor. The obligations of the CRB Issuer will generally be limited to representations and warranties with respect to the assets conveyed by it to the related trust. The CRB Issuer will not have guaranteed any of the assets conveyed to the related trust or any of the CRB Securities issued under the CRB Agreement. Distributions of principal and interest will be made on the CRB Securities on the dates specified in the related prospectus supplement. The CRB Securities may be entitled to receive nominal or no principal distributions or nominal or no interest distributions. Principal and interest distributions will be made on the CRB Securities by the CRB Trustee or the CRB Servicer. The CRB Issuer or the CRB Servicer may have the right to repurchase assets underlying the CRB Securities after a specified date or under other circumstances specified in the related prospectus supplement. UNDERLYING RECEIVABLES. The Receivables underlying the CRB Securities will consist of Credit Card Receivables, Charge Card Receivables or other specified types of Receivables. CREDIT ENHANCEMENT RELATING TO CRB SECURITIES. Credit Enhancement in the form of reserve funds, subordination of other CRB Securities, guarantees, letters of credit, cash collateral accounts, insurance policies or other types of Credit Enhancement may be provided with respect to the Receivables underlying the CRB Securities or with respect to the CRB Securities themselves. The type, characteristics and amount of Credit Enhancement will be a function of characteristics of the Receivables and other factors and will have been established for the CRB Securities on the basis of requirements of the applicable Rating Agencies. ADDITIONAL INFORMATION. The related prospectus supplement for a Series whose Base Assets include CRB Securities will specify, to the extent relevant and to the extent information is reasonably available to the Depositor, and to the extent the Depositor reasonably believes the information to be reliable: (a) the aggregate approximate principal amount and type of the CRB Securities to be included in the Base Assets; (b) characteristics of the Receivables which comprise the underlying assets for the CRB Securities, o whether the Receivables are Credit Card Receivables or other types of Receivables, o the fees and charges associated with the Receivables, and o the servicing fee or range of servicing fees with respect to the Receivables; (c) the expected and final maturity of the CRB Securities; (d) the interest rate of the CRB Securities; (e) the CRB Issuer, the CRB Servicer, if other than the CRB Issuer, and the CRB Trustee for the CRB Securities; (f) characteristics of the credit enhancement, if any, relating to the Receivables underlying the CRB Securities or relating to the CRB Securities themselves; (g) the terms on which the underlying Receivables for the CRB Securities may be, or are required to be, purchased prior to their stated maturity or the stated maturity of the CRB Securities; and (h) the terms on which Receivables may be substituted for those originally underlying the CRB Securities. If information of the nature described above representing the CRB Securities is not known to the Depositor at the time the related Series of Notes or Certificates, as applicable, are initially offered, approximate or more general information of the nature described above will be provided in the related prospectus supplement and the additional information, to the extent available, will be set forth in a Current Report on Form 8-K to be available to investors on the date of issuance of the related Series of Notes or Certificates, as applicable, and to be filed with the Commission within 15 days of the initial issuance of the Notes or Certificates, as applicable. As a general rule, each CRB Issuer will be subject to the information requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance with the Exchange Act, will file reports and other information with the Commission. Reports and other information filed with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices at Citicorp Center, 500 West Madison Street, 14th Floor, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of the material can be obtained from the Public Reference Section of the Commission at Judiciary Plaza, Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of this site is (http://www.sec.gov). In the event that any CRB Issuer is not subject to the information requirements of the Exchange Act on the date of issuance of the Certificates of the related Series or ceases to be subject to the information requirements after that date, the Depositor or the Trustee will provide, or cause to be provided, or make available, or cause to be made available, to holders of the Notes or Certificates, as applicable, upon request, the information contained in all periodic trustee reports, or similar reports, that are received by the Trustee with respect to the related CRB Securities where the CRB Securities represent 20% or more of the aggregate principal balance of the related Base Assets. Government Securities If so specified in the applicable prospectus supplement, the Base Assets for a Series may include any combination of: o receipts or other instruments created under the Department of the Treasury's Separate Trading of Registered Interest and Principal of Securities, or STRIPS, program ("Treasury Strips"), which interest and/or principal strips evidence ownership of specific interest and/or principal payments to be made on specified United States Treasury Bonds ("Treasury Bonds"); o Treasury Bonds; and o other debt securities ("GSE Bonds") of United States government sponsored enterprises ("GSEs", and together with Treasury Strips and Treasury Bonds, the "Government Securities"). The Government Securities, if any, included in a Trust are intended to assure investors that funds will be available to make suggested payments of principal and/or interest due on the related Notes or Certificates, as applicable. Accordingly, the Government Securities, if any, included in a Trust are intended both to: o support the ratings assigned to the related Notes or Certificates, as applicable, and o perform a function similar to that described in this Prospectus under "Series Enhancement". A description of the respective general features of Treasury Bonds, Treasury Strips and GSE Bonds is set forth below. The specific terms of the Government Securities, if any, and the private label custody receipt securities, if any, included in Base Assets will be set forth in the applicable prospectus supplement. Private Label Custody RECEIPT SECURITIES. Private Label Custody Receipt Securities will consist of any combination of: o receipts or other instruments, other than Treasury Strips, evidencing ownership of specific interest and/or principal payments to be made on Treasury Bonds held by a custodian ("Private Label Custody Strips"), and o receipts or other instruments evidencing ownership of specific interest and/or principal payments to be made on Resolution Funding Corporation ("REFCO") bonds ("REFCO Strips"; and together with Private Label Custody Strips, "Private Label Custody Receipt Securities", also referred to as "Receivables Pooling Certificates"). The specific terms of the Private Label Custody Receipt Securities, if any, included in a Trust will be set forth in the applicable prospectus supplement. The prospectus supplement for each Series of Notes or Certificates, as applicable, the Base Assets of which include Government Securities will contain information as to: (a) the title and series, the aggregate principal amount, denomination and form of each Government Security; (b) the limit, if any, upon the aggregate principal amount of the related Government Security; (c) the dates on which, or the range of dates within which, the principal of, and premium, if any, on, the related Government Security will be payable; (d) the rate or rates, or the method of determination of the rate or rates, at which the related Government Security will be payable; (e) the date or dates from which interest will accrue, and the dates on which interest will be payable; (f) whether the related Government Security was issued at a price lower than the principal amount of that Government Security; (g) material events of default or restrictive covenants provided for with respect to the related Government Security; (h) the rating of the Government Security, if any; (i) the issuer of each Government Security; (j) the material risks, if any, posed by the related Government Securities and the issuers of those Government Securities, which risks, if appropriate, will be described in the "Risk Factors" section of the related prospectus supplements; and (k) any other material terms of the related Government Security. With respect to Base Assets which include a pool of Government Securities, the related prospectus supplement will, to the extent applicable, describe the composition of the Government Securities' pool, material events of default or restrictive covenants common to the Government Securities, and, on an aggregate, percentage or weighted average basis, as applicable, the characteristics of the pool with respect to the terms set forth in (d), (e), and (f) of the preceding sentence and any other material terms regarding the related pool. The Government Securities included in a Trust will be senior unsecured, nonredeemable obligations of the issuer of the Government Securities, will be denominated in United States dollars and, if rated, will be rated at least investment grade by at least one nationally recognized rating agency (a "Rating Agency"). In addition, the inclusion of Government Securities in the Base Assets of a Series of Notes or Certificates, as applicable, is conditioned upon their characteristics being in form and substance satisfactory to the Rating Agency rating the related series of Notes or Certificates, as applicable. TREASURY BONDS. Treasury Bonds are issued by and are the obligations of The United States of America. Accordingly, the payment of principal and interest on each Treasury Bond will be guaranteed by the full faith and credit of the United States of America. Interest is typically payable on the Bonds semiannually. Treasury Bonds are issued in registered form in denominations of $1,000, $5,000, $10,000, $100,000 and $1,000,000 and in book-entry form in integral multiples of these amounts. TREASURY STRIPS. In general, Treasury Strips are created by separating, or "stripping", the principal and interest components of Treasury Bonds that have an original maturity of 10 or more years from the date of issue. A particular Treasury Strip evidences ownership of the principal payment or one of the periodic interest payments, generally semiannual, due on the Treasury Bond to which the Treasury Strip relates. In 1985 the Department of the Treasury, announced that all new issues of Treasury Bonds with maturities of 10 years or more would be transferable in their component pieces on the Federal Reserve wire system. In so doing, the Treasury created a generic, book-entry Treasury Strip named STRIPS (Separate Trading of Registered Interest and Principal of Securities) which, unlike private label Treasury Strips, can be issued without the need for a custodial arrangement. The STRIPS program has eclipsed the private sector programs (which are described below under - "Private Label Custody Receipt Securities"), and investment banks no longer sponsor new issues of custodial receipts. Treasury Strips may be either "serial" or "callable". A serial treasury strip (a "Serial Treasury Strip") evidences ownership of one of the periodic interest payments to be made on a Treasury Bond. No payments are made on the Treasury Strip, nor is it redeemable, prior to its maturity, at which time the holder becomes entitled to receive a single payment of the face amount of the Treasury Strip . Callable Treasury Strips relate to payments scheduled to be made after the related Treasury Bonds have become subject to redemption. Callable Treasury Strips (the "Callable Treasury Strips") evidence ownership of both principal of the related Treasury Bonds and each of the related interest payments commencing, typically, on the first interest payment date following the first optional redemption date. If the underlying Treasury Bonds are actually redeemed, holders of callable Treasury Strips generally receive a payment equal to the principal portion of the total face amount of these Treasury Strips plus the interest payment represented by the Treasury Strips maturing on the redemption date. No callable Treasury Strips will be included in a Trust. The face amount of any Treasury Strip is the aggregate of all payments scheduled to be received on that Treasury Strip. Treasury Strips are available in registered form and generally may be transferred and exchanged by the holders of the Treasury Strips in accordance with procedures applicable to the particular issue of the applicable Treasury Strips. GSE BONDS. As specified in the applicable prospectus supplement, the obligations of one or more of the following GSEs may be included in Base Assets: The Federal National Mortgage Association ("Fannie Mae"), The Federal Home Loan Mortgage Association ("Freddie Mac"), The Student Loan Marketing Association ("Sallie Mae"), REFCO, Tennessee Valley Authority ("TVA"), The Federal Home Loan Banks ("FHLB"), to the extent the obligations represent the joint and several obligations of the twelve Federal Home Loan Banks, and The Federal Farm Credit Banks ("FFCB"). GSE debt securities are exempt from registration under the Securities Act pursuant to Section 3(a)(2) of the Securities Act ,or are deemed by statute to be so exempt, and are not required to be registered under the Exchange Act. The securities of any GSE will be included in Base Assets only to the extent that: o its obligations are supported by the full faith and credit of the United States government, or o the organization makes publicly available its annual report which shall include financial statements or similar financial information with respect to the organization (a "GSE Issuer"). Unless otherwise specified in the related prospectus supplement, the GSE Bonds will not be guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality of the United States other than the related GSE. Unless otherwise specified in the related prospectus supplement, none of the GSE Bonds will have been issued pursuant to an indenture, and no trustee is provided for with respect to any GSE Bonds. There will generally be a fiscal agent ("Fiscal Agent") for an issuer of GSE Bonds whose actions will be governed by a fiscal agency agreement. A Fiscal Agent is not a trustee for the holders of the GSE Bonds and does not have the same responsibilities or duties to act for the holders as would a trustee. GSE Bonds may be subject to contractual and statutory restrictions which may provide some protection to securityholders against the occurrence or effects of specified events. Unless otherwise specified in the related prospectus supplement, each GSE is limited to activities that will promote its statutory purposes as set forth in the publicly available information with respect to the issuer. A GSE's promotion of its statutory purposes, as well as its statutory, structural and regulatory relationships with the federal government, may cause or require a GSE to conduct its business in a manner that differs from what an enterprise which is not a GSE might employ. THE FEDERAL NATIONAL MORTGAGE ASSOCIATION. Fannie Mae is a federally chartered and stockholder owned corporation organized and existing under the Federal National Mortgage Association Charter Act. It is the largest investor in home mortgage loans in the United States. Fannie Mae originally was established in 1938 as a corporation wholly owned by the United States government to provide supplemental liquidity to the mortgage market and was transformed into a stockholder owned and privately managed corporation by legislation enacted in 1968 and 1970. Fannie Mae provides funds to the mortgage market by purchasing mortgage loans from lenders, thus replenishing their funds for additional lending. Fannie Mae acquires funds to purchase loans from many capital market investors that ordinarily may not invest in mortgage loans, consequently expanding the total amount of funds available for housing. Operating nationwide, Fannie Mae helps to redistribute mortgage funds from capital-surplus to capital-short areas. Fannie Mae also issues mortgage-backed securities ("MBS"). Fannie Mae receives guaranty fees for its guaranty of timely payment of principal of and interest on MBS. Fannie Mae issues MBS primarily in exchange for pools of mortgage loans from lenders. The issuance of MBS enables Fannie Mae to further its statutory purpose of increasing the liquidity of residential mortgage loans. Fannie Mae prepares an Information Statement annually which describes Fannie Mae, its business and operations and contains Fannie Mae's audited financial statements. From time to time Fannie Mae prepares supplements to its Information Statement which include unaudited financial data and other information concerning the business and operations of Fannie Mae. Unless otherwise specified in the applicable prospectus supplement, these documents can be obtained without charge from the Office of Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016; telephone (202)752-7115. Fannie Mae is not subject to the periodic reporting requirements of the Exchange Act. THE FEDERAL HOME LOAN MORTGAGE CORPORATION. Freddie Mac is a publicly held government-sponsored enterprise created on July 24, 1970 pursuant to the Federal Home Loan Mortgage Corporation Act, Title III of the Emergency Home Finance Act of 1970, as amended (the "FHLMC Act"). Freddie Mac's statutory mission is to provide stability in the secondary market for home mortgages, to respond appropriately to the private capital market and to provide ongoing assistance to the secondary market for home mortgages, including mortgages secured by housing for low- and moderate-income families involving a reasonable economic return to Freddie Mac, by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for home mortgage financing. The principal activity of Freddie Mac consists of the purchase of conventional residential mortgages and participation interests in conventional residential mortgages from mortgage lending institutions and the sale of guaranteed mortgage securities backed by the mortgages so purchased. Freddie Mac generally matches and finances its purchases of mortgages with sales of guaranteed securities. Mortgages retained by Freddie Mac are financed with short- and long-term debt, cash temporarily held pending disbursement to security holders, and equity capital. Freddie Mac prepares an Information Statement annually which describes Freddie Mac, its business and operations and contains Freddie Mac's audited financial statements. From time to time Freddie Mac prepares supplements to its Information Statement which include unaudited financial data and other information concerning the business and operations of Freddie Mac. Unless otherwise specified in the applicable prospectus supplement, these documents can be obtained from Freddie Mac by writing or calling Freddie Mac's Investor Inquiry Department at 8200 Jones Branch Drive, McLean, Virginia, 22102; outside Washington, D.C. metropolitan area, telephone (800) 336-3672; within Washington, D.C. metropolitan area, telephone (703)759-8160. Freddie Mac is not subject to the periodic reporting requirements of the Exchange Act. THE STUDENT LOAN MARKETING ASSOCIATION. Sallie Mae is a stockholder-owned corporation established by the 1972 amendments to the Higher Education Act of 1965, as amended, to provide liquidity, primarily through secondary market and warehousing activities, for lenders participating in federally sponsored student loan programs, primarily the Federal Family Education Loan ("FFEL") program and the Health Education Assistance Loan Program. Under the Higher Education Act, Sallie Mae is authorized to purchase, warehouse, sell and offer participations or pooled interests in, or otherwise deal in, student loans, including, but not limited to, loans insured under the FFEL program, and to make commitments for any of the foregoing. Sallie Mae is also authorized to buy, sell, hold, underwrite and otherwise deal in obligations of eligible lenders, if these obligations are issued by the eligible lenders for the purpose of making or purchasing federally guaranteed student loans under the Higher Education Act. As a federally chartered corporation, Sallie Mae's structure and operational authorities are subject to revision by amendments to the Higher Education Act or other federal enactments. Sallie Mae prepares an Information Statement annually which describes Sallie Mae, its business and operations and contains Sallie Mae's audited financial statements. From time to time Sallie Mae prepares supplements to its Information Statement which include unaudited financial data and other information concerning the business and operations of Sallie Mae. Unless otherwise specified in the applicable prospectus supplement, these documents can be obtained without charge upon written request to the Corporate and Investor Relations Division of Sallie Mae at 1050 Thomas Jefferson Street, N.W., Washington, D.C. 20007; telephone (202) 298-3010. Sallie Mae is not subject to the periodic reporting requirements of the Exchange Act. THE RESOLUTION FUNDING CORPORATION. REFCO is a mixed-ownership government corporation established by Title V of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"). The sole purpose of REFCO is to provide financing for the Resolution Trust Corporation (the "RTC"). REFCO is to be dissolved, as soon as practicable, after the maturity and full payment of all obligations issued by it. REFCO is subject to the general oversight and direction of the Oversight Board, which is comprised of the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System, the Secretary of Housing and Urban Development and two independent members to be appointed by the President with the advice and consent of the Senate. The day-to-day operations of REFCO are under the management of a three-member Directorate comprised of the Director of the Office of Finance of the FHLB and two members selected by the Oversight Board from among the presidents of the twelve FHLB. The RTC was established by FIRREA to manage and resolve cases involving failed savings and loan institutions pursuant to policies established by the Oversight Board. The RTC was granted authority to issue nonvoting capital certificates to REFCO in exchange for the funds transferred from REFCO to the RTC. Pursuant to FIRREA, the net proceeds of these obligations are used to purchase nonvoting capital certificates issued by the RTC or to retire previously issued REFCO obligations. Information concerning REFCO may be obtained from the Secretary/Treasurer, Resolution Funding Corporation, Suite 1000, 11921 Freedom Drive, Reston, Virginia 22090; telephone (703) 487-9517. REFCO is not subject to the periodic reporting requirements of the Exchange Act. THE FEDERAL HOME LOAN BANKS. The Federal Home Loan Banks constitute a system of twelve federally chartered corporations, each wholly owned by its member institutions. The mission of the FHLB is to enhance the availability of residential mortgage credit by providing a readily available, low-cost source of funds to their member institutions. A primary source of funds for the FHLB is the proceeds from the sale to the public of debt instruments issued as consolidated obligations, which are the joint and several obligations of all the FHLB. The FHLB are supervised and regulated by the Federal Housing Finance Board, which is an independent federal agency in the executive branch of the United States government, but obligations of the FHLB are not obligations of the United States government. The Federal Home Loan Bank System produces annual and quarterly financial reports in connection with the original offering and issuance by the Federal Housing Finance Board of consolidated bonds and consolidated notes of the FHLB. Unless otherwise specified in the applicable prospectus supplement, questions regarding these financial reports should be directed to the Deputy Director, Financial Reporting and Operations Division, Federal Housing Finance Board, 1777 F Street, N.W., Washington, D.C. 20006; telephone (202) 408-2901. Unless otherwise specified in the applicable prospectus supplement, copies of these reports may be obtained by written request to Capital Markets Division, Office of Finance, Federal Home Loan Banks, Suite 1000, 11921 Freedom Drive, Reston, Virginia 22090, telephone (703) 487-9500. The FHLB are not subject to the periodic reporting requirements of the Exchange Act. TENNESSEE VALLEY AUTHORITY. TVA is a wholly owned corporate agency and instrumentality of the United States of America established pursuant to the Tennessee Valley Authority Act of 1933, as amended (the "TVA Act"). TVA's objective is to develop the resources of the Tennessee Valley region in order to strengthen the regional and national economy and the national defense. The programs of TVA consist of power and nonpower programs. For the fiscal year ending September 30, 1995, TVA received $139 million in congressional appropriations from the federal government for the nonpower programs. The power program is required to be self-supporting from revenues it produces. The TVA Act authorizes TVA to issue evidences of indebtedness that may be serviced only from proceeds of its power program. TVA bonds are not obligations of or guaranteed by the United States government. TVA prepares an Information Statement annually which describes TVA, its business and operations and contains TVA's audited financial statements. From time to time TVA prepares supplements to its Information Statement which include unaudited financial data and other information concerning the business and operations of TVA. Unless otherwise specified in the applicable prospectus supplement, these documents can be obtained by writing or calling Tennessee Valley Authority, 400 West Summit Hill Drive, Knoxville, Tennessee 37902-1499, Attention: Vice President and Treasurer; telephone (423) 632-3366. TVA is not subject to the periodic reporting requirements of the Exchange Act. FEDERAL FARM CREDIT BANKS. The Farm Credit System is a nationwide system of lending institutions and affiliated service and other entities (the "System"). Through its Banks ("FCBs") and related associations, the System provides credit and related services to farmers, ranchers, producers and harvesters of aquatic products, rural homeowners, some farm-related businesses, agricultural and aquatic cooperatives and rural utilities. System institutions are federally chartered under the Farm Credit Act of 1971, as amended (the "Farm Credit Act"), and are subject to regulation by a Federal agency, the Farm Credit Administration (the "FCA"). The FCBs and associations are not commonly owned or controlled. They are cooperatively owned, directly or indirectly, by their respective borrowers. Unlike commercial banks and other financial institutions that lend to the agricultural sector in addition to other sectors of the economy, under the Farm Credit Act the System institutions are restricted solely to making loans to qualified borrowers in the agricultural sector, to some related businesses and to rural homeowners. Moreover, the System is required to make credit and other services available in all areas of the nation. In order to fulfill its broad statutory mandate, the System maintains lending units in all 50 states and the Commonwealth of Puerto Rico. The System obtains funds for its lending operations primarily from the sale of debt securities issued under Section 4.2(d) of the Farm Credit Act ("Systemwide Debt Securities"). The FCBs are jointly and severally liable on all Systemwide Debt Securities. Systemwide Debt Securities are issued by the FCBs through the Federal Farm Credit Banks Funding Corporation, as agent for the FCBs (the "Funding Corporation"). Information regarding the FCBs and the Farm Credit System, including combined financial information, is contained in disclosure information made available by the Funding Corporation. This information consists of the most recent Farm Credit System Annual Information Statement and any Quarterly Information Statements issued subsequent to the most recently issued annual statement and press releases issued from time to time by the Funding Corporation. Unless otherwise specified in the applicable prospectus supplement, this information and the Farm Credit System Annual Report to Investors for the current and two preceding fiscal years are available for inspection at the Federal Farm Credit Banks Funding Corporation, Investment Banking Services Department, 10 Exchange Place, Suite 1401, Jersey City, New Jersey 07302; telephone (201) 200-8000. Upon request, the Funding Corporation will furnish, without charge, copies of the above information. The FCBs are not subject to the periodic reporting requirements of the Exchange Act. Private Label Custody Receipt Securities If so specified in the applicable prospectus supplement, the Trust for a Series may include any combination of Private Label Custody Strips and Private Label Custody Receipt Securities. The Private Label Custody Receipt Securities, if any, included in a Trust are intended to assure investors that funds are available to make specified payments of principal and/or interest due on the related Notes or Certificates, as applicable. Accordingly, the Private Label Custody Receipt Securities, if any, included in a Trust are intended both to: o support the ratings assigned to the relevant Notes or Certificates, as applicable, and o perform a function similar to that described in this Prospectus under "Series Enhancement". A description of the respective general features of Private Label Custody Strips and REFCO Strips is set forth below. The prospectus supplement, for each Series of Notes or Certificates, as applicable, of the Trust with respect to which contains Private Label Custody Receipt Securities, will contain information as to: (a) the title and series of each relevant Private Label Custody Receipt Security, the aggregate principal amount, denomination and form of that Private Label Custody Receipt Security; (b) the limit, if any, upon the aggregate principal amount of the relevant Private Label Custody Receipt Security; (c) the dates on which, or the range of dates within which, the principal of, and premium, if any, on, the relevant Private Label Custody Receipt Security will be payable; (d) the rate or rates, or the method of determination of the rate or rates, at which the relevant Private Label Custody Receipt Security will bear interest, if any, the date or dates from which the relevant interest will accrue; and the dates on which the relevant interest will be payable; (e) whether the relevant Private Label Custody Receipt Security was issued at a price lower than the principal amount of that Private Label Custody Receipt Security; (f) material events of default or restrictive covenants provided for with respect to the relevant Private Label Custody Receipt Security; (g) the rating of the Private Label Custody Receipt Security, if any; (h) the issuer of the relevant Private Label Custody Receipt Security; (i) the material risks, if any, posed by the Private Label Custody Receipt Security and the issuer of the Private Label Custody Receipt Security, which risks, if appropriate, will be described in the "Risk Factors" section of the related prospectus supplement; and (j) any other material terms of the relevant Private Label Custody Receipt Security. With respect to a Trust which includes a pool of Private Label Custody Receipt Securities, the related prospectus supplement will, to the extent applicable, describe the composition of the Private Label Custody Receipt Securities' pool, material events of default or restrictive covenants common to the Private Label Custody Receipt Securities, and, on an aggregate, percentage or weighted average basis, as applicable, the characteristics of the pool with respect to the terms set forth in (c), (d) and (e) of the preceding sentence and any other material terms regarding the pool. The Private Label Custody Receipt Securities included in a Trust will be senior, unsecured, nonredeemable obligations of the issuers of the Private Label Custody Receipt Securities, will be denominated in United States dollars and, if rated, will be rated at least investment grade by at least one nationally recognized rating agency. In addition, the inclusion of Private Label Custody Receipt Securities in a Trust with respect to a Series of Notes or Certificates, as applicable, is conditioned upon their characteristics being in form and substance satisfactory to the Rating Agency rating the related Series of Notes or Certificates, as applicable. Each Trust which includes Private Label Custody Securities will be provided with an opinion of Stroock & Stroock & Lavan LLP or other counsel specified in the related prospectus supplement to the effect that the Private Label Custody Receipt Securities included in the Trust are exempt from the registration requirements of the Securities Act. A copy of the related opinion will be filed with the SEC in a Current Report on Form 8-K or in a post-effective amendment to the Registration Statement. PRIVATE LABEL CUSTODY STRIPS. The first "stripping" of Treasury Bonds occurred in the 1970s when government securities dealers physically separated coupons from definitive certificates (the "Definitive Certificates ") and offered them to investors as tax-deferred investments. Investors were able to purchase the "strip" at a deep discount and pay no federal income tax until resale or maturity. This tax treatment was limited in 1982 by the Tax Equity and Fiscal Responsibility Act ("TEFRA") which required holders of these strips to accrue a portion of the discount toward par annually and report the accrual, even though unrealized, as taxable income. TEFRA also required that all new Treasury issues be made available only in book-entry form. The shift to "book-entry only" Treasury Bonds created a shortage of the physical certificates needed for stripping. In response, various dealers created custodial receipt programs in which Treasury Bonds in book-entry form were deposited with custodians who would then issue certificates evidencing rights in principal and interest payments. Some of the better known programs first came to market in 1982 and 1983. Although available eventually in denominations as small as $1,000, these custodial receipts lacked the liquidity of the physical strips. While physical strips had multiple market-makers, custodial receipts were proprietary and, accordingly, the sole market-maker would usually be an affiliate of the program's sponsor. As a result, the market that developed for custodial receipts was segmented. In early 1984, a group of dealers sought to enhance the liquidity of custodial receipts by developing a generic, multiple market-maker security known as a TR (Treasury Receipt). A large secondary market quickly developed in these generic Treasury Strips. Treasury Receipts, physical strips and the proprietary receipts trade at varying discounts from STRIPS which reflect, among other things, lower levels of liquidity and the structuring difference discussed above. A holder of a Private Label Custody Strip, as opposed to a STRIP, cannot enforce payment on a Treasury Strip against the Treasury; instead, the holder must look to the custodian for payment. The custodian and the holder of a Private Label Custody Strip that obtains ownership of the underlying Treasury Bond can enforce payment of the underlying Treasury Bond against the Treasury. In the event any Private Label Custody Strips are included in a Trust with respect to any Series of Notes or Certificates, as applicable, the prospectus supplement for that Series will include the identity and a brief description of each custodian that issued the related Private Label Custody Strips. In the event the Company knows that the depositor of the Treasury Bonds underlying the related Private Label Custody Strips is the Company or any of its affiliates, the Company will disclose this fact in the applicable prospectus supplement. REFCO STRIPS. A REFCO Bond may be divided into its separate components, consisting of: o each future semi-annual interest distribution (an "Interest Component"); and o the principal payment (the "Principal Component") (each component individually referred to as a "REFCO Strip"). REFCO Strips are not created by REFCO; instead, third parties such as investment banking firms create them. Each REFCO Strip has an identifying designation and CUSIP number. REFCO Strips generally trade in the market for Treasury Strips at yields of a few basis points over Treasury Strips of similar maturities. REFCO Strips are viewed generally by the market as liquid investments. For a REFCO Bond to be separated into its components, the par amount of the REFCO Bond must be in an amount which, based on the stated interest rate of the REFCO Bond, will produce a semi-annual interest payment of $1,000 or an integral multiple of $1,000. REFCO Bonds may be separated into their components at any time from the issue date until maturity. Once created, REFCO Strips are maintained and transferred in integral multiples of $1,000. A holder of a REFCO Strip cannot enforce payment on that REFCO Strip against REFCO; instead, the holder must look to the custodian for payment . This custodian and the holder of a REFCO Strip who obtains ownership of the underlying REFCO Bond can enforce payment of the underlying REFCO Bond against REFCO. The identity and a brief description of each custodian that has issued any REFCO Strip included in a Trust will be set forth in the related prospectus supplement. In the event the Company knows that the depositor of the REFCO Bonds underlying the REFCO Strips included in the Trust is the Company or any of its affiliates, the Company will disclose this fact in the related prospectus supplement. Collection and Payment Accounts A separate Collection Account will be established by the Trustee, or, in the case of a Series that includes Notes, the Indenture Trustee, or by the Servicer in the name of the Trustee, or the Indenture Trustee, for each Series of Notes or Certificates, as applicable, for receipt of the amount of cash, if any, specified in the related prospectus supplement to be initially deposited in the same Collection Account by the Depositor, all amounts received on or with respect to the Base Assets and, to the extent specified in the related prospectus supplement, any income earned on the Collection Account. Specified amounts on deposit in the Collection Account and specified amounts available pursuant to any Series Enhancement, as provided in the related prospectus supplement, will be deposited in one or more related payment accounts (the "Payment Accounts "), which will also be established by the Trustee, or the Indenture Trustee, for the related Series of Notes or Certificates, as applicable, for payment to the related holders of these Notes or Certificates, as applicable. The Trustee, or Indenture Trustee, will invest the funds in the Collection and Payment Accounts in Eligible Investments maturing, with some exceptions, in the case of funds in the Collection Account, not later than the day preceding the date the related funds are due to be deposited in the applicable Payment Account or otherwise paid, and in the case of funds in a Payment Account, not later than the day preceding the next Payment Date for the related Class or Classes of Notes or Certificates, as applicable. Eligible Investments include among other investments, obligations of the United States and some agencies of the United States, federal funds, certificates of deposits, commercial paper, demand and time deposits and banker's acceptances, specified repurchase agreements of United States government securities and specified guaranteed investment contracts, in each case, acceptable to the applicable Rating Agencies. From time to time, various other accounts, which may include a Pre-Funding Account may be created under the terms of the documents related to a specific Series. SERIES ENHANCEMENT For any Series of Notes or Certificates, as applicable, "Series Enhancement" may be provided with respect to one or more Classes of the related Series of Notes or Certificates, as applicable. Series Enhancement may consist of Credit Enhancement, Ancillary Arrangements, or both. Credit Enhancement "Credit Enhancement" with respect to a Series of Notes or Certificates, as applicable, or one or more specific Classes of a Series may take the form of the subordination of one or more Classes of Notes or Certificates, as applicable, to other Classes of the same Series, a letter of credit, the establishment of a cash collateral guaranty or account, a surety bond, insurance, the use of cross support features or another method of Credit Enhancement described in the related prospectus supplement, or any combination of the foregoing. If so specified in the related prospectus supplement, any form of Credit Enhancement may be structured so as to be drawn upon by more than one Class of Notes or Certificates, as applicable, of a Series to the extent described in the applicable prospectus supplement. Credit Enhancement will not provide protection against all risks of loss and will not guarantee repayment of the entire principal balance of the Notes or Certificates, as applicable, and interest on the Notes or Certificates, as applicable. If losses occur which exceed the amount covered by the Credit Enhancement or which are not covered by the Credit Enhancement, holders of Notes or Certificates, as applicable, will bear their allocable share of deficiencies. If Credit Enhancement is provided with respect to a Series, the related prospectus supplement will include a description of: o the amount payable under Credit Enhancement, o any conditions to payment under the related prospectus supplement not described in this Prospectus, o the conditions, if any under which the amount payable under Credit Enhancement may be reduced and under which Credit Enhancement may be terminated or replaced, and o any material provisions of any agreement relating to Credit Enhancement. Additionally, the related prospectus supplement may set forth specific information with respect to the issuer of any third-party Credit Enhancement, including: o a brief description of its principal business activities, o its principal place of business, place of incorporation and the jurisdiction under which it is chartered or licensed to do business, o if applicable, the identity of regulatory agencies which exercise primary jurisdiction over the conduct of its business, and o its total assets and its stockholders' or policyholders' surplus, if applicable, as of the date specified in the related prospectus supplement. If so specified in the related prospectus supplement, the issuer of a third party Credit Enhancement may have a subordinated interest in the Trust, the Receivables or cash flows in respect of the Receivables to the extent described in the related prospectus supplement (the "Enhancement Invested Amount"). Subordination If so specified in the related prospectus supplement, one or more Series of Notes or Certificates, as applicable, or one or more Classes of Notes or Certificates, as applicable, of a Series or one or more classes of other certificated or uncertificated interests in the assets of the related Trust ("Collateral Indebtedness Interests") may be subordinated to one or more other Series or one or more Classes of a Series. If so specified in the related prospectus supplement, the rights of holders of the subordinate Notes or Certificates, as applicable, or Collateral Indebtedness Interests to receive distributions of principal and/or interest on any Payment Date will be subordinated to the rights of the holders of the Notes or Certificates, as applicable, which are senior to the subordinate Notes or Certificates, as applicable, or Collateral Indebtedness Interests to the extent set forth in the related prospectus supplement. The related prospectus supplement will also set forth information concerning the amount of subordination of a Series or Class of subordinate Notes or Certificates, as applicable, or Collateral Indebtedness Interests, the circumstances in which this subordination will be applicable, the manner, if any, in which the amount of subordination will decrease over time and the conditions under which amounts available from payments that would otherwise be made to holders of subordinate Notes or Certificates, as applicable, or Collateral Indebtedness Interests will be distributed to holders of Notes or Certificates, as applicable, which are senior to the subordinate Notes or Certificates, as applicable, or Collateral Indebtedness Interests. The amount of subordination will decrease whenever amounts otherwise payable to the holders of subordinate Notes or Certificates, as applicable, or Collateral Indebtedness Interests are paid to the holders of the Notes or Certificates, as applicable, which are senior to these subordinated Notes or Certificates, as applicable, or Collateral Indebtedness Interests. If so specified in the related prospectus supplement, subordination may apply only in the event of specific types of losses not covered by another Credit Enhancement. Letter of Credit If so specified in the related prospectus supplement, support for a Series of Notes or Certificates, as applicable, or one or more Classes of a Series may be provided by one or more letters of credit. A letter of credit may provide limited protection against specific losses in addition to or in lieu of another form of Credit Enhancement. The issuer of the letter of credit named in the related prospectus supplement (the "L/C Bank") will be obligated to honor demands with respect to the letter of credit, to the extent of the amount available under the letter of credit, to provide funds under the circumstances and subject to conditions specified in the related prospectus supplement. The liability of the L/C Bank under its letter of credit may be reduced by the amount of unreimbursed payments under that same letter of credit. The maximum liability of a L/C Bank under its letter of credit will generally be an amount equal to a percentage specified in the related prospectus supplement of the initial principal amount of a Series of Notes or Certificates, as applicable, or a Class of a Series. The maximum amount available at any time to be paid under a letter of credit will be determined in the manner specified in the letter of credit and in the related prospectus supplement. Cash Collateral Guaranty or Cash Collateral Account If so specified in the related prospectus supplement, support for a Series of Notes or Certificates, as applicable, or one or more Classes of a Series may be provided by a guaranty (a "Cash Collateral Guaranty") secured by the deposit of cash, government securities or other permitted investments in an account (a "Cash Collateral Account") reserved for the beneficiaries of the Cash Collateral Guaranty, or by a Cash Collateral Account alone. A Cash Collateral Account will generally take the form of a cash collateral trust formed pursuant to a trust agreement involving a cash collateral depositor and a cash collateral trustee. The Cash Collateral Guaranty will generally be an obligation of the cash collateral trust and not of the cash collateral depositor, the cash collateral trustee, except to the extent of amounts on deposit in the Cash Collateral Account, or the related Trustee, Indenture Trustee, Seller, Servicer or the Depositor. The amount available pursuant to a Cash Collateral Guaranty or a Cash Collateral Account will be the lesser of the amount on deposit in the Cash Collateral Account and an amount specified in the related prospectus supplement. The related prospectus supplement will set forth the circumstances under which payments will be made to beneficiaries of a Cash Collateral Guaranty from the related Cash Collateral Account or from the Cash Collateral Account directly. Reserve Account If so specified in the related prospectus supplement, the Depositor may deposit cash, a letter or letters of credit, short-term investments, government securities or other instruments acceptable to the applicable Rating Agency or Rating Agencies in one or more reserve accounts (each, a "Reserve Account") to be established in the name of the Trustee, or the Indenture Trustee. A Reserve Account will be used, as specified in the related prospectus supplement, by the Trustee, or the Indenture Trustee, to make required payments of principal of or interest on the Notes or Certificates, as applicable, of the related Series or one or more Classes of the Series, to make adequate provision for future payments on one or more Classes of the Notes or Certificates, as applicable, or for any other purpose specified in the applicable Agreement with respect to the Series, to the extent that funds are not otherwise available for that purpose. In the alternative or in addition to a deposit, a Reserve Account for a Series may be funded through application of all or a portion of the excess cash flow from the Base Assets for the Series, to the extent described in the related prospectus supplement. If applicable, the initial amount of the Reserve Account and the Reserve Account maintenance requirements for a Series will be described in the related prospectus supplement. Amounts deposited in a Reserve Account will be invested by the Trustee, or the Indenture Trustee, in Eligible Investments meeting specified maturity criteria. Surety Bond or Insurance Policy If so specified in the related prospectus supplement, Credit Enhancement for a Series or one or more Classes of Notes or Certificates, as applicable, of a Series may be provided by the issuance of insurance by one or more insurance companies. The insurance will guarantee distributions of interest or principal on the affected Notes or Certificates, as applicable, in the manner and amount specified in the related prospectus supplement. If so specified in the related prospectus supplement, Credit Enhancement for a Series or one or more Classes of Notes or Certificates, as applicable, of a Series may take the form of a surety bond purchased for the benefit of the holders of the related Notes or Certificates, as applicable, to assure distributions of interest or principal with respect to the related Notes or Certificates, as applicable, in the manner and amount specified in the related prospectus supplement. Spread Account If so specified in the related prospectus supplement, support for a Series or one or more Classes of Notes or Certificates, as applicable, of a Series may be provided by the periodic deposit of available excess cash flow from the Trust assets into an account (the "Spread Account") intended to assure the subsequent distribution of interest and principal on the related Notes or Certificates, as applicable, in the manner specified in the prospectus supplement. Ancillary Arrangements If so specified in the related prospectus supplement, the Trust may enter into one or more derivative arrangements that are related to or incidental to one or more of the Base Assets for a Series ("Ancillary Arrangements"). Ancillary Arrangements may take the form of guaranteed rate agreements, maturity liquidity facilities, tax protection agreements, interest rate caps, floor or collar agreements, interest rate or currency swap agreements or other similar arrangements. If so specified in the related prospectus supplement, Ancillary Arrangements may be entered into with the Depositor or an affiliate of the Depositor. The related prospectus supplement will to the extent appropriate contain analogous disclosure with respect to any Ancillary Arrangements as is set forth in this Prospectus or in the related prospectus supplement with respect to the Base Assets. SERVICING OF RECEIVABLES Customary servicing functions with respect to any Receivables included in the Base Assets for a Series or underlying any Participations included in the Base Assets will be provided by the Servicer named in the related prospectus supplement pursuant to the related Pooling and Servicing Agreement. In general, comparable servicing functions will be performed by the CRB Servicer with respect to the Receivables underlying any CRB Securities included in the Base Assets. Collection Procedures The Servicer will make reasonable efforts to collect all payments required to be made under the Accounts and will, consistent with the terms of the related Pooling and Servicing Agreement for a Series and any applicable Credit Enhancement, follow the same collection procedures as it follows with respect to comparable receivables held in its own portfolio. Deposits to the Collection Account The Servicer will deposit, subject to some exceptions which, if applicable, will be specified in the related prospectus supplement, any collections on the Receivables in a monthly period (the "Monthly Period"), which period will be defined for each Servicer in the related prospectus supplement, into the Collection Account within two business days of the Date of Processing, or, in the case of interchange, on each Distribution Date, to the extent the collections are allocable among the Certificateholders of the Series (the "Investor Certificateholders' Interest ") of any Series and are required to be deposited into an account for the benefit of, or distributed to, the Investor Certificateholders of any Series or the issuer of any Series Enhancement. In limited circumstances, the Servicer will not be required to segregate, and will be permitted to use for its own benefit collections on the Receivables received by it during each Monthly Period until the related Distribution Date. The "Distribution Date" for each calendar month will be specified in the prospectus supplement. To the extent and in the manner specified in the related prospectus supplement and subject to specific exceptions that will be described in the applicable prospectus supplement, on the earlier of: o the second business day following the Date of Processing, and o the day on which the Servicer deposits any collections into the Collection Account. The Servicer will pay to the holder of the Depositor Certificate its allocable portion of any collections then held by the Servicer. The "Date of Processing" will generally be the business day on which a record of any transaction is first recorded on the Servicer's computer file of consumer revolving accounts, without regard to the effective date of recordation. To the extent and in the manner specified in the related prospectus supplement, the Servicer will establish the Collection Account in the name of the Trustee or, for a Series that includes Notes, the Indenture Trustee. To the extent and in the manner indicated in the related prospectus supplement, the Collection Account will be an account maintained: o at a depository institution, the long-term unsecured debt obligations of which at the time of any deposit in the depository institution are rated as described in the related prospectus supplement and as specified by the Rating Agencies rating the Notes or Certificates, as applicable, of the Series, or o in an account or accounts the deposits in which are insured to the maximum extent available by the Federal Deposit Insurance Corporation (the "FDIC") or which are secured in a manner meeting requirements established by the Rating Agencies. To the extent and in the manner specified in the related prospectus supplement, the funds held in the Collection Account may be invested, pending remittance to the Trustee, or the Indenture Trustee, in Eligible Investments. If so specified in the related prospectus supplement, the Servicer will be entitled to receive as additional compensation any interest or other income earned on funds in the Collection Account. The related prospectus supplement will describe the obligations of the Servicer, if different from those described above, the Seller, the Trustee, the Indenture Trustee and/or the Depositor to deposit payments and/or collections received by them in respect of the Trust assets into the Collection Account. In addition, to the extent so provided in the related prospectus supplement, if the Servicer deposits in the Collection Account for a Series any amount not required to be deposited in the Collection Account, it may, at any time, withdraw that amount from the related Collection Account. Servicing Compensation and Payment of Expenses The related prospectus supplement may provide that the Servicer will be entitled to receive a servicing fee in an amount to be determined as specified in the related prospectus supplement (the "Servicing Fee"). The Servicing Fee may be fixed or variable, as specified in the related prospectus supplement. As specified in the related prospectus supplement, the Servicer may be required to pay expenses incurred in connection with the servicing of the Receivables including, without limitation, the payment of the fees and expenses of the Trustee, and Indenture Trustee, and independent accountants, payment of the cost of any Series Enhancement and payment of expenses incurred in preparation of reports to holders of Notes or Certificates, as applicable. To the extent specified in the related prospectus supplement, the rights of the Servicer to receive funds from the Collection Account for a Series, whether as the Servicing Fee or other compensation, or for the reimbursement of expenses or otherwise, may be subordinated to the rights of holders of the Notes or Certificates, as applicable, of the related Series. Evidence as to Compliance The Pooling and Servicing Agreement for a Series may provide that, each year, a firm of independent public accountants will furnish a statement to the Trustee to the effect that the firm has examined specific documents and records relating to the servicing of the Receivables by the Servicer and that, on the basis of this examination, the firm is of the opinion that the servicing has been conducted in compliance with the Pooling and Servicing Agreement, except for: o exceptions the firm believes to be immaterial, and o other exceptions set forth in a related statement. The Pooling and Servicing Agreement for a Series will provide for delivery to the Trustee for the Series of an annual statement signed by an officer of the Servicer to the effect that the Servicer has fulfilled its obligations under the Pooling and Servicing Agreement throughout the preceding calendar year. Comparable statements and reports may be required to be delivered to the Indenture Trustee pursuant to any Indenture relating to this Series. CERTAIN MATTERS REGARDING THE SERVICER Any Servicer for a Series will be identified in the related prospectus supplement. The Servicer may be an affiliate of the Seller or the Depositor and may have other business relationships with the Seller, the Depositor or their respective affiliates. If specific events (each a "Servicer Default") occur with respect to the Servicer under an applicable Agreement, the related Trustee, or a specified percentage of the holders of Notes or Certificates, as applicable, or of each Class of Notes or Certificates, as applicable, as set forth in the related prospectus supplement may terminate the Servicer, in which case the Trustee will appoint a successor Servicer. Servicer Defaults and the rights of the Trustee and the holders of Notes or Certificates, as applicable, upon the occurrence of a Servicer Default under the applicable Agreement for a Series will be substantially similar to those described under "Description of the Trust Agreements or Pooling and Servicing Agreements-- Servicer Defaults" and "-- Rights upon Servicer Defaults" or will be as described in the related prospectus supplement. The Servicer generally may not resign from its obligations and duties under the applicable Agreement, except: (a) upon determination that, (1) the performance of its duties under the Pooling and Servicing Agreement is no longer permissible under applicable law, and (2) there is no reasonable action which the Servicer could take to make the performance of its duties under the applicable Agreement permissible under applicable law, (b) in connection with a conveyance, consolidation or merger by the Servicer with any corporation, or conveyance or transfer of its properties or assets substantially as an entirety to any other person permitted under the applicable Agreement, or (c) upon the satisfaction of the following conditions: (1) the acceptance and assumption, by agreement supplemental to the applicable Agreement, executed and delivered to the Trustee, in form satisfactory to the Trustee, of the obligations and duties of the Servicer under the related supplemental agreement by a proposed successor Servicer, (2) the Servicer having given written notice to each applicable Rating Agency of a transfer and each Rating Agency having notified the Servicer in writing to the effect that its then current rating of the Notes or Certificates, as applicable, of any Series will not be reduced or withdrawn as a result of the transfer, (3) the provider of Credit Enhancement, if any, having consented in writing to a transfer consent not to be unreasonably withheld, and (4) the proposed successor Servicer being an Eligible Servicer. Notwithstanding anything in the Pooling and Servicing Agreement to the contrary, any successor Servicer appointed under clause (c) will be deemed to be a successor Servicer. Any determination permitting the resignation of the Servicer will be evidenced as to clause (a) above by an opinion of counsel to that effect delivered to the Trustee. No resignation will become effective until the Trustee or a successor Servicer shall have assumed the responsibilities and obligations of the Servicer in accordance with the Pooling and Servicing Agreement. "Eligible Servicer" means the Trustee, or the Indenture Trustee, or an entity which, at the time of its appointment as Servicer: (a) is an established financial institution having capital or a net worth of not less than $100,000,000, (b) is servicing a portfolio of consumer credit card or charge card accounts, (c) is legally qualified and has the capacity to service the Accounts, (d) has demonstrated the ability to professionally and completely service a portfolio of similar accounts in accordance with standards of skill and care customary in the industry, and (e) is qualified to use the software that is then currently being used to service the Accounts or obtains the right to use or has its own software which is adequate to perform its duties under the Pooling and Servicing Agreement. Indemnification Except to the extent otherwise provided in the Pooling and Servicing Agreement, each Pooling and Servicing Agreement will provide that the Servicer will indemnify the Trust, the Trustee and the holders of all Notes or Certificates, as applicable, of a Series from and against any loss, liability, expense, damage or injury suffered or sustained by reason of any acts, omissions or alleged acts or omissions arising out of activities of the Servicer with respect to the Trust or the Trustee or any co-trustee pursuant to the Pooling and Servicing Agreement, including those arising from acts or omissions of the Servicer pursuant to the Pooling and Servicing Agreement, including but not limited to any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim; provided, however, that the Servicer shall not indemnify: o the Trust or the Trustee if any acts, omissions or alleged acts or omissions constitute fraud, gross negligence, breach of fiduciary duty or misconduct by the Trustee; o the Trust, the Trustee or the holders of Notes or Certificates, as applicable, for any liability, cost or expense of the Trust with respect to any action taken by the Trust at the request of the holders in accordance with the Pooling and Servicing Agreement or with respect to any Federal, state or local income or franchise taxes, or any interest or penalties with respect to state or local income or franchise taxes required to be paid by the Trust or by holders to any taxing authority; or o the Trust or the holders for any losses incurred by any of them as a result of defaulted Receivables or Receivables which are written off as uncollectible unless the write-off is caused by a breach of the Pooling and Servicing Agreement by the Servicer. Subject to exceptions in the Pooling and Servicing Agreement, any indemnification pursuant to the Pooling and Servicing Agreement will be only from the assets of the Servicer. DESCRIPTION OF THE NOTES The following summaries describe the material provisions of the Indentures which are anticipated to be common to any Notes included in a Series of Notes or Certificates, as applicable. The summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the related Notes and the Indenture. Where particular provisions or terms used in the Notes or Indentures are referred to in this Prospectus, the actual provisions, including definitions of terms, are incorporated in this Prospectus by reference as part of the summaries. The Notes included in any Series will be issued in one or more Classes. The Notes will only be issued in fully registered form, without coupons, in the authorized denominations for each Class specified in the related prospectus supplement. Upon satisfaction of the conditions, if any, applicable to a Class of Notes of a Series, as described in the related prospectus supplement, the transfer of the Notes may be registered, and the instruments evidencing the Notes may be exchanged, at the office of the registrar, which may be the Indenture Trustee, appointed from time to time pursuant to the Indenture (the "Registrar") without the payment of any service charge other than any tax or governmental charge payable in connection with the registration of transfer or exchange. If specified in the related prospectus supplement, one or more Classes of Notes of a Series may be available in book-entry form only. Payments of principal of and interest, if any, on the Notes of a Series will be made on the dates specified in the related prospectus supplement (the "Payment Dates") by check mailed to holders of these Notes, registered at the close of business on the record date applicable to the Payment Dates at their addresses appearing on the register of Notes for the related Series or in any other manner specified in the related prospectus supplement, except that: o payments may be made by wire transfer, at the expense of the Noteholder requesting payment by wire transfer, in specific circumstances described in the related prospectus supplement, and o final payments of principal in retirement of any Note will be made only upon presentation and surrender of the Note at the office of the Indenture Trustee specified in the related prospectus supplement. Notice of the final payment on a Note will be mailed to the holder of the Note before the Payment Date on which the final principal payment on any Note is expected to be made to the holder of that Note. Payments of principal of and interest on the Notes will be made by the Indenture Trustee, or a paying agent provided for under the Indenture, as specified in the related prospectus supplement. Payments of Interest and Principal Each Class of Notes of a Series will have a stated principal amount, notional amount or no principal amount and will bear interest at a specified "Note Interest Rate " or will not bear interest. Each Class of Notes may have a different Note Interest Rate, which may be fixed, variable or an adjustable Note Interest Rate, or any combination of the foregoing. The Notes included in any Series may include one or more Classes of Notes entitled to: o principal payments with disproportionate, nominal or no interest payments, or o interest payments with disproportionate, nominal or no principal payments. The related prospectus supplement will specify the Note Interest Rate for each Class of Notes or the method for determining the Note Interest Rate. The right of holders of any Class of Notes to receive payments of principal and interest may be senior or subordinate to the rights of holders of one or more other Class or Classes of Notes of the related Series, as described in the related prospectus supplement. The prospectus supplement may specify that payments of interest, if any, on Notes will be made prior to payments of principal on the Notes or any other order or priority as shall be specified in the related prospectus supplement. One or more Classes of Notes of a Series may be redeemable in whole or in part under the circumstances specified in the related prospectus supplement, including as the result of the exercise by the Servicer, the Seller or the Depositor of any option that it may have to purchase the Base Assets of the related Trust. To the extent specified in the related prospectus supplement, one or more Classes of Notes of a Series may have fixed principal payment schedules as set forth in the prospectus supplement. Holders of Notes will have the right to receive payments of principal on any given Payment Date in the applicable amount set forth in the related schedule with respect to the Notes. Notes may also be subject to prepayment of principal to the extent set forth in the related prospectus supplement. With respect to a Series that includes two or more Classes of Notes, each Class may differ as to the timing and priority of payments, seniority, allocations of losses, Note Interest Rates or amount of payments of principal or interest, and payments of principal or interest in respect of any related Class or Classes may be subject to the occurrence of specified events or may be made on the basis of collections from designated portions of the Base Assets. If specified in the related prospectus supplement, one or more Classes of Notes ("Strip Notes") may be entitled to: o principal payments with disproportionate, nominal or no interest payments, or o interest payments with disproportionate, nominal or no principal payments. Provisions of the Indenture EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. "Events of Default" in respect of a Series of Notes under the related Indenture will consist of events specified in the related prospectus supplement, which events will include: (a) a default for five days or more in the payment of any interest on any Note; (b) a default in the payment of the principal of, or any installment of the principal of, any Note when the same becomes due and payable; (c) a default by the related Trust in the observance or performance in any material respect of any covenant or an applicable agreement made in the related Indenture and the continuation of any default for a period of 30 days after notice of default is given to the related Trust by the applicable Indenture Trustee or to the related Trust and the related Indenture Trustee by the holders of 25% of the aggregate outstanding principal amount of the Notes; (d) any representation or warranty made by the related Trust in the related Indenture or in any certificate delivered pursuant to the related Indenture or in connection with the related Indenture having been incorrect in any material respect as of the time made, if the breach is not cured within 30 days after notice of the breach is given to the related Trust by the applicable Indenture Trustee or to the related Trust and the related Indenture Trustee by the holders of 25% of the aggregate outstanding principal amount of the Notes; (e) events of bankruptcy, insolvency, receivership or liquidation with respect to the Trust; or (f) any other events as shall be specified in the related prospectus supplement. The amount of principal required to be paid to Noteholders of each Series under the related Indenture on any Payment Date generally will be limited to amounts available to be deposited in the applicable Payment Account; therefore, the failure to pay principal on a Class of Notes generally will not result in the occurrence of an Event of Default until the applicable final scheduled Payment Date for the related Class of Notes. If an Event of Default should occur and be continuing with respect to the Notes of any Series, the related Indenture Trustee or holders of a majority in principal amount of the Notes may declare the principal of the Notes to be immediately due and payable. A declaration may, under some circumstances, be rescinded by the holders of a majority in principal amount of the Notes then outstanding. If the Notes of any Series are declared due and payable following an Event of Default, the related Indenture Trustee may institute proceedings to collect amounts due on the Notes, foreclose on the property of the Trust, exercise remedies as a secured party, sell the related Base Assets or elect to have the applicable Trust maintain possession of the related Base Assets and continue to apply collections on these Base Assets as if there had been no declaration of acceleration. The Indenture Trustee, however, will be prohibited from selling the Base Assets following an Event of Default, other than a default in the payment of any principal of, or a default for five days or more in the payment of any interest on, any Note of the related Series, unless one of the conditions specified in the related prospectus supplement are met, which conditions generally will include: (a) the holders of all outstanding Notes consent to the sale, (b) the proceeds of the sale are sufficient to pay in full the principal of and the accrued and unpaid interest on related outstanding Notes at the date of the sale, or (c) the related Indenture Trustee determines that the proceeds of the Base Assets would not be sufficient on an ongoing basis to make all payments on the Notes as payments would become due if the obligations had not been declared due and payable, and the related Indenture Trustee obtains the consent of the holders of 66 2/3% of the aggregate outstanding principal amount of the Notes. Subject to the provisions of the applicable Indenture relating to the duties of the related Indenture Trustee, if an Event of Default occurs and is continuing with respect to a Series of Notes, the related Indenture Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the holders of the related Notes if it reasonably believes it will not be adequately indemnified against the costs, expenses and liabilities that might be incurred by it in complying with the request. Subject to the provisions for indemnification and limitations contained in the related Indenture, the holders of a majority of the aggregate outstanding principal amount of the Notes of a Series will have the right to direct the time, method and place of conducting any proceeding or exercising any remedy available to the related Indenture Trustee; in addition, the holders of Notes representing a majority of the aggregate outstanding principal amount of the related Notes may, in some cases, waive any default with respect to the related Notes, except a default in the payment of principal of or interest on any Note or a default in respect of a covenant or provision of the related Indenture that cannot be modified or amended without the waiver or consent of the holders of all the outstanding Notes of the Series. No holder of a Note will have the right to institute any proceeding with respect to the related Indenture, unless specified conditions in the Indenture have been satisfied, which conditions generally will include: (a) the holder previously has given to the applicable Indenture Trustee written notice of a continuing Event of Default; (b) the holders of not less than 25% of the outstanding principal amount of the Notes have made written request to the related Indenture Trustee to so institute the proceeding in its own name as Indenture Trustee; (c) the holder or holders have offered the related Indenture Trustee reasonable indemnity; (d) the related Indenture Trustee has for 60 days failed to institute the proceeding; and (e) no direction inconsistent with the written request has been given to the related Indenture Trustee during the 60-day period by the holders of a majority of the outstanding principal amount of the Notes of the Series. With respect to any Series of Notes or Certificates, as applicable, that includes Notes, none of the related Indenture Trustee in its individual capacity, the related Trustee in its individual capacity, any holder of a Certificate representing an ownership interest in the related Trust or any other holder of an interest in the related Trust, or any of their respective beneficiaries, agents, officers, directors, employees, affiliates, successors or assigns will, in the absence of a related express agreement to the contrary, be personally liable for the payment of the principal of or interest on the related Notes or for the applicable agreements of Trust contained in the related Indenture. No Trust may engage in any activity other than as described in this Prospectus or in the related prospectus supplement. Except as and to the extent provided in the related prospectus supplement, no Trust will incur, assume or guarantee any indebtedness other than indebtedness incurred pursuant to the related Notes and the related Indenture. COVENANTS. Each Indenture will provide that the related Trust may not consolidate with or merge into any other entity, unless specific conditions, which shall be specified in the related Indenture shall be satisfied, which conditions generally will include: (a) the entity formed by or surviving consolidation or merger is organized under the laws of the United States, any state of the United States or the District of Columbia; (b) the entity expressly assumes the related Trust's obligation to make due and punctual payments upon the Notes of the related Series and to perform or observe every applicable agreement and covenant of the related Trust under the Indenture; (c) no Event of Default shall have occurred and be continuing immediately after merger or consolidation; (d) the Trust has been advised by each Rating Agency that merger or consolidation will not result in the qualification, reduction or withdrawal of its then-current rating of any Class of the Notes or Certificates of the Series; (e) the related Trust has received an opinion of counsel to the effect that consolidation or merger would have no material adverse tax consequence to the Trust or to any related Noteholder or Certificateholder; (f) any action that is necessary to maintain the lien and security interest created by this Indenture will have been taken; and (g) the Trust will have delivered to the Indenture Trustee an officer's certificate and an opinion of counsel each stating that consolidation or merger and supplemental indenture comply with the covenants of the Indenture and that all conditions precedent provided for in the Indenture relating to the transaction have been complied with. No Trust relating to a Series of Notes or Certificates, as applicable, that includes Notes will: (a) except as expressly permitted by the applicable Indenture, the applicable Trust Agreement or Pooling and Servicing Agreement or other documents with respect to the related Trust (the "Related Documents"), sell, transfer, exchange or otherwise dispose of any of the assets of the related Trust; (b) claim any credit on or make any deduction from principal and interest payments in respect of the related Notes, other than amounts withheld under the Code or applicable state tax laws or assert any claim against any present or former holder of the related Notes because of the payment of taxes levied or assessed upon the related Trust; (c) dissolve or liquidate in whole or in part; (d) permit the validity or effectiveness of the related Indenture to be impaired or permit any person to be released from any covenants or obligations with respect to the related Notes under the related Indenture except as may be expressly permitted by the related Indenture; (e) permit any lien, charge, excise, claim, security interest, mortgage, or other encumbrance to be created on or extend to or otherwise arise upon or burden the assets of the related Trust or any part of the related Trust, or any interest in the related Trust or the proceeds; or (f) permit the lien of the related Indenture not to constitute a valid first priority security interest, other than with respect to a tax, mechanics' or similar lien, in the assets of the related Trust. Each Indenture Trustee and the related Noteholders, by accepting the related Notes, will covenant that they will not at any time institute against the applicable Trust any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law. MODIFICATION OF INDENTURE. The Trust and the related Indenture Trustee may, with the consent of the holders of a majority of the aggregate outstanding principal amount of the Notes of the related Series, execute a supplemental indenture to add provisions to, change in any manner or eliminate any provisions of, the related Indenture, or modify, except as provided below, in any manner the rights of the related Noteholders, provided that, subject to exceptions which, if applicable, will be specified in the related prospectus supplement, without the consent of the holder of each outstanding Note affected by the related Indenture, no supplemental indenture will: (a) change the due date of any installment of principal of or interest on any related Note or reduce the principal amount of any related Note, the interest rate specified on the related Note or the redemption price with respect to the related Note or change any place of payment where or the coin or currency in which any related Note or any interest on the related Note is payable; (b) impair the right to institute suit for the enforcement of specific provisions of the related Indenture regarding payment; (c) reduce the percentage of the aggregate amount of the outstanding Notes of the related Series, the consent of the holders of which is required for any supplemental indenture or for any waiver of compliance with specific provisions of the related Indenture or of specific defaults under the related Indenture and their consequences as provided for in the related Indenture; (d) modify or alter the provisions of the related Indenture regarding the voting of Notes held by the applicable Trust, any other obligor on the related Notes, the Seller or an affiliate of any of them; (e) reduce the percentage of the aggregate outstanding amount of the related Notes, the consent of the holders of which is required to direct the related Indenture Trustee to sell or liquidate the Base Assets in the Trust if the proceeds of the sale would be insufficient to pay the principal amount and accrued and unpaid interest on the outstanding Notes of the related Series; (f) decrease the percentage of the aggregate principal amount of the related Notes required to amend the sections of the related Indenture that specify the percentage of the aggregate principal amount of the Notes of the Series necessary to amend the related Indenture or other related Agreements; or (g) permit the creation of any lien ranking prior to or on a parity with the lien of the related Indenture with respect to any of the collateral for the related Notes or, except as otherwise permitted or contemplated in the related Indenture, terminate the lien of the related Indenture on any related collateral or deprive the holder of any the related Note of the security afforded by the lien of the related Indenture. The Trust and the related Indenture Trustee may also enter into supplemental indentures, without obtaining the consent of the Noteholders of the related Series, for the purpose of, among other things, adding any provisions to or changing in any manner or eliminating any of the provisions of the related Indenture or of modifying in any manner the rights of the Noteholders; provided that this action will not materially and adversely affect the interest of any related Noteholder. ANNUAL COMPLIANCE STATEMENT. Each Trust for a Series of Notes or Certificates, as applicable, that includes Notes will be required to file annually with the related Indenture Trustee a written statement as to the fulfillment of its obligations under the related Indenture. INDENTURE TRUSTEE'S ANNUAL REPORT. The Indenture Trustee for each Trust for a Series of Notes or Certificates, as applicable, that includes Notes will be required to mail each year to all related Noteholders a brief report relating to its eligibility and qualification to continue as Indenture Trustee under the related Indenture, any amounts advanced by it under the Indenture, the amount, interest rate and maturity date of indebtedness owing by the related Trust to the applicable Indenture Trustee in its individual capacity, the property and funds physically held by the related Indenture Trustee as such and any action taken by it that materially affects the related Notes that has not been previously reported. SATISFACTION AND DISCHARGE OF INDENTURE. Each Indenture will be discharged with respect to the collateral securing the related Notes upon the delivery to the related Indenture Trustee for cancellation of all related Notes or, with limitations, upon deposit with the related Indenture Trustee of funds sufficient for the payment in full of all related Notes. The Indenture Trustee The Indenture Trustee for a Series of Notes will be specified in the related prospectus supplement. The Indenture Trustee for any Series may resign at any time, in which event the related Trust will be obligated to appoint a successor indenture trustee for the related Series. The Trust may also remove the related Indenture Trustee if the related Indenture Trustee ceases to be eligible to continue as Indenture Trustee under the related Indenture or if the related Indenture Trustee becomes insolvent. In these circumstances, the related Trust will be obligated to appoint a successor indenture trustee for the applicable Series of Notes. No resignation or removal of the Indenture Trustee and appointment of a successor indenture trustee for a Series of Notes will become effective until the acceptance of the appointment by the successor indenture trustee for the related Series. DESCRIPTION OF THE CERTIFICATES The following summaries describe the material provisions in the applicable Agreements which generally are anticipated to be common to the Trust Agreements and to the Pooling and Servicing Agreement. The summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the prospectus supplement and Agreement relating to each Series of Certificates. Where particular provisions or terms used in the related Certificates or Agreements are referred to in this Prospectus, the actual provisions, including definitions of terms, are incorporated in this Prospectus by reference as part of the summaries. The related prospectus supplement will provide that each Class of Certificates will have an original principal amount, no principal amount or notional amount and will accrue interest on the original principal amount or notional amount at a specified Certificate Interest Rate or will not bear interest. Each Class of Certificates may have a different Certificate Interest Rate, which may be a fixed, variable or adjustable Certificate Interest Rate, or any combination of the foregoing. The related prospectus supplement will specify the Certificate Interest Rate, or the method for determining the applicable Certificate Interest Rate, for each Class of Certificates. A Series of Notes or Certificates, as applicable, may include two or more Classes of Certificates that differ as to timing and priority of distributions, seniority, allocations of losses, Certificate Interest Rate or amount of distributions in respect of principal or interest. Additionally, distributions in respect of principal or interest in respect of any Class or Classes may or may not be made upon the occurrence of specified events or on the basis of collections from designated portions of the related Base Assets. If specified in the related prospectus supplement, one or more Classes of Certificates may be Strip Certificates. If a Series of Notes or Certificates, as applicable, includes Classes of Notes, distributions in respect of the Certificates may be subordinated in priority of payment to payments on the Notes to the extent specified in the related prospectus supplement. Certificates will be available for purchase in a minimum denomination of $100,000 or other minimum denominations as the prospectus supplement shall provide and in integral multiples of $1,000 in excess of the minimum denominations and will be available in book-entry form or if provided in the related prospectus supplement, as Definitive Certificates. If the Certificates will be available in book-entry form only, the related prospectus supplement will provide that Certificateholders will be able to receive Definitive Certificates only in the limited circumstances described in this Prospectus or in the related prospectus supplement. The Certificates of each Series will be issued only in fully registered form, without coupons, in the authorized denominations for each Class specified in the related prospectus supplement. Upon satisfaction of the conditions, if any, applicable to a Class of Certificates of a Series, as described in the related prospectus supplement, the transfer of the Certificates may be registered and the Certificates may be exchanged at the office of the Trustee specified in the related prospectus supplement without the payment of any service charge other than any tax or governmental charge payable in connection with the registration of transfer or exchange. Payments of principal of and interest, if any, on the Certificates of a Series will be made on the dates specified in the related prospectus supplement by check mailed to Certificateholders of the related Series, registered as Certificateholders of the Series at the close of business on the record date applicable to each Payment Date at their addresses appearing on the register of Certificates for the related Series or in any other manner as shall be specified in the related prospectus supplement, except that: o payments may be made by wire transfer, at the expense of the Certificateholder requesting payment by wire transfer, in circumstances described in the related prospectus supplement, and o final payments of principal in retirement of any Certificate will be made only upon presentation and surrender of the related Certificate at the office of the Trustee specified in the related prospectus supplement. Notice of the final payment on a Certificate will be mailed to the holder of the Certificate before the Payment Date on which the final principal payment on any Certificate is expected to be made to the holder of that Certificate. Payments of principal of and interest, if any, on the Certificates will be made by the Trustee, or a paying agent on behalf of the Trustee, as specified in the related prospectus supplement. All payments with respect to the Base Assets for a Series, together with reinvestment income on these payments, amounts withdrawn from any Reserve Account and amounts available pursuant to any other Series Enhancement generally will be deposited directly into the Collection Account net, if and as provided in the related prospectus supplement, of amounts payable to the Servicer under the related Agreement and specified in the related prospectus supplement, and will then be deposited into the applicable Payment Accounts and be available to make payments on Certificates of the related Series on the next Payment Date, as the case may be. See "The Trust Assets --Collection and Payment Accounts" . Payments of Interest The Certificates of each Class which by their terms are entitled to receive interest will bear interest, calculated on the basis of a 360-day year of twelve 30-day months or any other basis as is specified in the related prospectus supplement, from the date and at the rate per annum specified, or calculated in the method described, in the related prospectus supplement. Interest on the Certificates of a Series will be payable on the Payment Dates specified in the related prospectus supplement. The rate of interest on one or more Classes of Certificates of a Series may be fixed, floating, variable or adjustable. A Class of Certificates may by its terms be "Principal Only Certificates", which may not be entitled to receive any interest distributions or may be entitled to receive only nominal interest distributions. A Class of Certificates may by its terms be "Zero Coupon Certificates", the interest on which is not paid on the related Payment Date, but will accrue and be added to the principal of the Certificates on the related Payment Date. Interest payable on the Certificates on a Payment Date will include all interest accrued during the related period specified in the related prospectus supplement. In the event interest accrues during the calendar month preceding a Payment Date, the effective yield to Certificateholders will be reduced from the yield that would otherwise be obtainable if interest payable on the Certificates were to accrue through the day immediately preceding the related Payment Date. Payments of Principal On each Payment Date for Certificates of a Series, principal payments will be made to the holders of the related Certificates on which principal is then payable, to the extent set forth in the related prospectus supplement. The payments will be made in an aggregate amount determined as specified in the related prospectus supplement and will be allocated among the respective Classes of a Series in the manner, at the times and in the priority, which may, in some cases, include allocation by random lot, set forth in the related prospectus supplement. With respect to each Class of Certificates not issued pursuant to a Pooling and Servicing Agreement, a "Final Scheduled Payment Date" will be specified in the related prospectus supplement, which will be the date, calculated on the basis of the assumptions applicable to the Series described in the related prospectus supplement, on which the entire aggregate principal balance of the related Class is expected to be reduced to zero. Because payments received on the Base Assets will generally be used to make distributions in reduction of the outstanding principal amounts of the Certificates, it is likely that the final principal payment with respect to a Class of Certificates will occur earlier, and may occur substantially earlier than its Final Scheduled Payment Date. Receivables Pooling Certificates INVESTOR CERTIFICATEHOLDERS' INTEREST; DEPOSITOR'S INTEREST. In the case of a Series of Receivables Pooling Certificates, a portion of the assets of the related Trust will be allocated among the Investor Certificateholders' Interest and the remainder will be allocated to the depositor's interest (the "Depositor's Interest") and as provided in the related prospectus supplement. The Depositor's Interest represents the rights to the assets of the Trust not allocated to the Investor Certificateholders' Interest of any Series or any interests in the Trust issued as Series Enhancement. In the case of a Master Trust, the related Seller may cause the issuance of additional Series of Certificates from time to time and this issuance will have the effect of decreasing the Depositor's Interest. The Depositor's Interest may be evidenced by an exchangeable certificate that is subject to specific transfer restrictions. The aggregate principal amount of the Investor Certificateholders' Interest will, except as provided in this Prospectus or in the related prospectus supplement, remain fixed at the aggregate initial principal amount of the Certificates of the related Series and the principal amount of the Depositor's Interest will fluctuate as the amount of the "Principal Receivables", as defined in the related prospectus supplement, Government Securities, if any, and Private Label Custody Receipt Securities, if any, held by the Trust changes from time to time. If so provided in the related prospectus supplement, in some circumstances, interests in the assets of a Trust may be allocated to a credit enhancer, and in the case of a Master Trust, interests in the assets of the Trust may be allocated to the Investor Certificateholders of more than one Series. EFFECT OF ISSUANCE OF ADDITIONAL SERIES. In the case of a Master Trust, the Pooling and Servicing Agreement may provide that, pursuant to any one or more supplements to the related Pooling and Servicing Agreement (each, a "Supplement"), the Depositor may direct the Trustee to authenticate from time to time new Series, subject to the conditions described below (each issuance, a "New Issuance"). Each New Issuance will have the effect of decreasing the Depositor's Interest to the extent of the initial Invested Amount of a Series. Under the Pooling and Servicing Agreement, the Depositor may designate, with respect to any newly issued Series: (a) its name or designation; (b) its initial principal amount or method for calculating its amount, and its Invested Amount in the Trust which is generally based on the aggregate amount of Principal Receivables, Government Securities, if any, and Private Label Custody Receipt Securities, if any, in the Trust allocated to the related Series, and its Series Invested amount; (c) its certificate rate, or formula for the determination of the certificate rate; (d) the interest payment date or dates and the dates from which interest shall accrue; (e) the method for allocating collections to Certificateholders of the Series; (f) any bank accounts to be used by the related Series and the terms governing the operation of these bank accounts; (g) the percentage used to calculate the Monthly Servicing Fee; (h) the provider and terms of any form of Series Enhancement with respect to any newly issued Series; (i) the terms on which the Certificates of the Series may be repurchased or remarketed to other investors; (j) the Series Termination Date; (k) the number of Classes of Certificates of the Series, and if the Series consists of more than one Class, the rights and priorities of each related Class; (l) the extent to which the Certificates of the Series will be issuable in temporary or permanent global form, and, in this case, the depositary for these global certificate or certificates, the terms and conditions, if any, upon which these global certificate or certificates may be exchanged, in whole or in part, for definitive certificates, and the manner in which any interest payable on this global certificate or certificates will be paid; (m) whether the Certificates of the Series may be issued in bearer form and any limitations imposed on the Certificates; (n) the priority of the Series with respect to any other Series; and (o) any other relevant terms (all relevant terms, the "Principal Terms" of the related Series). None of the Depositor, the Servicer, the Trustee or the Trust is required or intends to obtain the consent of any Certificateholder of any outstanding Series to issue any additional Series. The Pooling and Servicing Agreement may provide that the Depositor may designate Principal Terms so that each Series has a Controlled Accumulation Period or a Controlled Amortization Period that may have a different length and begin on a different date than the Controlled Accumulation Periods or the Controlled Amortization Periods for any other Series. Further, one or more Series may be in their Controlled Accumulation Period or Controlled Amortization Period while other Series are not. Moreover, each Series may have the benefits of Series Enhancement issued by enhancement providers different from the providers of Series Enhancement with respect to any other Series. Under the Pooling and Servicing Agreement, the Trustee shall hold any Series Enhancement only on behalf of the Certificateholders of the Series to which the Series Enhancement relates. With respect to each Series Enhancement, the Depositor also has the option under the Pooling and Servicing Agreement to vary among Series the terms upon which a Series may be repurchased by the Depositor or remarketed to other investors. There is no limit to the number of New Issuances the Depositor may cause under the Pooling and Servicing Agreement. The Trust will terminate only as provided in the Pooling and Servicing Agreement. There can be no assurance that the terms of any Series might not have an impact on the timing and amount of payments received by a Certificateholder of another Series. Under the Pooling and Servicing Agreement and pursuant to a Supplement, a New Issuance may only occur upon the satisfaction of conditions provided in the Pooling and Servicing Agreement. The obligation of the Trustee to authenticate the Certificates of a new Series and to execute and deliver the related Series Supplement is subject to the satisfaction of the following conditions: (a) on or before the fifth day immediately preceding the date upon which the New Issuance is to occur, the Depositor shall have given the Trustee, the Servicer, each Rating Agency and any Series Enhancer so entitled pursuant to the relevant Supplement, written notice of the New Issuance and the date upon which the New Issuance is to occur; (b) the Depositor shall have delivered to the Trustee the related Supplement, in form satisfactory to the Trustee, executed by each party to the Pooling and Servicing Agreement other than the Trustee; (c) the Depositor shall have delivered to the Trustee any related Series Enhancement agreement executed by each of the parties to the applicable Agreement; (d) the Depositor shall have received notice from each Rating Agency that the New Issuance shall not cause the Rating Agency to reduce or withdraw the then current rating of the Certificates of any outstanding Series or Class; (e) the Depositor shall have delivered to the Trustee and providers of Series Enhancement a certificate of an authorized representative, dated the date upon which the New Issuance is to occur, to the effect that the Depositor reasonably believes that the issuance will not, based on the facts known to the representative at the time of certification, cause a Pay Out Event; and (f) the Depositor shall have delivered to the Trustee, each Rating Agency and providers of Series Enhancement an opinion of counsel acceptable to the Trustee that for federal income tax purposes: (1) following a New Issuance the Trust will not be deemed to be an association, or publicly traded partnership taxable as a corporation, (2) a New Issuance will not adversely affect the tax characterization as debt of Certificates of any outstanding Series or Class that were characterized as debt at the time of their issuance, (3) a New Issuance will not cause or constitute an event in which gain or loss would be recognized by any Certificateholders, and (4) except as is otherwise provided in a Supplement with respect to any Series, the Certificates of the related Series will be properly characterized as debt. Upon satisfaction of the above conditions, the Trustee shall execute the Supplement and issue to the Depositor the Certificates of the new Series for execution and redelivery to the Trustee for authentication. ALLOCATION PERCENTAGE. Pursuant to the Pooling and Servicing Agreement, all amounts collected with respect to: (a) finance charge receivables (as defined in the related prospectus supplement, the "Finance Charge Receivables") and Principal Receivables and the Defaulted Amount, (b) the Government Securities, if any, and (c) the Private Label Custody Receipt Securities, if any, with respect to any Monthly Period will be allocated among the Investor Certificateholders' Interest of each Series, the Depositor's Interest and in some circumstances to the provider of Series Enhancement, and all Adjustment Payments and Deposit Amounts deposited in the Collection Account (collectively, "Miscellaneous Payments") with respect to any Monthly Period will be allocated among the Investor Certificateholders' Interest of each Series, as follows: (1) collections of: (A) Finance Charge Receivables and the Defaulted Amount, (B) interest on the Government Securities, if any, and (C) interest on the Private Label Custody Receipt Securities, if any, will at all times be allocated to the Investor Certificateholders' Interest of a Series based on the Floating Allocation Percentage of the related Series; (2) collections of: (A) Principal Receivables; (B) principal of the Government Securities, if any, and (C) principal of the Private Label Custody Receipt Securities, if any, will at all times be allocated to the Investor Certificateholders' Interest of a Series based on the Principal Allocation Percentage of the related Series; and (3) miscellaneous Payments will at all times be allocated among the Investor Certificateholder's Interest of each Series based on their respective Invested amounts. The "Floating Allocation Percentage" and the "Principal Allocation Percentage" with respect to any Series will be determined as set forth in the related Supplement and, with respect to each Series offered by this Prospectus, in the related prospectus supplement. Amounts not allocated to the Investor Certificateholders' Interest of any Series as described above will be allocated to the Depositor's Interest. COLLECTIONS. All collections in respect of Receivables and Participations with respect to a given Trust will be allocated by the related Servicer or Trustee as amounts collected on Principal Receivables and on Finance Charge Receivables. The Servicer will allocate between the Investor Certificateholders' Interest of each Series, if more than one, of the related Trust and the Depositor's Interest all amounts collected with respect to: o Finance Charge Receivables and Principal Receivables and the Defaulted Amount, o the Government Securities, if any, and o Private Label Custody Receipt Securities, if any. The "Defaulted Amount" for any Monthly Period will be an amount, not less than zero, equal to: (a) the amount of Principal Receivables which were charged off as uncollectible in the Monthly Period in accordance with the Servicer's customary and usual servicing procedures ("Defaulted Receivables") for the Monthly Period, minus (b) the sum of: (1) the amount of any Defaulted Receivables of which either the Depositor or the Servicer becomes obligated to accept reassignment or assignment during the Monthly Period, unless an Insolvency Event shall have occurred with respect to the Depositor, the Seller or the Servicer, in which event the amount of the Defaulted Receivables will not be added to the sum so subtracted, (2) the aggregate amount of recoveries, net of collection expenses, received in the Monthly Period with respect to both Finance Charge Receivables and Principal Receivables previously charged off as uncollectible, and (3) the excess, if any, for the immediately preceding Monthly Period of the sum computed pursuant to this clause (b) for the Monthly Period over the amount of Principal Receivables which became Defaulted Receivables in the Monthly Period. Collections of: o Finance Charge Receivables and the Defaulted Amount, o interest on the Government Securities, if any, and o interest on the Private Label Custody Receipt Securities, if any, will be allocated to each Series at all times based upon its Floating Allocation Percentage. Collections of: o Principal Receivables, o principal of the Government Securities, if any, and o principal of the Private Label Custody Receipt Securities, if any, will be allocated to each related Series at all times based upon its Principal Allocation Percentage. The Floating Allocation Percentage and the Principal Allocation Percentage with respect to each related Series will be determined as set forth in the related Supplement and, with respect to each Series offered by this Prospectus, in the related prospectus supplement. Collections will be deposited in the related Collection Account and invested in the manner described under "Servicing of Receivables -- Deposits in the Collection Account". INTEREST. Interest will accrue on the Invested amount of the Receivables Pooling Certificates of a Series or Class (the "Invested Amount" of the Series or Class) offered by this Prospectus at the per annum rate either specified, or determined in the manner specified, in the related prospectus supplement (the "Certificate Interest Rate "). If the prospectus supplement for a Series of Receivables Pooling Certificates so provides, the interest rate and interest payment dates applicable to each Class of Certificates of that Series may be subject to adjustment from time to time. Any interest rate adjustment would be determined by reference to one or more indices or by a remarketing firm, in each case as described in the prospectus supplement for the related Series. To the extent provided in this Prospectus or in the related prospectus supplement, collections of Finance Charge Receivables and other amounts allocable to the Investor Certificateholders' Interest of a Series offered by this Prospectus will be used to make interest payments to Certificateholders of the related Series on each Interest Payment Date with respect to these collections, provided that if a rapid amortization period commences with respect to the related Series, interest will then be distributed to these Certificateholders monthly on each Special Payment Date. If the Interest Payment Dates for a Series or Class occur less frequently than monthly, collections or other amounts, or the portion allocable to the related Class, will be deposited in one or more trust accounts (in the case of the deposit of interest, an "Interest Funding Account") and used to make interest payments to Certificateholders of the related Series or Class on the following Interest Payment Date with respect to the related Series or Class. If a Series has more than one Class of Receivables Pooling Certificates, each related Class may have a separate Interest Funding Account. PRINCIPAL. The principal of any Receivables Pooling Certificates will be scheduled to be paid either in full on an expected date specified in the related prospectus supplement (the "Expected Final Payment Date "), in which case the related Series will have an accumulation period, as described below under " -- Accumulation Period", or in installments commencing on a date specified in the related prospectus supplement (the "Principal Commencement Date "), in which case the Receivables Pooling Certificates will have a Controlled Amortization Period as described below under " -- Controlled Amortization Period". If the related Series has more than one Class of Certificates, a different method of paying principal, Expected Final Payment Date and/or Principal Commencement Date may be assigned to each Class. The principal with respect to the Certificates of the related Series or Class may be made or commence earlier than the applicable Expected Final Payment Date or Principal Commencement Date, as the case may be, and the final principal payment with respect to the Certificates of the related Series or Class may be made earlier or later than the applicable Expected Final Payment Date or Principal Commencement Date, if a Pay Out Event occurs with respect to the related Series or Class or under other circumstances described in this Prospectus or in the related prospectus supplement. REVOLVING PERIOD. Receivables Pooling Certificates will have a "Revolving Period", which will commence on the date specified in the related prospectus supplement as the Series Cut-Off Date and continue until the earliest to occur of: o the commencement of the Rapid Amortization Period with respect to the Series, and o the date specified in the related prospectus supplement as the last day of the Revolving Period with respect to the Series. During the Revolving Period with respect to the Series, collections of Principal Receivables, collections of principal of the Government Securities, if any, collections of principal of the Private Label Custody Receipt Securities, if any, and other amounts otherwise allocable to the Investor Certificateholders' Interest of the Series will be distributed to or for the benefit of the Certificateholders of other Series, if so provided in the related prospectus supplement or the Seller or the Depositor in respect of the Depositor's Interest. CONTROLLED ACCUMULATION PERIOD. If so specified by the related prospectus supplement in the case of a Series of Receivables Pooling Certificates, and unless a Rapid Amortization Period commences with respect to the related Series, one or more Classes of Certificates of the Series will have a Controlled Accumulation Period. The controlled accumulation period (the "Controlled Accumulation Period") will commence on the close of business on the date specified, or determined in the manner specified, in the related prospectus supplement and will continue until the earliest to occur of: o the commencement of a Rapid Amortization Period with respect to the Series, o payment in full of the Invested Amount of the Certificates of the Series, or o the Series Termination Date with respect to the Series. During the Controlled Accumulation Period with respect to a Series of Receivables Pooling Certificates, collections of Principal Receivables, principal of the Government Securities, if any, principal of the Private Label Custody Receipt Securities, if any, and other amounts allocable to the Investor Certificateholders' Interest of the Series will be deposited on each Distribution Date in a trust account established for the benefit of the Investor Certificateholders of the Series (the "Principal Funding Account") and used to make principal distributions to the Certificateholders when due. The amount to be deposited in the Principal Funding Account on the applicable Distribution Date may, but will not necessarily, be limited to the "Controlled Deposit Amount " equal to the "Controlled Accumulation Amount" specified in the related prospectus supplement plus any existing deficit with respect to the Controlled Accumulation Amount arising from prior Distribution Dates (the "Deficit Controlled Accumulation Amount "). If a Series of Receivables Pooling Certificates has more than one Class, each Class may have a separate Principal Funding Account and Controlled Accumulation Amount. In addition, the related prospectus supplement may describe priorities among Classes with respect to deposits of principal into Principal Funding Accounts. In general, unless a Pay Out Event shall have occurred prior to the Expected Final Payment Date for a Series, on the Expected Final Payment Date for a particular Series or Class, all amounts accumulated in the Principal Funding Account with respect to the Series or Class during the Controlled Accumulation Period will be distributed as a single repayment of principal with respect to the Series or Class. RAPID ACCUMULATION PERIOD. If so specified and under the conditions set forth in the prospectus supplement relating to a Series having a Controlled Accumulation Period, during the period (the "Rapid Accumulation Period" and together with the Controlled Accumulation Period, each an "Accumulation Period") from the day on which a Pay Out Event has occurred until the earliest of: o the commencement of the Rapid Amortization Period, o payment in full of the Investor Interest of the Certificates of the Series and, if so specified in the related prospectus supplement, of the Collateral Interest, if any, with respect to the Series, and o the related Series Termination Date, collections of Principal Receivables allocable to the Investor Interest of the Series, and other amounts if so specified in the related prospectus supplement, will be deposited on each Transfer Date in the Principal Funding Account and used to make distributions of principal to the Certificateholders of the Series or Class on the Scheduled Payment Date. The amount to be deposited in the Principal Funding Account during the Rapid Accumulation Period will not be limited to the Controlled Deposit Amount. During the Rapid Accumulation Period, funds on deposit in any Principal Funding Account may be invested in permitted investments or subject to a guaranteed rate or investment contract or other arrangement intended to assure a minimum return on the investment of the funds. Investment earnings on the funds may be applied to pay interest on the related Series of Certificates or make other payments as specified in the related prospectus supplement. In order to enhance the likelihood of payment in full of principal at the end of the Rapid Accumulation Period with respect to a Series of Certificate, the Series may be subject to a principal guaranty or other similar agreement. CONTROLLED AMORTIZATION PERIOD. If the related prospectus supplement so specifies with respect to a Series of Receivables Pooling Certificates, unless a Rapid Amortization Period commences with respect to a Series, one or more Classes of Certificates of the Series will have a Controlled Amortization Period. The controlled amortization period (the "Controlled Amortization Period") will commence at the close of business on the date specified or determined in the manner specified in the related prospectus supplement and will continue until the earliest to occur of: o the commencement of the Rapid Amortization Period with respect to a Series, o payment in full of the Invested Amount of the Certificates of a Series, or o the Series Termination Date with respect to a Series. During the Controlled Amortization Period with respect to a Series, collections of Principal Receivables, principal of the Government Securities, if any, principal of the Private Label Custody Receipt Securities, if any, and other amounts allocable to the Investor Certificateholders' Interest of a Series will be used on each Distribution Date to make principal distributions to Certificateholders of the Series or any Class of the Series then scheduled to receive the related distributions. The amount to be distributed to Certificateholders of any Series on any Distribution Date may, but will not necessarily, be limited to an amount (the "Controlled Distribution Amount") which will be equal to the "Controlled Amortization Amount" specified in the related prospectus supplement plus any existing deficit with respect to the Controlled Amortization Amount arising from prior Distribution Dates (the "Deficit Controlled Amortization Amount". If a Series of Receivables Pooling Certificates has more than one Class, each Class may have a separate Controlled Amortization Amount. In addition, the related prospectus supplement may describe priorities among the Classes with respect to these distributions. RAPID AMORTIZATION PERIOD. During the Rapid Amortization Period, collections of Principal Receivables and other amounts allocable to the Investor Certificateholders' Interest of the Series will be distributed as principal payments to the Investor Certificateholders of the Series monthly on each Distribution Date beginning with the first Special Payment Date with respect to the Series. The "Rapid Amortization Period" will commence and end on the dates set forth in the related prospectus supplement. During the Rapid Amortization Period with respect to a Series, distributions of principal to Investor Certificateholders will not be subject to any Controlled Deposit Amount or Controlled Distribution Amount. In addition, upon the commencement of the Rapid Amortization Period with respect to a Series, any funds on deposit in a Principal Funding Account with respect to a Series will be paid to the Certificateholders of the relevant Class or Series on the first Special Payment Date with respect to the related Series. See "Description of the Certificates -- Pay Out Events" below for a discussion of the events which might lead to the commencement of the Rapid Amortization Period with respect to a Series. PAY OUT EVENTS. As described above, the Revolving Period with respect to a Series of Receivables Pooling Certificates will commence on the Series Cut-Off Date and continue until the commencement of the Controlled Accumulation Period or the Controlled Amortization Period, unless a Pay Out Event occurs with respect to the Series prior to any of these dates. A "Pay Out Event" with respect to the Series refers to any events specified in the related prospectus supplement, which events may include: o the occurrence of an "Insolvency Event", which shall mean the appointment of the FDIC as receiver of the Depositor or the Seller or another person specified in the related prospectus supplement, or other events relating to the bankruptcy, insolvency or receivership of the Depositor or the Seller, or another person specified in the related prospectus supplement; or o the Trust becoming an investment company within the meaning of the Investment Company Act of 1940 (the "Investment Company Act"). In the case of any event described above, a Pay Out Event with respect to the affected Series will be deemed to have occurred without any notice or other action on the part of the Trustee or the Investor Certificateholders of the affected Series immediately upon the occurrence of this event. The Rapid Amortization Period with respect to a Series will commence at the close of business on the day immediately preceding the day on which a Pay Out Event occurs with respect to the related Series. Distributions of principal to the Investor Certificateholders of the related Series will begin on the Distribution Date next following the month during which the Pay Out Event occurs (the Distribution Date and each following Distribution Date with respect to the related Series, a "Special Payment Date"). Any amounts on deposit in a Principal Funding Account or an Interest Funding Account with respect to the related Series at that time will be distributed on the first Special Payment Date to the Investor Certificateholders of the Series. If a Series has more than one Class of Certificates, each Class may have different Pay Out Events which, in the case of any Series of Certificates offered by this Prospectus, will be described in the related prospectus supplement. In addition to the consequences of a Pay Out Event discussed above, if any Insolvency Event occurs with respect to the Depositor or the Seller, pursuant to the Pooling and Servicing Agreement and the Receivables Purchase Agreement, on the day of the Insolvency Event, the Depositor or the Seller will immediately cease to transfer Principal Receivables directly or indirectly to the Trust and promptly give notice to the Trustee of the Insolvency Event. Under the terms of the Pooling and Servicing Agreement and the Receivables Purchase Agreement applicable to the Series, within 15 days the Trustee will publish a notice of the occurrence of the Insolvency Event stating that the Trustee intends to sell, dispose of or otherwise liquidate the Receivables, Government Securities, if any, and Private Label Custody Receipt Securities, if any, in a commercially reasonable manner and on commercially reasonable terms unless within 90 days from the date notice is published the holders of Certificates of each Series or, if a Series includes more than one Class, each Class of the related Series evidencing more than 50% of the aggregate unpaid principal amount of each related Series or Class and other interested parties specified in the related prospectus supplement instruct the Trustee not to dispose of or liquidate the Receivables, Government Securities, if any, and Private Label Custody Receipt Securities, if any, and to continue transferring Principal Receivables as before the Insolvency Event. The proceeds from any sale, disposition or liquidation of the Receivables, Government Securities, if any, and Private Label Custody Receipt Securities, if any, will be deposited in the Collection Account and allocated as described in the applicable Pooling and Servicing Agreement and the related prospectus supplement. If the sum of: o the portion of the proceeds allocated to the Investor Certificateholders' Interest of any Series, and o the proceeds of any collections of the Receivables, Government Securities, if any, and Private Label Custody Receipt Securities, if any, in the Collection Account allocated to the Investor Certificateholders' Interest of the related Series, together with any related rights under any applicable Series Enhancement, is not sufficient to pay the Invested Amount of the Certificates of the related Series in full, the Investor Certificateholders will incur a loss. PAIRED SERIES. If so provided in the related prospectus supplement, one or more Series or a portion of one or more Series previously issued by a Trust (a "Prior Series ") may be paired with one or more other series (a "Paired Series ") issued by the Trust. As the Invested Amount of the Prior Series is reduced, the Invested Amount in the Trust of the Paired Series will increase by an equal amount. Upon payment in full of the Prior Series, the Invested Amount of the Paired Series will be equal to the Invested Amount paid to Certificateholders of the Prior Series. If a Pay Out Event occurs with respect to the Prior Series or with respect to the Paired Series when the Prior Series is in a Controlled Amortization Period or Controlled Accumulation Period, the Series Allocation Percentage and the Principal Allocation Percentage for the Prior Series and the Series Allocation Percentage and the Principal Allocation Percentage for the Paired Series will be reset as provided in the related prospectus supplement and the Early Amortization Period or Early Accumulation Period for the related Series could be lengthened. It shall be a condition to the issuance of a Paired Series that this issuance shall not result in the reduction by any Rating Agency of the rating of the Prior Series. OPTIONAL TERMINATION; FINAL PAYMENT OF PRINCIPAL. If specified in the prospectus supplement, subject to any conditions described in the prospectus supplement, on any day occurring on or after the day that the principal amount of the Certificates of a Series and the Enhancement Invested Amount, if any, with respect to the Series is reduced to a percentage of the initial outstanding aggregate principal amount of the Certificates of the related Series set forth in the related prospectus supplement, the Depositor will have the option to repurchase the Investor Certificateholders' Interest of the related Series. The purchase price will be equal to the sum of the principal amount of the Series, less the amount, if any, on deposit in any Principal Funding Account with respect to the related Series, plus the Enhancement Invested Amount, if any, with respect to the related Series, plus accrued and unpaid interest on the unpaid principal amount of the Certificates, including the Collateral Indebtedness Interests, if any, and, if applicable, on the Enhancement Invested Amount, and accrued and unpaid interest with respect to interest amounts that were due but not paid on a prior Payment Date, through: o if the day on which the repurchase occurs is a Distribution Date, the day preceding this Distribution Date, or o if the day on which the repurchase occurs is not a Distribution Date, the day preceding the Distribution Date following that day, at the applicable Certificate Interest Rate. Following any repurchase and the deposit of the aggregate purchase price into the Collection Account, the Investor Certificateholders of the related Series will have no further rights with respect to the Receivables. In the event that the Depositor shall fail for any reason to deposit the aggregate purchase price for the Investor Certificateholders' Interest of a Series, payments would continue to be made to the Investor Certificateholders of the related Series as described in this Prospectus and in the related prospectus supplement. In any event, the last payment of principal and interest on the Notes or Certificates, as applicable, of a Series will be due and payable not later than the date (the "Series Termination Date") specified in the related prospectus supplement. In the event that the principal amount of the Notes or Certificates, as applicable, of any related Series or the Enhancement Invested Amount is greater than zero on the Series Termination Date, the Trustee will sell or cause to be sold interests in the Receivables, Government Securities, if any, and Private Label Custody Receipt Securities, if any, of the related Trust, as specified in the Pooling and Servicing Agreement, in an amount equal to the sum of the principal amount of the outstanding Notes or Certificates, as applicable, and the Enhancement Invested Amount, if any, with respect to the related Series at the close of business on the Series Termination Date. The net proceeds of the sale will be deposited in the Collection Account and allocated to the Certificateholders of the related Series or the holder of the Enhancement Invested Amount after the Certificateholders are paid in full, as provided in the Pooling and Servicing Agreement with respect to the Series. The Depositor may, at its option, purchase a Class of Certificates of any Series, on any Distribution Date under the circumstances, if any, specified in the prospectus supplement relating to that Series. Alternatively, if so specified in the related prospectus supplement for a Series of Certificates, the Depositor, the Servicer, or another entity designated in the related prospectus supplement may, at its option, cause an early termination of a Trust by repurchasing all of the Receivables, Government Securities, if any, and Private Label Custody Receipt Securities, if any, from the Trust on or after a date specified in the related prospectus supplement, or on or after that time as the aggregate outstanding principal amount of the Certificates or Receivables, Government Securities, if any, and Private Label Custody Receipt Securities, if any, as specified in the related prospectus supplement, is less than the amount or percentage specified in the related prospectus supplement. Notice of a purchase or termination must be given by the Depositor, the Servicer or the Trustee prior to the related date. The purchase or repurchase price will be set forth in the related prospectus supplement. In addition, the related prospectus supplement may provide other circumstances under which holders of Certificates of a Series could be fully paid significantly earlier than would otherwise be the case as a result of the occurrence of a Rapid Amortization Event. CERTAIN INFORMATION REGARDING THE SECURITIES Book-Entry Registration If so specified in the related prospectus supplement, holders of Notes or Certificates, as applicable, may hold their Notes or Certificates, as applicable, through the Depository Trust Company ("DTC" in the United States) or Clearstream Luxembourg or Euroclear (in Europe) if they are participants of these systems, or indirectly through organizations which are participants in these systems. Cede & Co. ("Cede"), as nominee for DTC, will hold one or more global Notes or Certificates, as applicable. Unless and until definitive securities are issued in fully registered, certified form ("Definitive Notes" or "Definitive Certificates," and collectively, "Definitive Securities ") under the limited circumstances described in the related prospectus supplement, all references in this Prospectus or in the related prospectus supplement to actions by holders of Notes or Certificates, as applicable, shall refer to actions taken by DTC upon instructions from its participating organizations (the "Participants") and all references in this Prospectus to distributions, notices, reports and statements to holders of Notes or Certificates, as applicable, shall refer to distributions, notices, reports and statements to DTC or Cede, as the registered holder of the Notes or Certificates, as applicable, as the case may be, for distribution to the beneficial owners of the related Notes or Certificates, as applicable, in accordance with DTC procedures. Clearstream Luxembourg and Euroclear will hold omnibus positions on behalf of their participants through customers' securities accounts in Clearstream Luxembourg's and Euroclear's names on the books of their respective Depositaries which in turn will hold these positions in customers' securities accounts in the Depositaries' names on the books of DTC. Citibank, N.A. will act as depositary for Clearstream Luxembourg and Morgan Guaranty Trust Company of New York will act as depositary for Euroclear (in these capacities, the "Depositaries"). Transfers between DTC Participants will occur in the ordinary way in accordance with DTC rules. Transfers among Clearstream Luxembourg Participants or Euroclear Participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Clearstream Luxembourg and Euroclear. Cross-market transfers between persons holding directly or indirectly through DTC on the one hand, and directly or indirectly through Clearstream Luxembourg or Euroclear, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its Depositary; however, these cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in the clearing system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its Depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Luxembourg Participants and Euroclear Participants may not deliver instructions directly to the Depositaries. Because of time-zone differences, credits of securities received in Clearstream Luxembourg or Euroclear as a result of a transaction with a DTC Participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. These credits or any transactions in the securities settled during processing will be reported to the relevant Euroclear Participant or Clearstream Luxembourg Participant on that business day. Cash received in Clearstream Luxembourg or Euroclear as a result of sales of securities by or through a Clearstream Luxembourg Participant or a Euroclear Participant to a DTC Participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream Luxembourg or Euroclear cash account only as of the business day following settlement in DTC. For additional information regarding clearance and settlement procedures for the Notes or Certificates, as applicable, see Annex I to this Prospectus and for information with respect to tax documentation procedures relating to the Notes or Certificates, as applicable, see Annex I to this Prospectus and "Certain Federal Income Tax Consequences -- Foreign Investors." DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York UCC, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its Participants and facilitate the clearance and settlement of securities transactions between Participants through electronic book-entry changes in accounts of its Participants, thus eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include other organizations, including the Underwriters. Indirect access to the DTC System also is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (the "Indirect Participants"). Holders of Notes or Certificates, as applicable, that are not Participants or Indirect Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, Notes or Certificates, as applicable, may do so only through Participants and Indirect Participants. In addition, holders of Notes or Certificates, as applicable, will receive all distributions of principal of and interest on the Notes or Certificates, as applicable, from the Trustee, or the Indenture Trustee, as paying agent, or its successor in this capacity (the "Paying Agent"), through the Participants who in turn will receive them from DTC. Under a book-entry format, holders of Notes or Certificates, as applicable, may experience some delay in their receipt of payments, since these payments will be forwarded by the Paying Agent to Cede, as nominee for DTC. DTC will forward these payments to its Participants which will then forward them to Indirect Participants or holders of Notes or Certificates, as applicable. It is anticipated that the only holder of the Certificates (the "Certificateholder"), holder of the Note (the "Noteholder" and together with the Certificateholder, the "Securityholder") for a Series will be Cede, as nominee of DTC. Holders of Notes or Certificates, as applicable, would not then be recognized by the Trustee as "Certificateholders", "Noteholders" or "Securityholders", as these terms are used in the related Agreement, and holders of Notes or Certificates, as applicable, would only be permitted to exercise the rights of a "Certificateholder", "Noteholder" or "Securityholder" indirectly through the Participant who in turn will exercise those 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 Notes or Certificates, as applicable, and is required to receive and transmit distributions of principal of and interest on the Notes or Certificates, as applicable. Participants and Indirect Participants with which holders of Notes or Certificates, as applicable, have accounts with respect to the Notes or Certificates, as applicable, similarly are required to make book-entry transfers and receive and transmit payments on behalf of their respective holders of Notes or Certificates, as applicable. Accordingly, although holders of Notes or Certificates, as applicable, will not possess Notes or Certificates, as applicable, holders of Notes or Certificates, as applicable, will receive payments and will be able to transfer their interests. Because DTC can only act on behalf of Participants, who in turn act on behalf of Indirect Participants, the ability of a holder of Notes or Certificates, as applicable, to pledge Notes or Certificates, as applicable, to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of the Notes or Certificates, as applicable, may be limited due to the lack of a physical certificate or instrument for the Notes or Certificates, as applicable. DTC will take any action permitted to be taken by a "Certificateholder", "Noteholder" or "Securityholder" under the applicable Agreement or Indenture only at the direction of one or more Participants to whose account with DTC the relevant Notes or Certificates, as applicable, are credited. Additionally, DTC will take these actions with respect to specified percentages of the Certificateholders', Noteholders' or Securityholders' interests only at the direction of and on behalf of Participants whose holdings include undivided interests that satisfy the specified percentages. DTC may take conflicting actions with respect to other undivided interests to the extent that these actions are taken on behalf of Participants whose holdings include these undivided interests. Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte, L-2967 Luxembourg ("Clearstream, Luxembourg"), was incorporated in 1970 as "Cedel S.A.", a company with limited liability under Luxembourg law (a societe anonyme). Cedel S.A. subsequently changed its name to Cedelbank. On January 10, 2000, Cedelbank's parent company, Cedel International, societe anonyme ("CI") merged its clearing, settlement and custody business with that of Deutsche Borse Clearing AG ("DBC"). The merger involved the transfer by CI of substantially all of its assets and liabilities (including its shares in CB) to a new Luxembourg company, New Cedel International, societe anonyme ("New CI"), which is 50% owned by CI and 50% owned by DBC's parent company Deutsche Borse AG. The shareholders of these two entities are banks, securities dealers and financial institutions. Cedel International currently has 92 shareholders, including U.S. financial institutions or their subsidiaries. No single entity may own more than 5 percent of Cedel International's stock. Further to the merger, the Board of Directors of New Cedel International decided to rename the companies in the group in order to give them a cohesive brand name. The new brand name that was chosen is "Clearstream". With effect from January 14, 2000 New CI has been renamed "Clearstream International, societe anonyme". On January 18, 2000, Cedelbank was renamed "Clearstream Banking, societe anonyme", and Cedel Global Services was renamed "Clearstream Services, societe anonyme". On January 17, 2000 DBC was renamed "Clearstream Banking AG". This means that there are now two entities in the corporate group headed by Clearstream International which share the name "Clearstream Banking", the entity previously named "Cedelbank" and the entity previously named "Deutsche Brse Clearing AG". Clearstream, Luxembourg holds securities for its customers ("Clearstream, Luxembourg Participants") and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg customers through electronic book-entry changes in accounts of Clearstream, Luxembourg customers, thereby eliminating the need for physical movement of certificates. Transactions may be settled by Clearstream, Luxembourg in any of 36 currencies, including United States Dollars. Clearstream, Luxembourg provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream, Luxembourg also deals with domestic securities markets in over 30 countries through established depository and custodial relationships. Clearstream, Luxembourg is registered as a bank in Luxembourg, and as such is subject to regulation by the Commission de Surveillance du Secteur Financier, "CSSF", which supervises Luxembourg banks. Clearstream, Luxembourg's customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg has approximately 2,000 customers located in over 80 countries, including all major European countries, Canada, and the United States. Indirect access to Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream, Luxembourg. Clearstream, Luxembourg has established an electronic bridge with Morgan Guaranty Trust Company of New York as the Operator of the Euroclear System (MGT/EOC) in Brussels to facilitate settlement of trades between Clearstream, Luxembourg and MGT/EOC. The Euroclear System ("Euroclear") was created in 1968 to hold securities for its participants ("Euroclear Participants") and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thus eliminating both the need for physical movement of certificates and the risk resulting from transfers of securities and cash that are not simultaneous. The Euroclear System has subsequently been extended to clear and settle transactions between Euroclear Participants counterparties both in Clearstream Luxembourg and in many domestic securities markets. Transactions may be settled in any of 32 settlement currencies, including United States dollars. In addition to safekeeping (custody) and securities clearance and settlement, the Euroclear System includes securities lending and borrowing and money transfer services. The Euroclear System is operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear Operator"), under contract with Euroclear Clearance System S.C., a Belgian cooperative corporation that establishes policy on behalf of Euroclear Participants. The Euroclear Operator is the Belgian branch of a New York banking corporation which is a member bank of the Federal Reserve System. Accordingly, it is regulated and examined by the Board of Governors of the Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. All operations are conducted by the Euroclear Operator and all Euroclear securities clearance accounts and cash accounts are accounts with the Euroclear Operator. They are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern all transfers of securities and cash, both within the Euroclear System and receipts and withdrawals of securities and cash. All securities in the Euroclear System are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. Euroclear Participants include banks, including central banks, securities brokers and dealers and other professional financial intermediaries and may include the Underwriters. Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear Participants. Distributions with respect to Notes or Certificates, as applicable, held through Clearstream Luxembourg or Euroclear will be credited to the cash accounts of Clearstream Luxembourg Participants or Euroclear Participants in accordance with the relevant system's rules and procedures, to the extent received by its Depositary. These distributions will be subject to tax reporting in accordance with relevant United States tax laws and regulations. See "Certain Federal Income Tax Consequences". Clearstream Luxembourg or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a Certificateholder, Noteholder or Securityholder under the applicable Agreement or Indenture on behalf of a Clearstream Luxembourg Participant or Euroclear Participant only in accordance with its relevant rules and procedures and subject to its Depositary's ability to effect these actions on its behalf through DTC. Although DTC, Clearstream Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Notes or Certificates, as applicable, among participants of DTC, Clearstream Luxembourg and Euroclear, they are under no obligation to perform or continue to perform the procedures and these procedures may be discontinued at any time. Definitive Securities If the Notes or Certificates, as applicable, of any Series will be available in book entry form, the related Notes or Certificates, as applicable, will be issued as Definitive Notes or Definitive Certificates, as applicable, rather than to DTC or its nominee, only under circumstances specified in the related prospectus supplement, which circumstances may include that, o the Depositor advises the Trustee, and any Indenture Trustee, in writing that DTC is no longer willing or able to discharge properly its responsibilities as depository with respect to the Notes or Certificates, as applicable, and the Trustee, or the Indenture Trustee, or the Depositor are unable to locate a qualified successor, o the Depositor, at its option, elects to terminate the book-entry system through DTC, or o after the occurrence of a Servicer Default, holders of Notes or Certificates, as applicable, of the related Series evidencing not less than 50% of the aggregate unpaid principal amount of the Notes or Certificates, as applicable, advise the Trustee and DTC through Participants in writing that the continuation of a book-entry system through DTC, or a successor to DTC, is no longer in the best interests of the holders of the Notes or Certificates, as applicable. Upon the occurrence of any of the events described in the immediately preceding paragraph, DTC is required to notify all Participants of the availability through DTC of Definitive Notes or Certificates, as applicable. Upon surrender by DTC of the physical certificates or notes held by Cede that represent the Notes or Certificates, as applicable, and instructions for registration, the Trustee, or the Indenture Trustee, will issue the related Notes or Certificates, as applicable, in the form of Definitive Notes or Definitive Certificates, as applicable, and the Trustee, or the Indenture Trustee, will then recognize the holders of these Definitive Notes or Definitive Certificates, as applicable, as holders of Notes or Certificates, as applicable, under the applicable Agreement or Indenture and the related prospectus supplement ("Holders"). If Definitive Notes or Definitive Certificates, as applicable, are issued, distribution of principal and interest on the Definitive Notes or Definitive Certificates, as applicable, will be made by the Paying Agent or the Trustee, or the Indenture Trustee, directly to the Holders in whose names the Definitive Notes or Definitive Certificates, as applicable, were registered on the related Record Date in accordance with the procedures set forth in this Prospectus and in the related Agreement, Indenture and prospectus supplement. Distributions will be made by check mailed to the address of each Holder as it appears on the register maintained by the Trustee, or the Indenture Trustee, except that the final payment on any Definitive Note or Definitive Certificate, as applicable, will be made only upon presentation and surrender of the Definitive Note or Definitive Certificate, as applicable, on the date for final payment at the office or agency as is specified in the notice of final distribution to Holders. The Trustee, or the Indenture Trustee, will provide notice to Holders not later than the date specified in the related prospectus supplement. Definitive Notes or Definitive Certificates, as applicable, will be transferable and exchangeable at the offices of the Transfer Agent specified pursuant to the applicable Agreement or Indenture (the "Transfer Agent") and the Registrar. No service charge will be imposed for any registration of transfer or exchange, but the Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection with the registration of transfer or exchange. DESCRIPTION OF THE TRUST AGREEMENTS OR THE POOLING AND SERVICING AGREEMENTS The following summaries describe the material provisions of the Trust Agreements and Pooling and Servicing Agreements which are anticipated to be common to any Series of Notes or Certificates, as applicable. The summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the related Agreement. Where particular provisions or terms used in a related Agreement are referred to in this Prospectus, the actual provisions, including definitions of terms, are incorporated in this Prospectus by reference as part of the summaries. Assignment of Base Assets to the Trust ASSIGNMENT OF RECEIVABLES; PRE-FUNDING ACCOUNT. For any Series of Receivables Pooling Certificates, pursuant to the related Pooling and Servicing Agreement and Receivables Purchase Agreement, the Seller will sell and assign to the related Trust on the Closing Date specified in the related prospectus supplement (the "Closing Date"), either directly or by assignment to the Depositor and reassignment by the Depositor to the Trust, without recourse to the Seller, or the Depositor, all Receivables in the Initial Accounts outstanding as of the Series Cut-Off Date, and will similarly sell and assign to the Trust all Receivables in the Additional Accounts as of the applicable additional cut-off dates and all Receivables later created under the Initial Accounts or the Additional Accounts, other than the Removed Accounts, any Participations added to the Trust and the proceeds of all of the foregoing. To the extent specified in the related prospectus supplement, a portion of the proceeds from the sale of the Notes or Certificates, as applicable, of a Series may be applied by the Depositor to the deposit of an amount on deposit in a Pre-Funding Account (the "Pre-Funded Amount"). If a Pre-Funding Account is provided for, the related prospectus supplement will specify the terms, conditions and manner under which additional Receivables will be purchased by the Trust from time to time during the funding period provided for in the related prospectus supplement. In connection with any transfer of any Receivables, the Seller will annotate and indicate in its computer files that these Receivables have been conveyed to the Trust. In addition, the Seller will provide to the Trustee a computer file or a microfiche list containing a true and complete list showing each Account, the Receivables of which have been designated for inclusion in the Trust, identified by account number, collection status, the amount of Receivables outstanding and the amount of Principal Receivables as of the initial Series Cut-Off Date, or additional Cut-Off Date. The Seller will not deliver to the Trustee any other records or agreements relating to these Accounts or the Receivables. The records and agreements relating to these Accounts and the Receivables maintained by the Seller or the Servicer will not be segregated by the Seller or the Servicer from other documents and agreements relating to other accounts and receivables and will not be stamped or marked to reflect the transfer of the Receivables to the Trust. Each Seller will file the UCC financing statements meeting the requirements of applicable state law with respect to the Receivables. See "Risk Factors - Certain Legal Aspects -- Transfer of Receivables" and "Risk Factors-- Risk of Commingling" and "Certain Legal Aspects of the Receivables". ASSIGNMENT OF CRB SECURITIES; PRE-FUNDING ACCOUNT. All or a portion of the net proceeds received from the sale of the Notes or Certificates, as applicable, of a Series, the Base Assets of which consist entirely or in part of CRB Securities, will be applied to the purchase of the related CRB Securities from the Depositor or other Seller on the Closing Date and, to the deposit of a Pre-Funded Amount into a Pre-Funding Account, if and to the extent specified in the related prospectus supplement. If a Pre-Funding Account is provided for, the related prospectus supplement will specify the terms, conditions and manner under which additional CRB Securities will be purchased by the Trust from time to time during the funding period provided for in the related prospectus supplement. The Trustee will cause any CRB Securities purchased by the Trust to be registered in the name of the Trustee, or its nominee or correspondent, or, where applicable, the Indenture Trustee, and the Trustee, or its agent or correspondent, or the Indenture Trustee will have possession of any certificated CRB Securities. The Trustee will not be in possession of or be assignee of record of any underlying assets for a CRB Security. See "The Trust Assets -- CRB Securities". Each CRB Security to be transferred to the Trust will be identified in a schedule appearing as an exhibit to the related Trust Agreement (the "CRB Schedule"), which will specify the original principal amount, outstanding principal balance as of the Cut-off Date, or subsequent cut-off date, annual Certificate Interest Rate or interest rate and maturity date for each CRB Security. In the Trust Agreement, to the extent that any CRB Securities are purchased from the Depositor, the Depositor will represent and warrant to the Trustee regarding the CRB Securities: (a) that the information contained in the CRB Schedule is true and correct in all material respects; (b) that, immediately prior to the conveyance of the CRB Securities, the Depositor had good title to, and was the sole owner of the CRB Securities; (c) that there has been no other sale by it of the CRB Securities; and (d) that there is no existing lien, charge, security interest or other encumbrance on the CRB Securities. ASSIGNMENT OF GOVERNMENT SECURITIES; PRE-FUNDING ACCOUNT. A portion of the net proceeds received from the sale of the Notes or Certificates, as applicable, of a Series, the Base Assets of which consist in part of Government Securities, will be applied to the purchase of the related Government Securities from the Depositor or other Seller on the Closing Date and, to the deposit of a Pre-Funded Amount into a Pre- Funding Account, if and to the extent specified in the related prospectus supplement. If a Pre-Funding Account is provided for, the related prospectus supplement will specify the terms, conditions and manner under which additional Government Securities will be purchased by the Trust from time to time during the funding period provided for in the related prospectus supplement. The Trustee will cause any Government Securities purchased by the Trust to be registered in the name of the Trustee, or its nominee or correspondent, or, where applicable, the Indenture Trustee, and the Trustee, or its agent or correspondent, or the related Indenture Trustee will have possession of any certificated Government Securities. The Trustee will not be in possession of or be assignee of record of any underlying assets for a Government Security. See "The Trust Assets -- Government Securities". Each Government Security to be transferred to the Trust will be identified in a schedule appearing as an exhibit to the related Trust Agreement (the "Government Security Schedule"), which will specify the original principal amount, outstanding principal balance as of the Cut-off Date, or subsequent cut-off date, annual interest rate and maturity date for each Government Security. In the Trust Agreement, to the extent that any Government Securities are purchased from the Depositor, the Depositor will represent and warrant to the Trustee regarding the Government Securities: (a) that the information contained in the Government Schedule is true and correct in all material respects; (b) that immediately prior to the conveyance of the Government Securities, the Depositor had good title to and was the sole owner of the Government Securities; (c) that there has been no other sale by it of Government Securities; and (d) that there is no existing lien, charge, security interest or other encumbrance on the Government Securities. ASSIGNMENT OF PRIVATE LABEL CUSTODY RECEIPT SECURITIES; PRE-FUNDING ACCOUNT. A portion of the net proceeds received from the sale of the Notes or Certificates, as applicable, of a Series, the Base Assets of which consist in part of Private Label Custody Receipt Securities, will be applied to the purchase of the related Private Label Custody Receipt Securities from the Depositor or other Seller on the Closing Date and, to the deposit of a Pre-Funded Amount into a Pre-Funding Account, if and to the extent specified in the related prospectus supplement. If a Pre-Funding Account is provided for, the related prospectus supplement will specify the terms, conditions and manner under which additional Private Label Custody Receipt Securities will be purchased by the Trust from time to time during the funding period provided for in the related prospectus supplement. The Trustee will cause any Private Label Custody Receipt Securities purchased by the Trust to be registered in the name of the Trustee, or its nominee or correspondent, or, where applicable, the Indenture Trustee, and the Trustee, or its agent or correspondent, or the Indenture Trustee will have possession of any certificated Private Label Custody Receipt Securities. The Trustee will not be in possession of or be assignee of record of any underlying assets for a Private Label Custody Receipt Security. See "The Trust Assets -- Government Securities". Each Private Label Custody Receipt Security to be transferred to the Trust will be identified in a schedule appearing as an exhibit to the related Trust Agreement (the "Private Label Custody Receipt Security Schedule"), which will specify the original principal amount, outstanding principal balance as of the Cut-off Date, or subsequent cut-off date, annual interest rate and maturity date for each Private Label Custody Receipt Security. In the Trust Agreement, to the extent that any Private Label Custody Receipt Securities are purchased from the Depositor, the Depositor will represent and warrant to the Trustee regarding the Private Label Custody Receipt Securities: (a) that the information contained in the Private Label Custody Receipt Schedule is true and correct in all material respects; (b) that immediately prior to the conveyance of the Private Label Custody Receipt Securities, the Depositor had good title to and was the sole owner of the Private Label Custody Receipt Securities; (c) that there has been no other sale by it of the related Private Label Custody Receipt Securities; and (d) that there is no existing lien, charge, security interest or other encumbrance on the related Private Label Custody Receipt Securities. Repurchase and Substitution of Non-Conforming Base Assets In general, the Depositor and/or the Seller or another entity will make specific representations and warranties to the Trust regarding the Base Assets to be purchased by the Trust. To the extent described in the related prospectus supplement, the applicable Agreement will provide that if the Depositor, the Seller or another entity cannot cure a breach of representations and warranties in all material respects within the time period specified in the related prospectus supplement after notification by the Trustee of the breach, and if the breach is of a nature that materially and adversely affects the value of a Base Asset, then the Depositor, the Seller or another entity will be required to repurchase the affected Base Assets on the terms and conditions and in the manner described in the related prospectus supplement. If provided in the related prospectus supplement, the Depositor, the Seller or another entity may, rather than repurchase a Base Asset as described above, remove the affected Base Asset from the Trust (the "Removed Base Asset") and substitute in its place one or more other Base Assets meeting the qualifications described in the related prospectus supplement each, a "Qualifying Substitute Base Asset". The above-described cure, repurchase or substitution obligations, subject to specific exceptions which, if applicable, will be specified in the related prospectus supplement, shall constitute the sole remedies available to holders of Notes or Certificates, as applicable, or the Trustee, or Indenture Trustee, for a breach of a representation or warranty in respect of a Base Asset. Where Base Assets are purchased by a Depositor from a Seller and reconveyed to the Trustee, the Depositor's only source of funds to effect any cure, repurchase or substitution generally will be through the enforcement of the corresponding obligations of the Seller to the Depositor. Trust Accounts With respect to any Series of Notes or Certificates, as applicable, that includes Notes, the Owner Trustee will establish and maintain with the related Indenture Trustee: o one or more accounts, in the name of the Indenture Trustee on behalf of the related Securityholders, into which all payments made on or in respect of the related Base Assets will be deposited (the "Collection Account"), and o one or more accounts, in the name of the Indenture Trustee on behalf of the Noteholders, into which amounts released from the Collection Account and any Reserve Account or other form of Series Enhancement for payment to the Noteholders will be deposited and from which all payments to these Noteholders will be made (the "Note Payment Account"). With respect to each Trust, the Trustee will establish and maintain one or more accounts with the related Trustee, in the name of that Trustee on behalf of the Certificateholders, into which amounts released from the Collection Account and any Reserve Account or other form of Series Enhancement for distribution to the Certificateholders will be deposited and from which all distributions to the Certificateholders will be made (the "Certificate Payment Account "). With respect to any Series that does not include Notes, the Trustee will also establish and maintain the Collection Account and any other account in the name of the related Trustee on behalf of the related Certificateholders. For each Series of Notes or Certificates, as applicable, funds in the Collection Account, Note Payment Account and Certificate Payment Account and any Reserve Account or other accounts, identified in the related prospectus supplement (collectively, the "Trust Accounts") will be invested as provided in the related Agreement or Indenture in Eligible Investments. "Eligible Investments" will generally be limited to investments acceptable to the Rating Agencies as being consistent with the rating of the related Notes or Certificates, as applicable. Except as described in this Prospectus or in the related prospectus supplement, Eligible Investments will be limited to obligations or securities that mature on or before the date of the next scheduled distribution to Securityholders of the related Series. However, to the extent permitted by the Rating Agencies, funds in any Reserve Account may be invested in securities that will not mature prior to the date of the next scheduled distribution with respect to the Notes or Certificates and will not be sold prior to maturity to meet any shortfalls. Thus, the amount of available funds on deposit in a Reserve Account at any time may be less than the balance of the Reserve Account. If the amount required to be withdrawn from a Reserve Account to cover shortfalls in collections with respect to the related Base Assets, as provided in the related prospectus supplement, exceeds the amount of available funds on deposit in the Reserve Account, a temporary shortfall in the amounts distributed to the related Noteholders or Certificateholders could result, which could, in turn, increase the average life of the related Notes or Certificates. The related prospectus supplement may provide that investment earnings on funds deposited in the Trust Accounts, net of losses and investment expenses (collectively, "Investment Earnings"), will be treated as collections of interest on the related Base Assets. The Trust Accounts will be maintained as Eligible Deposit Accounts. "Eligible Deposit Account" means either: o a segregated account with an Eligible Institution, or o a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states of the United States of America or the District of Columbia, or any domestic branch of a foreign bank, having corporate trust powers and acting as trustee for funds deposited in the segregated trust account, so long as any of the securities of the depository institution have a credit rating from each Rating Agency in one of its generic rating categories that signifies investment grade. "Eligible Institution" means, with respect to a Trust: (a) the corporate trust department of the related Indenture Trustee or Trustee, as applicable, or (b) a depository institution organized under the laws of the United States of America or any one of the states of the United States of America or the District of Columbia, or any domestic branch of a foreign bank, (1) that has either, (A) a long-term unsecured debt rating acceptable to the Rating Agencies, or (B) a short-term unsecured debt rating or certificate of deposit rating acceptable to the Rating Agencies, and (2) whose deposits are insured by the FDIC. Reports to Certificateholders The Trustee will prepare and forward to each Certificateholder on each Distribution Date, or as soon after each Distribution Date as is practicable, a statement setting forth, to the extent applicable to any Series, the information specified in the related prospectus supplement for the related Series. In addition, within a reasonable period of time after the end of each calendar year, the Trustee will be required to furnish to each holder of record at any time during the calendar year a statement setting forth the information specified in the related prospectus supplement, which will include information intended to enable holders of Certificates to prepare their tax returns. Information in the Distribution Date reports and the annual reports provided to the holders will not have been examined and reported upon by an independent public accountant. However, any Servicer will provide to the Trustee an annual report by independent public accountants with respect to the Servicer's servicing of the Receivables. See "Servicing of Receivables -- Evidence as to Compliance". Servicer Defaults With respect to a Series of Receivables Pooling Certificates, "Servicer Defaults" under the Pooling and Servicing Agreement for a Series generally include: (a) any failure by the Servicer to deposit amounts in the Collection Account and any Payment Account to enable the Trustee to distribute to Certificateholders of the Series any required payment, which failure continues unremedied for five days after the giving of written notice of failure to the Servicer by the Trustee for the Series, or to the Servicer and the Trustee by the holders of the required percentage of any Class of Notes or Certificates, as applicable, of the related Series specified in the related prospectus supplement, (b) any failure by the Servicer duly to observe or perform in any material respect any other of its covenants or agreements in the Pooling and Servicing Agreement which continues unremedied for 30 days after the giving of written notice of the failure to the Servicer by the Trustee, or to the Servicer and the Trustee by the holders of the required percentage of any Class of Notes or Certificates, as applicable, of the related Series, (c) events of insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings and specific actions by the Servicer indicating its insolvency, reorganization or inability to pay its obligations, and (d) other events that shall be specified in the related prospectus supplement. Rights Upon Servicer Defaults With respect to a Series of Receivables Pooling Certificates, so long as a Servicer Default remains unremedied under the Pooling and Servicing Agreement for a Series, and subject to any right of any Indenture Trustee, the Trustee for the Series or holders of the required percentage of any Class of Notes or Certificates, as applicable, specified in the related prospectus supplement may terminate all of the rights and obligations of the Servicer as servicer under the Pooling and Servicing Agreement in and to the Receivables, whereupon the Trustee will succeed to all the responsibilities, duties and liabilities of the Servicer under the Pooling and Servicing Agreement and will be entitled to reasonable servicing compensation not to exceed the applicable Servicing Fee, together with other servicing compensation in the form of assumption fees, late payment charges or as otherwise provided in the Pooling and Servicing Agreement. In the event that the Trustee is unwilling or unable so to act, it may select, or petition a court of competent jurisdiction to appoint, a financial institution, bank or loan servicing institution with a net worth of at least $15,000,000 to act as successor Servicer under the provisions of the Pooling and Servicing Agreement relating to the servicing of the Receivables. The successor Servicer would be entitled to reasonable servicing compensation in an amount not to exceed the Servicing Fee as set forth in the related prospectus supplement, together with the other servicing compensation in the form of assumption fees, late payment charges or otherwise, as provided in the Pooling and Servicing Agreement. During the continuance of any Servicer Default under the Pooling and Servicing Agreement for a Series, the Trustee for the Series will have the right to take action to enforce its rights and remedies and to protect and enforce the rights and remedies of the Certificateholders of the Series, and holders of the required percentages of the Certificates specified in the related prospectus supplement may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred upon the Trustee. The Trustee, however, will not be under any obligation to pursue any remedy or to exercise any trusts or powers unless the Certificateholders have offered the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred by the Trustee in or by pursuit of remedy or exercise of trusts or powers. Also, the Trustee may decline to follow any direction if the Trustee determines that the action or proceeding so directed may not lawfully be taken or would involve it in personal liability or be unjustly prejudicial to the nonassenting Certificateholders. No Certificateholder of a Series, solely by virtue of the holder's status as a Certificateholder, will have any right under the Pooling and Servicing Agreement for the related Series to institute any proceeding with respect to the Pooling and Servicing Agreement, unless the holder previously has given to the Trustee for the Series written notice of default and unless the holders of the required percentages of the outstanding Notes or Certificates, as applicable, specified in the related prospectus supplement have made written request upon the Trustee to institute a proceeding in its own name as Trustee under the Pooling and Servicing Agreement and have offered to the Trustee reasonable indemnity, and the Trustee for 60 days has neglected or refused to institute any proceeding. The Trustee The identity of the commercial bank, savings and loan association or trust company named as the Trustee for each Series of Certificates will be set forth in the related prospectus supplement. The entity serving as Trustee may have normal banking relationships with the Depositor, the Seller or the Servicer. In addition, for the purpose of meeting the legal requirements of some local jurisdictions, the Trustee will have the power to appoint co-trustees or separate trustees of all or any part of the Trust relating to a Series of Notes or Certificates, as applicable. In the event of an appointment, all rights, powers, duties and obligations conferred or imposed upon the Trustee by the applicable Agreement relating to the Series will be conferred or imposed upon the Trustee and each separate trustee or co-trustee jointly, or in any jurisdiction in which the Trustee shall be incompetent or unqualified to perform specific acts, singly upon the separate trustee or co-trustee who shall exercise and perform these rights, powers, duties and obligations solely at the direction of the Trustee. The Trustee may also appoint agents to perform any of the responsibilities of the Trustee, which agents shall have any or all of the rights, powers, duties and obligations of the Trustee conferred on them by the appointment; provided that the Trustee shall continue to be responsible for its duties and obligations under the applicable Agreement. Duties of the Trustee The Trustee will make no representations as to the validity or sufficiency of the applicable Agreement, the Notes or Certificates, as applicable, or of any Base Asset, Series Enhancement or related documents. If no Servicer Default, as defined in the related Pooling and Servicing Agreement, if applicable, has occurred, the Trustee is required to perform only those duties specifically required of it under the Agreement. Upon receipt of the various certificates, statements, reports or other instruments required to be furnished to it, the Trustee is required to examine them to determine whether they are in the form required by the related Agreement; however, the Trustee will not be responsible for the accuracy or content of the documents furnished by it or the Securityholders to the Servicer under the Agreement. The Trustee may be held liable for its own negligent action or failure to act, or for its own misconduct; provided, however, that the Trustee will not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Securityholders upon a Servicer Default. See "-- Rights Upon Servicer Defaults" above. The Trustee is not required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under an Agreement, or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that repayment of funds or adequate indemnity against risk or liability is not reasonably assured to it. Replacement of the Trustee The Trustee may, upon written notice to the Depositor, resign at any time, in which event the Depositor will be obligated to use its best efforts to appoint a successor Trustee. If no successor Trustee has been appointed and has accepted the appointment within 30 days after giving notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for appointment of a successor Trustee. The Trustee may also be removed at any time: o by the Depositor, if the Trustee ceases to be eligible to continue as under the related Agreement, o if the Trustee becomes insolvent, or o by the holders of the required percentages of the outstanding Notes or Certificates, as applicable, specified in the related prospectus supplement upon 30 days' advance written notice to the Trustee and to the Depositor. Any resignation or removal of the Trustee and appointment of a successor Trustee will not become effective until acceptance of the appointment by the successor Trustee. Amendment of the Agreement The Agreement for each Series of Notes or Certificates, as applicable, may be amended by the Depositor and the related Trustee, and where applicable the Seller and the Servicer, without notice to or consent of the Securityholders: (a) to cure any ambiguity, (b) to correct any defective provisions or to correct or supplement any provision in the Agreement which may be inconsistent with any other provision in the Agreement, (c) to add to the duties of the Depositor, Seller or Servicer, (d) to add any other provisions with respect to matters or questions arising under the related Agreement or related Series Enhancement, (e) to add or amend any provisions of the Agreement as required by a Rating Agency in order to maintain or improve the rating of any Class of the Notes or Certificates, as applicable, (f) to comply with any requirements imposed by the Code, or (g) to make other amendments as are specified in the related prospectus supplement; provided that any amendment pursuant to clause (d) or (g) above will not adversely affect in any material respect the interests of any Securityholders of the related Series, as evidenced by an opinion of counsel. Any amendment except pursuant to clause (f) of the preceding sentence shall be deemed not to adversely affect in any material respect the interests of any Securityholder if the Trustee receives written confirmation from each Rating Agency rating the Notes or Certificates, as applicable, that the amendment will not cause the Rating Agency to reduce the then current rating of the Notes or Certificates, as applicable. The Agreement for each Series may also be amended by the Depositor and the Trustee, and where applicable the Seller and the Servicer, with the consent of the holders of the required percentages of the outstanding Notes or Certificates, as applicable, of each Series affected by the amendment of the Agreement specified in the related prospectus supplement, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Agreement or modifying in any manner the rights of Securityholders of the related Series; provided, however, that no amendment may: o reduce the amount or delay the timing of payments on any Note or Certificate, as applicable, without the consent of the holder of that Note or Certificate, as applicable; or o reduce the aforesaid percentage of aggregate outstanding principal amount of Notes or Certificates, as applicable, of each Class, the holders of which are required to consent to any amendment. List of Certificateholders Upon written request of three or more Certificateholders of record of a Series for purposes of communicating with other Certificateholders with respect to their rights under the Agreement or under the Certificates for the Series, which request is accompanied by a copy of the communication which the Certificateholders propose to transmit, the Trustee will afford these Certificateholders access during business hours to the most recent list of Certificateholders of that Series held by the Trustee. No Agreement will provide for the holding of any annual or other meeting of Certificateholders. Termination The obligations created by the Agreement for a Series will terminate upon the distribution to Certificateholders of all amounts distributable to them pursuant to that Agreement after the earliest to occur of: o the final payment or other liquidation of the last Base Asset remaining in the Trust for the related Series, or o the repurchase, as described below, by the Servicer from the Trustee for the related Series of all Base Assets and other property at that time subject to the Agreement. The Agreement for each Series will permit, but will not require, the Servicer, the Seller and/or the Depositor to repurchase from the Trust for the Series all remaining Base Assets at a price equal to 100% of the aggregate principal amount of the Base Assets plus, with respect to any property acquired in respect of a Base Asset, if any, the outstanding principal amount of the related Base Asset, and unreimbursed expenses, that are reimbursable pursuant to the terms of the Agreement, plus accrued interest on the unreimbursed expenses at the weighted average rate on the related Base Assets through the last day of the Monthly Period in which the repurchase occurs. The exercise of this right will effect early retirement of the Certificates of the Series, but the Servicer's right to so purchase is subject to the aggregate principal balance of the Base Assets at the time of repurchase being less than a fixed percentage, to be set forth in the related prospectus supplement, of the Cut-off Date aggregate principal balance. In no event, however, will the trust created by the Agreement continue beyond the expiration of 21 years from the death of the last survivor of persons identified in the related prospectus supplement. For each Series, the Servicer or the Trustee, as applicable, will give written notice of termination of the Agreement to each Certificateholder, and the final distribution will be made only upon surrender and cancellation of the Certificates at an office or agency specified in the notice of termination. If so provided in the related prospectus supplement for a Series, the Depositor or another entity may effect an optional termination of the Trust under the circumstances described in the related prospectus supplement. See "Description of the Certificates-- Receivables Pooling Certificates -- Optional Termination; Final Payment of Principal". Payment in Full of the Notes With respect to any Series of Notes or Certificates, as applicable, that includes Notes, the Trust Agreement will provide that upon the payment in full of all outstanding Notes of a given Series and the satisfaction and discharge of the related Indenture, the related Trustee will succeed to all the rights of the Indenture Trustee, and the Certificateholders of the Series will succeed to all the rights of the Noteholders of the Series under the related Trust Agreement, to the extent and in the matter provided in the Trust Agreement. CERTAIN LEGAL ASPECTS OF THE RECEIVABLES The following discussion contains summaries of some legal aspects of credit, charge and debit card receivables which are general in nature. As a consequence, investors should consider the issues raised by the following discussion as relevant in connection with both the Receivables and the Receivables underlying the CRB Securities. Because some legal aspects are governed by applicable state law, which laws may differ substantially, the summaries do not purport to be complete nor purport to reflect the laws of any particular state, nor purport to encompass the laws of all states in which Receivables, or the Receivables underlying the CRB Securities, originate. The summaries are qualified in their entirety by reference to the applicable federal and state laws governing the Receivables, and the Receivables underlying the CRB Securities. Transfer of Receivables With respect to each transfer of Receivables to a Trust, the Seller and/or the Depositor will warrant in the applicable Agreement that the transfer constitutes either a valid transfer and assignment to the Trust of all right, title and interest of the Seller, and/or the Depositor, in and to the Receivables free and clear from liens arising from or through the Seller, or the Depositor, except, to the extent specified in the related prospectus supplement, for potential tax liens, any interest of the Seller or the Depositor as holder of the Depositor's Interest and the Servicer's right to receive interest and investment earnings ,net of losses and investment expenses, in respect of the Collection Account, or a valid grant to the Trust of a security interest in the Receivables. The Seller and/or the Depositor will also warrant in the Agreement that, in the event that the transfer of the Receivables to the Trust is deemed to create a security interest under the Uniform Commercial Code (the "UCC") as in effect in the state in which its principal office is located, there will exist a valid, subsisting and enforceable first priority perfected security interest in the Receivables in favor of the Trust and a valid, subsisting and enforceable first priority perfected security interest in the Receivables later created in the relevant Accounts in favor of the Trust upon their creation except for specific liens as described in the Agreement. The Receivables are generally considered to be "general intangibles" or "accounts" for purposes of the UCC. Both the transfer of accounts and the transfer of accounts as security for an obligation are treated under Article 9 of the UCC as creating a security interest in the Receivables and are subject to its provisions, and the filing of appropriate financing statements is required to perfect the security interest of the Trust. Financing statements covering the Receivables will be filed with the appropriate governmental authority to protect the interest of the Depositor and the Trust. There are limited circumstances under the UCC in which a prior or subsequent transferee of Receivables coming into existence after the date on which the Receivables are transferred to the Trust could have an interest in these Receivables with priority over the Trust's interest. Under the Pooling and Servicing Agreement, however, the Seller and/or the Depositor will warrant that the Receivables have been transferred to the Trust free and clear of the lien of any third party, except for some tax and other governmental liens. In addition, the Seller and the Depositor will each covenant that, except as permitted by the Pooling and Servicing Agreement, it will not sell, pledge, assign, transfer or grant any lien on any Receivables, or any interest in the Receivables, other than to the Trust. A tax or other government lien on property of the Seller or the Depositor arising prior to the time a Receivable comes into existence may also have priority over the interest of the Trust in the Receivables. In addition, if a Seller is a Bank, if the FDIC were appointed as receiver of the Bank, some administrative expenses of the receiver may also have priority over the interest of the Trust in these Receivables. A case decided by the United States Court of Appeals for the Tenth Circuit contains language to the effect that accounts sold by an entity which subsequently became bankrupt remained property of the debtor's bankruptcy estate. If a Seller were to become a debtor under the federal bankruptcy code and a court were to follow the reasoning of the Tenth Circuit, Securityholders could experience a delay or reduction in distributions. Certain Matters Relating to Receivership It is likely that the Sellers of Receivables to a Trust or the sellers of Receivables to CRB Trusts will be banking institutions. FIRREA, which became effective August 9, 1989, sets forth certain powers that the FDIC could exercise if it were appointed as receiver of a Seller which is a national bank. Subject to clarification by FDIC regulations or interpretations, it would appear from the positions taken by the FDIC before the passage of FIRREA that the FDIC in its capacity as receiver for a Seller would not interfere with the timely transfer to the Trust or to a CRB Trust of payments collected on the Receivables or interfere with the timely liquidation of Receivables as described below. To the extent that a Seller granted a security interest in the Receivables to the related Trust (or granted such a security interest to the Depositor which was then assigned the related Trust) or to a CRB Trust, and that interest was validly perfected before the Seller's insolvency and was not taken or granted in contemplation of insolvency or with the intent to hinder, delay or defraud the Seller or its creditors, that security interest should not be subject to avoidance, and payments to the Trust or to a CRB Trust with respect to Receivables should not be subject to recovery by the FDIC as receiver of the Seller. If, however, the FDIC were to assert a contrary position, or were to require the related Trustee or CRB Trustee to establish its right to those payments by submitting to and completing the administrative claims procedure established under FIRREA, delays in payments on the Notes or Certificates, as applicable, of any Series relating to such Seller (or delays in payments on CRB Securities relating to a similarly insolvent seller) outstanding at such time and possible reductions in the amount of those payments could occur. Each Pooling and Servicing Agreement and Receivables Purchase Agreement as to which a banking institution is the Seller will provide that, upon the appointment of a receiver for the Seller, the Seller will promptly give notice thereof to the Depositor, and a Pay Out Event will occur. Under the Pooling and Servicing Agreement, no new Principal Receivables will be transferred to the Trust and, unless otherwise instructed within a specified period by the holders of the required percentages of outstanding Notes or Certificates, as applicable, specified in the related Prospectus Supplement or unless otherwise prohibited by law, the Trustee will proceed to sell, dispose of or otherwise liquidate the Receivables in a commercially reasonable manner and on commercially reasonable terms. The proceeds from the sale of the Receivables would then be treated by the Trustee as collections on the Receivables. This procedure could by delayed as described above. The net proceeds of any such sale will first be treated by the Trustee as collections on the Finance Charge Receivables, if any. Upon the occurrence of a Pay Out Event, if a conservator or receiver is appointed for the Seller or the Depositor and no Pay Out Event other than such conservatorship or receivership or insolvency of the Seller or the Depositor exists, the conservator or receiver may have the power to prevent the early sale, liquidation or disposition of the Receivables and the commencement of a Rapid Amortization Period with respect to any outstanding Series. In addition, a conservator or receiver for the Seller or the Depositor may have the power to cause early payment of the Certificates. If a Seller that is a banking institution is servicing its Receivables and a conservator or receiver is appointed for the Servicer, and no Servicer Default other than such conservatorship or receivership or insolvency of the Servicer exist, the conservator or receiver may have the power to prevent either the Trustee or the Certificateholders from effecting a transfer of servicing to a successor Servicer. Consumer Protection Laws The relationship of cardholder and card issuer is extensively regulated by Federal and state consumer protection laws. The most significant of these laws include the Federal Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Reporting Act, Electronic Funds Transfer Act and, to the extent that the Seller is a national banking association, the National Bank Act, as well as the banking statutes of the state in which the bank is located, and comparable statutes in the states in which cardholders reside. These statutes impose disclosure requirements when an account is advertised, when it is opened, at the end of monthly billing cycles, upon account renewal for accounts on which annual fees are assessed, and at year end and, in addition, limit cardholder liability for unauthorized use, prohibit certain discriminatory practices in extending credit, and impose certain limitations on the type of account-related charges that may be assessed. Newly adopted Federal legislation requires card issuers to disclose to consumers the interest rates, annual cardholder fees, grace periods, and balance calculation methods associated with their accounts. Cardholders are entitled under current law to have payments and credits applied to the account promptly, to receive prescribed notices and to have billing errors resolved promptly. Various proposed laws and amendments to existing laws have been introduced in Congress and certain state and local legislatures that, if enacted, would further regulate the credit card industry. Certain such laws would, among other things, impose a ceiling on the rate at which a financial institution may assess finance charges on credit card accounts that would be substantially below the rates of the finance charges currently assessed by most Sellers on their accounts. A proposed bill of this nature was defeated in the United States House of Representatives in 1987, and on November 14, 1991, the United States Senate approved by a vote of 74 to 19 a measure which could have established, if it were enacted as law, a ceiling on credit card interest rates of 4% above the rate that the IRS charges on the underpayment of taxes. Such a law would, in effect, reduce all interest rates on credit cards to 14% per annum until the IRS calculates the new rate, which is currently done on a quarterly basis. Although this proposed legislation was not passed by Congress, the issue of federal regulation of interest rates on credit cards continues to be debated, and there can be no assurance that such a bill will not become law in the future. The potential effect of any legislation which limits the amount of finance charges that may be charged on credit cards could be to reduce the Net Portfolio Yield of each Series. If such Net Portfolio Yield of a Series is reduced, a Pay Out Event for such Series may occur, and the Rapid Amortization Period for such Series would commence. Since October 1991, a number of lawsuits and administrative actions have been filed in several states against out-of-state banks (both federally insured state-chartered banks and federally insured national banks) which issue cards. These actions challenge various fees and charges (such as late fees, overlimit fees, returned payment check fees and annual membership fees) assessed against residents of the states in which such suits were filed, based on restrictions or prohibitions under such states' laws alleged to be applicable to the out-of-state card issuers. In October 1991, the United States District Court for the State of Massachusetts held that Greenwood Trust Company (a federally-insured, Delaware-charted bank that issues the Discover credit card) was prohibited by Massachusetts law from assessing late charges on credit card accounts of Massachusetts residents. On August 6, 1992, the decision was reversed by the United States Court of Appeals for the First Circuit, which held that the Massachusetts law was preempted by federal law permitting the charges in question. In November 1992, the Commonwealth of Massachusetts petitioned the United States Supreme Court to accept the case. On January 11, 1993, the U.S. Supreme Court denied the petition of the Commonwealth to review the decision of the First Circuit. The California Supreme Court in March 1992 refused to review a lower court's determination that the practice by Wells Fargo Bank of charging its cardholders over-the-limit and late payment fees violated California laws that require banks to limit such charges to their costs. On November 29, 1995, the Supreme Court of New Jersey ruled that a national bank that issued credit cards in New Jersey but is located in another state, and that is entitled under the National Bank Act to charge borrowers interest at a rate allowed by the laws of the state where the bank is located, was not entitled to charge New Jersey cardholders certain late payment fees, notwithstanding the fact that the state in which the bank is located permits such late payment fees, because late payment fees are not defined as interest within the meaning of the National Bank Act and because New Jersey state law forbade the charging of such late payment fees. On June 3, 1996, the U.S. Supreme Court upheld regulations issued by the U.S. Comptroller of the Currency that characterize late fees as interest and that therefore entitle a national bank to charge late fees if the state in which such national bank is located allows such late fees. Although the U.S. Supreme Court resolved certain conflicts of interpretation among the states, such actions and similar actions which may be brought in other states as a result of such actions, if resolved adversely to card issuers, could have the effect of limiting certain charges, other than periodic finance charges, that could be assessed on accounts of residents of such states and could require card issuers to pay refunds and civil penalties with respect to charges previously imposed on cardholders in such states. The Trust may be liable for certain violations of consumer protection laws that apply to the Receivables, either as assignee of the Seller with respect to obligations arising before transfer of the Receivables to the Trust or as a party directly responsible for obligations arising after the transfer. In addition, a cardholder may be entitled to assert such violations by way of set-off against his obligation to pay the amount of Receivables owing. Each Seller will covenant in the Agreement to accept the retransfer of all Receivables in an Account if any Receivable in such Account has not been created in compliance with the requirements of such laws. Application of Federal and state bankruptcy and debtor relief laws would adversely affect the interests of the Certificateholders if such laws result in any Receivables being written off as uncollectible. THE DEPOSITOR ACE Securities Corp., the depositor, is a special purpose corporation incorporated in the State of Delaware on June 3, 1998. The principal executive offices of the depositor are located at 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211. Its telephone number is (704) 365-0569. The depositor does not have, nor is it expected in the future to have, any significant assets. The limited purposes of the depositor are, in general, to acquire, own and sell mortgage loans and financial assets; to issue, acquire, own, hold and sell securities and notes secured by or representing ownership interests in mortgage loans and other financial assets, collections on the mortgage loans and related assets; and to engage in any acts that are incidental to, or necessary, suitable or convenient to accomplish, these purposes. All of the shares of capital stock of the depositor are held by Altamont Holdings Corp., a Delaware corporation. USE OF PROCEEDS The Depositor will use the net proceeds from the sale of each Series of Notes or Certificates, as applicable, for one or more of the following purposes: (a) to purchase the related Base Assets and/or Series Enhancement, (b) to repay indebtedness which has been incurred to obtain funds to acquire the related Base Assets and/or Series Enhancement, (c) to fund the purchase of the related Base Assets and/or Series Enhancement by the related Trust on the Closing Date or to establish a Pre-Funding Account for the Series, (d) to establish any Reserve Account or Cash Collateral Accounts described in the related prospectus supplement, or (e) to pay costs of structuring and issuing the Notes or Certificates, as applicable. If so specified in the related prospectus supplement, the purchase of the Base Assets for a Series may be effected in whole or in part by an exchange of Notes or Certificates, as applicable, with the Seller of the related Base Assets. MATERIAL FEDERAL INCOME TAX CONSEQUENCES The following is a general discussion of the anticipated material United States federal income tax consequences of the purchase, ownership and disposition of securities. The summary does not purport to deal with federal income tax consequences applicable to all categories of holders, some of which may be subject to special rules. For example, it does not discuss the tax treatment of beneficial owners of notes ("Note Owners") or certificates ("Certificate Owners") that are insurance companies, regulated investment companies or dealers in securities. Moreover, there are no cases or Internal Revenue Service ("IRS") rulings on similar transactions involving both debt and equity interests issued by a trust with terms similar to those of the notes and the certificates. As a result, the IRS might disagree with all or part of the discussion below. Prospective investors are urged to consult their own tax advisors in determining the federal, state, local, foreign and any other tax consequences to them of the purchase, ownership and disposition of the notes and the certificates. The following summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations promulgated under the Code and judicial or ruling authority, all of which are subject to change, which change may be retroactive. Each Trust will be provided with an opinion of tax counsel specified in the related prospectus supplement ("Federal Tax Counsel") regarding some related federal income tax matters discussed below. An opinion of Federal Tax Counsel, however, is not binding on the IRS or the courts. No ruling on any of the issues discussed below will be sought from the IRS. The opinion of Federal Tax Counsel specifically addresses only those issues specificially identified below as being covered by that opinion; however, the opinion also states that the additional discussion set forth below accurately sets forth the advidce of Federal Tax Counsel wtih respect to material federal income tax issues. For purposes of the following summary, references to the Trust, the notes, the certificates and related terms, parties and documents shall be deemed to refer, unless otherwise specified in this prospectus, to each Trust and the notes, certificates and related terms, parties and documents applicable to the Trust. TRUSTS WHICH ARE NOT TREATED AS GRANTOR TAX CHARACTERIZATION OF THE TRUSTS In the case of a Trust which is not intended to be treated as a grantor turst (an "owner trust"), Federal Tax Counsel will deliver its opinion that the Trust will not be an association, or publicly traded partnership, taxable as a corporation for federal income tax purposes. The opinion of Federal Tax Counsel will be based on the assumption that the terms of the Trust Agreement and related documents will be complied with, and on the Federal Tax counsel's conclusions that the nature of the income of the Trust, or the restrictions, if any, on transfers of the certificates, will exempt the Trust from the rule that some publicly traded partnerships are taxable as corporations. If a Trust were taxable as a corporation for federal income tax purposes, the Trust would be subject to corporate income tax on its taxable income. The Trust's taxable income would include all of its income on the related Base Assets, which might be reduced by its interest expense on the notes. Any corporate income tax could materially reduce cash available to make payments on the notes and distributions on the certificates, and Certificate Owners, and possibly Note Owners could be liable for any resulting corporate income tax that is unpaid by the Trust. TAX CONSEQUENCES TO NOTE OWNERS Treatment of the Notes as Indebtedness. The Trust will agree, and the Note Owners will agree by their purchase of notes, to treat the notes as debt for federal tax purposes. Federal Tax Counsel will, subject to exceptions which, if applicable, will be specified in the related prospectus supplement, advise the owner trust that the notes will be classified as debt for federal income tax purposes, or classified in any other manner as shall be provided in the related prospectus supplement. If, contrary to the opinion of Federal Tax Counsel, the IRS successfully asserted that one or more of the notes did not represent debt for federal income tax purposes, the notes might be treated as equity interests in the Trust. If so treated, the Trust might be treated as a publicly traded partnership that would be taxable as a corporation unless it met particular qualifying income tests, and the resulting taxable corporation would not be able to reduce its taxable income by deductions for interest expense on notes recharacterized as equity. Treatment of the notes as equity interests in a partnership could have adverse tax consequences to some holders, even if the Trust were not treated as a publicly traded partnership taxable as a corporation. For example, income allocable to foreign holders might be subject to United States tax and United States tax return filing and withholding requirements, income allocable to tax-exempt holders might constitute "unrelated business taxable income" (if some, but not all, of the notes were recharacterized as equity in a partnership), individual holders might be subject to limitations on their ability to deduct their share of Trust expenses, and income from the Trust's assets would be taxable to Note Owners without regard to whether cash distributions are made to such Note Owners and without regard to the Note Owners' method of tax accounting. The discussion below assumes that the Notes will be characterized as debt for federal income tax purposes. Interest Income on the Notes - General. Except as discussed below, interest on a note generally is includable in a Note Owner's income as ordinary interest income when actually or constructively received, if the Note Owner uses the cash method of accounting for federal income tax purposes, or when accrued, if the Note Owner uses an accrual method of accounting for federal income tax purposes. Original Issue Discount. Notes of certain series may be issued with "original issue discount" within the meaning of Section 1273(a) of the Code. Holders of notes issued with original issue discount generally must include original issue discount in gross income for federal income tax purposes as it accrues, in advance of receipt of the cash attributable to such income, under a method that takes account of the compounding interest. The Code requires that information with respect to the original issue discount accruing on any note be reported periodically to the IRS and to certain categories of Note Owners. Each Trust will report original issue discount, if any, to the Note Owners based on the Treasury regulations relating to original issue discount (the "OID Regulations"). The OID Regulations concerning contingent payment debt instruments do not apply to the prepayable debt instruments, such as the notes. The OID Regulations provide that, in the case of debt instruments such as the notes, (i) the amount and rate of accrual of original issue discount will be calculated based on a reasonable assumed prepayment rate (the "Prepayment Assumption"), and (ii) adjustments will be made in the amount and rate of accrual of such discount to reflect differences between the actual prepayment rate and the Prepayment Assumption. The method for determining the appropriate assumed prepayment rate will eventually be set forth in Treasury regulations, but those regulations have not yet been issued. The applicable legislative history indicates, however, that such regulations will provide that the assumed prepayment rate for securities such as the notes will be the rate used in pricing the initial offering of those securities. If the notes of a series are issued with original issue discount, the Prospectus Supplement for that series of notes will specify the Prepayment Assumption. However, no representation is made that the notes of that series will, in fact, prepay at a rate based on the Prepayment Assumption or at any other rate. In general, a note will be considered to be issued with original issue discount if its stated redemption price at maturity exceeds its issue price. Except as discussed below under "--Payment Lag Notes; Initial Period Considerations," and "--Qualified Stated Interest," and in the case of certain Variable Rate Notes (as defined below) and accrual notes, the stated redemption price at maturity of a note is its principal amount. The issue price of a note is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of the class of notes is sold. Notwithstanding the general definition of original issue discount, such discount will be considered to be zero for any note on which such discount is less than 0.25% of its stated redemption price at maturity multiplied by its weighted average life. The weighted average life of a note apparently is computed for purposes of this de minimis rule as the sum, for all distributions included in the stated redemption price at maturity of the note, of the amounts determined by multiplying (i) the number of complete years (rounding down for partial years) from the applicable closing date to the date on which each such distribution is expected to be made, determined under the Prepayment Assumption, by (ii) a fraction, the numerator of which is the amount of such distribution and the denominator of which is the note's stated redemption price at maturity. The OID Regulations provide that holders will include any de minimis original issue discount ratably as payments of stated principal are made on the notes. The Note Owner of a note issued with original issue discount must include in gross income the sum of the "daily portions" of such original issue discount for each day during its taxable year on which it held such note. In the case of an original Note Owner, the daily portions of original issue discount are determined first by calculating the portion of the original issue discount that accrued during each period (an "accrual period") that begins on the day following a Distribution Date (or in the case of the first such period, begins on the applicable closing date) and ends on the next succeeding Distribution Date. The original issue discount accruing during each accrual period is then allocated ratably to each day during such period to determine the daily portion of original issue discount for that day. The portion of the original issue discount that accrues in any accrual period will equal the excess, if any, of (i) the sum of (A) the present value, as of the end of the accrual period, of all of the distributions to be made on the note, if any, in future periods and (B) the distributions made on the note during the accrual period that are included in such note's stated redemption price at maturity, over (ii) the adjusted issue price of such note at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence will be calculated (i) assuming that the notes will be prepaid in future periods at a rate computed in accordance with the Prepayment Assumption and (ii) using a discount rate equal to the original yield to maturity of the notes. For these purposes, the original yield to maturity of the notes will be calculated based on their issue price and assuming that the notes will be prepaid in accordance with the Prepayment Assumption. The adjusted issue price of a note at the beginning of any accrual period will equal the issue price of such note, increased by the portion of the original issue discount that has accrued during prior accrual periods, and reduced by the amount of any distributions made on such note in prior accrual periods that were included in such note's stated redemption price at maturity. The daily portions of original issue discount may increase or decrease depending on the extent to which the actual rate of prepayments diverges from the Prepayment Assumption. If original issue discount accruing during any accrual period computed as described above is negative, a Note Owner may only be entitled to offset such amount against positive original issue discount accruing on such note in future accrual periods. Such a Note Owner may be entitled to deduct a loss to the extent that its remaining basis would exceed the maximum amount of future payments to which such Note Owner is entitled. However, Treasury regulations do not address this issue. A subsequent Note Owner that purchases a note issued with original issue discount at a cost that is less than its remaining stated redemption price at maturity will also generally be required to include in gross income, for each day on which it holds such note, the daily portions of original issue discount with respect to the note, calculated as described above. However, if (i) the excess of the remaining stated redemption price at maturity over such cost is less than (ii) the aggregate amount of such daily portions for all days after the date of purchase until final retirement of such note, then such daily portions will be reduced proportionately in determining the income of such Note Owner. QUALIFIED STATED INTEREST. Interest payable on a note which qualifies as "qualified stated interest" for purposes of the OID Regulations will not be includable in the stated redemption price at maturity of the note. Conversely, if the interest on a note does not constitute "qualified stated interest," such interest will be includable in the stated redemption price at maturity of the note and the note, consequently, will have original issue discount. Interest payments will not qualify as qualified stated interest unless the interest payments are "unconditionally payable." The OID Regulations state that interest is unconditionally payable if reasonable legal remedies exist to compel timely payment, or the debt instrument otherwise provides terms and conditions that make the likelihood of late payment (other than a late payment that occurs within a reasonable grace period) or nonpayment of interest a remote contingency, as defined in the OID Regulations. Any terms or conditions that do not reflect arm's length dealing or that the Note Owner does not intend to enforce are not considered. PREMIUM. A purchaser of a note that purchases such note at a cost greater than its remaining stated redemption price at maturity will be considered to have purchased such note at a premium, and may, under Section 171 of the Code, elect to amortize such premium under a constant yield method over the life of the note. The Prepayment Assumption is probably taken into account in determining the life of the note for this purpose. Except as provided in regulations, amortizable premium will be treated as an offset to interest income on the note. PAYMENT LAG NOTES; INITIAL PERIOD CONSIDERATIONS. Certain notes may provide for distributions of interest based on a period that is the same length as the interval between Distribution Dates but ends prior to each Distribution Date. Any interest that accrues prior to the applicable closing date may be treated under the OID Regulations either (i) as part of the issue price and the stated redemption price at maturity of the notes or (ii) as not included in the issue price or the stated redemption price. The OID Regulations provide a special application of the DE MINIMIS rule for debt instruments with long first accrual periods where the interest payable for the first period is at a rate which is effectively less than that which applies in all other periods. In such cases, for the sole purpose of determining whether original issue discount is DE MINIMIS, the OID Regulations provide that the stated redemption price is equal to the instrument's issue price plus the greater of the amount of foregone interest or the excess (if any) of the instrument's stated principal amount over its issue price. VARIABLE RATE NOTES. Under the OID Regulations, notes paying interest at a variable rate (each, a "Variable Rate Note") are subject to special rules. A Variable Rate Note will qualify as a "variable rate debt instrument" if (i) its issue price does not exceed the total noncontingent principal payments due under the Variable Rate Note by more than a specified DE MINIMIS amount; (ii) it provides for stated interest, paid or compounded at least annually, at a current value of (a) one or more qualified floating rates, (b) a single fixed rate and one or more qualified floating rates, (c) a single objective rate or (d) a single fixed rate and a single objective rate that is a qualified inverse floating rate; and (iii) it does not provide for any principal payments that are contingent, as defined in the OID Regulations, except as provided in (i), above. Because the OID Regulations relating to contingent payment debt instruments do not apply to prepayable debt instruments, such as the notes, principal payments on the notes should not be considered contingent for this purpose. A "qualified floating rate" is any variable rate where variations in the value of such rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which the Variable Rate Note is denominated. A multiple of a qualified floating rate will generally not itself constitute a qualified floating rate for purposes of the OID Regulations. However, a variable rate equal to (i) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35 or (ii) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate will constitute a qualified floating rate for purposes of the OID Regulations. In addition, under the OID Regulations, two or more qualified floating rates that can reasonably be expected to have approximately the same values throughout the term of the Variable Rate Note will be treated as a single qualified floating rate (a "Presumed Single Qualified Floating Rate"). Two or more qualified floating rates with values within 25 basis points of each other as determined on the Variable Rate Note's issue date will be conclusively presumed to be a Presumed Single Qualified Floating Rate. Notwithstanding the foregoing, a variable rate that would otherwise constitute a qualified floating rate, but which is subject to one or more restrictions such as a cap or floor, will not be a qualified floating rate for purposes of the OID Regulations unless the restriction is fixed throughout the term of the Variable Rate Note or the restriction is not reasonably expected as of the issue date to significantly affect the yield of the Variable Rate Note. An "objective rate" is a rate that is not itself a qualified floating rate but which is determined using a single fixed formula and which is based upon objective financial or economic information. The OID Regulations also provide that other variable rates may be treated as objective rates if so designated by the IRS in the future. Despite the foregoing, a variable rate of interest on a Variable Rate Note will not constitute an objective rate if it is reasonably expected that the average value of such rate during the first half of the Variable Rate Note's term will be either significantly less than or significantly greater than the average value of the rate during the final half of the Variable Rate Note's term. Further, an objective rate does not include a rate that is based on information that is within the control of the issuer (or a party related to the issuer) or that is unique to the circumstances of the issuer (or a party related to the issuer). An objective rate will qualify as a "qualified inverse floating rate" if such rate is equal to a fixed rate minus a qualified floating rate and variations in the rate can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate. The OID Regulations also provide that if a Variable Rate Note provides for stated interest at a fixed rate for an initial period of less than one year followed by a variable rate that is either a qualified floating rate or an objective rate and if the variable rate on the Variable Rate Note's issue date is intended to approximate the fixed rate, then the fixed rate and the variable rate together will constitute either a single qualified floating rate or objective rate, as the case may be (a "Presumed Single Variable Rate"). If the value of the variable rate and the initial fixed rate are within 25 basis points of each other as determined on the Variable Rate Note's issue date, the variable rate will be conclusively presumed to approximate the fixed rate. For Variable Rate Notes that qualify as "variable rate debt instruments" under the OID Regulations and provide for interest at either a single qualified floating rate, a single objective rate, a Presumed Single Qualified Floating Rate or a Presumed Single Variable Rate throughout the term (a "Single Variable Rate Note"), original issue discount is computed as described above in "--Interest Income on the Notes--Original Issue Discount" based on the following: (i) stated interest on the Single Variable Rate Note which is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually will constitute qualified stated interest; (ii) by assuming that the variable rate on the Single Variable Rate Note is a fixed rate equal to: (a) in the case of a Single Variable Rate Note with a qualified floating rate or a qualified inverse floating rate, the value, as of the issue date, of the qualified floating rate or the qualified inverse floating rate or (b) in the case of a Single Variable Rate Note with an objective rate (other than a qualified inverse floating rate), a fixed rate which reflects the reasonably expected yield for such Single Variable Rate Note; and (iii) the qualified stated interest allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than) the interest assumed to be paid under the assumed fixed rate described in (ii), above. In general, any Variable Rate Note other than a Single Variable Rate Note (a "Multiple Variable Rate Note") that qualifies as a "variable rate debt instrument" will be converted into an "equivalent" fixed rate debt instrument for purposes of determining the amount and accrual of original issue discount and qualified stated interest on the Multiple Variable Rate Note. The OID Regulations generally require that such a Multiple Variable Rate Note be converted into an "equivalent" fixed rate debt instrument by substituting any qualified floating rate or qualified inverse floating rate provided for under the terms of the Multiple Variable Rate Note with a fixed rate equal to the value of the qualified floating rate or qualified inverse floating rate, as the case may be, as of the Multiple Variable Rate Note's issue date. Any objective rate (other than a qualified inverse floating rate) provided for under the terms of the Multiple Variable Rate Note is converted into a fixed rate that reflects the yield that is reasonably expected for the Multiple Variable Rate Note. (A Multiple Variable Rate Note may not bear more than one objective rate.) In the case of a Multiple Variable Rate Note that qualifies as a "variable rate debt instrument" and provides for stated interest at a fixed rate in addition to either one or more qualified floating rates or a qualified inverse floating rate, the fixed rate is initially converted into a qualified floating rate (or a qualified inverse floating rate, if the Multiple Variable Rate Note provides for a qualified inverse floating rate). Under such circumstances, the qualified floating rate or qualified inverse floating rate that replaces the fixed rate must be such that the fair market value of the Multiple Variable Rate Note as of the Multiple Variable Rate Note's issue date is approximately the same as the fair market value of an otherwise identical debt instrument that provides for either the qualified floating rate or qualified inverse floating rate rather than the fixed rate. Subsequent to converting the fixed rate into either a qualified floating rate or a qualified inverse floating rate, the Multiple Variable Rate Note is then converted into an "equivalent" fixed rate debt instrument in the manner described above. Once the Multiple Variable Rate Note is converted into an "equivalent" fixed rate debt instrument pursuant to the foregoing rules, the amounts of original issue discount and qualified stated interest, if any, are determined for the "equivalent" fixed rate debt instrument by applying the original issue discount rules to the "equivalent" fixed rate debt instrument in the manner described above in "--Interest Income on the Notes--Original Issue Discount." A holder of the Multiple Variable Rate Note will account for such original issue discount and qualified stated interest as if the holder held the "equivalent" fixed rate debt instrument. In each accrual period, appropriate adjustments will be made to the amount of qualified stated interest or original issue discount assumed to have been accrued or paid with respect to the "equivalent" fixed rate debt instrument in the event that such amounts differ from the actual amount of interest accrued or paid on the Multiple Variable Rate Note during the accrual period. If a Variable Rate Note does not qualify as a "variable rate debt instrument" under the OID Regulations, then the Variable Rate Note would be treated as a contingent payment debt obligation. The manner in which a Variable Rate Note would be taxed if such note were treated as a contingent payment debt obligation is not governed by the OID Regulations relating to contingent payment debt obligations which do not apply to prepayable debt instruments, such as the notes, and Treasury regulations do not otherwise address this point. MARKET DISCOUNT. A Note Owner that acquires a note at a market discount (that is, a discount that exceeds any unaccrued original issue discount) will recognize gain upon receipt of a principal distribution, regardless of whether the distribution is scheduled or is a prepayment. In particular, the Note Owner will be required to allocate that principal distribution first to the portion of the market discount on such note that has accrued but has not previously been includable in income, and will recognize ordinary income to that extent. In general terms, unless Treasury regulations when issued provide otherwise, market discount on a note may be treated, at the election of the holder of the note, as accruing either (i) under a constant yield method, taking into account the Prepayment Assumption, or (ii) in proportion to accruals of original issue discount (or, if there is no original issue discount, in proportion to stated interest on the note). In addition, a Note Owner may be required to defer deductions for a portion of the Note Owner's interest expense on any debt incurred or continued to purchase or carry a note purchased with market discount. The deferred portion of any interest deduction would not exceed the portion of the market discount on the note that accrues during the taxable year in which such interest would otherwise be deductible and, in general, would be deductible when such market discount is included in income upon receipt of a principal distribution on, or upon the sale of, the note. The Code requires that information necessary to compute accruals of market discount be reported periodically to the IRS and to certain categories of Note Owners. Notwithstanding the above rules, market discount on a note will be considered to be zero if such discount is less than 0.25% of the remaining stated redemption price at maturity of such note multiplied by its weighted average remaining life. Weighted average remaining life presumably is calculated in a manner similar to weighted average life (described above under "--Interest Income on the Notes--Original Issue Discount"), taking into account distributions (including prepayments) prior to the date of acquisition of such note by the subsequent purchaser. If market discount on a note is treated as zero under this rule, the actual amount of such discount must be allocated to the remaining principal distributions on such note in proportion to the amounts of such principal distributions, and when each such distribution is made, gain equal to the discount, if any, allocated to the distribution will be recognized. ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD RULES. The OID Regulations provide that the holder of a debt instrument issued after April 4, 1994 may elect to include in gross income all interest that accrues on such debt instrument using the constant yield method. For purposes of this election, interest includes stated interest, original issue discount, and market discount, as adjusted to account for any premium. Note Owners should consult their own tax advisors regarding the availability or advisability of such an election. SALES OF NOTES. If a note is sold, the seller will recognize gain or loss equal to the difference between the amount realized on the sale and its adjusted basis in the note. A holder's adjusted basis in a note generally equals the cost of the note to the holder, increased by income reported by the holder with respect to the note and reduced (but not below zero) by distributions on the note (other than qualified stated interest) received by the holder and by amortized premium. While any such gain or loss generally will be capital gain or loss provided the Note is held as a capital asset, gain recognized on the sale of a note by a seller who purchased the note at a market discount would be taxable as ordinary income in an amount not exceeding the portion of such discount that accrued during the period the note was held by such seller, reduced by any market discount includable in income under the rules described above under "--Interest Income on the Notes--Market Discount." Further, the notes will be "evidences of indebtedness" within the meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from a sale of a note by a bank or other financial institution to which such section applies would be ordinary income or loss. Short-Term Notes. In the case of a note with a maturity of one year or less from its issue date (a "Short-Term Note"), no interest is treated as qualified stated interest, and therefore all interest is included in original issue discount. Note Owners that report income for federal income tax purposes on an accrual method and some other Note Owners, including banks and certain dealers in securities, (collectively, "Short-Term Accruers") are required to include original issue discount in income on these Short-Term Notes on a straight-line basis, unless an election is made to accrue the original issue discount according to a constant yield method based on daily compounding. Any other Note Owner of a Short-Term Note is not required to accrue original issue discount for federal income tax purposes, unless it elects to do so. In the case of a Note Owner that is not required, and does not elect, to include original issue discount in income currently, any gain realized on the sale, exchange or retirement of a Short-Term Note is ordinary income to the extent of the original issue discount accrued on a straight-line basis, or, if elected, according to a constant yield method based on daily compounding, through the date of sale, exchange or retirement. In addition, Note Owners that are not required, and do not elect, to include original issue discount in income currently are required to defer deductions for any interest paid on indebtedness incurred or continued to purchase or carry a Short-Term Note in an amount not exceeding the deferred interest income with respect to the Short-Term Note, which includes both the accrued original issue discount and accrued interest that are payable but that have not been included in gross income, until the deferred interest income is realized. A Note Owner may elect to apply the foregoing rules, except for the rule characterizing gain on sale, exchange or retirement as ordinary, with respect to "acquisition discount" rather than original issue discount. Acquisition discount is the excess of the stated redemption price at maturity of the Short-Term Note over the Note Owner's basis in the Short-Term Note. This election applies to all obligations acquired by the taxpayer on or after the first day of the first taxable year to which the election applies, unless revoked with the consent of the IRS. A Note Owner's tax basis in a Short-Term Note is increased by the amount included in the Note Owner's income with respect to the Note. FOREIGN INVESTORS IN NOTES. Except as discussed below, a Note Owner that is not a "United States person" (as defined below) generally will not be subject to United States income or withholding tax in respect of a distribution on a note provided that (i) the holder complies to the extent necessary with certain certification requirements, which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is not a United States person (as defined below), (ii) the holder is not a "10-percent shareholder" within the meaning of Section 871(h)(3)(B) of the Code, which could be interpreted to include a person that directly or indirectly owns 10% or more of the certificates in the Trust, (iii) the holder is not a "controlled foreign corporation" (as defined in the Code) related to the Trust or related to a 10 percent holder of certificates in the Trust, and (iv) the holder is not engaged in a United States trade or business, or otherwise subject to federal income tax as a result of any direct or indirect connection to the United States other than through its ownership of a note. For these purposes, the term "United States person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership (or other entity properly treated as a corporation or partnership for federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate whose income is includable in gross income for United States federal income taxation regardless of its source, and (iv) a trust for which one or more United States fiduciaries have the authority to control all substantial decisions and for which a court of the United States can exercise primary supervision over the trust's administration. A "Foreign Person" is any person that is not a United States person. Each Note Owner should consult its tax advisors regarding the tax documentation and certifications that must be provided to secure the exemption from United States withholding taxes. Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a note by a Foreign Person generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Foreign Person and (ii) in the case of an individual Foreign Person, the Foreign Person is not present in the United States for 183 days or more in the taxable year. If the interest, gain or income on a note held by a Foreign Person is effectively connected with the conduct of a trade or business in the United States by the Foreign Person (although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected), the holder generally will be subject to United States federal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the Foreign Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its "effectively connected earnings and profits," within the meaning of the Code, for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty (as modified by the branch profits tax rules). BACKUP WITHHOLDING ON NOTES. Distributions made on the notes and proceeds from the sale of notes to or through certain brokers may be subject to a "backup" withholding tax of 31 percent of "reportable payments" (including interest accruals, original issue discount, and, under certain circumstances, distributions in reduction of principal amount) if the holder of the notes fails to comply with certain identification procedures, unless the Note Owner is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld from distributions on the notes would be refunded by the IRS or allowable as a credit against the Note Owner's federal income tax. TAX CONSEQUENCES TO CERTIFICATE OWNERS OF OWNER TRUST TREATMENT OF THE TRUST AS A PARTNERSHIP. Except to the extent a series of certificates is intended to be treated as indebtedness, as described below under "Certain Certificates Treated as Indebtedness," the Trust will agree, and the related Certificate Owners will agree by their purchase of certificates, if there is more than one Certificate Owner, to treat the Trust as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the Trust, the partners of the partnership being the Certificate Owners, including, to the extent relevant, the seller in its capacity as recipient of distributions from any reserve fund, and the notes being debt of the partnership, and if there is one Certificate Owner, to treat the Certificate Owner as the owner of the assets of the Trust and to treat the Trust as a disregarded entity. However, the proper characterization of the arrangement involving the Trust, the certificates, the notes, the seller, the company and the servicer is not certain because there is no authority on transactions closely comparable to that contemplated in this prospectus. A variety of alternative characterizations are possible. For example, because the certificates have certain features characteristic of debt, the certificates might be considered debt of the Trust. Generally, provided such certificates are issued at or close to face value, any such characterization would not result in materially adverse tax consequences to holders of Certificates as compared to the consequences from treatment of the certificates as equity in a partnership, described below. The following discussion assumes that the certificates represent equity interests in a partnership. The following discussion also assumes that all payments on the certificates are denominated in U.S. dollars, none of the Certificates have interest rates which would qualify as contingent interest under the Treasury regulations relating to original issue discount, and that a series of securities includes a single class of certificates. If these conditions are not satisfied with respect to any given series of certificates, additional tax considerations with respect to such certificates will be disclosed in the applicable Prospectus Supplement. The following discussion assumes that the certificates represent equity interests in a partnership. The following discussion also assumes that all payments on the certificates are denominated in U.S. dollars, none of the Certificates, have interest rates which would quality as contingent interest under the Treasury regulations relating to original issue discount, and that a series of securities includes a single class of certificates. If these conditions are not satisfied with respect to any given series of certificates, additional tax considerations with respect to the certificates will be disclosed in the related applicable Prospectus Supplement. Partnership Taxation. As a partnership, the Trust will not be subject to federal income tax. Rather, each Certificate Owner will be required to take into account separately the Certificate Owner's allocable share of income, gains, losses, deductions and credits of the Trust, whether or not there is a corresponding cash distribution. Thus, cash basis holders will in effect be required to report income from the certificates on the accrual basis and Certificate Owners may become liable for taxes on Trust income even if they have not received cash from the Trust to pay the taxes. The Trust's income will consist primarily of interest and finance charges earned on the related Base Assets, including appropriate adjustments for market discount, original issue discount and bond premium, and any gain upon collection or disposition of the related Base Assets. The Trust's deductions will consist primarily of interest accruing with respect to the Notes to the extent the Notes are properly characterized as debt, as discussed above under "--Tax Consequences to Note Owners", servicing and other fees, and losses or deductions upon collection or disposition of Base Assets. The Trust's deductions will consist primarily of interest accruing with respect to the notes, servicing and other fees, and losses or deductions upon collection or disposition of Base Assets. Any collateral certificates held by the Owner Trustee will be subject to the federal income tax treatment described in this Prospectus depending on the terms of the collateral certificates and their characterization (for example, as indebtedness) for federal income tax purposes. The federal income tax treatment of any Collateral Certificates held by the Trust will depend on the terms of the Collateral Certificates and their characterization (for example, as indebtedness) for federal income tax purposes. o the interest or other income that accrues on the certificates in accordance with their terms for the relevant month including, as applicable, interest accruing at the related certificate pass-through month and interest on amounts previously due on the Certificates but not yet distributed; o any Trust income attributable to discount on the related Base Assets that corresponds to any excess of the principal amount of the certificates over their initial issue price; o any prepayment premium payable to the Certificate Owners for the applicable month; and o any other amounts of income payable to the Certificate Owners for the applicable month. The allocation will be reduced by any amortization by the Trust of premium on Base Assets that corresponds to any excess of the issue price of certificates over their principal amount. Losses will generally be allocated in the manner in which they are borne. Based on the economic arrangement of the parties, the foregoing approach for allocating Trust income should be permissible under applicable Treasury regulations, although no assurance can be given that the IRS would not require a greater amount of income to be allocated to Certificate Owners. Moreover, even under the foregoing method of allocation, Certificate Owners may be allocated income equal to the entire certificate pass-through rate plus the other items described above, even though the Trust might not have sufficient cash to make current cash distributions of that amount. In addition, because tax allocations and tax reporting will be done on a uniform basis for all Certificate Owners, but Certificate Owners may be purchasing certificates at different times and at different prices, Certificate Owners may be required to report on their tax returns taxable income that is greater or less than the amount reported to them by the Trust. Assuming notes are also issued, all or substantially all of the taxable income allocated to a Certificate Owner that is a pension, profit sharing or employee benefit plan or other tax-exempt entity, including an individual retirement account, will generally constitute "unrelated business taxable income" generally taxable to the holder under the Code. An individual taxpayer's share of expenses of the Trust, including fees to the servicer, but not interest expense, would be miscellaneous itemized deductions and thus deductible only to the extent such expenses plus all other miscellaneous itemized deductions exceeds two percent of the individual's adjusted gross income. An individual taxpayer will be allowed no deduction for his share of expenses of the Trust, other than interest, in determining his liability for alternative minimum tax. In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for the taxable year for an individual whose adjusted gross income exceeds a prescribed threshold amount will be reduced by the lesser of (1) 3% of the excess of adjusted gross income over the specified threshold amount or (2) 80% of the amount of itemized deductions otherwise allowable for the applicable taxable year. Accordingly, deductions might be disallowed to the individual in whole or in part and might result in the Certificate Owner being taxed on an amount of income that exceeds the amount of cash actually distributed to the holder over the life of the Trust. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership," 70% of that partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. Accordingly, deductions might be disallowed to an individual in whole or in part and might result in the Certificate Owner being taxed on an amount of income that exceeds the amount of cash actually distributed to the holder over the life of the Trust. For taxable years beginning after December 31, 1997 in the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership" 70% of the partnership miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. The Trust intends to make all tax calculations relating to income and allocations to Certificate Owners on an aggregate basis to the extent relevant. If the IRS were to require that the calculations be made separately for each Base Asset, the calculations may result in timing and character differences under some circumstances. DISCOUNT AND PREMIUM. The purchase price paid by the Trust for the related Base Assets may be greater or less than the remaining principal balance of the Base Assets at the time of purchase. If so, the Base Assets will have been acquired at a premium or market discount, as the case may be. See "Tax Consequences to Note Owners--Premium" and "-- Market Discount" above. As indicated above, the Trust will make this calculation on an aggregate basis, but it is possible that the IRS might require that it be recomputed on a Base Asset-by-Base Asset basis. Further, to the extent a Base Asset is a Treasury Strip, Private Label Custody Strip, REFCO Strip or other instrument evidencing ownership of specific interest and/or principal of a particular bond, it will be subject to the rules relating to original issue discount (in lieu of the rules relating to market discount). See " Tax Consequences to Note Owners--Original Issue Discount" above. If the Trust acquires the Base Assets at a market discount or premium, the Trust will elect to include any market discount in income currently as it accrues over the life of the Base Assets or to offset any premium against interest income on the Base Assets. As indicated above, a portion of the market discount income or premium deduction may be allocated to Certificate Owners. SECTION 708 TERMINATION. Under Section 708 of the Code, the Trust will be deemed to terminate for federal income tax purposes if 50% or more of the capital and profits interests in the Trust are sold or exchanged within a 12-month period. If a termination occurs under Section 708 of the Code, the Trust will be considered to contribute its assets to a new Trust, which would be treated as a new partnership, in exchange for certificates in the new Trust. The original Trust will then be deemed to distribute the certificates in the new Trust to each of the owners of certificates in the original Trust in liquidation of the original Trust. The Trust will not comply with particular technical requirements that might apply when a constructive termination occurs. As a result, the Trust may be subject to some tax penalties and may incur additional expenses if it is required to comply with those requirements. Furthermore, the Trust might not be able to comply with these requirements due to lack of data. DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be recognized on a sale of certificates in an amount equal to the difference between the amount realized and the seller's tax basis in the certificates sold. Any gain or loss would be long-term capital gain or loss if the Certificate Owner's holding period exceeded one year. A Certificate Owner's tax basis in a Certificate will generally equal its cost, increased by its share of Trust income allocable to the Certificate Owner and decreased by any distributions received or losses allocated with respect to the certificate. In addition, both the tax basis in the certificates and the amount realized on a sale of a certificate would include the Certificate Owner's share, determined under Treasury Regulations, of the notes and other liabilities of the Trust. A Certificate Owner acquiring certificates at different prices will generally be required to maintain a single aggregate adjusted tax basis in the certificates and, upon a sale or other disposition of some of the certificates, allocate a portion of the aggregate tax basis to the certificates sold, rather than maintaining a separate tax basis in each certificate for purposes of computing gain or loss on a sale of that certificate. If a Certificate Owner is required to recognize an aggregate amount of income (not including income attributable to disallowed itemized deductions described above) over the life of the certificates that exceeds the aggregate cash distributions with respect to the certificates, the excess will generally give rise to a capital loss upon the retirement of the certificates. ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Trust's taxable income and losses will be determined monthly and the tax items for a particular calendar month will be apportioned among the Certificate Owners in proportion to the principal amount of certificates owned by them as of the close of the last day of the applicable month. As a result, a Certificate Owner purchasing certificates may be allocated tax items, which will affect the purchaser's tax liability and tax basis, attributable to periods before the actual transaction. The use of a monthly convention may not be permitted by existing Treasury regulations. If a monthly convention is not allowed, or only applies to transfers of less than all of the partner's interest, taxable income or losses of the Trust might be reallocated among the Certificate Owners. The Trust's method of allocation between transferors and transferees may be revised to conform to a method permitted by future laws, regulations or other IRS guidance. SECTION 731 DISTRIBUTIONS. In the case of any distribution to a Certificate Owner, no gain will be recognized to that Certificate Owner to the extent that the amount of any money distributed for that Certificate exceeds the adjusted basis of that Certificate Owner's interest in the Certificate. To the extent that the amount of money distributed exceeds that Certificate Owner's adjusted basis, gain will be currently recognized. In the case of any distribution to a Certificate Owner, no loss will be recognized except upon a distribution in liquidation of a Certificate Owner's interest. Any gain or loss recognized by a Certificate Owner generally will be capital gain or loss. SECTION 754 ELECTION. In the event that a Certificate Owner sells its certificates at a profit (or loss), the purchasing Certificate Owner will have a higher (or lower) basis in the certificates than the selling Certificate Owner had. The tax basis of the Trust's assets will not be adjusted to reflect that higher (or lower) basis unless the Trust were to file an election under Section 754 of the Code. In order to avoid the administrative complexities that would be involved in keeping accurate accounting records, as well as potentially onerous information reporting requirements, the Trust current does not intend to make an election under Section 754 of the Code. As a result, Certificate Owners might be allocated a greater or lesser amount of Trust income than would be appropriate based on their own purchase price for certificates. ADMINISTRATIVE MATTERS. The trustee is required to keep or cause to be kept complete and accurate books of the Trust. The trustee will file a partnership information return (IRS Form 1065) with the IRS for each taxable year of the Trust and will report each Certificate Owner's allocable share of items of Trust income and expense to Certificate Owners and the IRS on Schedule K-1. The Trust will provide the Schedule K-1 information to nominees that fail to provide the Trust with the information statement described below and the nominees will be required to forward this information to the beneficial owners of the certificates. Generally, holders must timely file tax returns that are consistent with the information return filed by the Trust or be subject to penalties unless the holder notifies the IRS of all the inconsistencies. Under Section 6031 of the Code, any person that holds certificates as a nominee at any time during a calendar year is required to furnish the Trust with a statement containing specific information on the nominee, the beneficial owners and the certificates so held. The information includes: (1) the name, address and taxpayer identification number of the nominee, and (2) as to each beneficial owner: o the name, address and identification number of such person, o whether such person is a United States person, a tax-exempt entity or a foreign government, an international organization, or any wholly owned agency, or instrumentality of either of the foregoing, and o partaiciular information on certificates that were held, bought or sold on behalf of the person throughout the year. In addition, brokers and financial institutions that hold certificates through a nominee are required to furnish directly to the Trust information as to themselves and their ownership of certificates. A clearing agency registered under Section 17A of the Exchange Act is not required to furnish any information statement to the Trust. The information referred to above for any calendar year must be furnished to the Trust on or before the following January 31. Nominees, brokers and financial institutions that fail to provide the Trust with the information described above may be subject to penalties. The company ordinarily will be designated as the tax matters partner for each Trust in the related Trust Agreement and, as the tax matters partner, will be responsible for representing the Certificate Owners in some specific disputes with the IRS. The Code provides for administrative examination of a partnership as if the partnership were a separate and distinct taxpayer. Generally, the statute of limitations for partnership items does not expire before the later of three years after the date on which the partnership information return is filed or the last day for filing the return for the applicable year, determined without regard to extensions. Any adverse determination following an audit of the return of the Trust by the appropriate taxing authorities could result in an adjustment of the returns of the Certificate Owners, and, under some circumstances, a Certificate Owner may be precluded from separately litigating a proposed adjustment to the items of the Trust. An adjustment could also result in an audit of a Certificate Owner's returns and adjustments of items not related to the income and losses of the Trust. A special audit system exists for qualifying large partnerships that have elected to apply a simplified flow-through reporting system under Sections 771 through 777 of the Code. Unless otherwise specified in the applicable Prospectus Supplement, a Trust will not elect to apply the simplified flow-through reporting system. TAXATION OF CERTAIN FOREIGN CERTIFICATE OWNERS. As used below, the term "Non-United States Owner" means a Certificate Owner that is not a United States person, as defined under "Tax Consequences to Note Owners--Foreign Investors in Notes," above. It is not clear whether the Trust would be considered to be engaged in a trade or business in the United States for purposes of federal withholding taxes with respect to Non-United States Owners because there is no clear authority dealing with that issue under facts substantially similar to those described in this Prospectus. Although it is not expected that the Trust would be engaged in a trade or business in the United States for these purposes, the Trust will withhold as if it were so engaged in order to protect the Trust from possible adverse consequences of a failure to withhold. The Trust expects to withhold on the portion of its taxable income that is allocable to Non-United States Owners pursuant to Section 1446 of the Code, as if the income were effectively connected to a U.S. trade or business, at a rate of 35% for Non-United States Owners that are taxable as corporations and 39.6% for all other Non-United States Owners. Subsequent adoption of Treasury regulations or the issuance of other administrative pronouncements may require the Trust to change its withholding procedures. Each Non-United States Owner might be required to file a U.S. individual or corporate income tax return on its share of the Trust's income including, in the case of a corporation, a return in respect of the branch profits tax. Assuming the Trust is not engaged in a U.S. trade or business, a Non-United States Owner would be entitled to a refund with respect to all or a portion of taxes withheld by the Trust if, in particular, the Owner's allocable share of interest from the Trust constituted "portfolio interest" under the Code. The interest, however, may not constitute "portfolio interest" if, among other reasons, the underlying obligation is not in registered form or if the interest is determined without regard to the income of the Trust, in the later case, the interest being properly characterized as a guaranteed payment under Section 707(c) of the Code. If this were the case, Non-United States Owners would be subject to a United States federal income and withholding tax at a rate of 30 percent on the Trust's gross income, without any deductions or other allowances for costs and expenses incurred in producing the income, unless reduced or eliminated pursuant to an applicable treaty. In this case, a Non-United States Owner would only be entitled to a refund for that portion of the taxes, if any, in excess of the taxes that should have been withheld with respect to the interest. BACKUP WITHHOLDING. Distributions made on the certificates and proceeds from the sale of the certificates will be subject to a "backup" withholding tax of 31% if, in general, the Certificate Owner fails to comply with particular identification procedures, unless the holder is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld would be refunded by the IRS or allowable as a credit against the Non-United States Owner's federal income tax. GRANTOR TRUSTS TAX CHARACTERIZATION OF THE GRANTOR TRUSTS CHARACTERIZATION. In the case of a grantor trust, Federal Tax Counsel will deliver its opinion that the Trust will not be classified as an association taxable as a corporation and that the Trust will be classified as a grantor trust under subpart E, Part I of subchapter J of the Code. In this case, beneficial owners of certificates (referred to in this Prospectus as "grantor trust certificateholders") will be treated for federal income tax purposes as owners of a portion of the Trust's assets as described below. The certificates issued by a Trust that is treated as a grantor trust are referred to in this Prospectus as "grantor trust certificates". TAXATION OF GRANTOR TRUST CERTIFICATEHOLDERS. Subject to the discussion below under "Stripped Certificates" and "Subordinated Certificates," each grantor trust certificateholder will be treated as the owner of a pro rata undivided interest in the Base Assets and other assets of the Trust. Accordingly, and subject to the discussion below of the recharacterization of the Servicing Fee, each grantor trust certificateholder must include in income its pro rata share of the interest and other income from the Base Assets, including any interest, original issue discount, market discount, prepayment fees, assumption fees, and late payment charges with respect to the assets, and, subject to limitations discussed below, may deduct its pro rata share of the fees and other deductible expenses paid by the Trust, at the same time and to the same extent as these items would be included or deducted by the grantor trust certificateholder if the grantor trust certificateholder held directly a pro rata interest in the assets of the Trust and received and paid directly the amounts received and paid by the Trust. Any amounts received by a grantor trust certificateholder in lieu of amounts due with respect to any Base 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 entitled to deduct its pro rata share of servicing fees, prepayment fees, assumption fees, any loss recognized upon an assumption and late payment charges retained by the servicer, provided that these amounts are reasonable compensation for services rendered to the Trust. Grantor trust certificateholders that are individuals, estates or trusts will be entitled to deduct their share of expenses only to the extent these expenses plus all other miscellaneous itemized deductions exceed two percent of the grantor trust certificateholder's adjusted gross income, and will be allowed no deduction for these expenses in determining their liabilities for alternative minimum tax. In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for the taxable year for an individual whose adjusted gross income exceeds a prescribed threshold amount will be reduced by the lesser of (1) 3% of the excess of adjusted gross income over the specified threshold amount or (2) 80% of the amount of itemized deductions otherwise allowable for the applicable taxable year. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership," 70% of the partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. (1) 3% of the excess of adjusted gross income over the specified threshold amount, or (2) 80% of the amount of itemized deductions otherwise allowable for the applicable year. In the case of a partnership that has 100 or more partners and elects to be treated as an "electing large partnership," 70% of the partnership's miscellaneous itemized deductions will be disallowed, although the remaining deductions will generally be allowed at the partnership level and will not be subject to the 2% floor that would otherwise be applicable to individual partners. The servicing compensation to be received by the servicer may be questioned by the IRS as exceeding a reasonable fee for the services being performed in exchange for the servicing compensation, and a portion of the servicing compensation could be recharacterized as an ownership interest retained by the servicer or other party in a portion of the interest payments to be made with respect to the Trust's assets. In this event, a certificate might be treated as a Stripped Certificate subject to the stripped bond rules of Section 1286 of the Code and the original issue discount provisions rather than to the market discount and premium rules. See the discussion below under "--Stripped Certificates". Except as discussed below under "Stripped Certificates" or "--Subordinated Certificates," this discussion assumes that the servicing fees paid to the servicer do not exceed reasonable servicing compensation. A purchaser of a grantor trust certificate will be treated as purchasing an interest in each Base Asset in the Trust at a price determined by allocating the purchase price paid for the certificate among all Base Assets in proportion to their fair market values at the time of the purchase of the certificate. To the extent that the portion of the purchase price of a grantor trust certificate allocated to a Base Asset is less than or greater than the portion of the stated redemption price at maturity of the Base Asset, the interest in the Base Asset will have been acquired at a discount or premium. See "--Market Discount" and "--Premium," below. The treatment of any discount on a Base Asset will depend on whether the discount represents original issue discount or market discount. Except as indicated otherwise in the applicable Prospectus Supplement, it is not expected that any Base Asset (other than a Base Asset that is a Treasury Strip, Private Label Custody Strip, REFCO Strip or other instrument evidencing ownership of specific interest and/or principal of a particular bond) will have original issue discount (except as discussed below under "Stripped Certificates" or "Subordinated Certificates"). For the rules governing original issue discount, see "Trusts Which Are Not Treated as Grantor Trusts--Tax Consequences to Note Owners--Original Issue Discount" above. However, in the case of Base Assets that constitute short-term Government Securities the rules set out above dealing with short-term obligations (see "Trusts Which Are Not Treated as Grantor Trusts--Tax Consequences to Note Owners-- Short-Term Notes" above) are applied with reference to acquisition discount rather than original issue discount, if the obligations constitute "short-term Government obligations" within the meaning of Section 1271(a)(3)(B) of the Code. Further, if 20 percent or more of the grantor trust certificateholders are Short-Term Accruers, all holders of grantor trust certificates may be required to accrue acquisition discount or original issue discount, as the case may be, with respect to short-term obligations held by the Trust in the same manner as a Short-Term Accruer would accrue such discount. See "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners-- Short-Term Notes" above. The information provided to grantor trust certificateholders will not include information necessary to compute the amount of discount or premium, if any, at which an interest in each Base Asset is acquired. MARKET DISCOUNT. A grantor trust certificateholder that acquires an undivided interest in Base Assets may be subject to the market discount rules of Sections 1276 through 1278 to the extent an undivided interest in a Base Asset is considered to have been purchased at a "market discount". For a discussion of the market discount rules under the Code, see "Trusts Which Are Not Treated as Grantor Trusts --Tax Consequences to Note Owners--Market Discount" above. As discussed above, to the extent a Base Asset is a Treasury Strip, Private Label Custody Strip, REFCO Strip or other instrument evidencing ownership of specific interest and/or principal of a particular bond, it will be subject to the rules relating to original issue discount (in lieu of the rules relating to market discount). See " Tax Consequences to Note Owners--Original Issue Discount" above. PREMIUM. To the extent a grantor trust certificateholder is considered to have purchased an undivided interest in a Base Asset for an amount that is greater than the stated redemption price at maturity of the interest, the grantor trust certificateholder will be considered to have purchased the interest in the Base Asset with "amortizable bond premium" equal in amount to the excess. For a discussion of the rules applicable to amortizable bond premium, see "Trusts Which Are Not Treated as Grantor Trusts --Tax Consequences to Note Owners--Premium" above. STRIPPED CERTIFICATES. Some classes of certificates may be subject to the stripped bond rules of Section 1286 of the Code and for purposes of this discussion will be referred to as "Stripped Certificates." In general, a Stripped Certificate will be subject to the stripped bond rules where there has been a separation of ownership of the right to receive some or all of the principal payments on a Base Asset from ownership of the right to receive some or all of the related interest payments. In general, where a separation has occurred, under the stripped bond rules of Section 1286 of the Code, the holder of a right to receive a principal or interest payment on the bond is required to accrue into income, on a constant yield basis under rules governing original issue discount (see "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners--Original Issue Discount"), the difference between the holder's initial purchase price for the right to receive and the principal or interest payment to be received with respect to that right. Certificates will constitute Stripped Certificates and will be subject to these rules under various circumstances, including the following: o if any servicing compensation is deemed to exceed a reasonable amount (see "--Taxation of Grantor Trust Certificateholders", above); o if the company or any other party retains a retained yield with respect to the Base Assets held by the Trust; o if two or more classes of certificates are issued representing the right to non-pro rata percentages of the interest or principal payments on the Trust's assets; or o if certificates are issued which represent the right to interest-only payments or principal-only payments. The tax treatment of the Stripped Certificates with respect to the application of the original issue discount provisions of the Code is currently unclear. However, the trustee intends to treat each Stripped Certificate as a single debt instrument issued on the day it is purchased for purposes of calculating any original issue discount. Original issue discount with respect to a Stripped Certificate must be included in ordinary gross income for federal income tax purposes as it accrues in accordance with the constant yield method that takes into account the compounding of interest and this accrual of income may be in advance of the receipt of any cash attributable to that income. See "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners--Original Issue Discount" above. For purposes of applying the original issue discount provisions of the Code, the issue price of a Stripped Certificate will be the purchase price paid by each holder of the Stripped Certificate and the stated redemption price at maturity may include the aggregate amount of all payments to be made with respect to the Stripped Certificate whether or not denominated as interest. The amount of original issue discount with respect to a Stripped Certificate may be treated as zero under the original issue discount DE MINIMIS rules described above. SUBORDINATED CERTIFICATES. In the event the Trust issues two classes of grantor trust certificates that are identical except that one class is a subordinate class, with a relatively high certificate pass-through rate, and the other is a senior class, with a relatively low certificate pass-through rate (referred to in this Prospectus as the "Subordinate Certificates" and "Senior Certificates", respectively), the grantor trust certificateholders in the aggregate will be deemed to have acquired the following assets: (1) the principal portion of each Base Asset plus a portion of the interest due on each Base Asset (the "Trust Stripped Bond"), and (2) a portion of the interest due on each Base Asset equal to the difference between the certificate pass-through rate on the Subordinate Certificates and the certificate pass-through rate on the Senior Certificates, if any, which difference is then multiplied by the Subordinate Class Percentage (the "Trust Stripped Coupon"). The "Subordinate Class Percentage" equals the initial aggregate principal amount of the Subordinate Certificates divided by the sum of the initial aggregate principal amount of the Subordinate Certificates and the Senior Certificates. The "Senior Class Percentage" equals the initial aggregate principal amount of the Senior Certificates divided by the sum of the initial aggregate principal amount of the Subordinate Certificates and the Senior Certificates. The Senior Certificateholders in the aggregate will own the Senior Class Percentage of the Trust Stripped Bond and accordingly each Senior Certificateholder will be treated as owning its pro rata share of such asset. The Senior Certificateholders will not own any portion of the Trust Stripped Coupon. The Subordinate Certificateholders in the aggregate own both the Subordinate Class Percentage of the Trust Stripped Bond plus 100% of the Trust Stripped Coupon, if any, and accordingly each Subordinate Certificateholder will be treated as owning its pro rata share in both assets. The Trust Stripped Bond will be treated as a "stripped bond" and the Trust Stripped Coupon will be treated as "stripped coupons" within the meaning of Section 1286 of the Code. Although not entirely clear, the interest income on the Subordinate Certificates and the portion of the Servicing Fee allocable to such certificates that does not constitute excess servicing will be treated by the Trust as qualified stated interest, assuming the interest with respect to the Base Assets would otherwise qualify as qualified stated interest. Accordingly, except to the extent modified below, the income of the Subordinate Certificates will be reported in the same manner as described generally above for holders of Senior Certificates. Income of the holder of the Trust Stripped Coupon will be reported by treating the Trust Stripped Coupon as a single debt instrument with original issue discount equal to the excess of the total amount payable with respect to the Trust Stripped Coupon, based on the prepayment assumption used in pricing the certificates, over the portion of the purchase price allocated to the Trust Stripped Coupon. The sum of the daily portions of original issue discount on the Trust Stripped Coupon for each day during a year in which the Subordinate Certificateholder holds the Trust Stripped Coupon will be included in the Subordinate Certificateholder's income. If the Subordinate Certificateholders receive distribution of less than their share of the Trust's receipts of principal or interest (the "Shortfall Amount") because of the subordination of the Subordinate Certificates, holders of Subordinate Certificates would probably be treated for federal income tax purposes as if they had. o received as distributions their full share of receipts; o paid over to the Senior Certificateholders an amount equal to the Shortfall Amount; and o retained the right to reimbursement of the relevant amounts to the extent these amounts are otherwise available as a result of collections on the Base Assets or amounts available from a reserve account or other form of credit enhancement, if any. Under this analysis, o Subordinate Certificateholders would be required to accrue as current income any interest income, original issue discount, or (to the extent paid on assets of the Trust) accrued market discount of the Trust that was a component of the Shortfall Amount, even though that amount was in fact paid to the Senior Certificateholders; o a loss would only be allowed to the Subordinate Certificateholders when their right to receive reimbursement of the Shortfall Amount became worthless (i.e., when it becomes clear that the amount will not be available from any source to reimburse the loss); and o reimbursement of the Shortfall Amount prior to a claim of worthlessness would not be taxable income to Subordinate Certificateholders because the amount was previously included in income. Those results should not significantly affect the inclusion of income for Subordinate Certificateholders on the accrual method of accounting, but could accelerate inclusion of income to Subordinate Certificateholders on the cash method of accounting by, in effect, placing them on the accrual method. Moreover, the character and timing of loss deductions are unclear. Subordinate Certificateholders are strongly urged to consult their own tax advisors regarding the appropriate timing, amount and character of any losses sustained with respect to the Subordinate Certificates including any loss resulting from the failure to recover previously accrued interest or discount income. Election to Treat All Interest as Original Issue Discount. The Treasury Regulations relating to original issue discount permt a grantor trust certificateholder to elect to accrue all interest, discount, including de minimis market or original issue discount, reduced by any premium, in income as interest, based on a constant yield method. If an election were to be made with respect to an interest in a Base Asset with market discount, the Certificate Owner would be deemed to have made an election to include in income currently market discount with respect to all other debt instruments having market discount that the grantor trust certificateholder acquires during the year of the election or afterward. See "--Market Discount" above. Similarly, a grantor trust certificateholder that makes this election for an interest in a Base Asset that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that the grantor trust certificateholder owns at the beginning of the first taxable year to which the election applies or acquires afterward. See "Premium" above. The election to accrue interest, discount and premium on a constant yield method with respect to a grantor trust certificate is irrevocable. Prepayments. The Taxpayer Relief Act of 1997 (the "1997 Act") contains a provision requiring original issue discount on any pool of debt instruments the yield on which may be affected by reason of prepayments to be calculated taking into account the Prepayment Assumption and requiring the discount to be taken into income on the basis of a constant yield to assumed maturity taking account of actual prepayments. The legislative history to the 1986 Act states that similar rules apply with respect to market discount and amortizable bond premium on debt instruments. Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of a grantor trust certificate prior to its maturity will result in gain or loss equal to the difference, if any, between the amount realized, exclusive of amounts attributable to accrued and unpaid interest, which will be treated as ordinary income, allocable to the Base Asset and the owner's adjusted basis in the grantor trust certificate. The adjusted basis generally will equal the seller's cost for the grantor trust certificate, increased by the original issue discount and any market discount included in the seller's gross income with respect to the grantor trust certificate, and reduced, but not below zero, by any premium amortized by the seller and by principal payments on the grantor trust certificate previously received by the seller. The gain or loss will, except as discussed below, be capital gain or loss to an owner for which the Base Assets represented by a grantor trust certificate are "capital assets" within the meaning of Section 1221. A capital gain or loss will be long-term or short-term depending on whether or not the grantor trust certificate has been owned for the long-term capital gain holding period, currently more than one year. Notwithstanding the foregoing, any gain realized on the sale or exchange of a grantor trust certificate will be ordinary income to the extent of the seller's interest in accrued market discount on Base Assets not previously taken into income. See "--Market Discount," above. Further, grantor trust certificates will be "evidences of indebtedness" within the meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a grantor trust certificate by a bank or thrift institution to which such section applied will be treated as ordinary gain or loss. FOREIGN INVESTORS IN GRANTOR TRUST CERTIFICATES. A holder of grantor trust certificate who is not a "United States person" (as defined above at "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners--Foreign Investors in Notes") and is not subject to federal income tax as a result of any direct or indirect connection to the United States other than its ownership of a grantor trust certificate generally will not be subject to United States income or withholding tax in respect of payments of interest or original issue discount on its grantor trust certificate to the extent attributable to debt obligations held by the Trust that were originated after July 18, 1984, provided that the grantor trust certificateholder complies to the extent necessary with certain certification requirements which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is not a United States person. Interest or original issue discount on a grantor trust certificate attributable to debt obligations held by the Trust that were originated prior to July 19, 1984 will be subject to a 30% withholding tax (unless such tax is reduced or eliminated by an applicable tax treaty). All holders of grantor trust certificates should consult their tax advisors regarding the tax documentation and certifications that must be provided to secure any applicable exemptions from United States withholding taxes. Any capital gain realized on the sale or other taxable disposition of a grantor trust certificate by a Foreign Person (as defined above at "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners--Foreign Investors in Notes") generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Foreign Person and (ii) in the case of an individual Foreign Person, the Foreign Person is not present in the United States for 183 days or more in the taxable year. If the interest, gain or income with respect to a grantor trust certificate held by a Foreign Person is effectively connected with the conduct of a trade or business in the United States by the Foreign Person (although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected), the holder generally will be subject to United States federal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the Foreign Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its "effectively connected earnings and profits," within the meaning of the Code, for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty (as modified by the branch profits tax rules). BACKUP WITHHOLDING. Distributions made on the grantor trust certificates and proceeds from the sale of the grantor trust certificates will be subject to a "backup" withholding tax of 31% if, in general, the grantor trust certificateholder fails to comply with particular identification procedures, unless the holder is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld would be refunded by the IRS or allowable as a credit against the grantor trust certificateholder's federal income tax. CERTAIN CERTIFICATES TREATED AS INDEBTEDNESS Upon the issuance of certificates that are intended to be treated as indebtedness for federal income tax purposes, Federal Tax Counsel will opine that based upon its analysis of the factors discussed below and certain assumptions and qualifications, the certificates will be properly classified as indebtedness for federal income tax purposes. However, opinions of counsel are not binding on the IRS and there can be no assurance that the IRS could not successfully challenge this conclusion. Such certificates that are intended to be treated as indebtedness are herein referred to as "Debt Certificates" and holders of such certificates are herein referred to as "Debt Certificateholders." The Depositor, or the Seller, will express in the Agreements its intent that for federal, state and local income and franchise tax purposes, the Debt Certificates will be indebtedness secured by the Base Assets. The Seller agrees and each Debt Certificateholder, by acquiring an interest in a Debt Certificate, agrees or will be deemed to agree to treat the Debt Certificates as indebtedness for federal, state and local income or franchise tax purposes. However, because different criteria are used to determine the non-tax accounting characterization of the transactions contemplated by the Agreements, the Seller expects to treat such transactions for financial accounting purposes, as a sale of ownership interests in the Base Assets and not as debt obligations. In general, whether for federal income tax purposes a transaction constitutes a sale of property or a loan the repayment of which is secured by the property, is a question of fact, the resolution of which is based upon the economic substance of the transaction. The form of a transaction, while a relevant factor, is not conclusive evidence of its economic substance. In appropriate circumstances, the courts have allowed taxpayers, as well as the IRS, to treat a transaction in accordance with its economic substance, as determined under federal income tax laws, notwithstanding that the participants characterize the transaction differently for non-tax purposes. In some instances, however, courts have held that a taxpayer is bound by a particular form it has chosen for a transaction, even if the substance of the transaction does not accord with its form. It is expected that Federal Tax Counsel will advise that the rationale of those cases will not apply to the transactions evidenced by a series of Debt Certificates. While the IRS and the courts have set forth several factors to be taken into account in determining whether the substance of a transaction is a sale of property or a secured indebtedness for federal income tax purposes, the primary factor in making this determination is whether the transferee has assumed the risk of loss or other economic burdens relating to the property and has obtained the economic benefits of ownership thereof. Federal Tax Counsel will analyze and rely on several factors in reaching its opinion that the weight of the benefits and burdens of ownership of the Base Assets has not been transferred to the Debt Certificateholders and that the Debt Certificates are properly characterized as indebtedness for federal income tax purposes. Contrary characterizations that could be asserted by the IRS are described below under "--Possible Classification of the Transaction as a Partnership or as an Association Taxable as a Corporation." TAXATION OF INCOME OF DEBT CERTIFICATEHOLDERS. As set forth above, it is expected that Federal Tax Counsel will advise the Seller and/or the Depositor that the Debt Certificates will constitute indebtedness for federal income tax purposes, and accordingly, holders of Debt Certificates generally will be taxed in the manner described above in "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners." If the Debt Certificates are issued with OID that is more than a DE MINIMIS amount as defined in the Code and Treasury regulations (see "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners") a United States holder of a Debt Certificate (including a cash basis holder) generally would be required to accrue the OID on its interest in a Debt Certificate in income for federal income tax purposes on a constant yield basis, resulting in the inclusion of OID in income in advance of the receipt of cash attributable to that income. Under Section 1272(a)(6) of the Code, special provisions apply to debt instruments on which payments may be accelerated due to prepayments of other obligations securing those debt instruments. However, no regulations have been issued interpreting those provisions, and the manner in which those provisions would apply to the Debt Certificates is unclear. Additionally, the IRS could take the position based on Treasury regulations that none of the interest payable on a Debt Certificate is "unconditionally payable" and hence that all of such interest should be included in the Debt Certificate's stated redemption price at maturity. Accordingly, Federal Tax Counsel is unable to opine as to whether interest payable on a Debt Certificates constitutes "qualified stated interest" that is not included in a Debt Certificate's stated redemption price at maturity. Consequently, prospective investors in Debt Certificates should consult their own tax advisors concerning the impact to them in their particular circumstances. The Prospectus Supplement will indicate whether the Trust expects to treat a Debt Certificate as having been issued with OID. TAX CHARACTERIZATION OF THE TRUST. Consistent with the treatment of the Debt Certificates as indebtedness, the Trust will be treated as a security device to hold Base Assets securing the repayment of the Debt Certificates. In connection with the issuance of Debt Certificates of any series, Federal Tax Counsel will render an opinion that, based on the assumptions and qualifications set forth therein, under then current law, the applicable Trust will not be characterized for federal income tax purposes as an association (or publicly traded partnership) taxable as a corporation. POSSIBLE CLASSIFICATION OF THE TRANSACTION AS A PARTNERSHIP OR AS AN ASSOCIATION TAXABLE AS A CORPORATION. The opinion of Federal Tax Counsel with respect to Debt Certificates will not be binding on the courts or the IRS. It is possible that the IRS could assert that, for federal income tax purposes, the transactions contemplated constitute a sale of the Base Assets (or an interest therein) to the Debt Certificateholders and that the proper classification of the legal relationship between the Seller, the Depositor, and some or all of the Debt Certificateholders resulting from the transactions is that of a partnership (including a publicly traded partnership), a publicly traded partnership taxable as a corporation, or an association taxable as a corporation. Neither the Seller, nor the Depositor, currently intends to comply with the federal income tax reporting requirements that would apply if any Classes of Debt Certificates were treated as interests in a partnership or corporation. If a transaction were treated as creating a partnership between the Seller and/or the Depositor and the Debt Certificateholders, the partnership itself would not be subject to federal income tax (unless it were characterized as a publicly traded partnership taxable as a corporation); rather, the partners of such partnership, including the Debt Certificateholders, would be taxed individually on their respective distributive shares of the partnership's income, gain, loss, deductions and credits. The amount and timing of items of income and deductions of a Debt Certificate could differ if the Debt Certificates were held to constitute partnership interests, rather than indebtedness. Moreover, unless the partnership were treated as engaged in a trade or business, an individual's share of expenses of the partnership would be miscellaneous itemized deductions that, in the aggregate, are allowed as deductions only to the extent they exceed two percent of the individual's adjusted gross income, and would be subject to reduction under Section 68 of the Code if the individual's adjusted gross income exceeded certain limits. As a result, the individual might be taxed on a greater amount of income than the stated rate on the Debt Certificates. Finally, all or a portion of any taxable income allocated to a Debt Certificateholder that is a pension, profit-sharing or employee benefit plan or other tax-exempt entity (including an individual retirement account) may, under certain circumstances, constitute "unrelated business taxable income" which generally would be taxable to the holder under the Code. If it were determined that a transaction created an entity classified as an association or as a publicly traded partnership taxable as a corporation, the Trust would be subject to federal income tax at corporate income tax rates on the income it derives from the Base Assets, which would reduce the amounts available for distribution to the Debt Certificateholders. Such classification may also have adverse state and local tax consequences that would reduce amounts available for distribution to Debt Certificateholders. Moreover, distributions on Debt Certificates that are recharacterized as equity in an entity taxable as a corporation would not be deductible in computing the entity's taxable income, and cash distributions on such Debt Certificates generally would be treated as dividends for tax purposes to the extent of such deemed corporation's earnings and profits. FOREIGN INVESTORS IN DEBT CERTIFICATES. As set forth above, it is expected that Federal Tax Counsel will advise the Seller and/or the Depositor that the Debt Certificates will constitute indebtedness for federal income tax purposes. Accordingly, Foreign Persons, as defined in the section above entitled "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note Owners--Foreign Investors in Notes," that hold Debt Certificates generally will be taxed in the manner described in that section. If the IRS were to contend successfully that the Debt Certificates are interests in a partnership and if such partnership were considered to be engaged in a trade or business in the United States, the partnership would be subject to a withholding tax on income of the Trust that is allocable to a Foreign Person and such Foreign Person would be credited for his or her share of the withholding tax paid by the partnership. In such case, the Foreign Person generally would be subject to United States federal income tax at regular income tax rates, and possibly a branch profits tax in the case of a corporate holder. Alternatively, although there may be arguments to the contrary, if such partnership is not considered to be engaged in a trade or business within the United States and if income with respect to the Debt Certificates is not otherwise effectively connected with the conduct of a trade or business in the United States by the Foreign Person, the Foreign Person would be subject to United States income tax and withholding at a rate of 30% (unless reduced by an applicable tax treaty) on the holder's distributive share of the partnership's interest income. See "Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Certificate Owners of Owner Trust--Taxation of Certain Foreign Certificate Owners" for a general discussion of the consequences of an equity investment by a Foreign Person in an entity characterized as a partnership. If the Trust were recharacterized as an association or publicly traded partnership taxable as a corporation, distribution to Certificate Owners that are Foreign Persons, to the extent treated as dividends, would generally be subject to withholding at the rate of 30%, unless such rate were reduced or eliminated by an applicable income tax treaty. If such dividend were effectively connected with the Foreign Person's United States trade or business (and, if necessary, the Foreign Person establishes that it is so effectively connected) the dividend would not be subject to withholding tax, but would be subject to United States federal income tax at regular federal income tax rates, and if the holder is a corporation, might be subject to a branch profits tax. STATE AND LOCAL TAX CONSIDERATIONS The discussion above does not address the tax consequences of purchase, ownership or disposition of certificates or notes under any state or local tax laws. We recommend that investors consult their own tax advisors regarding state and local tax consequences. * * * THE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTE OWNER'S OR CERTIFICATE OWNER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS OF NOTES OR CERTIFICATES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. ERISA CONSIDERATIONS Set forth below are some consequences under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Code that a fiduciary (a "Plan Fiduciary") of an "employee benefit plan" (as defined in and subject to ERISA) or of a "plan" (as defined in Section 4975 of the Code) who has investment discretion should consider before deciding to invest the plan's assets in Notes or Certificates, as applicable. The following summary is intended to be a summary of relevant ERISA issues and does not purport to address all ERISA considerations that may be applicable to a particular plan. In general, the terms "employee benefit plan" as defined in ERISA and "plan" as defined in Section 4975 of the Code (a "Plan") refer to any plan or account of various types which provide retirement benefits or welfare benefits to an individual or to an employer's employees and their beneficiaries. Plans include corporate pension and profit-sharing plans, "simplified employee pension plans", Keogh plans for self-employed individuals, including partners in a partnership, individual retirement accounts described in Section 408 of the Code and medical benefit plans. Each Plan Fiduciary must give appropriate consideration to the facts and circumstances that are relevant to an investment in the Notes or Certificates, as applicable, including the role that an investment in the Notes or Certificates, as applicable, plays in the Plan's investment portfolio. Each Plan Fiduciary, before deciding to invest in the Notes or Certificates, as applicable, must be satisfied that investment in the Notes or Certificates, as applicable, is a prudent investment for the Plan, that the investments of the Plan, including the investment in the Notes or Certificates, as applicable, are diversified so as to minimize the risks of large losses and that an investment in the Notes or Certificates, as applicable, complies with the Plan and related trust documents. Each Plan considering acquiring a Note or Certificate, as applicable, should consult its own legal and tax advisors before doing so. Exempt Plans ERISA and Section 4975 of the Code do not apply to governmental plans and some church plans, each as defined in Section 3 of ERISA and Section 4975(g) of the Code. However, fiduciaries with respect to these plans may be subject to federal, state or other laws similar in effect to ERISA and Section 4975 of the Code. The discussion below does not purport to address considerations under federal, state or other laws. Ineligible Purchasers Notes or Certificates, as applicable, may not be purchased with the assets of a Plan that is sponsored by or maintained by the Depositor, the Trustee, the Issuer, the Servicer or any of their respective affiliates. Notes or Certificates, as applicable, may not be purchased with the assets of a Plan if the Depositor, the Trustee, the Issuer, the Servicer or any of their respective affiliates or any of their employees: (a) has investment discretion with respect to the investment of the Plan assets; or (b) has authority or responsibility to give or regularly gives investment advice with respect to the Plan assets for a fee, pursuant to an appropriate agreement or understanding that the investment advice will serve as a primary basis for investment decisions with respect to the Plan assets and that the investment advice will be based on the particular investment needs of the Plan. A party that is described in clause (a) or (b) of the preceding sentence is a fiduciary under ERISA and the Code with respect to the Plan, and any purchase might result in a "prohibited transaction" under ERISA and the Code. Plan Assets It is possible that the purchase of a Note or Certificate, as applicable, by a Plan will cause, for purposes of Title I of ERISA and Section 4975 of the Code, the related Base Assets to be treated as assets of that Plan. A regulation (the "DOL Regulation") issued under ERISA by the United States Department of Labor (the "DOL") contains rules for determining when an investment by a Plan in an entity will result in the underlying assets of the entity being plan assets. Those rules provide that the assets of an entity will not be "plan assets" of a Plan that purchases an interest in those plan assets if the interest is not an "equity interest". The DOL Regulation defines an equity interest as an interest other than an instrument that is treated as indebtedness under applicable local law and that has no substantial equity features. The DOL Regulation provides, with respect to the purchase of an equity interest by a Plan, that the assets of an entity will not be plan assets of a Plan that purchases an interest in those plan assets if specific exceptions apply including the following: a) the investment by all "benefit plan investors" is not "significant"; or b) the security issued by the entity is a "publicly offered security". The prospectus supplement will specify whether any of the exceptions set forth in the regulation under ERISA may apply with respect to a Series of Notes or Certificates, as applicable. With respect to clause (a) of the preceding paragraph, the term "benefit plan investors" includes all plans and accounts of the types described above as employee benefit plans and accounts, whether or not subject to ERISA, as well as entities that hold "plan assets" due to investments made in these entities by any plans or accounts. Investments by benefit plan investors will be deemed not significant if benefit plan investors own, in the aggregate, less than a 25% interest in the entity, determined without regard to the investments of persons with discretionary authority or control over the assets of the entity, of any person who provides investment advice for a fee with respect to the assets and of "affiliates" of the persons, within the meaning of the DOL Regulation. Because the availability of this exception to any Trust depends upon the identity of the Certificateholders of the applicable Series at any time, there can be no assurance that any Series or Class of Certificates will qualify for this exception. With respect to clause (b) of the second preceding paragraph, a publicly offered security is one which is: (a) "freely transferable", (b) part of a class of securities that is "widely held", and (c) either, (1) part of a class of securities registered under Section 12(b) or 12(g) of the Exchange Act, or (2) sold to the Plan as part of a public offering pursuant to an effective registration statement under the Securities Act and registered under the Exchange Act within 120 days, or any later time as may be allowed by the Securities and Exchange Commission, after the end of the fiscal year of the issuer in which the offering of the security occurred. Whether a security is "freely transferable" is based on all relevant facts and circumstances. A class of securities is "widely held" only if it is of a class of securities owned by 100 or more investors independent of the issuer and of each other. The prospectus supplement will indicate if either of the exceptions set forth in the DOL Regulation apply. If neither exception is applicable, Securities which are Certificates will not be eligible to be purchased directly or indirectly for, or on behalf of, or with the assets of a Plan. Some transactions involving the purchase of Securities which are Notes might be deemed to constitute prohibited transactions under ERISA and the Code if the Base Assets were deemed to be assets of a Plan. Under the DOL Regulation, the Base Assets would be treated as plan assets of a Plan for the purposes of ERISA and the Code only if the Plan acquires an equity interest in the Trust and none of the exceptions contained in the DOL Regulation is applicable. The prospectus supplement will indicate whether the Notes will be treated as indebtedness without substantial equity features for purposes of the DOL Regulation. Without regard to whether the Notes are characterized as equity interests, the acquisition, transfer or holding of Notes by or on behalf of a Plan could be considered to give rise to a prohibited transaction if the Trust, the Trustee, the Indentive Trustee or any of their respective affiliates is or becomes a party in interest or a disqualified person with respect to the Plan or in the event that a Note is purchased in the secondary market and the purchase constitutes a sale or exchange between a Plan and a party in interest or disqualified person with respect to the Plan. Some exemptions from the prohibited transaction rules may be applicable depending on the type and circumstances of the plan fiduciary making the decision to acquire a Note. Included among these exemptions are: (a) Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance company pooled separate accounts; (b) PTCE 91-38 regarding investments by bank collective investment funds; (c) PTCE 95-60, regarding investments by insurance company general accounts; (d) PTCE 96-23, regarding transactions affected by in-house asset managers; and (e) PTCE 84-14, regarding transactions effected by "qualified professional asset managers." Before purchasing any Notes or Certificates, as applicable, a Plan Fiduciary should consult with its counsel and determine whether there exists any prohibition to the acquisition and holding of the Notes or Certificates, as applicable. In particular, a Plan Fiduciary should determine whether a plan asset exception or prohibited transaction class exemption is applicable in the Plan's particular circumstances and whether the exception or exemption covers all potential prohibited transactions. Except as otherwise set forth, the foregoing statements regarding the consequences under ERISA of an investment in Notes or Certificates, as applicable, are based on the provisions of the Code and ERISA as currently in effect, and the existing administrative and judicial interpretations under the Code and ERISA. No assurance can be given that administrative, judicial or legislative changes will not occur that would not make the foregoing statements incorrect or incomplete. ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF PLANS IS IN NO RESPECT A REPRESENTATION BY THE DEPOSITOR THE ISSUER, THE TRUSTEE, THE SERVICER OR ANY OTHER PARTY THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR PLAN OR THAT THE INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR PLAN. EACH PLAN FIDUCIARY SHOULD CONSULT WITH ATTORNEYS AND FINANCIAL ADVISORS AS TO THE PROPRIETY OF THIS TYPE OF INVESTMENT IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR PLAN AND THE RESTRICTIONS OF ERISA AND SECTION 4975 OF THE CODE. PLAN OF DISTRIBUTION On the terms and conditions set forth in an underwriting agreement with respect to the Notes, if any, of a given Series and an underwriting agreement with respect to the Certificates of the Series (collectively, the "Underwriting Agreements"), the Depositor will agree to cause the related Trust to sell to the underwriters named in the Underwriting Agreements and in the related prospectus supplement, and each underwriter will severally agree to purchase, the principal amount of each Class of Notes and Certificates, as the case may be, of the related Series set forth in the Underwriting Agreements and in the related prospectus supplement. In the Underwriting Agreements with respect to any given Series of Notes or Certificates, as applicable, the several underwriters will agree, subject to the terms and conditions set forth in the Underwriting Agreements, to purchase all of the Notes and Certificates, as the case may be, described in the Underwriting Agreements that are offered by this Prospectus and by the related prospectus supplement if any Notes and Certificates, as the case may be, are purchased. Each prospectus supplement will either: o set forth the price at which each Class of Notes and Certificates, as the case may be, being offered by the prospectus supplement will be offered to the public and any concessions that may be offered to dealers participating in the offering of the Notes and Certificates, as the case may be, or o specify that the related Notes and Certificates, as the case may be, are to be resold by the underwriters in negotiated transactions at varying prices to be determined at the time of the sale. After the initial public offering of any Notes and Certificates, as the case may be, public offering prices and concessions may be changed. Each Underwriting Agreement will provide that the related Seller will indemnify the related underwriters against specified civil liabilities, including liabilities under the Securities Act, or contribute to payments the several underwriters may be required to make in respect of these liabilities. Each Trust may, from time to time, invest the funds in its Trust Accounts in Eligible Investments acquired from the underwriters. Pursuant to each of the Underwriting Agreements with respect to a given Series of Notes or Certificates, as applicable, the closing of the sale of any Class of Notes or Certificates, as applicable, will be conditioned on the closing of the sale of all other Classes under the related Underwriting Agreement. The place and time of delivery for the Notes and Certificates, as the case may be, in respect of which this Prospectus is delivered will be set forth in the related prospectus supplement. If and to the extent required by applicable law or regulation, this Prospectus and the applicable prospectus supplements will also be used by the Underwriter after the completion of the offering in connection with offers and sales related to market-making transactions in the offered Notes or Certificates, as applicable, in which the Underwriter acts as principal. Sales will be made at negotiated prices determined at the time of sale. LEGAL MATTERS Some related legal matters relating to the Notes or Certificates, as applicable, of any Series will be passed upon by Stroock & Stroock & Lavan LLP, New York, New York or any other counsel set forth in the prospectus supplement. Some related federal income tax and other matters will be passed upon for each Trust by Stroock & Stroock & Lavan LLP, New York, New York or any other counsel set forth in the prospectus supplement. INDEX OF DEFINED TERMS 1996 Contingent Debt Regulations........................................74 1997 Act................................................................95 1997 Withholding Regulations............................................80 Account Balance.........................................................76 Accounts.................................................................8 Accumulation Period.....................................................47 Acquisition Discount....................................................80 Additional Accounts......................................................8 adjusted issue price....................................................76 Agreements...............................................................7 Ancillary Arrangements..................................................27 Base Assets..............................................................7 benefit plan investors.................................................105 Callable Treasury Strips................................................15 Cash Collateral Account.................................................25 Cash Collateral Guaranty................................................25 Cede....................................................................52 Certificate Interest Rate...............................................45 Certificate Owners......................................................72 Certificate Payment Account.............................................61 Certificateholder.......................................................53 Certificates.............................................................7 Check-the-Box Regulations...............................................84 Class....................................................................7 Closing Date............................................................57 Code....................................................................72 Collateral Indebtedness Interests.......................................24 Collection Account......................................................61 Commission...............................................................7 Controlled Accumulation Amount..........................................47 Controlled Accumulation Period..........................................47 Controlled Amortization Amount..........................................48 Controlled Amortization Period..........................................48 Controlled Deposit Amount...............................................47 Controlled Distribution Amount..........................................48 CRB Agreement...........................................................10 CRB Issuer..............................................................11 CRB Schedule............................................................58 CRB Securities...........................................................7 CRB Servicer............................................................11 CRB Trust...............................................................10 CRB Trustee.............................................................10 Credit Enhancement......................................................23 Date of Processing......................................................28 Defaulted Amount........................................................44 Defaulted Receivables...................................................44 Deficit Controlled Accumulation Amount..................................47 Deficit Controlled Amortization Amount..................................48 Definitive Certificates.................................................21 Definitive Securities...................................................52 Depositaries............................................................52 Depositor................................................................7 Depositor's Interest....................................................40 Distribution Date.......................................................27 DOL....................................................................105 DOL Regulation.........................................................105 DTC.....................................................................52 Eligible Deposit Account................................................62 Eligible Institution....................................................62 Eligible Investments....................................................61 Eligible Servicer.......................................................30 Enhancement Invested Amount.............................................24 ERISA..................................................................103 Euroclear...............................................................55 Euroclear Operator......................................................55 Euroclear Participants..................................................55 Events of Default.......................................................33 Exchange Act............................................................12 Expected Final Payment Date.............................................46 Fannie Mae..............................................................15 Farm Credit Act.........................................................19 FCA.....................................................................19 FCBs....................................................................19 FDIC....................................................................28 Federal Tax Counsel.....................................................72 FFCB....................................................................15 FFEL....................................................................17 FHLB....................................................................15 FHLMC Act...............................................................17 Final Scheduled Payment Date............................................40 Finance Charge Receivables..............................................43 financial institution...................................................81 FIRREA..................................................................18 Fiscal Agent............................................................16 Floating Allocation Percentage..........................................44 Foreign Investors......................................................100 Freddie Mac.............................................................15 freely transferable....................................................106 Funding Corporation.....................................................19 Global Securities......................................................115 Government Securities...................................................13 Government Security Schedule............................................59 Grantor Trust...........................................................90 Grantor Trust Certificateholders........................................90 Grantor Trust Certificates..............................................90 GSE Bonds...............................................................13 GSE Issuer..............................................................16 GSEs....................................................................13 Holders.................................................................57 Indenture................................................................7 Indenture Trustee........................................................7 Indirect Participants...................................................53 Initial Accounts.........................................................8 Insolvency Event........................................................49 Interest Component......................................................22 Interest Funding Account................................................46 intermediary certification..............................................81 Invested Amount.........................................................45 Investment Company Act..................................................49 Investment Earnings.....................................................61 Investor Certificateholders' Interest...................................27 IRS.....................................................................72 issue price.............................................................76 L/C Bank................................................................25 market discount.........................................................77 MBS.....................................................................16 miscellaneous itemized deductions.......................................86 Miscellaneous Payments..................................................43 Monthly Period..........................................................27 New Issuance............................................................41 Non-United States Holder................................................80 Non-United States Owner.................................................89 Non-United States Person................................................80 Note Interest Rate......................................................32 Note Owners.............................................................72 Note Payment Account....................................................61 Noteholder..............................................................53 Notes....................................................................7 objective rate..........................................................74 OID Regulations.........................................................74 original issue discount.................................................75 Paired Series...........................................................50 Participants............................................................52 Participations...........................................................7 Pay Out Event...........................................................49 Paying Agent............................................................53 Payment Accounts........................................................23 Payment Dates...........................................................32 Plan...................................................................103 Plan Fiduciary.........................................................103 Pooling and Servicing Agreement..........................................7 Pre-funded Amount.......................................................58 Pre-Funding Account......................................................8 premium.................................................................92 Prepayment Assumption...................................................76 Principal Allocation Percentage.........................................44 Principal Commencement Date.............................................46 Principal Component.....................................................22 Principal Funding Account...............................................47 Principal Only Certificates.............................................40 Principal Receivables...................................................41 Principal Terms.........................................................42 Prior Series............................................................50 Private Label Custody Receipt Securities................................13 Private Label Custody Receipt Security Schedule.........................60 Private Label Custody Strips............................................13 PTCE...................................................................106 publicly traded partnership.............................................98 qualified floating rate.................................................74 qualified inverse floating rate.........................................74 qualified stated interest...............................................74 qualifying income.......................................................98 Qualifying Substitute Base Asset........................................60 Rapid Accumulation Period...............................................47 Rapid Amortization Period...............................................48 Rating Agency...........................................................14 Receivables..............................................................7 Receivables Pooling Certificates........................................13 REFCO...................................................................13 REFCO Strip.............................................................22 REFCO Strips............................................................13 Registrar...............................................................31 Related Documents.......................................................36 Removed Accounts.........................................................8 Removed Base Asset......................................................60 Reserve Account.........................................................26 Revolving Period........................................................46 RTC.....................................................................18 Sallie Mae..............................................................15 Securities...............................................................7 Securities Act..........................................................10 Security Owners.........................................................72 Securityholder..........................................................53 Seller...................................................................8 Senior Class Percentage.................................................93 Serial Treasury Strip...................................................15 Series...................................................................7 Series Cut-Off Date......................................................8 Series Enhancement......................................................23 Series Termination Date.................................................51 Servicer Defaults.......................................................62 Servicing Fee...........................................................28 Shortfall Amount........................................................94 Short-Term Note.........................................................79 Special Payment Date....................................................49 Spread Account..........................................................26 stated redemption price at maturity.....................................76 Strip Notes.............................................................33 Stripped Certificates...................................................92 stripping...............................................................15 STRIPS..................................................................15 Subordinate Certificates................................................93 Subordinate Class Percentage............................................93 Supplement..............................................................41 System..................................................................19 Systemwide Debt Securities..............................................19 TEFRA...................................................................21 Terms and Conditions....................................................55 TIN.....................................................................82 Transfer Agent..........................................................57 Treasury Bonds..........................................................13 Treasury Strips.........................................................13 Trust....................................................................7 Trust Accounts..........................................................61 Trust Agreement..........................................................7 Trust Stripped Bond.....................................................93 Trust Stripped Coupon...................................................93 Trustee..................................................................7 TVA.....................................................................15 TVA Act.................................................................19 UCC.....................................................................68 unconditionally payable.................................................97 Underwriting Agreements................................................107 United States Person....................................................80 unrelated business taxable income.......................................86 widely held............................................................106 Zero Coupon Certificates................................................40 ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in limited circumstances, the globally offered Certificates (the "Global Securities") will be available only in book entry form. Unless otherwise specified in a prospectus supplement for a Series, investors in the Global Securities may hold Global Securities through any of DTC, Clearstream Luxembourg or Euroclear. The Global Securities will be tradeable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same day funds. Secondary market trading between investors holding Global Securities through Clearstream Luxembourg and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations. Secondary cross-market trading between Clearstream Luxembourg or Euroclear and DTC participants holding Global Securities will be effected on a delivery-against-payment basis through Citibank and Morgan as the respective depositaries of Clearstream Luxembourg and Euroclear and as participants in DTC. Non-U.S. holders of Global Securities will be exempt from U.S. withholding taxes, provided that the holders meet particular requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT All Global Securities will he held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC. As a result, Clearstream Luxembourg and Euroclear will hold positions on behalf of their participants through their respective Depositaries, Citibank and Morgan, which in turn will hold these positions in accounts as participants of DTC. Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to conventional asset-backed securities. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream Luxembourg or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds. Secondary Market Trading Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desire value date. Trading between DTC participants. Secondary market trading between DTC participants will be settled using the procedures applicable to conventional asset-backed securities. Trading between Clearstream Luxembourg and/or Euroclear Participants. Secondary market trading between Clearstream Luxembourg Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. Trading between DTC seller and Clearstream Luxembourg or Euroclear purchaser. When Global Securities are to be transferred from the account of a DTC participant to the account of a Clearstream Luxembourg Participant or a Euroclear Participant, the purchaser will send instructions to Clearstream Luxembourg or Euroclear through a participant at least one business day prior to settlement. Clearstream Luxembourg or Euroclear will instruct Citibank or Morgan, respectively, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date. Payment will then be made by Citibank or Morgan to the DTC participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream Luxembourg Participant's or Euroclear Participant's account. The Global Securities credit will appear the next day (European time) and the cash debit will be back-valued to, and the interest on the Global Securities will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Clearstream Luxembourg or Euroclear cash debit will be valued instead as of the actual settlement date. Clearstream Luxembourg Participants and Euroclear participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream Luxembourg or Euroclear. Under this approach, they may take on credit exposure to Clearstream Luxembourg or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream Luxembourg or Euroclear has extended a line of credit to them, participants can elect not to preposition funds and allow that credit line to be drawn upon to finance settlement. Under this procedure, Clearstream Luxembourg Participants or Euroclear Participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases, the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of overdraft charges, although this result will depend on each participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC participants can employ their usual procedures for sending Global Securities to Citibank or Morgan for the benefit of Clearstream Luxembourg Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC participant a cross-market transaction will settle no differently than a trade between two DTC participants. Trading between Clearstream Luxembourg or Euroclear seller and DTC purchaser. Due to time zone differences in their favor, Clearstream Luxembourg and Euroclear Participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through Citibank or Morgan, to a DTC participant. The seller will send instructions to Clearstream Luxembourg or Euroclear through a participant at least one business day prior to settlement. In these cases, Clearstream Luxembourg or Euroclear will instruct Citibank or Morgan, as appropriate, to deliver the Global Securities to the DTC participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date. The payment will then be reflected in the account of the Clearstream Luxembourg Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Clearstream Luxembourg or Euroclear Participant's account would be back-valued to the value date, which would be the preceding day, when settlement occurred in New York. Should the Clearstream Luxembourg or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debit in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft charges incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream Luxembourg or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream Luxembourg or Euroclear and that purchase Global Securities from DTC participants for delivery to Clearstream Luxembourg Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: (1) borrowing through Clearstream Luxembourg or Euroclear for one day, until the purchase side of the day trade is reflected in their Clearstream Luxembourg or Euroclear accounts in accordance with the clearing system's customary procedures; (2) borrowing the Global Securities in the U.S. from a DTC participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in their Clearstream Luxembourg or Euroclear account in order to settle the sale side of the trade; or (3) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Clearstream Luxembourg Participant or Euroclear Participant. Certain U.S. Federal Income Tax Documentation Requirements A beneficial owner of Global securities holding securities through Clearstream, Luxembourg or Euroclear, or through DTC will be subject to the 30% U.S. withholding tax that generally applies to payments of interest, including original issue discount, on registered debt issued by U.S. Persons or to 31% backup withholding, unless (1) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between the beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (2) the beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial owners of securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. If the information shown on Form W-8 BEN changes, a new Form W-8 must be filed within 30 days of the change. EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM W-8BEN). Non-U.S. Persons that are beneficial owners of securities residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate, depending on the treaty terms, by filing Form W-8BEN (including Part II thereof). If the treaty provides only for a reduced rate, the beneficial owner may still be entitled to complete exemption from withholding under item (1) above. EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain complete exemption from the withholding tax by filing Form W-9 (Request for Taxpayer Identification Number and Certification). U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a Global Security files by submitting the appropriate form to the person through whom it holds, the clearing agency, in the case of persons holding directly on the books of the clearing agency. Form W-8BEN and Form W-8ECI are generally effective for three calendar years from the close of the calendar year in which it is collected. The term "U.S. Person" means (1) a citizen or resident of the United States, (2) a corporation or partnership (or other entity properly classified as a corporation or partnership for U.S. Federal income tax purposes) organized in or under the laws of the United States or any state or the District of Columbia, (3) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or (4) 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. Notwithstanding the preceding sentence, to the extent provided in regulations, trusts in existence on August 20, 1996 and treated as United States persons prior to that date that elect to continue to be so treated also will be considered U.S. Persons. Treasury regulations provide certain presumptions regarding the entity classification and foreign or U.S. status of a holder that a payor generally must apply in the absence of appropriate documentation from the holder, and provide detailed documentation and procedures for holders claiming withholding tax exemptions through intermediaries. Prospective investors are urged to consult their tax advisors regarding the effect of these regulations on their ability to claim and the means for claiming exemptions from or reduced rates of U.S. withholding taxes. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global securities. Investors are advised to consult their own tax advisers for specific tax advice concerning their holding and disposing of the Global securities. The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus dated [ ]) ACE SECURITIES CORP. $[ ] Floating Rate Asset Backed Term Notes, Series [ ] ACE SECURITIES CORP. Seller [ ] Servicer - ------------------------------------------------------------------------------- CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. - ------------------------------------------------------------------------------- The [ ] term notes represent obligations of the trust only and do not represent obligations of or interests in, and are not guaranteed by, ACE Securities Corp., Deutsche Banc Alex. Brown or any of their affiliates. The notes will represent interests in the trust only and will not represent interests in or obligations of any other entity. - ------------------------------------------------------------------------------- This prospectus supplement may be used to offer and sell the notes only if accompanied by the prospectus. - ------------------------------------------------------------------------------- The trust will issues [ ] term notes to the public: Final Principal INTEREST Scheduled Price to Underwriting Proceeds NOTES BALANCE RATE DATE PUBLIC DISCOUNT FROM SALE ----- ------- ---- ---- ------ -------- --------- $ % % % $ Credit Enhancement o Reserve fund, with a deposit of $[ ]. o Cash accumulation reserve fund, with a deposit of $[ ]. o Subordinated certificate class with a certificate balance of $[ ]. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. DEUTSCHE BANC ALEX. BROWN The date of this prospectus supplement is [ ] IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the notes offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your notes, and (2) this prospectus supplement, which describes the specific terms of your notes. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the notes in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. -------------------------- Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the notes and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the notes will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. ---------------------------- We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. TABLE OF CONTENTS Prospectus Supplement Summary of Terms........................................ The Trust.............................................. The U.S. Portfolio..................................... The Pool of Accounts................................... The Dealer Floorplan Financing Business............................................. The [ ] Term Notes.................................... The Revolving Notes.................................... The [ ] Certificates................................. The Transfer and Servicing Agreements.................. ERISA Considerations................................... Federal Income Tax Consequences........................ Underwriting........................................... Legal Opinions......................................... Glossary of Principal Terms............................ Prospectus Risk Factors........................................... The Trusts............................................. Trust Assets........................................... Series Enhancement..................................... Servicing of Receivables............................... Certain Matters Regarding the Servicer................. Description of the Notes............................... Description of the Certificates........................ Certain Information Regarding the Securities........................................... Description of the Trust Agreements or Pooling and Servicing Agreements..................... Certain Legal Aspects of the Receivables.......................................... The Depositor.......................................... Use of Proceeds........................................ Material Federal Income Tax Consequences......................................... Certain State and Local Tax Considerations....................................... ERISA Considerations................................... Plan of Distribution................................... Legal Matters.......................................... Index of Defined Terms................................. Annex I; Global Clearance, Settlement and Tax Documentation Procedures..................... SUMMARY OF TERMS o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. o WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. THE PARTIES Issuer/Trust [ ], a Delaware business trust formed by Ace Securities Corp. Seller Ace Securities Corp. Servicer [ ]. Indenture Trustee [ ] Owner Trustee [ ]. Capitalization of the Trust General On the initial closing date, [ ], the trust will issue the following securities: o $[ ] Floating Rate Asset Backed Term Notes, Series [ ], which we refer to as the [ ]term notes. The [] term notes will bear interest, generally payable quarterly, at a rate equal to USD [three-month LIBOR] plus [ ] basis points ([]%) annually. o $[ ] Floating Rate Asset Backed Certificates, Class [ ], which we refer to as the [ ] certificates. Only the [........] term notes are offered hereby. The [ ] term notes will be registered in the name of the nominee for the Depository Trust Company. You may hold your [ ] term notes through the book-entry systems of DTC in the United States or Clearstream, Luxembourg or Euroclear in Europe. The trust will not issue any revolving notes or any other term notes on the initial closing date. After the initial closing date, the trust may issue from time to time revolving notes, additional series of term notes and additional certificates. We use the word notes to mean the [ ] term notes, any additional series of term notes that may be issued and any revolving notes that may be issued. We use the word securities to mean the notes, the [ ] certificates and any additional certificates that may be issued. Subordination The [ ] certificates will be subordinated to all series of notes. The [ ] certificates will receive no principal until the notes are fully paid or an allocation of principal sufficient to fully pay the notes has been made. The [ ] term notes and each future series of term notes and revolving notes will generally have equal priority in payments, although the timing of payments may vary. Basis Swaps On the initial closing date, the trust will enter into a basis swap with respect to the [ ] term notes. The basis swap counterparty, [ ], will pay to the trust on each distribution date, interest at a per annum rate of USD [three-month LIBOR] plus [ ]%. The trust will pay the basis swap counterparty interest at a per annum rate equal to the prime rate. Only the net amount due by the trust or by the basis swap counterparty, as the case may be, will be remitted. The trust will enter into a similar basis swap with [ ] with respect to the [ ] certificates. PAYMENTS ON THE [ ] TERM NOTES Interest o The trust will generally pay interest on the [ ] term notes at a rate equal to USD [three-month LIBOR] plus [] basis points ([ ]%) annually. o Except as described in the next bullet point, the trust will pay interest on the [ ] term notes on the [ ]th day of each [ ], [ ], [ ] and [ ] or on the next business day, which we refer to as quarterly distribution dates. The first quarterly distribution date is [ ]. o The trust will pay interest on the [ ] term notes on the [ ]th day of each month or on the next business day, which we refer to as monthly distribution dates, following a rapid amortization event or if the [ ] term notes are not paid by their targeted final payment date. If interest on the term notes is paid monthly, the interest rate will be USD [one-month LIBOR] plus [ ] basis points ([]%) annually. o The prospectus and this prospectus supplement describe how the trust will allocate available funds to interest payments on the [ ] term notes and other securities. o The trust will pay interest on the [ ] term notes based on the actual number of days elapsed and a 360-day year. Interest will accrue from and including the initial closing date, or from and including the most recent distribution date on which the trust has paid interest to but excluding the current distribution date. Principal Payments o We expect that the trust will pay the entire principal balance of the [ ] term notes on their targeted final payment date, which is the quarterly distribution date in [ ]. o Starting approximately five months before this targeted final payment date, the servicer will calculate the number of months in which the trust will allocate principal collections to the repayment of the [ ] term notes on the targeted final payment date. We refer to this period as the payment period. The trust will accumulate the allocated principal collections during the payment period in a distribution account for the [ ] term notes. o The trust could make principal payments on the [ ] term notes sooner than the targeted final payment date if a rapid amortization event occurs. The rapid amortization events for the [] term notes are: o [ ], [ ] or the seller becomes insolvent; o the trust or the seller is required to register under the Investment Company Act; and o the balance in the cash accumulation reserve fund declines below $[ ]. On each monthly distribution date after the occurrence of a rapid amortization event, the trust will apply allocated principal collections and other available funds to repay principal on the [ ] term notes. o It is also possible that the trust will not repay the entire principal balance of the [ ] term notes on or before the targeted final payment date. If principal collections are slower than anticipated during the payment period, then the payment of principal on the targeted final payment date could be insufficient to repay all of the [ ] term notes' principal balance. In that case, allocable principal collections will be applied to the repayment of principal on the [ ] term notes on subsequent monthly distribution dates. o All unpaid principal on the [ ] term notes will be due on the stated final payment date, which is the quarterly distribution date in [ ]. If the trust fails to pay the [ ] term notes in full on the stated final payment date, this will trigger an event of default. o The servicer may repurchase all of the remaining receivables when: o The daily trust balance is equal to or less than 10% of the highest sum, at any time since the initial closing date, of the daily trust balance plus cash held by the trust plus deposits in the cash accumulation account and the note distribution account, and o either no term notes are outstanding or the wind down period is in effect. CREDIT ENHANCEMENT AND LIQUIDITY The trust will repay the [ ] term notes primarily from principal and interest collections on the receivables. In addition, there are several additional sources from which funds will be available to pay principal and interest on the [ ] term notes as well as other payments which the trust must make, including: o the basis swap for the [ ] term notes; o advances the servicer makes to the trust in some circumstances; o subordination of payments on the certificates to payments on the notes; o monies in the reserve fund; and o in some circumstances, monies in the cash accumulation reserve fund. ASSETS OF THE TRUST The primary asset of the trust will be a revolving pool of receivables. This pool arises under floor plan financing agreements between [ ] and a group of retail automotive dealers franchised by [ ]. These agreements are lines of credit which dealers use to purchase new and used motor vehicles manufactured or distributed by [ ] and other motor vehicle manufacturers and distributors. We refer to the dealers' obligations under these agreements as receivables. The receivables will be sold by [ ] to the seller, and then by the seller to the trust. The trust will grant a security interest in the receivables and other trust property to the indenture trustee on behalf of the noteholders. The trust property will also include: o basis swaps with respect to all securities issued by the trust; o security interests in the collateral securing the dealers' obligation to pay the receivables, which will include vehicles and may include parts inventory, equipment, fixtures, service accounts, real estate and guarantees; o amounts held on deposit in trust accounts maintained for the trust; o any recourse [ ] has against the dealers under the floor plan financing agreements; o some of the rights the seller has under its purchase agreement with [ ]; and o all rights the trust has under its sale and servicing agreement with the seller. Revolving Pool As new receivables arise, the seller will ordinarily transfer them to the trust on a daily basis. At the same time, prior to the date on which funds will first be set aside for principal payments on the [ ] term notes, the trust will ordinarily use principal collections on the receivables to purchase new receivables from the seller or, after one or more revolving notes are issued, to pay down the principal balance on the revolving notes. The trust could also retain principal collections and invest them in eligible investments, if sufficient new receivables are not available. Revolving Period The revolving period for the trust will begin on the initial cut-off date and will end on the earlier of (a) the commencement of an early amortization period and (b) the scheduled revolving period termination date. The scheduled revolving period termination date will initially be [ ] and will be automatically extended to the last day of each succeeding month unless the Seller elects, at its option, to terminate the automatic extension. The scheduled revolving period termination date may not be extended beyond [ ]. If terminated upon the commencement of a cash accumulation period, the revolving period may recommence in certain limited circumstances. Cash Accumulation If a cash accumulation event occurs, the trust will retain all of the principal collections allocable to the [ ] term notes. The trust will then invest them in eligible investments in a cash accumulation account dedicated to the [ ] term notes. The trust will continue to invest these funds in eligible investments until the targeted final payment date for the [ ] term notes, or until the occurrence of a rapid amortization event. Cash accumulation events generally occur upon defaults under the underlying transaction agreements and when the pool of receivables fails to satisfy various performance tests or measurements. These tests may include: o the payment rate on the receivables, o the composition of the receivables pool, o the characteristics of the receivables, and o the amount on deposit in the reserve fund. If the Seller elects to terminate the automatic extension of the revolving period as described above, a wind down period will commence which constitutes a cash accumulation event for the [ ] Term Notes. Each of the early amortization events identified in the prospectus under "The Transfer and Servicing Agreements-- Early Amortization Events" is a cash accumulation event, other than those which are rapid amortization events. In addition, the termination of any basis swap identified in this prospectus supplement is generally a cash accumulation event. RESERVE FUNDS On the closing date, the seller will deposit $[ ] in cash or eligible investment into the reserve fund. The trust may experience shortfalls in principal and interest collections on the receivables and net receipts on the basis swaps. The trust will withdraw cash from the reserve fund when these shortfalls cause the trust to have insufficient amounts to: o pay the monthly servicing fee, o pay net amounts under the basis swaps, and o to make required distributions on the notes and the certificates. On any monthly distribution date, after the trust pays the monthly servicing fee and makes all deposits or payments due on the securities and any related basis swaps, the amount in the reserve fund may exceed the specified reserve amount. If so, the trust will pay the excess to the seller. On the closing date, the seller will deposit $[ ]in cash or eligible investments into the cash accumulation reserve fund. This account will supplement the funds available to pay interest on the [ ] term notes if a cash accumulation event occurs. Amounts will be added or released on each distribution date to maintain the balance at a specified reserve amount. SERVICING FEES Each month the trust will pay the servicer a servicing fee, based on [ ]% per annum, as compensation for servicing the receivables. TAX STATUS In the opinion of Stroock & Stroock & Lavan LLP, special tax counsel, the [ ] term notes will be characterized as indebtedness for federal income tax purposes and the trust will not be classified as an association or a publicly traded partnership taxable as a corporation for federal income tax purposes. ERISA CONSIDERATIONS Although it must consider the factors discussed under "ERISA Considerations", an employee benefit plan governed by the Employee Retirement Income Security Act of 1974 may generally purchase the [ ] term notes. An employee benefit plan should consult with its counsel before purchasing the [ ] term notes. RATINGS o We will not issue the [ ] term notes unless they are rated in the highest rating category for long-term obligations (i.e., "AAA") by at least one nationally recognized rating agency. o The rating of the [ ] term notes is partially based on the expected performance of the receivables. o We cannot assure you that a rating agency will maintain its rating if circumstances change. If a rating agency changes its rating, no one has an obligation to provide additional credit enhancement to restore the original rating. o A rating is not a recommendation to buy the [ ] term notes. The rating considers only the likelihood that the trust will pay interest on time and will ultimately pay principal. The rating does not consider either the [ ] term notes' price, their suitability to a particular investor or the timing of principal payments. You can find definitions of the capitalized terms used in this prospectus supplement in the "Glossary of Principal Terms" beginning on page S-[ ] of the prospectus supplement or in the "Index of Defined Terms" beginning on page [ ] in the prospectus. THE TRUST The issuer, [ ], is a business trust formed under the laws of the State of Delaware. The trust will be established and operated pursuant to a trust agreement dated on or before [ ], which is the date the trust initially issues securities, or the initial closing date. The trust will engage in only the following activities: o acquire, hold and manage the receivables and other assets of the trust; o issue securities; o make payments on the securities; and o take any action necessary to fulfill the role of the trust in connection with the [ ] term notes, the [ ] certificates and any additional securities issued by the trust. The trust's principal offices are in [ ], in care of [ ], as owner trustee, at the address listed under "--The Owner Trustee" below. Capitalization of the Trust The following table illustrates the capitalization of the trust as of the initial closing date: [ ] term notes................................. $[ ] [ ] certificates.................................[ ] Total...................................... $[ ] = The [ ] certificates represent the equity of the trust and will be issued under the trust agreement. The [ ] certificates are not being offered hereby. The Owner Trustee [ ]., is the owner trustee under the trust agreement. Its principal offices are located at [ ]. The Trust Estate The property of the trust - the trust estate - will include: o the seller's right, title and interest in, to and under o the Eligible Receivables existing in the dealer accounts included in the pool of accounts on [ ], which is the date [ ] days before the trust will initially issue the [ ] term notes o the Eligible Receivables existing in any additional dealer accounts added to the pool of accounts on the related cut-off date for additional accounts o the Eligible Receivables generated under each of the foregoing dealer accounts from time to time thereafter so long as the dealer account is included in the pool of accounts o principal and interest collections on all the Eligible Receivables o the related collateral security for the Eligible Receivables o the seller's rights and remedies under the pooling and servicing agreement associated with the receivables transferred to the trust; o the rights of the trust in relation to basis swaps with respect to all securities issued by the trust; o the reserve funds, owned by the seller and pledged to the indenture trustee, including the Reserve Fund and the Cash Accumulation Reserve Fund; o the rights of the trust in relation to following accounts, including the amounts held therein for the benefit of the [ ] term notes: o the Collection Account, including the Cash Collateral Amount o the Cash Accumulation Account o the distribution accounts for the term notes and certificates o any other account hereafter established for the benefit of all holders of securities or for the benefit of a specific series o the rights of the trust in relation to any other Specified Support Arrangement, or any other assets transferred to the trust after the initial closing date; and o the rights of the trust in relation to each swap and account established on or after the date the trust initially issues securities, or the initial closing date for the benefit of any other series or class of securities or for the benefit of all other series and classes of securities. Reinvestment of Trust Principal Collections Typically, the trust will use all Trust Principal Collections to purchase new receivables, make payments that are due in respect of a series of term notes or pay down the balance on any revolving notes. However, during some periods, including a Payment Period or Cash Accumulation Period for the [ ] term notes, the trust will accumulate the portion of Trust Principal Collections and other available amounts which are allocated to notes which have accumulation provisions. Generally, the trust will invest the accumulated amounts in Eligible Investments to provide for repayment of principal on those notes with the accumulation provisions, including the [ ] term notes, at the Targeted Final Payment Dates for such notes. For a description of the application of principal collections by the trust in each of these periods, see "Transfer and Servicing Agreements--Application of Principal Collections to the [ ] Term Notes" in this prospectus supplement. THE SERVICER [To be inserted] THE ORIGINATOR [To be inserted] THE PORTFOLIO General As of [ ], there were approximately [ ] dealers with active credit lines in [ ]'s portfolio. The total portfolio, which includes both owned receivables and serviced receivables, consisted of receivables with an aggregate principal balance of approximately $[ ]. [ ] is the primary source of floor plan financing for [ ]-franchised dealers in the United States. In the first quarter of [ ], [ ] provided financing for approximately [ ]% of new factory sales to [ ] dealers in the United States. As of [ ], receivables with respect to new vehicles represented approximately [ ]% of the aggregate principal amount of all receivables in the Portfolio. Receivables with respect to Used Vehicles represented approximately [ ]% of the aggregate principal amount of all receivables in the Portfolio. Other receivables, including receivables for heavy-duty trucks, off-highway vehicles and marine units represented approximately [...]% of the aggregate principal amount of all receivables in the portfolio. As of [ ], approximately [...]% by value of the used vehicles in [ ]'s portfolio represented vehicles bought at closed auctions held by [ ] or others. As of [ ], the average Account in [ ]'s portfolio provided for credit lines for new vehicles and used vehicles of approximately [ ] units and [ ] units, respectively, and the average principal balance of receivables thereunder was approximately $[ ] million and $[ ] million, respectively. For the [ ] months ended [ ], the weighted average spread over the Prime Rate charged to dealers in [ ]'s portfolio was approximately [ ]%. Some dealers elect not to participate in the net billing program and therefore continue to be offered rebates under incentive programs. For the [ ] months ended [ ], the average annual rate of dealer credits on [ ]'s portfolio ranged between [ ] and [ ] basis points. The amount of any credit is applied to a participating dealer's interest charges on floor plan and other loans, if any. We cannot assure you that the spread over the prime rate in the future will be similar to historical experience. As of [ ], the aggregate principal amount financed with respect to dealers assigned to "no credit" status was approximately $[ ] million or [ ]% of the aggregate principal amount financed in the portfolio. Loss Experience The following table sets forth [ ]'s average principal balance of receivables and loss experience for [ ]'s portfolio as a whole in each of the periods shown. [ ]'s portfolio includes fleet accounts and other accounts that are not Eligible Accounts as well as dealer accounts that meet the eligibility criteria for inclusion in the trust but were not selected. Thus, the dealer accounts related to the trust represent only a portion of [ ]'s entire portfolio and, accordingly, actual loss experience with respect to those dealer accounts may be different than that of [ ]'s portfolio as a whole. There can be no assurance that the loss experience for receivables in the future will be similar to the historical experience set forth below. The following historical experience reflects financial assistance and incentives provided, from time to time, by [ ] and [ ] to [ ]-franchised dealers, including those described in the prospectus. If [ ] or [ ] reduced or was unable or elected not to provide assistance or incentives, the loss experience of [ ]'s portfolio, including the dealer accounts, might be adversely affected. Loss Experience for the Portfolio THREE MONTHS ENDED MARCH 31, [ ] YEAR ENDED DECEMBER 31 [ ] [ ] [ ] [ ] [ ] (DOLLARS IN MILLIONS) Average Principal Receivables $ [ ] $ [ ] $ [ ] $[ ] $[ ] Balance...................... Net Losses (Recoveries)...... $ [ ]) $ [ ] $ [ ] $[ ] $[ ] Net Losses (Recoveries) as a % of Liquidations.............. [ ]% [ ]% [ ]% [ ]% [ ]% Net Losses (Recoveries) as a % of Average Principal Receivables Balance...................... [ ]% [ ]% [ ]% [ ]% [ ]% In the above table, average receivables balance is the average of the month-end principal balances of receivables, plus accrued interest, for each of the months during that period. Net losses in any period are gross losses less recoveries for that period. Recoveries include recoveries from collateral security in addition to vehicles, and liquidations include all principal reductions. The ratio of net losses (recoveries) to average principal balance for the three-month period has been annualized. Aging Experience The following table provides the age distribution of the receivables for all dealers in [ ]'s portfolio as a percentage of total principal balances of receivables outstanding at the date indicated. The aging is based on the receivable's interest commencement date. In addition, if a vehicle or the related receivable is reclassified for any reason, the interest commencement date will generally be the date of the reclassification. An example of a reason for reclassification is a dealer's decision to designate a new vehicle for use as a demonstration unit. The actual age distribution with respect to the receivables related to any trust may be different because those receivables will arise in dealer accounts representing only a portion of [ ]'s entire portfolio. There can be no assurance that the aging experience for receivables in the future will be similar to the historical experience set forth below. Age Distribution for the Portfolio Three Months Ended March 31, Year Ended December 31 [ ] [ ] [ ] [ ] [ ] --- --- --- --- --- 1-120.................... [ ]% [ ]% [ ]% [ ]% [ ]% 121-180.................. [ ]% [ ]% [ ]% [ ]% [ ]% 181-270.................. [ ]% [ ]% [ ]% [ ]% [ ]% Over 270................. [ ]% [ ]% [ ]% [ ]% [ ]% Monthly Payment Rates The following table sets forth the highest and lowest monthly payment rates for [ ]'s portfolio during any month in the periods shown and the average of the monthly payment rates for all months during the periods shown. he payment rates used below were calculated as set forth in the following equation: (PRINCIPAL COLLECTIONS DURING THE PERIOD) ----------------------------------------- Payment Rate % = (ending principal balance of receivables for that period) There can be no assurance that the rate of principal collections for the dealer accounts in the pool of accounts in the future will be similar to the historical experience set forth below. The actual monthly payment rates with respect to those dealer accounts may be different because, among other reasons, those dealer accounts will represent only a portion of [ ]'s entire portfolio. Monthly Payment Rates for the Portfolio Three Months Ended March 31, Year Ended December 31 [ ] [ ] [ ] [ ] [ ] --- --- --- --- --- Highest Month...................... [ ]% [ ]% [ ]% [ ]% [ ]% Lowest Month....................... [ ] [ ] [ ] [ ] [ ] Average for the Months in the period [ ] [ ] [ ] [ ] [ ] THE POOL OF ACCOUNTS As of the close of business on [ ], there were [ ] dealer accounts in the pool of accounts. As of [ ], the average principal balance of receivables in those Accounts was approximately $[ ] million (approximately [ ]% of which were Eligible Receivables) and the weighted average spread over the Prime Rate charged to dealers was approximately [...]% for the month of [ ]. This spread over the Prime Rate does not include rebates earned by dealers under [ ] incentive programs that entitle them to a credit based on interest charges. These credits do not affect the spread over the Prime Rate earned by the trust. As of [ ], the aggregate principal balance of receivables under those Accounts was $[ ] and, of that amount, $[ ] would qualify as Eligible Receivables, except for the limit imposed by the Maximum Pool Balance. In addition to the criteria specified in the definition of "Eligible Accounts" in the "Glossary of Terms" in the prospectus, a dealer account will not be an Eligible Account if (1) during the preceding twelve months, [ ] has charged off, without recovering, any amount in excess of $25,000 or (2) the obligor on such dealer account has materially breached its obligation to pay for a receivable upon sale of the related vehicle. Geographic Distribution The following table provides, as of [ ], the geographic distribution of the dealer accounts in the pool of accounts based on the dealer addresses. As of the [ ], no other state accounted for more than [ ]% of the principal amount of receivables outstanding in the dealer accounts. Geographic Distribution of Pool Accounts Related to the Trust Percentage of Number of Percentage of Total Receivables Total Receivables Dealer Number of Dealer State Outstanding Outstanding Outstanding Outstanding (thousands of dollars) [ ]....... $[ ] [ ]% [ ] [ ]% [ ]....... [ ] [ ] [ ] [ ] [ ]....... [ ] [ ] [ ] [ ] [ ]....... [ ] [ ] [ ] [ ] [ ]....... [ ] [ ] [ ] [ ] [ ]....... [ ] [ ] [ ] [ ] THE DEALER FLOORPLAN FINANCING BUSINESS [To be inserted] THE [ ] TERM NOTES General The [ ] term notes will be issued pursuant to the terms of an indenture to be dated as of the initial closing date between the trust and the indenture trustee. As amended and supplemented from time to time, this is known as the indenture, a form of which has been filed as an exhibit to the registration statement of which this prospectus supplement forms a part. The trust may issue additional series of term notes and revolving notes under the indenture after the initial closing date. A copy of the indenture will be filed with the SEC following the issuance of the [ ] term notes. The following summary describes some of the terms of the [ ] term notes and the indenture. The summary does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the [ ] term notes, the indenture and the prospectus. Where particular provisions or terms used in the indenture are referred to, the actual provisions are incorporated by reference as part of the summary. [ ], a [ ] banking corporation, will be the indenture trustee. All distributions will be made on each Note Payment Date to the holders of the [ ] term notes of record as of the day preceding that Note Payment Date. If definitive term notes are issued, distributions will be made to the holders of the [ ] term notes as of the last day of the preceding month. All payments will be made by wire transfer while the [ ] term notes are in global form and will be made in accordance with the procedures of DTC, Euroclear and Clearstream, Luxembourg. If definitive [ ] term notes are issued, such payments thereon will be made by check and will be mailed to the address on the register kept by the indenture trustee unless a holder gives wire transfer instructions before the relevant record date. Final payment of any definitive [ ] term note will only be made against presentation and surrender of the definitive [ ] term note at the place or places specified in the notice of final payment to the holder thereof. Payments of Interest Interest on the outstanding principal balance of the [ ] term notes will accrue from the initial closing date until the [ ] term notes are paid in full at a rate equal to USD [Three-Month LIBOR] plus [ ]% per annum, except as described below. Interest will be payable on the [ ]th day of each [], [ ], [ ] and [ ], or if such day is not a business day, then on the next business day. We refer to each quarterly date on which interest is paid as a Quarterly Distribution Date. The initial Quarterly Distribution Date is [ ]. There are two circumstances under which interest payments will be made monthly rather than quarterly. First, if a Rapid Amortization Period is in effect for the [ ] term notes, then from the first Monthly Distribution Date following the end of the calendar month in which the Rapid Amortization Event occurs until the date on which they are paid in full, the [ ] term notes will bear interest at a rate equal to USD [One-Month LIBOR] plus [.....]% per annum. Second, if the full amount of principal on [ ] term notes is not paid on or before the [ ] Term Note Targeted Final Payment Date, then from the [ ] term note Targeted Final Payment Date until the Monthly Distribution Date on which the [ ] term notes are paid in full, the [ ] term notes will also bear interest at a rate equal to USD [One-Month LIBOR] plus [ ]% per annum. In either case, interest will be payable on each Monthly Distribution Date following the date on which the interest rate has changed. We refer to times when monthly payments are made as Monthly Payment Periods. We use the term Note Payment Date to mean each Quarterly Distribution Date or Monthly Distribution Date, as applicable, on which interest is payable as described above or principal is payable as described below. Interest will accrue from and including the initial closing date, or from and including the most recent Note Payment Date on which interest has been paid to but excluding the current Note Payment Date. Interest on the [ ] term notes will be calculated on the basis of a year of 360 days and the actual number of days occurring in the period for which interest is payable. Each Note Payment Date will be a Payment Date as defined in the prospectus. Interest accrued as of any Note Payment Date, but not paid on that Note Payment Date, will be due on the next Note Payment Date. Payments of interest on the [ ] term notes will have equal priority with interest payments on other series of term notes and any series of revolving notes, and will be senior to distributions of interest on the [ ] certificates and any additional classes of certificates. Interest Collections will be applied to make interest payments on the [ ] term notes as described under "The Transfer and Servicing Agreements--Application of Interest Collections" in this prospectus supplement. Payments of Principal We expect that the trust will pay the entire principal balance of the [ ] term notes on the [ ] Term Note Targeted Final Payment Date, which is the Note Payment Date in [ ]. However, the trust could make principal payments sooner than the [ ] Term Note Targeted Final Payment Date if a Rapid Amortization Event occurs. On each Monthly Distribution Date after the commencement of a Rapid Amortization Period, the trust will apply the portion of Available Trust Principal allocated to the [ ] term notes and any funds held in the Cash Accumulation Account and Note Distribution Subaccount to repay principal on the [ ] term notes. It is also possible that the trust will not repay the entire principal balance of the [ ] term notes on or before the [ ] Term Note Targeted Final Payment Date. Starting on the [ ] Determination Date, the servicer will calculate the Required Payment Period Length to determine the date on which the trust will begin to accumulate principal collections for the purpose of repaying principal on the [ ] term notes on the [ ] Term Note Targeted Final Payment Date. If insufficient funds are accumulated during this period, then the payment of principal on the [ ] Term Note Targeted Final Payment Date will be insufficient to repay all of the [ ] term note principal balance. All unpaid principal on the [ ] term notes will be due on the Stated Final Payment Date for the [ ] term notes, which is the Distribution Date in [ ]. Failure to pay any securities in full on their Stated Final Payment Date will result in an event of default in the case of a note and an Early Amortization Event for the trust. If the Servicer exercises its optional right to repurchase receivables as described in "The Transfer and Servicing Agreements--Optional Purchase by the Servicer," then the proceeds of the repurchase will be treated as Trust Principal Collections and Trust Interest Collections. Priority Among Term Notes Payments of principal on the [ ] term notes will have at least equal priority with payments of principal on other series of term notes that may be issued from time to time by the trust. Some series of term notes may have a Payment Period prior to the commencement of the Wind Down Period and may have a Payment Period prior to or together with the Payment Period for the [ ] term notes. Delivery of Notes The [ ] term notes will be issued on or about the initial closing date in book entry form through the facilities of DTC, Clearstream, Luxembourg and Euroclear against payment in immediately available funds. THE REVOLVING NOTES No revolving notes will be issued on the initial closing date. However, the trust expects to issue revolving notes under the indenture after the initial closing date. The following summary describes some of the terms that will apply to any revolving notes that are so issued. The summary does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the revolving notes, the indenture and the prospectus. Where particular provisions or terms used in the indenture are referred to, the actual provisions, including definitions of terms, are incorporated by reference as part of the summary. References in this document to the revolving notes include all extensions and renewals thereof. Payments of Interest The trust will pay interest on each series of revolving notes at a floating rate, which we refer to herein as the Revolver Interest Rate for that series. This floating rate is likely to be based on USD [One-Month LIBOR] or USD [Three-Month LIBOR] plus a spread, although it is possible that another index will be used. Interest on each series will likely be paid on monthly or quarterly Distribution Dates, commencing with the first applicable Distribution Date after the issuance of the revolving notes. On each applicable Distribution Date, interest will be calculated based on the average daily Net Revolver Balance during the related Collection Period. Interest on any series of revolving notes accrued as of any applicable Distribution Date but not paid on that Distribution Date will be due on the next applicable Distribution Date. Payments of interest on the revolving notes will have equal priority to payments of interest on the term notes, including the [ ] term notes, and will be senior in right of payment to distributions of interest on the certificates. Payments of Principal and Additional Borrowings The trust may borrow funds under the revolving notes during the Revolving Period up to the trust's specified Maximum Revolver Balance. The holder of the revolving notes is under no obligation, however, to make advances thereunder to the trust. The Specified Maximum Revolver Balance for the trust will initially be $[ ] and may increase or decrease from time to time after the initial closing date as described in the prospectus under "The Transfer and Servicing Agreements--Additional Issuances; Changes in Specified Maximum Revolver Balance." The trust must stay within the Specified Maximum Revolver Balance. In connection with the issuance of any series, the revolving notes outstanding on that date may be paid in full. The trust will not borrow additional funds under the revolving notes during the Wind Down Period or any Early Amortization Period but may borrow funds during the Payment Period for the [ ] term notes. The trust may pay principal on the revolving notes on a daily basis during the Revolving Period, so long as it complies with the limitations described herein during the Payment Period for the [ ] term notes and any other applicable limitations during the Payment Period for any additional series of term notes. During the Payment Period for the [ ] term notes, except for any series of revolving notes then in a Payment Period, payments of principal on the revolving notes may be made only after the [ ] term notes' Fully Funded Date. During the Revolving Period, payments of principal on the revolving notes will be required to the extent set forth in the terms of the revolving notes. Each revolving note may be extended or renewed, and its Revolving Note Targeted Final Payment Date adjusted accordingly, at any time prior to the last day of the applicable month preceding the applicable Revolving Note Targeted Final Payment Date by written notice from the affected holder thereof to the indenture trustee and the seller setting forth the new Revolving Note Targeted Final Payment Date; provided, that the Targeted Final Payment Date for any revolving note may not occur during the Payment Period for any series of term notes, or within two months thereafter, unless the holder of such revolving note establishes its Revolving Note Targeted Final Payment Date by notice to the servicer delivered prior to the initial determination of the payment period length for that series of term notes. The new Revolving Note Targeted Final Payment Date must be a Payment Date on or prior to the then applicable Revolving Note Stated Final Payment Date. Principal on the revolving note will be due, to the extent of funds available for that purpose, in such amounts and at such times as are specified for each such revolving note. During the Wind Down Period or an Early Amortization Period for the trust, Available Trust Principal for any Collection Period and the related Distribution Date will be allocated to each series of revolving notes in accordance with their respective Principal Allocation Percentages up to their respective outstanding principal balances, and will be paid on the Distribution Date related to that Collection Period. An Early Amortization Period for the trust and a Cash Accumulation Period for the [ ] term notes will commence if, among other things, any revolving note is not paid in full on its Stated Final Payment Date. THE [ ] CERTIFICATES General On the initial closing date, the trust will issue the [ ] certificates in a principal amount equal to approximately $[ ]. Initially, the seller will retain [ ]% of the [ ] certificates. It is expected that the seller will privately place the remaining [ ] certificates on the initial closing date. The trust will issue the [ ] certificates under the trust agreement, a form of which the seller has filed as an exhibit to the registration statement of which this prospectus supplement forms a part. The following summary describes some of the terms of the [ ] certificates and the trust agreement. The summary does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the [ ] certificates, the trust agreement and the prospectus. Where particular provisions or terms used in the [ ] certificates and the trust agreement are referred to, the actual provisions, including definitions of terms, are incorporated by reference as part of the summary. Interest The [ ] certificates will bear interest on the outstanding certificate balance (without reduction for unreimbursed Trust Charge-Offs), payable on each Quarterly Distribution Date commencing on [ ], at a rate equal to USD [Three-Month LIBOR] plus [ ]% per annum. If the [ ] certificates are not paid in full on their Targeted Final Distribution Date or if the Fully Funded Date occurs for all outstanding series of notes under any circumstance other than the payments and set-asides that will occur during the Payment Period for the [ ] term notes, then interest will be payable on each Monthly Distribution Date thereafter at a rate equal to USD [One-Month LIBOR] plus [ ]% per annum. We refer to each of the days on which interest is payable on the [ ] certificates as a Certificate Payment Date. Interest on the [ ] certificates accrued as of any Certificate Payment Date but not distributed on a Certificate Payment Date will be due on the next Certificate Payment Date. Payments of interest on the notes will be senior to distributions of interest on the [ ] certificates. Certificate Balance The certificate balance as of any Monthly Distribution Date or a related Certificate Payment Date with respect to the [ ] certificates is (a) $[ ], plus (b) the principal amount of [ ] certificates issued after the initial closing date, minus (c) all distributions in respect of the certificate balance of the [ ] certificates actually made on or prior to that date, minus (d) unreimbursed Trust Charge-Offs on that Monthly Distribution Date (determined after giving effect to the application of Available Trust Interest and other amounts available to reimburse Trust Charge- Offs on that date as described below) allocated to the [ ] certificates, up to the certificate balance of the [ ] certificates on that Monthly Distribution Date calculated without regard to this clause (d). With respect to any other class of certificates, certificate balance means the amount set forth in the terms of that class of certificates. Any unreimbursed Trust Charge-Offs applied to reduce the certificate balance will be applied against each class of certificates on that Certificate Payment Date, pro rata on the basis of the certificate balance of the certificates of that class outstanding on the preceding Certificate Payment Date, without reduction for any unreimbursed Trust Charge-Offs. We expect that the trust will pay the entire certificate balance of the [ ] certificates on the Quarterly Distribution Date in [ ], which is the Targeted Final Distribution Date for the [ ] certificates. The trust will seek to set aside funds for this purpose during the Payment Period for the [ ] term notes. Following the respective Fully Funded Dates for the [ ] term notes and each other series of outstanding notes, all Available Trust Principal, up to an amount equal to the outstanding certificate balance of the [ ] certificates, will be set aside by the trust in a certificate distribution account for payment to the [ ] certificates on the Targeted Final Distribution Date for the [ ] certificates. Distributions will be made with respect to the certificate balance on the [ ] certificates after the trust has paid each series of term notes and revolving notes in full or, with respect to each series of term notes for which principal is being accumulated or otherwise provided, after the Fully Funded Date has occurred. If all notes have been paid or provided for by their respective Targeted Final Payment Dates, then distributions with respect to the certificate balance of the [ ] certificates will commence on the Targeted Final Payment Date for the [ ] certificates, to the extent of funds available for such purpose. The Stated Final Payment Date for the [ ] certificates will be on the Certificate Payment Date in [ ]. If the [ ] certificates have not been paid in full on or prior to that date, an Early Amortization Period for the trust will commence. Additional Issuances From time to time after the initial closing date, so long as it satisfies specified conditions, the trust may issue additional certificates. See "The Transfer and Servicing Agreements--Additional Issuances; Changes in Specified Maximum Revolver Balance" in the prospectus. The Certificate Rate for additional classes of certificates issued after the initial closing date may be different than the Certificate Rate for the [ ] certificates. THE SELLER AND SERVICER [TO BE INSERTED] THE TRANSFER AND SERVICING AGREEMENTS The parties will enter into the Transfer and Servicing Agreements as of the initial closing date. The following summary describes the material terms of the Transfer and Servicing Agreements. The seller has filed forms of the Transfer and Servicing Agreements as exhibits to the registration statement of which this prospectus supplement is a part. The Transfer and Servicing Agreements will be filed with the SEC following the initial closing date. The summary does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the Transfer and Servicing Agreements and the prospectus. Where particular provisions or terms used in the Transfer and Servicing Agreements are referred to, the actual provisions, including definitions of terms, are incorporated by reference as part of the summary. Application of Interest Collections For each Collection Period, the trust will apply funds to pay interest and other amounts on the related Monthly Distribution Date in the order and in the priority of clauses (1), (2) and (3) below: Clause (1) For each Collection Period, the trust will apply Trust Interest Collections together with the other amounts comprising Available Trust Interest for the related Monthly Distribution Date in the following order of priority: (a) an amount equal to the Monthly Servicing Fee for that Monthly Distribution Date will be paid to the servicer; and (b) an amount equal to the Trust Interest Allocation for each series of notes will be made available to that series and applied in clause (2) below. Clause (2) On each Monthly Distribution Date, the trust will apply the amounts from clause (1)(b), together with the funds specified below, to each series of notes as follows: (a) for the [ ] term notes: (i) the trust will make the following funds available: (A) the [ ] term notes' Trust Interest Allocation; (B) the net amount, if any, received by the trust under the [ ] term notes basis swap; (C) all net investment earnings on funds deposited in the Note Distribution Subaccount for the [ ] term notes; (D) all Cash Accumulation Account Earnings; and (E) if the [ ] term notes are then in a Cash Accumulation Period and if the amounts specified in the foregoing subclauses (A) through (D) are less than the [ ] Term Notes Monthly Carrying Costs for that Monthly Distribution Date, then the lowest of (x) such shortfall, (y) the Cash Accumulation Reserve Fund Release Amount and (z) the amount of funds on deposit in the Cash Accumulation Reserve Fund will be made available. The amounts made available pursuant to the foregoing clauses (2)(a)(i)(A) through (E) will be the [ ] Term Notes Monthly Available Amount. (ii) Next, the trust will aggregate and apply the [ ] Term Notes Monthly Available Amount on the Monthly Distribution Date as follows: (A) first, the lesser of (x) the [ ] Term Notes Monthly Available Amount and (y) the net payment, if any, due from the trust under the [ ] term notes basis swap will be paid in accordance with the terms of the [ ] term notes basis swap; and (B) second, the lesser of (x) the [ ] Term Notes Monthly Available Amount remaining after the application in subclause (A) and (y) an amount equal to the [ ] Term Notes Monthly Interest Payable Amount for the related Monthly Distribution Date will be transferred to the Note Distribution Account for payment of interest on the [ ] term notes on the related Note Payment Date. The amounts required to be paid pursuant to the foregoing clauses (2)(a)(ii)(A)(y) and (B)(y) are the [ ] Term Notes Monthly Carrying Costs. Any shortfall of the [ ] Term Notes Monthly Available Amount below the [ ] Term Notes Monthly Carrying Costs will be treated as a Series Shortfall for the [ ] term notes. Any excess of the [ ] Term Notes Monthly Available Amount over the [ ] Term Notes Monthly Carrying Costs will be treated as Remaining Interest Amounts. (b) for each revolving note: (i) on each Monthly Distribution Date, the trust will make the following funds available: (A) that revolving note's Trust Interest Allocation; and (B) the net amount, if any, received by the trust under the basis swap with respect to that revolving note. The amounts made available pursuant to the foregoing clauses (2)(b)(i)(A) and (B) will be the Revolving Note Monthly Available Amount for that revolving note. (ii) Next, the trust will aggregate and apply the Revolving Note Monthly Available Amount for that revolving note as follows: (A) first, the lesser of (x) the Revolving Note Monthly Available Amount for that revolving note and (y) the net payment, if any, due from the trust under the revolving note basis swap with respect to that revolving note will be paid in accordance with the terms of the revolving note basis swap with respect to that revolving note; and (B) second, the lesser of (x) the Revolving Note Monthly Available Amount remaining after the application in subclause (A) and (y) an amount not to exceed that revolving note's Noteholders' Interest for the related Monthly Distribution Date will be transferred to the Note Distribution Account for payment of interest on that revolving note. The amounts required to be paid pursuant to the foregoing clauses (2)(b)(ii)(A)(y) and (B)(y) are the Revolving Note Monthly Carrying Costs for that revolving note. Any shortfall of the Revolving Note Monthly Available Amount below the Revolving Note Monthly Carrying Costs will be treated as a Series Shortfall for that revolving note. Any excess of the Revolving Note Monthly Available Amount over the Revolving Note Monthly Carrying Costs will be treated as Remaining Interest Amounts. (c) for each other series of term notes, in accordance with the terms of each series, the trust will apply (x) the Trust Interest Allocation for that series, (y) any amounts received from or owing under Specified Support Arrangements in accordance with the terms of the series of notes and (z) net investment earnings, if any, on funds deposited in that series' Note Distribution Subaccount to pay the monthly carrying costs for the series of term notes, which will include the Noteholders' Interest for such series. Shortfalls in these applications will be treated as a Series Shortfall for each series and excess amounts will be treated as Remaining Interest Amounts. Clause (3) On each Monthly Distribution Date, the trust will aggregate the Remaining Interest Amounts from all series of notes and apply these funds in the following order of priority: (a) with respect to any series of notes which has a Series Shortfall, pro rata on the basis of the respective Series Shortfalls, an amount equal to the Series Shortfall for that series of notes for that Monthly Distribution Date, will be transferred to the Note Distribution Account in respect of that series or other applicable account for the payment of amounts owing under the basis swap or in respect of interest on those notes or payments on an interest rate swap for any other series of notes; (b) an amount equal to the net payment, if any, due from the trust under the [ ] certificates basis swap and under any basis swap with respect to any other class of certificates will be paid in accordance with each basis swap; (c) an amount equal to the Aggregate Certificateholders' Interest for that Monthly Distribution Date will be transferred to the Certificate Distribution Account; (d) an amount equal to any servicer advances not previously reimbursed will be paid to the Servicer, except as otherwise provided in the Transfer and Servicing Agreements; (e) an amount equal to any Reserve Fund Deposit Amount for that Monthly Distribution Date will be deposited into the Reserve Fund; (f) pro rata among the following amounts specified in (A) and (B) for that Monthly Distribution Date, (A) an amount equal to the Cash Accumulation Reserve Fund Deposit Amount will be deposited into the Cash Accumulation Reserve Fund and (B) an amount equal to any deposit required under the terms of any other Specified Support Arrangements will be deposited into the account designated by the terms of the Specified Support Arrangement; (g) an amount equal to any Trust Defaulted Amount will be treated as Additional Trust Principal on that Monthly Distribution Date; and (h) an amount equal to the aggregate amount of unreimbursed Trust Charge-Offs will be treated as Additional Trust Principal on that Monthly Distribution Date. If Monthly Available Amounts are not sufficient to make all payments required by clauses (1), (2) and (3), then the funds described below will be applied in the following order: first, if any amounts specified in clauses (3)(a), (b), (c) and (d) above remain unpaid, then a Deficiency Amount will exist, and the servicer will be obligated to make a servicer advance of this amount to the trust, but only to the extent that the Servicer, in its sole discretion, expects to recover the advance from Remaining Interest Amounts applied as described above on subsequent Distribution Dates and from releases from the Cash Accumulation Reserve Fund as provided in "--Cash Accumulation Reserve Fund" in this prospectus supplement, and the servicer advances will be applied to reduce the Deficiency Amount in the order set forth in clauses (2) and (3); and second, if any Monthly Carrying Costs or any amounts specified in clauses (3)(a), (b), (c), (d), (g) and (h) remain unpaid after the application described in the preceding clause first, then an Unsatisfied Deficiency Amount will exist, and funds on deposit in the Reserve Fund will be applied to reduce the unsatisfied deficiency amount in the order set forth in clauses (2) and (3), except that no application of amounts from the Reserve Fund will be made for the priorities in clauses (3)(e) or (f). Remaining Interest Amounts for a Monthly Distribution Date not applied as described above will generally be allocated and paid to the seller as compensation for making the initial deposit and any additional deposits into the Reserve Fund and the Cash Accumulation Reserve Fund. To the extent that the full amount of the Trust Defaulted Amount has not been treated as Additional Trust Principal pursuant to clause (3)(g) above, the amount of the deficiency will be added to unreimbursed Trust Charge-Offs. APPLICATION OF PRINCIPAL COLLECTIONS BY THE TRUST There are three mutually exclusive time periods with respect to the trust. These time periods are the Revolving Period, the Wind Down Period and the Early Amortization Period. The way in which each of these trust level time periods is relevant to and impacts each series or class of securities depends in part upon the specific terms of that series or class. In addition, each series or class of securities may have, by their terms, additional time periods specific to that series or class which occur within or across the time periods applicable to the trust as a whole. See "Application of Principal Collections to the [ ] Term Notes" below for a description of the time periods which specifically apply to the [ ] term notes. Revolving Period During the Revolving Period, the trust may, on a daily basis, use Trust Principal Collections: o to make payments of principal on the revolving notes; o to purchase additional Eligible Receivables from the seller; o to the extent required to maintain the Daily Trust Balance equal the Daily Trust Invested Amount, to add to the Cash Collateral; and o to make principal payments or to set aside principal for later payment on any series of term notes which then requires Available Trust Principal to be retained or set aside. No distributions of the certificate balance will be made during the Revolving Period. During the Revolving Period, the trust may also use the Cash Collateral Amount for the purposes described in the first, second and fourth points above. During the Revolving Period, the trust may issue from time to time, so long as it satisfies the conditions described in the prospectus under "The Transfer and Servicing Agreements--Additional Issuances; Changes in Specified Maximum Revolver Balance," revolving notes, additional series of term notes and additional classes of certificates. The Revolving Period will terminate on the Scheduled Revolving Period Termination Date. The Scheduled Revolving Period Termination Date will initially be [ ], and it will automatically be extended to the last day of each succeeding month unless the seller, prior to the then Scheduled Revolving Period Termination Date, makes a non-extension election, causing the extension not to occur. Unless a non-extension election is made as described below, each extension will become effective as of the Business Day prior to the then Scheduled Revolving Period Termination Date. The seller cannot extend the Scheduled Revolving Period Termination Date beyond [ ], which is the Final Revolving Period Termination Date. In addition to a non-extension election, the seller may, at any time prior to the then Scheduled Revolving Period Termination Date, affirmatively cause an affirmative extension of the Scheduled Revolving Period Termination Date to the last day of any specified month (but not beyond the Final Revolving Period Termination Date), subject thereafter to further automatic extensions, non- extension elections and affirmative extensions. Any non-extension election or affirmative extension will be made by providing written notice of the extension to the Servicer, the owner trustee (who will be obligated to provide notice to the certificateholders), the indenture trustee (who will be obligated to provide notice to the noteholders) and the rating agencies. Assuming no Early Amortization Event has occurred, the Revolving Period will terminate and the Wind Down Period will commence on the day immediately following a non-extension election. If the seller makes a non-extension election, as a result of which the Revolving Period terminates and the Wind Down Period commences prior to the Final Revolving Period Termination Date, the seller may elect to recommence the Revolving Period on any date prior to the date that is the earlier of (1) the one year anniversary of the termination of the Revolving Period and (2) the Final Revolving Period Termination Date, so long as no Early Amortization Event has occurred and is continuing. If an Early Amortization Event described in subparagraphs (6), (8) or (10) under "The Transfer and Servicing Agreements--Early Amortization Events" in the prospectus has occurred the seller may nonetheless elect to so recommence the Revolving Period if the conditions specified under "--Wind Down Period and Early Amortization Period--Recommencement of Revolving Period" in this prospectus supplement are satisfied. Wind Down Period and Early Amortization Period The Revolving Period will be followed by either the Wind Down Period or an Early Amortization Period. These periods commence as follows: o The Wind Down Period for the trust will begin on the day following the Scheduled Revolving Period Termination Date and will continue until the earlier of (a) the commencement of an Early Amortization Period, (b) the date on which all outstanding securities are paid in full and (c) under the limited circumstances described above under "The Transfer and Servicing Agreements--Application of Principal Collections by the Trust--Revolving Period," the recommencement of the Revolving Period. o The Early Amortization Period will commence upon the occurrence of an Early Amortization Event, whether it occurs during the Revolving Period or the Wind Down Period. The Early Amortization Events are set out in the prospectus under "The Transfer and Servicing Agreements--Early Amortization Events" and below under "--Early Amortization Events." During the Wind Down Period and during any Early Amortization Period, the trust will no longer reinvest Trust Principal Collections in new receivables, nor will it make additional borrowings under any revolving notes or issue any additional securities. Instead, on each Monthly Distribution Date, Trust Principal Collections during the related Collection Period, together with other amounts comprising Available Trust Principal, will be treated as follows: first, the amounts will be allocated to each series of notes in accordance with the series' Principal Allocation Percentage, and the Available Trust Principal will be paid or set aside until the Fully Funded Date for that series, and second, following the Fully Funded Date for all series of notes, any remaining Available Trust Principal will be available for the payment of the outstanding certificate balance on the certificates or for any other applications permitted by holders of certificates. Principal payments will be made on the term notes of each series, including the [ ] term notes and any revolving notes as described in "The [ ] Term Notes--Payment of Principal" and "The Revolving Notes--Payments of Principal and Additional Borrowings" above. For additional information on the application of Available Trust Principal in respect of the [ ] term notes, see "The Transfer and Servicing Agreements--Application of Principal Collections to the [ ] Term Notes--Cash Accumulation Period" and "--Rapid Amortization Period" below. Early Amortization Events. In addition to the Early Amortization Events set forth in the prospectus, an Early Amortization Event will occur if any of the basis swaps terminate, except if the termination is for the limited reasons set forth in "Basis Swaps" below. The trigger amount for the Reserve Fund, which is a component of the Early Amortization Event described in sub-paragraph (9) under "The Transfer and Servicing Agreements--Early Amortization Events" in the prospectus, will equal $[ ]. Recommencement of Revolving Period. In limited circumstances the seller may elect to terminate an Early Amortization Period and recommence the Revolving Period and any Payment Period prior to the Final Revolving Period Termination Date. If an Early Amortization Event described in sub-paragraphs (6), (8) or (10) under "The Transfer and Servicing Agreements--Early Amortization Events" in the prospectus each of which is a Cash Accumulation Event for the [ ] term notes - has occurred, the seller may elect to end the Cash Accumulation Period and Early Amortization Period and recommence the Revolving Period within the one-year anniversary of the commencement of the Early Amortization Period and the Cash Accumulation Period if: o none of those Early Amortization Events has existed for three consecutive months; o the Final Revolving Period Termination Date has not occurred; o the long-term debt obligations of [ ] are rated at least "Baa3" by Moody's; o the Reserve Fund Funding Condition is satisfied; and o after giving effect to any securities issued and any changes in the trust's specified Maximum Revolver Balance on the date of the recommencement, the quotient of (A) the outstanding certificate balance of all the outstanding [ ] certificates over (B) the Maximum Pool Balance equals or exceeds the specified certificate percentage, which is [ ]%. The Reserve Fund Funding Condition will be satisfied on the date of recommencement of the Revolving Period only if: o the amount on deposit in the Reserve Fund equals or exceeds the Fund Required Amount as of the date of recommencement; o the amount on deposit in the Cash Accumulation Reserve Fund for series of notes equals or exceeds the related Cash Reserve Fund Required Amount as of the date of recommencement. Upon any recommencement, funds in the Cash Accumulation Account may be used to purchase additional receivables, so long as the Daily Trust Balance is equal to the Daily Trust Invested Amount. APPLICATION OF PRINCIPAL COLLECTIONS TO THE [ ] TERM NOTES Overview There are three basic and mutually exclusive time periods with respect to the [ ] term notes which determine how Trust Principal Collections and principal payments on the [ ] term notes are handled by the trust. These periods are the Payment Period, the Cash Accumulation Period and the Rapid Amortization Period. The Payment Period will begin one to four months prior to the Targeted Final Payment Date on the [ ] term notes. The Cash Accumulation Period will begin upon the occurrence of a Cash Accumulation Event. The Rapid Amortization Period will begin upon the occurrence of a Rapid Amortization Event. The time periods with respect to the [ ] term notes co-exist with the trust time periods described above in "--Application of Principal Collections by the Trust." If an Early Amortization Period occurs for the trust, then it will give rise to either a Cash Accumulation Period or Rapid Amortization Period for the [ ] term notes. If the Wind Down Period commences for the trust prior to the Payment Period for the [ ] term notes, a Cash Accumulation Period for the [ ] term notes will commence. If the trust remains in its Revolving Period, then the [ ] term notes will not have any separate time period until the commencement of their Payment Period. However, if a Rapid Amortization Event which is not an Early Amortization Event occurs, the [ ] term notes will be in a Rapid Amortization Period at the same time that the trust is in the Revolving Period. During the Payment Period and the Cash Accumulation Period, principal collections on the receivables allocated to the [ ] term notes are set aside in accounts to repay principal on the [ ] term notes on the Targeted Final Payment Date. In contrast, during a Rapid Amortization Period, the trust will pay out principal collections allocated to the [ ] term notes on each Monthly Distribution Date occurring after the start of the Rapid Amortization Period instead of retaining these collections for distribution on the Targeted Final Payment Date. Payment Period A Payment Period for a series of notes occurs during the Revolving Period for the trust. If so specified with respect to a series of notes, Available Trust Principal will be used or set aside during the Payment Period for the purpose of repaying the outstanding principal balance of those notes. If the series of notes is subject to a currency swap, interest rate swap or another type of swap or derivative instrument in respect of principal, then principal will be set aside for the purpose of making payments under the swap or instrument. Each series of notes which is in a Payment Period will be allocated Available Trust Principal equal to its Principal Allocation Percentage thereof. If Trust Principal Collections will not be set aside during the Payment Period to repay the outstanding principal balance, then alternate sources of repayment will be specified. Available Trust Principal which is not applied for this purpose or set aside for repayment of the Certificate Balance will be used for the other purposes specified above under "--Application of Principal Collections By the Trust--Revolving Period". Upon the commencement of a Payment Period for a series of term notes, the servicer will establish a Note Distribution Subaccount. Any Investment Proceeds or earnings in respect of funds in the Note Distribution Subaccount, will be applied as provided in the clause (2) under "--Application of Interest Collections" above. The Payment Period for the [ ] term notes will commence no earlier than [ ]and no later than [ ]. On the Determination Date in [ ] and on each Determination Date thereafter before the commencement of the Payment Period, the Servicer will determine the appropriate date by calculating the Required Payment Period Length, which is an estimation of the number of Collection Periods needed to set aside funds for the repayment of the [ ] term notes and the [ ] certificates on the [ ] Term Note Targeted Final Payment Date, which is also the Targeted Final Distribution Date for the [ ] certificates. The Payment Period will commence with the first day of the Collection Period which follows the first Determination Date on which the Required Payment Period Length is equal to or greater than the number of full Collection Periods remaining between that Determination Date and the [ ] Term Note Targeted Final Payment Date. On each day during the [ ] term notes' Payment Period, the [ ] term notes will be allocated their Principal Allocation Percentage of Available Trust Principal. These amounts will be deposited in the Note Distribution Subaccount for the [ ] term notes until the Fully Funded Date for the [ ] term notes has occurred and will be invested in Eligible Investments. The trust will use amounts in the [ ] term notes' Note Distribution Subaccount, other than Investment Proceeds thereon, only to make principal payments on the [ ] term notes. During a Payment Period for the [ ] term notes, unless the revolving notes are then in a Payment Period, the trust will not repay principal under the revolving notes until the Fully Funded Date has occurred for the series of Notes in that Payment Period, but the trust may purchase additional receivables by borrowing under the revolving notes. On the Targeted Final Payment Date for the [ ] term notes, the trust will pay the outstanding principal balance of the [ ] term notes, or any lesser amount that has been set aside for that purpose, and, to the extent not paid in full on the Targeted Final Payment Date, on each Monthly Distribution Date thereafter until so paid in full. The terms of any series of term notes issued after the initial closing date with a Payment Period occurring, in whole or in part, during the Payment Period for the [ ] term notes may provide for the Required Payment on those term notes to be payable during the Payment Period for the [ ] term notes or after the Fully Funded Date for the [ ] term notes. As described under "The Transfer and Servicing Agreements--Collections" in the prospectus, in some circumstances the Servicer is permitted to make deposits of Principal Collections and Interest Collections into the Collection Account on each Monthly Distribution Date rather than on a daily basis. However, during a Payment Period, Cash Accumulation Period or Rapid Amortization Period for the [ ] term notes, the Servicer will be required to deposit Collections into the Collection Account on a daily basis until the Fully Funded Date has occurred with respect to the [ ] term notes and the [ ] certificates have been fully provided for. Cash Accumulation Period On each day during a Cash Accumulation Period for the [ ] term notes, the [ ] term notes will be allocated their Principal Allocation Percentage of Available Trust Principal and that amount will be deposited in the Cash Accumulation Account for the [ ] term notes until the amount on deposit therein equals the outstanding principal balance of the [ ] term notes. The trust will use amounts in the Cash Accumulation Account only to make principal payments on the [ ] term notes or as described under "--Application of Principal Collections by the Trust - Wind Down Period and Early Amortization Period - Recommencement of the Revolving Period" in this prospectus supplement. During a Cash Accumulation Period, the trust will not borrow additional funds under the revolving notes, nor will the trust purchase additional receivables. On the Targeted Final Payment Date for the [ ] term notes, the trust will pay the outstanding principal balance of the [ ] term notes, or any lesser amount as has been set aside for this purpose, and, to the extent not paid in full on the Targeted Final Payment Date, on each Monthly Distribution Date thereafter until so paid in full. If the [ ] term notes, any other series of term notes, or any revolving notes are not paid in full on or prior to the applicable Stated Final Payment Date, an Early Amortization Period for the trust will commence. This event will constitute a Cash Accumulation Period for the [ ] term notes. If the Targeted Final Payment Date for the [ ] term notes has previously occurred, the effect of this Early Amortization Event - or any other Early Amortization Event which occurs after the [ ] Term Note Targeted Final Payment Date and which causes a Cash Accumulation Period to occur for the [ ] term notes - will be that the trust will continue to pay allocable funds to the [ ] term notes on each subsequent Monthly Distribution Date. Rapid Amortization Period On each day during a Rapid Amortization Period for the [ ] term notes, the [ ] term notes will be allocated their Principal Allocation Percentage of Available Trust Principal and that amount will be deposited in the Note Distribution Account for the [ ] term notes. All amounts so allocated during a Rapid Amortization Period will be paid to the holders of the [ ] term notes on the related Monthly Distribution Date. In addition, on the first Monthly Distribution Date during the Rapid Amortization Period, any amounts in respect of principal held in the Cash Accumulation Account or the Note Distribution Account for the [ ] term notes will be paid to the holders of the [ ] term notes. Reserve Fund The Reserve Fund will be an Eligible Deposit Account established and maintained in the name of the indenture trustee for the benefit of the holders of notes, the holders of Certificates, and, as applicable, a swap counterparty. On the initial closing date, the Reserve Fund will be funded with the Reserve Fund Initial Deposit from the seller in an amount equal to $[ ]. The Reserve Fund is of the type contemplated by the prospectus. See "The Transfer and Servicing Agreements--Liquidity and Credit Support--Reserve Fund" in the prospectus. Additional amounts may be deposited in the Reserve Fund, and the formula for the Reserve Fund Required Amount adjusted, in connection with the issuance of additional series of term notes or changes in the trust's Specified Maximum Revolver Balance. In addition, the seller, in its sole discretion, may at any time make additional deposits into the Reserve Fund as described in the prospectus under "The Transfer and Servicing Agreements-- Liquidity and Credit Support--Reserve Fund." The seller is not obligated to make any additional deposits into the Reserve Fund, and we cannot assure you that any additional deposits will be made. If the amount in the Reserve Fund is less than the Reserve Fund Required Amount for any Monthly Distribution Date, the amount of the deficiency, to the extent funds are available as described above under "--Application of Interest Collections," will be deposited into the Reserve Fund. Amounts on deposit in the Reserve Fund will be available to cover the Unsatisfied Deficiency Amount on each Monthly Distribution Date as described above under "--Application of Interest Collections." Amounts on deposit in the Reserve Fund will be included in Available Trust Principal and applied to make the final principal payments on the notes and the final distributions with respect to Certificate Balance on the certificates during the Wind Down Period and any Early Amortization Period if and to the extent that the application of the amount on deposit in the Reserve Fund as Available Trust Principal will reduce the outstanding principal balance on all notes and the outstanding Certificate Balance with respect to all certificates to zero. This application will occur after giving effect to all other required applications of the Reserve Fund on that Monthly Distribution Date and all other amounts to be applied as Available Trust Principal on that Monthly Distribution Date and after giving effect to the payment and distribution of all amounts otherwise on deposit, or to be deposited, in the Distribution Accounts on that Monthly Distribution Date. If the amount in the Reserve Fund is more than the Reserve Fund Required Amount for any Monthly Distribution Date, the amount of the excess, unless otherwise agreed by the seller, will be paid to the seller as compensation for making the Reserve Fund Initial Deposit and other deposits, if any, into the Reserve Fund. On the Trust Termination Date, any funds remaining on deposit in the Reserve Fund will be distributed to the seller. Any investment earnings, net of losses and investment expenses, with respect to the Reserve Fund for a Collection Period will be Investment Proceeds and will be included in Available Trust Interest. Cash Accumulation Reserve Fund The Cash Accumulation Reserve Fund will be fully funded in the amount of $[ ] on the initial closing date. The [ ] term notes will not have any rights to amounts on deposit in the cash accumulation reserve fund or interest income thereon, except as described in this prospectus supplement. The seller, in its sole discretion, may at any time make additional deposits into the Cash Accumulation Reserve Fund. The seller is not obligated to make any additional deposits into the Cash Accumulation Reserve Fund and there can be no assurance that any additional deposits will be made. If the amount in the cash accumulation reserve fund on any Monthly Distribution Date is less than the Cash Accumulation Reserve Fund Required Amount for that Monthly Distribution Date, the amount of the deficiency, to the extent available as described above under "--Application of Interest Collections," will be deposited into the Cash Accumulation Reserve Fund. On each Monthly Distribution Date, if the funds in the Cash Accumulation Reserve Fund after giving effect to all other distributions or allocations on that Monthly Distribution Date exceed the Cash Accumulation Reserve Fund Required Amount, that excess will be distributed first to reimburse servicer advances and second to the seller. The Cash Accumulation Reserve Fund Required Amount will decline on each Monthly Distribution Date as the [ ] term notes approach their Targeted Final Payment Date. On repayment of the entire outstanding principal balance of the [ ] term notes, any funds remaining on deposit in the Cash Accumulation Reserve Fund will be paid to the seller. Basis Swaps On the initial closing date, the trust will enter into a basis swap with [ ], as the basis swap counterparty, with respect to each of the following: o the [ ] term notes, and we refer to this basis swap as the [ ] term notes basis swap o the [ ] certificates, and we refer to this basis swap as the [ ] certificate basis swap Each basis swap is intended to allow the trust to receive interest at a rate determined by reference to the index upon which the rate of interest for the applicable series of notes or certificates or amounts payable under any related Specified Support Arrangement is based. In each case, the trust will pay an interest rate determined by reference to the prime rate, on the one hand, and the trust will receive a rate of interest determined by reference to USD [Three-Month LIBOR], as described herein. As set forth in the table below, for each basis swap, on each Monthly Distribution Date, the basis swap counterparty will be obligated to pay to the trust an amount equal to interest accrued during the related Collection Period preceding that Monthly Distribution Date, on the applicable Notional Amount shown in the following table, at a rate equal to USD [Three-Month LIBOR], with respect to that Monthly Distribution Date, plus a specified percentage for each day during the related Collection Period divided by 360. In exchange, on each Monthly Distribution Date, the trust will be obligated to pay to the basis swap counterparty an amount equal to interest accrued during the related Collection Period, on either the daily [ ] Term Notional Amount or the [ ] Certificate Notional Amount at a per annum rate equal to the prime rate for each day during that Collection Period divided by 360. AMOUNT DUE FROM AMOUNT DUE BASIS SWAP NOTIONAL AMOUNT SWAP COUNTERPARTY FROM THE TRUST ---------- --------------- ----------------- -------------- [ ] Term Notes [ ] Term Notional USD [Three-Month [Prime Rate LIBOR] + basis swap Amount] [ ]% [ ] Certificate [ ] Term Notional USD [Three-Month [Prime Rate LIBOR] + basis swap Amount] [ ]% Under the basis swaps, on each Monthly Distribution Date the amount the trust is obligated to pay will be netted against the amount the basis swap counterparty is obligated to pay so that only the net amount will be due from the trust or the basis swap counterparty, as the case may be. This amount will be payable out of Available Trust Interest as described above in clauses (2) and (3) of "--Application of Interest Collections" or will be included in Available Trust Interest. Each basis swap will terminate if, among other things, either party defaults in the payment of any amount due thereunder and if the basis swap counterparty becomes insolvent. The termination of any basis swap upon these events will be an Early Amortization Event for the trust and either a Cash Accumulation Event or, in the case of an insolvency event, a Rapid Amortization Event, for the [ ] term notes. The termination of a basis swap will not result in any make-whole amount being payable by either party. In some limited situations, the trust may, without causing an Early Amortization Event, terminate, amend or modify the terms of any basis swap or enter into other Specified Support Arrangements without the consent of holders of the outstanding notes or certificates. These limited situations include: (1) in connection with the issuance of additional term notes, revolving notes or certificates; (2) a change in the trust's specified Maximum Revolver Balance or the specified Maximum Revolver Balance for any series of revolving notes; or (3) the payment in full of any series of term notes. The trust must satisfy the conditions set forth in the trust sale and servicing agreement for the issuance or change, including, in the case of any issuance or increase in the trust's specified Maximum Revolver Balance, confirmation from each rating agency that the issuance or increase will not result in a reduction or withdrawal of the rating of any outstanding securities. See "The Transfer and Servicing Agreements--Additional Issuances; Changes in Specified Maximum Revolver Balance" in the prospectus. OTHER LIQUIDITY AND CREDIT SUPPORT Distributions on the certificates will be subordinated to payments on the notes to the extent described herein. The trust property will include the basis swaps, and the funds on deposit in the Reserve Fund and the Cash Accumulation Reserve Fund. The servicer may also make Servicer Liquidity Advances with respect to additional series of term notes issued hereafter if the terms of the additional term notes so provide. The servicer will also make servicer advances as described above. The Servicer will not make Servicer Liquidity Advances for the [ ] term notes. Other credit, liquidity and other enhancement arrangements may be established in connection with the issuance of additional securities or increases in the trust's specified Maximum Revolver Balance. There can be no assurance that any of these arrangements will be for the benefit of the holders of the [ ] term notes. DEFAULTS AND CHARGE-OFFS For any Monthly Distribution Date, Available Trust Interest will be available to cover the Trust Defaulted Amount as described in clause (3) under "Application of Interest Collections" above. To the extent that, for any Monthly Distribution Date, the allocated Available Trust Interest does not cover the full amount of the Trust Defaulted Amount through treatment of that Available Trust Interest as Additional Trust Principal, that deficiency will constitute an unreimbursed Trust Charge- Off. Unreimbursed Trust Charge-Offs will be covered on any subsequent Distribution Date out of Available Trust Interest and, to the extent available therefor, withdrawals from the Reserve Fund. For any date, unreimbursed Trust Charge-Offs will, unless reduced as described below, equal the aggregate Trust Charge-Offs for all prior Monthly Distribution Dates unless and to the extent the Trust Charge-Offs have been so covered. The Daily Trust Invested Amount is reduced by the amount of unreimbursed Trust Charge-Offs and will therefore be reinstated to the extent any Trust Charge-Offs are reimbursed. Unreimbursed Trust Charge-Offs will be applied first to reduce the outstanding Certificate Balance of the certificates and then to reduce the outstanding principal balance of the notes. Interest payments on securities will be reduced to the extent unreimbursed Trust Charge-Offs are applied against these securities as of any Monthly Distribution Date. If unreimbursed Trust Charge-Offs exceed the certificate balance on the Stated Final Payment Date for a series of notes, then the trust will not owe to the holders of the [ ] term notes the portion of the excess that is allocable to the [ ] term notes, and the amount of unreimbursed Trust Charge-Offs will be permanently reduced by that allocation. Unreimbursed Trust Charge-Offs in excess of the Certificate Balance will be applied to the notes on the basis of the Trust Interest Allocation Percentage of the notes then outstanding. For purposes of this application, the certificate balance and Trust Interest Allocation will be calculated without reduction for Trust Charge-Offs. OPTIONAL PURCHASE BY THE SERVICER Notwithstanding anything in the prospectus to the contrary, at any time from and after the time that: o the Daily Trust Balance is equal to or less than 10% of the highest sum, at any time since the initial closing date, of the Daily Trust Balance plus the Cash Collateral Amount plus amounts on deposit in the Cash Accumulation Account and the Note Distribution Account; and o either no term notes are outstanding or the Wind Down Period is in effect, the servicer may, at its option, purchase from the trust, as of the last day of any Collection Period, all remaining receivables and other assets then held by the trust, at a price equal to the aggregate Administrative Purchase Payments for those receivables plus the appraised value of the other assets which price will not be less than the outstanding principal balance and unpaid interest on all notes. That amount will be treated as Trust Principal Collections received during that Collection Period to the extent of the principal portion of the aggregate Administrative Purchase Payments so paid, with the remainder being Trust Interest Collections. ERISA CONSIDERATIONS Although there is little guidance on the subject, the seller believes that, at the time of their issuance, the [ ] term notes would be treated as indebtedness without substantial equity features for purposes of the Plan Assets Regulation. The debt treatment of the [ ] term notes could change, subsequent to their issuance, if the trust incurred losses. However, without regard to whether [ ] term notes are treated as an equity interest for those purposes, the acquisition or holding of [ ] term notes by or on behalf of a benefit plan could be considered to give rise to a prohibited transaction if the seller, the trust or any of their respective affiliates is or becomes a party in interest or a disqualified person with respect to a benefit plan. Some of the exemptions from the prohibited transaction rules could be applicable to the purchase and holding of [ ] term notes by a benefit plan depending on the type and circumstances of the plan fiduciary making the decision to acquire the [ ] term notes. Included among these exemptions are: Prohibited Transaction Class Exemption 96-23, regarding transactions affected by in-house asset managers; PTCE 95-60, regarding investments by insurance company general accounts; PTCE 90-1, regarding investments by insurance company pooled separate accounts; PTCE 91-38 regarding investments by bank collective investment funds; and PTCE 84-14, regarding transactions effected by "qualified professional asset managers." For additional information regarding treatment of the [ ] term notes under ERISA, see "ERISA Considerations" in the prospectus. FEDERAL INCOME TAX CONSEQUENCES In the opinion of Stroock & Stroock & Lavan LLP, special tax counsel to the seller, for U.S. federal income tax purposes, the [ ] term notes will constitute indebtedness and the trust will not be treated as an association, or publicly traded partnership, taxable as a corporation. Each term noteholder, by the acceptance of a [ ] term note, will agree to treat the [ ] term notes as indebtedness for federal, state and local income and franchise tax purposes. Further, the trust will agree, and each holder of a [ ] certificate will agree by their acceptance of such certificates, to treat the trust as a partnership for federal, state and local income and franchise tax purposes if there is more than one owner of [ ] certificates, and, if there is only one owner of [ ] certificates, to treat that sole owner of the certificates as the owner of the assets of the trust and to treat the trust as a disregarded entity. [The trust does not anticipate treating the [ ] term notes as being issued with original issue discount.] All prospective purchasers of [ ] term notes or [ ] certificates should see "Material Federal Income Tax Consequences" in the accompanying prospectus for additional information regarding the application of federal income tax laws, and should also see "State and Local Tax Considerations" in the accompanying prospectus. UNDERWRITING Based on the terms and conditions set forth in the underwriting agreement, the seller has agreed to sell to each of the underwriters named below, and each of the underwriters has severally agreed to purchase from the seller, the principal amount of [ ] term notes set forth opposite its name below: Aggregate Principal Amount to be Purchased UNDERWRITER [ ] TERM NOTES Deutsche Bank Securities Inc............... $[ ] Total................................. $[ ] = The seller has been advised by the underwriters that the several underwriters propose initially to offer the [ ] term notes to the public at the prices set forth on the cover page hereof, and to dealers at these prices less a selling concession not in excess of the percentage set forth below for the [ ] term notes. The Underwriters may allow, and the dealers may re-allow to other dealers, a subsequent concession not in excess of the percentage set forth below for the [ ] term notes. After the initial public offering, the public offering price and these concessions may be changed. SELLING CONCESSION RE-ALLOWANCE [ ] term notes [ ]% [ ]% The underwriters may engage in over-allotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids with respect to the [ ] term notes in accordance with Regulation M under the Securities Exchange Act of 1934. Over-allotment transactions involve syndicate sales in excess of the offering size, which creates a syndicate short position. Stabilizing transactions permit bids to purchase the [ ] term notes so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the [ ] term notes in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the [ ] term notes originally sold by that syndicate member are purchased in a syndicate covering transaction. These over-allotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids may cause the prices of the [ ] term notes to be higher than they would otherwise be in the absence of those transactions. Neither the seller nor any of the underwriters represent that the underwriters will engage in these transactions or that these transactions, if commenced, will not be discontinued without notice at any time. We will receive proceeds of approximately $[ ] from the sale of the [ ] term notes, representing [ ]% of the principal amount of the [ ] term notes, after paying the underwriting discount of $[ ], representing [.]% of the principal amount of the [ ] term notes. Additional offering expenses are estimated to be $[ ]. LEGAL OPINIONS In addition to the legal opinions described in the prospectus, some of the legal matters relating to the [ ] term notes will be passed upon for the underwriters by Stroock & Stroock & Lavan LLP. [ ] has from time to time represented, and is currently representing, [ ] and a number of its affiliates. GLOSSARY OF PRINCIPAL TERMS The following are given the meanings shown below to help describe the payments and cash flows on the notes and the certificates. [ ] Term Note Interest Rate means, for any Note Payment Date, (a) if such Note Payment Date is a Quarterly Distribution Date, an interest rate equal to USD [Three-Month LIBOR] plus [ ]% per annum, and (b) if such Note Payment Date is a Monthly Distribution Date because a Rapid Amortization Event has occurred or because the entire principal balance of the [ ] term notes was not paid on or before the Targeted Final Payment Date, an interest rate equal to USD [One- Month LIBOR] plus [ ]% per annum. [ ] Term Notes Monthly Available Amount has the meaning set forth on page S-[ ]. [ ] Term Notes Monthly Carrying Costs has the meaning set forth on page S-[]. [ ] Term Notes Monthly Interest Payable Amount means, for any Monthly Distribution Date, the sum of: (a) the product of (1) the outstanding principal balance of the [ ] Term Notes on the last day of the related Collection Period (or, in the case of the initial Monthly Distribution Date, the outstanding principal balance on the initial closing date), (2) the [ ] Term Note Interest Rate for the related Note Payment Date, and (3) a fraction, the numerator of which is the number of days elapsed from and including the prior Monthly Distribution Date (or, in the case of the initial Monthly Distribution Date, from and including the initial closing date) to but excluding such Monthly Distribution Date and the denominator of which is 360, and (b) the excess of the [ ] Term Notes Monthly Interest Payable Amount for the prior Monthly Distribution Date over the amount of funds that were deposited in the [ ] Note Distribution Account on the preceding Monthly Distribution Date. [ ] Term Note Targeted Final Payment Date has the meaning set forth on page S-[ ]. [ ] Term Notional Amount for any day during a Collection Period equals the Unaccumulated Principal Balance of the [ ] term notes as of that day, including after giving effect to unreimbursed Trust Charge-Offs as of the close of business on the Monthly Distribution Date during that Collection Period. Additional Trust Principal means, for any Monthly Distribution Date, the amount, if any, of Available Trust Interest and funds in the Reserve Fund applied to cover the Trust Defaulted Amount or to cover unreimbursed Trust Charge-Offs on that Monthly Distribution Date. Aggregate Certificateholders' Interest means, for any Monthly Distribution Date, an amount equal to the sum of (a) the Certificateholders' Interest for all classes of certificates for that Distribution Date and (b) the Certificateholders' Interest Carryover Shortfall for the preceding Monthly Distribution Date. Aggregate Revolver Interest means, for any Monthly Distribution Date, the sum of (a) the Revolver Interest for all series of revolving notes for that Monthly Distribution Date and (b) the Revolver Interest Carryover Shortfall for the preceding Monthly Distribution Date. Available Trust Interest means, for any Distribution Date, the sum of (1) Trust Interest Collections; (2) Shared Investment Proceeds; (3) the net amounts, if any, paid to the trust under the [ ] certificates basis swap; and (4) the portion of the purchase price to be included in Available Trust Interest if the Servicer exercises its option to purchase the assets of the trust as described below under "Optional Purchase by the Servicer." Available Trust Principal means (a) for any day during a Collection Period, Trust Principal Collections for that day minus any amounts paid on that day to the Servicer as reimbursement for outstanding Servicer Liquidity Advances and (b) on the Monthly Distribution Date related to that Collection Period, the sum of (1) Additional Trust Principal, if any, for that Monthly Distribution Date, (2) the Cash Collateral Amount on that Monthly Distribution Date and (3) if that Monthly Distribution Date is related to the Wind Down Period or an Early Amortization Period for the trust or to the Payment Period for the [ ] term notes, and if the amount on deposit in the Reserve Fund on that Distribution Date exceeds zero, the Supplemental Principal Allocation for that current Monthly Distribution Date. Business Day means any day other than a Saturday, Sunday or any other day on which banks in New York, New York or Detroit, Michigan may, or are required to, be closed. Cash Accumulation Account means an Eligible Deposit Account established and maintained by the Servicer with the indenture trustee, in the name of the indenture trustee, on behalf of the holders of the [ ] term notes. Funds in the Cash Accumulation Account will be invested in Eligible Investments. The Cash Accumulation Account will constitute a Designated Account, but the Cash Accumulation Account Earnings will not constitute Shared Investment Proceeds for purposes of the definition of Available Trust Interest. Cash Accumulation Account Earnings will be maintained in the Cash Accumulation Account. Cash Accumulation Account Earnings for a Monthly Distribution Date means investment earnings during the related Collection Period on funds deposited in the Cash Accumulation Account, net of losses and investment expenses with respect to these funds. Cash Accumulation Event means, for the [ ] term notes, each of the Early Amortization Events, except for Early Amortization Events which are also Rapid Amortization Events, and the commencement of a Wind Down Period for the trust. Cash Accumulation Reserve Fund means an Eligible Deposit Account established and maintained by the trust in the name of the indenture trustee for the benefit of the holders of the [ ] term notes. The Cash Accumulation Reserve Fund is available for the payment of interest on the [ ] term notes to the extent described under "The Transfer and Servicing Agreements--Application of Interest Collections" in this prospectus supplement. Cash Accumulation Reserve Fund Deposit Amount means, for any Monthly Distribution Date, the excess, if any, of the Cash Accumulation Reserve Fund Required Amount over the amount on deposit in the Cash Accumulation Reserve Fund. Cash Accumulation Period means, for the [ ] term notes, a period beginning on the occurrence of a Cash Accumulation Event and ending on the earliest of: (1) the date on which the [ ] term notes are paid in full, (2) the occurrence of a Rapid Amortization Event for the [ ] term notes, (3) the Trust Termination Date and (4) under the limited circumstances described above under "--Application of Principal Collections by the Trust--Revolving Period," the recommencement of the Revolving Period for the trust. Cash Accumulation Reserve Fund Release Amount for a Monthly Distribution Date can never be less than zero and is always equal to zero except during a Cash Accumulation Period or a Rapid Amortization Period when it is calculated as follows: Cash Accumulation Reserve ( (CAB) x ([ ] Term Note Interest Rate) x (Actual Days) - (Interest Earned) - ------------------------------------------------------------------------------- Fund Release Amount = 360 where: CAB is the sum of (a) the daily average balance in the Cash Accumulation Account and (b) the daily average balance in the Note Distribution Subaccount in respect of the [ ] term notes prior to any deposits or withdrawals in respect of principal into those accounts on that Monthly Distribution Date; provided that earnings on those accounts during the related Collection Period will be excluded from those balances. Actual Days is the actual numbers of days elapsed from and including the prior Monthly Distribution Date to but excluding that Monthly Distribution Date. Interest Earned is the sum of the Cash Accumulation Account Earnings and the Note Distribution Subaccount Earnings during the related Collection Period. Cash Accumulation Reserve Fund Required Amount means, with respect to any Determination Date, the sum of (1) the present value, discounted at [ ]% per annum, of the Monthly Mismatch Amounts for each Monthly Distribution Date following the Monthly Distribution Date for which the calculation is being made to the Monthly Distribution Date preceding the [ ] Targeted Final Payment Date for the [ ] term notes and (2) $[ ]. Class A Certificate Notional Amount for any day during a Collection Period equals the outstanding Certificate Balance of the [ ] certificates as of the last day of that Collection Period, including after giving effect to unreimbursed Trust Charge-Offs as of the close of business on the Monthly Distribution Date during that Collection Period. Certificate Payment Date shall have the meaning set forth on page S-[ ]. Certificate Rate means for the [ ] certificates issued on the initial closing date a rate equal to, with respect to any Certificate Payment Date, the product of (1) a fraction, the numerator of which is the number of days elapsed from and including the prior Certificate Payment Date (or, in the case of the first Certificate Payment Date, from and including the initial closing date) to but excluding that Certificate Payment Date and the denominator of which is 360 and (2) USD [Three- Month LIBOR] plus [ ]% or, if the [ ] certificates have not been paid in full on their Targeted Final Payment Date or the Fully Funded Date occurs for all outstanding series of notes, then USD [One-Month LIBOR] plus [ ]%. Certificateholders' Interest means, for any Monthly Distribution Date, for any class of certificates, the product of (a) the Certificate Balance (without reduction for unreimbursed Trust Charge-Offs) for that class on the prior Monthly Distribution Date (or, in the case of the first Monthly Distribution Date following the issuance of that class of certificates, on the related closing date) plus the initial Certificate Balance (without reduction for unreimbursed Trust Charge-Offs) of any certificates of that class issued since that prior Monthly Distribution Date and (b) the Certificate Rate for that class for that Monthly Distribution Date. Certificateholders' Interest Carryover Shortfall means, for any Monthly Distribution Date, the excess of (a) the Aggregate Certificateholders' Interest for that Monthly Distribution Date over (b) the amount that was actually deposited in the Certificate Distribution Account on that Monthly Distribution Date in respect of Aggregate Certificateholders' Interest. Deficiency Amount has the meaning specified on page S-[ ]. Determination Date means the [ ] day of each calendar month, or if the [ ] day is not a Business Day, the next succeeding Business Day. Eligible Investments means book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form which, at the time made, evidence: (a) direct obligations of and which are fully guaranteed as to timely payment by, the United States of America; (b) demand deposits, time deposits or certificates of deposit of any depository institution or trust company incorporated under the laws of the United States of America or any state thereof, or any U.S. branch of a foreign bank; the depository institution or trust company shall be supervised and examined by federal or state banking or depository institution authorities; provided, however, that at any time of the investment or contractual commitment to invest therein, the commercial paper or other short-term unsecured debt obligations, other than those obligations the rating of which is based on the credit of a person or entity other than that depository institution or trust company, thereof shall have a credit rating from each of the rating agencies then rating the obligations in the highest investment category granted thereby; (c) commercial paper having, at the time of the investment or contractual commitment to invest therein, a rating from each of the rating agencies then rating that commercial paper in the highest investment category granted thereby; (d) investments in money market or common trust funds having a rating from each of the rating agencies then rating those funds in the highest investment category granted thereby for money market funds, including funds for which the indenture trustee or the owner trustee or any of their respective affiliates is an investment manager or advisor, so long as those fund shall have that rating, provided, however, that no funds in the Cash Accumulation Account or the Note Distribution Subaccount for the [ ] term notes shall be invested in Eligible Investments described in this clause (d); (e) bankers' acceptances issued by any depository institution or trust company referred to in clause (b) above; (f) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a person or entity with the required deposit rating or otherwise approved by the rating agencies; and (g) any other investment permitted by each of the rating agencies, in each case, other than as permitted by the rating agencies, maturing not later than the Business Day immediately preceding the next Monthly Distribution Date. As used in this definition, a rating is in the "highest investment category" without regard to relative gradations within that category so that, for example, commercial paper with a rating of either A-1 or A-1+ is considered to be in the "highest investment category." Final Revolving Period Termination Date has the meaning set forth on page S-[ ]. Fully Funded Date means, with respect to a series of notes, the day on which: (a) for the [ ] term notes, (1) the sum of the amounts on deposit in the Cash Accumulation Account plus the amount on deposit in the Note Distribution Subaccount for the [ ] term notes for the payment of principal equals the outstanding principal balance of the [ ] term notes or (2) the [ ] term notes have been paid in full; (b) for each other outstanding series of term notes, (1) the outstanding principal balance of that series has been reduced to zero, (2) an amount equal to the principal balance has been set aside in a segregated account for the benefit of the notes or (3) some other arrangement with respect to the repayment of principal of the Notes has been made which is satisfactory to the rating agencies; or (c) for the revolving notes, the principal balance has been reduced to zero and the Specified Maximum Revolver Balance has been reduced to zero. LIBOR Business Day means any day other than a Saturday, Sunday or any other day on which banks in London are required or authorized to be closed. Monthly Available Amount means, for any Monthly Distribution Date, the aggregate of the [ ] term notes Monthly Available Amount, any revolving note monthly available amount and the comparable monthly available amounts for each other series of term notes and revolving notes, if any. Monthly Carrying Costs means, for any Monthly Distribution Date, the aggregate of the [ ] term notes Monthly Carrying Costs, any Revolving Note Monthly Carrying Costs and the comparable monthly carrying costs for each other series of term notes and revolving notes, if any. Monthly Distribution Date means the [ ]th day of each month, or if such day is not a business day, then the next succeeding day which is a business day, commencing [ ]. Each Monthly Distribution Date is a "Distribution Date" as defined in the prospectus. The Monthly Mismatch Amount for a Monthly Distribution Date is calculated as follows: Monthly Mismatch Amount = (Term Note Balance) x (Mismatch Rate) - ------------------------------------------------------------------------------- 12 where: Term Note Balance is the outstanding principal balance on the [ ] term notes on the Monthly Distribution Date on which the Cash Accumulation Reserve Fund Required Amount is being calculated after distribution of principal on that Monthly Distribution Date, and Mismatch Rate is [ ]%. Monthly Payment Period has the meaning set forth on page S-[ ]. Note Distribution Subaccount means an account in which the Servicer will maintain all the funds deposited in the Note Distribution Account in respect of principal for the series of term notes beginning its Payment Period. This account may only be kept on the trust's books. Note Payment Date has the meaning set forth on page S-[ ]. Noteholders' Interest means, for any Monthly Distribution Date, (a) with respect to any series of term notes other than the [ ] term notes, the amount required to be paid as, or set aside for payment of, interest on that series of term notes on the Monthly Distribution Date under its terms, including any interest payable as a result of shortfalls from prior Monthly Distribution Dates, and (b) with respect to any series of revolving notes, the sum of (1) the Revolver Interest and (2) the Revolver Interest Carryover Shortfall, in each case, for that series of revolving notes for that Distribution Period. One Month Reference Bank Rate means, for a Monthly Distribution Date, a rate determined on the basis of the rates at which deposits in U.S. dollars are offered by the reference banks (which will be four major banks that are engaged in transactions in the London interbank market, selected by the indenture trustee after consultation with the seller) as of 11:00 a.m., London time, on the day that is two LIBOR Business Days prior to the immediately preceding Monthly Distribution Date to prime banks in the London interbank market for a period of one month commencing on such preceding Monthly Distribution Date in amounts approximately equal to the principal balance of the [ ] term notes then outstanding. The indenture trustee will request the principal London office of each of the reference banks to provide a quotation of its rate. If at least two such quotations are provided, the rate will be the arithmetic mean of the quotations, rounded upwards to the nearest one-sixteenth of one percent. If on any such date fewer than two quotations are provided as requested, the rate will be the arithmetic mean, rounded upwards to the nearest one- sixteenth of one percent, of the rates quoted by one or more major banks in New York, selected by the indenture trustee after consultation with the seller, as of 11:00 a..m., New York time, on such date to leading European banks for U.S. dollar deposits for a period of one month commencing on such applicable date in amounts approximately equal to the then outstanding principal balance of the [ ] term notes. If no such quotation can be obtained, the rate will be USD One-Month LIBOR for the prior Monthly Distribution Date. Principal Allocation Percentage for a referent series of notes, which requires Available Trust Principal to be retained or set aside during any period to fund principal payments with respect to the referent series on any date, is calculated as follows: (1) if that date does not relate to a Wind Down Period or an Early Amortization Period for the trust: (Aggregate Principal Balance of Referent Series) - ------------------------------------------------------------------------------- Principal Allocation Percentage= for a Referent Series (Sum of Aggregate Principal Balance for all Referent Series) where: Aggregate Principal Balance of Referent Series is (A) with respect to any referent series of term notes, the aggregate initial principal balance with respect to that referent series or (B) with respect to any referent series of revolving notes, the outstanding principal balance of that referent series as of the close of business on the day preceding the first day of the Payment Period with respect to that series. Sum of Aggregate Principal Balance for all Referent Series is the sum of the Aggregate Principal Balance of Referent Series for each series of notes which is on that date a referent series. (2) if that date relates to a Wind Down Period or an Early Amortization Period for the trust: (Aggregate Principal Balance of Referent Series) Principal Allocation Percentage= for a Referent Series (Sum of Aggregate Principal Balance for each Series of Notes) where: Aggregate Principal Balance of Referent Series is the aggregate outstanding principal balance of the referent series then outstanding on the last day of the Revolving Period Sum of Aggregate Principal Balance for each Series of Notes is the sum of the Aggregate Principal Balance of Referent Series for all series then outstanding on the last day of the Revolving Period, except for any series the principal balance of which has been fully paid or provided for, calculated for this purpose as though each outstanding series is a Referent Series on that date. Quarterly Distribution Date means with respect to the [ ] term notes and the [ ] certificates, the [ ]th day of each [.], [ ], [ ] and [ ], or if such day is not a Business Day, the next succeeding Business Day, beginning on [ ]. A Rapid Amortization Event for the [ ] term notes will be: (1) specified insolvency events relating to [ ], the Servicer, [ ], or the seller, (2) either the trust or the seller becomes required to register as an "investment company" within the meaning of the Investment Company Act of 1940 and (3) on any Monthly Distribution Date, the balance in the Cash Accumulation Reserve Fund would be less than $[ ] after giving effect to all withdrawals and additions on that Monthly Distribution Date. Items (2) and (3) above are not Early Amortization Events for the trust. Rapid Amortization Period for the [ ] term notes means a period commencing upon the occurrence of a Rapid Amortization Event and ending on the earliest of (a) the date on which the [ ] term notes are paid in full and (b) the Trust Termination Date. Remaining Interest Amounts means, with respect to a series of notes, each of the amounts designated as Remaining Interest Amounts under clause (2) of "The Transfer and Servicing Agreements - Application of Interest Collections". Required Payment means, for any series of term notes other than the [ ] term notes, the amount of principal, if any, required by the terms of the term notes to be due and payable, or to be set aside in anticipation of a future payment of principal, on any specified date or dates. The term Required Payment is not used herein to describe amounts owing or required to be set aside for the [ ] term notes. The Required Payment Period Length, as of a Determination Date, is calculated as follows, with figures rounded up to the nearest whole integer: Required Payment (Outstanding Note Principal Balance) + (Certificate Balance) - -------------------------------------------------------------------------------- Period Length = (Recent Minimum Daily Trust Balance) x (Minimum Monthly Payment Rate) where: Outstanding Note Principal Balance is the outstanding principal balance of all [ ] term notes and all other notes with scheduled Payment Periods during the Payment Period for the [ ] term notes; Recent Minimum Daily Trust Balance is the minimum expected Daily Trust Balance during the period between that Determination Date and February 28, 2005 as determined by the Servicer; and Minimum Monthly Payment Rate is the minimum Monthly Payment Rate during the twelve Collection Periods preceding that Determination Date. Reserve Fund Deposit Amount means, for any Monthly Distribution Date, the excess, if any, of the Reserve Fund Required Amount over the amount on deposit in the Reserve Fund after taking into account any withdrawals from the Reserve Fund on that Monthly Distribution Date. Reserve Fund Funding Condition has the meaning set forth on page S-[ ]. Reserve Fund Required Amount means, (a) for any Monthly Distribution Date during the Revolving Period or Wind Down Period, [ ]% of the Maximum Pool Balance as of that Monthly Distribution Date, or if, as of that Monthly Distribution Date, the long-term debt obligations of [ ] are rated less than "BBB-" by Standard & Poor's Ratings Services, then [ ]%. (b) for any Monthly Distribution Date during any Early Amortization Period occurring prior to the Fully Funded Date for all series of notes, [ ]% of the Maximum Pool Balance as of the last day of the Revolving Period, or if, as of the last day of the Revolving Period the long-term debt obligations of [ ] are rated less than "BBB--" by Standard & Poor's Ratings Services, then [ ]%; and (c) for any Monthly Distribution Date falling on or after the Fully Funded Date for all series of notes, zero. Revolver Interest means, for any Monthly Distribution Date, for any series of revolving notes, the product of (a) the average daily Series Net Revolver Balance for the series of revolving notes during the related Collection Period and (b) the Revolver Interest Rate for the series of revolving notes for the Monthly Distribution Date. Revolver Interest Carryover Shortfall means, for any Monthly Distribution Date, the excess of (a) the Aggregate Revolver Interest for the Monthly Distribution Date over (b) the amount that was actually deposited in the Revolver Distribution Account on the Monthly Distribution Date in respect of Aggregate Revolver Interest. Revolver Interest Rate for any revolving note to be issued has the meaning set forth on page S-[ ]. Revolving Note Monthly Available Amount has the meaning set forth on page S-[ ]. Revolving Note Monthly Carrying Costs has the meaning set forth on page S-[ ]. Scheduled Revolving Period Termination Date has the meaning set forth on page S-[ ]. Series Net Revolver Balance means, with respect to any series of revolving notes, for any date, the aggregate outstanding principal balance under the series of revolving notes minus any amounts on deposit in the Revolver Distribution Account on that date for the payment of principal on that series of revolving notes. Series Shortfall means, for a series of notes, each of the amounts designated as a Series Shortfall in clause (2) under "The Transfer and Servicing Agreements -- Application of Interest Collections." Servicer Liquidity Advance means, for any series of term notes the terms of which provide for a Servicer Liquidity Advance, an advance by the Servicer to the trust made to the extent a required principal payment for any series of Notes for any Monthly Distribution Date cannot otherwise be made, after giving effect to all issuances of securities and additional borrowings under the revolving notes on that Monthly Distribution Date, as they are available. However, the Servicer can only make Servicer Liquidity Advances to the extent that the Servicer, in its sole discretion, expects to recover those advances from subsequent trust Principal Collections. Servicer Liquidity Advances with respect to a series of term notes will be reimbursed (a) if Available Trust Principal is being set aside for that series of term notes, out of that series' share of Available Trust Principal and (b) if Available Trust Principal is not being set aside for term notes, out of a portion of Trust Principal Collections not to exceed a fraction, the numerator of which is the outstanding principal balance of that series of term notes and the denominator of which is the outstanding balance of all series of notes as of that date. The terms of the [ ] term notes do not provide for the Servicer to make Servicer Liquidity Advances. Shared Investment Proceeds means all Investment Proceeds other than (A) Cash Accumulation Account Earnings, (B) Note Distribution Subaccount earnings for the [ ] term notes, (C) Investment Proceeds from the Cash Accumulation Reserve Fund and (D) Investment Proceeds from any other account established for other series of term notes in which funds are accumulated to pay principal on the notes at designated times. Specified Maximum Revolver Balance has the meaning set forth on page S-__. Specified Support Arrangement means any letter of credit, security bond, cash collateral account, spread account, guaranteed rate agreement, maturity or liquidity facility, tax protection agreement, interest rate swap agreement, interest rate cap agreement, other derivative product or other arrangement to provide liquidity or credit support for the benefit of holders of one or more series or classes of securities, other than the Reserve Fund, whether or not that arrangement is an asset of the trust and is so designated. As of the initial closing date, the Specified Support Arrangements will consist of the basis swaps and the Cash Accumulation Reserve Fund. Specified Support Arrangements for the benefit of any series or classes of securities, including those established in connection with the issuance of any securities after the initial closing date, may not inure to the benefit of other securities, including the [ ] term notes, issued by the trust. Supplemental Principal Allocation means, for any Monthly Distribution Date related to the Wind Down Period or an Early Amortization Period for the trust or related to the Payment Period for the [ ] term notes, an amount not less than zero and equal to the lesser of: (a) the excess, if any, of (1) the product of (A) the percentage equivalent of a fraction which will never exceed 100%, the numerator of which is the Daily Trust Balance and the denominator of which is the principal balance of all receivables, including receivables owned by [ ], in the dealer accounts included in the pool of accounts, in each case, as of the termination of the Ordinary Revolving Period, and (B) the aggregate amount of Principal Collections on all receivables, including receivables held by [ ], in the dealer accounts in the pool of accounts for each day during the related Collection Period over (2) the aggregate amount of Trust Principal Collections for each day during the related Collection Period provided that no amount will be included pursuant to clause (1)(B) or (2) for any day in that Collection Period that occurred during the Ordinary Revolving Period and (b) an amount equal to (1) the Daily Trust Balance as of the termination of the Ordinary Revolving Period plus (2) the Cash Collateral Amount on the last day of the Ordinary Revolving Period minus (3) the Available Trust Principal for each Monthly Distribution Date from and after the final Monthly Distribution Date for the Revolving Period through but excluding that current Monthly Distribution Date minus (4) the amount added to unreimbursed Trust Charge-Offs on each Monthly Distribution Date from and after the final Monthly Distribution Date for the Revolving Period through and including that current Monthly Distribution Date minus (5) Available Trust Principal for that current Monthly Distribution Date, assuming the Supplemental Principal Allocation for that Monthly Distribution Date was zero. For purposes of this definition, Ordinary Revolving Period means the period ending on the business day preceding the commencement of the Wind Down Period or the Early Amortization Period for the trust or the Payment Period for the [ ] term notes. Targeted Final Distribution Date for the [ ] certificates has the meaning specified on page S-[ ]. Three Month Reference Bank Rate means, for a Quarterly Distribution Date, a rate determined on the basis of the rates at which deposits in U.S. dollars are offered by the reference banks (which will be four major banks that are engaged in transactions in the London interbank market, selected by the indenture trustee after consultation with the seller) as of 11:00 a.m., London time, on the day that is two LIBOR Business Days prior to the immediately preceding Quarterly Distribution Date to prime banks in the London interbank market for a period of three months commencing on such preceding Quarterly Distribution Date in amounts approximately equal to the principal balance of the [ ] term notes then outstanding. The indenture trustee will request the principal London office of each of the reference banks to provide a quotation of its rate. If at least two such quotations are provided, the rate will be the arithmetic mean of the quotations, rounded upwards to the nearest one-sixteenth of one percent. If on any such date fewer than two quotations are provided as requested, the rate will be the arithmetic mean, rounded upwards to the nearest one- sixteenth of one percent, of the rates quoted by one or more major banks in New York, selected by the indenture trustee after consultation with the seller, as of 11:00 a..m., New York time, on such date to leading European banks for U.S. dollar deposits for a period of three months commencing on such applicable date in amounts approximately equal to the then outstanding principal balance of the [ ] term notes. If no such quotation can be obtained, the rate will be USD [Three-Month LIBOR] for the prior Quarterly Distribution Date. Trust Interest Allocation means, for any series of notes, for any Monthly Distribution Date, an amount equal to the product of (1) Available Trust Interest less the amounts paid to the Servicer under clause 1(a) under the "The Transfer and Servicing Agreements -- Application of Interest Collections" and (2) the Trust Interest Allocation Percentage for that series. Trust Interest Allocation Percentage means, for any series of notes, for any Monthly Distribution Date, a fraction calculated as set forth in the following equation: Trust Interest = (UPB OF NOTE SERIES) -------------------------------------------------- Allocation Percentage (UPB of all Term Notes) + (UPB of all Revolving Notes) where: UPB of Note Series is (1) for a series of term notes, the Unaccumulated Principal Balance for that series of term notes and (2) for a series of revolving notes, the daily average outstanding principal balance for that series of revolving notes during the related Collection Period; UPB of all Term Notes is the Unaccumulated Principal Balances of all series of term notes then outstanding; and UPB of all Revolving Notes is the daily average of the outstanding principal balance of all revolving notes during the related Collection Period. Trust Interest Collections means, for any Monthly Distribution Date, an amount equal to the sum of (1) the product of (a) the Trust Percentage and (b) Interest Collections for the related Collection Period and (2) recoveries during the related Collection Period on Eligible Receivables that have previously become defaulted receivables. If, on any Monthly Distribution Date, the Servicer does not make a servicer advance in the amount of the full Deficiency Amount, Trust Interest Collections for the Monthly Distribution Date will be adjusted to give effect to the actual percentage of Eligible Receivables in those dealer accounts in the pool of accounts in which the full amount of interest due for the related Collection Period was not collected. The adjustment will not affect the amount of interest allocated to the trust with respect to the other dealer accounts in the pool of accounts. Trust Percentage means, for any Monthly Distribution Date, the percentage equivalent of a fraction never to exceed 100%, the numerator of which is the average Daily Trust Balance during the related Collection Period and the denominator of which is the average daily aggregate principal balance of all receivables, including receivables owned by [ ], in the dealer accounts included in the pool of accounts during the related Collection Period. Trust Principal Collections means, for any date, the sum of (a) the amount of Principal Collections on receivables held by the trust and (b) the principal portion of all Warranty Payments and Administrative Purchase Payments, if any, on that date. Unaccumulated Principal Balance means, with respect to any series of term notes as of a Monthly Distribution Date, (1) the daily average of the outstanding principal balance of the term notes during the related Collection Period minus (2) with respect to the [ ] term notes, the daily average during the related Collection Period of the sum of (a) the amount of funds on deposit in the Cash Accumulation Account and (b) the amount of funds on deposit in the Note Distribution Account in respect of the outstanding principal balance of the [ ] term notes or, with respect to other series of term notes, the daily average of the amount of funds on deposit in any account during the related Collection Period for which funds are accumulated to pay principal on that series as specified under the terms of that series of term notes. Unsatisfied Deficiency Amount has the meaning specified on page S-[ ]. USD One-Month LIBOR (a) with respect to the [ ] term notes on each Monthly Distribution Date, means the rate for deposits in U.S. Dollars for a period of one month which appears on the Bridge Information Systems Telerate Service Page 3750 as of 11:00 a.m., London time, on the day that is two LIBOR Business Days prior to the Monthly Distribution Date preceding that Monthly Distribution Date, or, for the initial Monthly Distribution Date, two LIBOR Business Days prior to the initial closing date. If the rate does not appear on that page or any other page that may replace page 3750 on the Telerate service, or if the Telerate service is no longer offered, then the indenture trustee will select the appropriate rate from another service for displaying LIBOR or comparable rates after consultation with the seller. If no other service is available, then the rate will be the Three Month Reference Bank Rate; and (b) with respect to the [ ] certificates, has a correlative meaning to the definition in clause (a), except that references therein and in the definition of One- Month Reference Bank Rate to the [ ] term notes should be read to mean the [ ] certificates. USD Three-Month LIBOR (a) with respect to the [ ] term notes on each Quarterly Distribution Date, the rate for deposits in U.S. Dollars for a period of three months which appears on the Bridge Information Systems Telerate Service Page 3750 as of 11:00 a.m., London time, on the day that is two LIBOR Business Days prior to the Quarterly Distribution Date preceding that Quarterly Distribution Date, or, for the initial Quarterly Distribution Date, two LIBOR Business Days prior to the initial closing date. If the rate does not appear on that page or any other page that may replace page 3750 on the Telerate service, or if the Telerate service is no longer offered, then the indenture trustee will select the appropriate rate from another service for displaying LIBOR or comparable rates after consultation with the seller. If no service is available, then the rate will be the Three Month Reference Bank Rate; and (b) with respect to the [ ] certificates, has a correlative meaning to the definition in clause (a), except that references therein and in the definition of Three-Month Reference Bank Rate to the [ ] term notes should be read to mean the [ ] certificates. The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION , _______, ____ PROSPECTUS DEALER FLOORPLAN RECEIVABLE ASSET-BACKED NOTES (ISSUABLE IN SERIES) ACE SECURITIES CORP. SELLER --------------- SERVICER EACH TRUST-- o will issue one or more series of term notes, which will be described in a prospectus supplement; o will own a revolving pool of wholesale automotive receivables generated by a portfolio of floor plan financing agreements with retail automotive dealers; and o Will also issue one or more series of revolving notes and one or more classes of certificates, but these revolving notes and certificates will not be sold under this prospectus. THE TERM NOTES-- o will represent indebtedness of the related trust; o will be paid only from the assets of the trust and amounts on deposit in the related reserve funds; o will represent the right to payments in the amounts and at the times described in the related prospectus supplement; and o will benefit from one or more forms of credit enhancement. YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE _ IN THIS PROSPECTUS. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE TERM NOTES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. MAKING ANY CONTRARY REPRESENTATION IS A CRIMINAL OFFENSE. Important notice about information presented in this prospectus and the accompanying prospectus supplement We provide information to you about the term notes in two separate documents: (1) this prospectus, which provides general information and terms of the term notes, some of which may not apply to a particular series of term notes, including your series. (2) the accompanying prospectus supplement, which will provide information regarding the pool of receivables held by the trust and will specify the terms of your series of term notes. IF THE TERMS OF YOUR SERIES OF TERM NOTES VARY BETWEEN THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE PROSPECTUS SUPPLEMENT. You should rely only on the information provided in this prospectus and the accompanying prospectus supplement, including the information incorporated by reference. We have not authorized anyone to provide you with other or different information. We are not offering the term notes in any state where the offer is not permitted. YOU CAN FIND DEFINITIONS OF THE CAPITALIZED TERMS USED IN THIS PROSPECTUS UNDER THE CAPTION "GLOSSARY OF TERMS" WHICH APPEARS AT THE END OF THIS PROSPECTUS. TABLE OF CONTENTS Risk Factors.................................................3 The Originator and the Servicer..............................3 The Seller...................................................4 The Trusts...................................................7 Capitalization Of The Trust..................................8 The Owner Trustee............................................8 Use Of Proceeds..............................................8 The Dealer Floor Plan Financing Business.....................8 Creation Of Receivables......................................9 The Accounts.................................................13 Maturity And Principal Considerations........................14 The Term Notes...............................................14 The Revolving Notes..........................................25 The Certificates.............................................26 The Transfer And Servicing Agreements........................26 Sale And Assignment Of Receivables And Collateral Security...26 Principal Collections........................................32 Legal Aspects................................................44 Federal Income Tax Consequences..............................46 Tax Characterization And Treatment Of Term Notes.............47 Tax Characterization Of The Trust............................50 State, Local And Foreign Tax Consequences....................51 Erisa Considerations.........................................51 Plan Of Distribution.........................................51 Legal Opinions...............................................52 Glossary Of Terms............................................54 RISK FACTORS You should consider the following risk factors in deciding whether to purchase the securities. SOME RECEIVABLES MAY BECOME UNCOLLECTIBLE IF OTHER PARTIES ESTABLISH LIENS ON RECEIVABLES THAT ARE SUPERIOR TO THE TRUST'S, WHICH COULD DELAY PAYMENT ON YOUR TERM NOTES. The originator and the seller will file financing statements with respect to each pool of receivables sold to each trust. These financing statements perfect the security interests that the seller and the trust have in the pool of receivables. However, the seller expects that the originator, as servicer, will serve as the custodian of the receivables and will not physically segregate or mark the receivables from other receivables to indicate that they have been sold to the trust. Instead the receivables will be held as discussed in the section in this prospectus titled "The Transfer and Servicing Agreements--Sale and Assignment of Receivables and Collateral Security." It is possible that another party could acquire an interest in the receivables superior to the trust's interest. This would happen if the other party purchases or takes a security interest in the receivables: o for value o in the ordinary course of business and o without actual knowledge of the seller's or the trust's interest. When a previously secured vehicle is sold or leased, and the proceed of that sale of lease include chattel paper -- as with most retail installment contracts -- then a party who buys that chattel paper may have an interest in the receivable that is senior to the trust's interest. This may result in delay or reduction of payments on the term notes. This is described further in the section of this prospectus titled "Legal Aspects--Transfer of Receivables." SOME RECEIVABLES MAY BECOME UNCOLLECTIBLE IF DEALERS MAKE SALES OUT OF TRUST, WHICH COULD DELAY PAYMENT ON YOUR TERM NOTES A dealer who purchases financed vehicles gives the originator a security interest in those vehicles. When a financed vehicle is sold or leased, originator's security interest in the vehicle will generally terminate. A sale out of trust occurs when a dealer sells or leases a vehicle but fails to pay the originator the amount owed on the receivable for that vehicle. If this happens, originator will no longer be able to look to that vehicle as security for the receivable. This may impair originator's ability to collect the receivable, in which case you might experience reductions or delays in payments on your term notes. IF THE ORIGINATOR FILES FOR BANKRUPTCY YOU COULD EXPERIENCE REDUCTIONS AND DELAYS IN PAYMENTS ON YOUR TERM NOTES. If the originator files for bankruptcy under the federal bankruptcy code or any state insolvency laws, a court may: o consolidate the assets and liabilities of the originator with those of the seller o decide that the sale of the receivables to the seller was not a "true sale" o disallow a transfer of receivables prior to the bankruptcy. The result of this court ruling could be that the receivables become part of the originator's bankruptcy estate. If that were to happen, you might experience reductions or delays in payments on your term notes. In addition, tax or other liens might have priority over the trust's interest. For a more detailed discussion of this risk, see "Legal Aspects--Matters Relating to Bankruptcy " in this prospectus. In addition, if the originator files for bankruptcy under the federal bankruptcy code or any state insolvency laws, the franchised dealers who are obligated to make payments on the receivables might respond by delaying or withholding payments on the receivables. They might do this even though they have no legal or contractual justification to stop payments. The result might be that you experience reductions or delays in payments on your term notes. THE TRUST IS DEPENDENT ON THE ORIGINATOR TO GENERATE NEW RECEIVABLES; WITHOUT NEW RECEIVABLES, THE TRUST MAY BE UNABLE TO MAKE PAYMENTS ON THE TERM NOTES. The originator makes loans to franchised dealers to finance their wholesale automobile purchases, and these loans generate receivables. The originator typically has in the past provided financial assistance to dealers, including capital contributions in the form of minority equity investments. The originator must be able to generate new receivables in order to meet the trust's obligations to pay interest and principal on the securities. The seller does not guarantee that it will continue to generate receivables at historical rates, and the following events could negatively impact the originator's ability to generate new receivables: o A decline in the manufacture and sale of automobiles and light trucks due to an economic downturn, a labor disruption, competitive pressure, or any other factors o A change in vehicle distribution practices by manufacturers whose vehicles are financed by the originator o A change in dealer inventory management practices o A change in the interest rates charged by the originator to dealers o A change in the amounts of the credit lines offered by the originator to dealers o A change in the terms offered by the originator to dealers o Defaults on dealers accounts o Termination of dealer franchises o Dealers filing for bankruptcy o A change in other financial support offered by the originator to dealers o Seasonal fluctuations in the sale and leasing of vehicles If the originator generates new receivables at a lower rate than it has done in the past, you might experience reductions or delays in payments on your term notes. The payment reductions or delays may reflect the decrease in receivables. If an auto maker terminates a dealer franchise, the manufacturer is typically obligated to repurchase most new vehicles from that dealer. If the originator or another creditor forecloses on a dealer's property, the manufacturer has the option, but not the obligation, to repurchase the dealer's new, current model, undamaged vehicles at invoice price. If the originator exercises this option, then the proceeds of the purchase will generally be available to pay on the receivables. COLLECTIONS FROM DEALERS IS GENERALLY THE TRUST'S ONLY SOURCE OF FUNDS TO MAKE PAYMENTS ON THE TERM NOTES The trust's ability to make payments on the term notes generally depends on collections. The from dealers on the receivables. The prospectus supplement will describe past patterns of dealer payments on similar receivables. However, we do not guarantee that dealers will pay on the receivables at the same rate they have in the past or in any other pattern. No one can be certain of when dealers will sell and lease vehicles. The timing of sales depends on many economic and social factors that are beyond the control of the originator, the seller and the trust. Sales incentive programs and financing incentive programs of vehicle manufacturers also affect the sale and lease of vehicles. If the dealers' ability to pay on the receivables declines for whatever reason, you might experience reductions or delays in payments on your term notes. THE ORIGINATOR AND THE SELLER DO NOT GUARANTEE PAYMENTS ON THE RECEIVABLES OR THE TERM NOTES, BUT IN LIMITED CIRCUMSTANCES THE ORIGINATOR MAY BE REQUIRED TO REPURCHASE RECEIVABLES The originator, the seller and their respective affiliates are generally not obligated to make any term note payments to you, and they do not guarantee payments on the receivables and warranties about the characteristics of the receivables, and the originator will then assign those representations warranties to the trust. If the originator branches the receivables, the trust may require the originator to repurchase the applicable receivables from the trust. If the originator fails to repurchase those receivables, you might experience reductions or delays in payments on your term notes. THE TRUST HAS LIMITED ASSETS: THE RECEIVABLES AND ANY FORMS OF CREDIT ENHANCEMENT The only significant assets or sources of funds any trust will have will be its receivables, its rights in any reserve fund, or other rights or credit enhancements that the related prospectus supplement will specify. The term notes will only represent interests in the trust related to those term notes. Neither the originator, the seller, the trustee, any of their affiliates nor any other person nor entity will insure or guarantee the term notes, except as described in the related prospectus supplement. You must rely primarily on payments on the related receivables and on the reserve fund as the repayment sources of your term notes. In addition, you may have to look to the proceeds from the repossession and sale of collateral which secures defaulted receivables and the proceeds from any recourse against dealers under the financing agreements. If these sources are insufficient, you might experience reductions or delays in payments on your term notes. For further detail please see the section in this prospectus titled "The Transfer and Servicing Agreements--Liquidity and Credit Support" and Legal Aspects." YOU MAY FIND A LIMITED MARKET FOR ANY RESALE OF THE TERM NOTES The underwriters may assist you in reselling the term notes, but they are not required to do so. A secondary market for any term notes may not develop. If a secondary market does develop, it might not continue or it might not be sufficiently liquid to allow you to resell any of your term notes. THE RATINGS ON THE TERM NOTES ARE NOT RECOMMENDATIONS; THEY MAY CHANGE OR BE WITHDRAWN The term notes for each trust will be issued only if they receive the required rating. A security rating is not a recommendation to buy, sell or hold the term notes. Rating agencies may revise the ratings or withdrawn them at any time. Ratings on the term notes do not address the timing of distributions on principal on the term notes prior to the date specified in the prospectus supplement as the rated final maturity date. A withdrawal or lower of rating of the term notes may impact the value of your term notes and affect their marketability. THE ORIGINATOR AND THE SERVICER Information with respect the originator and the servicer will be set forth in the related prospectus supplement. THE SELLER ACE Securities Corp., the seller, is a special purpose corporation incorporated in the State of Delaware on June 3, 1998. The principal executive offices of the depositor are located at 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211. Its telephone number is (704) 365-0569. The depositor does not have, nor is it expected in the future to have, any significant assets. The limited purposes of the seller are, in general, to acquire, own and sell mortgage loans and financial assets; to issue, acquire, own, hold and sell securities and notes secured by or representing ownership interests in mortgage loans and other financial assets, collections on the mortgage loans and related assets; and to engage in any acts that are incidental to, or necessary, suitable or convenient to accomplish, these purposes. All of the shares of capital stock of the depositor are held by Altamont Holdings Corp., a Delaware corporation. THE TRUSTS ACE Securities Corp., a Delaware corporation will establish a trust or master trust pursuant to a trust agreement or a master trust agreement. The trustee of each trust will be a commercial bank, savings and loan association or trust company identified as the trustee in the related prospectus supplement. Each Trust will issue one or more series of asset backed notes or asset backed certificates, that will include one or more classes of certificates or one or more classes of notes. Any notes included in a series will be issued pursuant to an indenture entered into between the related trust and an indenture trustee. The indenture trustee will also be a commercial bank, savings and loan association or trust company identified as the indenture trustee in the related prospectus supplement. In exchange for the securities to be issued by a trust on the initial issuance date for those securities, the seller will establish each trust by selling, transferring and assigning to each trust, without recourse, the seller's right, title and interest in, to and under: o the Eligible Receivables existing in each dealer account in the related pool of accounts on the date on which the trust issues its first series of term notes and the Eligible Receivables generated in each dealer account in the pool of accounts from time to time thereafter during the term of the trust, o Collections on these receivables and o the related Collateral Security. The seller or originator will retain the Retained Property, and under each trust sale and servicing agreement, the seller will also sell, transfer and assign to the related trust the seller's rights and remedies under the related pooling and servicing agreement associated with the related receivables. To the extent specified in the related prospectus supplement states otherwise, each trust's assets will also include one or more interest rate swaps and funds on deposit in some of the bank accounts of the trust. Each dealer account is an individual line of credit or related lines of credit represented by a revolving dealer floor plan financing agreement extended or maintained by the originator to a United States corporation or other entity or person engaged generally in the business of purchasing vehicles from a manufacturer or distributor thereof and holding the vehicles for sale or lease in the ordinary course of business. The pool of accounts is comprised of all dealer accounts identified on the Schedule of Accounts as amended and supplemented from time to time pursuant to the related pooling and servicing agreement and trust sale and servicing agreement. Pursuant to each trust sale and servicing agreement, the seller or originator will have the limited right from time to time to designate additional dealer accounts to be included in the related pool of accounts and from time to time to designate the dealer accounts to be removed from that pool of accounts. Once a dealer account is so designated for removal, or if a dealer account ceases to be an Eligible Account, the receivables originated thereafter in that dealer account will not be transferred to the trust. See "The Transfer and Servicing Agreements--Addition and Removal of Accounts " in this prospectus. With respect to each trust and to the extent specified in the related prospectus supplement, interest rate cap or swap agreements, cash collateral accounts and other credit, liquidity and other enhancement arrangements may be held by the owner trustee or the indenture trustee for the benefit of holders of any securities. These items may be included as assets of a trust or may be held outside of a trust. Arrangements for the benefit of holders of one series or class of securities of a trust may not be available to the holders of other series or classes of the same trust. The principal offices of each trust will be specified in the related prospectus supplement. CAPITALIZATION OF THE TRUST Prior to each trust's initial issuance date, the trust will have no assets or liabilities. No trust is expected to engage in any activities other than (1) acquiring, managing and holding (a) the related receivables (b) other assets contemplated in this document and in the related prospectus supplement and (c) the proceeds from the assets in paragraphs (a) and (b); (2) issuing securities; and (3) making payments and distributions on those securities and related activities. No trust is expected to have any source of capital other than its assets and any related credit, liquidity or other enhancement arrangement. With respect to each trust, on the related initial issuance date, the trust is expected to issue one or more series of term notes, one or more series of revolving notes and one or more classes of certificates, all as further described herein and in the prospectus supplement related to any term notes offered hereby. See "The Revolving Notes " and "The Certificates " in this prospectus. From time to time thereafter, the trust may issue additional series of notes and additional certificates. See "The Transfer and Servicing Agreements--Additional Issuances, Changes in Maximum Revolver Balance " in this prospectus. The related prospectus supplement will set forth the pro forma capitalization of a trust at the time of the issuance of any term notes. The certificates will represent the equity in each trust. The related prospectus supplement will set forth the portion of the certificates issued on the related initial issuance date. To the extent applicable, the related prospectus supplement will also set forth the portion of the certificates issued since the related initial issuance date. The seller or its affiliates may retain all or a portion of the certificates by or they may be sold to third party investors that are unaffiliated with the seller, the originator and the trust. THE OWNER TRUSTEE The related prospectus supplement will specify the owner trustee for each trust. The owner trustee's liability in connection with the issuance and sale of the securities is limited solely to the express obligations of that owner trustee set forth in the related trust agreement. An owner trustee may resign at any time, in which event the servicer will be obligated to appoint a successor trustee. The administrator of a trust may also remove the owner trustee if the owner trustee ceases to be eligible to continue as owner trustee under the related trust Agreement or if the owner trustee becomes insolvent. In these circumstances, the administrator will be obligated to appoint a successor trustee. Any resignation or removal of an owner trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by the successor trustee. USE OF PROCEEDS Unless the related prospectus supplement states otherwise, the net proceeds to be received by the seller from the sale of the securities will be applied to purchase receivables from the originator. THE DEALER FLOORPLAN FINANCING BUSINESS The dealer accounts are individual lines of credit represented by revolving dealer floor plan financing agreements extended or maintained by the originator to United States dealers and, to the extent specified in the related prospectus supplement, foreign dealers. The lines of credit for all these dealers constitute the U.S. portfolio. Dealers use funds loaned under these arrangements, which are known generally as "wholesale" or "floor plan" financing, primarily to finance new and used motor vehicles manufactured or distributed by motor vehicle manufacturers and distributors pending sale or lease to the ultimate customer. In general, each receivable generated in a dealer account is secured by all vehicles owned by the related dealer and, in some instances, by other collateral security owned by that dealer. The related prospectus supplement will provide information with respect to the accounts which will include, among other things: (a) underwriting criteria; (b) the loss and delinquency experience for the portfolio of accounts; (c) the composition of the portfolio by account balance; and (d) the geographic distribution of accounts. THE ACCOUNTS The receivables of any trust are rights to receive payments on advances made by the originator to the related dealers under the dealer accounts included in the pool of accounts for that trust. The initial pool of accounts related to any trust will be selected from all of the dealer accounts in the the originator's portfolio that were Eligible Accounts as of the date on which the trust issues its first series of term notes. Eligible Accounts do not include fleet accounts. Only Eligible Receivables will be transferred to the related trust. See "The Transfer and Servicing Agreements--Sale and Assignment of Receivables and Collateral Security " in this prospectus. Information with respect to the dealer accounts initially included in the pool of accounts for any trust will be set forth in the related prospectus supplement. For each trust, pursuant to the related trust sale and servicing agreement, the seller will have the limited right to designate from time to time additional dealer accounts to be included in the pool of accounts. The seller will have the right to purchase from the originator the Eligible Receivables then existing and thereafter arising in those dealer accounts and to sell and assign those receivables to the trust. See "The Transfer and Servicing Agreements Sale and Assignment of Receivables and Collateral Security " in this prospectus. In order to be designated an additional dealer account, among other things, each additional dealer account must be an Eligible Account. Under the circumstances specified in the related trust sale and servicing agreement, the seller has the right to remove dealer accounts from the pool of accounts. If a dealer account is so designated for removal or ceases to be an Eligible Account, the receivables originated thereafter in that dealer account will not be transferred to the trust. See "The Transfer and Servicing Agreements--Addition and Removal of Accounts " in this prospectus. MATURITY AND PRINCIPAL CONSIDERATIONS Full amortization of any term notes by the applicable Targeted Final Payment Date, if any, and the applicable Stated Final Payment Date depends on, among other things, payments by dealers on receivables, and may not occur if these payments are insufficient. Because the receivables generally are not paid prior to the ultimate sale or lease of the underlying vehicle, the timing of these payments is uncertain. In addition, the originator will not be able to cannot assure that it will generate additional receivables under the dealer accounts, that additional dealer accounts will be available or added to any pool of accounts or that any particular pattern of dealer payments will occur. The amount of new receivables generated in any month and monthly payment rates on the receivables may vary because of any of the following factors: o seasonal variations in vehicle sales and inventory levels o retail incentive programs provided by vehicle manufacturers o incentive programs provided by financing sources and various other factors affecting vehicle sales generally Some historical information concerning the monthly payment rates for the receivables in the portfolio will be set forth in each prospectus supplement. There can be no assurance that the rate of principal collections on the receivables in any trust will be comparable to prior experience. Full amortization of any term notes by the applicable Targeted Final Payment Date, if any, and the applicable Stated Final Payment Date may also be affected by payment requirements for, and allocations to, other series of term notes and the related revolving notes and certificates. THE TERM NOTES General With respect to each trust, one or more series of term notes will be issued pursuant to the terms of an indenture, a form of which has been filed as an exhibit to the registration statement of which this prospectus forms a part. The following summary does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the term notes and the indenture. Where particular provisions or terms used in the indenture are referred to, the actual provisions, along with definitions of terms, are incorporated by reference as part of this summary. Unless the related prospectus supplement specifies that the term notes will be issued in definitive form, each series of term notes will initially be represented by one or more term notes, which will be registered in the name of Cede & Co., as the nominee of DTC in the United States, or Clearstream, Luxembourg or Euroclear in Europe, except as set forth below. Unless the related prospectus supplement states otherwise, term notes will be available for purchase in denominations of $1,000 and integral multiples thereof in book-entry form only. Unless and until definitive term notes are issued under the limited circumstances described herein or in the related prospectus supplement, no term noteholder will be entitled to receive a physical certificate representing a term note. Unless otherwise indicated, all references herein to actions by Term Noteholders refer to actions taken by DTC upon instructions from its participating organizations, or DTC participants. All distributions, notices, reports and statements to term noteholders will be sent to DTC or Cede & Co. As the registered holder of the term notes, as the case may be, for distribution to beneficial owners in accordance with DTC's procedures. See "Book-Entry Registration" and "Definitive Term Notes" in this prospectus. Principal and Interest on the Term Notes The related prospectus supplement will describe the timing and priority of payment, seniority, Interest Rate, Targeted Final Payment Date, if any, Stated Final Payment Date, Payment Period, if any, and the amount of, or method for, determining payments of principal and interest on a series of term notes. The related prospectus supplement will describe whether interest payments on term notes will be made monthly, quarterly, semi-annually or otherwise. With respect to each trust, unless the related prospectus supplement states differently and except for a series of term notes during its Payment Period, if any, during the Revolving Period, no payments of principal will be made on the term notes and no distributions of the certificate balance will be made with respect to the certificates and no amounts will be set aside for that purpose. During the Payment Period, if any, for a series of term notes, Principal Collections and other amounts constituting Available Trust Principal, which may include proceeds from the issuance of additional securities, will be allocated to principal payments thereon and paid as set forth in the related prospectus supplement. Any of these principal payments may be due in instalments, may be limited by a Controlled Deposit Amount, or may be due in a lump sum payment. During the Wind Down Period and any Early Amortization Period, Principal Collections and other amounts constituting Available Trust Principal will be allocated to principal payments on the notes and will be set aside for that purpose as set forth in the related prospectus supplement. Unless the related prospectus supplement states otherwise, during the Wind Down Period and any Early Amortization Period, if and so long as there are any funds on deposit in the related Reserve Fund, to the extent that it would result in more principal collections being allocated to the trust than otherwise, Principal Collections will be allocated to the trust pro rata, based on the aggregate percentage of all the receivables in the dealer accounts that are Eligible Receivables as of the commencement of the Wind Down Period or Early Amortization Period. Alternatively, if an Early Amortization Period commences during the Wind Down Period, as of the commencement of the Wind Down Period. During the Wind Down Period, the amount so allocated may, to the extent provided in the related prospectus supplement, be limited by any applicable Controlled Deposit Amounts. If an Early Amortization Period commences during any Payment Period or the Wind Down Period, amounts on deposit in the Note Distribution Account, the Revolver Distribution Account and the Certificate Distribution Account, if any, will be paid to holders of securities on the first Distribution Date for the Early Amortization Period as described in the related prospectus supplement. If the related prospectus supplement so provides, specified Early Amortization Events may be designated as a Cash Accumulation Event, in which case a Cash Accumulation Period will commence. During any Cash Accumulation Period, allocated Principal Collections will be invested in a cash accumulation account dedicated to the holders of the series of term notes described in the prospectus supplement until the planned date or dates for repayment of that series of term notes. With respect to each trust, unless the related prospectus supplement states otherwise, principal and interest payments on all series of term notes will have the same priority of payment. Payments of principal and interest on a series of term notes may be senior or equivalent to the priority of payments on the related revolving notes, as described in the related prospectus supplement. However, this would not be the case in circumstances related to the occurrence of an Event of Default. To the extent specified in the related prospectus supplement, payments of principal and interest on the notes will be senior in priority of payment to the distributions to be made on the related certificates outstanding from time to time. A series of term notes may be entitled to (1) principal payments with disproportionate, contingent, nominal or no interest payment, or (2) interest payments with disproportionate, contingent, nominal or no principal payments (Strip Notes). The Interest Rate for each series of term notes issued by a trust may be o fixed, o variable, o contingent, o adjustable, o for some series of Strip Notes, an interest rate of zero, or o any combination of Interest Rate types. Each series of term notes may also have a different Targeted Final Payment Date, if any, and Stated Final Payment Date. The related prospectus supplement will specify the Interest Rate for each series of term notes, or the initial Interest Rate and the method for determining subsequent changes in the Interest Rate. One or more series of term notes of a trust may be redeemable under the circumstances and in the manner specified in the related prospectus supplement. Unless the related prospectus supplement states differently, payments of interest on the term notes will be made prior to payments of principal thereon. The Indenture MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT. Each trust and related indenture trustee, on the trust's behalf, may, without consent of the related noteholders, enter into one or more supplemental indentures for any of the following purposes: (1) to correct or amplify the description of the collateral or add additional collateral; (2) to provide for the assumption of the notes and the indenture obligations by a permitted successor to the trust; (3) to add additional covenants for the benefit of the related noteholders; (4) to convey, transfer, assign, mortgage or pledge any property to or with the indenture trustee; (5) to cure any ambiguity or correct or supplement any provision in the indenture or in any supplemental indenture which may be inconsistent with any other provision of the indenture or of any supplemental indenture; (6) to provide for the acceptance of the appointment of a permitted successor indenture trustee or to add to or change any of the provisions of the indenture as shall be necessary and permitted to facilitate the administration by more than one trustee; (7) to modify, eliminate or add to the provisions of the indenture in order to comply with the Trust Indenture Act; (8) to increase the Specified Maximum Revolver Balance in accordance with the conditions therefor in the related trust sale and servicing agreement; and (9) to add any provisions to, change in any manner, or eliminate any of the provisions of, the indenture or modify in any manner the rights of noteholders under the indenture; provided that any action specified in this clause (9) does not adversely affect in any material respect the interests of any related noteholder unless noteholder consent is otherwise obtained as described below. MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT. With respect to each trust, with the consent of the holders of a majority in principal amount of the outstanding notes affected thereby, the trust and the indenture trustee may execute a supplemental indenture to add provisions to, change in any manner or eliminate any provisions of, the related indenture, or modify in any manner the rights of the related noteholders. Without the consent of the holder of each outstanding related note affected thereby, however, unless otherwise provided in the prospectus supplement, no supplemental indenture will: (1) change the due date of any installment of principal of or interest on any note or reduce the principal amount thereof, the applicable interest rate or the redemption price with respect thereto or change any place of payment where or the coin or currency in which any note or any interest thereon is payable or modify any of the provisions of the indenture in a way that affects the calculation of the amount of any payment of interest or principal due on any note on any Payment Date; (2) impair the right to institute suit for the enforcement of some of the provisions of the indenture regarding payment; (3) reduce the percentage of the aggregate principal amount of the outstanding notes the consent of the holders of which is required for the supplemental indenture or the consent of the holders of which is required to waive compliance with provisions of the indenture or of defaults thereunder and their consequences as provided for in the indenture; (4) modify or alter the provisions of the indenture regarding the voting of notes held by the related trust, any other obligor on the notes, the seller or an affiliate of any of them; (5) reduce the percentage of the aggregate outstanding principal amount of the notes the consent of the holders of which is required to direct the indenture trustee to sell or liquidate the trust estate if the proceeds of the sale would be insufficient to pay the principal amount and accrued but unpaid interest on the outstanding notes; (6) decrease the percentage of the aggregate outstanding principal amount of the Notes required to amend the sections of the indenture which specify the applicable percentage of aggregate outstanding principal amount of the notes necessary to amend the indenture; or (7) permit the creation of any lien ranking prior to or on a parity with the lien of the indenture with respect to any part of the trust estate or, except as otherwise permitted or contemplated in the indenture, terminate the lien of the indenture on any of the collateral or deprive the holder of any note of the security afforded by the lien of the indenture. Events of Default, Rights Upon Event of Default. With respect to each trust, unless the related prospectus supplement states differently, Events of Default under the indenture will consist of: (1) any failure to pay interest on the related notes as and when the same becomes due and payable, which failure continues unremedied for five days; (2) any failure (a) to make any required payment of principal on the related notes or (b) to observe or perform in any material respect any other covenants or agreements in the indenture, which failure in the case of a default under this clause (2)(b) materially and adversely affects the rights of related noteholders, and which failure in either case continues for 30 days after written notice is given of the failure (x) to the trust, the seller, or the servicer, as applicable, by the indenture trustee or (y) to the trust, the seller, the servicer, as applicable, and the indenture trustee by the holders of not less than 25% of the principal amount of the related notes; (3) failure to pay the unpaid principal balance of any related series of notes by the respective Stated Final Payment Date for any series; and (4) specified events of bankruptcy, insolvency or receivership with respect to the trust. However, the amount of principal required to be paid to term noteholders under the related indenture will generally be limited to amounts available to be deposited therefor in the Note Distribution Account. Therefore, unless the related prospectus supplement states otherwise, the failure to pay principal on a series of term notes will not result in the occurrence of an Event of Default until the applicable Stated Final Payment Date. If an Event of Default should occur and be continuing with respect to the notes of any trust, the related indenture trustee or the holders of a majority in principal amount of the notes then outstanding, voting together as a single class, may declare the principal of the notes to be immediately due and payable. That declaration will constitute an Early Amortization Event. Under some circumstances, the holders of a majority in principal amount of the notes then outstanding may rescind the declaration. If this happens, the Revolving Period will recommence in some circumstances. See "The Transfer and Servicing Agreements--Early Amortization Events " in this prospectus. If the notes of any trust are declared due and payable following an Event of Default with respect thereto, the related indenture trustee may institute proceedings to: (1) collect amounts due or foreclose on trust property, (2) exercise remedies as a secured party, (3) sell the related trust estate or (4) elect to have the trust maintain possession of the trust estate and continue to apply Collections as if there had been no declaration of acceleration. The indenture trustee could make this election even though the Early Amortization Period commenced by the declaration will continue unless the declaration is rescinded. The indenture trustee, however, is prohibited from selling the receivables held by the trust following an Event of Default, unless: (1) the holders of all the outstanding notes of the trust consent to the sale, (2) the proceeds of the sale are sufficient to pay in full the principal of and the accrued interest on the outstanding securities at the date of the sale or (3) in some cases, the indenture trustee determines that the trust estate would not provide sufficient funds on an ongoing basis to make all payments on the notes as payments would have become due if the obligations had not been declared due and payable, and the indenture trustee obtains the consent of the holders of a majority of the aggregate outstanding principal amount of the notes. Unless the related prospectus supplement provides otherwise, following a declaration that the notes of a trust are immediately due and payable, (1) noteholders will be entitled to pro rata repayment of principal on the basis of their respective unpaid principal balances, and (2) repayment in full of the accrued interest on and unpaid principal balances of the notes will be made prior to any further distribution of interest on the certificates or in respect of the certificate balance. Although the indenture trustee must comply with its duties under the related indenture, if an Event of Default occurs and is continuing with respect to the notes of any trust, the indenture trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any of the holders of the notes, if the indenture trustee reasonably believes it will not be adequately indemnified against the costs, expenses and liabilities which might be incurred by it in complying with that request. As set forth in the indenture, the holders of a majority in aggregate principal amount of the outstanding notes of a trust, voting together as a single class, will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee. The holders of a majority in aggregate principal amount of the notes then outstanding, voting together as a single class, may, in some cases, waive any default with respect thereto, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the indenture that cannot be modified without the waiver or consent of all of the holders of the notes. No holder of a note will have the right to institute any proceeding with respect to the related indenture, unless: (1) the holder previously has given to the indenture trustee written notice of a continuing Event of Default, (2) the holders of not less than 25% in aggregate principal amount of the outstanding notes, voting together as a single class, have made written request of the indenture trustee to institute the proceeding in its own name as indenture trustee, (3) the holder or holders have offered the indenture trustee reasonable indemnity, (4) the indenture trustee has for 60 days failed to institute the proceeding and (5) no direction inconsistent with the written request has been given to the indenture trustee during the 60-day period by the holders of a majority in aggregate principal amount of the outstanding Notes. If an Event of Default occurs and is continuing with respect to any trust and if it is known to the indenture trustee, the indenture trustee will mail notice of the Event of Default to each noteholder of the trust within 90 days after it occurs. Except in the case of a failure to make any required payment of principal or interest on any note, the indenture trustee may withhold the notice beyond the 90 day period if and so long as it determines in good faith that withholding the notice is in the interests of the noteholders. In addition, the indenture trustee and each noteholder and note owner, by accepting a note, or interest therein, will covenant that they will not, for a period of one year and one day after the termination of the related trust agreement, institute against the related trust or seller any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law. Neither the indenture trustee in its individual capacity nor the owner trustee in its individual capacity, nor any holder of a certificate including, without limitation, the seller, nor any of their respective owners, beneficiaries, agents, officers, directors, employees, affiliates, successors or assigns will, in the absence of an express agreement to the contrary, be personally liable for the payment of the principal of or interest on the Notes or for the agreements of the related trust contained in the indenture. COVENANTS. Each indenture typically will provide that the related trust may not consolidate with or merge into any other entity, unless, among other things (1) the entity formed by or surviving the consolidation or merger is organized under the laws of the United States, any state or the District of Columbia, (2) the entity expressly assumes the trust's obligation to make due and punctual payments on the notes and the performance or observance of every agreement and covenant of the trust under the indenture, (3) no Event of Default shall have occurred and be continuing immediately after the merger or consolidation, (4) the trust has been advised that the ratings of the related securities would not be reduced or withdrawn by the rating agencies as a result of the merger or consolidation and (5) the trust has received an opinion of counsel to the effect that the consolidation or merger would have no material adverse tax consequences to the trust or to any related holder of securities. Each trust will not, among other things, except as expressly permitted by the Related Documents: (1) sell, transfer, exchange or otherwise dispose of any of the assets of the trust, (2) other than amounts withheld under the Code or applicable state law, claim any credit on or make any deduction from the principal or interest payable in respect of the related notes or assert any claim against any present or former holder of the notes because of the payment of taxes levied or assessed upon the trust, (3) dissolve or liquidate in whole or in part, (4) permit the validity or effectiveness of the related indenture to be impaired or permit any person to be released from any covenants or obligations with respect to the related Notes under the indenture except as may be expressly permitted thereby or (5) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance to be created on or extend to or otherwise arise upon or burden the trust estate or any part thereof, or any interest therein or the proceeds thereof. Except as specified in the related prospectus supplement, no trust may engage in any activity other than as described above under "The Trusts." No trust will incur, assume or guarantee any indebtedness other than indebtedness incurred pursuant to the related notes, the related indenture, or otherwise in accordance with the related Transfer and Servicing Agreements. ANNUAL COMPLIANCE STATEMENT. Each trust will be required to file annually with the related indenture trustee a written statement as to the fulfillment of its obligations under the indenture. INDENTURE TRUSTEE'S ANNUAL REPORT. The indenture trustee will be required to mail each year to all related Noteholders, to the extent required under the Trust Indenture Act, (1) a brief report relating to its eligibility and qualification to continue as indenture trustee under the related indenture, (2) any amounts advanced by it under the indenture, (3) the amount, interest rate and maturity date of some types of indebtedness owing by the trust to the indenture trustee in its individual capacity, (4) the property and funds physically held by the indenture trustee, and (5) any action taken by it that materially affects the notes and that has not been previously reported. SATISFACTION AND DISCHARGE OF INDENTURE. The indenture will be discharged with respect to the notes of any trust upon the delivery of all of the notes to the related indenture trustee for cancellation or, with limitations, upon deposit of funds sufficient for the payment in full of all of the notes with the indenture trustee. The Indenture Trustee The indenture trustee for the notes of a trust will be specified in the related prospectus supplement. The indenture trustee may give notice of its intent to resign at any time, in which event the trust will be obligated to appoint a successor trustee. The trust may also remove the indenture trustee if the indenture trustee ceases to be eligible to continue in that capacity under the indenture, becomes insolvent, or otherwise becomes incapable of acting. If the indenture trustee is removed, the trust will be obligated to appoint a successor trustee. The holders of a majority of the aggregate principal amount of the outstanding notes will also be entitled to remove the indenture trustee and appoint a successor. Any resignation or removal of the indenture trustee and appointment of a successor trustee does not become effective until acceptance of the appointment by the successor trustee. Reports to Term Noteholders With respect to each trust, on or prior to each Payment Date, the servicer will prepare and provide to the indenture trustee a statement to be delivered to the related term noteholders on the Payment Date. To the extent applicable to each series each statement will include the following information as to the term notes with respect to the Payment Date or the period since the previous Payment Date, as applicable: (1) the amount, if any, of the distribution allocable to principal on each series of term notes; (2) the amount, if any, of the distribution allocable to interest on each series of term notes; (3) the aggregate outstanding principal balance for each series of term notes, after giving effect to all payments reported under (1) above; (4) the aggregate principal balance of the revolving notes and the aggregate certificate balance; (5) if applicable, the amount of outstanding servicer advances; (6) the amount of the Monthly Servicing Fee paid to the servicer with respect to the related Collection Period or Periods, as the case may be; (7) the interest rate applicable for the next Payment Date for any series of term notes with variable or adjustable rates; (8) the amount, if any, withdrawn from or credited to any Reserve Fund; (9) the accumulated interest shortfalls, if any, on each series or class of securities and the change in that amounts from the preceding Payment Date; (10) the Trust Charge-Offs allocated to each series or class of securities and the change in those amounts from the preceding Payment Date; and (11) the balance of the Reserve Fund, if any, on the relevant date, after giving effect to changes therein on that date. Each amount set forth pursuant to subclauses (1), (2) and (9) with respect to term notes will be expressed as a dollar amount per $1,000 of the initial principal balance of the term notes. Within the prescribed period of time for tax reporting purposes after the end of each calendar year during which any term notes are outstanding, the indenture trustee will furnish or cause to be furnished to each person or entity who at any time during the preceding calendar year was a holder of record of a Term Note -- initially Cede, as the nominee of DTC -- and received any payment thereon from the trust, a statement containing information for the purpose of assisting that Noteholders in the preparation of their federal income tax returns. As long as the holder of record of the term notes is Cede, as nominee of DTC, beneficial owners of term notes will receive tax and other information from DTC participants and indirect DTC participants rather than from the indenture trustee. See "Federal Income Tax Consequences " in this prospectus. Book-Entry Registration The Depository Trust Company is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York UCC and a "clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between DTC participants through electronic book-entries, thereby eliminating the need for physical movement of certificates. DTC participants include securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to the DTC system also is available to banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC participant, either directly or through indirect DTC participants. Unless the prospectus supplement provides otherwise, owners of beneficial interest in notes (note owners) that are not participants or indirect participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, term notes may do so only through DTC participants and through indirect DTC participants. In addition, term note owners will receive all distributions of principal and interest through DTC participants. Under a book-entry format, term note owners may experience some delay in their receipt of payments since payments will be forwarded by the indenture trustee to Cede, as nominee for DTC. DTC will forward the payments to DTC participants, which thereafter will forward them to indirect DTC participants or term note owners. It is anticipated that the only term noteholder of record will be Cede, as nominee of DTC. Term note owners will not be recognized by the indenture trustee as term noteholders, as that term is used in the indenture, and term note owners will be permitted to exercise the rights of term noteholders only indirectly through DTC and its DTC participants. Under the rules, regulations and procedures creating and affecting DTC and its operations, DTC is required to make book-entry transfers of term notes among DTC participants on whose behalf it acts with respect to the term notes and to receive and transmit payments of principal of, and interest on, the term notes. DTC participants and indirect DTC participants with which term note owners have accounts with respect to the term notes similarly are required to make book-entry transfers and receive and transmit the payments on behalf of their respective term note owners. Accordingly, although term note owners will not possess term notes, the DTC's rules provide a mechanism by which term note owners will receive payments and will be able to transfer their interests in term notes. Because DTC can only act on behalf of DTC participants, who in turn act on behalf of indirect DTC participants and banks, the ability of a holder to pledge term notes to persons or entities that do not participate in the DTC system, or to otherwise act with respect to the term notes, may be limited due to the lack of a physical certificate for the term notes. DTC has advised the seller that it will take any action permitted to be taken by a term noteholder under the indenture or other Related Document only at the direction of one or more DTC participants to whose accounts with DTC the term notes are credited. DTC may take conflicting actions with respect to other undivided interests to the extent that the actions are taken on behalf of DTC participants whose holdings include the undivided interests. In addition to holding term notes through DTC participants or Indirect DTC participants in the United States as described above, holders of term notes may hold their term notes through Clearstream, Luxembourg or Euroclear in Europe if they are participants of those systems, or indirectly through organizations which are participants in those systems. Clearstream, Luxembourg and Euroclear will hold omnibus positions on behalf of their participants through customers' securities accounts in Clearstream, Luxembourg's and Euroclear's names on the books of their respective depositories which in turn will hold those positions in customers' securities accounts in the depositories' names on the books of DTC. Transfers between Clearstream, Luxembourg participants, as defined below, and Euroclear participants, as defined below, will occur in accordance with their respective rules and operating procedures. Cross- market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream, Luxembourg participants or Euroclear participants, on the other hand, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing systems by its depositary. Cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in the clearing system in accordance with its rules and procedures and within its established deadlines. These deadlines will be set in European time. The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream, Luxembourg participants and Euroclear participants may not deliver instructions directly to the depositories. Because of time-zone differences, credits of securities received in Clearstream, Luxembourg or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and dated the Business Day following the DTC settlement date. Any credits or any transactions in securities settled during this processing will be reported to the relevant Euroclear or Clearstream, Luxembourg participants on that Business Day. Cash received in Clearstream, Luxembourg or Euroclear as a result of sales of securities by or through a Clearstream, Luxembourg participant or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream, Luxembourg or Euroclear cash account only as of the Business Day following settlement in DTC. For information with respect to tax documentation procedures, see "Federal Income Tax Consequence--Tax Characterization and Treatment of Term Notes--Tax Consequences to Foreign Noteholders " in this prospectus. Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte, L-2967 Luxembourg ("Clearstream, Luxembourg"), was incorporated in 1970 as "Cedel S.A.", a company with limited liability under Luxembourg law (a societe anonyme). Cedel S.A. subsequently changed its name to Cedelbank. On January 10, 2000, Cedelbank's parent company, Cedel International, societe anonyme ("CI") merged its clearing, settlement and custody business with that of Deutsche Borse Clearing AG ("DBC"). The merger involved the transfer by CI of substantially all of its assets and liabilities (including its shares in CB) to a new Luxembourg company, New Cedel International, societe anonyme ("New CI"), which is 50% owned by CI and 50% owned by DBC's parent company Deutsche Borse AG. The shareholders of these two entities are banks, securities dealers and financial institutions. Cedel International currently has 92 shareholders, including U.S. financial institutions or their subsidiaries. No single entity may own more than 5 percent of Cedel International's stock. Further to the merger, the Board of Directors of New Cedel International decided to rename the companies in the group in order to give them a cohesive brand name. The new brand name that was chosen is "Clearstream". With effect from January 14, 2000 New CI has been renamed "Clearstream International, societe anonyme". On January 18, 2000, Cedelbank was renamed "Clearstream Banking, societe anonyme", and Cedel Global Services was renamed "Clearstream Services, societe anonyme". On January 17, 2000 DBC was renamed "Clearstream Banking AG". This means that there are now two entities in the corporate group headed by Clearstream International which share the name "Clearstream Banking", the entity previously named "Cedelbank" and the entity previously named "Deutsche Brse Clearing AG". Clearstream, Luxembourg holds securities for its customers ("Clearstream, Luxembourg Participants") and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg customers through electronic book-entry changes in accounts of Clearstream, Luxembourg customers, thereby eliminating the need for physical movement of certificates. Transactions may be settled by Clearstream, Luxembourg in any of 36 currencies, including United States Dollars. Clearstream, Luxembourg provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream, Luxembourg also deals with domestic securities markets in over 30 countries through established depository and custodial relationships. Clearstream, Luxembourg is registered as a bank in Luxembourg, and as such is subject to regulation by the Commission de Surveillance du Secteur Financier, "CSSF", which supervises Luxembourg banks. Clearstream, Luxembourg's customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg has approximately 2,000 customers located in over 80 countries, including all major European countries, Canada, and the United States. Indirect access to Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream, Luxembourg. Clearstream, Luxembourg has established an electronic bridge with Morgan Guaranty Trust Company of New York as the Operator of the Euroclear System (MGT/EOC) in Brussels to facilitate settlement of trades between Clearstream, Luxembourg and MGT/EOC. Euroclear was created in 1968 to hold securities for Euroclear participants and to clear and settle transactions between Euroclear participants through simultaneous electronic book-entry delivery against payment. This eliminated the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in any of 34 currencies, including United States dollars. Euroclear includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. Euroclear is operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New York under contract with Euro-clear Clearance Systems S.C., a Belgian cooperative corporation. All operations are conducted by Morgan Guaranty, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with Morgan Guaranty, not with Euro-clear Clearance Systems. Euro-clear Clearance Systems establishes policy for Euroclear on behalf of Euroclear participants. Euroclear participants include banks, central banks, securities brokers and dealers and other professional financial intermediaries and may include the Underwriters. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly. Morgan Guaranty Trust Company of New York is the Belgian branch of a New York banking corporation which is a member bank of the Federal Reserve System. It is regulated and examined by the Board of Governors of the Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. Securities clearance accounts and cash accounts with Morgan Guaranty are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and the applicable Belgian law. These laws and procedures govern transfers of securities and cash with Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. Morgan Guaranty acts under these laws and procedures only on behalf of Euroclear participants, and has no record of or relationship with persons holding through Euroclear participants. Distributions with respect to term notes held through Clearstream, Luxembourg or Euroclear will be credited to the cash accounts of Clearstream, Luxembourg participants or Euroclear participants in accordance with the relevant system's rules and procedures, to the extent received by its depositary. The distributions must be reported accordance with relevant United States tax laws and regulations. See "Federal Income Tax Consequences--Tax Characterization and Treatment of Term Notes " in this prospectus. Clearstream, Luxembourg or Morgan Guaranty, as the case may be, will take any other action permitted to be taken by a term noteholder under the indenture or other Related Document on behalf of a Clearstream, Luxembourg participant or Euroclear participant only in accordance with its relevant rules and procedures and only if its depositary is able to effect that action on its behalf through DTC. Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of term notes among participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no obligation to perform or continue to perform these procedures and these procedures may be discontinued at any time. Except as required by law, neither the administrator, the owner trustee nor the indenture trustee will have any liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of the notes or the certificates of any series held by Cede, as nominee for DTC, by Clearstream, Luxembourg or by Euroclear in Europe, or for maintaining, supervising or reviewing any records relating to any beneficial ownership interests. Definitive Term Notes Unless the related prospectus supplement states otherwise, term notes will be issued in fully registered, certificated form, or definitive term notes, to term noteholders or their nominees, rather than to DTC or its nominee, only if (1) the administrator advises the indenture trustee in writing that DTC is no longer willing or able to discharge properly its responsibilities with respect to the term notes and the trust is unable to locate a qualified successor, (2) the administrator, at its option, elects to terminate the book-entry system through DTC, or (3) after the occurrence of an Event of Default or a Servicing Default, note owners representing beneficial interests aggregating at least a majority of the outstanding principal amount of the related term notes advise the appropriate trustee through DTC in writing that the continuation of a book-entry system through DTC, or a successor thereto, is no longer in the best interest of the note owners. Upon the occurrence of any event described in the immediately preceding paragraph, DTC will notify the note owners and the indenture trustee of that occurrence and of the availability of definitive term notes. Upon surrender by DTC of the definitive certificates representing the term notes and receipt of instructions for re-registration, the indenture trustee will reissue the related term notes as definitive term notes to holders thereof. Payments of principal of, and interest on, the definitive term notes will thereafter be made in accordance with the procedures set forth in the indenture directly to holders of definitive term notes in whose names the definitive term notes were registered at the close of business on the last day of the preceding month. Those payments will be made by check mailed to the address of the holder as it appears on the register maintained by the indenture trustee. The final payment on any definitive term note, however, will be made only upon presentation and surrender of the definitive term note at the office or agency specified in the notice of final payment to the holders thereof. Definitive term notes will be transferable and exchangeable at the offices of the appropriate trustee or of a registrar named in a notice delivered to holders of definitive term notes. No service charge will be imposed for any registration of transfer or exchange, but the appropriate trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith. THE REVOLVING NOTES Each trust will issue one or more series of revolving notes on the initial issuance date and may issue more series of revolving notes from time to time thereafter. Each series of revolving notes may have a different Revolver Interest Rate which may be fixed, variable, contingent, adjustable or any combination of the foregoing, and a different Targeted Final Payment Date, if any, and Stated Final Payment Date. With respect to each trust, the outstanding principal balance of the revolving notes may fluctuate on a daily basis as Principal Collections on the related receivables not needed for principal payments or distributions on related term notes or certificates are, at the discretion of the seller or as otherwise described herein: (1) allocated to the seller in payment for receivables purchased by the trust, (2) allocated to the Revolver Distribution Account as a payment of principal on the revolving notes, or (3) retained as the Cash Collateral Amount. With respect to each trust, the seller, at its option, may on any day increase the outstanding principal balance of the revolving notes to fund purchases of receivables, provided, however, that the Net Revolver Balance may not at any time exceed the Maximum Revolver Balance. The Specified Maximum Revolver Balance for a trust will be set forth in the related prospectus supplement and may be increased or decreased from time to time if a number of conditions are satisfied. See "The Transfer and Servicing Agreements--Additional Issuances, Changes in Maximum Revolver Balance " in this prospectus. Unless the related prospectus supplement provides otherwise, no additional borrowings will be permitted under any revolving note during the Wind Down Period or any Early Amortization Period for the related trust. Payments of principal on revolving notes will be made in the amounts and priority, and at the times, specified in the related prospectus supplement. One or more series of revolving notes for any trust may have a Targeted Final Payment Date, if any, and Stated Final Payment Date or otherwise require principal payments during the related Revolving Period and may provide for extensions and renewals under some circumstances. Each revolving note will initially be held by the originator or the seller, and the revolving note or an interest therein may be sold by the originator or the seller in a private placement to a third-party investor. Thereafter, a revolving note or an interest therein may be transferred in whole or in part if certain conditions are satisfied. Any additional borrowings under, and principal payments on, the revolving notes will be allocated among all outstanding revolving notes as determined by the seller in its sole discretion. However, this allocation will depend on any agreements among the seller and any holders of the revolving notes. The revolving notes are not being offered pursuant to this prospectus or any related prospectus supplement. THE CERTIFICATES With respect to each trust, the certificates will be issued pursuant to the terms of a trust agreement between the seller and the owner trustee and will represent the ownership interest in the trust. Certificates will be issued on the initial issuance date for a trust and may be issued from time to time thereafter. The certificate rate for the certificates may be fixed, variable, contingent, adjustable or any combination of the foregoing, and may vary by class of certificate. The related prospectus supplement will set forth the amount of, or method for determining, distributions of the certificate balance and the timing of the distributions, including the Stated Final Payment Date. Unless the related prospectus supplement provides differently, principal and interest payments on the notes will be senior to distributions of the certificate balance and interest on the related certificates. The certificates are not being offered pursuant to this prospectus or any related prospectus supplement. THE TRANSFER AND SERVICING AGREEMENTS Except as otherwise specified in the related prospectus supplement, the following summary describes some of the material terms of: (1) the pooling and servicing agreement pursuant to which the seller will purchase Eligible Receivables from the originator, and the servicer will agree to service all receivables in the related dealer accounts, (2) the trust sale and servicing agreement pursuant to which the trust will acquire those receivables from the seller and agree to the servicing of the receivables by the servicer, (3) the trust agreement pursuant to which the trust will be created and certificates will be issued and (4) the administration agreement pursuant to which the originator, as administrator, will undertake a number of administrative duties with respect to the trust. Collectively, these agreements will be referred to as the Transfer and Servicing Agreements. Forms of the Transfer and Servicing Agreements have been filed as exhibits to the Registration Statement of which this prospectus forms a part. Upon request of a holder of securities described therein. The seller will provide a copy of the Transfer and Servicing Agreements. This copy will not include exhibits. This summary does not purport to be complete and is qualified by reference to all of the provisions of the Transfer and Servicing Agreements. Where particular provisions or terms used in the Transfer and Servicing Agreements are referred to, the actual provisions are incorporated by reference as part of this summary. SALE AND ASSIGNMENT OF RECEIVABLES AND COLLATERAL SECURITY The originator will sell and assign to the seller, without recourse, o on the initial issuance date for a trust, its entire interest in the Eligible Receivables under the dealer accounts included in the related pool of accounts as of the Initial Cut-Off Date, and o on each date on which receivables are originated in a dealer account in the related pool of accounts, its entire interest in, all Eligible Receivables created on that date in the dealer accounts in the related pool of accounts. However, if the originator becomes subject to a bankruptcy proceeding, the originator will not assign receivables to the seller without approval of the bankruptcy court. In each case, the originator will sell and assign to the seller the related Collateral Security and the proceeds of all of the foregoing, pursuant to a pooling and servicing agreement between the originator and the seller. For each trust, on its initial issuance date and on each Receivables Purchase Date, the seller will transfer and assign to the applicable trust, without recourse, the Eligible Receivables and the other assets purchased from the originator on that date, pursuant to a trust sale and servicing agreement among the seller, the servicer and the trust. The owner trustee, on behalf of the trust, together with the indenture trustee with respect to the notes, concurrently with the initial transfer and assignment to the trust, will execute and deliver to the seller the related notes and the related certificates to be issued on the initial issuance date. Unless the related prospectus supplement provides otherwise, the seller will sell the securities and will apply the net proceeds received from the sale of the securities to the purchase of the related receivables from the originator. In each pooling and servicing agreement, in connection with the sale of the related receivables to the seller, the originator will agree to indicate in its records that the Eligible Receivables and Collateral Security have been sold to the seller, and that, upon the execution of a trust sale and servicing agreement, the seller has sold and assigned that property to the trust. In addition, the originator will agree to provide a complete list to the seller showing for each dealer account to be included in the pool of accounts, as of the Initial Cut-Off Date, its account number and the outstanding principal balance of receivables that the originator represents are Eligible Receivables under that dealer account. In the related trust sale and servicing agreement, the trust will accept the designation of the originator as custodian to maintain possession, as the trust's agent, of the documents relating to the receivables. the originator will not deliver to the seller, the owner trustee or the indenture trustee any records or agreements relating to the dealer accounts or the receivables. The records and agreements relating to the dealer accounts and receivables related to any trust will not be segregated from those relating to other accounts and receivables of the originator or otherwise marked to reflect the sale of the receivables therein to the seller or the subsequent sale to the related trust. This helps to assure uniform quality in servicing both the receivables related to any trust and the servicer's own portfolio of receivables, as well as to facilitate servicing and save administrative costs. However, with respect to each trust, the originator will file UCC financing statements with respect to the sale, transfer and assignment of receivables to the seller and the seller will file UCC financing statements with respect to the sale, transfer and assignment of the receivables to the trust. In addition, each trust will file UCC financing statements with respect to the security interest in the trust's assets granted to the indenture trustee under the indenture to secure the trust's obligations thereunder. See "Legal Aspects--Transfer of Receivables " in this prospectus. The documents evidencing the receivables will remain in the originator's possession and will not be stamped or otherwise marked to reflect the sale and assignment of the interests in the receivables to the seller or the trust. As a result of the originator's continued possession, if a subsequent purchaser were able to take possession of the receivables without knowledge of the assignment, and if the receivables are deemed "chattel paper" under applicable law, the trust's interests in the receivables could be defeated. See "Legal Aspects--Transfer of Receivables " in this prospectus. With respect to each trust, pursuant to the trust sale and servicing agreement, as described in "Addition and Removal of Accounts " below, the seller has the limited right to designate from time to time additional dealer accounts to be included in the related pool of accounts. In connection with any designation of additional dealer accounts, the seller will purchase from the originator the Eligible Receivables in the additional dealer accounts and the originator will follow the procedures set forth in the preceding paragraph, except that the list will show information for the additional dealer accounts as of the cut-off date for additional dealer accounts. The servicer will notify the seller of this cut-off date in writing. Representations and Warranties In each pooling and servicing agreement, the originator will represent and warrant to the seller, among other things, that: (1) as of the initial issuance date, or, in the case of an additional dealer account, as of the related cut-off date for additional dealer accounts, each dealer account or additional dealer account included in the pool of accounts is an Eligible Account; and (2) as of the initial issuance date, or, in the case of an additional dealer account, as of the related cut-off date for additional dealer accounts, and on each Receivables Purchase Date each receivable conveyed to the seller on that date that is identified as an Eligible Receivable is actually an Eligible Receivable. In the case of an additional dealer account, the originator will make the above representations and warranties as of the related cut-off date. In the related trust sale and servicing agreement, the seller will assign the representations and warranties of the originator with respect to the dealer accounts and the receivables to the trust, and will represent and warrant to the trust that the seller has taken no action which would cause the representations and warranties of the originator to be false in any material respect as of the initial issuance date, each cut-off date for additional dealer accounts and each Receivables Purchase Date, as the case may be. The seller and the servicer may discover that there has been a breach of a representation or warranty of the seller or the originator that materially and adversely affects the trust's interest in a deferred payment receivable. This is a receivable for which payment has been deferred pursuant to DPP, an installment sales program or a similar arrangement. Any receivable affected this way is referred to as a "Warranty Receivable". Unless and to the extent the breach is cured in all material respects, the originator or the seller will repurchase a Warranty Receivable as follows: (1) if the breach or deferral is a breach of a representation or warranty of the originator, the seller and the servicer will use reasonable efforts to enforce the obligation of the originator under the pooling and servicing agreement to pay the related Warranty Payment, as defined below, and repurchase the receivable or (2) if the breach or deferral is a breach of a representation or warranty of the seller, the seller will repurchase the receivable. Without limiting the generality of the foregoing, a receivable held by a trust will not be an Eligible Receivable, and thus will be repurchased if and to the extent (1) the principal amount thereof is adjusted downward because of a rebate, refund, credit adjustment or billing error to the related dealer, or (2) the receivable was created in respect of a vehicle that was refused or returned by a dealer. The "Warranty Payment", which is the price for a repurchase of a Warranty Receivable by the originator or the seller will be equal to the principal amount of the receivable. In the case of a breach or deferral affecting less than the entire principal amount of a receivable, the Warranty Payment will be to the extent of the breach or deferral, plus all accrued and unpaid interest thereon through the date of purchase. The principal portion of the Warranty Payment will be treated as Trust Principal Collections and the remainder will be included in Interest Collections. All Warranty Payments will be deposited into the related Collection Account on the related Distribution Date. The repurchase obligations of the seller and the originator constitute the sole remedy available to the securityholders, the indenture trustee or the owner trustee for any uncured breach or deferral. In each pooling and servicing agreement, the originator will also make representations and warranties to the seller to the effect that, among other things, as of the closing date for the sale of any securities: (1) the originator is duly incorporated and in good standing, it has the authority to consummate the transactions contemplated by the pooling and servicing agreement, and the related Transfer and Servicing Agreements constitute legal, valid and binding obligations of the originator; and (2) the transfer of the receivables and the related Vehicle Collateral Security, pursuant to the related pooling and servicing agreement constitutes a valid sale, transfer and assignment to the seller of all right, title and interest of the originator therein, whether then existing or thereafter created, and the proceeds thereof. If the breach of any of the representations and warranties described in this paragraph results in the obligation of the seller under the related trust sale and servicing agreement to purchase the receivables and the related Collateral Security as described below, the originator will be obligated to repurchase the property for an amount equal to the Reassignment Amount. In other circumstances in which the seller is obligated under a trust sale and servicing agreement to purchase the property, the originator will not be obligated to repurchase the property. In each trust sale and servicing agreement, the seller will also make representations and warranties to the related trust to the effect that, among other things, as of the closing date for the sale of any securities: (1) the seller is duly incorporated and in good standing, it has the authority to consummate the transactions contemplated by the trust sale and servicing agreement, and the trust sale and servicing agreement constitutes a legal, valid and binding agreement of the seller; and (2) the transfer of the receivables pursuant to the trust sale and servicing agreement constitutes a valid sale, transfer and assignment to the trust of all right, title and the interest of the seller in the receivables and the related Collateral Security, whether then existing or thereafter created, and the proceeds thereof. With respect to each trust, if the breach of any of the representations and warranties described in this paragraph has a material adverse effect on the interests of the securityholders, then any of the indenture trustee, the owner trustee or the holders of the outstanding securities evidencing not less than a majority of the outstanding principal amount of the notes and a majority of the Voting Interests of all outstanding certificates, by written notice to the seller, may direct the seller to accept the reassignment of all receivables and the related Collateral Security within 60 days of the notice, or within the longer period specified in the notice. The seller will be obligated to accept the reassignment and pay the Reassignment Amount on a Distribution Date occurring within the applicable period. The reassignment will not be required to be made, however, if at or prior to the end of the applicable period, the representations and warranties are then true and correct in all material respects and any material adverse effect caused by the breach has been cured. With respect to each trust, the payment of the Reassignment Amount for all outstanding securities will be considered as payment in full for all receivables and the related Collateral Security. The obligation of the seller to pay the Reassignment Amount as described above will constitute the sole remedy respecting a breach of the representations and warranties available to the trust, the securityholders, the owner trustee or indenture trustee. It is not expected that the seller will have significant assets other than its rights under the pooling and servicing agreement and the trust sale and servicing agreement with respect to each trust. In each pooling and servicing agreement, the originator will covenant that the originator will not sell, pledge, assign or transfer any interest in any Eligible Receivables or the related Vehicle Collateral Security, unless required to by agreements with other persons or entities. An exception to this covenant will be made for the sale and conveyances under the pooling and servicing agreement and the interests created under the trust sale and servicing agreement, or as otherwise permitted by the pooling and servicing agreement. Addition and Removal of Accounts With respect to each trust, and taking into account the conditions described below, under the pooling and servicing agreement, the originator may offer to designate, and the seller may request the designation of, additional dealer accounts to be included in the pool of accounts and, under the trust sale and servicing agreement, the seller has the right to designate from time to time additional dealer accounts to be included in the related pool of accounts. Unless the related prospectus supplement provides otherwise, in order to add any additional dealer account to the related pool of accounts, the following conditions, among others, must be satisfied: (1) each additional dealer account must be an Eligible Account; (2) the seller must represent and warrant that the inclusion of the additional dealer accounts in the related pool of accounts will not, in the reasonable belief of the seller, cause an Early Amortization Event to occur; and (3) unless the related prospectus supplement provides otherwise, each of the rating agencies rating the notes must have provided written confirmation that the addition will not result in a reduction or withdrawal of the rating of any outstanding related securities. On the date any additional dealer account is added to the pool of accounts, all Eligible Receivables then in that dealer account will be sold by the originator to the seller and will be transferred by the seller to the trust. With respect to each trust, even though each additional dealer account must be an eligible account, additional dealer accounts may not be of the same credit quality as the initial dealer accounts because, among other things, those dealer accounts may not have been part of the originator's U.S. portfolio on the Initial Cut-Off Date. Additional dealer accounts may have been originated at a different time using credit criteria different from those applied to the initial dealer accounts. With respect to each trust, upon the satisfaction of the conditions specified in the trust sale and servicing agreement, the seller will have the right to remove dealer accounts from the pool of accounts. To so remove dealer accounts, after proper notice, the seller, or the servicer on its behalf must, among other things: (1) furnish to the owner trustee a list of the selected dealer accounts to be so removed from the pool of accounts specifying for each selected dealer account to be removed, its account number and the aggregate balance of Eligible Receivables in that dealer account; (2) represent and warrant that the removal of the selected dealer accounts will not, in the reasonable belief of the seller, result in the occurrence of an Early Amortization Event; and (3) represent and warrant that the seller and the servicer have not received notice from any rating agency that the removal will result in a reduction or withdrawal of the rating of any of the outstanding related securities. In addition, if a dealer account in the pool of accounts ceases to be an eligible account, that dealer account will be deemed a selected account to be removed on that date. In either case, receivables arising thereafter in the selected account selected for removal will not be transferred to the trust. Receivables in any dealer account transferred to the trust prior to that date and Collections thereon will continue to be assets of the trust. Unless the related prospectus supplement states otherwise, the servicer will allocate all Principal Collections on receivables in a Selected Account to the oldest receivables in that dealer account. A selected account will be deemed removed from the pool of accounts on the date on which the balance of all receivables in that dealer account held by the trust becomes zero. Bank Accounts With respect to each trust, the servicer will establish and maintain several Distribution Accounts: the Collection Account, the Note Distribution Account, the Revolver Distribution Account and the Certificate Distribution Account. The prospectus supplement may specify also that the servicer will establish and maintain a Swap Distribution Account. For each trust, funds in the Collection Account, the Note Distribution Account, the Revolver Distribution Account and the Reserve Fund, if any, and other accounts identified as these accounts in the related prospectus supplement - - collectively, the Designated Accounts - and the Certificate Distribution Account will be invested as provided in the trust sale and servicing agreement in eligible investments, which are specified categories of marketable securities. Eligible investments will generally be limited to investments acceptable to the rating agencies as being consistent with the rating of the related securities. Except as described below or in the related trust sale and servicing agreement, eligible investments will be limited to obligations or securities that mature on or before the next Distribution Date or, in the case of the Note Distribution Account, the date of the next payment with respect to the term notes. To the extent permitted by the rating agencies rating the notes, funds in any Reserve Fund and other cash collateral accounts, if any, may be invested in related term notes that will not mature prior to the date of the next payment or distribution with respect to the term notes. Except as otherwise specified in the related prospectus supplement, the term notes may only be sold prior to their maturity at a price equal to or greater than the unpaid principal balance thereof if, following the sale, the amount on deposit in any Reserve Fund would be less than the related Reserve Fund Required Amount or other applicable limits, if any. Thus, the amount of cash in any Reserve Fund at any time may be less than the balance of the Reserve Fund. If the amount required to be withdrawn from the Reserve Fund to cover shortfalls in Collections on the receivables or other assets specified in the related prospectus supplement exceeds the amount of cash in the Reserve Fund, a temporary shortfall in the amounts available for distribution could result. Except as otherwise specified in the related prospectus supplement, investment earnings on funds deposited in the Designated Accounts and the Certificate Distribution Account, net of losses and investment expenses, will be Investment Proceeds and will be available for distribution as described in the related prospectus supplement. References to amounts on deposit in any Designated Account or the Certificate Distribution Account will not include the amount of any Investment Proceeds. The Designated Accounts and the Certificate Distribution Account will be maintained as Eligible Deposit Accounts. Any other accounts to be established with respect to a trust will be described in the related prospectus supplement. Collections With respect to each trust, the servicer will deposit Principal Collections and Interest Collections on the related receivables into the related Collection Account on a daily basis. However, the servicer need not deposit Principal Collections and Interest Collections into the Collection Account on a daily basis but may use all of those Collections for its own benefit until the Business Day immediately preceding the related Distribution Date if at any time the following conditions are satisfied: (1) the entity specified in the prospectus supplement is the servicer, (2) no Servicing Default has occurred and is continuing and (3) the entity specified in the prospectus supplement either (a) maintains a short-term debt rating of at least A-1 by Standard & Poor's and P-1 by Moody's, (b) arranges for and maintains a letter of credit or other form of credit support or enhancement in respect of the servicer's obligations to make deposits of Collections on the related receivables in the Collection Account that is acceptable in form and substance to each rating agency or (c) otherwise obtains the written confirmation from each rating agency that the failure by the entity specified in the prospectus supplement to make daily deposits will not result in a downgrade, suspension or withdrawal of \the rating of any of the outstanding related securities that it is then rating. Notwithstanding the foregoing, the Cash Collateral Amount for the last day of any Collection Period shall be deposited into the Collection Account (to the extent not already on deposit therein) no later than the second Business Day of the following Collection Period. The prospectus supplement may describe additional circumstances under which daily deposits will be required. On any date on which Collections are deposited in the Collection Account for a trust, the servicer will distribute directly to the entity specified in the prospectus supplement on account of the Retained Property an amount equal to Principal Collections on the receivables included in the Retained Property. Whether or not the servicer is then making daily deposits of Collections, if, at any time, the amount on deposit in a Collection Account exceeds the amount required to be so deposited, the servicer will be permitted to withdraw from the Collection Account and pay to the seller or the entity specified in the prospectus supplement, as applicable, the amount of the excess. Application of Collections Interest Collections. For each trust, except as set forth in the related prospectus supplement, for each Collection Period, the trust will apply o Trust Interest Collections, o receipts under credit, liquidity and other enhancement arrangements, o servicer advances, o Investment Proceeds and o amounts in the Reserve Fund and will use these amounts to o make interest payments on the related securities, o pay related Monthly Servicing Fees, o make payments under credit, liquidity and other enhancement arrangements, o reimburse servicer advances and o cover some of the losses on defaulted receivables. The related prospectus supplement will further set forth these applications. Unless the related prospectus supplement states otherwise, Interest Collections in excess of trust Interest Collections will be paid to the entity specified in the prospectus supplement on account of the Retained Property. PRINCIPAL COLLECTIONS Revolving Period. During the Revolving Period for a trust and so long as no series of related term notes is in a Payment Period, unless the related prospectus supplement states otherwise, no amount is required to be set aside to make principal payments on the term notes and distributions of the certificate balance on related certificates. Accordingly, all Trust Principal Collections and Additional Trust Principal on any date during the Revolving Period, together with the Cash Collateral Amount from the prior date, will be available for reinvestment in additional receivables to be purchased from the seller, and will be paid to the seller to the extent so reinvested, so long as the servicer is able to recover advances of principal. This will be the case provided that these amounts will be held as the Cash Collateral Amount to the extent necessary to ensure that the Daily Trust Invested Amount for that date equals the Daily Trust Balance for that date. That determination will be made after giving effect to any payments of principal, including required principal payments, on, or additional borrowings under, the revolving notes on that date and all collections on, and reinvestments in, receivables and all issuances of securities by the trust on that date. Unless the related prospectus supplement states otherwise, Principal Collections in excess of Trust Principal Collections will be paid to the entity specified in the prospectus supplement on account of the Retained Property. Payment Periods. The prospectus supplement for a series of term notes will describe how, during the Payment Period for that series, Available Trust Principal will be allocated to the series and be available to make principal payments on the term notes. This allocation will be dependent on the servicer's ability to recover any advances of principal it may make. Principal payments on any series of term notes will be made in the amounts and at the times described in the related prospectus supplement. Available Trust Principal not so allocated to term notes will be applied as described above under "Revolving Period." The Payment Period, if any, for a series of term notes will commence on the first to occur of the related Scheduled Series Payment Period Commencement Date and a Series Early Payment Event. Early Amortization and Wind Down Periods. The prospectus supplement for a series of term notes will also describe how, during an Early Amortization Period or the Wind Down Period for any trust, the trust will retain Trust Principal Collections and set them aside as required for the purpose of making payments of principal on the related notes and distributions with respect to the certificate balance on the related certificates. The trust will make this retention, and not pay Trust Principal Collections to the seller, so long as the servicer is able to recover advances of principal it may make. Unless the related prospectus supplement states differently, during either of these periods, no additional borrowings will be permitted under the related revolving notes. For each Collection Period during an Early Amortization Period or the Wind Down Period for a trust, Trust Principal Collections, together with other amounts, if any, comprising Available Trust Principal, will be applied to make the required deposits into the Note Distribution Account, the Revolver Distribution Account and the Certificate Distribution Account. The relative priorities of these deposits and the amounts required to be so deposited for any Distribution Date will be set forth in the related prospectus supplement. Unless the related prospectus supplement states otherwise, during the Wind Down Period for a trust, the amount to be so applied to payments on securities will be limited by the applicable Controlled Deposit Amount. During an Early Amortization Period for a trust, that limit will not apply and, in general, all Trust Principal Collections and other amounts constituting Available Trust Principal will be available to make payments on the securities. Payments will be made on securities during the Wind Down Period and any Early Amortization Period to the extent, if any, described in the related prospectus supplement. Unless the related prospectus supplement states differently, Principal Collections in excess of Trust Principal Collections will be paid to the entity specified in the prospectus supplement on account of the Retained Property. Servicer Advances The servicer will make a servicer advance to each trust to the extent and for the purposes set forth in the related prospectus supplement. Unless the prospectus supplement provides otherwise, the servicer will agree to make advances to the extent that the servicer, in its sole discretion, expects to recoup those advances from subsequent Collections and other amounts available for that purpose as described in the related prospectus supplement. Liquidity and Credit Support The amounts and types of credit, liquidity and other enhancement arrangements and the provider thereof, if applicable, with respect to each trust will be set forth in the related prospectus supplement. If and to the extent provided in the related prospectus supplement, those arrangements may be in the form of reserve accounts, letters of credit, credit or liquidity facilities, repurchase obligations, third party payments or other support, cash deposits or other arrangements as may be described in the related prospectus supplement or any combination of two or more of the foregoing. In addition, securities may have the benefit of interest rate swaps, caps and floors and other derivative products, all as further described in the related prospectus supplement. These arrangements may be for the benefit of one or more series or classes of securities or all securities issued by a trust as described in the related prospectus supplement. The presence of a Reserve Fund and other forms of liquidity and credit support, if any, are intended to increase the likelihood that the securityholders or certificateholders, who are to benefit from those arrangements will receive the full amount of principal or the certificate balance, as the case may be, plus interest due. These forms of liquidity and credit support are also intended to decrease the likelihood that the securityholders will experience losses. Unless the related prospectus supplement provides otherwise, these arrangements will not provide protection against all risks of loss and will not guarantee repayment of the entire principal balance or the certificate balance, as the case may be, and interest thereon. If losses occur which exceed the amount covered by applicable arrangements or which are not so covered, securityholders will bear their allocable share of deficiencies as described herein and in the related prospectus supplement. In addition, if an arrangement is for the benefit of more than one series or class of securities issued by a trust, securityholders of a series or class will be faced with the risk that the arrangement will be exhausted by the claims of securityholders of other series or classes. RESERVE FUND. If so provided in the related prospectus supplement, for each trust, there will be established and maintained in the name of the indenture trustee for the benefit of the securityholders a Reserve Fund. The Reserve Fund will be an Eligible Deposit Account and funds in any Reserve Fund will be invested in eligible investments. Except as otherwise provided in the related prospectus supplement, with respect to each trust, any investment earnings, net of losses and investment expenses, with respect to the related Reserve Fund will be Investment Proceeds and will be available for distribution as described in the related prospectus supplement. Amounts on deposit in any Reserve Fund ,other than Investment Proceeds, will be available to make payments and distributions on related securities, to cover any related Trust Defaulted Amounts and for other purposes to the extent described in the related prospectus supplement. The Reserve Fund Initial Deposit, if any, made by the seller will be specified in the related prospectus supplement. After the initial issuance date for a trust, the seller may make additional deposits into any related Reserve Fund in connection with the issuance of additional securities or an increase in the Specified Maximum Revolver Balance. In addition, during the term of any trust, the seller will have the option to make an additional deposit into any related Reserve Fund in an amount not in excess of 1% of the Maximum Pool Balance. Available Trust Interest will also be available for deposit into any Reserve Fund to the extent described in the related prospectus supplement. Unless the related prospectus supplement states differently, with respect to each trust, amounts on deposit in the Reserve Fund will be paid to the seller to the extent the amounts exceed the Reserve Fund Required Amount set forth in the related prospectus supplement or as otherwise agreed by the seller, and on the trust Termination Date any funds remaining on deposit in the Reserve Fund will be distributed to the seller. Following distribution to the seller of amounts from the Reserve Fund, securityholders will not have any rights in, or claims to, those amounts. Distributions With respect to each trust, payments of principal and interest on the related term notes and revolving notes and distributions with respect to the certificate balance and interest on the related certificates will be made from amounts deposited for that purpose into the Note Distribution Account, the Revolver Distribution Account and the Certificate Distribution Account, respectively, as described in the related prospectus supplement. The timing, calculation, allocation, order, source, priorities and requirements for all payments to each series of noteholders and all distributions to certificateholders will be set forth in the related prospectus supplement. Payments of principal on notes and distributions in respect of the certificate balance will be subordinate to distributions in respect of interest, and distributions in respect of the certificates will be subordinate to payments on the notes, all as more fully described in the related prospectus supplement. With respect to each trust, unless the related prospectus supplement states differently, payments of principal and interest on all series of term notes will have the same priority of payment. This would be other than in circumstances related to the occurrence of an Event of Default, payments of principal and interest on term notes may be senior or equivalent to payment on the related revolving notes, as described in the related prospectus supplement. Net Deposits and Payments As an administrative convenience, the servicer will be permitted to make the deposit of Interest Collections, Principal Collections, servicer advances and other amounts, for any trust, including amounts relating to any credit, liquidity or other enhancement arrangement, on any date net of distributions or payments to be made to the servicer on behalf of the trust on that date. The servicer, however, will account to the indenture trustee, the owner trustee and the securityholders with respect to each trust as if all deposits, distributions and transfers were made individually. In addition, in connection with any trust, at any time that the servicer is not required to remit Collections on a daily basis and payments or distributions on any securities are not required to be made monthly, the servicer may retain amounts allocable to the securities or the Distribution Accounts until the related Payment Date or Distribution Date. Pending deposit into an account, the Collections may be employed by the servicer at its own risk and for its own benefit and will not be segregated from its own funds. In this situation, all distributions, deposits or other remittances will be treated as having been distributed, deposited or remitted on the applicable Distribution Date for purposes of determining other amounts required to be distributed, deposited or otherwise remitted on that Distribution Date and other Distribution Dates. Defaults and Charge-Offs With respect to each trust, the extent to which Trust Interest Collections, funds in the related Reserve Fund and other amounts are available to cover the Trust Defaulted Amount will be described in the related prospectus supplement. Any Trust Defaulted Amount not so covered will constitute Trust Charge-Offs. Trust Charge-Offs may be covered in subsequent periods, but only to the extent described in the related prospectus supplement. Amounts not so covered will reduce the principal amount of the notes or the certificate balance, as the case may be, which will reduce the Daily Trust Invested Amount, and will be allocated among the securities as set forth in the related prospectus supplement. Early Amortization Events Unless the related prospectus supplement provides otherwise, an "Early Amortization Event" with respect to any trust refers to any of the following events: (1) failure on the part of the seller, the originator or the servicer to observe or perform in any material respect any of its covenants or agreements set forth in the related pooling and servicing agreement or the related trust sale and servicing agreement, as applicable, which failure continues unremedied for a period of 60 days after written notice; provided, however, that no Early Amortization Event will be deemed to exist if the receivables affected by that failure are repurchased by the seller, the originator or the servicer, as applicable, in accordance with the related Transfer and Servicing Agreements; (2) any representation or warranty made by the originator in the related pooling and servicing agreement or by the seller in the related trust sale and servicing agreement or any information contained on the Schedule of Accounts proves to have been incorrect in any material respect when made and continues to be incorrect in any material respect for a period of 60 days after written notice and, as a result, the interests of the Securityholders are materially and adversely affected; provided, however, that no Early Amortization Event will be deemed to occur if the receivables relating to the representation or warranty are repurchased by the originator or the seller, as applicable, in accordance with the related Transfer and Servicing Agreements; (3) failure to pay or set aside for payment all amounts required to be paid as principal on the Notes or distributed with respect to the certificate balance on the applicable Stated Final Payment Date; (4) on any Distribution Date, the average of the Monthly Payment Rates for the three preceding Collection Periods is less than 25%; (5) the amount on deposit in the related Reserve Fund is less than the Reserve Fund Required Amount on three consecutive Distribution Dates; (6) a notice setting forth one or more Events of Default under the related indenture and declaring the unpaid principal amount of the related notes immediately due and payable has been given pursuant to the indenture; provided, however, that if no other Early Amortization Event has occurred and is continuing and so long as the Scheduled Revolving Period Termination Date has not occurred, if the seller so elects, the Early Amortization Period resulting from that occurrence will terminate and the Revolving Period will recommence if a notice rescinding the declaration is given pursuant to the indenture; (7) the occurrence of specified events of bankruptcy, insolvency or receivership relating to any of (a) any entity specified in the related prospectus supplement, (b) the servicer, (c) the originator, if it is not the servicer, or the (d) seller; (8) on any Distribution Date, as of the last day of the related Collection Period, the aggregate principal balance of receivables owned by the trust which were advanced against used vehicles exceeds 20% of the Daily Trust Balance, for purposes of this clause (8), any entity specified in the related prospectus supplement vehicles which are sold to daily rental car operations, repurchased pursuant to related repurchase agreements and subsequently sold at auction to a related-franchised dealer will not be considered to be used vehicles; (9) on any Distribution Date, the Reserve Fund Required Amount for that Distribution Date exceeds the amount on deposit in the related Reserve Fund by more than the Reserve Fund Trigger Amount as specified in the related prospectus supplement; (10) on any Distribution Date, the average Daily Trust Balance is less than 75% (or such other percentage set forth in the related prospectus supplement) of the sum of the average outstanding principal balance of the related term notes and the average certificate balance (in each case, the average being determined over the six Collection Periods immediately preceding the Distribution Date, or, if shorter, the period from the related initial issuance date through and including the last day of the immediately preceding Collection Period; (11) on any Distribution Date, as of the last day of each of the two immediately preceding Collection Periods, the aggregate principal balance of all related Available Receivables is less than 70% of the aggregate principal balance of all receivables in the dealer accounts in the related pool of accounts; and (12) any other Early Amortization Event set forth in the related prospectus supplement. Upon the occurrence of any event described above, except as described above or in the related prospectus supplement, an Early Amortization Event with respect to a trust will be deemed to have occurred without any notice or other action on the part of any other party. The Early Amortization Period will commence as of the day on which the Early Amortization Event is deemed to occur. During an Early Amortization Period for a trust, Trust Principal Collections and other amounts constituting Available Trust Principal will be allocated to principal payments on the related Notes and distributions of the certificate balance on the related certificates and will be paid as set forth in the related prospectus supplement. No Controlled Deposit Amount will apply during that period. If an Early Amortization Period commences during a Payment Period or the Wind Down Period, amounts, if any, on deposit in the Distribution Accounts will be paid to Securityholders on the first Distribution Date for the Early Amortization Period as described in the related prospectus supplement. Except as otherwise described in the related prospectus supplement, no additional borrowings may be made on the revolving notes during an Early Amortization Period for the related trust. In some circumstances, so long as the related Scheduled Revolving Period Termination Date has not occurred, the Revolving Period may recommence following the occurrence of an Early Amortization Event as described in subparagraph (6) above or in the related prospectus supplement. In addition to the consequences of an Early Amortization Event discussed above, if an insolvency event occurs with respect to the seller, the receivables of the trust may be liquidated and the trust terminated as described below in "Insolvency Events." Additional Issuances; Changes In Specified Maximum Revolver Balance After the initial issuance date for a trust, additional series of term notes, additional series of revolving notes and additional classes of certificates may be issued by the trust from time to time, whether or not additional revolving notes are issued in connection therewith. The Specified Maximum Revolver Balance may also be increased or decreased without the consent of holders of the outstanding notes or certificates, in each case upon the satisfaction of the conditions specified in the related trust sale and servicing agreement. These include the conditions that (1) the seller will have represented and warranted that the issuance, increase or decrease will not, in the reasonable belief of the seller, cause an Early Amortization Event to occur, and (2) after giving effect to all issuances and all changes in the Specified Maximum Revolver Balance, the outstanding certificate balance of all then outstanding certificates, less amounts held in the Certificate Distribution Account, as a percentage of the Maximum Pool Balance equals or exceeds the trust's Specified Certificate Percentage, in each case, as set forth in the related prospectus supplement. Any issuance or increase in the Specified Maximum Revolver Balance is also dependent upon each rating agency providing written confirmation that the issuance or increase will not result in a reduction or withdrawal of the rating of any outstanding securities. There is no limit to the number of series of term notes that may be issued under the related trust sale and servicing agreement or the related indenture. The seller may offer any securities under a Disclosure Document in transactions either registered under the Act, or exempt from registration thereunder, directly, through one or more underwriters or placement agents, in fixed-price offerings or in negotiated transactions or otherwise. Any of these securities may be issued in fully registered or book-entry form in minimum denominations determined by the seller. Servicing Compensation and Payment of Expenses With respect to each trust, unless the related prospectus supplement states differently, as compensation for its servicing activities with respect to the related receivables, on each Distribution Date, the servicer will receive a servicing fee, the Monthly Servicing Fee, for the preceding Collection Period equal to one-twelfth of the Servicing Fee Rate multiplied by the average daily balance of the Daily Trust Invested Amount for the Collection Period. The Monthly Servicing Fee will be payable to the servicer solely to the extent amounts are available for distribution therefor as described in the related prospectus supplement. With respect to any pool of accounts, the servicer will service the receivables included in the Retained Property as well as the receivables sold to the related trust. The Monthly Servicing Fee associated with each trust is intended to compensate the servicer for performing the functions of a third party servicer of wholesale receivables as an agent for their beneficial owner. These duties include, without limitation, o collecting and recording payments, o communicating with dealers, o investigating payment delinquencies, o evaluating the increase of credit limits, and o maintaining records with respect to the dealer accounts and receivables arising thereunder. With respect to any pool of accounts, the servicer will service the receivables included in the Retained Property as well as the receivables sold to the related trust. The Monthly Servicing Fee will also compensate the servicer for managerial and custodial services performed by the servicer on behalf of the trust. These include: o accounting for collections, o furnishing monthly and annual statements to the owner trustee and the indenture trustee with respect to payments and distributions, o making servicer advances, if any, o providing assistance in any inspections of the documents and records relating to the dealer accounts and receivables by the indenture trustee and the owner trustee pursuant to the related trust sale and servicing agreement, and o providing related data processing and reporting services for securityholders and on behalf of the indenture trustee and owner trustee. The Monthly Servicing Fee will also serve to reimburse the servicer for additional expenses the servicer incurs in connection with administering the pool of accounts. These expenses include: o taxes, other than the trust's or the securityholders' federal, state and local income and franchise taxes, if any, o the owner trustee's and the indenture trustee's fees, o accounting fees, o outside auditor fees, o data processing costs and other costs. Servicing Procedures Pursuant to each pooling and servicing agreement and related trust sale and servicing agreement, the servicer is responsible for servicing, collecting, enforcing and administering the receivables under the related dealer accounts. The servicer will conduct these activities in accordance with customary and usual procedures for servicing its own portfolio of revolving dealer floor plan lines of credit, except where the failure to so act would not have a material adverse effect on the interests of the Securityholders. Pursuant to each pooling and servicing agreement and the related trust sale and servicing agreement, the servicer may only modify the contractual terms of the dealer accounts included in the related pool of accounts in general if: (1) in the servicer's reasonable belief, no Early Amortization Event will occur as a result of the change, (2) the change is made applicable to the comparable segment of any similar portfolio of accounts serviced by the servicer and not only to those dealer accounts and (3) in the case of a reduction in the rate of finance charges on the receivables transferred to the trust, the servicer does not reasonably expect that the reduction will, after considering amounts due and amounts payable under any related interest rate swaps or caps or similar agreements and Shared Investment Proceeds for the related period, reduce the Net Receivables Rate below the sum of: (a) the weighted average of the rates of interest payable to related securityholders and (b) the Monthly Servicing Fee for the related period. The servicer is not, however, precluded from renegotiating the contractual terms of agreements with dealers on a case-by-case basis in a manner consistent with its servicing guidelines. Servicer Covenants In each pooling and servicing agreement, the servicer will agree that: (1) it will maintain in effect all qualifications required in order to service the dealer accounts included in the related pool of accounts and related receivables and will comply in all material respects with all requirements of law in connection with servicing the dealer accounts and receivables, except where the failure to maintain that qualifications to comply with those requirements would not have a material adverse effect on the related securityholders of any outstanding related series; (2) it will not permit any rescission or cancellation of receivables held by the trust except as ordered by a court of competent jurisdiction or other government authority; (3) it will do nothing to impair the rights of the related securityholders in the receivables held by the trust and it will not reschedule, revise or defer payments due on any receivable held by the trust, except in a manner consistent with its servicing guidelines or as otherwise contemplated by the related trust sale and servicing agreement; and (4) it will not permit any receivable held by the trust to become subject to any right of set-off or any offsetting balance. For each trust, pursuant to the related pooling and servicing agreement and the related trust sale and servicing agreement, the seller or the servicer may from time to time discover or receive written notice that some of the covenants of the servicer set forth therein have not been complied with in all material respects with respect to any related receivable transferred to the trust or related dealer account, and the noncompliance has a material adverse effect on the interests of related securityholders in or under the receivable or dealer account. If this occurs, the servicer will purchase the receivable or all receivables transferred to the trust under the dealer account -- each, an administrative receivable -- as applicable. The purchase will be made no later than two Business Days , or during any other period as may be agreed by the applicable trustee, following the discovery by the servicer of the noncompliance. With respect to each administrative receivable the servicer will be obligated to deposit into the related Collection Account on the date on which the purchase is deemed to occur an amount, the Administrative Purchase Payment, equal to the principal amount of the receivable PLUS accrued but unpaid interest thereon through the date of the purchase. An Administrative Purchase Payment will be included in (i) Additional Trust Principal, to the extent of the principal amount of the related receivable, and (ii) Interest Collections, as to the remainder of the amount. A purchase by the servicer constitutes the sole remedy available to the securityholders, the seller, the owner trustee, the indenture trustee or the trust, if the covenant or warranty of the servicer is not satisfied. Matters Regarding The Servicer Each trust sale and servicing agreement will provide that the servicer may not resign from its obligations and duties as servicer thereunder and under the related pooling and servicing agreement, except upon determination that the servicer's performance of those duties is no longer permissible under applicable law. No resignation will become effective until the related indenture trustee or a successor servicer has assumed servicer's servicing obligations and duties under the related Transfer and Servicing Agreements. Each trust sale and servicing agreement will further provide that neither the servicer nor any of its directors, officers, employees and agents will be under any liability to the related trust, indenture trustee, owner trustee or any related securityholders for taking any action or for refraining from taking any action pursuant to the related Transfer and Servicing Agreements or for errors in judgment; except that neither the servicer nor any of those persons will be protected against any liability that would otherwise be imposed by reason of wilful misfeasance, bad faith or negligence -- except errors in judgment -- in the performance of duties thereunder or by reason of reckless disregard of its obligations and duties thereunder. Each trust sale and servicing agreement will further provide that the servicer and its directors, officers, employees and agents will be reimbursed by the related owner trustee for any contractual damages, liability or expense incurred by reason of the trustee's wilful misfeasance, bad faith or negligence -- except errors in judgment -- in the performance of the trustee's duties under the applicable Transfer and Servicing Agreements or by reason of reckless disregard of its obligations and duties thereunder. In addition, each trust sale and servicing agreement will provide that the servicer is under no obligation to appear in, prosecute or defend any legal action that is not incidental to the servicer's servicing responsibilities under the related Transfer and Servicing Agreements and that, in its opinion, may cause it to incur any expense or liability. The servicer may, however, undertake any reasonable action that it may deem necessary or desirable in respect of the related Transfer and Servicing Agreements and the rights and duties of the parties thereto and the interests of the Securityholders thereunder. The legal expenses and costs of that action and any liability resulting therefrom will be expenses, costs and liabilities of the trust and the servicer will be entitled to be reimbursed therefor out of the related Collection Account. Any indemnification or reimbursement will reduce the amount otherwise available for distribution to the Securityholders. Under the circumstances specified in each trust sale and servicing agreement, any entity which succeeds the servicer will be treated as the successor of the servicer under the trust sale and servicing agreement and the pooling and servicing agreement. This successor entity will assume the obligations of the servicer under those agreements. A successor entity of the servicer includes any entity into which the servicer may be merged or consolidated, or any entity resulting from any merger or consolidation to which the servicer is a party, or any entity succeeding to the business of the servicer or, with respect to its obligations as servicer, any entity 50% or more of the voting stock or interest of which is owned, directly or indirectly, by the indirect parent of the servicer and which is otherwise servicing wholesale receivables. So long as the initial servicer acts as servicer, the servicer may at any time subcontract any duties as servicer under the trust sale and servicing agreement or pooling and servicing agreement to any entity more than 50% of the voting stock or interest of which is owned, directly or indirectly, by the indirect parent of the servicer or to any entity that agrees to conduct the duties in accordance with the servicer's servicing guidelines and the trust sale and servicing agreement. The servicer may at any time perform specific duties as servicer through subcontractors who are in the business of servicing receivables similar to the receivables, provided that no delegation will relieve the servicer of its responsibility with respect to those duties. Servicing Default Except as otherwise provided in the related prospectus supplement, a servicing default under each trust sale and servicing agreement will consist of: (1) the servicer fails at any time to make any required distribution, payment, transfer or deposit or to direct the related indenture trustee to make any required distribution, which failure continues unremedied for five Business Days after written notice from the indenture trustee or the owner trustee is received by the servicer or after discovery of the failure by an officer of the servicer; (2) the servicer fails at any time to duly observe or perform in any material respect any other covenant or agreement in the trust sale and servicing agreement, the related pooling and servicing agreement, the related indenture or the related trust agreement, which failure materially and adversely affects the rights of the securityholders and which continues unremedied for 90 days after the giving of written notice of the failure to the servicer by the indenture trustee or the owner trustee or to the servicer and the indenture trustee and the owner trustee by holders of notes or Voting Interests, as applicable, evidencing not less than 25% in principal amount of the outstanding notes or Voting Interests or after discovery of the failure by an officer of the servicer; (3) any representation, warranty or certification made by the servicer in the trust sale and servicing agreement or in any certificate delivered pursuant thereto proves to have been incorrect when made and the inaccuracy has a material adverse effect on the rights of the related securityholders and the effect continues unremedied for a period of 60 days after the giving of written notice thereof to the servicer by the indenture trustee or the owner trustee; or (4) specified events of bankruptcy, insolvency or receivership involving the servicer occur. Notwithstanding the foregoing, there will be no servicing default where a servicing default would otherwise exist under clause (1)above for a period of ten Business Days or under clauses (2) or (3) for a period of 60 days if the delay or failure giving rise to the servicing default was caused by an act of God or other similar occurrence. Upon the occurrence of any of these events, the servicer will not be relieved from using its best efforts to perform its obligations in a timely manner in accordance with the terms of the pooling and servicing agreement and the trust sale and servicing agreement and the servicer will provide the indenture trustee, the owner trustee, the seller and the securityholders with prompt notice of the failure or delay by it, together with a description of its efforts to so perform its obligations. Rights Upon Servicing Default As long as a servicing default under a trust sale and servicing agreement remains unremedied, the related indenture trustee or holders of related Notes evidencing not less than a majority in principal amount of the then outstanding notes may terminate all the rights and obligations of the servicer under the trust sale and servicing agreement and the related pooling and servicing agreement. If the notes have been paid in full and the related indenture has been discharged with respect thereto, by the related owner trustee or certificateholders whose certificates evidence not less than a majority of the Voting Interests may terminate. Upon termination, the indenture trustee will succeed to all the responsibilities, duties and liabilities of the servicer under those agreements and will be entitled to similar compensation arrangements. If, however, a bankruptcy trustee or similar official has been appointed for the servicer, and no Servicing Default other than the appointment has occurred, the trustee or official may have the power to prevent the indenture trustee or the Securityholders from effecting a transfer of servicing. In the event that the indenture trustee is unwilling or unable to so act, it may appoint, or petition a court of competent jurisdiction for the appointment of, a successor with a net worth of at least $100,000,000 and who otherwise meets the eligibility requirements set forth in the trust sale and servicing agreement. The indenture trustee may make arrangements for compensation to be paid, which in no event may be greater than the servicing compensation to the servicer under the trust sale and servicing agreement. Waiver of Past Defaults With respect to each trust, the holders of notes evidencing at least a majority in principal amount of the then-outstanding Notes, voting as a single class, may, on behalf of all the securityholders, waive any default by the servicer in the performance of its obligations under the pooling and servicing agreement and the trust sale and servicing agreement and its consequences. However, a servicing default in making any required distributions, payments, transfers or deposits in accordance with the trust sale and servicing agreement may not be waived. No waiver of past defaults will impair the rights of the indenture trustee, the owner trustee, or the securityholders with respect to subsequent defaults. Statements to Trustees and Trust Prior to each Payment Date and Distribution Date, with respect to each trust, the servicer will provide to the indenture trustee and the owner trustee as of the close of business on the last day of the preceding Collection Period a statement setting forth substantially the same information as is required to be provided in the periodic reports to be provided to securityholders on that date under the transfer and servicing agreements. Evidence as to Compliance Each trust sale and servicing agreement will provide that a firm of independent public accountants will furnish to the owner trustee and the indenture trustee on or before the date specified in the related prospectus supplement of each year, beginning no later than the date specified in the related prospectus supplement which is at least twelve months after the trust's initial issuance date, a statement as to compliance by the servicer during the preceding twelve months ended the date specified in the related prospectus supplement with some of the standards relating to the servicing of the receivables, the servicer's accounting records and computer files with respect thereto and a number of other matters. The first of these statements shall cover the period from the Initial issuance date to the date specified in the related prospectus supplement. Each trust sale and servicing agreement will also provide for delivery to the owner trustee and the indenture trustee, on or before the date specified in the related prospectus supplement of each year, beginning no later than the date specified in the related prospectus supplement which is at least twelve months after the trust's initial issuance date, a certificate signed by an officer of the servicer stating that the servicer has fulfilled its obligations under the trust sale and servicing agreement throughout the preceding twelve months ended the date specified in the related prospectus supplement, or in the case of the first certificate, the period from the trust's initial issuance date to the date specified in the related prospectus supplement of that year. If there has been a default in the fulfillment of this obligation, the certificate shall describe each default. The servicer has agreed to give the indenture trustee and the owner trustee notice of Servicing Defaults under the related trust sale and servicing agreement. Copies of these statements and certificates may be obtained by Securityholders by request in writing addressed to the applicable indenture trustee or owner trustee. Amendments Each of the Transfer and Servicing Agreements may be amended by the parties thereto without the consent of the related securityholders (1) to cure any ambiguity, (2) to correct or supplement any provision therein that may be defective or inconsistent with any other provision therein, (3) to add or supplement any credit, liquidity or other enhancement arrangement for the benefit of any securityholders, provided that if any addition affects any series or class of Securityholders differently than any other series or class of Securityholders, then the addition will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of any series or class of securityholders, (4) to add to the covenants, restrictions or obligations of the seller, the servicer, the owner trustee or the indenture trustee for the benefit of securityholders, or (5) to add, change or eliminate any other provision of the agreements in any manner that will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of the securityholders. Each agreement may also be amended by the parties thereto with the consent of the holders of at least a majority in principal amount of then outstanding notes and the holders of certificates evidencing at least a majority of the Voting Interests for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the agreements or of modifying in any manner the rights of the securityholders, except that no amendment may (1) increase or reduce in any manner the amount of, or accelerate or delay the timing of, distributions or payments that are required to be made on any security without the consent of the holder thereof, (2) adversely affect the rating of any series by any rating agency without the consent of two-thirds of the principal amount of the outstanding notes or the Voting Interests of the outstanding certificates, as appropriate, of that series or class, or (3) reduce the aforesaid percentage required to consent to any amendment without the consent of the aforesaid percentage of securityholders. Insolvency Events If pursuant to federal law the originator becomes party to any involuntary bankruptcy or similar proceeding -- other than as a claimant -- the seller will suspend its purchase of receivables from the originator under each pooling and servicing agreement. If the originator or the seller obtains an order approving the continued sale of receivables to the seller on the same terms as, or on terms that do not have a material adverse effect on securityholders as compared to, the terms in effect prior to the commencement of the proceeding, the originator may resume selling receivables to the seller. Receivables will be considered transferred to the seller only to the extent the purchase price therefor has been paid in cash on the same Business Day. If the involuntary proceeding has not been dismissed within 60 days of its filing, the seller may not thereafter purchase receivables from the originator under any pooling and servicing agreement and thus, no additional receivables will be transferred to any trust. See "Legal Aspects " in this prospectus. Each trust agreement will provide that the owner trustee does not have the power to commence a voluntary proceeding in bankruptcy relating to the related trust without the unanimous prior approval of all related certificateholders , including the seller, and the delivery to the owner trustee by each certificateholder, including the seller, of a certificate certifying that each certificateholder reasonably believes that the trust is insolvent. In each trust sale and servicing agreement, the servicer and the seller will covenant that they will not, for a period of one year and one day after the final distribution with respect to the related notes and the related certificates to the Note Distribution Account or the Certificate Distribution Account, as applicable, institute against the related trust any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law. Seller Liability; Indemnification Each trust sale and servicing agreement provides that the servicer will indemnify the indenture trustee and the owner trustee from and against any loss, liability, expense, damage or cost arising out of or incurred in connection with the acceptance or performance of its duties pursuant to the Transfer and Servicing Agreements, including any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim. However, this indemnification will be limited by the proviso that neither the indenture trustee nor owner trustee will be so indemnified if the acts or omissions or alleged acts or omissions constitute willful misfeasance, bad faith or negligence by the indenture trustee or the owner trustee, as applicable. In addition, the servicer will indemnify the trust, the indenture trustee, the owner trustee and the securityholders against losses arising out of the negligence, willful misfeasance or bad faith of the servicer in the performance of its duties under the Transfer and Servicing Agreements and the indenture or by reason of its reckless disregard of its obligations and duties thereunder. The servicer will also indemnify the parties against any taxes that may be asserted against the parties with respect to the transactions contemplated in the trust sale and servicing agreement, other than taxes with respect to the sale of receivables or securities, the ownership of receivables or the receipt of payments on securities or other compensation. Termination A trust will terminate on its Trust Termination Date. Upon termination of a trust and payment, or deposit to the Distribution Accounts, of all amounts to be paid to securityholders, the receivables and all other assets of the trust will be conveyed and transferred to the seller. However, funds in the related Distribution Accounts for the final distributions to the securityholders and after distribution to the entity specified in the prospectus supplement from the Collection Account of amounts on account of the Retained Property, if required, will not be conveyed and transferred to the seller at that time. Optional Purchase by the Servicer During the Wind Down Period and as otherwise set forth in the related prospectus supplement, the servicer or any successor servicer will be permitted, at its option, to purchase from each trust all remaining receivables and other assets to the extent provided in the related prospectus supplement. Intercreditor Arrangements The agreements governing the dealer accounts typically provide for a security interest in favor of the originator in the vehicles related to receivables thereunder. With respect to the receivables to be conveyed to the trust, the originator will represent in the related pooling and servicing agreement that the security interest in the related vehicles is a first priority perfected security interest. The security interest in favor of the originator in the vehicles related to each dealer account in the related pool of accounts will be assigned by the originator to the seller pursuant to each pooling and servicing agreement and assigned to the applicable trust by the seller pursuant to the related trust sale and servicing agreement. In its other lending activities, the originator may have made capital loans, real estate loans or other loans to dealers that are also secured by a security interest in the vehicles. In each pooling and servicing agreement, the originator will agree that any security interests in the vehicles that it may have in respect of advances or loans to dealers other than the related receivables shall be junior and subordinate to the security interests therein granted in connection with the related receivables and that it will not realize on any collateral in a manner materially adverse to the seller or any trust and the securityholders until the seller and the related trust have been paid in full in respect of their interests in the receivables related to the vehicles. In addition, in connection with any other loans or advances made by the originator to a Dealer, the originator may also have a security interest in property constituting Collateral Security other than vehicles. In those cases, the originator, in its sole discretion, may realize on that other Collateral Security for its own benefit in respect of those loans or advances before the indenture trustee, on behalf of any trust, is permitted to realize upon that other Collateral Security and the security interests of the indenture trustee therein shall be junior and subordinate to the security interests of the originator granted in connection with those other loans and advances. Because of the subordinate position of any indenture trustee in respect of the other Collateral Security, there is no assurance that any indenture trustee will realize any proceeds in respect of any other Collateral Security. Administration Agreement The administrator specified in the prospectus supplement will enter into an administration agreement with the related trust and the related indenture trustee pursuant to which the administrator will agree, to the extent provided in the administration agreement, to provide the notices and to perform other administrative obligations required by the related indenture. With respect to each trust, the related prospectus supplement states otherwise, as compensation for the performance of its obligations under the administration agreement and as reimbursement for its expenses related thereto, the administrator will be entitled to a monthly administration fee in an amount that will be specified in the prospectus supplement. LEGAL ASPECTS Transfer of Receivables On the initial issuance date for any trust, on each date on which dealer accounts are added to the pool of accounts and on each Receivables Purchase Date, the originator will sell, transfer and assign to the seller and the seller will sell, transfer and assign the Eligible Receivables in the dealer accounts included in the related pool of accounts to the trust. In the related pooling and servicing agreement, the originator will represent and warrant to the seller that the sale, transfer and assignment of the receivables thereunder constitutes a valid sale, transfer and assignment of all right, title and interest of the originator in and to the receivables to the seller. In the related trust sale and servicing agreement, the seller will represent and warrant to the trust that the seller has taken no action to make the representations and warranties false in any material respect and that the sale, transfer and assignment of the receivables thereunder constitutes a valid sale, transfer and assignment of all right, title and interest of the seller in and to the receivables to the trust. Each of the originator and the seller will also covenant that it will not sell, pledge, assign, transfer or grant any lien on the receivable other than to the seller or to the trust, as applicable, or as otherwise contemplated by the related Transfer and Servicing Agreements. For a discussion of the rights of each trust arising from these representations and warranties, see "The Transfer and Servicing Agreements--Representations and Warranties" in this prospectus. To secure its payment obligations under the notes, pursuant to the indenture, the trust will grant a security interest in the receivables to the indenture trustee. The originator will represent in each pooling and servicing agreement that the receivables to be conveyed to the trust are either "chattel paper," "accounts" or "general intangibles" for purposes of the UCC. If receivables are deemed to be chattel paper or accounts and the transfer thereof by the originator to the seller or by the seller to a trust is deemed either to be a sale or to create a security interest, the UCC will apply and the transferee must file an appropriate financing statement or statements in order to perfect its interest therein. If receivables are deemed to be general intangibles and the transfer thereof by the originator to the seller or by the seller to a trust is deemed to create a security interest, the UCC will apply and the transferee must file an appropriate financing statement or statements in order to perfect its interest therein. If receivables are deemed to be general intangibles and the transfer thereof is deemed to be a sale, state law other than the UCC may determine the appropriate steps to perfect the sale. Financing statements covering the receivables to be conveyed to the trust will be filed under the UCC by both the seller and each related trust to perfect and/or protect their respective interests in the receivables, to the extent the filings are required to so perfect and/or protect those interests). Continuation statements will be filed as required to continue the perfection of those interests. No filings will be made under any state laws other than the UCC. There are circumstances under the UCC and applicable federal law in which some limited subsequent transferees of a receivable held by the trust could have an interest in a receivable with priority over the trust's interest in that receivable. A purchaser of chattel paper who gives new value and takes possession of the instruments which evidence the chattel paper in the ordinary course of the purchaser's business may, under some circumstances, have priority over the interest of the trust in the chattel paper. If the transfer of receivables to the seller or a trust were recharacterized as a pledge, a tax or other lien on property of the originator or the seller may also have priority over the interest of the trust in the receivable. Further, cash collections on the receivables held by each trust may, to the extent described above, be commingled with the funds of the servicer and amounts due to the entity specified in the prospectus supplement as the holder of the Retained Property held by each trust and, in the event of the bankruptcy of the originator, the trust may not have a perfected interest in the collections. The originator will represent and warrant in the pooling and servicing agreement that each receivable at the time of the sale to the seller is secured by a first priority perfected security interest in the related vehicles. Generally, under applicable state laws, a security interest in an automobile or light truck which secures wholesale financing obligations may be perfected by the filing of UCC financing statements. the originator takes all actions it deems necessary under applicable state laws to perfect the originator's security interest in vehicles. However, at the time a vehicle is sold or leased, the originator's security interest in the vehicle will generally terminate. Therefore, if a dealer fails to remit to the servicer amounts owed with respect to any vehicle that has been sold or leased, the related receivable will no longer be secured by the vehicle, but will be secured by the proceeds of the retail sale or lease and, to the extent applicable, other Collateral Security. If the proceeds of the sale or lease include chattel paper -- as is the case with most retail instalment contracts -- some limited subsequent transferees of that chattel paper could have an interest therein with priority over the trust's interest therein. Matters Relating to Bankruptcy The seller's by-laws include a provision that, under some circumstances, requires the seller to designate at least one director who qualifies under the by-laws as "independent directors." The seller's certificate of incorporation provides that the seller will not file a voluntary petition for relief under the Bankruptcy Code without the unanimous affirmative vote of its directors. Pursuant to the Transfer and Servicing Agreements, the owner trustee, the indenture trustee and all securityholders will covenant that they will not institute against the seller any bankruptcy, reorganization or other proceedings under any insolvency laws until one year and one day after all securities have been paid in full. In addition, a number of other steps will be taken to avoid the seller's becoming a debtor in a bankruptcy case. The seller will agree not to file a voluntary petition for relief under the insolvency laws so long as it is solvent and does not foresee becoming insolvent. The transfers of receivables from the originator to the seller and from the seller to the trust have been structured as, and will be treated by the parties as, sales. In 1993, the U.S. Court of Appeals for the Tenth Circuit found that accounts sold prior to a bankruptcy should be treated as property of the bankruptcy estate. In the event that the originator or the seller were to become a debtor in a bankruptcy case, a creditor or trustee in bankruptcy of the debtor or the debtor itself may apply this analysis or otherwise take the position that the transfer of the receivables from the debtor to the seller or a trust, as the case may be, should be recharacterized as a pledge of the receivables to secure a borrowing by the debtor. If this were to occur, delays in receipt of Collections on the receivables to the related trust and payments on the related securities could result or, should the court rule in favor of any creditor, trustee in bankruptcy or debtor, reductions in the amount of the payments could result. In addition, in the event that the originator or the seller were to become a debtor in a bankruptcy case and a creditor or trustee in bankruptcy of the debtor or the debtor itself were to request a court to order that the originator should be substantively consolidated with the seller, delays in payments on the securities could result. Should the bankruptcy court rule in favor of the creditor, trustee in bankruptcy or debtor, the amount of the payments could be reduced. If the originator or the seller were to become a debtor in a bankruptcy case, an Early Amortization Event would occur. If this happened, all Trust Principal Collections would be applied to principal payments on related securities and receivables arising in the related dealer accounts thereafter would no longer be sold to the seller and transferred to the related trust. The occurrence of specified events of bankruptcy, insolvency or receivership with respect to the servicer will also result in a servicing default. A trustee in bankruptcy of the servicer, including the servicer as debtor in possession, may have the power to prevent either the indenture trustee, the owner trustee or the securityholders from appointing a successor servicer. In addition, if any Transfer and Servicing Agreement is deemed an executory contract under bankruptcy laws, a trustee in bankruptcy of any party to those agreements, including the party as debtor in possession, may have the power to assume (i.e., reaffirm) or reject the agreement. A party deciding whether to assume or reject an agreement would be given a reasonable period of time to make that decision, perhaps even until the time of confirmation of the plan of reorganization, which could result in delays in payments or distributions on the related securities. Transfers made in some isolated transactions contemplated by the Transfer and Servicing Agreements (including payments made by the originator or the seller with respect to repurchases or reassignments of receivables and the transfers in connection with the designation of additional dealer accounts) may be recoverable by the originator or the seller, as debtor in possession, or by a trustee in bankruptcy of the originator or the seller, as a preferential transfer from the originator or the seller if the transfers are made within specified periods prior to the filing of a bankruptcy case in respect of the originator or the seller and other conditions are met. In addition, application of federal bankruptcy and state debtor relief laws to any dealer could affect the interests of the related trust and the related indenture trustee in the receivables of the dealer if the enforcement of those laws result in any receivables conveyed to the trust being written off as uncollectible by the servicer. Whether or not any receivables are written off as uncollectible, delays in payments due on the receivables could result. MATERIAL FEDERAL INCOME TAX CONSEQUENCES The following is a general discussion of the anticipated material United States federal income tax consequences of the purchase, ownership and disposition of the term notes. The summary does not purport to deal with federal income tax consequences applicable to all categories of holders, some of which may be subject to special rules. For example, it does not discuss the tax treatment of beneficial owners of term notes ("Note Owners") that are insurance companies, regulated investment companies or dealers in securities. Moreover, there are no cases or Internal Revenue Service ("IRS") rulings on similar transactions involving debt interests issued by a trust with terms similar to those of the term notes. As a result, the IRS might disagree with all or part of the discussion below. Prospective investors are urged to consult their own tax advisors in determining the federal, state, local, foreign and any other tax consequences to them of the purchase, ownership and disposition of the term notes. The following summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations promulgated under the Code and judicial or ruling authority, all of which are subject to change, which change may be retroactive. Each owner trust will be provided with an opinion of tax counsel specified in the related prospectus supplement ("Federal Tax Counsel") regarding some related federal income tax matters discussed below. An opinion of Federal Tax Counsel, however, is not binding on the IRS or the courts. No ruling on any of the issues discussed below will be sought from the IRS. The opinion of Federal Tax Counsel specifically addresses only those issues specifically identified below as being covered by that opinion; however, the opinion also states that the additional discussion set forth below accurately sets forth the advice of Federal Tax Counsel with respect to material federal income tax issues. For purposes of the following summary, references to the owner trust, the term notes, and related terms, parties and documents shall be deemed to refer, unless otherwise specified in this prospectus, to each owner trust and the term notes, and related terms, parties and documents applicable to the owner trust. TAX CHARACTERIZATION OF THE OWNER TRUSTS Upon the issuance of term notes, Federal Tax Counsel will deliver its opinion that the relevant owner trust will not be an association, or publicly traded partnership, taxable as a corporation for federal income tax purposes. The opinion of Federal Tax Counsel will be based on the assumption that the terms of the related trust agreement and documents will be complied with, and on counsel's conclusions that the nature of the income of the owner trust, or restrictions, if any, on transfers of the equity interests in the owner trust, will exempt the owner trust from the rule that some publicly traded partnerships are taxable as corporations. If a owner trust were taxable as a corporation for federal income tax purposes, the owner trust would be subject to corporate income tax on its taxable income. The owner trust's taxable income would include all of its income with respect to the contracts and other assets held by the owner trust, which might be reduced by its interest expense on the term notes. Any corporate income tax could materially reduce cash available to make payments of principal and interest on the term notes. TAX CONSEQUENCES TO NOTE OWNERS TREATMENT OF THE TERM NOTES AS INDEBTEDNESS The owner trust will agree, and the Note Owners will agree by their purchase of term notes, to treat the term notes as debt for federal tax purposes. Federal Tax Counsel will, subject to exceptions which, if applicable, will be specified in the related prospectus supplement, advise the owner trust that each series of term notes, other than Strip Notes and any series which is specifically identified as receiving different tax treatment in the applicable prospectus supplement, will be classified as debt for federal income tax purposes. If, contrary to the opinion of Federal Tax Counsel, the IRS successfully asserted that one or more of the term notes did not represent debt for federal income tax purposes, the term notes might be treated as equity interests in the owner trust. If so treated, the owner trust might be treated as a publicly traded partnership that would be taxable as a corporation unless it met particular qualifying income tests, and the resulting taxable corporation would not be able to reduce its taxable income by deductions for interest expense on term notes recharacterized as equity. Treatment of the term notes as equity interests in a partnership could have adverse tax consequences to some holders, even if the owner trust were not treated as a publicly traded partnership taxable as a corporation. For example, income allocable to foreign holders might be subject to United States tax and United States tax return filing and withholding requirements, income allocable to tax-exempt holders might constitute "unrelated business taxable income" (if some, but not all, of the term notes were recharacterized as equity in a partnership), individual holders might be subject to limitations on their ability to deduct their share of owner trust expenses, and income from the owner trust's assets would be taxable to Note Owners without regard to whether cash distributions are made to such Note Owners and without regard to the Note Owners' method of tax accounting. The discussion below assumes that the term notes will be characterized as debt for federal income tax purposes. INTEREST INCOME ON THE TERM NOTES GENERAL. Expect as discussed below, interest on a term note generally is includable in a Note Owner's income as ordinary interest income when actually or constructively received, if the Note Owner uses the cash method of accounting for federal income tax purposes, or when accrued, if the Note Owner uses an accrual method of accounting for federal income tax purposes. ORIGINAL ISSUE DISCOUNT. Term Notes of certain series may be issued with "original issue discount" within the meaning of Section 1273(a) of the Code. Holders of term notes issued with original issue discount generally must include original issue discount in gross income for federal income tax purposes as it accrues, in advance of receipt of the cash attributable to such income, under a method that takes account of the compounding of interest. The Code requires that information with respect to the original issue discount accruing on any term note be reported periodically to the IRS and to certain categories of Note Owners. Each owner trust will report original issue discount, if any, to the Note Owners based on the Treasury regulations relating to original issue discount (the "OID Regulations"). The OID Regulations concerning contingent payment debt instruments do not apply to the prepayable debt instruments, such as the term notes. The OID Regulations provide that, in the case of debt instruments such as the term notes, (i) the amount and rate of accrual of original issue discount will be calculated based on a reasonable assumed prepayment rate (the "Prepayment Assumption"), and (ii) adjustments will be made in the amount and rate of accrual of such discount to reflect differences between the actual prepayment rate and the Prepayment Assumption. The method for determining the appropriate assumed prepayment rate will eventually be set forth in Treasury regulations, but those regulations have not yet been issued. The applicable legislative history indicates, however, that such regulations will provide that the assumed prepayment rate for securities such as the term notes will be the rate used in pricing the initial offering of those securities. If the term notes of a series are issued with original issue discount, the Prospectus Supplement for that series of term notes will specify the Prepayment Assumption. However, no representation is made that the term notes of that series will, in fact, prepay at a rate based on the Prepayment Assumption or at any other rate. In general, a term note will be considered to be issued with original issue discount if its stated redemption price at maturity exceeds its issue price. Except as discussed below under "--Payment Lag Term Notes; Initial Period Considerations," and "--Qualified Stated Interest," and in the case of certain Variable Rate Term Notes (as defined below) and accrual term notes, the stated redemption price at maturity of a term note is its principal amount. The issue price of a note is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of the class of notes is sold. Notwithstanding the general definition of original issue discount, such discount will be considered to be zero for any note on which such discount is less than 0.25% of its stated redemption price at maturity multiplied by its weighted average life. The weighted average life of a term note apparently is computed for purposes of this DE MINIMIS rule as the sum, for all distributions included in the stated redemption price at maturity of the term note, of the amounts determined by multiplying (i) the number of complete years (rounding down for partial years) from the applicable closing date to the date on which each such distribution is expected to be made, determined under the Prepayment Assumption, by (ii) a fraction, the numerator of which is the amount of such distribution and the denominator of which is the term note's stated redemption price at maturity. The OID Regulations provide that holders will include any DE MINIMIS original issue discount ratably as payments of stated principal are made on the term notes. The Note Owner of a term note issued with original issue discount must include in gross income the sum of the "daily portions" of such original issue discount for each day during its taxable year on which it held such term note. In the case of an original Note Owner, the daily portions of original issue discount are determined first by calculating the portion of the original issue discount that accrued during each period (an "accrual period") that begins on the day following a payment date (or in the case of the first such period, begins on the applicable closing date) and ends on the next succeeding payment date. The original issue discount accruing during each accrual period is then allocated ratably to each day during such period to determine the daily portion of original issue discount for that day. The portion of the original issue discount that accrues in any accrual period will equal the excess, if any, of (i) the sum of (A) the present value, as of the end of the accrual period, of all of the distributions to be made on the term note, if any, in future periods and (B) the distributions made on the term note during the accrual period that are included in such term note's stated redemption price at maturity, over (ii) the adjusted issue price of such term note at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence will be calculated (i) assuming that the term notes will be prepaid in future periods at a rate computed in accordance with the Prepayment Assumption and (ii) using a discount rate equal to the original yield to maturity of the term notes. For these purposes, the original yield to maturity of the term notes will be calculated based on their issue price and assuming that the term notes will be prepaid in accordance with the Prepayment Assumption. The adjusted issue price of a term note at the beginning of any accrual period will equal the issue price of such term note, increased by the portion of the original issue discount that has accrued during prior accrual periods, and reduced by the amount of any distributions made on such term note in prior accrual periods that were included in such term note's stated redemption price at maturity. The daily portions of original issue discount may increase or decrease depending on the extent to which the actual rate of prepayments diverges from the Prepayment Assumption. If original issue discount accruing during any accrual period computed as described above is negative, a Note Owner may only be entitled to offset such amount against positive original issue discount accruing on such term note in future accrual periods. Such a Note Owner may be entitled to deduct a loss to the extent that its remaining basis would exceed the maximum amount of future payments to which such Note Owner is entitled. However, Treasury regulations do not address this issue. A subsequent Note Owner that purchases a term note issued with original issue discount at a cost that is less than its remaining stated redemption price at maturity will also generally be required to include in gross income, for each day on which it holds such term note, the daily portions of original issue discount with respect to the term note, calculated as described above. However, if (i) the excess of the remaining stated redemption price at maturity over such cost is less than (ii) the aggregate amount of such daily portions for all days after the date of purchase until final retirement of such term note, then such daily portions will be reduced proportionately in determining the income of such Note Owner. QUALIFIED STATED INTEREST. Interest payable on a term note which qualifies as "qualified stated interest" for purposes of the OID Regulations will not be includable in the stated redemption price at maturity of the term note. Conversely, if the interest on a term note does not constitute "qualified stated interest," such interest will be includable in the stated redemption price at maturity of the term note and the term note, consequently, will have original issue discount. Interest payments will not qualify as qualified stated interest unless the interest payments are "unconditionally payable." The OID Regulations state that interest is unconditionally payable if reasonable legal remedies exist to compel timely payment, or the debt instrument otherwise provides terms and conditions that make the likelihood of late payment (other than a late payment that occurs within a reasonable grace period) or nonpayment of interest a remote contingency, as defined in the OID Regulations. Any terms or conditions that do not reflect arm's length dealing or that the Note Owner does not intend to enforce are not considered. PREMIUM. A purchaser of a term note that purchases such term note at a cost greater than its remaining stated redemption price at maturity will be considered to have purchased such term note at a premium, and may, under Section 171 of the Code, elect to amortize such premium under a constant yield method over the life of the term note. The Prepayment Assumption is probably taken into account in determining the life of the term note for this purpose. Except as provided in regulations, amortizable premium will be treated as an offset to interest income on the term note. PAYMENT LAG TERM NOTES; INITIAL PERIOD CONSIDERATIONS. Certain term notes may provide for distributions of interest based on a period that is the same length as the interval between payment dates but ends prior to each payment date. Any interest that accrues prior to the applicable closing date may be treated under the OID Regulations either (i) as part of the issue price and the stated redemption price at maturity of the term notes or (ii) as not included in the issue price or the stated redemption price. The OID Regulations provide a special application of the DE MINIMIS rule for debt instruments with long first accrual periods where the interest payable for the first period is at a rate which is effectively less than that which applies in all other periods. In such cases, for the sole purpose of determining whether original issue discount is DE MINIMIS, the OID Regulations provide that the stated redemption price is equal to the instrument's issue price plus the greater of the amount of foregone interest or the excess (if any) of the instrument's stated principal amount over its issue price. VARIABLE RATE TERM NOTES. Under the OID Regulations, term notes paying interest at a variable rate (each, a "Variable Rate Term Note") are subject to special rules. A Variable Rate Term Note will qualify as a "variable rate debt instrument" if (i) its issue price does not exceed the total noncontingent principal payments due under the Variable Rate Term Note by more than a specified DE MINIMIS amount; (ii) it provides for stated interest, paid or compounded at least annually, at a current value of (a) one or more qualified floating rates, (b) a single fixed rate and one or more qualified floating rates, (c) a single objective rate or (d) a single fixed rate and a single objective rate that is a qualified inverse floating rate; and (iii) it does not provide for any principal payments that are contingent, as defined in the OID Regulations, except as provided in (i), above. Because the OID Regulations relating to contingent payment debt instruments do not apply to prepayable debt instruments, such as the term notes, principal payments on the term notes should not be considered contingent for this purpose. A "qualified floating rate" is any variable rate where variations in the value of such rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which the Variable Rate Term Note is denominated. A multiple of a qualified floating rate will generally not itself constitute a qualified floating rate for purposes of the OID Regulations. However, a variable rate equal to (i) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35 or (ii) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate will constitute a qualified floating rate for purposes of the OID Regulations. In addition, under the OID Regulations, two or more qualified floating rates that can reasonably be expected to have approximately the same values throughout the term of the Variable Rate Term Note will be treated as a single qualified floating rate (a "Presumed Single Qualified Floating Rate"). Two or more qualified floating rates with values within 25 basis points of each other as determined on the Variable Rate Term Note's issue date will be conclusively presumed to be a Presumed Single Qualified Floating Rate. Notwithstanding the foregoing, a variable rate that would otherwise constitute a qualified floating rate, but which is subject to one or more restrictions such as a cap or floor, will not be a qualified floating rate for purposes of the OID Regulations unless the restriction is fixed throughout the term of the Variable Rate Term Note or the restriction is not reasonably expected as of the issue date to significantly affect the yield of the Variable Rate Term Note. An "objective rate" is a rate that is not itself a qualified floating rate but which is determined using a single fixed formula and which is based upon objective financial or economic information. The OID Regulations also provide that other variable rates may be treated as objective rates if so designated by the IRS in the future. Despite the foregoing, a variable rate of interest on a Variable Rate Term Note will not constitute an objective rate if it is reasonably expected that the average value of such rate during the first half of the Variable Rate Term Note's term will be either significantly less than or significantly greater than the average value of the rate during the final half of the Variable Rate Term Note's term. Further, an objective rate does not include a rate that is based on information that is within the control of the issuer (or a party related to the issuer) or that is unique to the circumstances of the issuer (or a party related to the issuer). An objective rate will qualify as a "qualified inverse floating rate" if such rate is equal to a fixed rate minus a qualified floating rate and variations in the rate can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate. The OID Regulations also provide that if a Variable Rate Term Note provides for stated interest at a fixed rate for an initial period of less than one year followed by a variable rate that is either a qualified floating rate or an objective rate and if the variable rate on the Variable Rate Term Note's issue date is intended to approximate the fixed rate, then the fixed rate and the variable rate together will constitute either a single qualified floating rate or objective rate, as the case may be (a "Presumed Single Variable Rate"). If the value of the variable rate and the initial fixed rate are within 25 basis points of each other as determined on the Variable Rate Term Note's issue date, the variable rate will be conclusively presumed to approximate the fixed rate. For Variable Rate Term Notes that qualify as "variable rate debt instruments" under the OID Regulations and provide for interest at either a single qualified floating rate, a single objective rate, a Presumed Single Qualified Floating Rate or a Presumed Single Variable Rate throughout the term (a "Single Variable Rate Term Note"), original issue discount is computed as described above in "--Interest Income on the Term Notes--Original Issue Discount" based on the following: (i) stated interest on the Single Variable Rate Term Note which is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually will constitute qualified stated interest; (ii) by assuming that the variable rate on the Single Variable Rate Term Note is a fixed rate equal to: (a) in the case of a Single Variable Rate Term Note with a qualified floating rate or a qualified inverse floating rate, the value, as of the issue date, of the qualified floating rate or the qualified inverse floating rate or (b) in the case of a Single Variable Rate Term Note with an objective rate (other than a qualified inverse floating rate), a fixed rate which reflects the reasonably expected yield for such Single Variable Rate Term Note; and (iii) the qualified stated interest allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than) the interest assumed to be paid under the assumed fixed rate described in (ii), above. In general, any Variable Rate Term Note other than a Single Variable Rate Term Note (a "Multiple Variable Rate Term Note") that qualifies as a "variable rate debt instrument" will be converted into an "equivalent" fixed rate debt instrument for purposes of determining the amount and accrual of original issue discount and qualified stated interest on the Multiple Variable Rate Term Note. The OID Regulations generally require that such a Multiple Variable Rate Term Note be converted into an "equivalent" fixed rate debt instrument by substituting any qualified floating rate or qualified inverse floating rate provided for under the terms of the Multiple Variable Rate Term Note with a fixed rate equal to the value of the qualified floating rate or qualified inverse floating rate, as the case may be, as of the Multiple Variable Rate Term Note's issue date. Any objective rate (other than a qualified inverse floating rate) provided for under the terms of the Multiple Variable Rate Term Note is converted into a fixed rate that reflects the yield that is reasonably expected for the Multiple Variable Rate Term Note. (A Multiple Variable Rate Term Note may not bear more than one objective rate.) In the case of a Multiple Variable Rate Term Note that qualifies as a "variable rate debt instrument" and provides for stated interest at a fixed rate in addition to either one or more qualified floating rates or a qualified inverse floating rate, the fixed rate is initially converted into a qualified floating rate (or a qualified inverse floating rate, if the Multiple Variable Rate Term Note provides for a qualified inverse floating rate). Under such circumstances, the qualified floating rate or qualified inverse floating rate that replaces the fixed rate must be such that the fair market value of the Multiple Variable Rate Term Note as of the Multiple Variable Rate Term Note's issue date is approximately the same as the fair market value of an otherwise identical debt instrument that provides for either the qualified floating rate or qualified inverse floating rate rather than the fixed rate. Subsequent to converting the fixed rate into either a qualified floating rate or a qualified inverse floating rate, the Multiple Variable Rate Term Note is then converted into an "equivalent" fixed rate debt instrument in the manner described above. Once the Multiple Variable Rate Term Note is converted into an "equivalent" fixed rate debt instrument pursuant to the foregoing rules, the amounts of original issue discount and qualified stated interest, if any, are determined for the "equivalent" fixed rate debt instrument by applying the original issue discount rules to the "equivalent" fixed rate debt instrument in the manner described above in "--Interest Income on the Term Notes--Original Issue Discount." A holder of the Multiple Variable Rate Term Note will account for such original issue discount and qualified stated interest as if the holder held the "equivalent" fixed rate debt instrument. In each accrual period, appropriate adjustments will be made to the amount of qualified stated interest or original issue discount assumed to have been accrued or paid with respect to the "equivalent" fixed rate debt instrument in the event that such amounts differ from the actual amount of interest accrued or paid on the Multiple Variable Rate Term Note during the accrual period. If a Variable Rate Term Note does not qualify as a "variable rate debt instrument" under the OID Regulations, then the Variable Rate Term Note would be treated as a contingent payment debt obligation. The manner in which a Variable Rate Term Note would be taxed if such note were treated as a contingent payment debt obligation is not governed by the OID Regulations relating to contingent payment debt obligations which do not apply to prepayable debt instruments, such as the term notes, and Treasury regulations do not otherwise address this point. MARKET DISCOUNT. A Note Owner that acquires a term note at a market discount (that is, a discount that exceeds any unaccrued original issue discount) will recognize gain upon receipt of a principal distribution, regardless of whether the distribution is scheduled or is a prepayment. In particular, the Note Owner will be required to allocate that principal distribution first to the portion of the market discount on such term note that has accrued but has not previously been includable in income, and will recognize ordinary income to that extent. In general terms, unless Treasury regulations when issued provide otherwise, market discount on a term note may be treated, at the election of the holder of the term note, as accruing either (i) under a constant yield method, taking into account the Prepayment Assumption, or (ii) in proportion to accruals of original issue discount (or, if there is no original issue discount, in proportion to stated interest on the term note). In addition, a Note Owner may be required to defer deductions for a portion of the Note Owner's interest expense on any debt incurred or continued to purchase or carry a term note purchased with market discount. The deferred portion of any interest deduction would not exceed the portion of the market discount on the term note that accrues during the taxable year in which such interest would otherwise be deductible and, in general, would be deductible when such market discount is included in income upon receipt of a principal distribution on, or upon the sale of, the term note. The Code requires that information necessary to compute accruals of market discount be reported periodically to the IRS and to certain categories of Note Owners. Notwithstanding the above rules, market discount on a term note will be considered to be zero if such discount is less than 0.25% of the remaining stated redemption price at maturity of such term note multiplied by its weighted average remaining life. Weighted average remaining life presumably is calculated in a manner similar to weighted average life (described above under "--Interest Income on the Term Notes--Original Issue Discount"), taking into account distributions (including prepayments) prior to the date of acquisition of such term note by the subsequent purchaser. If market discount on a term note is treated as zero under this rule, the actual amount of such discount must be allocated to the remaining principal distributions on such term note in proportion to the amounts of such principal distributions, and when each such distribution is made, gain equal to the discount, if any, allocated to the distribution will be recognized. ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD RULES. The OID Regulations provide that the holder of a debt instrument issued after April 4, 1994 may elect to include in gross income all interest that accrues on such debt instrument using the constant yield method. For purposes of this election, interest includes stated interest, original issue discount, and market discount, as adjusted to account for any premium. Note Owners should consult their own tax advisors regarding the availability or advisability of such an election. SALES OF TERM NOTES If a term note is sold, the seller will recognize gain or loss equal to the difference between the amount realized on the sale and its adjusted basis in the term note. A holder's adjusted basis in a term note generally equals the cost of the term note to the holder, increased by income reported by the holder with respect to the term note and reduced (but not below zero) by distributions on the term note (other than qualified stated interest) received by the holder and by amortized premium. While any such gain or loss generally will be capital gain or loss provided the term note is held as a capital asset, gain recognized on the sale of a term note by a seller who purchased the term note at a market discount would be taxable as ordinary income in an amount not exceeding the portion of such discount that accrued during the period the term note was held by such seller, reduced by any market discount includable in income under the rules described above under "--Interest Income on the Term Notes--Market Discount." Further, the term notes will be "evidences of indebtedness" within the meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from a sale of a term note by a bank or other financial institution to which such section applies would be ordinary income or loss. SHORT-TERM NOTES In the case of a term note with a maturity of one year or less from its issue date (a "Short-Term Note"), no interest is treated as qualified stated interest, and therefore all interest is included in original issue discount. Note Owners that report income for federal income tax purposes on an accrual method and some other Note Owners, including banks and certain dealers in securities, are required to include original issue discount in income on Short-Term Notes on a straight-line basis, unless an election is made to accrue the original issue discount according to a constant yield method based on daily compounding. Any other Note Owner of a Short-Term Note is not required to accrue original issue discount for federal income tax purposes, unless it elects to do so. In the case of a Note Owner that is not required, and does not elect, to include original issue discount in income currently, any gain realized on the sale, exchange or retirement of a Short-Term Note is ordinary income to the extent of the original issue discount accrued on a straight-line basis, or, if elected, according to a constant yield method based on daily compounding, through the date of sale, exchange or retirement. In addition, Note Owners that are not required, and do not elect, to include original issue discount in income currently are required to defer deductions for any interest paid on indebtedness incurred or continued to purchase or carry a Short-Term Note in an amount not exceeding the deferred interest income with respect to the Short-Term Note, which includes both the accrued original issue discount and accrued interest that are payable but that have not been included in gross income, until the deferred interest income is realized. A Note Owner may elect to apply the foregoing rules, except for the rule characterizing gain on sale, exchange or retirement as ordinary, with respect to "acquisition discount" rather than original issue discount. Acquisition discount is the excess of the stated redemption price at maturity of the Short-Term Note over the Note Owner's basis in the Short-Term Note. This election applies to all obligations acquired by the taxpayer on or after the first day of the first taxable year to which the election applies, unless revoked with the consent of the IRS. A Note Owner's tax basis in a Short-Term Note is increased by the amount included in the Note Owner's income with respect to the Short-Term Note. FOREIGN INVESTORS IN TERM NOTES Except as discussed below, a Note Owner that is not a "United States person" (as defined below) generally will not be subject to United States income or withholding tax in respect of a distribution on a term note provided that (i) the holder complies to the extent necessary with certain certification requirements, which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is not a United States person (as defined below), (ii) the holder is not a "10-percent shareholder" within the meaning of Section 871(h)(3)(B) of the Code, which could be interpreted to include a person that directly or indirectly owns 10% or more of the equity interests in the owner trust, (iii) the holder is not a "controlled foreign corporation" (as defined in the Code) related to the owner trust or related to a 10 percent holder of equity interests in the owner trust, and (iv) the holder is not engaged in a United States trade or business, or otherwise subject to federal income tax as a result of any direct or indirect connection to the United States other than through its ownership of a term note. For these purposes, the term "United States person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership (or other entity properly treated as a corporation or partnership for federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate whose income is includable in gross income for United States federal income taxation regardless of its source, and (iv) a trust for which one or more United States fiduciaries have the authority to control all substantial decisions and for which a court of the United States can exercise primary supervision over the trust's administration. A "Foreign Person" is any person that is not a United States person. Each Note Owner should consult its tax advisors regarding the tax documentation and certifications that must be provided to secure the exemption from United States withholding taxes. Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a term note by a Foreign Person generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Foreign Person and (ii) in the case of an individual Foreign Person, the Foreign Person is not present in the United States for 183 days or more in the taxable year. If the interest, gain or income on a term note held by a Foreign Person is effectively connected with the conduct of a trade or business in the United States by the Foreign Person (although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected), the holder generally will be subject to United States federal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the Foreign Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its "effectively connected earnings and profits," within the meaning of the Code, for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty (as modified by the branch profits tax rules). BACKUP WITHHOLDING ON TERM NOTES Distributions made on the term notes and proceeds from the sale of term notes to or through certain brokers may be subject to a "backup" withholding tax of 31 percent of "reportable payments" (including interest accruals, original issue discount, and, under certain circumstances, distributions in reduction of principal amount) if the holder of the term notes fails to comply with certain identification procedures, unless the Note Owner is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld from distributions on the term notes would be refunded by the IRS or allowable as a credit against the Note Owner's federal income tax. STATE AND LOCAL TAX CONSIDERATIONS The discussion above does not address the tax consequences of purchase, ownership or disposition of term notes under any state or local tax laws. We recommend that investors consult their own tax advisors regarding state and local tax consequences. * * * THE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTE OWNER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS OF TERM NOTES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF TERM NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. ERISA CONSIDERATIONS Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit-sharing or other employee benefit plan, as well as individual retirement accounts and some types of Keogh Plans, each a Benefit Plan, from engaging in some types of transactions with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to a Benefit Plan. A violation of these "prohibited transaction" rules may result in an excise tax or other penalties and liabilities under ERISA and the Code for those persons. Some transactions involving the trust might be deemed to constitute prohibited transactions under ERISA and the Code with respect to a Benefit Plan that purchased term notes if assets of the trust were deemed to be assets of the Benefit Plan. Under a regulation issued by the United States Department of Labor, the Plan Assets Regulation, the assets of the trust would be treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan acquired an "equity interest" in the trust and none of the exceptions contained in the Plan Assets Regulation was applicable. An equity interest is defined under the Plan Assets Regulation as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Unless the related prospectus supplement states otherwise, although there is little guidance on the subject, the seller believes the term notes of each trust would be treated as indebtedness without substantial equity features for purposes of the Plan Assets Regulation. Other exceptions, if any, from application of the Plan Assets Regulation available with respect to any term notes will be discussed in the related prospectus supplement. However, without regard to whether term notes are treated as an equity interest for those purposes, the acquisition or holding of term notes by or on behalf of a Benefit Plan could be considered to give rise to a prohibited transaction if the seller, the servicer, the related trust or any of their respective affiliates is or becomes a party in interest or a disqualified person with respect to a Benefit Plan. Some of the exemptions from the prohibited transaction rules could be applicable to the purchase and holding of term notes by a Benefit Plan depending on the type and circumstances of the plan fiduciary making the decision to acquire the notes. Included among these exemptions are: Prohibited Transaction Class Exemption, 90-1, regarding investments by insurance company pooled separate accounts; PTCE 91-38, regarding investments by bank collective investment funds; PTCE 84-14, regarding transactions effected by qualified professional asset managers; PTCE 95-60, regarding transactions by life insurance company general accounts; and PTCE 96-23, regarding transactions affected by in-house asset managers. Employee benefit plans that are governmental plans, as defined in Section 3(32) of ERISA, and some church plans, as defined in Section 3(33) of ERISA, are not governed by ERISA. A plan fiduciary considering the purchase of term notes should consult its tax and/or legal advisors regarding whether the assets of the related trust would be considered plan assets, the possibility of exemptive relief from the prohibited transaction rules and other issues and their potential consequences. PLAN OF DISTRIBUTION On the terms and conditions set forth in an underwriting agreement , with respect to each series of term notes offered thereby, the seller will agree to sell to each of the underwriters named therein and in the related prospectus supplement, and each of the underwriters will severally agree to purchase from the seller, the principal amount of term notes set forth therein and in the related prospectus supplement. In each underwriting agreement, the underwriters will agree, based on the terms and conditions set forth therein, to purchase all the term notes described therein which are offered hereby and by the related prospectus supplement if any of the term notes are purchased. In the event of a default by any underwriter, each underwriting agreement will provide that, in some circumstances, purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated. Each prospectus supplement will either: (1) set forth the price at which each series of term notes being offered thereby will be offered to the public and any concessions that may be offered to dealers participating in the offering of the term notes or (2) specify that the term notes are to be resold by the underwriters in negotiated transactions at varying prices to be determined at the time of the sale. After the initial public offering of any term notes, the public offering price and the concessions may be changed. The extent, if any, to which the closing of the sale of any series of term notes is conditioned upon the closing of any other series of securities will be set forth in the related prospectus supplement. Each underwriting agreement will provide that the seller will indemnify the underwriters against a number of liabilities, including liabilities under the Securities Act. The indenture trustee may, from time to time, invest the funds in the Designated Accounts in eligible investments acquired from the underwriters. The place and time of delivery for the term notes in respect of which this prospectus is delivered will be set forth in the related prospectus supplement. LEGAL OPINIONS Some legal matters relating to the term notes will be passed upon for each trust and the seller Stroock & Stroock & Lavan LLP, special counsel to each trust and the seller. Federal income tax matters will be passed upon for each trust and the seller by Stroock & Stroock & Lavan LLP. WHERE YOU CAN FIND MORE INFORMATION As required by the Securities Act, we filed a registration statement relating to the securities with the SEC. This prospectus is part of the registration statement, but the registration statement includes additional information. The servicer will file with the SEC all required annual, monthly and special SEC reports and other information about the trust. You may read and copy any reports, statements or other information we file at the SEC's public reference room in Washington, D.C. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings are also available to the public on the SEC Internet site (http://www.sec.gov). INCORPORATION BY REFERENCE The SEC allows us to "incorporate by reference" information we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. Information that we file later with the SEC will automatically update the information in this prospectus. In all cases, you should rely on the later information over different information included in this prospectus or the accompanying prospectus supplement. We incorporate by reference any future SEC reports and materials filed by or on behalf of the trust until we terminate our offering of the certificates. As a recipient of this prospectus, you may request a copy of any document we incorporate by reference, except exhibits to the documents, unless the exhibits are specifically incorporated by reference, at no cost, by writing us at: 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211. GLOSSARY OF TERMS THIS GLOSSARY OF TERMS DOES NOT PURPORT TO BE COMPLETE AND IS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE RELATED TRANSFER AND SERVICING AGREEMENTS, FORMS OF WHICH ARE FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. SOME OF THE CAPITALIZED TERMS USED BUT NOT DEFINED IN THE PROSPECTUS OR THIS GLOSSARY OF TERMS ARE DEFINED IN THE RELATED PROSPECTUS SUPPLEMENT. REFERENCES TO THE SINGULAR INCLUDE REFERENCES TO THE PLURAL AND VICE VERSA. "Additional Trust Principal" means, for any date, the sum of amounts applied to cover the Trust Defaulted Amount and other amounts, all as more fully described in the related prospectus supplement. "Administrative Purchase Payment " has the meaning set forth in "The Transfer and Servicing Agreements--Servicer Covenants." "Available Receivable" means, with respect to each trust, unless the related prospectus supplement states otherwise, a receivable that is identified by the originator as satisfying the criteria set forth in clauses (1) through (16) of the definition of Eligible Receivable. "Available Trust Interest" means, with respect to each trust, for any Distribution Date, the sum of (1) Trust Interest Collections, (2) Shared Investment Proceeds and (3) receipts under credit, liquidity and other enhancement arrangements and other amounts available to make interest payments on securities and pay other amounts, all as more fully described in the related prospectus supplement. "Available Trust Principal" means, with respect to each trust, for any Distribution Date, the sum of (1) Trust Principal Collections for the related Collection Period, (2) Additional Trust Principal and (3) receipts under credit, liquidity and other enhancement arrangements and other amounts available to make payments of principal on the notes and distributions with respect to the certificate balance on the certificates, all as more fully described in the related prospectus supplement. "Bankruptcy Code" means Title 11 of the United States Code, as amended. "Benefit Plan" has the meaning set forth in "ERISA Considerations." "Business Day" means, unless the related prospectus supplement states differently, any day other than a Saturday, Sunday or any other day on which banks in New York, New York may, or are required to, remain closed. "Cash Accumulation Event" has the meaning set forth in "The Term Notes--Principal and Interest on the Term Notes." "Cash Accumulation Period" has the meaning set forth in "The Term Notes--Principal and Interest on the Term Notes." "Cash Collateral Amount" means, with respect to each trust as of any date, the amount of cash that is required to be held on behalf of the trust in order to ensure that the Daily Trust Balance at least equals the Daily Trust Invested Amount as described under "The Transfer and ServicingAgreements--Application of Collections--Principal Collections." "Certificate Distribution Account" means, for each trust, on or more accounts established by the servicer at and maintained with the related owner trustee, in the name of the owner trustee on behalf of the related certificateholders, in which amounts to be applied for distribution to the certificateholders will be deposited and from which all distributions to the certificateholders will be made. "Code" means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. "Collateral Security" means, with respect to a dealer account included in the pool of accounts and receivables arising in the dealer account, all collateral security granted to secure the obligations of the related Dealer in connection therewith and any proceeds therefrom, including all Vehicle Collateral Security and, to the extent applicable, other motor vehicles, parts inventory, equipment, fixtures, service accounts, realty and guarantees. "Collection Account" means, with respect to each trust, one or more bank accounts, established by the servicer at and maintained with the indenture trustee, in the name of the indenture trustee, on behalf of the holders of the related securities, into which the trust's share of all payments made on or with respect to the receivables in the dealer accounts related to that trust will be deposited. "Collection Period," including "Related Collection Period," means, with respect to any Distribution Date, the calendar month preceding the month in which that Distribution Date occurs. "Collections" means Interest Collections and Principal Collections. "Controlled Deposit Amount" means, with respect to any trust or any series or class of securities, on any date, the amount set forth or determined as described in the related prospectus supplement, which amount limits the amount of Principal Collections that may be applied to make principal payments on the notes or distributions of the certificate balance or be set aside for that purpose. "Daily Portion" has the meaning set forth in "Federal Income Tax Consequences--Tax Characterization and Treatment of Term Notes." "Daily Trust Balance" means, with respect to each trust, for any date, the aggregate principal balance of all receivables held by the trust on that date. "Daily Trust Invested Amount" means, with respect to each trust, for any date during a Collection Period, an amount equal to, without duplication: (1) the outstanding aggregate principal amount of the related term notes on that date PLUS (2) the outstanding certificate balance on that date PLUS (3) the Net Revolver Balance for that date MINUS (4) the Cash Collateral Amount for that date MINUS (5) any amounts held on that date in a related Distribution Account, Cash Accumulation Account or other account for payment of principal on the notes or distribution of the certificate balance on the certificates, MINUS, (6) the amount of unreimbursed trust Charge-Offs as of that date. "Dealer Overconcentration Receivables" means, for any date, with respect to any dealer or group of affiliated dealers, the outstanding Available receivables with respect to that dealer or group of affiliated dealers to the extent, if any, of the excess of: (1) the aggregate principal balance of all the Available Receivables on that date over (2) 1.0% (or a different percentage as may be set forth in the related prospectus supplement) of the sum of (a) the Specified Maximum Revolver Balance and (b) the aggregate principal balance of all outstanding term notes as of that date or, if applicable, as of the commencement of any then occurring Early Amortization Period, Wind Down Period or Payment Period. If, on any date, there exist Dealer Overconcentration Receivables with respect to a dealer or group of affiliated dealers, those Receivables constituting Dealer Overconcentration Receivables shall be identified pursuant to the procedures set forth in the related trust sale and servicing agreement. Dealer Overconcentration Receivables are determined in accordance with the servicer's standard procedures for identifying and tracking accounts of affiliated dealers. "Defaulted Receivables" means, with respect to each trust, for any Distribution Date, all receivables held by the trust that were charged-off as uncollectible during the related Collection Period, other than any receivables that may be repurchased by the seller or the originator or purchased by the servicer on that Distribution Date unless specified events of bankruptcy, insolvency or receivership have occurred with respect to the seller, the originator or the servicer, as the case may be, in which event Defaulted Receivables will include the principal amount of the otherwise excluded receivables. "Designated Accounts" has the meaning set forth in "The Transfer and Servicing Agreements--Bank Accounts." "Disclosure Document" has the meaning set forth in "prospectus Summary--The Term Notes." "Distribution Accounts" means the Securities Distribution Accounts and the Swap Distribution Account, collectively. "Distribution Date" means, with respect to each trust, the fifteenth day of each calendar month or, if that day is not a Business Day, the next succeeding Business Day, beginning on the Initial Distribution Date specified inthe related prospectus supplement. "DPP" has the meaning set forth in "The Dealer Floor Plan Financing Business--Dealer Payment Terms." "Early Amortization Event" has the meaning set forth in "The Transfer and Servicing Agreements Early Amortization Events." "Early Amortization Period" means, with respect to any trust, the period commencing on the day on which an Early Amortization Event with respect to the trust is deemed to have occurred, and ending on the first to occur of: (1) the payment in full of all outstanding securities issued by the trust, (2) the recommencement of the Revolving Period if and to the extent described herein or in the related prospectus supplement; and (3) the Trust Termination Date. A Distribution Date is said to occur for an Early Amortization Period if the last day of the related Collection Period occurred during an Early Amortization Period. "Eligible Account" means, with respect to any trust, a dealer account which, as of the date of determination thereof: (1) is in favor of an entity or person that is not faced with voluntary or involuntary liquidation, that is not classified in "programmed" or "no credit" status and in which the originator or an affiliate of the originator does not have a more than 20% equity interest; (2) has been established by the originator or and affiliate of the originator; (3) is maintained and serviced by the originator or an affiliate of the originator; (4) is not a fleet account; and (5) satisfies the other criteria, if any, set forth in the related prospectus supplement. "Eligible Deposit Account" means either (1) a segregated account with an Eligible Institution, or (2) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia, or any domestic branch of a foreign bank. This corporate trust department having corporate trust powers and acting as trustee for funds deposited in that account, so long as any of the securities of the depository institution has a credit rating from each rating agency then rating the securities in one of its generic rating categories which signifies investment grade. "Eligible Institution" means, with respect to a trust, either (1) the corporate trust department of the related indenture trustee or owner trustee, as applicable, or (2) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia or any domestic branch of a foreign bank, (a) which has either (i) a long-term unsecured debt rating acceptable to the rating agencies rating the notes or (ii) a short-term unsecured debt rating or certificate of deposit rating acceptable to the Rating Agencies and (b) whose deposits are insured by the Federal Deposit Insurance Corporation or any successor thereto. "Eligible Receivable" means, with respect to any date, a receivable, except as otherwise provided in the related prospectus supplement: (1) which was originated by the originator in the ordinary course of business or which was originated by the originator or an affiliate of the originator in the ordinary course of business and acquired by the originator or an affiliate of the originator; (2) which arose under a dealer account that was an Eligible Account, and not a Selected Account, at the time of the transfer of the receivable from the originator or affiliate of the originator to the seller; (3) which is payable in United States dollars; (4) to which the originator had good and marketable title immediately prior to the transfer thereof by the originator to the seller and which has been the subject of a valid transfer and assignment from the originator to the seller of all of the originator's right, title and interest therein and the related Vehicle Collateral Security, including any proceeds thereof; (5) which is advanced against a vehicle; (6) which at the time of the transfer thereof by the originator to the seller is secured by a first priority perfected security interest in the vehicle related thereto; (7) with respect to which all consents, licenses and approvals of any governmental authority in connection with the transfer thereof to the seller and to the trust have been obtained and are in full force and effect; (8) which was created in compliance in all material respects with all requirements of law applicable thereto; (9) as to which, at all times following the transfer of the receivable to the trust, the trust has either a first priority perfected security interest or good and marketable title thereto, free and clear of all liens, other than liens permitted pursuant to the related trust sale and servicing agreement; (10) which has been the subject of a valid transfer and assignment from the seller to the trust of all the seller's right, title and interest therein and the related Vehicle Collateral Security, including any proceeds thereof; (11) which is the legal, valid, binding and assignable payment obligation of the dealer relating thereto, enforceable against the dealer in accordance with its terms, except where enforceability may be limited by the insolvency laws; (12) which, at the time of transfer thereof by the originator to the seller, is not faced with any valid right of rescission, setoff or any other defense, including defenses arising out of violations of usury laws, of the related dealer; (13) as to which, at the time of the transfer thereof to the trust, the originator and the seller have satisfied in all material respects all their respective obligations with respect to the Receivable required to be satisfied at that time; (14) as to which, at the time of the transfer thereof to the trust, neither the originator nor the seller has taken or failed to take any action that would impair the rights of the trust or the securityholders therein; (15) which constitutes "chattel paper," an "account" or a "general intangible" as defined in Article 9 of the UCC; (16) with respect to which the related dealer has not postponed principal payment pursuant to DPP, any similar arrangement, or any installment payment program; (17) which does not constitute a Dealer Overconcentration Receivable; and (18) which does not constitute an Excess Available Receivable. Notwithstanding the foregoing, any other Receivable identified by the originator as an Eligible Receivable will also be deemed an Eligible Receivable unless and until that receivable is thereafter determined not to satisfy the eligibility criteria set forth above and is reassigned by the related trust to the originator or the seller pursuant to the related Transfer and Servicing Agreements. "Event of Default" has the meaning set forth in "The Term Notes--The Indenture-- Events of Default; Rights upon Events of Default." "Excess Available Receivables" means, with respect to each trust, for any date, Available Receivables to the extent, if any, of the excess of: (1) the aggregate principal balance of Available Receivables less the aggregate principal balance of Dealer Overconcentration receivables over (2) the Maximum Pool Balance. If, on any date, there exist Excess Available receivables, those receivables constituting Excess Available receivables shall be identified pursuant to the related trust sale and servicing agreement. "Foreign Person" means a any noteholder other than a U.S. person. "Initial Cut-Off Date" means, with respect to each trust, the date so specified in the prospectus supplement relating to the first series of term notes issued by the trust. "Insolvency Event" means, with respect to a specified entity: (1) the entry of a decree or order by a court, agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver, trustee or liquidator for the entity, in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of the entity's affairs, and the continuance of that decree or order unstayed and in effect for a period of 90 consecutive days, (2) the consent by the entity to the appointment of a conservator, receiver or liquidator in any insolvency, bankruptcy, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the entity or of or relating to substantially all of the entity's property, or (3) the entity 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, bankruptcy or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations. "Interest Collections" means, with respect to any trust, for any Collection Period, collections received during the Collection Period on the receivables existing under the dealer accounts in the related pool of accounts that the servicer attributes to interest pursuant to its servicing guidelines, including Administrative Purchase Payments and Warranty Payments in excess of the principal portion thereof. "Interest Rate" means for any Payment Date and for any series of term notes, the rate or rates of interest on the series of term notes as specified in the related prospectus supplement. "Investment Proceeds" means, with respect to any trust, for any Distribution Date, investment earnings on funds deposited in Designated Accounts and the Certificate Distribution Account, net of losses and investment expenses, during the related Collection Period. "Marine Accounts" means credit lines or accounts pursuant to which advances are made to finance new and used boats and related items. "Maximum Pool Balance" means, with respect to each trust, the sum of (1) the Maximum Revolver Balance, (2) the aggregate outstanding principal balance of all term notes after giving effect to any amounts on deposit in the Note Distribution Account for payments of principal and (3) the aggregate outstanding certificate balance of all certificates after giving effect to any amounts on deposit in the Certificate Distribution Account for distributions with respect to the certificate balance. "Maximum Revolver Balance" means, with respect to each trust, at any time, the Specified Maximum Revolver Balance set forth in the related prospectus supplement, as that amount may be increased or decreased from time to time in accordance with the related trust sale and servicing agreement. However, if at any time additional borrowings may not be made under the revolving notes, including, if applicable, during the Wind Down Period or an Early Amortization Period, Maximum Revolver Balance shall mean the Net Revolver Balance. "Monthly Payment Rate" means, for any Collection Period, the percentage obtained by dividing Principal Collections for the Collection Period by the average daily aggregate principal balance of all receivables included in the Accounts in the pool of accounts during that Collection Period. "Monthly Servicing Fee" means, with respect to each trust, unless the related prospectus supplement states differently, for any Distribution Date, the product of (1) the average daily balance of Daily Trust Invested Amount for the related Collection Period and (2) one-twelfth of the Servicing Fee Rate. "Net Receivables Rate" means, with respect to each trust, unless the related prospectus supplement states differently, with respect to any Collection Period, a rate equal to the product of (1) the quotient obtained by dividing (a) 360 by (b) the actual number of days elapsed in that Collection Period and (2) the percentage equivalent of a fraction, the numerator of which is the amount of Trust Interest Collections for the immediately preceding Collection Period, after subtracting therefrom the Trust Defaulted Amount for the Distribution Date related to the immediately preceding Collection Period, and the denominator of which is the average Daily Trust Balance for the immediately preceding Collection Period. "Net Revolver Balance" means, with respect to each trust, for any date, the aggregate outstanding principal balance under the revolving notes minus any amounts on deposit in the related Revolver Distribution Account on the date for the payment of principal. "Note Distribution Account" means, with respect to each trust, one or more accounts, established by the servicer at and maintained with the related indenture trustee, in the name of the indenture trustee, on behalf of the holders of the related term notes, in which amounts to be applied for payment to the term noteholders will be deposited and from which all payments to the term noteholders will be made. "OID" means original issue discount, as discussed and described in "Material Federal Income Tax Consequences--Tax Consequences to Note Owners-Interest Income on the Term Notes -- Original Issue Discount." "Payment Date" means, with respect to a series of notes, each date specified for payment of interest or principal on the notes in the related prospectus supplement. With respect to a series of notes providing for monthly payment of interest or principal, Payment Date means a Distribution Date. "Payment Period" means, with respect to a series of notes, the period, if any, described in the related prospectus supplement during which any amounts will be set aside and/or paid as principal on the notes prior to the Wind Down Period or an Early Amortization Period. "Principal Collections" means, with respect to any trust, for any date or any period, collections received on that date or during that period, as applicable, on the receivables existing under the dealer accounts in the related pool of accounts that the servicer attributes to principal pursuant to its servicing guidelines, including the principal portion of warranty payments and Administrative Purchase Payments. "PTP" means, under the Code and Treasury Department regulations, publicly traded partnership. "Reassignment Amount" means, for any Distribution Date, after giving effect to any allocations, withdrawals and deposits otherwise to be made on that Distribution Date, the sum of the Daily Trust Invested Amount, which, for that purpose, will be calculated without reduction for the Cash Collateral Amount, and accrued but unpaid interest on all outstanding securities to the extent not previously distributed to securityholders. "Receivables Purchase Date" means, with respect to each trust, unless the related prospectus supplement states differently, each Business Day during the related Revolving Period on which Eligible Receivables are created in any dealer account then included in the related pool of accounts, except as described under "The Transfer and Servicing Agreements--Insolvency Events." "Registered Term Notes" means a term note issued by the trust in registered form. "Related Documents" means the indenture, the transfer and servicing agreement, and other related documents for the trust. "Reserve Fund" means, with respect to each Trust, an Eligible Deposit Account maintained for the benefit of the Trust and the Securityholders as described in "The Transfer and Servicing Agreements--Liquidity and Credit Support. "Reserve Fund Initial Deposit" means, with respect to each trust, the amount, if any, specified in the related prospectus supplement. "Reserve Fund Required Amount" means, with respect to each trust, the amount, if any, specified in the related prospectus supplement. "Retained Property" means (i) receivables in the dealer accounts included in the related pool of accounts that the originator does not transfer to the seller and collections thereon and (ii) any receivables and collections thereon repurchased by the originator from the seller or the trust as described herein. "Revolver Distribution Account" means, with respect to each trust, one or more accounts, established by the servicer at and maintained with the related indenture trustee, in the name of the indenture trustee, on behalf of the holders of the related revolving notes, in which amounts to be applied for payment to the revolving noteholders will be deposited and from which all payments to the revolving noteholders will be made. "Revolver Interest Rate" means for any Distribution Date and for any series of revolving notes, the rate or rates of interest on those revolving notes. "Revolving Period" means, with respect to each trust, the period commencing on the date on which the trust issues its first series of term notes and continuing until the earlier of (1) the commencement of an Early Amortization Period and (2) the Scheduled Revolving Period Termination Date. The Revolving Period for a trust may recommence in limited circumstances described herein or in the related prospectus supplement. "Schedule of Accounts" means the list of the dealer accounts included in the pool of accounts, which may be amended and supplemented from time to time. "Scheduled Revolving Period Termination Date" means, with respect to each trust, the date specified in the related prospectus supplement. "Scheduled Series Payment Period Commencement Date" means, with respect to any series of term notes with a Payment Period, the date so specified in the related prospectus supplement. "Securities Distribution Accounts " means the Note Distribution Account, the Revolver Distribution Account, and the Certificate Distribution Account, collectively. "Selected Accounts" has the meaning set forth in the "The Transfer and Servicing Agreements--Addition and Removal of Accounts." "Series Early Payment Event" means with respect to any series of term notes with a Payment Period, an event specified in the related prospectus supplement as commencing the related Payment Period. "Servicing Fee Rate" means, with respect to each trust, 1% unless any related prospectus supplement states otherwise. "Short-Term Note" has the meaning set forth in "Material Federal Income Tax Consequences--Tax Consequences to Note Owners--Short-Term Notes." "State Final Payment Date" means, with respect to any series of notes or certificates, the date so set forth in the related prospectus supplement, on which date the final payment on the notes or final distribution on the certificates is due. "Strip Notes" has the meaning set forth in "The Term Notes--Principal and Interest on the Term Notes." "Swap Distribution Account" means, f so specified in the prospectus supplement, one or more established by the servicer at and maintained with the indenture trustee, in the name of the indenture trustee on behalf of the counterparty to an applicable currency swap, interest rate swap or other swap, together with the holders of the term notes of the relevant series, in which amounts to be applied for distribution to such counterparty will be deposited and from which distributions to such counterparty will be made. "Targeted Final Payment Date" means, with respect to any series of notes, the date, if any, specified in the related prospectus supplement on which all principal is scheduled to be paid as principal on that series of notes, to the extent not previously paid. "Transfer and Servicing Agreements" means, with respect to each trust, the pooling and servicing agreement, the trust sale and servicing agreement, the trust agreement and the administration agreement. "Trust Charge-Offs" means, with respect to each trust, for any Distribution Date, the amount of the trust Defaulted Amount for that Distribution Date that is not covered through the application of Trust Interest Collections and funds in the Reserve Fund or otherwise. As of any date, unreimbursed trust Charge-Offs will equal the aggregate trust Charge-Offs for all prior Distribution Dates unless and to the extent the trust Charge-Offs have been covered or otherwise reduced as described in the related prospectus supplement. "Trust Defaulted Amount" means, with respect to each trust, for any Distribution Date, an amount not less than zero equal to the principal amount of all Defaulted receivables. "Trust Interest Collections" means, with respect to each trust, Interest Collections for the related Collection Period attributable to the receivables held by the trust, as more fully described herein and in the related prospectus supplement. "Trust Principal Collections" means, with respect to each trust, Principal Collections for the related Collection Period attributable to the receivables held by the trust, as more fully described herein and in the related prospectus supplement. "Trust Termination Date" is the date each trust will terminate and will be on the earlier to occur of (1) the day following the Distribution Date on which all amounts required to be paid to the related securityholders pursuant to the related Transfer and Servicing Agreements have been paid or have been deposited in the related Distribution Accounts, and the aggregate outstanding balance of the revolving notes is zero, if the seller elects to terminate the trust at that time, and (3) the specified Trust Termination Date as set forth in the related prospectus supplement. "UCC" means the Uniform Commercial Code as in effect in Delaware, Michigan or New York, and as may be amended from time to time. "U.S Person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership created or organized in the United States or under the laws of the United States or of any state, (iii) an estate the income of which is subject to federal income taxation regardless of its source, or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States fiduciaries have the authority to control all substantial decisions of the trust. "Vehicle Collateral Security" means, with respect to an Account and the receivables arising under that dealer account, the security interest in the vehicles of the related dealer granted to secure the obligations of that dealer in connection therewith and any proceeds therefrom. "Voting Interests" means, as of any date, the aggregate outstanding certificate balance of all certificates; provided, however, that if the originator and its affiliates own less than 100% of the certificates, then certificates owned by the originator, the trust or any affiliate of the originator or the trust, other than the seller, shall be disregarded and deemed not to be outstanding. However, in determining whether the owner trustee shall be protected in relying upon any request, demand, authorization, direction, notice, consent or waiver, only certificates that the owner trustee knows to be so owned shall be so disregarded. Certificates so owned that have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the owner trustee the pledgor's right so to act with respect to the certificates and that the pledgee is not the originator or the Trust or any affiliate of the originator or the trust, other than the seller. "Warranty Payment" has the meaning set forth in "The Transfer and Servicing Agreements--Representations and Warranties." "Warranty Receivable" has the meaning set forth in "The Transfer and Servicing Agreements--Representations and Warranties." "Wind Down Period" means, with respect to each trust, the period commencing on the day immediately after the Scheduled Revolving Period Termination Date and continuing until the earlier of (1) the commencement of an Early Amortization Period and (2) the date on which all of the related securities have been paid in full. The first Distribution Date for a Wind Down Period will be the Distribution Date following the first Collection Period included in the Wind Down Period. SUBJECT TO COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus dated , [ ]) $[ ] (APPROXIMATE) ACE SECURITIES CORP. DEALER FLOORPLAN MASTER LOAN TRUST [ ]-[ ] Issuer [FLOATING RATE][ %] DEALER FLOORPLAN ASSET BACKED CERTIFICATES, SERIES [ ]-[ ], DUE , 20[ ]. ACE SECURITIES CORP. SELLER [ ] SERVICER ----------------------------------- CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The certificates will represent interests in the trust fund only and will not represent interests in or obligations of any other entity. This prospectus supplement may be used to offer and sell the certificates only if accompanied by the prospectus. Principal amount.........................................$[ ] Per annum interest rate.................................... [ ]% [ ] Expected principal payment date..........................[. ] $[ ] [ ]% Legal final..............................................$[ ] [ ]% $[ ] [ ]% Initial public offering price(1)........................... Underwriting discount...................................... Proceeds to seller......................................... The initial public offering price will also include interest accrued on the Series [ ]-[ ] certificates, if any, from [ ]. The seller must pay expenses estimated to be $[ ]. The trust will pay interest on the Series [ ]-[ ] on the [ ] day of each month. The first distribution date will be [ ]. We will deliver the Series [ ]-[ ] certificates in book-entry form only on or about [ ]. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNDERWRITER: DEUTSCHE BANC ALEX. BROWN The date of this prospectus supplement is[ ]. IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the certificates offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your certificates, and (2) this prospectus supplement, which describes the specific terms of your certificates. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the certificates in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. ---------------------- Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the certificates and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the certificates will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. ---------------------- We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. TABLE OF CONTENTS SUMMARY OF TERMS................................. RISK FACTORS..................................... USE OF PROCEEDS.................................. THE DEALER FLOORPLAN FINANCING BUSINESS.......... THE ACCOUNTS..................................... The Seller and the Servicer...................... [ ]'S PERFORMANCE HISTORY................... MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS.... SERIES PROVISIONS................................ LEGAL MATTERS.................................... CERTIFICATE RATINGS.............................. GLOSSARY OF PRINCIPAL TERMS...................... ANNEX 1-OTHER SERIES OF INVESTOR CERTIFICATES.... SUMMARY OF TERMS O THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE CERTIFICATES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. O WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. TITLE OF SECURITIES [Floating Rate] [ %] Dealer Floorplan Asset Backed Certificates, Series [ ]-[ ] (the "Series [ ]-[ ] certificates"). ISSUER [ ] Dealer Floorplan Master Loan Trust (the "trust") SELLER ACE Securities Corp. SERVICER [ ]. TRUSTEE [ ]. INVESTED AMOUNT The total principal amount of the Series [ ]-[ ] certificates invested in receivables on the date they are issued is expected to be $[ ]. This invested amount is subject to decreases and increases as described in this prospectus supplement under the caption "Series Provisions - Allocation Percentages". SERIES ISSUANCE DATE [ ]. SERIES CUT-OFF DATE [ ]. TERMS OF THE CERTIFICATES: A. Interest Payment Dates Interest will be payable on the [ ] of each [month] [quarter] [other], unless the [ ] is not a business day, in which case the payment will be made on the following business day. The first payment will be on [ ]. B. Per Annum Interest [Rate] [Rates] [ ]. [[ ]] [above] [below] [times[ ] or, if lower, the assets receivables rate described in this prospectus supplement.] [Interest will be calculated on the basis of the actual number of days in the applicable interest period divided by 360.] [Interest will be calculated on the basis of a 360-day year of twelve 30-day months.] C. Interest Periods Each period from and including a distribution date to but excluding the day prior to the following distribution date, except that the first interest period will be [ ] days.] D. Principal Payments We expect to pay the principal of the Series [ ]-[ ] certificates in full on [ ]. However, under some circumstances we may pay principal earlier or later or in reduced amounts. See "Maturity and Principal Payment Considerations" in this prospectus supplement. LEGAL FINAL We will be obligated to pay the outstanding principal amount of the Series [ ]-[ ] certificates, to the extent not previously paid, by [ ]. REVOLVING PERIOD During the revolving period, we will not pay principal on the Series [ ]-[ ] certificates or accumulate principal for that purpose. Instead, we will use the Series [ ]-[ ] share of principal collections to make principal distributions on other series and or pay them to the seller. The revolving period will begin at the close of business on the Series Cut-Off Date and end when the [accumulation period] [controlled amortization period] begins. The revolving period will also end if an early amortization period that is not terminated begins. [ACCUMULATION PERIOD We will accumulate principal for the Series [ ]-[ ] certificates during an accumulation period of between one and [ ] months long unless an early amortization period that is not terminated begins before the start of the accumulation period. The latest date on which the accumulation period will commence is [ ]. During the accumulation period we will accumulate the Series [ ]-[ ] share of principal collections for payment on [ ]. See "Series Provisions -- Principal" in this prospectus supplement.] [CONTROLLED AMORTIZATION PERIOD The Series [ ]-[ ] certificates will have a controlled amortization period of between one and [.] months long unless an early termination period that is not terminated begins before the start of the controlled amortization period. The latest date on which the controlled amortization period will commence is [ ]. We expect to make payments of principal on the Series [ ]-[ ] certificates on each distribution date during that period. See "Series Provisions -- Principal" in this prospectus supplement.]. [REINVESTMENT PERIOD] If a reinvestment event occurs, the Series [ ]-[ ] certificates will have a reinvestment period. Under some circumstances, the revolving period may recommence if the seller takes some actions. See "Series Provisions -- Reinvestment Events".] [EXCLUDED SERIES; PREFUNDED PERIOD We are issuing the Series [ ]-[ ] certificates at a time when another series is amortizing or accumulating principal or is about to do so. We refer to that other series as a paired series in relation to Series [ ]-[ ]. Consequently, we will keep the Series [ ]-[ ] initial invested amount in a prefunding account during its prefunded period. The prefunded period will start on the Series [ ]-[ ] issuance date and will not go beyond [ ]. As funds are deposited into an account for the paired series, we will release an equal amount of funds from the prefunding account to the seller. However, until the paired series is paid in full, we will not allocate any collections on the receivables to Series [ ]-[ ]. In this context, we refer to Series [ ]-[ ] as an excluded series. During the prefunded period, we will pay interest on the Series [ ]-[ ] certificates out of net investment earnings from funds in the prefunded account [and funds in a yield supplement account]. We will not pay principal on the Series [ ]-[ ] certificates until the paired series has been paid in full. The effect of this prefunding arrangement is that we will apply the Series [ ]-[ ] invested amount to the purchase of its share of receivables during the prefunded period to the extent the paired series amortizes or accumulates. See "Series Provisions" in this prospectus supplement.] EARLY AMORTIZATION PERIOD If an early amortization event occurs and is not cured, you will begin to receive payments of principal. We refer to this period after the occurrence of an early amortization event as the early amortization period. Early amortization events are events that might adversely affect the trust's ability to make payments on the Series [ ]-[ ] certificates as originally expected. See "Description of the Certificates -- Reinvestment Events and Early Amortization Events" in the prospectus and "Series Provisions - Early Amortization Events" in this prospectus supplement for a description of the events that might cause an early amortization period to start and, in some cases, terminate. CREDIT ENHANCEMENT A. Subordination of the Seller's Interest The seller's interest in the trust will be subordinated to the rights of the Series [ ]-[ ] certificateholders to the extent described in this prospectus supplement. Collections on the receivables otherwise allocable to the seller may be used to pay interest on the Series [ ]-[ ] certificates and other amounts, but only to the extent of the available subordinated amount. The "available subordinated amount" will initially be $[ ] but is subject to reduction from time to time. See "Series Provisions -- Allocation of Collections; Limited Subordination of Seller's Interest" in this prospectus supplement for more information about the available subordinated amount. B. [Reserve Fund On the Series [ ]-[ ] issuance date, the seller will deposit $[ ] into the reserve fund for the Series [ ]-[ ] certificates. The reserve fund required amount for any distribution date will equal [ ]% of the outstanding principal balance of the Series [ ]-[ ] certificates for that distribution date, after giving effect to any change in the outstanding principal balance on that distribution date. Amounts on deposit in the reserve fund will be available to pay monthly interest, the monthly servicing fee and investor default amounts and, on the final payment date, carry-over amounts.] [C. Other Enhancement] The trust will have the benefit of a [letter of credit] [interest rate swap] [currency swap] [cash collateral account] [guaranty] [surety bond] [insurance policy] [spread account] [other enhancement] [issued by [ ]] for the benefit of the Series [ ]-[ ] certificateholders as described in this prospectus supplement. [Describe subordination of another series, if applicable.] See "Series Provisions -- Distributions from the Collection Account; Reserve Fund; [Yield Supplement Account]; Other Enhancement" in this prospectus supplement]. [YIELD SUPPLEMENT ACCOUNT On the Series [ ]-[ ] issuance date, the seller will deposit $[ ] in the yield supplement account for the Series [ ]-[ ] certificates. The yield supplement account required amount for any distribution date will equal [ ]% of the outstanding principal balance of the Series [ ]-[ ] certificates for that distribution date, after giving effect to any change in the outstanding principal balance on that distribution date. Amounts on deposit in the yield supplement account will be available to pay carry-over amounts.] EXCESS PRINCIPAL COLLECTIONS Principal collections allocable to other series, to the extent not needed to make payments in respect of the other series, will be applied to make principal payments in respect of the Series [ ]-[ ] certificates and of other series of certificates entitled to principal payments. [EXCESS SERVICING All interest collections otherwise allocable to any series with respect to any distribution date, to the extent the collections are not needed to make payments to or deposits for the benefit of certificateholders of the series or to restore the credit enhancement for the series, will be applied to cover shortfalls with respect to interest payments and other amounts due to or for the benefit of the holders of the Series [ ]-[ ] certificates, the Series [ ]-[ ] certificates, the Series [ ] certificates and each Series of certificates issued after the Series [ ]-[ ] certificates that is designated by the seller to share the collections.] SERVICING FEE RATE [ ]% [per month] [per annum] [(on a [ ] day basis)], or less if the servicer waives any portion of the monthly servicing fee on any date. OPTIONAL REPURCHASE The Series [ ]-[ ] certificateholders' interest in the trust is subject to optional repurchase by the servicer on any distribution date after the invested amount for the Series [ ]-[ ] certificates is reduced to $[ ] or less. OTHER SERIES OF CERTIFICATES The trust has previously issued and may issue additional series of certificates. A summary of series currently outstanding is contained in "Annex I -- Other Series of Investor Certificates" at the end of this prospectus supplement. ERISA CONSIDERATIONS [It is expected that the Series [ ]-[ ] certificates will be eligible for purchase by employee benefit plans. However, plans contemplating the purchase of Series [ ]-[ ] certificates should consult their counsel before making a purchase. See "ERISA Considerations" in the prospectus.] [Other.] TAX STATUS Stroock & Stroock & Lavan LLP, federal tax counsel to the trust, is of the opinion that at the time of initial issuance of the Series [ ]-[ ] certificates for federal income tax purposes: the Series [ ]-[ ] certificates will be characterized as debt and the trust will not be characterized as an association, or a publicly traded partnership, taxable as a corporation. By your acceptance of a certificate, you will agree to treat your Series [ ]-[ ] certificates as indebtedness for federal, state and local income and franchise tax purposes and [ ] single business tax purposes. [The trust does not anticipate treating the Series [ ]-[ ] certificate as being issued with original issue discount.] See "Material Federal Income Tax Consequences" in the accompanying prospectus for additional information concerning the application of federal income tax laws. CERTIFICATE RATINGS The trust will issue the Series [ ]-[ ] certificates only if they are rated at the time of issuance in the highest long-term rating category by at least one nationally recognized rating agency. The rating agencies and their ratings only address the likelihood that you will ultimately receive all of your required principal and interest distributions. The rating agencies and their ratings do not address the likelihood that any carry-over interest amounts will be paid, the likelihood you will receive interest or principal payments on a scheduled date, or whether you will receive any principal on the Series [ ]-[ ] certificates prior to or after the expected distribution date. RISK FACTORS An investment in Series [ ]-[ ] certificates involves material risks. See "Risk Factors" in this prospectus supplement or the prospectus. CERTIFICATES NOT LISTED ON ANY EXCHANGE The Series [ ]-[ ] certificates will not be listed on an exchange or quoted in an automated quotation system of a registered securities association. See "Risk Factors--Your Ability to Resell Certificates is Limited" in this prospectus supplement or the prospectus. RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE CERTIFICATES. YOU MAY NOT RECEIVE YOUR PRINCIPAL The shorter the accumulation period ON THE EXPECTED PAYMENT DATE the greater the chance that payment BECAUSE OF THE PERFORMANCE in full of the Series [ ]-[ ] OTHER SERIES: certificates by their OF expected distribution date will depend on principal collections from other series.] A series from which principal collections are expected to be available to make payments on the Series [ ]-[ ] certificates may enter an early amortization period [or reinvestment period] after [ ] [the [ ] distribution date] [the start of its accumulation period]. Principal collections from that series will not be available to pay principal of the Series [ ]-[ ] certificates. As a result, you may receive some of your principal later than the Series [ ]-[ ] expected distribution date. [Payments of principal during the controlled amortization period may be less than the amount we expect to pay.] [Also, you will not receive any principal until the invested amount of the paired series has been paid in full.] On written request, the seller will give you disclosure documents relating to the other outstanding series. Those documents describe the events which could result in the start of an early amortization period for those series. IF AN EARLY AMORTIZATION EVENT If an early amortization event OCCURS, YOU MAY RECEIVE YOUR occurs, you may receive your PRINCIPAL SOONER OR LATER THAN YOU principal sooner or later than you EXPECTED AND YOU MAY NOT RECEIVE expected and you may not receive ALL OF YOUR PRINCIPAL: all of your principal. In particular, a significant decline in the amount of receivables generated could cause an early amortization of your certificates. If the balance of the receivables is not maintained at a specified level, [ ] must designate additional accounts, the receivables of which will be sold to the seller. The seller will be required to transfer those receivables to the trust. If additional accounts are not designated by [ ] when required, an early amortization event will occur. In some cases, however, the resulting early amortization period may end and you will stop receiving principal payments. If a bankruptcy event relating to [ ], the seller or [ ] were to occur, an early amortization event would occur. In that case additional receivables would not be transferred to the trust and principal payments on the Series [ ]-[ ] certificates would commence. See "The Dealer Floorplan Financing Business" in the prospectus and "Maturity and Principal Payment Considerations" and "Series Provisions - Early Amortization Events" in this prospectus supplement for more information about the timing of payments on the Series [ ]-[ ] certificates. You may receive interest at a lower rate than you expected. The receivables bear interest at the prime rates of banks plus a margin, while the certificate rate is based on [_____]. Several factors will have an effect on the interest rates of the Series [ ]-[ ] certificates. Some of those factors are described below. YOU WILL RECEIVE THE LOWER OF [ ] The "assets receivables rate" is AND THE ASSETS RECEIVABLES RATE: based on the interest rates on the receivables and investment earnings on amounts on deposit in trust bank accounts. If (a) the certificate rate based on [ ] exceeds (b) the assets receivables rate, the certificate rate will be the assets receivables rate. YOU WILL RECEIVE LESS INTEREST IF The certificate rate based on [ ] THE TRUST IS NOT ABLE TO MAKE UP A may exceed the assets receivables DEFICIENCY IN INTEREST PAYMENTS IF rate as a result of (i) [ ] THE CERTIFICATE RATE IS HIGHER exceeding the interest rate on the THAN THE ASSETS RECEIVABLES RATE: receivables and (ii) [ ] exceeding the investment earnings on amounts, if any, on trust accounts in which principal collections are held. In this regard, [ ] may reduce the interest rates borne by the receivables. Any deficiency in interest payments resulting from the assets receivables rate being lower than the certificate rate based on [ ] and interest on the deficiency (a "Carry-over Amount") will be paid with: o any amounts in the yield supplement account; any funds remaining after all required distributions and deposits for the Series [ ]-[ ] certificates have been made; and o on the last distribution date for Series [ ]-[ ], amounts in the [reserve fund and] some of the seller's collections. We cannot assure you that those amounts, if any, will be sufficient to pay any of these unpaid interest amounts. If any of these unpaid interest amounts is outstanding for [six] distribution dates in a row, an [early amortization event] [reinvestment event] will occur.] CREDIT ENHANCEMENT IS LIMITED o As the Credit Enhancement Is AND MAY BE REDUCED. Reduced, You Are More Likely to Incur Losses and to Receive Your Principal Earlier or Later Than You Expected. Credit enhancement of the Series [ ]-[ ] certificates will be provided by the subordination of the seller's interest to the extent of the available subordinated amount as described in this prospectus supplement [and by amounts in the reserve fund]. [Describe other subordination of the seller's interest, if applicable.] [Describe any other applicable credit enhancements.] The amount of such credit enhancement is limited and will be reduced from time to time. See "Series Provisions -- Allocation of Collections; Limited Subordination of Seller's Interest" for more information about credit enhancement for the Series [ ]-[ ] certificates. THE TRUST IS o The trust is completely DEPENDENT ON [ ] AND [ ]. dependent upon [ ] for the generation of new receivables. The ability of [ ] to generate receivables is in turn dependent to a large extent on the sales of automobiles and light duty trucks manufactured or distributed by [ ]. Several factors will have an effect on that dependence. If [ ] does not generate sufficient receivables, an early amortization event may occur. YOUR ABILITY TO RESELL o There may be no secondary market CERTIFICATES IS LIMITED. for your certificates. The underwriters may participate in making a secondary market in the certificates, but are under no obligation to do so. We cannot assure you that a secondary market will develop. If a secondary market does develop, we cannot assure you that it will continue or that you will be able to resell your certificates. Also, your certificates will not be listed on any securities exchange or quoted in the automated quotation system of any registered securities association. As a result, you will not have the liquidity that might be provided by that kind of listing or quotation. You can find a "Glossary of Principal Terms for the Prospectus Supplement" beginning on page S-[ ] in this prospectus supplement. USE OF PROCEEDS From the net proceeds of the Series [ ]-[ ] certificates, we will make the deposits to the [Reserve Fund] [the Yield Supplement Account] [the Excess Funding Account] described in this prospectus supplement, and we will pay the remaining $[..] of the net proceeds to [ ]. [ ] will use the proceeds to purchase receivables from [ ] or to repay amounts previously borrowed to purchase receivables. [ ] will use the portion of the proceeds paid to it for general corporate purposes. THE DEALER FLOORPLAN FINANCING BUSINESS The receivables sold to the trust were or will be selected from extensions of credit and advances made by [ ] and [ ] to approximately [ ] domestic motor vehicle dealers. [ ] financed [ ]% of the total number of all [ ]-franchised dealers as of [ ]. [ ] has extended credit lines to [ ] [ ]-franchised dealers that also operate non-[ ] franchises (representing approximately [ ]% of the aggregate credit lines of dealers in the Wholesale Portfolio as of [ ]) and [ ] non-[ ] dealers (representing approximately [ ]% of those aggregate credit lines). As of [ ], the balance of principal receivables in the Wholesale Portfolio was approximately $[ ] billion. [ ] currently services the Wholesale Portfolio through its home office and through a network of [ ] zone offices located throughout the United States. As of [..], the average credit lines per dealer in the Wholesale Portfolio for new and used vehicles (which includes Auction Vehicles) were $[ ] million and $[ ] million, respectively, and the average balance of principal receivables per dealer was $[ ] million. As of [ ], the aggregate total receivables balance as a percentage of the aggregate total credit lines was approximately [ ]%. The following table sets forth the percentages of dealer account balances by year of credit line origination for the Wholesale Portfolio. PORTFOLIO PERCENTAGES BY YEAR OF CREDIT LINE ORIGINATION AS OF [ ] PRIOR TO [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] As of [ ], the weighted average spread over the prime rate charged to dealers in the Wholesale Portfolio was approximately [ ]%. Used vehicles (which excludes Auction Vehicles) represented approximately [ ]% of the aggregate principal amount of receivables in the Wholesale Portfolio as of [ ]. As of [ ], used vehicles represented approximately [ ]% of the aggregate principal amount of receivables in the trust (including Excluded Receivables). The following table provides the percentage of dealers in the Wholesale Portfolio that were subject to finance hold as of the dates indicated. Finance Hold Experience As of December 31, FINANCE HOLD EXPERIENCE AS OF [] AS OF DECEMBER 31, [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Percentage of Dealers.. [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% The following table provides the number and percentage of dealers in Dealer Trouble Status in the Wholesale Portfolio as of the dates indicated. Dealer Trouble Experience AS OF [] AS OF DECEMBER 31, [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Number of Dealers [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Percentage of Dealers [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% THE ACCOUNTS As of [ ], with respect to the Accounts in the trust: (a) there were approximately [ ] Accounts and the principal receivables balance was approximately $[ ] billion; (b) the average credit lines per dealer for new and used vehicles (which include Auction Vehicles) were approximately $[ ]million and $[ ] million, respectively, and the average balance of principal receivables per dealer was approximately $[ ] million; and (c) the aggregate total receivables balance as a percentage of the aggregate total credit line was approximately [ ]%. Unless otherwise indicated, the statistics included in this paragraph, in the table below with respect to the Accounts and the receivables in the trust give effect to approximately $[ ] million of principal receivables balances with respect to dealers (the "Excluded Receivables" and the "Excluded Dealers", respectively), that are in voluntary or involuntary bankruptcy proceedings or voluntary or involuntary liquidation or that, subject to limitations, are being voluntarily removed by the seller from the trust. A portion of those principal receivables was created after those dealers entered into that status or were designated by the seller for removal from the trust and, as a result, are owned by [ ]. Principal receivables balances created prior to those dealers entering into that status or being designated for removal from the trust are included in the principal receivables balance. See "Description of the Certificates" in the prospectus for a description of the manner in which an Account can be removed from the trust. The following table sets forth the percentages of dealer account balances by year of credit line origination for the accounts in the trust. PORTFOLIO PERCENTAGES BY YEAR OF CREDIT LINE ORIGINATION AS OF [ ] PRIOR TO [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% As of [ ], the weighted average spread over the Prime Rate charged to Dealers was approximately [ ]%. [ ]'S PERFORMANCE HISTORY LOSS EXPERIENCE The following tables set forth the average principal receivables balance and loss experience for each of the periods shown on the Wholesale Portfolio. Because the Eligible Accounts will be only a portion of the entire Wholesale Portfolio, actual loss experience with respect to the Eligible Accounts may be different. We cannot assure you that the loss experience for the receivables in the future will be similar to the historical experience set forth below with respect to the Wholesale Portfolio. Also, the historical experience set forth below reflects financial assistance provided by Deutsche Banc Alex. Brown or [ ] to [ ]-franchised dealers as described under "The Dealer Floorplan Financing Business -- Relationship with [ ]" in the prospectus. If [ ] is not able to or elects not to provide that assistance, the loss experience in respect of the Wholesale Portfolio may be adversely affected. See "Risk Factors" in the prospectus and "Risk Factors -- The Trust is Dependent on [ ] and [ ]" in this prospectus supplement. LOSS EXPERIENCE FOR THE WHOLESALE PORTFOLIO [ ] MONTHS ENDED YEAR ENDED DECEMBER 31 [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Average Principal Receivables Balance(1)....$ []% $[ ]% $[ ] $[ ]% $[ ]% $[ ]% $[ ] $[ ]% $[ ]% Net Losses/(Net Recoveries)(2)$[ ]% $[ ]% $[ ] $[ ]% $[ ]% $ [ ]% $[ ]% $[ ]% $[ ]% Net Losses/(Net Recoveries) as a Percent of Liquidations $[ ]% $[ ]% $[ ] $[ ]% $[ ]% $ [ ]% $[ ]% $[ ]% $[ ]% Net Losses/(Net Recoveries) as a Percent of Average Principal Receivables Balance(3) [ ]% [ ]% [ ] [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ] MONTHS ENDED YEAR ENDED DECEMBER 31, [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Average Principal Receivables $[ ] $[ ] $[ ] $[ ] $[ ] $[ ] $[ ] $[ ] $[ ] Balance(1) Net Losses/(Net Recoveries)(2)$[ ] $[ ] $[ ] $[ ] $[ ] $[ ] $[ ] $[ ] $[ ] Net Losses/(Net Recoveries) as a Percent of Liquidations [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% Net Losses/(Net Recoveries) as a Percent of Average Principal Receivables Balance(3) [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% YEAR ENDED DECEMBER 31, [ ] [ ] [ ] [ ] [ ] [ ] Average Principal Receivables Balance(1) $[ ] $[ ] $[ ] $[ ] $[ ] $[ ] Net Losses/(Net Recoveries)(2) $[ ] $[ ] $[ ] $[ ] $[ ] $[ ] Net Losses/(Net Recoveries) as a Percent of Liquidations [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% Net Losses/(Net Recoveries) as a Percent of Average Principal Receivables Balance(3) [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% - --------- (1) Average Principal Receivables Balance is the average of the month-end principal balances for the [ ] months ending on the last day of the period, except for the [ ] months ended [ ]and [ ], which are based on a [ ]-month average. (2) Net losses in any period are gross losses less recoveries for such period. (3) Percentages for the [ ] months ended [ ] and [ ] are expressed on an annualized basis. AGING EXPERIENCE The following table provides the age distribution of vehicle inventory for all dealers in the Wholesale Portfolio, as a percentage of total principal outstanding at the date indicated. Because the Eligible Accounts will only be a portion of the entire Wholesale Portfolio, actual age distribution with respect to the Eligible Accounts may be different. AGE DISTRIBUTION FOR THE WHOLESALE PORTFOLIO AS OF [ ] AS OF DECEMBER 31, DAYS [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] 1-120........... [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% 121-180......... [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] 181-270......... [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Over 270........ [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] GEOGRAPHIC DISTRIBUTION The following table provides the geographic distribution of the vehicle inventory for all dealers in the trust on the basis of receivables outstanding and the number of dealers generating the portfolio. The percentages may not add to 100.00% because of rounding. GEOGRAPHIC DISTRIBUTION OF ACCOUNTS IN THE TRUST AS OF [ ] PERCENTAGE OF PERCENTAGE OF RECEIVABLES RECEIVABLES TOTAL NUMBER OF NUMBER OF OUTSTANDING(2) OUTSTANDING(2) DEALERS(3) DEALERS(3) [Texas]......... $ % % [California].... [New York]...... [Florida]....... [Illinois]...... [New Jersey].... [Michigan]...... [ ]........ Other(1)........ Total........... $ % % - ---------------- (1) No other state includes more than 5% of the outstanding receivables. (2) Includes Excluded Receivables. (3) Includes Excluded Dealers. MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS You will begin receiving principal on your certificates if an Early Amortization Period that is not terminated has commenced. Full amortization of the Series [ ]-[ ] certificates by the [ ] distribution date (the "Series [ ]-[ ] Expected Payment Date") depends on, among other things, repayment by dealers of the receivables and may not occur if dealer payments are insufficient. Because the receivables are paid upon retail sale of the underlying vehicle, the timing of the payments is uncertain. Also, there is no assurance that [ ] will generate additional receivables under the Accounts or that any particular pattern of dealer payments will occur. [Also, the shorter the Accumulation Period Length the greater the likelihood that payment of the Series [ ]-[ ] certificates in full by the Series [ ]-[ ] Expected Payment Date will be dependent on the reallocation of principal collections which are initially allocated to other outstanding series.] If one or more other series from which principal collections are expected to be available to be reallocated to the payment of the Series [ ]-[ ] certificates enters into an early amortization period [or reinvestment period] after [ ] [the [ ] distribution date] [the start of the Accumulation Period], principal collections allocated to those series will not be available to be reallocated to make payments of principal of the Series [ ]-[ ] certificates and [you may receive your final payment of principal later than the Series [ ]-[ ] Expected Payment Date] [the amount of principal distributed on the Series [ ]-[ ] certificates on any distribution date during the Controlled Amortization Period may be less than the Controlled Amortization Amount.] [Also, you will not receive any payments of principal until the invested amount of the Paired Series has been reduced to zero.] Because an Early Amortization Event with respect to the Series [ ]-[ ] certificates may occur and would initiate an Early Amortization Period, you may receive the final distribution of principal on your Series [ ]-[ ] certificates prior to the scheduled termination of the Revolving Period or prior to the Series [ ]-[ ] Expected Payment Date. [Several of the events which constitute Reinvestment Events with respect to the Series [ ]-[ ] certificates may constitute early amortization events with respect to other Series. Should an event of that type occur, holders of certificates of those other series would receive monthly distribution of principal, which distributions would not be limited to any controlled amortization amount. At the same time, Series [ ]-[ ] Certificateholder Principal Collections would be retained in the Principal Funding Account and would not be distributed to Series [ ]-[ ] certificateholders until the Series [ ]-[ ] Expected Payment Date or, if earlier, the first distribution date following the occurrence of an Early Amortization Event. The amount of new receivables generated in any month and monthly payment rates on the receivables may vary because of seasonal variations in vehicle sales and inventory levels, retail incentive programs provided by vehicle manufacturers and various economic factors affecting vehicle sales generally. The following table sets forth the highest and lowest monthly payment rates for the Wholesale Portfolio during any month in the periods shown and the average of the monthly payment rates for all months during the periods shown. The monthly payment rate is the percentage equivalent of a fraction, the numerator of which is the aggregate of all collections of principal during the period and the denominator of which is the average aggregate principal balance for the period. We cannot assure you that the rate of principal collections will be similar to the historical experience set forth below. As the Eligible Accounts will be only a portion of the entire Wholesale Portfolio, historical monthly payment rates with respect to the Eligible Accounts may be different than those shown below. MONTHLY PAYMENT RATES FOR THE WHOLESALE PORTFOLIO [ ] MONTHS ENDED [ ] YEAR ENDED DECEMBER 31, [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Highest Month [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]%[ ]% [ ]% Lowest Month [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Average of the Months in the Period [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] SERIES PROVISIONS GENERAL The trust will issue the Series [ ]-[ ] certificates under the Pooling and Servicing Agreement and a Series Supplement relating to the Series [ ]-[ ] certificates (the "Series Supplement"). Beneficial interests in Series [ ]-[ ] certificates will be offered in minimum denominations of $1,000 and integral multiples of that amount. The trustee will make available for inspection a copy of the Pooling and Servicing Agreement, without exhibits or schedules, on request. You should refer to the prospectus for additional information concerning the Series [ ]-[ ] certificates and the Pooling and Servicing Agreement. In general terms, we allocate collections on the receivables first among each series. We then allocate the series collections between the investors in that series and the seller. We apply the investor's share of interest collections to pay the investors' share of the servicing fee and interest on the Series [ ]-[ ] certificates and to cover the investors' share of losses on the principal receivables. If the investors' share of interest collections is not sufficient to cover those amounts, we will use the seller's share of collections, but only up to the available subordinated amount, to cover the shortfall. When it is time to distribute principal to investors or accumulate principal collections for that purpose, we will use the investors' share of principal collections. Under some circumstances, we may use collections allocated to another series, but which are not then needed by that series. For the most part, the trustee applies the collections pursuant to directions from the servicer. The preceding paragraph is a very simplified description of the primary allocation and use of collections on the receivables. The following description contains a precise description of the calculations of allocations and the manner, timing and priorities of the application of the collections. Many of the calculations are complex and are described in the definition of the terms used. The complex defined terms are needed in order to tell you the precise amount that will be available to make a specified payment. The Glossary of Principal Terms for the Prospectus Supplement at the end of this prospectus supplement contains many of these definitions. However, for convenience we often include the definition where its subject is being discussed. INTEREST Interest on the principal balance of the Series [ ]-[ ] certificates will accrue at the Certificate Rate and will be payable to the Series [ ]-[ ] certificateholders on each distribution date, commencing [ ]. Interest payable on any distribution date will accrue from and including the preceding distribution date to but excluding that distribution date, or, in the case of the first distribution date, from and including the Series [ ]-[ ] Issuance Date to but excluding the first distribution date. Each of those periods is an "Interest Period." Interest will be calculated on a basis of [the actual number of days in each Interest Period divided by [360] [other]] [a 360-day year of twelve 30-day months]. Interest due for any distribution date but not paid on that distribution date will be due on the next distribution date, together with interest on the amount at the Certificate Rate [calculated on the basis of [ ]], to the extent permitted by applicable law. We will make interest payments on the Series [ ]-[ ] certificates generally out of Series [ ]-[ ] Certificateholder Interest Collections, [any withdrawals from the Reserve Fund, [Excess Interest Collections, if any, allocated to Series [ ]-[ ] , ] and Investment Proceeds and, under some circumstances, Available Seller's Collections to the extent of the Available Subordinated Amount [and any withdrawals from the Yield Supplement Account] [describe other sources.] The Certificate Rate for each Interest Period will be determined on the [LIBOR Determination Date ] [Adjustment Date] preceding that Interest Period. The "Certificate Rate" will be [ %] [equal to [the lesser of (a)] the index] [LIBOR] [plus] [minimum] [times] [ ]% [and (b) [except with respect to [the Prefunded Period [other]] the [Assets Receivables Rate for the related distribution date]. "Monthly Interest" for any distribution date means the amount of interest accrued in respect of the Series [ ]-[ ] certificates in the Interest Period for that distribution date. ["LIBOR" with respect to any Interest Period will be established by the Calculation Agent and will equal the offered rate for United States dollar deposits for one month that appears on Telerate Page 3750 as of 11:00 A.M., London time, on the second LIBOR Business Day prior to that Interest Period (a "LIBOR Determination Date"). "Telerate Page 3750" means the display page so designated on the Dow Jones Telerate Service, or any other page as may replace that page on that service, or any other service as may be nominated as the information vendor, for the purpose of displaying London interbank offered rates of major banks). If that rate appears on Telerate Page 3750, LIBOR will be that rate. "LIBOR Business Day" as used in this prospectus supplement means a day that is both a Business Day and a day on which banking institutions in the City of London, England are not required or authorized by law to be closed. If on any LIBOR Determination Date the offered rate does not appear on Telerate Page 3750, the Calculation Agent will request each of the reference banks, which shall be major banks that are engaged in transactions in the London interbank market selected by the Calculation Agent, to provide the Calculation Agent with its offered quotation for United States dollar deposits for one month to prime banks in the London interbank market as of 11:00 A.M., London time, on that date. If at least two reference banks provide the Calculation Agent with the offered quotations, LIBOR on that date will be the arithmetic mean, rounded upwards, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward, of all the quotations. If on that date fewer than two of the reference banks provide the Calculation Agent with the offered quotations, LIBOR on that date will be the arithmetic mean, rounded upwards, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward, of the offered per annum rates that one or more leading banks in The City of New York selected by the Calculation Agent are quoting as of 11:00 A.M., New York City time, on that date to leading European banks for United States dollar deposits for one month. If, however, those banks are not quoting as described above, LIBOR for that date will be LIBOR applicable to the Interest Period immediately preceding that Interest Period. The "Calculation Agent" will be the trustee. [Describe Index and define Adjustment Date.] [If the Certificate Rate for a distribution date [other than a distribution date [with respect to the Prefunded Period] [other]] calculated on the basis of [the Index] [LIBOR] as described above is greater than the Assets Receivable Rate, then the Certificate Rate for that distribution date will be the Assets Receivables Rate.] The "Assets Receivables Rate" for any Interest Period shall equal the product of (a) the quotient obtained by dividing (i) 360 by (ii) the actual number of days elapsed in that period and (b) a percentage, expressed as a fraction,(i) the numerator of which is the sum of (A) Certificateholder Interest Collections for the Collection Period immediately preceding the last day of that period, which for this purpose only is based on interest amounts billed to the dealers which are due during that Collection Period, less the Monthly Servicing Fee with respect to that immediately preceding Collection Period, (B) the Investment Proceeds to be applied on the distribution date related to that period and (ii) the denominator of which is the sum of (A) the product of (I) the Floating Allocation Percentage, (II) the Series Allocation Percentage and (III) the average Pool Balance, after giving effect to any charge-offs, for that immediately preceding Collection Period, (B) the principal balance on deposit in the Excess Funding Account on the first day of that period, after giving effect to all deposits to and withdrawals therefrom on that first day, and (C) the principal balance on deposit in the Principal Funding Account on the first day of that period, after giving effect to all deposits to and withdrawals therefrom on that first day, [other]. If the Certificate Rate for any distribution date is based on the Assets Receivables Rate, the Series [ ]-[ ] will be entitled to receive the Carry-over Amount to the extent of available funds. The "Carry-over Amount" for a distribution date will be the sum of (a) the excess of the amount of interest on the Series [ ]-[ ] certificates that would have accrued in respect of the related Interest Period had interest been calculated based on [LIBOR][the Index], over (b) the amount of interest on the Series [ ]-[ ] certificates actually accrued in respect of that Interest Period based on the Assets Receivables Rate plus (c) the unpaid portion of any excess from prior distribution dates, and interest accrued on that amount calculated on the basis of [LIBOR][the Index]. A Carry-over Amount will only be payable from amounts on deposit in the Yield Supplement Account and, if those amounts are depleted, to the extent funds are allocated and available for that purpose after making all required distributions and deposits with respect to the Series [ ]-[ ] certificates, including payments with respect to principal [(including payments to the Excess Funding Account)], Monthly Interest, the Monthly Servicing Fee[, the Reserve Fund Deposit Amount] and the Investor Default Amount as described below under "Distributions from the Collection Account; [Reserve Fund;] Yield Supplement Account [Other Enhancement]". Also, any Carry-over Amount outstanding on the final distribution date, after making the distributions described in the preceding sentence, will be paid on the final distribution date from (i) amounts on deposit in the Reserve Fund that would otherwise be payable to the seller, and (ii) Available Seller's Collections on deposit in the Collection Account that would otherwise be payable to the seller, as described under "Distributions from the Collection Account; [Reserve Fund]; Yield Supplement Account][Other Enhancement]". The rating of the Series [ ]-[ ] certificates does not address the likelihood of payment of any Carry-over Amount.] PRINCIPAL We will not make principal payments to the Series [ ]-[ ] certificateholders until the Series [ ]-[ ] [Expected Payment Date] [Principal Commencement Date] or, upon the commencement of an Early Amortization Period that is not terminated as described in this prospectus supplement, until the first Special Payment Date. [However, even if an Early Amortization Event occurs, we will not make principal payments will be made to the Series [ ]-[ ] certificateholders during the Prefunded Period.] On each distribution date with respect to the Revolving Period, collections of principal receivables allocable to the interest of the Series [ ]-[ ] certificateholders in the Trust Assets (the "Series [ ]-[ ] Certificateholders' Interest") that are not required to be deposited to the Excess Funding Account, subject to limitations, will either be (a) allocated to one or more series which are in amortization, early amortization or accumulation periods to cover principal payments due to the certificateholders of any of those series or which provides for excess funding accounts or similar arrangements or (b) if no series is then amortizing or accumulating principal or otherwise does not provide for excess funding accounts or similar arrangements, paid to the seller to maintain the Series [ ]-[ ] Certificateholders' Interest or held as Unallocated Principal Collections. See "Allocation Percentages -- Principal Collections for all Series" and "Distributions from the Collection Account[; Reserve Fund][; Yield Supplement Account][; Other Enhancement] -- Principal Collections". The "Revolving Period" will be the period beginning at the close of business on the Series Cut-Off Date and terminating on the earlier of (a) the close of business on the day immediately preceding the Accumulation Period Commencement Date and (b) the close of business on the day an Early Amortization Period commences. The Revolving Period, however, may recommence upon the termination of an Early Amortization Period. See "Early Amortization Events". During the Revolving Period, we will not use the Series [ ]-[ ] certificateholders' share of principal collection to make principal payments on the Series [ ]-[ ] certificates. Instead, we will use them to make principal distributions on other series or we will pay them to the seller. Unless an Early Amortization Period [or Reinvestment Period] that is not terminated as described in this prospectus supplement shall have commenced, the Series [ ]-[ ] certificates will have an Accumulation Period of one, two, three, four or five month(s) long as described in the following paragraph. On the [ ] distribution date and each subsequent distribution date after that date that occurs prior to the Accumulation Period Commencement Date, the servicer shall calculate the Accumulation Period Length. The "Accumulation Period Length" will be calculated on each of those dates as the lesser of (i) the number of full Collection Periods between that distribution date and the Series [ ]-[ ] Expected Payment Date and (ii) the product, rounded upwards to the nearest integer not greater than five, of (a) one divided by the lowest Monthly Payment Rate on the receivables during the last [ ] months and (b) a fraction, the numerator of which is the sum of (i) the Invested Amount as of that distribution date, after giving effect to all changes in the Invested Amount on that date, and (ii) the invested amounts of all other series [,excluding some series,] currently in their amortization or accumulation periods or expected to be in their amortization or accumulation periods by the Series [ ]-[ ] Expected Payment Date and (iii) the denominator of which is the sum of the Invested Amount and the invested amounts as of that distribution date, after giving effect to all changes in those amounts on that date, of all other outstanding series [,excluding some series,] which are expected to be outstanding on the Series [ ]-[ ] Expected Payment Date. The "Accumulation Period Commencement Date" will be determined as follows: THE ACCUMULATION PERIOD COMMENCEMENT DATE WILL BE THE IF THE ACCUMULATION PERIOD FIRST DAY IN THE FOLLOWING LENGTH IS COLLECTION PERIOD: Five Collection Periods [ ] Collection Period Four Collection Periods [ ] Collection Period Three Collection Periods [ ] Collection Period Two Collection Periods [ ] Collection Period One Collection Period [ ] Collection Period However, if at any time after the [ ] distribution date, any other outstanding series [,excluding some series,] shall have entered into an early amortization period, the Accumulation Period Commencement Date shall be the earlier of (i) the date that that outstanding series shall have entered into its early amortization period and (ii) the Accumulation Period Commencement Date as previously determined. See "Annex I-- Other Series of Investor Certificates" The effect of the calculation of the Accumulation Period Length will allow us to reduce the length of the Accumulation Period based on the invested amounts of other series which are scheduled to be in their revolving periods during the Accumulation Period and on increases in the principal payment rate. Unless and until an Early Amortization Period [or Reinvestment Period] that is not terminated as described in this prospectus supplement shall have occurred and until the outstanding principal balance of the Series [ ]-[ ] certificates is paid in full, on each distribution date with respect to the [Accumulation Period][Controlled Amortization Period], collections of principal receivables allocable to the Series [ ]-[ ] Certificateholders' Interest plus other amounts comprising Monthly Principal will no longer be paid for the benefit of another series or to the seller. Instead, those collections up to the [Controlled Deposit Amount][Controlled Distribution Amount] for each of those distribution dates will be [deposited in the Principal Funding Account][distributed to the Series [ ]-[ ] certificateholders]. [We will use the funds deposited in the Principal Funding Account and any amounts in the Excess Funding Account to pay the outstanding principal balance of the Series [ ]-[ ] certificates on the Series [ ]-[ ] Expected Payment Date. If on that date the total amount in the Principal Funding Account and the Excess Funding Account is less than the outstanding principal balance of the Series [ ]-[ ] certificates, the Early Amortization Period will commence. On each subsequent distribution date the Series [ ]-[ ] certificateholders will receive distributions of Monthly Principal and Monthly Interest until the outstanding principal balance of the Series [ ]-[ ] certificates has been paid in full or the Termination Date has occurred. Even if the total amount in the Principal Funding Account Balance and the Excess Funding Account on the Series [ ]-[ ] Expected Payment Date is insufficient to pay the outstanding principal balance of the Series [ ]-[ ] certificates in full, we will distribute that amount to the Series [ ]-[ ] certificateholders at that time.] [However, we will not make any payments of principal on the Series [ ]-[ ] certificates during the Prefunded Period.] EXCESS FUNDING ACCOUNT Unless and until an Early Amortization Event [or Reinvestment Event] shall have occurred, we will keep the Excess Funded Amount in the Excess Funding Account established with the trustee. The Excess Funded Amount will initially equal the excess, if any, of the initial principal balance of the Series [ ]-[ ] certificates, over the Initial Invested Amount. The trustee will invest funds on deposit in the Excess Funding Account at the direction of the servicer in Eligible Investments. Those investments must mature on or prior to the next distribution date. We will pay funds on deposit in the Excess Funding Account to the seller or allocate them to one or more series which are in amortization, early amortization or accumulation periods, but only to the extent of any increases in the Invested Amount as a result of the addition of receivables to the trust, a reduction in the Seller's Interest, or a reduction in the invested amount of any other series. We will deposit additional amounts in the Excess Funding Account on a distribution date to the extent that (i) the sum of (a) the Series [ ]-[ ] Certificateholders' Interest in Principal Receivables, determined for this purpose by reducing the interest by the amount, if any, by which the Required Participation Amount exceeds the Pool Balance due to an increase in the Subordination Factor, and (b) the amount on deposit in the Excess Funding Account prior to the deposit on that distribution date is less than (ii) the outstanding principal balance of the Series [ ]-[ ] certificates, but only to the extent that funds are available as described in this prospectus supplement. If other series provide for excess funding accounts or other arrangements similar to the Excess Funding Account involving fluctuating levels of investment in the receivables, the allocation of additional receivables to increase the Invested Amount will be based on the proportion that the amount on deposit in the Excess Funding Account bears to the amounts on deposit in the excess funding accounts of all series providing for excess funding accounts or similar arrangements or to amounts otherwise similarly available. The deposit of amounts in the Excess Funding Account will be based on the proportion that the Adjusted Invested Amount bears to the adjusted invested amounts of all series providing for excess funding accounts or similar arrangements. On each distribution date, we will apply all investment income received on amounts in the Excess Funding Account during the related Collection Period as described in this prospectus supplement. On the [ ] distribution date we will transfer any funds on deposit in the Excess Funding Account to the Principal Funding Account. No funds will be deposited in the Excess Funding Account during any Early Amortization Period. Also, we will not deposit any amounts into the Excess Funding Account with respect to any Collection Period following the [ ] Collection Period.] ALLOCATION PERCENTAGES ALLOCATION BETWEEN THE SERIES [ ]-[ ] CERTIFICATEHOLDERS AND THE SELLER. We will allocate funds to the Series [ ]-[ ] certificateholders on the basis of various percentages. Which percentage we use depends on whether the collections being allocated are interest collections, principal collections or other amounts and whether or not the collections are received in the Revolving Period. The servicer will allocate amounts initially allocated to Series [ ]-[ ] as described under "Description of the Certificates - Allocation Percentage" in the prospectus between the Series [ ]-[ ] Certificateholders' Interest and the Seller's Interest for each Collection Period as follows: (i) Series Allocable Interest Collections and the Series Allocable Defaulted Amount will be allocated to Series [ ]-[ ] certificateholders based on the Floating Allocation Percentage[. During any Early Amortization Period, however, Series Allocable Interest Collections will be allocated to the Series [ ]-[ ] certificateholders based on the Principal Allocation Percentage]; (ii) during any period that is not the Accumulation Period or an Early Amortization Period (a "Nonprincipal Period"), Series Allocable Principal Collections will be allocated to Series [ ]-[ ] certificateholders based on the Floating Allocation Percentage; (iii) during the [Accumulation Period][Controlled Amortization Period] and any Early Amortization Period [or Reinvestment Period], Series Allocable Principal Collections will be allocated to Series [ ]-[ ] certificateholders based on the [Principal Allocation Percentage][other]; and (iv) Series Allocable Miscellaneous Payments will at all times be allocated to Series [ ]-[ ] certificateholders. We will allocate to the seller all amounts that are not allocated to the Series [ ]-[ ] certificateholders as described above. The "Floating Allocation Percentage" effects, in general, a pro rata allocation based on the Invested Amount, The "Floating Allocation Percentage" for any Collection Period will be [the percentage equivalent, which shall never exceed 100%, of a fraction, the numerator of which is the Invested Amount as of the last day of the immediately preceding Collection Period and the denominator of which is the product of (x) the Pool Balance as of that last day and (y) the Series Allocation Percentage for the Collection Period in respect of which the Floating Allocation Percentage is being calculated. With respect to the first Collection Period, however, the Floating Allocation Percentage shall mean the percentage equivalent of a fraction, the numerator of which is the Initial Invested Amount as of the Series Issuance Date and the denominator of which is the Series Allocation Percentage of the Pool Balance as of the Series Cut-Off Date][other]. The "Principal Allocation Percentage" is, in general, based on the Invested Amount at the end of the Revolving Period. Consequently, even though we are distributing or accumulating principal collections for Series [ ]-[ ] certificateholders, the numerator used for the calculation will not decline. The "Principal Allocation Percentage" for any Collection Period will be [the percentage equivalent, which shall never exceed 100%, of a fraction, the numerator of which is the Invested Amount as of the last day of the Revolving Period, if that last day has occurred or, if that last day has not occurred, as of the last day of the immediately preceding Collection Period and the denominator of which is the product of (x) the Pool Balance as of that last day and (y) the Series Allocation Percentage for the Collection Period in respect of which the Principal Allocation Percentage is being calculated][other]. The "Invested Amount" represents the amount of outstanding principal receivables allocable to the Series [ ]-[ ] certificateholders. The Invested Amount may increase or decrease depending on principal collection deposited into or released from the Excess Funding Account, principal distributed to or accumulated for Series [ ]-[ ] certificateholders and losses on the receivables and the reimbursement of those losses. The "Invested Amount" for any date will be [an amount equal to the Initial Invested Amount (x) minus the amount, without duplication, of principal payments, except for principal payments made from the Excess Funding Account, made to Series [ ]-[ ] certificateholders or deposited to the Principal Funding Account in respect of the Series [ ]-[ ] certificates prior to that date since the Series Issuance Date (y) minus the excess, if any, of (i) the aggregate amount of Investor Charge-Offs for all distribution dates preceding that date, over (ii) the aggregate amount of any reimbursements of Investor Charge-Offs for all distribution dates preceding that date][other]. The "Initial Invested Amount" means [[the portion of the initial principal amount of the Series [ ]-[ ] certificates which is invested in principal receivables on the Series Issuance Date, which is expected to equal $[ ], based on information as of the Series Cut-off Date,] during the Prefunded Period, zero and after that time [ ]], (x) plus the amount of any withdrawals from the Excess Funding Account in connection with the purchase of an additional interest in principal receivables since the Series Issuance Date, (y) minus the amount of any additions to the Excess Funding Account in connection with a reduction in the principal receivables in the trust or an increase in the Subordination Factor since the Series Issuance Date. The Floating Allocation Percentage and the Principal Allocation Percentage will be adjusted for any Collection Period in which Additional Accounts are designated to reflect the additional receivables added to the trust. PRINCIPAL COLLECTIONS FOR ALL SERIES We will allocate principal collections allocated to the Series [ ]-[ ] Certificateholders' Interest for any Collection Period first [to make required deposits to the Excess Funding Account during the Revolving Period], [to make required payments of principal [to the Principal Funding Account during the [Accumulation Period] [or Reinvestment Period] and] to the Series [ ]-[ ] certificateholders during [the Controlled Amortization Period and] any Early Amortization Period] [describe other applications, if applicable]. See "Distributions from the Collection Account; [Reserve Fund;] Yield Supplement Account; Other Enhancement -- Principal Collections". The servicer will determine the amount of Available Series [ ]-[ ] Certificateholder Principal Collections for any Collection Period remaining after required payments, if any, and the amount of any similar excess for any other series ("Excess Principal Collections"). The servicer will allocate Excess Principal Collections to cover any principal distributions to certificateholders for any series entitled to them which are either scheduled or permitted and which have not been covered out of principal collections and other amounts allocated to those series ("Principal Shortfalls"). See "Maturity and Principal Payment Considerations". We will generally not use Excess Principal Collections to cover investor charge-offs for any series. If Principal Shortfalls exceed Excess Principal Collections for any Collection Period, we will allocate Excess Principal Collections [pro rata among the applicable series based on the relative amounts of Principal Shortfalls] [describe other method of applying, if applicable]. ALLOCATION OF COLLECTIONS; LIMITED SUBORDINATION OF SELLER'S INTEREST On any date on which collections are deposited in the Collection Account, the servicer will distribute directly to the seller an amount equal to (a) the Excess Seller's Percentage for the related Collection Period of Series Allocable Interest Collections for that date and (b) the Excess Seller's Percentage for the related Collection Period of Series Allocable Principal Collections for that date. However, the servicer will make this distribution only if the Seller's Participation Amount, determined after giving effect to any Principal Receivables transferred to the trust on that date, exceeds the Trust Available Subordinated Amount for the immediately preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date immediately following that Determination Date. The "Excess Seller's Percentage" is an allocation percentage that reflects the seller's share of cancellations that will not be available as part of the Available Seller's Collections to cover losses and shortfalls allocable to the Series [ ]-[ ] certificates. Also, during any Nonprincipal Period, subject to limitations, the servicer will distribute directly to the seller on each date of deposit an amount equal to the Available Seller's Principal Collections for that date. However, the servicer will make this distribution only if the Seller's Participation Amount, determined after giving effect to any principal receivables transferred to the trust on that date, exceeds the Trust Available Subordinated Amount for the immediately preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date immediately following that Determination Date. [describe exceptions, if any] The "Available Seller's Principal Collections" is the seller's share of principal collections that are part of the Available Seller's Collections, which are generally available to cover losses and shortfalls allocable to the Series [ ]-[ ] certificates. The Available Seller's Interest Collections is also part of the Available Seller's Collections. The allocation percentage used to determine each of these amounts is the percentage equal to the Seller's Percentage minus the Excess Seller's Percentage. The Seller's Percentage is the allocation percentage used to determine the seller's entire share of collections. It will vary depending on whether interest collections, principal collections or defaulted receivables are being allocated and whether the allocation occurs during the Revolving Period. The "Seller's Percentage" means 100% minus the Floating Allocation Percentage, when used with respect to interest collections [, except during any Early Amortization Period], Defaulted Receivables and principal collections during any Nonprincipal Period, and the [Principal Allocation Percentage][other], when used with respect to [interest collections during any Early Amortization Period and] principal collections during the [Accumulation Period] [Controlled Amortization Period] and any Early Amortization Period [or Reinvestment Period]. The "Seller's Participation Amount" for any date means an amount equal to the Pool Balance on that date minus the aggregate invested amounts for all outstanding series on that date. DEFICIENCY AMOUNT [On each Determination Date [with respect to a distribution date that occurs on or prior to the Fully Reinvested Date [or any distribution date after that date during the Revolving Period, if the Revolving Period has recommenced]], the servicer will determine any shortfall in amounts payable to or for the account of the Series [ ]-[ ] certificateholders and losses on the receivables that are allocable to the Series [ ]-[ ] certificates. This shortfall and loss amount is the "Deficiency Amount". It is calculated as the amount, if any, by which (a) the sum of (i) Monthly Interest for the following distribution date, (ii) Monthly Interest accrued but not paid with respect to prior distribution dates, and interest on that Monthly Interest, (iii) the Monthly Servicing Fee for that distribution date, (iv) the Investor Default Amount for that distribution date, (v) the amount of any Adjustment Payment allocated to the Series [ ]-[ ] certificates for that distribution date that has not been deposited in the Collection Account as required under the Pooling and Servicing Agreement and (vi) if that distribution date is the final distribution date, any Carry-over Amount on that distribution date that will not be satisfied on that date by the application of amounts on deposit in the Yield Supplement Account as described under "Distributions from the Collection Account; Reserve Fund; Yield Supplement Account; Other Enhancement -- Yield Supplement Account", exceeds (b) the sum of (i) Certificateholder Interest Collections and Investment Proceeds for that distribution date, (ii) [Excess Interest collections allocated to Series [ ]-[ ] with respect to that distribution date] [and (iii) the amount of funds in the Reserve Fund on that Determination Date available to fund any portion of the Deficiency Amount as described under "Distributions from the Collection Account; Reserve Fund[; Yield Supplement Account] -- Interest Collections"]. The lesser of the Deficiency Amount and the Available Subordinated Amount is the "Draw Amount".(1) [Include other sources of funds and applications of the Draw Amount, as appropriate.]1 We will use Available Seller's Collections, up to the Draw Amount, to cover the shortfalls and losses represented by the Deficiency Amount. AVAILABLE SUBORDINATED AMOUNT The amount of seller's collections available to cover any Deficiency Amount is limited to Available Seller's Collections, which is in turn determined by the Available Subordinated Amount. Under certain circumstances, the seller may, but is not obligated to, increase the Available Subordinated Amount by the Incremental Subordinated Amount. The formulas for determining these amounts are set forth below. The "Available Subordinated Amount" for a Determination Date is equal to (a) the lesser of (i) the Available Subordinated Amount for the preceding Determination Date, minus, with limitations, the Draw Amount for that preceding Determination Date, [minus funds from the Reserve Fund applied to cover any portion of the Investor Default Amount,] plus the excess, if any, of the Required Subordinated Amount for that Determination Date over the Required Subordinated Amount for the immediately preceding Determination Date due to an increase in the Subordination Factor, plus the amount of Excess Servicing available to be paid to the seller as described under "Distributions from the Collection Account[; Reserve Fund;] [Yield Supplement Account][; Other Enhancement]-- Excess Servicing", and (ii) the product of the fractional equivalent of the Subordinated Percentage and the Invested Amount, minus (b) in the case of clause (i)(a), the Incremental Subordinated Amount for that preceding Determination Date, plus (c) the Incremental Subordinated Amount for the current Determination Date, plus (iii) the Subordinated Percentage of funds to be withdrawn from the Excess Funding Account on the succeeding distribution date and paid to the seller or allocated to one or more series.] (1) Modify, as appropriate, if interest collections, Investment Proceeds and Available Sellers' Collections from one series will be available to cover interest or other shortfalls for a related series. However, from and after the commencement of the [Accumulation Period][Controlled Amortization Period] until the [Series [ ]-[ ]] certificates are paid in full and from and after the commencement of any Early Amortization Period that is not terminated as described in this prospectus supplement until the payment in full of the [Series [ ]-[ ]] certificates, we will calculate the Available Subordinated Amount on the basis of the Invested Amount as of the close of business on the day preceding the [Accumulation Period] [Controlled Amortization Period] or Early Amortization Period, as applicable. [Also, from and after the commencement of any Reinvestment Period that is not terminated until the earliest of (a) the commencement of any Early Amortization Period that is not terminated as described in this prospectus supplement, (b) the payment in full of the [Series [ ]-[ ]] certificates and (c) the Fully Reinvested Date, we will calculate the Available Subordinated Amount on the basis of the Invested Amount as of the close of business on the day preceding that Reinvestment Period [less [describe permitted reductions]. The Available Subordinated Amount for the first Determination Date is equal to the Required Subordinated Amount. The "Required Subordinated Amount" is, as of any date of determination, [the sum of] (a) the product of the initial Subordinated Percentage[, as adjusted from time to time as described in this prospectus supplement other than as a result of an increase in the Subordinated Percentage at the option of the seller,] and the Invested Amount [and the Incremental Subordinated Amount.] Assuming that the Initial Invested Amount of the [Series [ ]-[ ]] certificates is equal to the initial principal amount of the [Series [ ]-[ ]] certificates, the Required Subordinated Amount would initially be $[ ]. The "Incremental Subordinated Amount" on any Determination Date will equal the result obtained by multiplying (i) a fraction, the numerator of which is the sum of the Invested Amount on the last day of the immediately preceding Collection Period and the Available Subordinated Amount for that Determination Date, calculated without adding the Incremental Subordinated Amount for that Determination Date as described in the third clause in the definition of "Available Subordinated Amount" above, and the denominator of which is the Pool Balance on that last day by (ii) the excess, if any, of (a) the sum of the Overconcentration Amount, the Installment Balance Amount and the aggregate amount of Ineligible Receivables on that Determination Date over (b) the aggregate amount of Ineligible Receivables, receivables in Accounts containing Dealer Overconcentrations and receivables in Installment Balances, in each case that became Defaulted Receivables during the preceding Collection Period and are not subject to reassignment from the trust, unless insolvency events relating to the seller or [ ] have occurred, as further described in the Pooling and Servicing Agreement. The "Subordinated Percentage" will initially equal the percentage equivalent of a fraction, the numerator of which is the Subordination Factor and the denominator of which will be the excess of 100% over the Subordination Factor. The "Subordination Factor" will [initially] be [ ]% [, but will be subject to increase to [ ]% in the event that the rating of [ ]'s long-term unsecured debt is lowered below BBB- by Standard & Poor's or withdrawn by Standard & Poor's, unless the seller receives written confirmation from Standard & Poor's that the failure to so increase the Subordination Factor would not result in Standard & Poor's lowering or withdrawing its rating of the [Series [ ]-[ ]] certificates. The seller may, in its sole discretion, at any time increase the Available Subordinated Amount for so long as the cumulative amount of the increases does not exceed the lesser of (i) $ [ ] or (ii) [ ]% of the Invested Amount. The seller is not under any obligation to increase the Available Subordinated Amount at any time, except as described in this prospectus supplement. If [the sum of] the Available Subordinated Amount [and the Incremental Subordinated Amount] were reduced to less than the Required Subordinated Amount [and the Incremental Subordinated Amount], a [Reinvestment Event] [Early Amortization Event] would occur. The seller could elect to increase the Available Subordinated Amount at the time the [Reinvestment Event] [Early Amortization Event] would otherwise occur, thus preventing or delaying the occurrence of the [Reinvestment Event] [Early Amortization Event] [Describe partial Reinvestment Periods resulting from a failure to meet the test described above, if applicable.]. [Negative Carry Subordinated Amount. We will set aside funds to mitigate the decrease in interest collections that arises when principal collections are deposited in an account and invested in Eligible Investments rather than reinvested in receivables. In the event of the occurrence of [a Reinvestment Event,] [an Early Amortization Event] [or the commencement of the Accumulation Period] [or the commencement of the Controlled Amortization Period], Interest Collections and Principal Collections otherwise distributed to the seller in respect of the Excess Seller's Percentage will be deposited to the Reserve Fund [and other] until the aggregate amount of the deposits made for that purpose is $[ ]. We will not replenish any of those funds that are deposited for that purpose and are later withdrawn from the Reserve Fund. [Describe other subordination of the Seller's Interest, if applicable.] DISTRIBUTIONS FROM THE COLLECTION ACCOUNT[; RESERVE FUND] [; YIELD SUPPLEMENT ACCOUNT][; OTHER ENHANCEMENT] INTEREST COLLECTIONS. On each distribution date [with respect to a Collection Period that ends prior to the Fully Invested Date [and each Collection Period after the Fully Invested Date during the Revolving Period]], the trustee will apply Series [ ]-[ ] Certificateholder Interest Collections and Investment Proceeds, if any, [Excess Interest Collections allocated to Series [ ]-[ ] [other amounts] in respect of the related Collection Period to make the following distributions in the following priority: (i) [first, the trustee will [deposit into the Interest Funding Account] [distribute to the Series [ ]-[ ] certificateholders] an amount equal to Monthly Interest for that distribution date, plus the amount of any Monthly Interest previously due but not [deposited to the Interest Funding Account or] distributed on a prior distribution date, plus, but only to the extent permitted under applicable law, interest at the Certificate Rate on Monthly Interest previously due but not [deposited or] distributed; (ii) [second, [describe application, if any, to cover interest or other shortfalls with respect to related series;] (iii) third, the trustee will distribute to the servicer an amount equal to the Monthly Servicing Fee for that distribution date, unless that amount has been netted against deposits to the Collection Account as described in the prospectus under "Description of the Certificates -- Allocation of Collections; Deposits in Collection Account" or waived by the servicer; (iv) [fourth, the trustee will deposit into the Reserve Fund an amount equal to the Reserve Fund Deposit Amount, if any, for that distribution date shall be deposited in the Reserve Fund;] (v) fifth, an amount equal to the Investor Default Amount, if any, for that distribution date shall be treated as a portion of Available Series [ ]-[ ] Certificateholder Principal Collections for that distribution date; (vi) [sixth, the trustee will distribute to the Series [ ]-[ ] certificateholders an amount equal to any outstanding Carry-over Amount, after giving effect to any withdrawals from the Yield Supplement Account;] (vii) [seventh, the trustee will deposit into the Yield Supplement Account an amount equal to the Yield Supplement Account Deposit Amount, if any, for that distribution date;] (viii) [eighth, describe other applications, if any]; and (ix) ninth, the balance shall constitute Excess Servicing]. [Describe application of Interest Collections, Investment Proceeds and other amounts allocated to related series to cover distributions under the first clause above, if applicable.] [If, during the Prefunded Period, the Investment Proceeds [describe other funds] are not sufficient to make the entire distributions required by the first clause above, the trustee shall withdraw funds from the Yield Supplement Account and apply the funds to complete the distributions under that clause.] [If [Series [ ]-[ ]] Certificateholder Interest Collections and Investment Proceeds [Excess Interest Collections allocated to Series [ ]-[ ] [describe other funds] are not sufficient to make the entire distributions required by the first, second, third and fifth clauses above and, in the case of the final payment date only, the sixth clause above, the trustee [after applying amounts on deposit in the Yield Supplement Account and [describe other funds]] shall withdraw funds from the Reserve Fund and apply those funds to complete the distributions under those clauses. In the case of the sixth clause above, the withdrawal will be limited to amounts that would otherwise be distributable to the seller. During any Early Amortization Period [or Reinvestment Period], however, the trustee will not apply funds in the Reserve Fund to make distributions required by the fifth clause above to the extent that, after giving effect to the application, the amount on deposit in the Reserve Fund would be less than $[ ].] If there is a Draw Amount for the distribution date and the distribution date is not the final payment date, the trustee shall apply the amount of Available Seller's Collections for the related Collection Period on deposit in the Collection Account on that distribution date, but only up to the Draw Amount, to make the distributions required by the first, second, third and fifth clauses above [that have not been made through the application of funds from the Reserve Fund [or the Yield Supplement Account] [or describe other funds] as described in the preceding paragraph.] If there is a Draw Amount for that distribution date and that distribution date is the final distribution date, the trustee shall apply the amount of Available Seller's Collections for the related Collection Period on deposit in the Collection Account on that distribution date, but only up to the Draw Amount, to make the distributions required by the first, second, third, fifth and sixth clauses above that have not been made through the application of funds from the Reserve Fund [or the Yield Supplement Account] [or described other funds] as described in the preceding paragraph.] Additionally, the trustee will apply Available Seller's Collections to any unpaid Adjustment Payments. The Available Subordinated Amount will be reduced by the amount of Available Seller's Collections so applied. If the Draw Amount exceeds the Available Seller's Collections, the Available Subordinated Amount will be reduced by the amount of the excess, but not by more than the sum of the Investor Default Amount and the portion of Adjustment Payments not paid by the seller, in order to maintain the Invested Amount, but not by more than the Investor Default Amount for the distribution date. "[Series [ ]-[ ]] Certificateholder Interest Collections" for any distribution date will be the portion of Series Allocable Interest Collections for the related Collection Period allocated to the [Series [ ]-[ ]] Certificateholders' Interest as described under "Allocation Percentages -- Allocation Between the [Series [ ]-[ ]] Certificateholders and the Seller". "Investment Proceeds" for any distribution date will be an amount equal to the sum of investment earnings for the preceding Collection Period from: (a) [funds held in the Reserve Fund;] (b) [the Series Allocation Percentage of funds held in the Collection Account;] (c) [funds held in the Excess Funding Account;] (d) [funds held in the Yield Supplement Account;] (e) [funds held in the Principal Funding Account;] (f) [funds held in the Prefunding Account;] (g) [funds held in the Interest Funding Account;] (h) [funds held in [other accounts].] [INVESTMENT PROCEEDS. On each distribution date with respect to a Collection Period that ends after the Fully Reinvested Date [other than any of those Collection Periods during the Revolving Period], the trustee will apply Investment Proceeds [Excess Interest Collections allocated to Series [ ]-[ ] ] [describe other funds], in respect of the related Collection Period to make the following distributions in the following priority: (a) first, an amount equal to Monthly Interest for that distribution date, plus, the amount of any Monthly Interest previously due but not [deposited in the Interest Funding Account or] distributed on a prior distribution date, plus, but only to the extent permitted under applicable law, interest at the Certificate Rate plus [ ]% on Monthly Interest previously due but not [deposited or] distributed, shall be [deposited to the Interest Funding Account] [distributed to Series [ ]-[ ] certificateholders; (b) [second, describe other applications, including, if applicable, to cover interest or other shortfalls with respect to related series; and] (c) third, the balance shall be distributed to the seller.] [Describe application of Interest Collections, Investment Proceeds and other amounts allocated to related Series to cover distributions under the first clause above, if applicable.] [If, on any distribution date, Investment Proceeds [Excess Interest Collections allocated to Series [ ]-[ ] ] [describe other funds] are not sufficient to make the entire distribution required in clause first above [after applying [describe other funds]], the trustee shall withdraw funds from the Reserve Fund and apply those funds to complete the distribution under that clause.] [RESERVE FUND. The "Reserve Fund" will be an Eligible Deposit Account established and maintained in the name of the trustee for the benefit of the [Series [ ]-[ ]] certificateholders. On the Series Issuance Date, the seller will deposit $[ ] ([ ]% of the principal balance of the Series [ ]-[ ] certificates) into the Reserve Fund. We will deposit certain collections into the Reserve Fund in an effort to keep the Reserve Fund Required Amount in the Reserve Fund. The "Reserve Fund Required Amount" for any distribution date will equal [ ]% of the outstanding principal balance of the [Series [ ]-[ ]] certificates for that distribution date, after giving effect to any change in that balance on that distribution date. [Describe any increases in the Reserve Fund Required Amount.] Funds in the Reserve Fund will be invested in Eligible Investments that will mature on or prior to the next distribution date. On each Determination Date, the servicer will apply any investment earnings (net of losses and investment expenses) with respect to the Reserve Fund as set forth under "Distributions from the Collection Account; Reserve Fund[; Yield Supplement Account] [Other Enhancement]". After the earlier of the payment in full of the outstanding principal balance of the [Series [ ]-[ ]] certificates and the Termination Date, any funds remaining on deposit in the Reserve Fund will be paid to the seller. [Describe other applications, if any.] If, after giving effect to the allocations, distributions and deposits in the Reserve Fund described above under "Interest Collections", the amount in the Reserve Fund is less than the Reserve Fund Required Amount for the next distribution date, the trustee shall deposit any remaining Available Seller's Collections for the related Collection Period into the Reserve Fund until the amount in the Reserve Fund is equal to that Reserve Fund Required Amount. If, for any distribution date with respect to an Early Amortization Period [or Reinvestment Period], after giving effect to the allocations, distributions and deposits described in the preceding paragraph, the amount in the Reserve Fund is less than the Excess Reserve Fund Required Amount for that distribution date, the trustee shall deposit the remaining Available Seller's Collections for the related Collection Period into the Reserve Fund until the amount in the Reserve Fund is equal to that Excess Reserve Fund Required Amount. [YIELD SUPPLEMENT ACCOUNT. The "Yield Supplement Account" will be an Eligible Deposit Account established and maintained in the name of the trustee for the benefit of the Series [ ]-[ ] certificateholders. On the Series Issuance Date, the seller will deposit $[ ] ([ ]% of the principal balance of the Series [ ]-[ ] certificates) into the Yield Supplement Account. We will apply funds in the Yield Supplement Account toward the payment of the shortfalls interest distributions to Series [ ]-[ ] certificateholders] described in the following paragraph. After the Series Issuance Date, we will fund the Yield Supplement Account as described under "Interest Collections" above. [On any distribution date with respect to the Prefunded Period on which Investment Proceeds [describe other funds] are insufficient to make the entire distributions required by the first clause] under "Interest Collections" above, the trustee will apply the amount on deposit in the Yield Supplement Account on that distribution date toward payment of that insufficiency.] [On any distribution date on which there is a Carry-over Amount, the trustee will apply the amount on deposit in the Yield Supplement Account on that distribution date toward payment of that Carry-over Amount to satisfy that Carry-over Amount.] [Describe other applications, e.g., to pay Monthly Interest [other than during a Prefunded Period].] Funds in the Yield Supplement Account will be invested [in Eligible Investments that mature on or prior to the next distribution date] [at the direction of the servicer in any investments consisting of financial assets that by their terms convert to cash within a finite period of time]. On each Determination Date, the servicer will apply any investment earnings, net of losses and investment expenses, with respect to the Yield Supplement Account as set forth under "Distributions from the Collection Account; [Reserve Fund;] Yield Supplement Account; Other Enhancement". After the earlier of the payment in full of the outstanding principal balance of the Series [ ]-[ ] certificates and the Termination Date, any funds remaining on deposit in the Yield Supplement Account will be paid to the seller. [Describe other applications.]] EXCESS SERVICING. On each distribution date [with respect to a Collection Period that ends prior to the Fully Reinvested Date [or any Collection Period that ends after the Fully Reinvested Date during the Revolving Period]], the servicer will allocate Excess Servicing with respect to the Collection Period immediately preceding that distribution date, in the following priority: (a) [FIRST, we will allocate an amount equal to the aggregate amount of Investor Charge-Offs which have not been previously reimbursed, after giving effect to the allocation on that distribution date of Series Allocable Miscellaneous Payments with respect to that distribution date, in the same manner as we allocate Available [Series [ ]-[ ]] Certificateholder Principal Collections for that distribution date; (B) SECOND, the trustee will pay to the servicer an amount equal to the aggregate outstanding amounts of the Monthly Servicing Fee which have been previously waived as described under "Description of the certificates -- Servicing Compensation and Payment of Expenses" in the prospectus; (c) [THIRD, describe other applications; and] (D) FOURTH, the balance, if any, shall increase the Available Subordinated Amount as described in the definition of "Available Subordinated Amount" and be distributed to the seller.] PRINCIPAL COLLECTIONS On each distribution date [with respect to a Collection Period that ends prior to the Fully Reinvested Date [or any Collection Period that ends after the Reinvested Date during the Revolving Period]], the servicer will allocate Available [Series [ ]-[ ]] Certificateholder Principal Collections as follows: (a) for each distribution date with respect to any Nonprincipal Period, the servicer will allocate all Available Series [ ]-[ ] Certificateholder Principal Collections FIRST, to make a deposit to the Excess Funding Account if the sum of (i) the [Series [ ]-[ ]] Certificateholders' Interest in Principal Receivables, determined for this purpose by reducing that interest by the amount, if any, by which the Required Participation Amount exceeds the Pool Balance due to an increase in the Subordination Factor, and (ii) the amount on deposit in the Excess Funding Account prior to the allocation on that distribution date is less than the outstanding principal balance of the [Series [ ]-[ ]] certificates and SECOND to Excess Principal Collections as described under "Allocation Percentages-- Principal Collections for all Series"; and (b) for each distribution date with respect to the [Accumulation Period][Controlled Amortization Period], all Available [Series [ ]-[ ]] Certificateholder Principal Collections the servicer will allocate: (i) first, an amount equal to Monthly Principal for that distribution date will be deposited to the Principal Funding Account; and (ii) second, the balance, if any, will be allocated to Excess Principal Collections; and (c) for each distribution date with respect to any Early Amortization Period, the trustee will distribute an amount equal to the Monthly Principal to the [Series [ ]-[ ]] certificateholders. [If the Invested Amount is greater than zero on the Termination Date, any funds remaining in the Reserve Fund, after the application of funds in the Reserve Fund as described above under "Interest Collections", will be treated as a portion of Available [Series [ ]-[ ]] Certificateholder Principal Collections for the distribution date occurring on the Termination Date.] "Monthly Principal" is the amount of principal that we will distribute to or accumulate for the Series [ ]-[ ] certificateholders. The "Monthly Principal" with respect to any distribution date relating to the [Accumulation Period][Controlled Amortization Period] or any Early Amortization Period [or Reinvestment Period] will equal Available [Series [ ]-[ ]] Certificateholder Principal Collections for that distribution date. For each distribution date, however, [with respect to the Controlled Amortization Period, Monthly Principal will not exceed the Controlled Deposit Amount]. Also, Monthly Principal will not exceed the Invested Amount. During the "Controlled Accumulation Period", we intend to accumulate each month a fixed amount equal to the Controlled Accumulation Amount, which is equal to the Invested Amount as of the [ ] distribution date, after giving effect to any changes in the Invested Account on that date, divided by the Accumulation Period Length. Because there may be funds in the Excess Funding Account and the amount of principal collection may fluctuate, we intend to accumulate the Controlled Deposit Amount in each distribution date in the Controlled Accumulation Period. The "Controlled Deposit Amount" for a distribution date will be the excess, if any, of (a) the sum of (i) the product of the Controlled Accumulation Amount and the number of distribution dates from and including the first distribution date with respect to the Accumulation Period through and including that distribution date, but not in excess of the Accumulation Period Length, and (ii) the amount on deposit in the Excess Funding Account as of the [ ] distribution date, after giving effect to any withdrawals from or deposits to that account on that date, other than the transfer to the Principal Funding Account of amounts on deposit in the Excess Funding Account on that date)), over (b) the sum of amounts on deposit in the [Excess Funding Account and] the Principal Funding Account, in each case before giving effect to any withdrawals from or deposits to those accounts on that distribution date.] REQUIRED PARTICIPATION PERCENTAGE As described under "Description of the Certificates" in the prospectus, the seller will be required to add the receivables of Additional Accounts if the Pool Balance at the end of a Collection Period is less than the Required Participation Amount for the following distribution date. The calculation of the Required Participation Amount is a function of the Required Participation Percentage. The "Required Participation Percentage" for [Series [ ]-[ ]] is [ ]%. However, if the aggregate amount of principal receivables due from any dealer or group of affiliated dealers at the close of business on the last day of any Collection Period with respect to which that determination is being made is greater than [ ]% of the Pool Balance on that last day, the Required Participation Percentage, as of that last day and with respect to that Collection Period and the immediately following Collection Period only, will be [ ]%. Furthermore, the seller may, upon ten days' prior notice to the trustee, the Rating Agencies and any Enhancement provider, reduce the Required Participation Percentage to not less than 100%, so long as the Rating Agencies shall not have notified the seller or the servicer that any reduction will result in a reduction or withdrawal of the rating of the [Series [ ]-[ ]] certificates or any other outstanding series or class of certificates. [PRINCIPAL FUNDING ACCOUNT The servicer will establish and maintain in the name of the trustee an Eligible Deposit Account for the benefit of the Series [ ]-[ ] certificateholders (the "Principal Funding Account"). On each distribution date with respect to the [Accumulation Period] [or any Reinvestment Period], we will deposit Monthly Principal in the Principal Funding Account as provided above under "Principal Collections". If an Early Amortization Period [that is not terminated as described in this prospectus supplement] commences during the [Accumulation Period] [or any Reinvestment Period], we will distribute the Principal Funding Account Balance shall be paid to the Series [ ]-[ ] certificateholders on the first distribution date after the Collection Period in which the Early Amortization Period begins. The trustee will invest all amounts on deposit in the Principal Funding Account on any distribution date, after giving effect to distributions to be made on that distribution date (the "Principal Funding Account Balance"), from the date of their deposit to on or prior to the Series [ ]-[ ] Expected Payment Date at the direction of the servicer in Eligible Investments that will mature on or prior to the following distribution date. The servicer may select an appropriate agent as representative of the servicer for the purpose of designating those investments. On each distribution date, the trustee will apply the interest and other investment income on the Principal Funding Account Balance as provided above under "Distributions from the Collection Account[; Reserve Fund][; Yield Supplement Account]; Other Enhancement]".] [PREFUNDING ACCOUNT The servicer will establish and maintain in the name of the trustee, on behalf of the trust, an Eligible Deposit Account for the benefit of the Series [ ]-[ ] certificateholders (the "Prefunding Account"). On the Series Issuance Date the seller will deposit an amount equal to the initial principal amount of the Series [ ]-[ ] certificates in the Prefunding Account. As funds are accumulated in the Principal Funding Account for the Paired Series or distributed to holders of certificates of those series, the trustee will distribute an equal amount of funds on deposit in the Prefunding Account to the seller. The trustee will invest all amounts on deposit in the Prefunding Account on any distribution date, after giving effect to distributions to be made on that distribution date (the "Prefunding Account Balance"), from the date of their deposit at the direction of the servicer in Eligible Investments that will mature on or prior to the following distribution date. The servicer may select an appropriate agent as representative of the servicer for the purpose of designating those investments. On each distribution date, the trustee will apply the interest and other investment income on the Prefunding Account Balance as provided above under "Distributions from the Collection Account[; Reserve Fund][; Yield Supplement Account][; Other Enhancement]".] [Describe other Series [ ]-[ ] accounts, if applicable.] [OTHER ENHANCEMENT] [Describe any other Enhancement] DISTRIBUTIONS The trust will make payments to Series [ ]-[ ] certificateholders from the Collection Account, [the Reserve Fund,] [the Principal Funding Account,] [the Interest Funding Account,] [the Yield Supplement Account,] [other] and [the Excess Funding Account]. (a) The trustee will apply funds on deposit in the Collection Account, [the Reserve Fund,] [the Interest Funding Account,] [the Yield Supplement Account,] [other] to make the following distributions at the following times: (i) on each [distribution date] [interest payment date or Special Payment Date] all amounts on deposit in the Collection Account, [the Reserve Fund,] [the Interest Funding Account,] [the Yield Supplement Account] [other] as are payable to the Series [ ]-[ ] certificateholders with respect to accrued interest will be distributed to the Series [ ]-[ ] certificateholders. (b) The trustee will apply the funds on deposit in the [Collection Account,] [the Principal Funding Account,] [other] and [the Excess Funding Account], to make, without duplication, the following distributions at the following times: (i) [on each distribution date during the Controlled Amortization Period the trustee will distribute to the Series [ ]-[ ] certificateholders all amounts on deposit in the Collection Account [and the Excess Funding Account] [other] as are payable to the Series [ ]-[ ] certificateholders with respect to principal; and] (c) [on the Series [ ]-[ ] Expected Payment Date, the trustee will distribute to the Series [ ]-[ ] certificateholders the Principal Funding Account Balance, [the amount on deposit in the Excess Funding Account] [and all amounts on deposit in the Collection Account [other] as are payable to Series [ ]-[ ] certificateholders with respect to principal up to a maximum amount on that date equal to the excess of the outstanding principal amount of the Series [ ]-[ ] certificates over unreimbursed Investor Charge-Offs, each on that date]. (d) [on each Special Payment Date, the Principal Funding Account Balance, the trustee will distribute to the Series [ ]-[ ] certificateholders [the amount on deposit in the Excess Funding Account] [and all amounts on deposit in the Collection Account][other] as are payable to Series [ ]-[ ] certificateholders with respect to principal up to a maximum amount on that date equal to the excess of the outstanding principal amount of the Series [ ]-[ ] certificates over unreimbursed Investor Charge-Offs, each on that date.] (e) On each distribution date on which there is an unpaid Carry-over Amount, the trustee will distribute to the Series [ ]-[ ] certificateholders that Carry-over Amount to the extent funds are available therefor first from amounts on deposit in the Yield Supplement Account and second to the extent funds are available for that purpose after making all required distributions and deposits with respect to the Series [ ]-[ ] certificates as provided above under "Distributions from the Collection Account [; Reserve Fund;] [Yield Supplement Account][; Other Enhancement] -- Interest Collections".]; (f) [If, on the finals distribution date, there is any Carry-over Amount, after giving effect to any distributions on that date under the first through third clauses above, the trustee shall distribute to the Series [.] certificateholders (i) amounts on deposit in the Reserve Fund, to the extent those amounts would otherwise be distributed to the seller, and (ii) Available Seller's Collections on deposit in the Collection Account, to the extent those amounts would otherwise be distributed to the seller, which are available to satisfy the Carry-over Amount on the final distribution date, as described above under "Distributions from the Collection Account; [Reserve Fund][; Yield Supplement Account][; Other Enhancement] -- Interest Collections". We will make the distributions to the Series [ ]-[ ] certificateholders of record at the close of business on the day immediately preceding the related distribution date (each of those days a "Record Date"), except that the final distribution with respect to any Series [ ]-[ ] Certificate will be made only upon surrender of that Series [[ ]-[ ]] Certificate. OPTIONAL REPURCHASE The Series [ ]-[ ] Certificateholders' Interest will be subject to optional repurchase by the servicer on any distribution date after the Invested Amount becomes less than or equal to $[ ], which is [ ]% of the initial outstanding principal amount of the Series [ ]-[ ] certificates. [Series [ ]-[ ] certificates will also be subject to repurchase at the option of the seller or the Series [ ]-[ ] certificateholders at any time on or after the [ ] distribution date.] The purchase price will equal the sum of (i) the Invested Amount of the Series [ ]-[ ] certificates on the Determination Date preceding the distribution date on which the purchase is scheduled to be made, (ii) accrued and unpaid interest on the Series [ ]-[ ] certificates at the Certificate Rate, together with interest on overdue interest, [and (iii) any outstanding Carry-Over Amount with respect to the Series [ ]-[ ] certificates.] INVESTOR CHARGE-OFFS Investor Default Amounts are losses incurred in the receivables during a Collection Period that are allocable to the Series [ ]-[ ] certificateholders. We intend to cover Investor Default Amounts as described under "Interest Collections" under "Distribution's from the Collection Account [; Reserve Fund] [; Yield Supplement Account] [; Other Enhancement]". If we are unable to do so, Investor Charge-offs may occur. If the Available Subordinated Amount is reduced to zero and on any distribution date the Deficiency Amount is greater than zero, the outstanding principal balance of the Series [ ]-[ ] certificates will be reduced by the Deficiency Amount, but not by more than the Investor Default Amount for that distribution date. Such reduction is an "Investor Charge-Off". Any reduction in the outstanding principal balance of the Series [ ]-[ ] certificates will have the effect of slowing or reducing the return of principal to the holders of Series [ ]-[ ] certificates. If the outstanding principal balance of the Series [ ]-[ ] certificates has been reduced by any Investor Charge-Offs, it will be increased on any distribution date, but not by an amount in excess of the aggregate unreimbursed Investor Charge-Offs, by the sum of (a) Series Allocable Miscellaneous Payments for that distribution date and (b) the amount of Excess Servicing allocated and available for that purpose as described above. [REINVESTMENT EVENTS We describe what happens upon the occurrence of a Reinvestment Event under "Description of the Certificates--Reinvestment Events and Early Amortization Events" in the prospectus. The Reinvestment Events with respect to the Series [ ]-[ ] certificates are the following: [1 failure on the part of [ ], the servicer or [ ], as applicable, o to make any payment or deposit required by the Pooling and Servicing Agreement or the Receivables Purchase Agreement, including but not limited to any Transfer Deposit Amount or Adjustment Payment, on or before the date occurring two business days after the date that payment or deposit is required to be made; o to deliver a Distribution Date Statement on the date required under the Pooling and Servicing Agreement, or within the applicable grace period which will not exceed five business days; o to comply with its covenant not to create any lien on a Receivable; or o to observe or perform in any material respect any other covenants or agreements set forth in the Pooling and Servicing Agreement or the Receivables Purchase Agreement, which failure continues unremedied for a period of 45 days after written notice of that failure; 2. any representation or warranty made by the RPA seller in the Receivables Purchase Agreement or by [ ] in the Pooling and Servicing Agreement or any information required to be given by [ ] to the trustee to identify the Accounts proves to have been incorrect in any material respect when made and continues to be incorrect in any material respect for a period of 60 days after written notice and as a result the interests of the certificateholders are materially and adversely affected. A Reinvestment Event, however, shall not be deemed to occur if [ ] has repurchased the related receivables or all of the receivables, if applicable, during that period in accordance with the provisions of the Pooling and Servicing Agreement; 3. the occurrence of events of bankruptcy, insolvency or receivership relating to any of [ ] or [ ]; 4. a failure by [ ] to convey receivables in Additional Accounts to the trust within five business days after the day on which it is required to convey the receivables under the Pooling and Servicing Agreement; 5. on any Determination Date, the Available Subordinated Amount for the next distribution date will be reduced to an amount less than the Required Subordinated Amount on that Determination Date after giving effect to the distributions to be made on the next distribution date; 6. any Service Default with respect to the Series [ ]-[ ] certificates occurs; 7. on any Determination Date, as of the last day of the preceding Collection Period, the aggregate amount of Principal Receivables relating to Used Vehicles exceeds [ ]% of the Pool Balance on that last day; 8. on any Determination Date, the average of the Monthly Payment Rates for the two preceding Collection Periods, is less than [ ]%; 9. the delivery by the seller to the trustee, of a notice stating that the seller will no longer continue to sell receivables to the trust commencing on [ ] or any yearly anniversary of that date; provided, however, that the seller shall have delivered to the trustee an opinion of counsel to the effect that, following the discontinuation of sales of receivables, the trust shall not become an investment company within the meaning of the Investment Company Act of 1940, as amended; 10. on any Determination Date, the quotient expressed as a percentage and obtained by dividing (i) the sum of (a) the amount on deposit in the Yield Supplement Account on the next distribution date, after giving effect to the distribution to be made on that distribution date, and (b) the amount on deposit in the Yield Supplement Account on the immediately preceding distribution date, after giving effect to the distributions made on that distribution date, by (ii) the sum of (a) the outstanding principal balance of the Series [ ]-[ ] certificates on the next distribution date, after giving effect to all distributions and payments to be made on that distribution date, and (b) the outstanding principal balance of the Series [ ]-[ ] certificates on the immediately preceding distribution date, after giving effect to all distributions and payments made on that distribution date, is less than [ ]%; 11. interest at the Certificate Rate is not paid on the Series [ ]-[ ] Certificate on any interest payment date; 12. any Carry-over Amount is outstanding on six consecutive distribution dates; and 13. [other].(2) [In the case of any event described in the clause [1, 2 or 6] above, a Reinvestment Event with respect to Series [ ]-[ ] will be deemed to have occurred only if, after the applicable grace period described in those clauses, if any, either the trustee or Series [ ]-[ ] certificateholders holding Series [ ]-[ ] certificates evidencing more than 50% of the aggregate unpaid principal amount of the Series [ ]-[ ] certificates by written notice to the seller and the servicer, and the trustee, if given by certificateholders, declare that a Reinvestment Event has occurred as of the date of that notice. In the case of any event described in clause [3, 4, 5, 7, 8, 9, 10, 11, 12 or 13] above, a Reinvestment Event with respect to Series [ ]-[ ] will be deemed to have occurred without any notice or other action on the part of the trustee or the Series [ ]-[ ] certificateholders immediately upon the occurrence of that event.] [Under limited circumstances, a Reinvestment Period which commences prior to the scheduled end of the Revolving Period may terminate and the Revolving Period recommence. If a Reinvestment Period results from the failure by [ ] to convey receivables in Additional Accounts to the trust, as described in clause 4 above, during the Revolving Period and no other Reinvestment Period or Early Amortization Period [that has not been terminated as described in this prospectus supplement] has commenced, the Reinvestment Period resulting from that failure will terminate and the Revolving Period will recommence. However, it will not recommence if the scheduled termination date of the Revolving Period has occurred, as of the end of the first Collection Period during which the seller would no longer be required to convey receivables to the trust. The seller may no longer be required to convey receivables as described above as a result of a reduction in the Invested Amount occurring due to principal payments made in respect of the Series [ ]-[ ] certificates and the certificates of other outstanding series during the Reinvestment Period or as a result of the subsequent addition of receivables to the trust. However, if any Reinvestment Event occurs, the Revolving Period will recommence following the receipt of ......... (2) Delete or modify, as appropriate. o written confirmation by each Rating Agency, other than Moody's, that its rating of the Series [ ]-[ ] certificates will not be withdrawn or lowered as a result of that recommencement and o the consent of Series [ ]-[ ] certificateholders holding Series [ ]-[ ] certificates evidencing more than 50% of the aggregate unpaid principal amount of the Series [ ]-[ ] certificates to that recommencement, provided that no other Reinvestment Period or Early Amortization Period [that has not been terminated as described in this prospectus supplement] has commenced and the scheduled termination of the Revolving Period has not occurred.] [Describe other cures of Reinvestment Events and partial Reinvestment Periods, if applicable.] EARLY AMORTIZATION EVENTS [The Early Amortization Events with respect to the Series [ ]-[ ] certificates will include each of the events so defined in the prospectus, plus the following: 1. failure on the part of [ ], the servicer or [ ], as applicable, (a) to make any payment or deposit required by the Pooling and Servicing Agreement or the Receivables Purchase Agreement, including but not limited to any Transfer Deposit Amount or Adjustment Payment, on or before the date occurring two business days after the date that payment or deposit is required to be made; or (b) to deliver a Distribution Date Statement on the date required under the Pooling and Servicing Agreement, or within the applicable grace period which will not exceed five business days; or (c) to comply with its covenant not to create any lien on a Receivable; or (d) to observe or perform in any material respect any other covenants or agreements set forth in the Pooling and Servicing Agreement or the Receivables Purchase Agreement, which failure continues unremedied for a period of 45 days after written notice of that failure; 2. any representation or warranty made by the RPA seller in the Receivables Purchase Agreement or by [ ] in the Pooling and Servicing Agreement or any information required to be given by [ ] to the trustee to identify the Accounts proves to have been incorrect in any material respect when made and continues to be incorrect in any material respect for a period of 60 days after written notice and as a result the interests of the certificateholders are materially and adversely affected. An Early Amortization Event, however, shall not be deemed to occur if [ ] has repurchased the related receivables or all of the receivables, if applicable, during that period in accordance with the provisions of the Pooling and Servicing Agreement; 3. the occurrence of events of bankruptcy, insolvency or receivership relating to [ ] or [ ]; 4. a failure by [ ] to convey receivables in Additional Accounts to the trust within five business days after the day on which it is required to convey those receivables under the Pooling and Servicing Agreement; 5. on any Determination Date, the Available Subordinated Amount for the next distribution date will be reduced to an amount less than the Required Subordinated Amount on that Determination Date after giving effect to the distributions to be made on the next distribution date; 6. any Service Default with respect to the Series [ ]-[ ] certificates occurs; 7. on any Determination Date, as of the last day of the preceding Collection Period, the aggregate amount of Principal Receivables relating to Used Vehicles exceeds [ ]% of the Pool Balance on that last day; 8. on any Determination Date, the average of the Monthly Payment Rates for the three preceding Collection Periods, is less than [ ]%; 9. any Carry-over Amount is outstanding on six consecutive distribution dates; and 10. the outstanding principal amount of the Series [ ]-[ ] certificates is not repaid by the Series [ ]-[ ] Expected Payment Date; and 11. [Other].(3) [In the case of any event described in clauses [1, 2 or 6] above, an Early Amortization Event with respect to Series [ ]-[ ] will be deemed to have occurred only if, after the applicable grace period described in those clauses, if any, either the trustee or Series [ ]-[ ] certificateholders holding Series [ ]-[ ] certificates evidencing more than 50% of the aggregate unpaid principal amount of the Series [ ]-[ ] certificates by written notice to the seller and the servicer, and the trustee, if given by certificateholders, declare that an Early Amortization Event has occurred as of the date of that notice. In the case of any Early Amortization Event described in the prospectus or any event described in [3, 4, 5, 7, 8, 9, 10 or 11] above, an Early Amortization Event with respect to Series [ ]-[ ] will be deemed to have occurred without any notice or other action on the part of the trustee or the Series [ ]-[ ] certificateholders immediately upon the occurrence of that event.] - ---------- (3) Delete or modify, as appropriate. [Under limited circumstances, an Early Amortization Period which commences prior to the scheduled end of the Revolving Period may terminate and the Revolving Period recommence. If an Early Amortization Period results from the failure by [ ] to convey receivables in Additional Accounts to the trust, as described in clause 4 above, during the Revolving Period and no [Reinvestment Event or] Early Amortization Event [that has not been cured or waived as described in this prospectus supplement] has occurred, the Early Amortization Period resulting from that failure will terminate and the Revolving Period will recommence. However, it will not recommence if the scheduled termination date of the Revolving Period has occurred, as of the endof the first Collection Period during which the seller would no longer be required to convey receivables to the trust. The seller may no longer be required to convey receivables as described above as a result of a reduction in the Invested Amount occurring due to principal payments made in respect of the Series [ ]-[ ] certificates and the certificates of other outstanding series during the Early Amortization Period or as a result of the subsequent addition of receivables to the trust. However, if any Early Amortization Event, other than an Early Amortization Event described in the third clause above or in the prospectus, occurs, the Revolving Period will recommence following receipt of (a) written confirmation by each Rating Agency, other than Moody's, that its rating of the Series [ ]-[ ] certificates will not be withdrawn or lowered as a result of the recommencement and (b) the consent of Series [ ]-[ ] certificateholders holding Series [ ]-[ ] certificates evidencing more than 50% of the aggregate unpaid principal amount of the Series [ ]-[ ] certificates to the recommencement, provided that no other [Reinvestment Event or] Early Amortization Event] [that has not been cured or waived as described in this prospectus supplement] has occurred and the scheduled termination of the Revolving Period has not occurred.] TERMINATION The last payment of principal and interest on the Series [ ]-[ ] certificates will be due and payable no later than the [ ] distribution date (the "Termination Date"). In the event that the Invested Amount is greater than zero on the Termination Date, after giving effect to deposits and distributions otherwise to be made on the Termination Date, the trustee will sell or cause to be sold an interest in the receivables, as specified in the Pooling and Servicing Agreement, in an amount equal to the sum of (a) 110% of the Invested Amount on the Termination Date, after giving effect to the deposits and distributions, and (b) the Available Subordinated Amount on the preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date following that Determination Date. In no event, however, shall the amount exceed the product of the Series Allocation Percentage, for the Collection Period in which the Termination Date occurs, of receivables on the Termination Date. The trustee will distribute the net proceeds of the sale and any collections on the receivables will be paid to Series [ ]-[ ] certificateholders on the Termination Date to the extent necessary to pay the remaining amounts due to the Series [ ]-[ ] certificateholders. REPORTS On each distribution date, including each distribution date that corresponds to the Series [ ]-[ ] Expected Payment Date or any Special Payment Date, commencing with the initial distribution date, the trustee will forward to each Series [ ]-[ ] certificateholder of record a statement (the "Distribution Date Statement") prepared by the servicer setting forth the following information. In the case of the third, fourth and fifth clauses below, the information will be presented on the basis of an original principal amount of $1,000 per Series [ ]-[ ] certificate if the [Accumulation Period] [Controlled Amortization Period] or an Early Amortization Period][or Reinvestment Period] has commenced). The information includes: (a) the aggregate amount of collections, the aggregate amount of Interest Collections and the aggregate amount of Principal Collections processed during the immediately preceding Collection Period; (b) the Series Allocation Percentage, the Floating Allocation Percentage, the Principal Allocation Percentage and the Series [ ]-[ ] Certificate Principal Percentage for that Collection Period; (c) the total amount, if any, distributed on the Series [ ]-[ ] certificates; (d) the amount of the distribution allocable to principal on the Series [ ]-[ ] certificates; (e) the amount of the distribution allocable to interest on the Series [ ]-[ ] certificates; (f) the Investor Default Amount for that distribution date; (g) the Draw Amount, if any, for that Collection Period; (h) the amount of the Investor Charge-Offs and the amounts of reimbursements of the Investor Charge-Offs for that Collection Period; (i) the amount of the Monthly Servicing Fee for that Collection Period; (j) the [Controlled Distribution Amount][Controlled Deposit Amount] for the following distribution date; (k) the Invested Amount[, the Excess Funded Amount] and the outstanding principal balance of the Series [ ]-[ ] certificates for that distribution date, after giving effect to all distributions which will occur on that distribution date; (l) the "pool factor" for the Series [ ]-[ ] certificates as of the Determination Date with respect to that distribution date, consisting of an eleven-digit decimal expressing the Invested Amount as of that Determination Date, determined after taking into account any reduction in that Invested Amount which will occur on that distribution date, as a proportion of the Initial Invested Amount; (m) the Available Subordinated Amount for that Determination Date; (n) [the Reserve Fund balance for that date]; (o) [the Principal Funding Account Balance,] [the Interest Funding Account Balance,] [the Prefunding Account Balance] and [the Yield Supplement Account balance] with respect to that date; (p) [during any Reinvestment Period, information with respect to the Eligible Investments in the accounts for the Series [ ]-[ ] certificates;] and (q) [other]. [However, after the Fully Reinvested Date, [unless the Revolving Period has recommenced,] that statement will not include the information in clauses [ above].] UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement (the "Underwriting Agreement"), the seller has agreed to sell to the underwriters named below (the "underwriters"), and each of the underwriters has severally agreed to purchase from the seller, the principal amount of the Series [ ]-[ ] certificates set forth opposite its name: SERIES [ ]-[ UNDERWRITERS ] CERTIFICATES [ ]................................ $[ ] [ ]................................ $[ ] Total.................................. $[ ] [Distribution of the Series [ ]-[ ] certificates will be made from time to time in negotiated transactions or otherwise at varying prices to be determined at the time of sale. Proceeds to the seller will be [ ]% of the aggregate principal amount of the Series [ ]-[ ] certificates plus accrued interest from [ ], before deducting expenses estimated to be $[ ]. In connection with the purchase and sale of the Series [ ]-[ ] certificates, the underwriters may be deemed to have received compensation from the seller in the form of underwriting discounts. [In the ordinary course of their businesses, the underwriters and their respective affiliates have engaged and may engage in investment banking transactions with the seller and its affiliates.] The underwriters intend to make a secondary market in the Series [ ]-[ ] certificates, but have no obligation to do so. We cannot assure you that a secondary market for the Series [ ]-[ ] certificates will develop or, if it does develop, that it will continue or that it will provide holders of the Series [ ]-[ ] certificates with a sufficient level of liquidity of, or trading markets for, the Series [ ]-[ ] certificates. ERISA CONSIDERATIONS Employee benefit plans and other retirement arrangements (including individual retirement accounts) which are subject to Title I of the Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of the Code may not purchase the Series [ ] - [ ] certificates. LEGAL MATTERS Certain legal matters relating to the Series [ ]-[ ] certificates will be passed upon for [ ] by Stroock & Stroock & Lavan LLP, New York, New York, and for the underwriters by Stroock & Stroock & Lavan LLP. Federal income tax and ERISA matters will be passed upon for [ ] and the trust by Stroock & Stroock & Lavan LLP. In addition to representing the underwriters, Stroock & Stroock & Lavan LLP from time to time represents Deutsche Banc Securities Inc. and its affiliates on other matters. See "Legal Matters" in the prospectus. CERTIFICATE RATINGS The trust will issue the Series [ ]-[ ] certificates only if they are rated at the time of issuance in the highest long-term rating category by at least one nationally recognized rating agency. The rating agencies and their ratings only address the likelihood that you will ultimately receive all of your required principal and interest distributions. The rating agencies and their ratings do not address the likelihood that any carry-over interest amounts will be paid, the likelihood you will receive interest or principal payments on a scheduled date, or whether you will receive any principal on the Series [ ]-[ ] certificates prior to or after the expected distribution date. The ratings assigned to the Series [ ]-[ ] certificates should be evaluated independently form similar ratings on other types of securities. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the rating agencies. GLOSSARY OF PRINCIPAL TERMS "Accumulation Period Commencement Date" means the date on which the Accumulation Period will begin, which is determined as follows: THE ACCUMULATION PERIOD COMMENCEMENT DATE IF THE ACCUMULATION WILL BE THE FIRST DAY IN THE FOLLOWING PERIOD LENGTH IS COLLECTION PERIOD: Five Collection Periods [ ] Collection Period Four Collection Periods [ ] Collection Period Three Collection Periods [ ] Collection Period Two Collection Periods [ ] Collection Period One Collection Period [ ] Collection Period However, if at any time after the [ ] payment date, any other outstanding series [(excluding certain series)] shall have entered into an early amortization period, the Accumulation Period Commencement Date shall be the earlier of (i) the date that that outstanding series shall have entered into its early amortization period and (r) the Accumulation Period Commencement Date as previously determined. "Accumulation Period Length" means the length of the Accumulation Period, which will be lesser of (i) the number of full Collection Periods between such payment date and the Series [ ]-[ ] Expected Payment Date and (ii) the product, rounded upwards to the nearest integer not greater than five, of (a)one divided by the lowest Monthly Payment Rate on the receivables during the last [ ] months and (b) fraction, (x) the numerator of which is the sum of (1) the Invested Amount as of that distribution date, after giving effect to all changes in the Invested Amount on that date, and (2) the invested amounts of all other series [,excluding some series,] currently in their amortization or accumulation periods or expected to be in their amortization or accumulation periods by the Series [ ]-[ ] Expected Payment Date and (y) the denominator of which is the sum of the Invested Amount and the invested amounts as of that distribution date, after giving effect to all changes in those amounts on that date, of all other outstanding series [,excluding some series,] which are expected to be outstanding on the Series [ ]-[ ] Expected Payment Date. "Assets Receivables Rate" means the product of (a) the quotient obtained by dividing (i) 360 by the actual number of days elapsed in that period and (ii) a percentage, expressed as a fraction, (b) the numerator of which is the sum of (x) Certificateholder Interest Collections for the Collection Period immediately preceding the last day of that period, which for this purpose only is based on interest amounts billed to the dealers which are due during that Collection Period, less the Monthly Servicing Fee with respect to that immediately preceding Collection Period, (y) the Investment Proceeds to be applied on the distribution date related to that period and (z) Excess Interest Collections allocated to Series [ _-_] with respect to that period] and (c) the denominator of which is the sum of (x) the product of (1) the Floating Allocation Percentage, (2) the Series Allocation Percentage and (3) the average Pool Balance, after giving effect to any charge-offs, for that immediately preceding Collection Period, (y) the principal balance on deposit in the Excess Funding Account on the first day of that period, after giving effect to all deposits to and withdrawals therefrom on that first day, and (z) the principal balance on deposit in the Principal Funding Account on the first day of that period, after giving effect to all deposits to and withdrawals therefrom on that first day, [other]. "Available Seller's Collections" means, for any date, the sum of (i) the Available Seller's Interest Collections for that date and (ii) the Available Seller's Principal Collections for that date. The "Available Seller's Collections", however, will be zero for any Collection Period with respect to which the Available Subordinated Amount is zero on the Determination Date immediately following the end of that Collection Period. "Available Seller's Interest Collections" means, for any date, an amount equal to the result obtained by multiplying (i) the excess of (a) the Seller's Percentage for the related Collection Period over (b) the Excess Seller's Percentage for that Collection Period by (ii) Series Allocable Interest Collections for that date. "Available Seller's Principal Collections" means, for any date, an amount equal to the product of (i) the excess of (a) the Seller's Percentage for the related Collection Period over (b) the Excess Seller's Percentage for that Collection Period and (ii) Series Allocable Principal Collections for that date. "Available Series [ ]-[ ] Certificateholder Principal Collections" means, for any distribution date, the sum of (i) the product of (a) the Floating Allocation Percentage, with respect to any Nonprincipal Period, or the Principal Allocation Percentage, with respect to the [Accumulation Period][Controlled Amortization Amount] or any Early Amortization Period [or Reinvestment Period], for the related Collection Period and (b) Series Allocable Principal Collections deposited in the Collection Account for the related Collection Period, (ii) the amount, if any, of Interest Collections, Investment Proceeds, [funds in the Reserve Fund,] Available Seller's Collections and Excess Servicing allocated to cover the Investor Default Amount or reimburse Investor Charge-Offs, (iii) Series Allocable Miscellaneous Payments on deposit in the Collection Account for that distribution date and (iv) Excess Principal Collections, if any, from other series allocated to Series [ ]-[ ] . "Available Subordinated Amount" means, for a Determination Date, an amount equal to (i) the lesser of (a) the Available Subordinated Amount for the preceding Determination Date, minus, with limitations, the Draw Amount for that preceding Determination Date, [minus funds from the Reserve Fund applied to cover any portion of the Investor Default Amount,] plus the excess, if any, of the Required Subordinated Amount for that Determination Date over the Required Subordinated Amount for the immediately preceding Determination Date due to an increase in the Subordination Factor, plus the amount of Excess Servicing available to be paid to the seller as described under "Distributions from the Collection Account[; Reserve Fund;] [Yield Supplement Account][; Other Enhancement]-- Excess Servicing", and (b) the product of the fractional equivalent of the Subordinated Percentage and the Invested Amount, [minus (ii) in the case of the first subclause to the first clause above the Incremental Subordinated Amount for that preceding Determination Date,] [plus (iii) the Incremental Subordinated Amount for the current Determination Date,] [plus (iv) the Subordinated Percentage of funds to be withdrawn from the Excess Funding Account on the succeeding distribution date and paid to the seller or allocated to one or more series.] "Calculation Agent" means the trustee. "Certificate Rate" means [ %] [an amount equal to [the lesser of (a)] the index] [LIBOR] [plus] [minimum] [times] [ ]% [and (b) [except with respect to [the Prefunded Period [other]] the [Assets Receivables Rate for the related distribution date] "Carry-over Amount" means (i) the excess of (a) the amount of interest on the Series [ ]-[ ] certificates that would have accrued in respect of the related Interest Period had interest been calculated based on [LIBOR][the Index], over (b) the amount of interest on the Series [ ]-[ ] certificates actually accrued in respect of that Interest Period based on the Assets Receivables Rate plus (ii) the unpaid portion of any excess from prior distribution dates, and interest accrued on that amount calculated on the basis of [LIBOR][the Index]. "Controlled Accumulation Amount" means an amount equal to the Invested Amount as of the [ ] distribution date (after giving effect to any changes in the Invested Amount on that date) divided by the [Accumulation Period Length].] "Controlled Deposit Amount" means, for a distribution date, the excess, if any, of (i) [the sum of (a) the product of the Controlled Accumulation Amount and the number of distribution dates from and including the first distribution date with respect to the Accumulation Period through and including that distribution date, but not in excess of the Accumulation Period Length, [and (b) the amount on deposit in the Excess Funding Account as of the [ ] distribution date, after giving effect to any withdrawals from or deposits to that account on that date, other than the transfer to the Principal Funding Account of amounts on deposit in the Excess Funding Account on that date, ] over (ii) the sum of amounts on deposit in the [Excess Funding Account and] the Principal Funding Account, in each case before giving effect to any withdrawals from or deposits to those accounts on that distribution date.] "Deficiency Amount" means the amount, if any, by which (a) the sum of (i) Monthly Interest for the following distribution date, (ii) Monthly Interest accrued but not paid with respect to prior distribution dates, and interest on that Monthly Interest, (iii) the Monthly Servicing Fee for that distribution date,(iv) the Investor Default Amount for that distribution date, (v) the amount of any Adjustment Payment allocated to the Series [ ]-[ ] certificates for that distribution date that has not been deposited in the Collection Account as required under the Pooling and Servicing Agreement and (vi) if that distribution date is the final distribution date, any Carry-over Amount on that distribution date that will not be satisfied on that date by the application of amounts on deposit in the Yield Supplement Account as described under "Distributions from the Collection Account; Reserve Fund; Yield Supplement Account; Other Enhancement -- Yield Supplement Account", exceeds (b) the sum of (i) Certificateholder Interest Collections and Investment Proceeds for that distribution date, (ii) Excess Interest collections allocated to Series [ ]-[ ] with respect to that distribution date] [and (iii) the amount of funds in the Reserve Fund on that Determination Date available to fund any portion of the Deficiency Amount as described under "Distributions from the Collection Account; Reserve Fund[; Yield Supplement Account] - Interest Collections"]. "Distribution Date Statement" means a statement prepared by the servicer setting forth the following information (which, in the case of the third, fourth and fifth clauses below, will be stated on the basis of an original principal amount of $1,000 per Series [ ]-[ ] certificate if the [Accumulation Period] [Controlled Amortization Period] or an Early Amortization Period][or Reinvestment Period] has commenced): (a) the aggregate amount of collections, the aggregate amount of Interest Collections and the aggregate amount of Principal Collections processed during the immediately preceding Collection Period; (b) the Series Allocation Percentage, the Floating Allocation Percentage, the Principal Allocation Percentage and the Series [ ]-[ ] Certificate Principal Percentage for that Collection Period; (c) the total amount, if any, distributed on the Series [ ]-[ ] certificates; (d) the amount of the distribution allocable to principal on the Series [ ]-[ ] certificates; (e) the amount of the distribution allocable to interest on the Series [ ]-[ ] certificates; (f) the Investor Default Amount for that distribution date; (g) the Draw Amount, if any, for that Collection Period; (h) the amount of the Investor Charge-Offs and the amounts of reimbursements of the Investor Charge-Offs for that Collection Period; (i) the amount of the Monthly Servicing Fee for that Collection Period; (j) the [Controlled Distribution Amount][Controlled Deposit Amount] for the following distribution date; (k) the Invested Amount[, the Excess Funded Amount] and the outstanding principal balance of the Series [ ]-[ ] certificates for that distribution date, after giving effect to all distributions which will occur on that distribution date; (l) the "pool factor" for the Series [ ]-[ ] certificates as of the Determination Date with respect to that distribution date, consisting of an eleven-digit decimal expressing the Invested Amount as of that Determination Date, determined after taking into account any reduction in that Invested Amount which will occur on that distribution date, as a proportion of the Initial Invested Amount; (m) the Available Subordinated Amount for that Determination Date; (n) [the Reserve Fund balance for that date]; (o) [the Principal Funding Account Balance,] [the Interest Funding Account Balance,] [the Prefunding Account Balance] and [the Yield Supplement Account balance] with respect to that date; (p) [during any Reinvestment Period, information with respect to the Eligible Investments in the accounts for the Series [ ]-[ ] certificates;] and (q) [other]. [However, after the Fully Reinvested Date, [unless the Revolving Period has recommenced,] that statement will not include the information in clauses [ above].] "Draw Amount" means the lesser of (i) the Deficiency Amount and (ii) the Available Subordinated Amount. "Excess Principal Collections" means the amount of Available Certificateholder Principal Collections for any Collection Period remaining after their application to required payments or deposits for Series [ ]-[ ] , if any, and the amount of any similar excess for any other series. "Excess Reserve Fund Required Amount" for any distribution date with respect to an Early Amortization Period [or Reinvestment Period] means an amount equal to the greater of (i) [ ]% of the initial principal balance of the [Series [ ]-[ ]] certificates and (ii) the excess of (a) the sum of (x) the Available Subordinated Amount on the preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits to be made on that distribution date, and (y) an amount equal to (1) the excess of the Required Participation Percentage over 100% multiplied by (2) the outstanding principal balance of the [Series [ ]-[ ]] certificates on that distribution date, after giving effect to any changes in that balance on that distribution date, (b) over the excess of (x) the Series Allocation Percentage of the Pool Balance on the last day of the immediately preceding Collection Period over (y) the Invested Amount on that distribution date, after giving effect to changes in that amount on that distribution date; provided that the Excess Reserve Fund Required Amount shall not exceed that Available Subordinated Amount. [Describe adjustments, if applicable] "Excess Seller's Percentage" means, for any Collection Period, a percentage, which percentage shall never be less than 0% nor more than 100%, equal to (i) 100% minus, when used with respect to interest collections [, except during any Early Amortization Period,] and principal collections during any Nonprincipal Period, the sum of (a) the Floating Allocation Percentage with respect to that Collection Period and (b) the percentage equivalent of a fraction, the numerator of which is the Available Subordinated Amount as of the Determination Date occurring in that Collection Period, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date immediately following that Determination Date, and the denominator of which is the product of (x) the Pool Balance as of the last day of that immediately preceding Collection Period and (y) the Series Allocation Percentage for the Collection Period in respect of which the Excess Seller's Percentage is being calculated or (ii) 100% minus, when used with respect to [interest collections during any Early Amortization Period and] principal collections during [the Accumulation Period] [Controlled Amortization Period] and any Early Amortization Period [or Reinvestment Period], the sum of (a) the [Principal Allocation Percentage] [other] with respect to that Collection Period and (b) the percentage described in the clause (i)(b) above for that Collection Period. "Excluded Dealers" means the dealers that are in voluntary or involuntary bankruptcy proceedings or voluntary or involuntary liquidation or that, subject to limitations, are being voluntarily removed by the seller from the trust. "Excluded Receivables" means principal receivables with respect to Excluded Dealers. "Final Distribution Date" means the distribution date on which, after giving effect to all payments to be made on that distribution date, the outstanding principal balance of the [Series [ ]-[ ]] certificates will be paid in full. "Floating Allocation Percentage" means, for any Collection Period, [the percentage equivalent, which shall never exceed 100%, of a fraction, the numerator of which is the Invested Amount as of the last day of the immediately preceding Collection Period and the denominator of which is the product of (a) the Pool Balance as of that last day and (b) the Series Allocation Percentage for the Collection Period in respect of which the Floating Allocation Percentage is being calculated. With respect to the first Collection Period, however, the Floating Allocation Percentage shall mean the percentage equivalent of a fraction, the numerator of which is the Initial Invested Amount as of the Series Issuance Date and the denominator of which is the Series Allocation Percentage of the Pool Balance as of the Series Cut-Off Date][other]. "Incremental Subordinated Amount" means on any Determination Date the result obtained by multiplying (i) a fraction, the numerator of which is the sum of the Invested Amount on the last day of the immediately preceding Collection Period and the Available Subordinated Amount for such Determination Date, calculated without adding the Incremental Subordinated Amount for such Determination Date, and the denominator of which is the Pool Balance on such last day by (ii) the excess, if any, of (a) the sum of the Overconcentration Amount, the Installment Balance Amount and the aggregate amount of Ineligible Receivables on such Determination Date over (b) the aggregate amount of Ineligible Receivables, receivables in Accounts containing Dealer Overconcentrations and receivables in Installment Balances, in each case that became Defaulted Receivables during the preceding Collection Period and are not subject to reassignment from the trust, unless certain insolvency events relating to the seller or [ ] have occurred, as further described in the Pooling and Servicing Agreement. "Initial Invested Amount" means [[the portion of the initial principal amount of the Series [ ]-[ ] certificates which is invested in principal receivables on the Series Issuance Date, which is expected to equal $[ ], based on information as of the Series Cut-off Date,] during the Prefunded Period, zero and after that time [ ]], (i) plus the amount of any withdrawals from the Excess Funding Account in connection with the purchase of an additional interest in principal receivables since the Series Issuance Date, (ii) minus the amount of any additions to the Excess Funding Account in connection with a reduction in the principal receivables in the trust or an increase in the Subordination Factor since the Series Issuance Date. "Interest Period" means, with respect to any distribution date, the period from and including the preceding distribution date to but excluding that distribution date, or, in the case of the first distribution date, from and including the Series [ ]-[ ] issuance date to but excluding the first distribution date. "Invested Amount" means for any date [an amount equal to the Initial Invested Amount, (a) minus the amount, without duplication, of principal payments, except for principal payments made from the Excess Funding Account, made to Series [ ]-[ ] certificateholders or deposited to the Principal Funding Account in respect of the Series [ ]-[ ] certificates prior to that date since the Series Issuance Date (b) minus the excess, if any, of (i) the aggregate amount of Investor Charge-Offs for all distribution dates preceding that date, over (ii) the aggregate amount of any reimbursements of Investor Charge-Offs for all distribution dates preceding that date][other]. "Investment Proceeds" means, for any distribution date, an amount equal to the sum of investment earnings for the preceding Collection Period from: (a) funds held in the Reserve Fund;] (b) the Series Allocation Percentage of funds held in the Collection Account;] (c) funds held in the Excess Funding Account;] (d) funds held in the Yield Supplement Account;] (e) funds held in the Principal Funding Account;] (f) funds held in the Prefunding Account;] (g) funds held in the Interest Funding Account;] (h) funds held in [other accounts].] "Investor Charge-Off" means a reduction in the outstanding principal balance of the Series [ ]-[ ] certificates, calculated as described on pages S-[ ]. "LIBOR" means, with respect to any Interest Period, the rate established by the Calculation Agent, which will equal the offered rate for United States dollar deposits for one month that appears on Telerate Page 3750 as of 11:00 A.M., London time, on the LIBOR Determination Date. However, if on any LIBOR Determination Date the offered rate does not appear on Telerate Page 3750, the Calculation Agent will request each of the reference banks, which shall be major banks that are engaged in transactions in the London interbank market selected by the Calculation Agent, to provide the Calculation Agent with its offered quotation for United States dollar deposits for one month to prime banks in the London interbank market as of 11:00 A.M., London time, on that date. If at least two reference banks provide the Calculation Agent with the offered quotations, LIBOR on that date will be the arithmetic mean, rounded upwards, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward, of all the quotations. If on that date fewer than two of the reference banks provide the Calculation Agent with the offered quotations, LIBOR on that date will be the arithmetic mean, rounded upwards, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward, of the offered per annum rates that one or more leading banks in The City of New York selected by the Calculation Agent are quoting as of 11:00 A.M., New York City time, on that date to leading European banks for United States dollar deposits for one month. If, however, those banks are not quoting as described above, LIBOR for that date will be LIBOR applicable to the Interest Period immediately preceding that Interest Period. "LIBOR Business Day" means a day that is both a Business Day and a day on which banking institutions in the City of London, England are not required or authorized by law to be closed. "LIBOR Determination Date" means, with respect to any Interest Period, the second LIBOR Business Day prior to that Interest Period. "Monthly Interest" means, for any distribution date, the amount of interest accrued in respect of the Series [ ]-[ ] certificates in the Interest Period for that distribution date. "Monthly Principal" means, with respect to any distribution date relating to the [Accumulation Period][Controlled Amortization Period] or any Early Amortization Period [or Reinvestment Period], the Available [Series [ ]-[ ]] Certificateholder Principal Collections for that distribution date. For each distribution date, however, [with respect to the Controlled Amortization Period, Monthly Principal may not exceed the Controlled Deposit Amount]. Also, Monthly Principal will not exceed the Invested Amount. "Nonprincipal Period" means any period that is not the Accumulation Period or an Early Amortization Period. "Pool Factor" means, for a distribution date, an eleven-digit decimal expressing the Invested Amount as of the Determination Date, determined after taking into account any reduction in the Invested Amount which will occur on the distribution date, as a proportion of the Initial Invested Amount. "Prefunding Account" means an Eligible Deposit Account established and maintained by the servicer in the name of the trustee, on behalf of the trust, for the benefit of the [Series [ ]-[ ]] certificateholders into which the seller will deposit the initial principal amount of the Series [ ]-[ ] certificates. "Prefunding Account Balance" means all amounts on deposit in the Prefunding Account on any distribution date, after giving effect to distributions to be made on such distribution date. "Principal Allocation Percentage" means, for any Collection Period, [the percentage equivalent, which shall never exceed 100%, of a fraction, the numerator of which is the Invested Amount as of the last day of the Revolving Period, if that last day has occurred or, if that last day has not occurred, as of the last day of the immediately preceding Collection Period and the denominator of which is the product of (a) the Pool Balance as of that last day and (b) the Series Allocation Percentage for the Collection Period in respect of which the Principal Allocation Percentage is being calculated][other]. "Principal Funding Account" means an Eligible Deposit Account established and maintained by the servicer in the name of the trustee, on behalf of the trust, for the benefit of the Series [ ]-[ ] certificateholders and in which principal is accumulated for payment to the Series [ ]-[ ] certificateholders. "Principal Funding Account Balance" means all amounts on deposit in the Principal Funding Account on any distribution date, after giving effect to distributions to be made on such distribution date. "Principal Shortfalls" means any principal distributions to certificateholders for any series entitled to those principal distributions which are either scheduled or permitted and which have not been covered out of principal collections and other amounts allocated to the series. "Record Date" means, for any distribution date, the day immediately preceding that date. "Required Participation Percentage" means, for [Series [ ]-[ ]], [ ]%. If, however, the aggregate amount of Principal Receivables due from any Dealer or group of affiliated Dealers at the close of business on the last day of any Collection Period with respect to which the determination is being made is greater than [ ]% of the Pool Balance on that last day, the Required Participation Percentage shall mean, as of that last day and with respect to that Collection Period and the immediately following Collection Period only, [ ]%. Furthermore, the seller may, upon ten days' prior notice to the trustee, the Rating Agencies and any Enhancement provider, reduce the Required Participation Percentage to not less than 100%, so long as the Rating Agencies shall not have notified the seller or the servicer that any reduction will result in a reduction or withdrawal of the rating of the [Series [ ]-[ ]] certificates or any other outstanding series or class of certificates. "Required Subordinated Amount" means, as of any date of determination, [the sum of (i) the product of the initial Subordinated Percentage[, as adjusted from time to time as described in this prospectus supplement other than as a result of an increase in the Subordinated Percentage at the option of the seller,] and the Invested Amount [and (ii) the Incremental Subordinated Amount.] "Reserve Fund" means an Eligible Deposit Account established and maintained in the name of the trustee for the benefit of the [Series [ ]-[ ]] certificateholders to hold the Reserve Fund Required Amount. "Reserve Fund Deposit Amount" means the amount, if any, by which the Reserve Fund Required Amount exceeds the amount on deposit in the Reserve Fund. "Reserve Fund Required Amount" means, for any distribution date, [ ]% of the outstanding principal balance of the [Series [ ]-[ ]] certificates for that distribution date, after giving effect to any change in that balance on that distribution date. [Describe any increases in the Reserve Fund Required Amount.] "Revolving Period" means the period beginning at the close of business on the Series Cut-Off Date and terminating on the earlier of (i) the close of business on the day immediately preceding the day on which the Accumulation Period commences and (ii) the close of business on the day an Early Amortization Period commences. The Revolving Period, however, may recommence upon the termination of an Early Amortization Period. "Seller's Participation Amount" means, for any date, an amount equal to the Pool Balance on that date minus the aggregate invested amounts for all outstanding series on that date. "Seller's Percentage" means 100% minus (i) the Floating Allocation Percentage, when used with respect to interest collections [, except during any Early Amortization Period], Defaulted Receivables and principal collections during any Nonprincipal Period, and (ii) the [Principal Allocation Percentage][other], when used with respect to [interest collections during any Early Amortization Period and] principal collections during the [Accumulation Period] [Controlled Amortization Period] and any Early Amortization Period [or Reinvestment Period]. "[Series [ ]-[ ]] Certificateholder Interest Collections" means, for any distribution date, the portion of Series Allocable Interest Collections for the related Collection Period allocated to the [Series [ ]-[ ]] Certificateholders' Interest as described under "Series Provisions -- Allocation Percentages -- Allocation Between the [Series [ ]-[ ]] Certificateholders and the Seller" in this prospectus supplement. "Series [ ]-[ ] Certificateholders' Interest" means the interest of the Series [ ]-[ ] certificateholders in the Trust Assets. "Series [ ]-[ ] certificates" means the [Floating Rate] [ %] Dealer Floorplan Asset Backed Certificates, Series [ ]-[ ] . "Series [ ]-[ ] Expected Payment Date" means the [ ] distribution date. "Series Supplement" means the series supplement to the Pooling and Servicing Agreement relating to the Series [ ]-[ ] certificates. "Subordinated Percentage" means, initially, the percentage equivalent of a fraction, the numerator of which is the Subordination Factor and the denominator of which will be the excess of 100% over the Subordination Factor. "Subordination Factor" means, [initially] [ ]% [, but will be subject to increase to [ ]% in the event that the rating of [ ]'s long-term unsecured debt is lowered below BBB- by Standard & Poor's or withdrawn by Standard & Poor's, unless the seller receives written confirmation from Standard & Poor's that the failure to so increase the Subordination Factor would not result in Standard & Poor's lowering or withdrawing its rating of the [Series [ ]-[ ]] certificates.] "Telerate Page 3750" means the display page so designated on the Dow Jones Telerate Service, or any other page as may replace that page on that service, or any other service as may be nominated as the information vendor, for the purpose of displaying London interbank offered rates of major banks. "Termination Date" means the [ ] distribution date, on which the last payment of principal and interest on the Series [ ]-[ ] certificates will be due and payable. "Trust" means the [ ] Dealer Floorplan Master Loan Trust. "Underwriters" means [ ] and [ ]. "Underwriting Agreement" means the Underwriting Agreement [between] [among] [ ] dated as of [ ]. "Yield Supplement Account" means an Eligible Deposit Account established and maintained in the name of the trustee for the benefit of the Series [ ]-[ ] certificateholders to hold the Yield Supplement Required Amount. "Yield Supplement Account Deposit Amount" means the amount, if any, by which the Yield Supplement Account Required Amount exceeds the amount on deposit in the Yield Supplement Account. "Yield Supplement Account Required Amount" means for any distribution date (a)that occurs during the Prefunded Period, [ ], (b) that occurs [after the Prefunded Period and] prior to the Fully Reinvested Date [or any distribution date after the Fully Reinvested Date during the Revolving Period]], [ ]% of the outstanding principal balance of the Series [ ]-[ ] certificates for that distribution date, after giving effect to any change in that balance on that distribution date, [and (c) for any [other] distribution date that occurs on or after the Fully Reinvested Date, zero]. [THIS PAGE INTENTIONALLY LEFT BLANK] ANNEX I OTHER SERIES OF INVESTOR CERTIFICATES This Annex I sets forth the principal characteristics of (i) the Floating Rate Dealer Floorplan Asset Backed Certificates, Series [ ], (ii) the Floating Rate Dealer Floorplan Asset Backed Certificates, Series [ ], (iii) the [.]% Dealer Floorplan Asset Backed Certificates, Series [ ], (iv) the Floating Rate Dealer Floorplan Asset Backed Certificates, Series [ ], (v) the Fixed Rate Dealer Floorplan Asset Backed Certificates, Series [ ], (vi) the Floating Rate Dealer Floorplan Asset Backed Certificates, Series [ ], (vii) the Floating Rate Dealer Floorplan Asset Backed Certificates, Series [ ], (viii) the [ ]% Dealer Floorplan Asset Backed Certificates, Series [ ] and (ix) the Floating Rate Dealer Floorplan Asset Backed Certificates, Series [ ] ("Series [ ]", "Series [ ]", "Series [ ]", "Series [ ]", "Series [ ]", "Series [ ]", "Series [ ]", "Series [ ]" and "Series [ ]", respectively). For more specific information with respect to any Series, any prospective investor should contact [ ] at [ ]. [ ] will provide, without charge, to any prospective purchaser, a copy of the disclosure document with respect to that series.
1. SERIES [ ] Initial Principal Amount............................. $[ ] Scheduled Interest Payment Date...................... Monthly, on or about the [ ]th day of each month Current Principal Amount............................. $[ ] Required Participation Percentage.................... [ ]% Initial Subordinated Amount.......................... Approximately [ ]% of the Invested Amount Revolving Period [ ] to the earlier of the commencement of an Accumulation Period or an Early Amortization Period Expected Payment Date................................ [ ] Distribution Date Termination Date..................................... [ ] Distribution Date 2. SERIES [ ] Initial Principal Amount............................. $[ ] Scheduled Interest Payment Date...................... Monthly, on or about the [ ]th day of each month Current Principal Amount............................. $[ ] Required Participation Percentage.................... [ ]% Initial Subordinated Amount.......................... Approximately [ ]% of the Invested Revolving Period..................................... [ ] to the earlier of the commencement of an Accumulation Period or an Early Amortization Period Expected Payment Date................................ [ ] Distribution Date Termination Date..................................... [ ] Distribution Date 3. SERIES [ ] Initial Principal Amount............................. $[ ] Scheduled Interest Payment Date...................... Monthly, on or about the [ ]th day of each month Current Principal Amount............................. $[ ] Required Participation Percentage.................... [ ]% Initial Subordinated Amount.......................... Approximately [ ]% of the Invested Amount Revolving Period [ ] to the earlier of the commencement of an Accumulation Period, a Reinvestment Period or an Early Amortization Period Expected Payment Date................................ [ ] Distribution Date Termination Date..................................... [ ] Distribution Date 4. SERIES [ ] Initial Principal Amount .....................................................Class A-1 Certificates $[ ] .....................................................Class A-2 Certificates $[ ] Scheduled Interest Payment Date...................... Monthly, on or about the [ ]th day of each month Current Principal Amount .....................................................Class A-1 Certificates $[ ] .....................................................Class A-2 Certificates $[ ] Required Participation Percentage.................... [ ]% Initial Subordinated Amount.......................... Approximately [ ]% of the Invested Amount Revolving Period Class A-1 Certificates...................... [ ] to the earlier of the commencement of an Accumulation Period or an Early Amortization Period Class A-2 Certificates...................... [ ] to the earlier of the commencement of an Accumulation Period or an Early Amortization Period Expected Payment Date Class A-1 Certificates...................... [ ] Distribution Date Class A-2 Certificates...................... [ ] Distribution Date Termination Date Class A-1 Certificates...................... [ ] Distribution Date Class A-2 Certificates...................... [ ] Distribution Date 5. SERIES [ ] Initial Principal Amount Class A-1 Certificates...................... $[ ] Class A-2 Certificates...................... $[ ] Scheduled Interest Payment Date...................... Monthly, on or about the [ ]th day of each month Current Principal Amount Class A-1 Certificates...................... $[ ] Class A-2 Certificates...................... $[ ] Required Participation Percentage.................... [ ]% Initial Subordinated Amount.......................... Approximately [ ]% of the Invested Amount Revolving Period Class A-1 Certificates...................... [ ] to the earlier of the commencement of an Accumulation Period or an Early Amortization Period Class A-2 Certificates...................... [ ] to the earlier of the commencement of an Accumulation Period or an Early Amortization Period Expected Payment Date Class A-1 Certificates...................... [ ] Distribution Date Class A-2 Certificates...................... [ ] Distribution Date Termination Date Class A-1 Certificates...................... [ ] Distribution Date Class A-2 Certificates...................... [ ] Distribution Date 6. SERIES [....................................] Initial Principal Amount Class A-1 Certificates...................... $[ ] Class A-2 Certificates...................... $[ ] Scheduled Interest Payment Date...................... Monthly, on or about the [ ]th day of each month Current Principal Amount Class A-1 Certificates...................... $[ ] Class A-2 Certificates...................... $[ ] Required Participation Percentage.................... [ ]% Initial Subordinated Amount.......................... Approximately [ ]% of the Invested Amount Revolving Period Class A-1 Certificates...................... [ ] to the earlier of the commencement of an Accumulation Period or an Early Amortization Period Class A-2 Certificates...................... [ ] to the earlier of the commencement of an Accumulation Period or an Early Amortization Period Expected Payment Date Class A-1 Certificates...................... [ ] Distribution Date Class A-2 Certificates...................... [ ] Distribution Date Termination Date Class A-1 Certificates...................... [ ] Distribution Date Class A-2 Certificates...................... [ ] Distribution Date 7. SERIES [ ] Initial Principal Amount............................. $[ ] Scheduled Interest Payment Date...................... Monthly, on or about the [ ]th day of each month Current Principal Amount............................. $[ ] Required Participation Percentage.................... [ ]% Initial Subordinated Amount.......................... Approximately [ ]% of the Invested Amount Revolving Period..................................... [ ] to the earlier of the commencement of an Accumulation Period or an Early Amortization Period Expected Payment Date................................ [ ] Termination Date..................................... [ ] 8. SERIES [ ] Initial Principal Amount............................. $[ ] Scheduled Interest Payment Date...................... Monthly, on or about the [ ]th day of each month Current Principal Amount............................. $[ ] Required Participation Percentage.................... [ ]% Initial Subordinated Amount.......................... Approximately [ ]% of the Invested Amount Revolving Period..................................... [ ] to the earlier of the commencement of an Accumulation Period or an Early Amortization Period Expected Payment Date................................ [ ] Termination Date..................................... [ ] 9. [ ] Initial Principal Amount............................. $[ ] Scheduled Interest Payment Date...................... Monthly, on or about the [ ]th day of each month Current Principal Amount............................. $[ ] Required Participation Percentage.................... [ ]% Initial Subordinated Amount.......................... Approximately [ ]% of the Invested Amount Revolving Period..................................... [ ] to earlier of the commencement of an Accumulation Period or an Early Amortization Period Expected Payment Date................................ [ ] Termination Date..................................... [ ]
SUBJECT TO COMPLETION, [ ], 20[ ] PROSPECTUS DEALER FLOORPLAN FLOORPLAN MASTER LOAN TRUST Issuer ASSET BACKED CERTIFICATES ACE SECURITIES CORP. Seller THE TRUST-- o may periodically issue asset backed certificates in one or more series with one or more classes; and o will own -- receivables arising from a portfolio of automobile dealer revolving floorplan financing agreements; -- payments due on those receivables; and -- other property described in this prospectus and in the prospectus supplement. THE CERTIFICATES-- o will represent interests in the trust; o will be paid only from the assets of the trust; o will represent the right to payments in the amounts and at the times described in the prospectus supplement for those certificates; and o may benefit from one or more forms of credit enhancement. BEFORE YOU DECIDE TO INVEST IN ANY OF THE CERTIFICATES, PLEASE READ THIS PROSPECTUS AND THE RELATED PROSPECTUS SUPPLEMENT, ESPECIALLY THE RISK FACTORS BEGINNING ON PAGE OF THE PROSPECTUS. The certificates will be interests in the trust only and neither the certificates nor the assets of the trust will represent interests in or obligations of ACE Securities Corp. or any of its affiliates. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is [ ], 20[ ] READING THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT We provide information on your certificates in two separate documents that offer varying levels of detail: o this prospectus provides general information, some of which may not apply to a particular series of certificates, including your certificates, and o the accompanying prospectus supplement provides a summary of the specific terms of your certificates. If the terms of the certificates described in this prospectus vary with the accompanying prospectus supplement, you should rely on the information in the prospectus supplement. We include cross-references to sections in these documents where you can find further related discussions. Refer to the table of contents in the front of each document to locate the referenced sections. You should rely only on the information contained in this prospectus and the accompanying prospectus supplement, including any information incorporated by reference. We have not authorized anyone to provide you with different information. The information in this prospectus or the accompanying prospectus supplement is only accurate as of the dates on their respective covers. TABLE OF CONTENTS Section Page Risk Factors.................................................. ACE Securities Corp. and the Trust............................ Use of Proceeds............................................... The Dealer Floorplan Financing Business....................... The Accounts.................................................. The Seller.................................................... The Originator and the Servicer............................... Description of the Certificates............................... Description of the Receivables Purchase Agreement.............................................. Legal Aspects of the Receivables.............................. Tax Matters................................................... ERISA Considerations.......................................... Experts....................................................... Plan of Distribution.......................................... Legal Matters................................................. Glossary of Principal Terms for Prospectus.................... Global Clearance, Settlement and Tax.......................... Documentation Procedures RISK FACTORS IN THIS SECTION AND IN THE RELATED PROSPECTUS SUPPLEMENT UNDER THE HEADING "RISK FACTORS," WE DISCUSS THE PRINCIPAL RISK FACTORS OF AN INVESTMENT IN THE CERTIFICATES. YOUR ABILITY TO RESELL CERTIFICATES There may be no secondary IS LIMITED. market for your certificates. Underwriters may participate in making a secondary market in the certificates, but are under no obligation to do so. We cannot assure you that a secondary market will develop. If a secondary market does develop, we cannot assure you that it will continue or that you will be able to resell your certificates. Also, your certificates will not be listed on any securities exchange or quoted in the automated quotation system of any registered securities association. As a result, you will not have the liquidity that might be provided by that kind of listing or quotation. VARIOUS LEGAL ASPECTS MAY CAUSE There are limited circumstances DELAYS IN YOUR RECEIVING under the Uniform Commercial Code PAYMENTS OR MAY RESULT IN REDUCED and applicable federal law in which PAYMENTS OR LOSSES prior or subsequent transferees of ON YOUR CERTIFICATES. receivables could have an interest in the receivables with priority over the trust's interest. See "Legal Aspects of the Receivables -- Transfer of Receivables". THIS RISK FACTOR DISCUSSES VARIOUS The originator and the seller WAYS IN WHICH A THIRD have and will treat the PARTY MAY BECOME ENTITLED TO transactions described in this RECEIVE COLLECTIONS ON THE prospectus as a sale of the RECEIVABLES INSTEAD OF receivables to the seller and then THE TRUST. IF THAT HAPPENS, YOU to the trust. However, the WILL EXPERIENCE DELAYS IN originator and/or the seller may DISTRIBUTIONS ON YOUR CERTIFICATES become a debtor in a bankruptcy AND MAY EXPERIENCE REDUCTIONS IN case and a creditor or DISTRIBUTIONS ON YOUR trustee-in-bankruptcy of the debtor CERTIFICATES. ULTIMATELY, YOU MAY or the debtor itself may take the INCUR A LOSS ON YOUR CERTIFICATES. position that the sale of receivables to the seller or to the trust should be recharacterized as a pledge of the receivables to secure a borrowing of the debtor. In that case, the trust could experience delays in payments of collections of receivables to it or, should the court rule in favor of any trustee, debtor or creditor, reductions in the amount of the payments could result. Also, if the transfer of receivables to the seller is recharacterized as a pledge, a tax or government lien on the property of the originator arising before any receivables come into existence may have priority over the seller's interest in the receivables. See "Legal Aspects of the Receivables - Matters Relating to Bankruptcy". At the time a vehicle is sold, the originator's security interest in the vehicle will terminate. Therefore, if a dealer fails to remit to the originator amounts owed with respect to vehicles that have been sold, the related receivables will no longer be secured by vehicles. THE TIMING OF PAYMENTS ON THE Dealers pay receivables upon RECEIVABLES WILL the retail sale of the underlying DETERMINE WHETHER WE WILL vehicle. The timing of those sales PAY PRINCIPAL ON THE is uncertain. Also, we cannot CERTIFICATES WHEN INTENDED. assure you that there will be additional receivables created under the Accounts or that any particular pattern of dealer repayments will occur. The payment of principal on the certificates depends on dealer repayments. As a result, you may not receive your principal when you expected because: o the certificates of your series or class may not be fully amortized by its expected payment date, if any, or o the payment of principal to certificateholders or the deposit of principal in a principal funding account during the controlled amortization period or accumulation period, if any, with respect to your series or class of certificates may not equal the controlled amortization amount or controlled deposit amount, if any, with respect to the series or class. SOCIAL, ECONOMIC AND OTHER FACTORS Payment of the receivables is WILL AFFECT THE LEVEL OF THE COLLECTIONS largely dependent upon the retail ON THE RECEIVABLES AND MAY AFFECT sale of the related vehicles. The THE AMOUNT OF THE level of retail sales of cars and DISTRIBUTIONS OF THE CERTIFICATES. light duty trucks may change as the result of a variety of social and economic factors. Economic factors include o interest rates, o unemployment levels, o the rate of inflation and o consumer perception of economic conditions generally. The use of incentive programs, e.g., manufacturers' rebate programs, may affect retail sales. However, we cannot predict whether or to what extent economic or social factors will affect the level of vehicle sales. THE ABILITY OF THE TRUST TO The originator is not obligated MAKE PAYMENTS ON YOUR CERTIFICATES to make any payments in respect of DEPENDS IN PART ON THE ABILITY OF THE any certificates or the ORIGINATOR TO GENERATE RECEIVABLES AND receivables. However, the trust THE ABILITY OF THE ORIGINATOR TO depends completely upon the PERFORM ITS OBLIGATIONS UNDER THE originator to generate new POOLING AND SERVICING AGREEMENT. receivables. The ability of the originator to generate receivables depends in turn to a large extent on the sales of automobiles and light duty trucks. We cannot assure you that the originator will continue to generate receivables at the same rate as receivables were generated in prior years. Also, if the initial servicer were to cease acting as servicer, delays in processing payments on the receivables and information in respect of the receivables could occur and result in delays in payments to you. The originator makes representations and warranties with respect to the characteristics of the receivables. In some cases, the originator would be required to purchase receivables with respect to which the representations and warranties have been breached. If the originator fails to make a required repurchase, the trust may have less funds. In addition, subject to limitations, the originator has the ability to change the terms of the Accounts, including the rate and the credit line, as well as change its underwriting procedures. These changes could reduce the amount of collections received on the receivables. Under agreements between the manufacturer and franchised dealers, manufacturers are committed to purchase unmiled vehicles from the dealers upon dealership termination. If the relevant manufacturer is not able to repurchase the new vehicles under the repurchase provision of new vehicles in the dealer agreements, losses with respect to the receivables may be adversely affected. See "The Dealer Floorplan Financing Business - Relationship with Franchised Dealers". CREDIT ENHANCEMENT IS LIMITED. We will provide credit IF THE CREDIT ENHANCEMENT IS enhancement of each series of EXHAUSTED, YOU MAY INCUR A certificates by subordinating the LOSS. seller's interest to the extent of the available subordinated amount for the series as described in the related prospectus supplement. The amount of the credit enhancement is limited and will be reduced from time to time as described in the related prospectus supplement. If the credit enhancement is exhausted, you are much more likely to incur a loss. See "Limited Subordination of Seller's Interest; Enhancements". OTHER CERTIFICATEHOLDERS MAY In some cases, the consent or CONTROL THE ACTIONS OF THE TRUST. approval of the holders of a THEIR ACTIONS MAY BE specified percentage of the ADVERSE TO YOUR INTEREST. aggregate unpaid principal amount of all outstanding certificates of all outstanding series will be required to direct some actions. These actions include amending the pooling and servicing agreement in some cases and directing a reassignment of the entire portfolio of receivables. Also, following the occurrence of an insolvency event with respect to the seller, the holders of certificates evidencing more than 50% of the aggregate unpaid principal amount of each series or each class of each series, and any holder of a supplemental certificate, will be required to direct the trustee not to sell or otherwise liquidate the receivables. THE ISSUANCE OF The relevant trust, which may ADDITIONAL SERIES OF be a master trust, may have CERTIFICATES MAY ADVERSELY AFFECT previously issued series and may YOUR INTEREST. issue additional series, which may be represented by different classes within a series. A series supplement delivered under the pooling and servicing agreement in connection with the issuance of other series will specify principal terms applicable to the series. No series supplement may change the terms of the certificates of another series or the terms of the pooling and servicing agreement as applied to the certificates of another series. See "Description of the Certificates -- New Issuances". However, we cannot assure you that the terms of any one series might not have an impact on the timing or amount of payments received by a certificateholder of any other series. CREDIT RATINGS OF THE Unless we specify otherwise in CERTIFICATES REFLECT THE RATING the related prospectus supplement, AGENCY'S ASSESSMENT OF THE it will be a condition to the LIKELIHOOD THAT YOU WILL issuance of the certificates of RECEIVE YOUR each series offered by this PAYMENTS OF INTEREST AND prospectus that they be rated one PRINCIPAL. of the four highest long-term rating category by at least one nationally recognized rating agency. Any rating assigned to the certificates of a series or a class by a rating agency o will reflect the rating agency's assessment of the likelihood that certificateholders of the series or class will receive the payments of interest and principal required to be made under the pooling and servicing agreement and o will be based primarily on the value of the receivables in the trust, the level of subordination of the seller's interest in the trust and the availability of any enhancement with respect to the series or class. However, any rating will not, unless we otherwise specify in the related prospectus supplement, address the likelihood that the principal of, or interest on, any certificates of the series or class will be paid on a scheduled date. The rating will not be a recommendation to buy, hold or sell certificates of the series or class, and the rating will not comment as to the market price or suitability for a particular investor. We cannot assure you that a rating will remain for any given period of time or that a rating agency will not reduce or withdraw a rating in the future if in its judgment circumstances in the future so warrant. BOOK-ENTRY REGISTRATION MAY LIMIT Unless we otherwise specify in YOUR ABILITY TO RESELL the prospectus supplement relating OR PLEDGE YOUR CERTIFICATES. to a series of certificates, the certificates of each series will initially be book-entry certificates and will not be registered in your name or your nominee's name. Accordingly, you will not be recognized by the trustee as the "certificateholder". You will only be able to exercise the rights of a certificateholder indirectly through DTC and its participating organizations, and, if applicable, through Euroclear or Clearstream Banking and their respective participating organizations. See "Description of the Certificates -- General", " -- Book-Entry Registration" and " -- Definitive Certificates". You can find a "Glossary of Principal Terms for the Prospectus" beginning on page _____ in this prospectus. ACE SECURITIES CORP. AND THE TRUST ACE SECURITIES CORP. Ace Securities Corp.'s executive offices are located at 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211, and its telephone number is (704) 365-0569. THE TRUST ACE Securities Corp., will establish a trust or master trust pursuant to a trust agreement or a master trust agreement. The trustee of each trust will be a commercial bank, savings and loan association or trust company identified as the trustee in the related prospectus supplement. The trust was or will be formed in accordance with the laws of the State of New York under the Pooling and Servicing Agreement. The property of the trust consists of o the receivables existing in the Accounts on the date specified in the prospectus supplement (the "Initial Cut-Off Date"). o all receivables generated in the Accounts from time to time after the Initial Cut-Off Date during the term of the trust as well as receivables generated in any Accounts added to the trust from time to time, but excluding receivables in any Accounts that are removed from the trust from time to time after the Initial Cut-Off Date, o an assignment of all the seller's rights and remedies under the Receivables Purchase Agreement, o all funds collected or to be collected in respect of the receivables, o all funds on deposit in accounts of the trust, o any Enhancement issued with respect to any particular series or class of certificates and o a security interest in the vehicles and any other collateral security. See "Description of the Certificates -- Addition of Accounts". See "Description of the Receivables Purchase Agreement" for a summary of terms of the Receivables Purchase Agreement. The property of the Trust may also include Enhancements for the benefit of certificateholders of a particular series or class. The certificateholders of a particular series or class will not have any interest in any Enhancements provided for the benefit of the certificateholders of another series or class, unless we so provide in the related Series Supplement or Series Supplements. Under the Pooling and Servicing Agreement, the seller will be allowed, subject to limitations and conditions, and in some circumstances will be obligated, o to designate from time to time Additional Accounts to be included as Accounts and to convey to the trust the receivables of the Additional Accounts, and o to designate from time to time Accounts to be removed and to require the trustee to convey receivables in the Removed Accounts to the seller. The trust was formed for this and like transactions under the Pooling and Servicing Agreement and prior to formation had no assets or obligations. The trust will not engage in any business activity other than o acquiring and holding the receivables and the other assets of the trust and proceeds from the receivables and those assets, o issuing the certificates and the seller's certificate, and any Supplemental certificates, and making payments on those certificates o and related activities. As a consequence, we do not expect the trust to have any need for, or source of, capital resources other than the assets of the trust. USE OF PROCEEDS Unless we otherwise provide in the related prospectus supplement: o from the net proceeds from the sale of the certificates of a series offered by this prospectus we will make the deposit of the Excess Funded Amount, if any, for the series, to the Excess Funding Account for the series, and we will pay the remaining portion of the net proceeds to the seller; and o the seller will use the portion of the proceeds paid to it. THE DEALER FLOORPLAN FINANCING BUSINESS We will set forth in the prospectus supplement for each series information with respect to the dealer floorplan financing business of the originator. The dealer accounts are individual lines of credit represented by revolving dealer floor plan financing agreements extended or maintained by the originator to United States dealers and, to the extent specified in the related prospectus supplement, foreign dealers. The lines of credit for all these dealers constitute the U.S. portfolio. Dealers use funds loaned under these arrangements, which are known generally as "wholesale" or "floor plan" financing, primarily to finance new and used motor vehicles manufactured or distributed by motor vehicle manufacturers and distributors pending sale or lease to the ultimate customer. In general, each receivable generated in a dealer account is secured by all vehicles owned by the related dealer and, in some instances, by other collateral security owned by that dealer. The related prospectus supplement will provide information with respect to the accounts which will include, among other things: (a) underwriting criteria; (b) the loss and delinquency experience for the portfoliio of accounts; (c) the composition of the portfolio by account balance; and (d) the geographic distribution of accounts. THE ACCOUNTS GENERAL The receivables arise in the revolving financing arrangements (the "Accounts") with domestic automobile dealers ("dealers") franchised by automobile manufacturers. The originator selected or will select the Accounts from all the wholesale accounts in the Wholesale Portfolio that are Eligible Accounts (the "Eligible Portfolio"). Each Account in the Eligible Portfolio must be an account established by the originator, directly or as successor, in the ordinary course of business and meet other criteria provided in the Pooling and Servicing Agreement. See "Description of the Certificates -- Representations and Warranties". The originator and the seller have represented or will represent that each believes that the Accounts will be representative of the accounts in the Eligible Portfolio and that the inclusion of the Accounts, as a whole, will not represent an adverse selection from the Eligible Portfolio. From time to time, dealers may deposit funds with the originator in cash management accounts, limited in amount to the amount of the wholesale accounts. The originator will apply funds deposited by a dealer in its cash management account to reduce the dealer's outstanding Principal Receivables balance. Under some circumstances, a dealer may reborrow the funds. Under the Pooling and Servicing Agreement, the seller, and under the Receivables Purchase Agreement, the originator has the right, subject to limitations and conditions, and in some circumstances is obligated, to choose from time to time additional qualifying wholesale accounts to be included as Accounts and to convey to the trust some of the receivables of the Additional Accounts, including receivables created after the conveyance. These accounts must meet the eligibility criteria set forth above as of the date the accounts are designated as Additional Accounts. The originator will convey the receivables then existing, with exceptions, or later created under the Additional Accounts to the seller. The seller will then convey them to the trust. See "Description of the Certificates -- Addition of Accounts". In addition, as of any Additional Cut-off Date in respect of Additional Accounts and the date any new receivables are generated, the originator will represent and warrant to the seller, and the seller will represent and warrant to the trust, that the receivables meet the eligibility requirements set forth in the Pooling and Servicing Agreement. See "Description of the Certificates -- Conveyance of Receivables". Under some circumstances specified in the Pooling and Servicing Agreement, the seller has the right to remove Accounts, and the receivables arising from the Accounts, from the trust. See "Description of the Certificates -- Removal of Accounts". During the term of the trust, the Accounts from which the receivables arise will be the same Accounts designated by the seller on the Initial Cut-Off Date plus any Additional Accounts, minus any Accounts removed from the trust. We will provide information about the Accounts in each prospectus supplement. THE ORIGINATOR AND THE SERVICER Information with respect the originator and the servicer will be set forth in the related prospectus supplement. DESCRIPTION OF THE CERTIFICATES GENERAL The trust will issue the certificates of a series under a Pooling and Servicing Agreement (as amended and supplemented from time to time, the "Pooling and Servicing Agreement"), among Ace Securities Corp., as seller of the receivables, the servicer of the receivables, and the trustee. The Pooling and Servicing Agreement will be substantially in the form filed as an exhibit to the Registration Statement of which this prospectus is a part. The trustee will make available for inspection a copy of the Pooling and Servicing Agreement, without exhibits or schedules, to certificateholders of a Series on written request. The following summary describes terms that may be applicable to the certificates of each series, is not complete and is qualified in its entirety by reference to the Pooling and Servicing Agreement and the applicable Series Supplement. The certificates of each series will evidence undivided beneficial interests in assets of the trust allocated to the certificateholders of the series (the "Certificateholders' Interest"). These interests will represent the right to receive from the trust assets funds up to, but not in excess of, the amounts required to make payments of interest on and principal of the certificates of the series under the Pooling and Servicing Agreement as described in the related prospectus supplement. The certificates of each series will initially be represented by certificates registered in the name of the nominee of DTC (together with any successor depository selected by the seller, the "Depository"), except as set forth below. Unless the related prospectus supplement states otherwise, the certificates of each series will be available for purchase in minimum denominations of $1,000 and integral multiples of $1,000 in book-entry form only. DTC has informed the seller that DTC's nominee will be Cede. Accordingly, Cede is expected to be the holder of record of the certificates. Unless and until Definitive Certificates are issued, no certificateholder will be entitled to receive a physical certificate representing a certificate. All references in this prospectus to actions by certificateholders shall refer to actions taken by DTC upon instructions from Participants. Also, all references in this prospectus to distributions, notices, reports and statements to certificateholders shall refer to distributions, notices, reports and statements to DTC or Cede, as the registered holder of the certificates, as the case may be. See "Book-Entry Registration" and "Definitive Certificates". INTEREST The certificates of a series or class will accrue interest on their principal balance at the per annum rate set forth in or determined as described in the prospectus supplement. Interest will be payable to the certificateholders of a series or class on the interest payment dates specified in the prospectus supplement. If the prospectus supplement for a series or class of certificates so provides, the interest rate and the interest payment dates for each certificate of that series or class may be adjusted from time to time, including as a result of a decline in the interest rate of the receivables. Except as otherwise stated in this prospectus or in the related prospectus supplement, interest collections and other amounts allocable to the Certificateholders' Interest of a Series will be used to make interest payments to certificateholders of the Series on each interest payment date with respect to those certificateholders. During any Early Amortization Period, however, with respect to a series, we will distribute interest to the certificateholders monthly on each Special Payment Date. If the interest payment dates for a series or class occur less than monthly, we will deposit the collections or other amounts, or the portion allocable to the class, in one or more trust accounts (each an "Interest Funding Account"). The trustee will apply the amounts in the Interest Funding Account to make interest payments to certificateholders of the series or class on the following interest payment date for that series. If a series has more than one class of certificates, each class may have a separate Interest Funding Account. PRINCIPAL The certificates of each series and class will have a revolving period (the "Revolving Period"). During the Revolving Period, principal collections and other amounts otherwise allocable to the Certificateholders' Interest of the series or class will not be paid to those certificateholders. Instead, they will be o paid to the entity specified in the related prospectus supplement, o deposited to the Excess Funding Account, if any, for the series or o distributed to, or for the benefit of, the certificateholders of other classes or series. A Revolving Period for a series will begin on the date stated in the related prospectus supplement (the "Series Cut-off Date") and end on the earlier of: o the day immediately before the Accumulation Period commencement date or the Controlled Amortization Period commencement date for the series and o the day immediately before the day on which an Early Amortization Event or a Reinvestment Event occurs with respect to the series. If a series has more than one class of certificates, each class may have a different Revolving Period. The trust may use any of the following structures for paying principal on a series or class of certificates. We will describe the actual structure for a series or class in the related prospectus supplement. A series may have an accumulation period (the "Accumulation Period"). The Accumulation Period will begin at the close of business on the date specified in or determined in the manner specified in the prospectus supplement and end on the earliest of: o the beginning of a Reinvestment Period with respect to the series, o the beginning of an Early Amortization Period with respect to the series and o payment in full of the outstanding principal amount of the series certificates. During the Accumulation Period for a series, we will deposit principal collections and other amounts allocable to the Certificateholders' Interest of the series, which may include some Excess Principal Collections, on each distribution date in a trust account established for the benefit of the certificateholders of the series (a "Principal Funding Account"). The trustee will apply the amounts in the Principal Funding Account, together with any amounts in the Excess Funding Account allocable to the series, to make principal distributions to the certificateholders of the series when due. The amount to be deposited in a Principal Funding Account for any series on any distribution date may, but will not necessarily, be limited to the Controlled Deposit Amount. The "Controlled Deposit Amount" is an amount stated in the related prospectus supplement plus, in the case of some distribution dates, any amounts in the Excess Funding Account allocable to the series. If a series has more than one class of certificates, each class may have a different Accumulation Period and a separate Principal Funding Account and Controlled Deposit Amount. Also, there may be priorities among the classes with respect to deposits of principal into the Principal Funding Accounts. A series may have a controlled amortization period (the "Controlled Amortization Period"). The Controlled Amortization Period will begin at the close of business on the date stated in or determined in the manner stated in the related prospectus supplement and will end on the earliest of: o the beginning of a Reinvestment Period with respect to the series, o the beginning of an Early Amortization Period with respect to the series and o payment in full of the outstanding principal amount of the certificates of that series. During the Controlled Amortization Period for a series, the trustee will apply principal collections and other amounts allocable to the Certificateholders' Interest of the series, which may include Excess Principal Collections and amounts in the Excess Funding Account, on each distribution date to make principal distributions to any class of certificateholders of the series then scheduled to receive distributions. The amount to be distributed to those certificateholders may be limited to the Controlled Amortization Amount for the series. If a series has more than one class of certificates, each class may have a different Controlled Amortization Period and a separate Controlled Amortization Amount. In addition, the related prospectus supplement may describe priorities among the classes with respect to the distributions. A series may have a reinvestment period (the "Reinvestment Period"). The Reinvestment Period will begin on the day on which a Reinvestment Event has occurred and end on the earliest of: o the beginning of an Early Amortization Period with respect to the series, o the recommencement of the Revolving Period in accordance with the related Series Supplement and o payment in full of the outstanding principal amount of the certificates of that series. During the Reinvestment Period for a series, we will deposit principal collections and other amounts allocable to the Certificateholders' Interest of the series, which may include some Excess Principal Collections, on each distribution date in a Principal Funding Account. The trustee will apply the funds in the Principal Funding Account, together with any amounts in the Excess Funding Account allocable to the series, to make principal distributions to the certificateholders of the series when due. The amount to be deposited in a Principal Funding Account for any series on any distribution date will not be limited to any Controlled Deposit Amount or Controlled Amortization Amount. If a series has more than one class of certificates, each class may have a separate Principal Funding Account and there may be priorities among the classes with respect to deposits of principal into the Principal Funding Accounts. The "Early Amortization Period" for a series is the period beginning on the day on which an Early Amortization Event has occurred with respect to the series and ending on the earliest of: o payment in full of the outstanding principal amount of the certificates of that series, o the recommencement of the Revolving Period in accordance with the related Series Supplement and o the Termination Date for the series. The start of an Early Amortization Period for a series will terminate its Revolving Period, Reinvestment Period, Controlled Amortization Period or Accumulation Period, as applicable. Further, we will no longer pay principal collections and some other amounts allocable to the Certificateholders' Interest of that series to the seller or the holders of any other outstanding series or deposited in a Principal Funding Account. Instead, the trustee will distribute them as principal payments to the applicable certificateholders of that series monthly on each distribution date beginning with the distribution date following the Collection Period in which that Early Amortization Period begins (each of those distribution dates, a "Special Payment Date"). During an Early Amortization Period for a series, distributions of principal to certificateholders of the series will not be limited to any Controlled Deposit Amount or Controlled Amortization Amount. In addition, on the first Special Payment Date for any series, to the extent stated in the related Series Supplement, the trustee will distribute any funds on deposit in its Excess Funding Account, if any, and any funds on deposit in its Principal Funding Account with respect to that series to the certificateholders of the relevant class or series up to the outstanding principal balance of their certificates. See "Reinvestment Events and Early Amortization Events" for a discussion of the events which might lead to the beginning of an Early Amortization Period with respect to a Series. The trust may use any combination of the above described structures for a series or class and may use any other principal payment structure set forth in a prospectus supplement. We will invest funds on deposit in any Principal Funding Account in Eligible Investments. The Eligible Investments in the related prospectus supplement intended to assure a minimum rate of return on the investment of the funds. To make it more likely that the principal amount of a series or class of certificates will be paid in full at the end of its Accumulation Period, the series or class may be subject to a maturity liquidity facility or other similar mechanism stated in the relevant prospectus supplement. A maturity liquidity facility is a financial contract that typically provides that enough principal will be available to retire the certificates at a specified date. Certificates of a series or class may also be purchased from time to time, typically at their respective principal amounts, in connection with a remarketing of the certificates if we so provide in the related prospectus supplement. A purchase of certificates of a series or class may cause the outstanding principal amount of series or class to decrease prior to the start of any Controlled Amortization Period or Early Amortization Period. The prospectus supplement for any series subject to purchase will describe the conditions to and procedures for any purchase. The proceeds of any purchase would be paid to the holders of the certificates so purchased. BOOK-ENTRY REGISTRATION Unless in the related prospectus supplement states otherwise, certificateholders may hold certificates of a Series through DTC, in the United States, or Clearstream Banking, societe anonyme ("Clearstream") or Euroclear, in Europe, if they are participants of those systems, or indirectly through organizations which are participants in those systems. Cede, as nominee for DTC, will be the registered holder of the global certificates. Except as described in this prospectus, no certificateholder will be entitled to receive a certificate representing that person's interest in the certificates. Unless and until Definitive Certificates are issued, all references in this prospectus to actions by certificateholders shall refer to actions taken by DTC upon instructions from its Participants. Also, all references in this prospectus to distributions, notices, reports and statements to certificateholders shall refer to distributions, notices, reports and statements to Cede, as the registered holder of the certificates, for distribution to the certificateholders in accordance with DTC procedures. Clearstream and Euroclear will hold omnibus positions on behalf of their participants through customers' securities accounts in Clearstream's and Euroclear's names on the books of their respective depositaries. Those depositaries will hold those positions in customers' securities accounts in the depositaries' names on the books of DTC. Citibank, N.A. ("Citibank") will act as depositary for Clearstream and Morgan Guaranty Trust Company of New York ("Morgan") will act as depositary for Euroclear (in those capacities, the "Foreign Agency Depositaries"). Transfers between DTC participants will occur in the ordinary way in accordance with DTC rules. Transfers between Clearstream Participants and Euroclear Participants will occur in the ordinary way in accordance with their applicable rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream or Euroclear participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its Foreign Agency Depositary. Those cross-market transactions, however, will require the counterparty in the relevant European international clearing system to deliver instructions to the system in accordance with its rules and procedures and within its European time deadlines. The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its Foreign Agency Depositary to take action to effect final settlement on its behalf. The Foreign Action Depositary will then deliver or receive securities in DTC, and make or receive payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Participants and Euroclear Participants may not deliver instructions directly to the Foreign Agency Depositaries. Because of time-zone differences, credits of securities received in Clearstream or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. Those credits or any transactions in the securities settled during the processing will be reported to the relevant Euroclear or Clearstream participant on that business day. Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream Participant or a Euroclear Participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC. For additional information regarding clearance and settlement procedures for the certificates, see Annex I. Also, for information with respect to tax documentation procedures relating to the certificates, see Annex I and "Tax Matters --Federal Income Tax Consequences -- Foreign Investors". DTC is o a limited-purpose trust company organized under the laws of the State of New York, o a member of the Federal Reserve System, o a "clearing corporation" within the meaning of the UCC and o a "clearing agency" registered under 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, eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include other organizations. Indirect access to the DTC system also is available to others including banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("Indirect Participants"). Certificateholders that are not Participants or Indirect Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, certificates may do so only through Participants and Indirect Participants. In addition, certificateholders will receive all distributions of principal of and interest on the certificates from the trustee through DTC and its Participants. Under a book-entry format, certificateholders will receive payments after the related distribution date because, while payments are required to be forwarded to Cede, as nominee for DTC, on each distribution date, DTC will forward the payments to its Participants which then will be required to forward them to Indirect Participants or certificateholders. It is anticipated that the only "Certificateholder", as that term is used in the Pooling and Servicing Agreement, will be Cede, as nominee of DTC, and that the trustee will not recognize certificateholders as certificateholders under the Pooling and Servicing Agreement. Certificateholders will only be permitted to exercise the rights of certificateholders under the Pooling and Servicing Agreement indirectly through DTC and its Participants who in turn will exercise their rights through DTC. Under the rules, regulations and procedures creating and affecting DTC and its operations, DTC must make book-entry transfers among Participants on whose behalf it acts with respect to the certificates and must receive and transmit distributions of principal of and interest on the certificates. Participants and Indirect Participants with which certificateholders have accounts with respect to the certificates also must make book-entry transfers and receive and transmit those payments on behalf of their respective certificateholders. Because DTC can only act on behalf of Participants, who in turn act on behalf of Indirect Participants and banks, a certificateholder will have a limited ability to pledge certificates to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of the certificates. DTC has told the seller that it will take any action permitted to be taken by a certificateholder under the Pooling and Servicing Agreement only at the direction of one or more Participants to whose account with DTC the certificates are credited. Clearstream is incorporated under the laws of Luxembourg as a professional depository. Clearstream holds securities for Clearstream participants and facilitates the clearance and settlement of securities transactions between Clearstream participants through electronic book-entry changes in accounts of Clearstream participants, eliminating the need for physical movement of certificates. Transactions may be settled in Clearstream in any of 28 currencies, including United States dollars. Clearstream provides to Clearstream participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. As a professional depository, Clearstream is subject to regulation by the Luxembourg Monetary Institute. Clearstream participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, checkering corporations and other organizations. Indirect access to Clearstream is also available to others, including banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream participant, either directly or indirectly. The Euroclear System was created in 1968 to hold securities for participants of the Euroclear System ("Euroclear Participants") and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in any of 27 currencies, including United States dollars. The Euroclear System includes various other services, including securities lending and borrowing, and interfaces with domestic markets in several countries similar to the arrangements for cross-market transfers with DTC described above under "Book-Entry Registration". The Euroclear System ("Euroclear") is operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office (the "Euroclear Operator") under contract with Euroclear S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear Clearance System cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for the Euroclear System on behalf of Euroclear Participants. Euroclear Participants include banks, including central banks, securities brokers and dealers and other professional financial intermediaries and may include any underwriters, agents or dealers involved in the distribution of the certificates. Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. The Euroclear Operator is the Belgian branch of a New York banking corporation which is a member of the Federal Reserve System. Because of this fact, it is regulated and examined by the Board of Governors of the Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operative Procedures of the Euroclear System, and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within the Euroclear System, withdrawals of securities and cash from the Euroclear System, and receipts of payments with respect to securities in the Euroclear System. All securities in the Euroclear System are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear Participants. Distributions with respect to certificates held through Clearstream or Euroclear will be credited to the cash accounts of Clearstream Participants or Euroclear Participants in accordance with the relevant system's rules and procedures, to the extent received by its Foreign Agency Depositary. The distributions will be subject to tax reporting in accordance with relevant United States tax laws and regulations. See "Tax Matters". Clearstream or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a certificateholder under the Pooling and Servicing Agreement or the applicable Series Supplement on behalf of a Clearstream Participant or Euroclear Participant only in accordance with its relevant rules and procedures and subject to its Foreign Agency Depositary's ability to effect those actions on its behalf through DTC. Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of certificates among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform the procedures and the procedures may be discontinued at any time. DEFINITIVE CERTIFICATES Unless the related prospectus supplement states otherwise, the trust will issue the certificates of a series or class in fully registered, certificated form to certificateholders or their nominees ("Definitive Certificates"), rather than to DTC or its nominee only if: o the seller 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 of the series or class and the seller is unable to locate a qualified successor, o the seller, at its option, chooses to end the book-entry system through DTC with respect to the series or class or o after a Service Default occurs, certificateholders representing not less than 50% of the aggregate unpaid principal amount of the certificates of the series or class advise the trustee and DTC through Participants in writing that the continuation of a book-entry system through DTC, or a successor to DTC, is no longer in the best interests of the certificateholders. If any of the events described in the immediately preceding paragraph occurs, DTC must notify all Participants of the availability of Definitive Certificates. When DTC surrenders the certificate or certificates representing those certificates and gives instructions for re-registration, the trustee will issue the certificates in the form of Definitive Certificates. After doing so, the trustee will recognize the holders of the Definitive Certificates as certificateholders under the Pooling and Servicing Agreement ("Holders"). If the trust issues Definitive Certificates or DTC ceases to be the clearing agency for any series or class of certificates, the Pooling and Servicing Agreement provides that the applicable certificateholders will be notified of that event. The trustee will make distributions of principal of, and interest on, the certificates directly to Holders in accordance with the procedures set forth in this prospectus and in the Pooling and Servicing Agreement. On each distribution date the trustee will make distributions to Holders in whose names the Definitive Certificates were registered at the close of business on the related record date. The trustee will make distributions by check mailed to the address of the Holder as it appears on the register maintained by the trustee. The trustee will make the final distribution on any Certificate, whether Definitive Certificates or the certificate or certificates registered in the name of Cede representing the certificates, however, only when the certificate is presented and surrendered on the final payment date at the office or agency that is specified in the notice of final distribution to certificateholders. The trustee will provide that notice to registered certificateholders not later than the fifth day of the month of the final distribution. Definitive Certificates will be transferable and exchangeable at the offices of the trustee, which shall initially be 101 Barclay Street, New York, New York 10286. The trustee will not impose any service charge for any registration of transfer or exchange, but the trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection with a transfer exchange. THE SELLER'S CERTIFICATE The Pooling and Servicing Agreement provides that the entity specified in the related prospectus supplment may, from time to time, exchange a portion of the certificate evidencing the Seller's Interest (the "Seller's Certificate") for another certificate (a "Supplemental Certificate") for transfer or assignment to a person or entity chosen by the entity specified in the related prospectus supplement upon the execution and delivery of a supplement to the Pooling and Servicing Agreement, if o the entity specified in the related prospectus supplement shall at the time of that exchange and after giving effect to the exchange have an interest in the Pool Balance of not less than 2% of the aggregate amount of the principal balances of the receivables (the "Pool Balance"), o the entity specified in the related prospectus supplement shall have delivered to the trustee, the Rating Agencies and any Enhancement provider a Tax Opinion with respect to the exchange and o the entity specified in the related prospectus supplement shall have delivered to the trustee written confirmation from the applicable Rating Agencies that the exchange will not result in a reduction or withdrawal of the rating of any outstanding series or class of certificates. Any later transfer or assignment of a Supplemental Certificate is also subject to the second and third conditions described in the preceding sentence. The entity specified in the related prospectus supplement may transfer a Supplemental Certificate to a securitization vehicle that in turn issues asset-backed securities based on that Supplemental Certificate. NEW ISSUANCES The Pooling and Servicing Agreement states that under one or more Series Supplements, the trustee may issue two types of certificates: o one or more series of certificates which are transferable and have the characteristics described below under "New Issuances" and o the Seller's Certificate, and any Supplemental Certificate, which will evidence the Seller's Interest and will be transferable only upon the satisfaction of conditions described under "The Seller's Certificate". The Pooling and Servicing Agreement also provides that, under one or more Series Supplements, the seller may cause the trustee to issue one or more new series. Under the Pooling and Servicing Agreement, the seller may specify, among other things, with respect to any series: o its name or designation, o its initial principal amount, or method for calculating that amount, o its certificate rate, or the method for determining its certificate rate, o a date on which it will begin its Accumulation Period or Controlled Amortization Period, if any, o the method for allocating principal and interest to certificateholders of the series, o the percentage used to calculate monthly servicing fees, o the issuer and terms of any Enhancement or the level of subordination provided by the Seller's Interest, o the terms on which the certificates of the series may be exchanged for certificates of another series, be subject to repurchase, optional redemption or mandatory redemption by the seller, servicer or originator or be remarketed by any remarketing agent, o the Series Termination Date and o any other terms permitted by the Pooling and Servicing Agreement (all of those terms, the "Principal Terms" of the series). The seller may offer any series to the public under a prospectus or other disclosure document in transactions either registered under the Securities Act or exempt from registration under the Securities Act, directly or through one or more underwriters or placement agents. There is no limit to the number of series that may be issued under the Pooling and Servicing Agreement. The Pooling and Servicing Agreement provides that the seller may specify Principal Terms of a new series so that each series has a Controlled Amortization Period or Accumulation Period which may have a different length and begin on a different date than the Controlled Amortization Period or Accumulation Period for any other series. Further, one or more series may be in their Reinvestment Periods, Early Amortization Periods, Controlled Amortization Periods or Accumulation Periods while other series are not. Thus, some series may be amortizing or accumulating principal, while other series are not. Moreover, different series may have the benefits of different forms of Enhancement issued by different entities. Under the Pooling and Servicing Agreement, the trustee will hold each form of Enhancement only on behalf of a specified series or a particular class within that series. The seller may specify different certificate rates and Monthly Servicing Fees with respect to each series, or a particular class. In addition, the seller has the option to vary among series, or classes within a series, the terms upon which the seller may repurchase a series, or classes within a series. Under the Pooling and Servicing Agreement and a Series Supplement, a new series may be issued only if specified conditions are satisfied. The seller may cause the issuance of a new series by notifying the trustee at least five business days in advance of the applicable Series Issuance Date. The notice shall state the designation of any series, and classes within a series, if any. The Pooling and Servicing Agreement states that the trustee will issue a new series only when it is delivered the following: o a Series Supplement in form satisfactory to the trustee signed by the seller and the servicer and specifying the Principal Terms of the series o the form of any Enhancement and any related agreement, o an opinion of counsel to the effect that, for federal income and single business tax purposes, o the issuance will not adversely affect the characterization of the certificates of any outstanding series or class as debt of the seller, o such issuance will not cause a taxable event to any certificateholders (an opinion of counsel to the effect referred to in the first subclause above and this subclause with respect to any action is referred to in this prospectus as a "Tax Opinion"), and o the new series will be characterized as debt of the seller, and o written confirmation from each applicable Rating Agency that the issuance will not cause it to reduce or withdraw the rating of any outstanding series or class of certificates. The issuance is also subject to the conditions that o the seller shall have represented and warranted that the issuance shall not, in the reasonable belief of the seller, cause an Early Amortization Event or Reinvestment Event to occur with respect to any outstanding series, and o after giving effect to the issuance, the entity's specified in the related prospectus supplement interest in the Pool Balance shall not be less than 2% of the Pool Balance. When all of these conditions are satisfied, the trustee will issue the series. CONVEYANCE OF RECEIVABLES AND COLLATERAL SECURITY The seller has sold and assigned or will sell and assign to the trust o all of its right, title and interest in and to the receivables and the related Collateral Security as of the Initial Cut-Off Date, o all receivables created in the Accounts after the Initial Cut-Off Date, o its interests in the related Collateral Security and the Receivables Purchase Agreement and o the proceeds of all of the foregoing. The "Collateral Security" in respect of the receivables is a security interest in vehicles and parts inventory, equipment, fixtures, service accounts and, in some cases, realty and a personal guarantee. The seller and the originator must indicate in their computer records that the receivables in the Accounts and the related Collateral Security have been conveyed to the trust. In addition, the seller must provide to the trustee a computer file or microfiche or written list containing a true and complete list showing for each Account, as of the Initial Cut-Off Date and the applicable Additional Cut-Off Date, o its account number, o the outstanding balance of the receivables in the Account and o the outstanding balance of principal receivables in the Account. The originator will retain and will not deliver to the trustee any other records or agreements relating to the receivables. Except as set forth above, the originator has not and will not segregate the records and agreements relating to the trust's receivables from those relating to other accounts of the originator. The originator has not and will not stamp or mark the physical documentation relating to the receivables to reflect the transfer of the receivables to the trust. The seller will file one or more financing statements in accordance with applicable state law to perfect the trust's interest in the receivables, the Collateral Security, the Receivables Purchase Agreement and the proceeds of those items. See "Risk Factors" and "Legal Aspects of the Receivables". As contemplated above and as described below under "Addition of Accounts", the seller has the right, subject to limitations and conditions, and in some circumstances is obligated, to designate from time to time additional accounts to be included as Additional Accounts, to purchase from the originator the receivables then existing or created after that time in the Additional Accounts and to convey the receivables to the trust. Each Additional Account must be an Eligible Account. In respect of any conveyance of receivables in Additional Accounts, the seller will follow the procedures set forth in the preceding paragraph, except the list will show information for the Additional Accounts as of the date the Additional Accounts are identified and selected (the "Additional Cut-Off Date"). REPRESENTATIONS AND WARRANTIES The seller will represent and warrant to the trust, among other things, that o as of each Series Cut-Off Date, and the date of issuance of any series (a "Series Issuance Date"), or, in the case of the Additional Accounts, as of the Additional Cut-Off Date and the date the related receivables are transferred to the trust (an "Addition Date"), each Account or Additional Account was an Eligible Account, o as of the Series Cut-Off Date, or as of the Additional Cut-Off Date, in the case of any Additional Accounts, or as of the date any future receivable is generated (a "Transfer Date"), each receivable is an Eligible Receivable or, if the receivable is not an Eligible Receivable, the receivable is conveyed to the trust as described below under "Ineligible Receivables, the Installment Balance Amount and the Overconcentration Amount", o each receivable and all Collateral Security conveyed to the trust on the Transfer Date or, in the case of Additional Accounts, on the Addition Date, and all of the seller's right, title and interest in the Receivables Purchase Agreement, have been conveyed to the trust free and clear of any liens and o all appropriate consents and governmental authorizations required to be obtained by the seller in connection with the conveyance of each receivable or Collateral Security have been duly obtained. If the seller breaches any representation and warranty described in the preceding paragraph the trust will reassign the related receivables to the seller in the manner described in the following paragraph. However, the trust will be entitled to make that reassignment only if o the breach remains uncured for 30 days or a longer period as may be agreed to by the trustee, after the earlier to occur of the discovery of the breach by the seller or the servicer or receipt of written notice of the breach by the seller or the servicer, and o the breach has a materially adverse effect on the Certificateholders' Interest in the receivable or, in the case of a breach relating to an Account, all receivables in the related Account ("Ineligible Receivables"). The trust will reassign each Ineligible Receivable to the seller on or before the end of the Collection Period in which the reassignment obligation arises by deducting the principal balance of the receivable from the Pool Balance. A deduction may cause the Pool Balance minus the aggregate Invested Amounts for all outstanding series (the "Seller's Participation Amount") to be less than the aggregate Available Subordinated Amounts for all outstanding series (the "Trust Available Subordinated Amount") on the second business day preceding the distribution date (each second business day preceding a Distribution Day, a "Determination Date"), after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date. If this happens, the seller must make a deposit into the Collection Account in immediately available funds in an amount equal to the amount by which the Seller's Participation Amount would be less than the Trust Available Subordinated Amount (that amount, a "Transfer Deposit Amount"). If the Transfer Deposit Amount is not so deposited, the principal balance of the related Ineligible Receivables will be deducted from the Pool Balance only to the extent the Seller's Participation Amount is not reduced below the Trust Available Subordinated Amount. Any principal balance not so deducted will not be reassigned and will remain part of the trust. The reassignment of any receivable to the seller and the payment of any related Transfer Deposit Amount will be the sole remedy available against the seller for any breach of the representations and warranties described in this section. The seller will also represent and warrant to the trust that, among other things, as of each Series Issuance Date o it is duly formed and in good standing, it has the authority to consummate the transactions contemplated by the Pooling and Servicing Agreement and the Pooling and Servicing Agreement constitutes a valid, binding and enforceable agreement of the seller, and o the Pooling and Servicing Agreement constitutes a valid sale, transfer and assignment to the trust of all right, title and interest of the seller in the receivables and the Collateral Security, whether then existing or created after that time, the Receivables Purchase Agreement, and the proceeds of those items, including proceeds in any of the accounts established for the benefit of the certificateholders of any series, subject to the rights of the Purchasers with respect to some of the Collateral Security, under the UCC, which is effective as to each receivable existing on the Initial Closing Date, or as of the Addition Date, if applicable, or, as to each receivable arising after those dates, upon the creation of that receivable and until termination of the trust. If a breach of any of the representations and warranties described in the preceding paragraph has a materially adverse effect on the Certificateholders' Interest in the receivables, either the trustee or the holders of certificates of all outstanding series evidencing not less than a majority of the aggregate unpaid principal amount of all outstanding series, by written notice to the seller and the servicer, and to the trustee and the provider of any Enhancement if given by certificateholders, may direct the seller to accept the reassignment of the Certificateholders' Interest of all series within 60 days of the notice, or within a longer period specified in the notice. The seller must accept the reassignment of the Certificateholders' Interest on a distribution date occurring within the 60-day period. However, the reassignment need not be made if at the end of the applicable period, the representations and warranties shall then be true and correct in all material respects and any materially adverse effect caused by the breach shall have been cured. The price for the reassignment will typically be equal to the sum of: o the aggregate "Invested Amounts", as specified in the related Series Supplements, of all series on the Determination Date preceding the distribution date on which the purchase is scheduled to be made, o accrued and unpaid interest on the unpaid principal amount of the certificates at the applicable certificate rate, together with interest on overdue interest, and o with respect to any particular series, any other amounts stated in its Series Supplement. The payment of the reassignment price for all outstanding series will be considered a payment in full of the Certificateholders' Interest. The trustee will distribute those funds to the applicable certificateholders upon presentation and surrender of the certificates. If the trustee or the certificateholders give a notice as provided in the preceding paragraph, the obligation of the seller to make any deposit will constitute the sole remedy respecting a breach of the representations and warranties available to certificateholders or the trustee on behalf of the certificateholders. ELIGIBLE ACCOUNTS AND ELIGIBLE RECEIVABLES As discussed under "Representations and Warranties" above, the seller represents that, as of specified times, the Accounts are Eligible Accounts and the receivables are Eligible Receivables. An "Eligible Account" is a wholesale financing line of credit extended by the originator to a Dealer, which, as of its date of determination: o is established by the originator in the ordinary course of business under a floorplan financing agreement, o is in favor of an Eligible Dealer, o is in existence and maintained and serviced by the servicer, and o in respect of which no amounts have been charged off as uncollectible or are classified as past due or delinquent. An "Eligible Dealer" is a dealer: o which is located in the United States of America, including its territories and possessions, o which has not been identified by the servicer as being the subject of any voluntary or involuntary bankruptcy proceeding or in voluntary or involuntary liquidation, o in which the originator or any affiliate of the originator does not have an equity investment and o which has not been classified by the servicer as being under Dealer Trouble status. An "Eligible Receivable" is a receivable: o which was originated or acquired by the originator in the ordinary course of business, o which has arisen under an Eligible Account and is payable in United States dollars, o which is owned by the originator at the time of sale to the seller, o which represents the obligation of a dealer to repay an advance made to the Dealer to finance the acquisition of vehicles, o which at the time of creation and at the time of transfer to the trust is secured by a perfected first priority security interest in the related vehicle, o which was created in compliance in all respects with all requirements of law applicable to the receivable and under a floorplan financing agreement which complies in all respects with all requirements of law applicable to any party to the agreement, o with respect to which all consents and governmental authorizations required to be obtained by the originator or the seller in connection with the creation of the receivable or the transfer of the receivable to the trust or the performance by the originator of the floorplan financing agreement under which the receivable was created, have been duly obtained, o as to which at all times following the transfer of the receivable to the trust, the trust will have good and marketable title to the receivable free and clear of all liens arising prior to the transfer or arising at any time, other than liens permitted under the Pooling and Servicing Agreement, o which has been the subject of a valid transfer and assignment from the seller to the trust of all the seller's interest in the receivable, including any proceeds of the receivable, o which will at all times be the legal and assignable payment obligation of the related Dealer, enforceable against the dealer in accordance with its terms, except as enforceability may be limited by applicable bankruptcy or other similar laws, o which at the time of transfer to the trust is not subject to any right of rescission, setoff, or any other defense, including defenses arising out of violations of usury laws, of the Dealer, o as to which, at the time of transfer of the receivable to the trust, the originator and the seller have satisfied all their respective obligations with respect to the Receivable required to be satisfied at that time, o as to which, at the time of transfer of the receivable to the trust, neither the originator nor the seller has taken or failed to take any action which would impair the rights of the trust or the certificateholders, o which constitutes "chattel paper" as defined in Article 9 of the UCC and o which was transferred to the trust with all applicable governmental authorization. The trustee did not and will not make any initial or periodic general examination of the receivables or any records relating to the receivables for the purpose of establishing the presence or absence of defects, compliance with representations and warranties of the seller or for any other purpose. Also, the trustee will not make any initial or periodic general examination of the servicer for the purpose of establishing the compliance by the servicer with its representations or warranties, the observation of its obligations under the Pooling and Servicing Agreement or for any other purpose. The servicer, however, will deliver to the trustee on or before March 31 of each calendar year, an opinion of counsel with respect to the validity of the interest of the trust in and to the receivables and other components of the trust. INELIGIBLE RECEIVABLES, THE INSTALLMENT BALANCE AMOUNT AND THE OVERCONCENTRATION AMOUNT For the purpose of facilitating the administration and reporting requirements of the servicer under the Pooling and Servicing Agreement, the seller and the originator will transfer all Ineligible Receivables arising in an Eligible Account to the trust. If, however, the Series Supplement for a series so states, the Incremental Subordinated Amount for the series will be adjusted by the portion of the aggregate principal amount of receivables included in the series allocable to the Certificateholders' Interest of the series. Also, if the Series Supplement for a series so states, the Incremental Subordinated Amount for the series shall be adjusted to reflect, on each distribution date, o the aggregate principal amount of receivables in the trust on the distribution date which are Dealer Overconcentrations (the "Overconcentration Amount") allocable to the Certificateholders' Interest of the series and o the portion of the aggregate amount of Installment Balances in respect of which the originator has not received an offsetting payment from the related Dealer on the distribution date (the "Installment Balance Amount") allocable to the Certificateholders' Interest of the series. "Dealer Overconcentrations" on any distribution date means, with respect to any Dealer or group of affiliated Dealers, the excess of o the aggregate principal amount of receivables due from the Dealer or group of affiliated Dealers on the last day of the Collection Period immediately preceding such distribution date over o 2% of the Pool Balance on the last day of the immediately preceding Collection Period. ADDITION OF ACCOUNTS Subject to the conditions described in this paragraph, the seller has the right to designate from time to time additional accounts to be included as Accounts (the "Additional Accounts"). Also, the seller must add the receivables of Additional Accounts if the Pool Balance on the last day of any Collection Period is less than the Required Participation Amount as of the following distribution date, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date. In that case, unless insolvency events have occurred with respect to the seller or the originator, then the originator under the Receivables Purchase Agreement must sell to the seller, and the seller under the Pooling and Servicing Agreement must transfer and assign to the trust, within 10 business days after the end of the Collection Period, interests in all receivables arising in the Additional Accounts, whether the receivables are then existing or created after that time. Any designation of Additional Accounts is subject to the following conditions, among others: o each Additional Account must be an Eligible Account; o the seller shall represent and warrant that the addition of the Additional Accounts shall not, in the reasonable belief of the seller, cause an Early Amortization Event or Reinvestment Event to occur with respect to any series; o the originator shall not select the Additional Accounts in a manner that it believes is adverse to the interests of the certificateholders or any Enhancement provider; o if the addition is not required, the seller shall deliver a Tax Opinion and other opinions of counsel with respect to the addition of the Additional Accounts to the trustee, the Rating Agencies and any Enhancement provider; and o the applicable Rating Agencies shall have provided written confirmation that the addition will not cause the rating of any outstanding series or class of certificates to be reduced or withdrawn. The seller may, however, from time to time, at its discretion, and subject only to the limitations specified in this paragraph, designate Additional Accounts. Additional Accounts designated in accordance with the provisions described in this paragraph are referred to in this prospectus as "Automatic Additional Accounts". Unless each Rating Agency otherwise consents, o the number of Automatic Additional Accounts designated with respect to any of the three consecutive Collection Periods beginning in January, April, July and October of each calendar year shall not exceed 8% of the number of Accounts as of the first day of the calendar year during which the Collection Periods begin and o the number of Automatic Additional Accounts designated during any calendar year shall not exceed 20% of the number of Accounts as of the first day of the calendar year. On or before the first business day of each Collection Period beginning in January, April, July and October of each calendar year, the seller shall have requested and obtained notification from each Rating Agency of any limitations to the right of the seller to designate Eligible Accounts as Automatic Additional Accounts during any period which includes the Collection Period. On or before the date specified in the prospectus supplement, the trustee shall have received confirmation from each Rating Agency that the addition of all Automatic Additional Accounts included as Accounts during the three consecutive Collection Periods ending in the calendar month prior to that date shall not have resulted in any applicable Rating Agency reducing or withdrawing its rating of any outstanding series or class of certificates. On or before the date specified in the prospectus supplement, or on or before the last day of each month in some circumstances, the seller shall have delivered to the trustee, each Rating Agency and any Enhancement provider an opinion of counsel with respect to the Automatic Additional Accounts included as Accounts during the preceding calendar year confirming the validity and perfection of each transfer of that Automatic Additional Accounts. If the trustee has not received the Rating Agency confirmation or opinion of counsel with respect to any Automatic Additional Accounts, the seller must remove the Automatic Additional Accounts from the trust. Each Additional Account, including each Automatic Additional Account, must be an Eligible Account at the time of its addition. However, since Additional Accounts may not have been a part of the initial portfolio of the originator, they may not be of the same credit quality as the initial Accounts. Additional Accounts may have been originated by the originator at a later date using credit criteria different from those which were applied to the initial Accounts or may have been acquired by the originator from another wholesale lender that had different credit criteria. In addition, the seller will be permitted to designate Additional Accounts that contain receivables that have been sold or pledged to third parties. Following, however, the applicable Additional Cut-Off Date, no receivables arising after the Additional Cut-Off Date in any of those accounts shall be sold or pledged to any third parties. The "Required Participation Amount" for any date is an amount equal to the sum of: o the sum of the amounts for each series obtained by multiplying the Required Participation Percentage for the series by the Initial Invested Amount for the series at that time. However, each Excluded Series will be excluded from this calculation until the Invested Amount of the related Paired Series is reduced to zero; and o the Trust Available Subordinated Amount on the immediately preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date following the Determination Date. o The "Required Participation Percentage" for a series will be specified in the related Series Supplement. REMOVAL OF ACCOUNTS The seller shall have the right at any time to require the removal from the trust of Eligible Accounts. To remove any Eligible Account, the seller, or the servicer on its behalf, shall, among other things, o furnish to the trustee, any Enhancement provider and the Rating Agencies a written notice (the "Removal Notice") stating the Determination Date on which removal of one or more Accounts will commence (the "Removal Commencement Date") and the Accounts to be removed from the trust (the "Designated Accounts"), o determine on the Removal Commencement Date the aggregate principal balance of receivables in respect of each the Designated Account (the "Designated Balance"), o from and after the Removal Commencement Date, cease to transfer to the trust all receivables arising in the Designated Accounts, o from and after the Removal Commencement Date, allocate all principal collections in respect of each Designated Account, first to the oldest outstanding principal balance of the Designated Account, until the Determination Date on which the Designated Balance in the Designated Account is reduced to zero (the "Removal Date"), o on each business day from and after the Removal Commencement Date to and until the related Removal Date, allocate o to the trust, to be further allocated under the Pooling and Servicing Agreement, interest collections in respect of each Designated Account with respect to receivables in all Designated Accounts sold to the trust, and o to the seller the remainder of the interest collections in all of those Designated Accounts, o represent and warrant that the removal of any Eligible Account on any Removal Date shall not, in the reasonable belief of the seller, cause an Early Amortization Event or Reinvestment Event to occur with respect to any Series or cause the Pool Balance to be less than the Required Participation Amount, o represent and warrant that no selection procedures believed by the seller to be adverse to the interests of the certificateholders were utilized in selecting the Designated Accounts, o represent and warrant that the removal will not cause the rating of any outstanding series or class of certificates to be reduced or withdrawn, and o on or before the related Removal Date, deliver to the trustee and any Enhancement provider an officers' certificate confirming the items set forth in the sixth, seventh and eighth clauses above and a Tax Opinion with respect to the removal. No Designated Accounts shall be removed if the removal will cause the rating of any outstanding series or class of certificates to be reduced or withdrawn. On any date on which an Account becomes an Ineligible Account, which date will be deemed the Removal Commencement Date for the Account, the seller will start the removal of the Account from the trust by taking each of the actions specified in the first five clauses of the preceding paragraph with respect to the Ineligible Account. Upon satisfaction of the above conditions, on the Removal Date with respect to any the Designated Account, the seller will stop allocating collections of receivables to the Designated Account, which shall be deemed removed from the trust for all purposes (a "Removed Account"). In addition to the removal rights described in the four paragraphs above, the seller shall have the right at any time to remove Accounts from the trust and, in connection with the removal, repurchase the then existing receivables in the Accounts. To remove Accounts and repurchase the then existing receivables in those Accounts, the seller, or the servicer on its behalf, shall, among other things: o furnish to the trust, each Enhancement provider and the Rating Agencies a Removal Notice stating the Designated Accounts which are to be removed, and the then existing receivables in the Designated Accounts (the "Designated Receivables") which are to be repurchased from the trust and the Determination Date on which the removal of the Designated Accounts and the purchase of the Designated Receivables will occur (the "Removal and Repurchase Date"), o deliver to the trustee on the Removal and Repurchase Date a computer file or microfiche or written list containing a true and complete list of the Removed Accounts stating for each Account its account number and the aggregate amount of receivables outstanding in the Account, o represent and warrant that the removal of any Eligible Account and the repurchase of the receivables then existing in the Account on any Removal and Repurchase Date shall not, in the reasonable belief of the seller, cause an Early Amortization Event or Reinvestment Event to occur with respect to any Series or cause the Pool Balance to be less than the Required Participation Amount, o represent and warrant that no selection procedures believed by the seller to be adverse to the interests of the certificateholders were used in selecting the Designated Accounts, o represent and warrant as of the Removal and Repurchase Date that the list of Removed Accounts delivered to the trustee as of the Removal and Repurchase Date, is true and complete in all material respects, o represent and warrant that the removal and repurchase will not cause the rating of any outstanding series or class of certificates to be reduced or withdrawn by the applicable Rating Agency, o deliver to the trustee, each Rating Agency and any Enhancement providers a Tax Opinion, dated the Removal and Repurchase Date, with respect to the removal and repurchase, and o deliver to the trustee and any Enhancement providers an officers' certificate confirming the items set forth in the fourth through seventh clauses above. The seller may not remove Designated Accounts or repurchase Designated Receivables unless each Rating Agency shall have notified the seller, the servicer and the trustee in writing that the removal and repurchase will not cause the Rating Agency's rating of any outstanding series or class of certificates to be reduced or withdrawn. Upon satisfaction of the above conditions, on the Removal and Repurchase Date with respect to any Designated Account and Designated Receivables, the Designated Account shall be deemed removed, and the Designated Receivables ("Repurchased Receivables") shall be deemed repurchased, from the trust for all purposes. On each distribution date, the trustee will apply any amounts on deposit in the Collection Account on the distribution date resulting from payment by the seller of the Repurchased Receivables Purchase Price, first, to fund any unpaid Miscellaneous Payment due on or prior to the distribution date. Second, an amount equal to the product of o the amount of any Repurchased Receivables Purchase Price initially deposited by the seller in the Collection Account in connection with the repurchase, and o the Monthly Payment Rate for the immediately preceding Collection Period shall be treated as principal collections collected in the immediately preceding Collection Period. The "Monthly Payment Rate" for a Collection Period is the percentage obtained by dividing principal collections for the Collection Period by the daily average Pool Balance for the Collection Period. The seller, however, shall have the right to require the reassignment to it of all the trust's right, title and interest in the receivables then existing and created after that time in Accounts ("Automatic Removed Accounts") designated by the seller, together with existing and future collections and proceeds from those receivables, upon satisfaction of the following conditions: o on or before the fifth business day immediately preceding the date upon which the Accounts are to be removed, the seller shall have given the trustee, each Enhancement provider and the Rating Agencies a Removal Notice specifying the date for removal of the Automatic Removed Accounts (the "Automatic Removal Date"); o on or prior to the date that is five business days after the Automatic Removal Date, the seller shall have delivered to the trustee a computer file or microfiche or written list containing a true and complete list of the Automatic Removed Accounts stating for each Account, as of the removal notice date, its account number and the aggregate amount of receivables outstanding in the Account; o the seller shall have represented and warranted as of each Automatic Removal Date that the list of Automatic Removed Accounts delivered to the trustee, as of the Automatic Removal Date, is true and complete in all material respects; o the trustee shall have received confirmation from each Rating Agency that the removal will not cause the Ratings Agency's rating of any outstanding series or class of certificates to be reduced or withdrawn; o the seller shall have delivered to the trustee, each Rating Agency and any Enhancement providers an officers' certificate, dated the Automatic Removal Date, to the effect that the seller reasonably believes the removal will not cause an Early Amortization Event or Reinvestment Event to occur with respect to any series; and o the seller shall have delivered to the trustee, each Rating Agency and any Enhancement providers a Tax Opinion, dated the Automatic Removal Date, with respect to the removal. o Upon satisfaction of the above conditions, on the Automatic Removal Date the trust's interest in the receivables arising in the Automatic Removed Accounts, all monies due and to become due and all amounts received with respect to the receivables and all proceeds of the receivables shall be deemed removed from the trust for all purposes. EXCLUDED SERIES A series of certificates may be designated as an excluded series (an "Excluded Series") with respect to a series of certificates previously issued by the trust as to which the Accumulation Period or Controlled Amortization Period has commenced (a "Paired Series"). This allows a seller, in effect, to replace an amortizing series with a new series without waiting for the amortizing series to be paid in full. Each Excluded Series will be prefunded with an initial deposit to a prefunding account in an amount equal to the initial principal balance of the Excluded Series. The source of funds will primarily be the proceeds of the offering of the Excluded Series. Any prefunding account will be held for the benefit of the Excluded Series and not for the benefit of the Paired Series. As funds are accumulated in the Principal Funding Account for the Paired Series or distributed to holders of certificates of the Paired Series, the trustee will distribute to the seller an equal amount of funds from any prefunding account for the Excluded Series. Until payment in full of the Paired Series, no interest collections, principal collections, Defaulted Amounts or Miscellaneous Payments will be allocated to the related Excluded Series. Also, it is expected that any Excluded Series will be excluded from the calculation of the Required Participation Amount as described under " -- Addition of Accounts". COLLECTION ACCOUNT In general, either the servicer, subject to limitations, will hold the trust's funds or the trustee will keep those funds in accounts that must be Eligible Deposit Accounts. The servicer will establish and will maintain an Eligible Deposit Account for the benefit of the certificateholders in the name of the trustee, on behalf of the trust (the "Collection Account"). "Eligible Deposit Account" means either o a segregated account with an Eligible Institution or o a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States or any one of the states of the United States, or any domestic branch of a foreign bank, having corporate trust powers and acting as trustee for funds deposited in the account, so long as any of the securities of the depository institution has a credit rating from each Rating Agency in one of its generic rating categories which signifies investment grade. "Eligible Institution" means o the corporate trust department of the trustee or o a depository institution organized under the laws of the United States or any one of the states of the United States, or the District of Columbia, or a domestic branch of a foreign bank, which at all times o has either o a long-term unsecured debt rating of A2 or better by Moody's Investors Service, Inc. ("Moody's") and of AAA or better by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies ("Standard & Poor's") or o a certificate of deposit rating of P-1 by Moody's or A-1+ by Standard & Poor's, and o is a member of the FDIC. Funds in the Collection Account generally will be invested in Eligible Investments. "Eligible Investments" are book-entry securities, negotiable instruments or physical securities having original or remaining maturities of 30 days or less, but in no event occurring later than the distribution date next succeeding the trustee's acquisition of the book-entry securitized, negotiable instruments or physical securities, except as otherwise provided in the related Series Supplement. Eligible Investments are limited to: o direct obligations of, and obligations fully guaranteed as to timely payment by, the United States of America; o demand deposits, time deposits or certificates of deposit of any depositary institution or trust company incorporated under the laws of the United States of America or any state of the United States, or any domestic branch of a foreign bank, and subject to supervision and examination by Federal or state banking or depository institution authorities. However, at the time of the trust's investment or contractual commitment to invest in the demand deposits, the deposits or certificates of deposit, the commercial paper or other short-term unsecured debt obligations, other than obligations the rating of which is based on the credit of a person or entity other than the depository institution or trust company of the depositary institution or trust company, must have a credit rating from each of the Rating Agencies in its highest investment category; o commercial paper having, at the time of the trust's investment or contractual commitment to invest in the commercial paper, a rating from each of the Rating Agencies in its highest investment category; o except during a Reinvestment Period with respect to any series, investments in money market funds having a rating from each of the Rating Agencies in its highest investment category or otherwise approved in writing thereby; o bankers' acceptances issued by any depository institution or trust company referred to in the second clause of this sentence; o repurchase obligations, including those of appropriately rated broker-dealers and financial institutions; and o any other investment consisting of a financial asset that by its terms converts to cash within a finite period of time. However, each Rating Agency shall have notified the seller, the servicer and the trustee that the trust's investment in the financial asset will not cause the Rating Agency to reduce or withdraw its then rating of any outstanding class or series. Any earnings, net of losses and investment expenses, on funds in the Collection Account will be credited to the Collection Account. The servicer will have the revocable power to instruct the trustee to make withdrawals and payments from the Collection Account for the purpose of making payments under the Pooling and Servicing Agreement. The servicer may select an appropriate agent as representative of the servicer for the purpose of choosing the investments. EXCESS FUNDING ACCOUNT Except, to the extent provided in the related Series Supplement, during an Early Amortization Period or Reinvestment Period for a series, we will keep the Excess Funded Amount, if any, for that series in an Eligible Account (the "Excess Funding Account") established with the trustee for the series. The "Excess Funded Amount" for a series will initially equal the excess, if any, of the initial principal balance of the certificates of the series over the Initial Invested Amount of the series. The trustee will invest funds on deposit in the Excess Funding Account for a series will be invested by the trustee at the direction of the servicer in Eligible Investments. The investments must mature on or prior to the next distribution date. The servicer may select an agent for the purpose of designating the investments. The trustee will distribute funds on deposit in the Excess Funding Account for a series to the seller or allocate them to one or more other series which are in Controlled Amortization, Early Amortization, Reinvestment or Accumulation Periods to the extent of any increases in the Invested Amount of that series as a result of the addition of receivables to the trust, a reduction in the Seller's Interest, or a reduction in the Initial Invested Amount of any other series. The trustee will deposit additional amounts in the Excess Funding Account for a series on a distribution date to the extent that the sum of the Certificateholders' Interest of the series in principal receivables and the amount on deposit in the Excess Funding Account, if any, for the series prior to that date is less than the outstanding principal balance of the certificates of the series, but only to the extent that funds are available as provided in the related Series Supplement. The allocation of additional receivables to increase the Invested Amount of each series that provides for an Excess Funding Account or similar arrangement involving fluctuating levels of investment in the receivables will be made pro rata on the basis of the amounts in the excess Funding Accounts or similar basis. The deposit of amounts in the Excess Funding Accounts for each of those series will be made pro rata on the basis of their respective Adjusted Invested Amounts. On each distribution date, we will apply all investment income earned on amounts in the Excess Funding Account for any series since the preceding distribution date as described in this prospectus and in the related prospectus supplement. The trustee will distribute funds on deposit in the Excess Funding Account for a series on the earliest of o the commencement of a Reinvestment Period with respect to the series, o the commencement of an Early Amortization Period with respect to the series and o the distribution date or distribution dates specified in or determined in the manner provided in the Series Supplement for the series to the certificateholders of the series or a class of the series or deposit those amounts in the Principal Funding Account for the series or a class of the series, in each case if and to the extent the related Series Supplement so states. Also, except as otherwise provided in the related Series Supplement, we will not deposit funds in the Excess Funding Account for a series during any Early Amortization Period or Reinvestment Period with respect to the series or with respect to any Collection Period following the Collection Period stated in or determined in the manner provided in the Series Supplement for the series. ALLOCATION PERCENTAGES We will allocate collections to each series and then between the seller and the certificateholders of that series on the basis of various percentages. Which percentage we use depends on whether the collections being allocated are interest collections or principal collections or other amounts and whether or not the collections are received in the Revolving Period for a series. Allocations among Series. Under the Pooling and Servicing Agreement, during each Collection Period the servicer will allocate to each outstanding Series its share of interest collections, principal collections, Defaulted Receivables and Miscellaneous Payments based on the applicable Series Allocable Interest Collections, Series Allocable Principal Collections, Series Allocable Defaulted Amount and Series Allocable Miscellaneous Payments. "Series Allocable Interest Collections", "Series Allocable Principal Collections", "Series Allocable Defaulted Amount" and "Series Allocable Miscellaneous Payments" are, with respect to any series of certificates for any Collection Period, the product of the Series Allocation Percentage for the series and the amount of interest collections, principal collections, the Defaulted Amount and Miscellaneous Payments, respectively, with respect to the Collection Period. "Miscellaneous Payments" for any Collection Period are the sum of o Adjustment Payments and Transfer Deposit Amounts received with respect to the Collection Period and o Unallocated Principal Collections on the distribution date available to be treated as Miscellaneous Payments as described below under "Principal Collections for all Series". "Series Allocation Percentage" is, with respect to a series for any Collection Period, the percentage equivalent of a fraction, the numerator of which is the Adjusted Invested Amount of the series as of the last day of the immediately preceding Collection Period and the denominator of which is the Trust Adjusted Invested Amount as of that last day. "Adjusted Invested Amount" is, with respect to a series for any date, an amount equal to the sum of o the Initial Invested Amount of the series, minus unreimbursed Investor Charge-Offs for the series and o the Available Subordinated Amount with respect to the series, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date during the Collection Period in which the date occurs. "Trust Adjusted Invested Amount" is, with respect to any Collection Period, the sum of the Adjusted Invested Amounts for all outstanding series. "Initial Invested Amount" is, with respect to any series and for any date, the amount stated in the related Series Supplement. The Initial Invested Amount for any series may be increased or decreased from time to time as stated in the related Series Supplement, including as a result of deposits to or withdrawals from the Excess Funding Account, if any, for the series. Allocation Between the Certificateholders and the Seller's Interest. The servicer will allocate amounts initially allocated to each series between the Certificateholders' Interest and the Seller's Interest for each Collection Period as stated in the related Series Supplement and described in the related prospectus supplement. If a series consists of more than one class, the amounts allocated to the Certificateholders' Interest of the series will be further allocated between those classes as stated in the related Series Supplement and described in the related prospectus supplement. Principal Collections for all Series. We will allocate principal collections allocated to the Certificateholders' Interest of any series, for any Collection Period with respect to any Accumulation Period, Controlled Amortization Period, Reinvestment Period or Early Amortization Period with respect to the series or a class of the series, first to make required payments of principal to the Principal Funding Account or to the Certificateholders of the series or class, in each case if and to the extent stated in the Series Supplement for the series. The servicer will determine the amount of available certificateholder principal collections for each series and any Collection Period remaining after the required payments, if any ("Excess Principal Collections"). The servicer will allocate Excess Principal Collections to cover any principal distributions to certificateholders of any series which are either scheduled or permitted and which have not been covered out of principal collections and other amounts allocated to the series ("Principal Shortfalls"). Excess Principal Collections will not be used to cover Investor Charge-Offs for any series. If Principal Shortfalls exceed Excess Principal Collections for any Collection Period, Excess Principal Collections will be allocated pro rata among the applicable series based on the relative amounts of Principal Shortfalls, unless otherwise provided in the applicable Series Supplements. To the extent that Excess Principal Collections exceed Principal Shortfalls, the trustee will pay the balance to the seller if the Seller's Participation Amount, determined after giving effect to any principal receivables transferred to the trust on that date, exceeds the Trust Available Subordinated Amount for the immediately preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date immediately following the Determination Date. Any amount not allocated to the seller because the Seller's Participation Amount does not exceed the Trust Available Subordinated Amount will be held unallocated ("Unallocated Principal Collections") until the Seller's Participation Amount exceeds the Trust Available Subordinated Amount, at which time we will allocate the amount to the seller. However, if an Early Amortization Period, Accumulation Period, Controlled Amortization Period or Reinvestment Period commences for any series, the amount will be treated as a Series Allocable Miscellaneous Payment. ALLOCATION OF COLLECTIONS; DEPOSITS IN COLLECTION ACCOUNT On each Determination Date, the servicer will calculate the amounts to be allocated in respect of collections on receivables received with respect to the related Collection Period to the certificateholders of each outstanding series or class or the seller in accordance with the Series Supplements. The servicer, no later than two business days after the processing date, will deposit all collections received with respect to the receivables, excluding, with exceptions, portions allocable to the seller, in each Collection Period into the Collection Account. However, the servicer need not make daily deposits if o the initial servicer remains the servicer under the Pooling and Servicing Agreement, o no Service Default has occurred and is continuing and o the servicer has and maintains a short-term debt rating of at least A-1 by Standard & Poor's and P-1 by Moody's, and o the servicer arranges for and maintains a letter of credit or other form of Enhancement in respect of the servicer's obligation to make deposits of collections on the receivables in the Collection Account that is acceptable in form and substance to each Rating Agency or o the servicer otherwise obtains the Rating Agency confirmations described below in this paragraph. In that case, subject to any limitations referred to below, the servicer may use for its own benefit all collections until the related distribution date. At that time the servicer will make the deposits in an amount equal to the net amount of the deposits and withdrawals which would have been made if deposits were made on a daily basis. However, before ceasing daily deposits as described above, the seller must deliver to the trustee written confirmation from the applicable Rating Agencies that the failure by the servicer to make daily deposits will not cause the Rating Agencies to reduce or withdraw rating of any outstanding series or class of certificates. In addition, during any Collection Period the servicer will be required to deposit interest collections and principal collections into the Collection Account only to the extent of o the distributions the trust must make to certificateholders, o the amounts the trust must deposit into any account maintained for the benefit of certificateholders of any series and other parties and o the amounts the trust must pay to any Enhancement provider on the distribution date relating to the Collection Period. Also, if, at any time prior to that distribution date, the amount of collections deposited in the Collection Account exceeds the amount the servicer is required to deposit, the servicer will be permitted to withdraw the excess from the Collection Account. On any date on which the servicer deposits collections in the Collection Account, the servicer will distribute directly to the seller the amount of the interest collections allocable to each series specified in the related Series Supplement and described in the related prospectus supplement. However, the trustee will make that distribution only if the Seller's Participation Amount, determined after giving effect to any Principal Receivables transferred to the trust on the date, exceeds the Trust Available Subordinated Amount for the immediately preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits required to be made on the distribution date immediately following the Determination Date. Also, during the Revolving Period for any series, subject to limitations, the servicer will distribute directly to the seller on each date of deposit the amount of principal collections allocable to each series stated in the related Series Supplement and described in the related prospectus supplement if the Seller's Participation Amount, determined after giving effect to any principal receivables transferred to the trust on that date, exceeds the Trust Available Subordinated Amount for the immediately preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits the servicer is to make on the distribution date immediately following the Determination Date. LIMITED SUBORDINATION OF SELLER'S INTEREST; ENHANCEMENTS SUBORDINATION OF SELLER'S INTEREST. With respect to any series of certificates, we will subordinate the Seller's Interest to the rights of certificateholders of the series to the extent described in the related prospectus supplement. This will provide credit enhancement to the series. The amount of the subordination with respect to any series is the "Available Subordinated Amount" for the series. We will decrease and increase the Available Subordinated Amount for any series from time to time if and to the extent described in the related prospectus supplement. We will describe in the prospectus supplement for each series the manner in which the servicer may draw upon collections attributable to the Available Subordinated Amount for the series to make payments to or for the benefit of the holders of certificates of the series. If we so state in the related Series Supplements, the Available Subordinated Amount for a series may be available to more than one series of certificates. ENHANCEMENTS. In addition to the subordination described above, for any series, we may provide enhancements ("Enhancements") with respect to one or more classes of the series, including one or more of the following: o letter of credit, o surety bond, o cash collateral account, o spread account, o guaranteed rate agreement, o swap, including without limitation currency swaps, or other interest protection agreement, o repurchase obligation, o cash deposit or o another form of credit enhancement described in the related prospectus supplement. We may also provide enhancements to a series or class or classes of a series by subordination provisions which require that distributions of principal and/or interest be made with respect to the certificates of the series or the class or classes before distributions are made to one or more series or one or more classes of the series. If we so provide in the related prospectus supplement, any form of Enhancement may be available to more than one class or series. The trust may use a currency swap to issue certificates payable in a currency other than United States dollars. If we provide Enhancement with respect to a series, we will include in the related prospectus supplement a description of o the amount payable under the Enhancement, o any conditions to payment we do not otherwise describe in this prospectus, o the conditions, if any, under which we may reduce the amount payable under the Enhancement and under which we may terminate or replace the Enhancement and o any material provisions of any agreement relating to the Enhancement. Additionally, we may set forth in the related prospectus supplement the information with respect to the applicable Enhancement provider, including o a brief description of its principal business activities, o its principal place of business, place of incorporation and the jurisdiction under which it is chartered or licensed to do business, o if applicable, the identity of regulatory agencies which exercise primary jurisdiction over the conduct of its business and o its total assets, and its stockholders' equity or policyholders' surplus, if applicable, as of a date we state in the prospectus supplement. Limitations on Subordination and Enhancements. We intend the presence of an Available Subordinated Amount or Enhancement with respect to a series or class to enhance the likelihood of receipt by certificateholders of the series or class of the full amount of principal and interest and to decrease the likelihood that the certificateholders will experience losses. However, unless we otherwise state in the prospectus supplement for a series, neither subordination of the Seller's Interest nor the Enhancement, if any, will provide protection against all risks of loss or will guarantee repayment of the entire principal balance of the certificates and interest on the certificates. If losses exceed the amount covered by the subordination or Enhancement or are not covered by the subordination or Enhancement, certificateholders will bear their allocable share of deficiencies. In addition, if we provide specific Enhancement for the benefit of more than one class or series, certificateholders of that class or series will be subject to the risk that the Enhancement will be exhausted by the claims of certificateholders of other classes or series. DISTRIBUTIONS The servicer will make payments to certificateholders of a series or a class from the Collection Account and any accounts established for the benefit of the certificateholders as we describe in the related prospectus supplement. DEFAULTED RECEIVABLES AND RECOVERIES "Defaulted Receivables" on any Determination Date are o all receivables which the servicer charged off as uncollectible in respect of the immediately preceding Collection Period and o all receivables which were Eligible Receivables when transferred to the trust, which arose in an Account which became an Ineligible Account after the date of transfer of the receivables to the trust and which were not Eligible Receivables for any six consecutive Determination Dates after the date of transfer of the receivables to the trust. The "Defaulted Amount" for any Collection Period will be an amount, which shall not be less than zero, equal to o the principal amount of receivables that became Defaulted Receivables during the preceding Collection Period minus o the sum of o the full amount of any Defaulted Receivables subject to reassignment to the seller or purchase by the servicer for the Collection Period unless events of bankruptcy, insolvency or receivership have occurred with respect to either of the seller or the servicer, in which event the Defaulted Amount will not be reduced for those Defaulted Receivables, and o the excess, if any, for the immediately preceding Determination Date of the amount determined under this second clause for the Determination Date over the amount determined under the first clause for the Determination Date. The servicer will change off receivables as uncollectible in accordance with the servicer's customary and usual policies and procedures for servicing its own comparable revolving dealer wholesale loan accounts. The servicer will allocate a portion of the Series Allocable Defaulted Amount for each series and Collection Period between the certificateholders of the series and the seller as we state in the related Series Supplement. The portion of the Defaulted Amount allocated to the certificateholders of a series will be the "Investor Default Amount" for the series. The servicer will further allocate the Investor Default Amount for any series that consists of more than one class between those classes as we state in the related Series Supplement. If the servicer adjusts the amount of any receivable because of a rebate, billing error or other non-cash items to a dealer, or because the receivable was created in respect of inventory which was refused or returned by a dealer, we will reduce the principal amount of each of the Seller's Interest and the Pool Balance by the amount of the adjustment or charge-off. Further, to the extent that the reduction in the Seller's Interest would reduce the Seller's Participation Amount below the Trust Available Subordinated Amount for the immediately preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date immediately following that Determination Date, the seller will deposit a cash amount equal to the deficiency into the Collection Account in immediately available funds (an "Adjustment Payment") on the day on which the servicer makes the adjustment. OPTIONAL REPURCHASE If we so state in the prospectus supplement relating to a series of certificates, on any distribution date occurring after the Invested Amount of the certificates of the series is reduced to the percentage of the initial outstanding principal amount of the certificates of the series we state in the prospectus supplement, the servicer will have the option, subject to conditions, to repurchase the Certificateholders' Interest of the series. The purchase price will be equal to the Invested Amount of the series on the Determination Date preceding the distribution date on which the servicer will make the repurchase plus accrued and unpaid interest on the unpaid principal amount of the certificates of the series at the applicable certificate rate, together with interest on overdue interest, to the extent lawful, plus any other amounts we state in the related Series Supplement. The servicer will deposit the purchase price in the Collection Account in immediately available funds on the distribution date on which the servicer exercises that option. Following any purchase, the certificateholders of the series will have no further rights with respect to the Certificateholders' Interest of the series, other than the right to receive the final distribution on the certificates of that series. If the servicer fails for any reason to deposit the purchase price, the servicer will continue to make payments to the certificateholders of the series as we describe in the related prospectus supplement. Reinvestment Events and Early Amortization Events Beginning on the first distribution date following the Collection Period in which a Reinvestment Event has occurred with respect to any series, o the servicer will no longer pay to the holder of the Seller's Interest principal collections allocable to the Certificateholders' Interest of the series or allocate those collections to any other series but instead will deposit those collections to the Principal Funding Account for the series monthly on each distribution date, and o the Controlled Deposit Amount or Controlled Amortization Amount, if any, will no longer apply to distributions of principal in respect of the certificates of the series, in each case except as we describe below under "Reinvestment Events and Early Amortization Events" or as we state in the related Series Supplement. A "Reinvestment Event" is, for any series, any of the events we so describe in the related Series Supplement and describe in the related prospectus supplement. If any event we so define occurs, we will deem a Reinvestment Event to have occurred with respect to the series without any notice or other action on the part of any other party immediately upon the occurrence of the event. The Reinvestment Period with respect to the series will begin as of the close of business on the business day immediately preceding the day on which we deem the Reinvestment Event to have occurred. Monthly deposits of principal to the Principal Funding Account for the series will, except as we describe below under "Reinvestment Events and Early Amortization Events" or state in the related Series Supplement, begin on the first distribution date following the Collection Period in which a Reinvestment Period has begun with respect to the series. Beginning on the first distribution date following the Collection Period in which an Early Amortization Event has occurred with respect to any series, o the servicer will no longer pay to the holder of the Seller's Interest Principal Collections allocable to the Certificateholders' Interest of the series, allocate those collections to any other series or retain those collections in the Principal Funding Account for the series but instead will be distributed to certificateholders of the series monthly on each distribution date and o the Controlled Deposit Amount or Controlled Amortization Amount, if any, will no longer apply to distributions of principal on the certificates of the series, in each case except as we describe below under "Reinvestment Events and Early Amortization Events" or state in the related Series Supplement. An "Early Amortization Event" is, for any series, any of the events we so define in the related Series Supplement and describe in the related prospectus supplement, as well as each of the following events: o the occurrence of events of bankruptcy, insolvency or receivership relating to the trust or the seller; and o the trust or Ace Securities Corp. becomes an investment company within the meaning of the Investment Company Act of 1940. If any event we describe above or in the prospectus supplement for a series occurs, we will deem an Early Amortization Event to have occurred with respect to the series without any notice or other action on the part of any other party immediately upon the occurrence of the event. The Early Amortization Period with respect to the series will begin as of the close of business on the business day immediately preceding the day on which we deem the Early Amortization Event to have occurred. Monthly distributions of principal to the certificateholders of the series will begin on the first distribution date following the Collection Period in which an Early Amortization Period has begun with respect to the series, except as we describe below under "Reinvestment Events and Early Amortization Events". The failure of the trust to pay the outstanding principal amount of the certificates of any series or class by their Expected Payment Date will have the same consequences as the occurrence of an Early Amortization Event with respect to the series or class. We shall deem all references in this prospectus to Early Amortization Events to include that type of failure. Even if a Reinvestment Period or an Early Amortization Period begins with respect to a series, that period may terminate and the Revolving Period with respect to the series and any class may recommence when the event giving rise to the beginning of the Reinvestment Period or Early Amortization Period no longer exists, whether as a result of the distribution of principal to certificateholders of the series or otherwise, in each case if and to the extent we state in the Series Supplement for the series. In addition, if an insolvency event occurs with respect to the originator or the seller, or the originator or the seller violates its covenant not to create any lien on any receivable, in each case as provided in the Pooling and Servicing Agreement, on the day of the insolvency event or violation, as applicable, the seller will, subject to the actions of the certificateholders, immediately cease to transfer receivables to the trust and promptly give notice to the trustee of the insolvency event or violation, as applicable. Under the terms of the Pooling and Servicing Agreement, within 15 days the trustee will publish a notice of the insolvency event or violation stating that the trustee intends to sell, liquidate or otherwise dispose of the receivables in a commercially reasonable manner and on commercially reasonable terms, unless within a stated period of time holders of certificates of each outstanding series representing more than 50% of the aggregate unpaid principal amount of the certificates of each outstanding series, or, with respect to any series with two or more classes, the certificates of each class, and each person holding a Supplemental Certificate, instruct the trustee not to sell, dispose of or otherwise liquidate the receivables and to continue transferring receivables as before the insolvency event or violation, as applicable. If the portion of the proceeds allocated to the Certificateholders' Interest and the proceeds of any collections on the receivables in the Collection Account allocable to the Certificateholders' Interest are not enough to pay the aggregate unpaid principal balance of the certificates in full plus accrued and unpaid interest on the certificates, certificateholders will incur a loss. TERMINATION; FULLY REINVESTED DATE TERMINATION. The trust will terminate on the earliest to occur of o the day following the distribution date on which the aggregate Invested Amounts for all series is zero, o the date specified in the prospectus supplement, and o the date on which the servicer distributes to the certificateholders proceeds from the sale, disposal or other liquidation of the receivables following an insolvency event with respect to the originator or the seller or any violation by the originator or the seller of its covenant not to create any lien on any receivable, in each case as stated in the Pooling and Servicing Agreement and as we describe above under "Reinvestment Events and Early Amortization Events". When the trust is terminated, the trust will transfer to the entity specified in the prospectus supplement all right, title and interest in the receivables and other funds of the trust, other than amounts in the trust's accounts for the final distribution of principal and interest to certificateholders. In any event, the last payment of principal and interest on any series of certificates will be due and payable no later than the date we state in the related prospectus supplement (the "Series Termination Date"). FULLY REINVESTED DATE. The "Fully Reinvested Date" is the date on which the amount on deposit in the Principal Funding Account with respect to a series equals the outstanding principal amount of the certificates of the series. After the Fully Reinvested Date occurs with respect to any series, certificateholders of that series will no longer have any interest in the receivables. Further, all the representations and covenants of the seller and the servicer relating to the receivables, as well as other provisions of the Pooling and Servicing Agreement and all remedies for breaches of those representations, covenants and other provisions, will no longer accrue to the benefit of the certificateholders of that series, in each case unless the Revolving Period with respect to the series recommences as we state in the related Series Supplement. Those representations, covenants and other provisions include o the conditions to the exchange of the Seller's Certificate we describe under "The Seller's Certificate", o the conditions to the issuance of a new series we describe under "New Issuances", o the representations we describe under "Representations and Warranties" to the extent they relate to the receivables and the Collateral Security, o the limitations on additions and removals of Accounts we describe under "Addition of Accounts" and "Removal of Accounts", respectively, and o the obligations of the servicer with respect to servicing the receivables we describe under "Collection and Other Servicing Procedures" and "Servicer Covenants". Also, if the Fully Reinvested Date occurs with respect to any series, the servicer will allocate to that series no interest collections, principal collections, Defaulted Receivables or Miscellaneous Payments, unless the series' Revolving Period begins again as we describe above. However, when the servicer has made the final distribution with respect to each series of certificates or the series' Fully Reinvested Date has occurred, the trustee will convey and transfer to the entity specified in the related prospectus supplement, all right, title and interest in the receivables. INDEMNIFICATION The Pooling and Servicing Agreement will state that the servicer will indemnify the trust and the trustee from and against any loss, liability, expense, damage or injury suffered or sustained arising out of any acts, omissions or alleged acts or omissions arising out of activities of the trust, the trustee or the servicer under the Pooling and Servicing Agreement. The servicer will not so indemnify the trust or the trustee, however, if the acts, omissions or alleged acts or omissions constitute fraud, gross negligence, breach of fiduciary duty or willful misconduct by the trustee. Also, the servicer will not indemnify the trust, the trustee or the certificateholders for any act taken by the trustee at the request of the certificateholders or for any tax which the trust or the certificateholders is required to pay. The Pooling and Servicing Agreement will state that, except as we describe above and with other exceptions, neither the seller, the servicer nor any of their directors, officers, employees or agents will be under any liability to the trust, the trustee, the certificateholders or any other person for taking any action, or for refraining from taking any action, under the Pooling and Servicing Agreement. However, neither the seller, the servicer nor any of their directors, officers, employees or agents will be protected against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence of any of those persons in the performance of their duties or by reason of reckless disregard of their obligations and duties under the Pooling and Servicing Agreement. Also, the Pooling and Servicing Agreement states that the servicer is not under any obligation to appear in, prosecute or defend any legal action which is not incidental to its servicing responsibilities under the Pooling and Servicing Agreement. The servicer may, in its sole discretion, undertake any legal action which it may deem necessary or desirable for the benefit of the certificateholders with respect to the Pooling and Servicing Agreement and the rights and duties of the parties to that agreement and the interest of the certificateholders under that agreement. COLLECTION AND OTHER SERVICING PROCEDURES Under the Pooling and Servicing Agreement, the servicer is responsible for servicing, collecting, enforcing and administering the receivables. The servicer must do so in accordance with customary and usual procedures for servicing its own revolving credit line dealer wholesale loans, except where the failure to so act would not materially and adversely affect the rights of the trust. The originator covenants that it may only change the terms relating to the Accounts if o in the servicer's reasonable judgment, the charge will not cause any Early Amortization Event or Reinvestment Event to occur with respect to any series and o the servicer applies the change to the comparable segment of the portfolio of revolving credit line dealer wholesale loan accounts with similar characteristics owned or serviced by the servicer and not only to the Accounts. When acting as a servicer, the servicer will, among other things o collect and record payments, o communicate with dealers, o investigate payment delinquencies, o evaluate the increase of credit limits, and o maintain internal records with respect to each Account. Managerial and custodial services performed by the servicer on behalf of the trust include o providing assistance in any inspections of the documents and records relating to the Accounts and receivables by the trustee under the Pooling and Servicing Agreement, o maintaining the agreements, documents and files relating to the Accounts and receivables as custodian for the trust and o providing related data processing and reporting services for certificateholders and on behalf of the trustee. SERVICER COVENANTS In the Pooling and Servicing Agreement the servicer covenants that: o it will duly satisfy all obligations on its part to be fulfilled under or in connection with the receivables and the Accounts, will maintain in effect all qualifications required in order to service the receivables and the Accounts and will comply in all material respects with all requirements of law in connection with servicing the receivables and the Accounts, the failure to comply with which would have a materially adverse effect on the certificateholders of any outstanding series; o it will not permit any rescission or cancellation of a receivable except as ordered by a court of competent jurisdiction or other government authority; o it will do nothing to impair the rights of the certificateholders in the receivables or the Accounts; and o it will not reschedule, revise or defer payments due on any receivable except in accordance with its guidelines for servicing revolving credit line dealer wholesale loans. Under the terms of the Pooling and Servicing Agreement, if the seller or the servicer discovers, or receives written notice, that any covenant of the servicer set forth above has not been complied with in all material respects and the noncompliance has not been cured within 30 days, or a longer period as the trustee may agree to, and has a materially adverse effect on the interests of all certificateholders in any receivable or Account, the servicer will purchase the receivable or all receivables in the Account, as applicable. Some servicers will purchase the receivable or receivables on the Determination Date following the expiration of the 30-day cure period and the servicer will be obligated to deposit into the Collection Account an amount equal to the amount of the receivable or receivables plus accrued and unpaid interest on that amount. We shall deem the amount of the deposit a Transfer Deposit Amount. The purchase by the servicer constitutes the sole remedy available to the certificateholders if the covenant or warranty of the servicer is not satisfied and the trust's interest in any purchased receivables shall be automatically assigned to the servicer. SERVICING COMPENSATION AND PAYMENT OF EXPENSES Unless we state otherwise in the related Series Supplement or prospectus supplement, the servicer's compensation with respect to the certificates of a series for its servicing activities and reimbursement for its expenses will be a monthly servicing fee (the "Servicing Fee"). The Servicing Fee is an amount payable in arrears on each distribution date on or before the Series Termination Date of the series and the Fully Reinvested Date, if any, of the series, and after that date during the Revolving Period with respect to the series, if the Revolving Period begins again, equal to one-twelfth of the product of o the "Servicing Fee Rate" set forth in the series Supplement, o the Pool Balance as of the last day of the second preceding Collection Period and o the Series Allocation Percentage for the series for the immediately preceding Collection Period. Unless we state otherwise in a related Series Supplement or prospectus supplement, the share of the Servicing Fee allocable to certificateholders of any series with respect to any distribution date (the "Monthly Servicing Fee") shall be equal to one-twelfth of the product of o the Servicing Fee Rate and o the Invested Amount of the series as of the last day of the second preceding Collection Period. The seller shall pay the remainder of the Servicing Fee with respect to any series. The servicer shall pay the Monthly Servicing Fee with respect to any series solely to the extent amounts are available for distribution of the Monthly Servicing Fee under the terms of the Pooling and Servicing Agreement. The servicer may waive its right to receive the Servicing Fee with respect to any series on any distribution date, so long as it believes that enough interest collections will be available on a future distribution date to pay the Monthly Servicing Fee relating to the waived Servicing Fee. If that happens, we shall deem the Servicing Fee and the Monthly Servicing Fee for the series and the distribution date to be zero. The servicer will pay from its servicing compensation expenses it incurs when servicing the Accounts and the receivables including, without limitation, payment of fees and disbursements of the trustee and independent accountants and all other fees and expenses which are not expressly stated in the Pooling and Servicing Agreement to be payable by the trust or the certificateholders other than federal, state and local income and franchise taxes, if any, of the trust or the certificateholders. MATTERS REGARDING THE SERVICER The servicer may not resign from its obligations and duties under the Pooling and Servicing Agreement, except upon determination that those duties are no longer permissible under applicable law. No resignation will become effective until the trustee or a successor to the servicer has assumed the servicer's responsibilities and obligations under the Pooling and Servicing Agreement. The servicer may delegate any of its duties as servicer to any of its affiliates, but any delegation will not relieve the servicer of its obligation under the Pooling and Servicing Agreement. Any person into which, in accordance with the Pooling and Servicing Agreement, the servicer may be merged or consolidated or any person resulting from any merger or consolidation to which the servicer is a party, or any person succeeding to the business of the servicer, will be the successor to the servicer under the Pooling and Servicing Agreement. SERVICE DEFAULT In the event of any Service Default, the trustee, by written notice to the servicer, may terminate all of the rights and obligations of the servicer, as servicer, under the Pooling and Servicing Agreement and in and to the receivables and the proceeds of the receivables and appoint a new servicer (a "Service Transfer"). The rights and interest of the seller under the Pooling and Servicing Agreement in the Seller's Interest will not be affected by any Service Transfer. The trustee shall as promptly as possible appoint a successor servicer and if no successor servicer has been appointed by the trustee and has accepted the appointment by the time the servicer ceases to act as servicer, all rights, authority, power and obligations of the servicer under the Pooling and Servicing Agreement shall pass to and be vested in the trustee. Before any Service Transfer, the trustee will review any bids obtained from potential servicers meeting eligibility requirements set forth in the Pooling and Servicing Agreement to serve as successor servicer for servicing compensation not in excess of the Servicing Fee, plus excess amounts payable to the seller. A "Service Default" refers to any of the following events: o failure by the servicer to make any payment, transfer or deposit, or to give instructions to the trustee to make any payment, transfer or deposit, on the date the Pooling and Servicing Agreement requires the servicer to do so, which is not cured within a five business day grace period; o failure by the servicer duly to observe or perform any other covenants or agreements of the servicer in the Pooling and Servicing Agreement which failure has a materially adverse effect on the certificateholders of any outstanding series and which continues unremedied for a period of 30 days after the date the trustee shall have given written notice of the failure to the servicer, o the servicer delegates its duties under the Pooling and Servicing Agreement, except as specifically permitted under that agreement; o any representation, warranty or certification made by the servicer in the Pooling and Servicing Agreement or in any certificate delivered under the Pooling and Servicing Agreement proves to have been incorrect in any material respect when made, has a materially adverse effect on the rights of the certificateholders of any outstanding Series, and which materially adverse effect continues for a period of 60 days after the trustee shall have given written notice of that fact to the servicer; or o events of bankruptcy, insolvency or receivership occur with respect to the servicer. However, a delay in or failure of performance referred to under the first clause for a period of ten business days or referred to under the second, third or fourth clauses for a period of 60 business days, shall not constitute a Service Default if the delay or failure was caused by an act of God or other similar occurrence. If any of those events occurs, the servicer shall not be relieved from using its best efforts to perform its obligations in a timely manner in accordance with the terms of the Pooling and Servicing Agreement and the servicer shall provide the trustee, any Enhancement provider, the seller and the certificateholders prompt notice of the failure or delay by it, together with a description of its efforts to so perform its obligations. The servicer shall immediately notify the trustee in writing of any Service Default. REPORTS On each distribution date, including each distribution date that corresponds to an interest payment date or any Special Payment Date, the trustee will forward to each certificateholder of record of any series a statement (the "Distribution Date Statement") prepared by the servicer. The Distribution Date Statement will set forth information with respect to the trust and the certificates of the series, as we state in the related Series Supplement and describe in the related prospectus supplement. With respect to each interest payment date or Special Payment Date, the Distribution Date Statement with respect to any Series will include the following information with respect to the certificates of the series: o the total amount distributed on the certificates of the series; o the amount of the distribution allocable to principal on the certificates of the series; and o the amount of the distribution allocable to interest on the certificates of the series. On or before the date specified in the prospectus supplement, the trustee will furnish, or cause to be furnished, to each person who at any time during the preceding calendar year was a certificateholder of record a statement containing the information required to be provided by an issuer of indebtedness under the Code for the preceding calendar year or the applicable portion of that year during which the person was a certificateholder, together with other customary information which the Code requires issuers of indebtedness to provide and other customary information which certificateholders need to prepare their tax returns. See "Tax Matters". EVIDENCE AS TO COMPLIANCE The Pooling and Servicing Agreement states that on or before the date specified in the related prospectus supplement of each calendar year, the servicer will cause a firm of nationally recognized independent public accountants, who will also render other services to the servicer or the seller, to furnish a report regarding matters in connection with the servicing of the originator's portfolio of wholesale receivables. The Pooling and Servicing Agreement states that on or before the date specified in the prospectus supplement, the servicer will deliver to the trustee a statement, signed by an officer of the servicer. The statement will state that the servicer has fully performed, or caused to be fully performed, its obligations in all material respects under the Pooling and Servicing Agreement throughout the preceding year or, if there has been a default in the performance of any obligation, will state the nature and status of the default. You may obtain copies of all statements, certificates and reports furnished to the trustee by delivering a written request to the trustee. AMENDMENTS The seller, the servicer and the trustee may amend the Pooling and Servicing Agreement and any Series Supplement, without certificateholder consent, so long as any amendment shall not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of the certificateholders. The seller, the servicer and the trustee may amend the Pooling and Servicing Agreement and any Series Supplement with the consent of the holders of certificates evidencing not less than 66-2/3% of the aggregate unpaid principal amount of the certificates of all adversely affected series for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Pooling and Servicing Agreement or of modifying in any manner the rights of certificateholders. No amendment, however, may o reduce in any manner the amount of or delay the timing of distributions the servicer is required to make to certificateholders or deposits of amounts to be so distributed without the consent of each affected certificateholder, o change the definition or the manner of calculating any Certificateholders' Interest without the consent of each affected certificateholder, o reduce the amount available under any Enhancement without the consent of each affected certificateholder, o adversely affect the rating of any series or class by each Rating Agency without the consent of the holders of certificates of the series or class evidencing not less than 66-2/3% of the aggregate unpaid principal amount of the certificates of the series or class or o reduce that percentage of the unpaid principal amount of certificates the holders of which are required to consent to any amendment without the consent of each certificateholder. Promptly following the execution of any amendment to the Pooling and Servicing Agreement, other than an amendment described in the preceding paragraph, the trustee will notify each certificateholder in writing of the substance of the amendment. However, we will deem each holder of a certificate offered by this prospectus, by its acceptance of the certificate, to have consented to an amendment to the Pooling and Servicing Agreement that o provides that funds in the Collection Account may be invested in Eligible Investments, o provides that the seller need not make any deposit to the Collection Account in respect of the Repurchased Receivables Price of any Designated Receivables repurchased from the trust, o otherwise changes the procedures for removing receivables from the trust as described under "Removal of Accounts", o provides that, subject to the limitations we describe in prospectus, the originator need not deposit collections with respect to Collection Period in the Collection Account until the related date or o permits the designation of Automatic Additional Accounts as we describe in this prospectus. The Pooling and Servicing Agreement may not be amended in any manner which materially adversely affects the interests of any Enhancement provider without its prior consent. LIST OF CERTIFICATEHOLDERS Upon written request of any three or more certificateholders of record, the trustee will give those certificateholders access during business hours to the current list of certificateholders of a series or all outstanding series, as applicable, for purposes of communicating with other certificateholders of the series or all outstanding series, as applicable, with respect to their rights under the Pooling and Servicing Agreement. See "Book-Entry Registration" and "Definitive Certificates". The Pooling and Servicing Agreement will not provide for any annual or other meetings of certificateholders. THE TRUSTEE The trustee so specified in the prospectus supplement will act as trustee under the Pooling and Servicing Agreement. The seller, the servicer and their respective affiliates may from time to time enter into normal banking and trustee relationships with the trustee and its affiliates. The trustee may hold certificates in its own name with the same rights it would have if it were not the trustee. In addition, for purposes of meeting the legal requirements of local jurisdictions, the trustee shall have the power to appoint a co-trustee or separate trustees of all or a part of the trust. In the event of those appointments, all rights, powers, duties and obligations shall be conferred or imposed upon the trustee and the separate trustee or co-trustee jointly, or, in any jurisdiction in which the trustee shall be incompetent or unqualified to perform some acts, singly upon the separate trustee or co-trustee, who shall exercise and perform those rights, powers, duties and obligations solely at the direction of the trustee. The trustee may resign at any time, in which event the seller must appoint a successor trustee. The servicer may also remove the trustee if the trustee ceases to be eligible to continue as the trustee under the Pooling and Servicing Agreement or if the trustee becomes insolvent. If that happens, the servicer may appoint a successor trustee. Any resignation or removal of the trustee and appointment of a successor trustee does not become effective until the acceptance of the appointment by the successor trustee. DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT The parties to the Receivables Purchase are the originator (together with its predecessors as appropriate, the "RPA seller"), and the seller. In the following summary we describe terms of the Receivables Purchase Agreement. The summary, however, is qualified in its entirety by reference to the Receivables Purchase Agreement. SALE OR TRANSFER OF RECEIVABLES Under the Receivables Purchase Agreement, the RPA seller will sell or transfer to the seller all of its right, title and interest in and to all of the receivables and the Collateral Security as of the Initial Cut-Off Date and all of the receivables created after that date. In addition, the RPA seller will designate Additional Accounts, and convey to the seller the Principal Receivables in the Additional Accounts, together with the related Collateral Security, as of the applicable Additional Cut-Off Date and all receivables, and related Collateral Security, created after that date. As we describe in this prospectus, under the Pooling and Servicing Agreement, the seller will transfer to the trust all of its right, title and interest in and to the Receivables Purchase Agreement. In connection with the sale or transfer of the receivables to the seller, the RPA seller must indicate in its computer files that the receivables have been sold or transferred to the seller, and that the receivables have been transferred by the seller to the trust. In addition, the RPA seller must provide to the seller a computer file or microfiche or written list containing a true and complete list of all the receivables. The records and agreements relating to the Accounts and receivables have not and will not be segregated by the RPA seller from other documents and agreements relating to other accounts and receivables and are not and will not be stamped or marked to reflect the sale or transfer of the receivables to the seller. The computer records, however, of the RPA seller will be marked to evidence the sale or transfer. The RPA seller will file UCC financing statements with respect to the receivables meeting the requirements of the applicable state law. See "Risk Factors -- Legal Aspects" and "Legal Aspects of the Receivables -- Transfer of Receivables". REPRESENTATIONS AND WARRANTIES The RPA seller will make representations and warranties to the seller that, among other things, as of the Initial Closing Date and each Series Issuance Date, it was duly formed and in good standing and that it has the authority to consummate the transactions contemplated by the Receivables Purchase Agreement. The RPA seller will also make representations and warranties to the seller relating to the receivables to the effect, among other things, that o as of the Initial Closing Date and each Series Issuance Date, each of the Accounts is an Eligible Account and o as of the date any new receivable is created, the receivable is an Eligible Receivable. If any representation and warranty set forth in this paragraph is breached and the breach results in an Ineligible Receivable and the requirement that the seller accept retransfer of the Ineligible Receivable under the Pooling and Servicing Agreement, the RPA seller shall repurchase the Ineligible Receivable from the seller on the date of the retransfer. The purchase price for the Ineligible Receivable shall be the face amount of the Ineligible Receivable, of which at least the amount of any cash deposit required to be made by the seller under the Pooling and Servicing Agreement in respect of the retransfer of the Ineligible Receivable shall be paid in cash. The RPA seller will also make representations and warranties to the seller to the effect, among other things, that as of the Initial Closing Date and each Series Issuance Date o the Receivables Purchase Agreement is a legal, valid and binding obligation of the RPA seller and o the Receivables Purchase Agreement is a valid sale or transfer to the seller of all right, title and interest of the RPA seller in and to the receivables, whether then existing or created after that time in the Accounts, the Collateral Security and the proceeds of those items which is effective as to each receivable upon the creation of that receivable. If any of the representations and warranties described in this paragraph are breached and the breach results in the obligation of the seller under the Pooling and Servicing Agreement to accept retransfer of the receivables, the RPA seller will repurchase the receivables retransferred to the seller for an amount of cash equal to the amount of cash the seller is required to deposit under the Pooling and Servicing Agreement in connection with the retransfer. The RPA seller will agree to indemnify the seller and to hold the seller harmless from and against any and all losses, damages and expenses, including reasonable attorneys' fees, suffered or incurred by the seller if the foregoing representations and warranties are materially false. COVENANTS In the Receivables Purchase Agreement, the RPA seller will covenant that it will perform its obligations under the agreements relating to the receivables and the Accounts in conformity with its current policies and procedures relating to the receivables and the Accounts. The RPA seller will covenant further that, except for the sale and conveyances under the Receivables Purchase Agreement and the interests created under the Pooling and Servicing Agreement, the RPA seller will not sell, pledge, assign or transfer any interest in the receivables to any other person. The RPA seller will also covenant to defend and indemnify the seller for any loss, liability or expense incurred by the seller in connection with a breach by the RPA seller of any of its representations, warranties or covenants contained in the Receivables Purchase Agreement. In addition, the RPA seller will expressly acknowledge and consented to the seller's assignment of its rights relating to the receivables under the Receivables Purchase Agreement to the trustee. TERMINATION The Receivables Purchase Agreement will terminate immediately after the trust terminates. Also, if under provisions of federal law the RPA seller becomes party to any bankruptcy or similar proceeding, other than as a claimant, and if the proceeding is not voluntary and is not dismissed within 60 days of its institution, the RPA seller will immediately cease to sell or transfer receivables to the seller and will promptly give notice of that event to the seller and to the trustee. LEGAL ASPECTS OF THE RECEIVABLES TRANSFER OF RECEIVABLES On the Initial Closing Date, the RPA seller sold and assigned or will sell and assign the receivables to the seller, and the seller immediately transferred or will transfer the receivables to the trust. The seller will represent and warranty on the Series Issuance Date with respect to each Series that o the transfer to the trust constituted a valid transfer to the trust of all right, title and interest of the seller in and to the receivables and o under the applicable UCC there exists a valid, subsisting and enforceable first-priority perfected ownership interest in the receivables, in existence at the time of the formation of the trust or at the date of addition of any Additional Accounts, in favor of the trust and a valid, subsisting and enforceable first-priority perfected ownership interest in the receivables created after that time in favor of the trust on and after their creation. However, the transfer of receivables by the seller to the trust could be deemed to create a security interest under the UCC. For a discussion of the trust's rights arising from these representations and warranties not being satisfied, see "Description of the Certificates -- Representations and Warranties". Each of the RPA seller and the seller will represent that the receivables are "chattel paper" for purposes of the appliable UCC. If the receivables are deemed to be chattel paper and the transfer of the receivables by either the RPA seller to the seller or by the seller to the trust is deemed either to be a sale or to create a security interest, the applicable UCC applies. In that case, the transferee must either take possession of the chattel paper or file an appropriate financing statement or statements in order to perfect its interest in the chattel paper. Both the seller and the trust have filed financing statements covering the receivables under the applicable UCC to perfect their respective interests in the receivables and continuation statements will be filed as required to continue the perfection of those interests. The receivables have not and will not be stamped to indicate the interest of the seller or the trustee. There are circumstances under the UCC and applicable federal law in which prior or subsequent transferees of receivables could have an interest in the receivables with priority over the trust's interest. A purchaser of the receivables who gives new value and takes possession of the instruments which evidence the receivables, i.e., the chattel paper, in the ordinary course of the purchaser's business may, under some circumstances, have priority over the interest of the trust in the receivables. A tax or other government lien on property of the RPA seller or the seller arising prior to the time a receivable is conveyed to the trust may also have priority over the interest of the trust in the receivable. Under the Receivables Purchase Agreement, the RPA seller will warrant to the seller, and under the Pooling and Servicing Agreement, the seller will warrant to the trust, that the receivables have been transferred free and clear of the lien of any third party. Each of the RPA seller and the seller will also covenant that it will not sell, pledge, assign, transfer or grant any lien on any receivable or, except as we describe under "Description of the Certificates -- The Seller's Certificate", the Seller's Certificate, or any interest in the Seller's Certificate, other than to the trust. Also, while the servicer so specified in the related prospectus supplement is the servicer, cash collections on the receivables may, in some cases, be commingled with the funds of the originator prior to each distribution date and, in the event of the bankruptcy of the originator, the trust may not have a perfected interest in those collections. MATTERS RELATING TO BANKRUPTCY The RPA seller will warrant to the seller in the Receivables Purchase Agreement that the sale of the receivables by it to the seller is a valid sale of the receivables to the seller. Also, the RPA seller and the seller will agree to treat the transactions described in this prospectus as a sale of the receivables to the seller, and the RPA seller has or will take all actions that are required under the applicable state law to perfect the seller's ownership interest in the receivables. However, the RPA seller could become a debtor in a bankruptcy case and a creditor or trustee-in-bankruptcy of the debtor or the debtor itself could take the position that the sale of receivables from the debtor to the seller should be recharacterized as a pledge of the receivables to secure a borrowing from the debtor. In that event, payments of collections of receivables to the seller could be delayed, or, if the court should rule in favor of any trustee, debtor in possession or creditor, reduced in amount. See "Special Considerations -- Legal Aspects". In a 1993 case decided by the U.S. Court of Appeals for the Tenth Circuit, Octagon Gas System, Inc. v. Rimmer, the court determined that "accounts", as defined under the Uniform Commercial Code, would be included in the bankruptcy estate of a transferor regardless of whether the transfer is treated as a sale or a secured loan. Although the receivables are likely to be viewed as "chattel paper", as defined under the Uniform Commercial Code, rather than as accounts, the Octagon holding may be applied to chattel paper. The circumstances under which the Octagon ruling would apply are not fully known and the extent to which the Octagon decision will be followed in other courts or outside of the Tenth Circuit is not certain. If the holding in the Octagon case were applied in a bankruptcy of the originator, however, even if the transfer of receivables to the seller and the trust were treated as a sale, the receivables would be part of originator's bankruptcy estate and would be subject to claims of creditors. In that event, payments to the seller and certificateholders could be delayed or reduced. In addition, the RPA seller could become a debtor in a bankruptcy case and a creditor or trustee-in-bankruptcy of the debtor or the debtor itself could request a court to order that the RPA seller should be substantively consolidated with the seller. In that event, payments on the certificates could be delayed, or, if a bankruptcy court should rule in favor of any creditor, trustee-in-bankruptcy or the debtor, reduced in amount. The seller will warrant to the trust that the transfer of the receivables to the trust is a sale of the receivables to the trust. The seller has or will take all actions that are required under applicable state law to perfect the trust's ownership interest in the receivables and the seller has warranted to the trust that the trust will at all times have a first priority perfected ownership interest in the receivables and, with exceptions, in proceeds of the receivables. Nevertheless, a tax or government lien on property of the originator or the seller arising prior to the time a receivable is conveyed to the trust may have priority over the interest of the trust in the receivable. ACE's limited liability agreement provides that it shall not file a voluntary application for relief under Title 11 of the United States Code (the "Bankruptcy Code") without the affirmative vote of the two independent directors of its member. Under the Pooling and Servicing Agreement, the trustee, all certificateholders and any Enhancement provider will covenant that they will not at any time institute against the seller any bankruptcy, reorganization or other proceedings under any federal or state bankruptcy or similar law. In addition, other steps will be taken to avoid the seller's becoming a debtor in a bankruptcy case. However, the seller could become a debtor in a bankruptcy case, and a bankruptcy trustee for the seller or the seller as debtor in possession or a creditor of the seller could take the position that the transfer of the receivables from the seller to the trust should be recharacterized as a pledge of the receivables. In that event, payments on the certificates could be delayed or, should the court rule in favor of any trustee, debtor in possession or creditor, reduced in amount. The seller does not intend to file, and the originator will agree that it will not cause the seller to file, a voluntary application for relief under the Bankruptcy Code or any similar applicable state law with respect to the seller so long as the seller is solvent and does not foresee becoming insolvent. If the RPA seller or the seller were to become a debtor in a bankruptcy case, a Reinvestment Event or an Early Amortization Event would occur with respect to the certificates of each series. In that event, under the Receivables Purchase Agreement, new receivables would no longer be transferred to the seller and, under the Pooling and Servicing Agreement, only collections on receivables already sold to the seller and transferred to the trust would be available to be applied to pay interest accruing on the certificates and to pay the principal amount of the certificates. If that happens, the servicer must allocate all collections on Principal Receivables to the oldest principal balance first. If the bankruptcy court were to alter the allocation method, the rate of payment on the certificates might be adversely affected. In addition, distributions in respect of principal on each certificate would not be subject to any applicable Controlled Distribution Amount. The occurrence of events of bankruptcy, insolvency or receivership with respect to the servicer will result in a Service Default. The Service Default, in turn, may result in a Reinvestment Event or an Early Amortization Event with respect to a series. If no other Service Default other than the commencement of the bankruptcy or similar event exists, a trustee-in-bankruptcy of the servicer may have the power to prevent either the trustee or the certificateholders from appointing a successor servicer. Payments made in respect of repurchases of receivables by the originator or the seller under the Pooling and Servicing Agreement may be recoverable by the originator or the seller, as debtor in possession, or by a creditor or a trustee-in-bankruptcy of the originator or the seller as a preferential transfer from the originator or the seller if the payments are made within one year prior to the filing of a bankruptcy case in respect of the originator. Neither the originator nor the seller intends to file, and the originator will agree that it will not cause an affiliate of the originator or the seller to file, a voluntary application for relief under the Bankruptcy Code or any similar applicable state law with respect to the originator or an affiliate thereof so long as the originator, an affiliate thereof and the seller are solvent and do not foresee becoming insolvent. TAX MATTERS FEDERAL INCOME TAX CONSEQUENCES The following is a general discussion of the anticipated material United States federal income tax consequences of the purchase, ownership and disposition of the certificates. The summary does not purport to deal with federal income tax consequences applicable to all categories of holders, some of which may be subject to special rules. For example, it does not discuss the tax treatment of beneficial owners of certificates that are insurance companies, regulated investment companies or dealers in securities. Moreover, there are no cases or Internal Revenue Service ("IRS") rulings on similar transactions involving interests issued by a trust with terms similar to those of the certificates. As a result, the IRS might disagree with all or part of the discussion below. Prospective investors are urged to consult their own tax advisors in determining the federal, state, local, foreign and any other tax consequences to them of the purchase, ownership and disposition of the certificates. The following summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations promulgated under the Code and judicial or ruling authority, all of which are subject to change, which change may be retroactive. Each trust will be provided with an opinion of tax counsel specified in the related prospectus supplement ("Federal Tax Counsel") regarding some related federal income tax matters discussed below. An opinion of Federal Tax Counsel, however, is not binding on the IRS or the courts. No ruling on any of the issues discussed below will be sought from the IRS. The opinion of Federal Tax Counsel specifically addresses only those issues specifically identified below as being covered by that opinion; however, the opinion also states that the additional discussion set forth below accurately sets forth the advice of Federal Tax Counsel with respect to material federal income tax issues. CERTIFICATES TREATED AS INDEBTEDNESS Upon the issuance of certificates that are intended to be treated as indebtedness for federal income tax purposes, Federal Tax Counsel will opine that based upon its analysis of the factors discussed below and certain assumptions and qualifications, the certificates will be properly classified as indebtedness for federal income tax purposes. However, opinions of counsel are not binding on the IRS and there can be no assurance that the IRS could not successfully challenge this conclusion. Such certificates that are intended to be treated as indebtedness are herein referred to as "Debt Certificates" and holders of such certificates are herein referred to as "Debt Certificateholders." ACE will express in the Pooling and Servicing Agreement its intent that for federal, state and local income and franchise tax purposes, the Debt Certificates will be indebtedness secured by the assets of the trust. ACE agrees and each Debt Certificateholder, by acquiring an interest in a Debt Certificate, agrees or will be deemed to agree to treat the Debt Certificates as indebtedness for federal, state and local income or franchise tax purposes. However, because different criteria are used to determine the non-tax accounting characterization of the transactions contemplated by the Pooling and Servicing Agreement, ACE expects to treat such transactions for financial accounting purposes as a sale of ownership interests in the assets of the trust and not as debt obligations. In general, whether for federal income tax purposes a transaction constitutes a sale of property or a loan the repayment of which is secured by the property, is a question of fact, the resolution of which is based upon the economic substance of the transaction. The form of a transaction, while a relevant factor, is not conclusive evidence of its economic substance. In appropriate circumstances, the courts have allowed taxpayers, as well as the IRS, to treat a transaction in accordance with its economic substance, as determined under federal income tax laws, notwithstanding that the participants characterize the transaction differently for non-tax purposes. In some instances, however, courts have held that a taxpayer is bound by a particular form it has chosen for a transaction, even if the substance of the transaction does not accord with its form. It is expected that Federal Tax Counsel will advise that the rationale of those cases will not apply to the transactions evidenced by a series of Debt Certificates. While the IRS and the courts have set forth several factors to be taken into account in determining whether the substance of a transaction is a sale of property or a secured indebtedness for federal income tax purposes, the primary factor in making this determination is whether the transferee has assumed the risk of loss or other economic burdens relating to the property and has obtained the economic benefits of ownership thereof. Federal Tax Counsel will analyze and rely on several factors in reaching its opinion that the weight of the benefits and burdens of ownership of the assets of the trust has not been transferred to the Debt Certificateholders and that the Debt Certificates are properly characterized as indebtedness for federal income tax purposes. Contrary characterizations that could be asserted by the IRS are described below under "--Possible Classification of the Transaction as a Partnership or as an Association Taxable as a Corporation." TAXATION OF INCOME OF DEBT CERTIFICATEHOLDERS As set forth above, it is expected that Federal Tax Counsel will advise the seller that the Debt Certificates will constitute indebtedness for federal income tax purposes, and this discussion assumes that the Debt Certificates will be characterized as debt for federal income tax purposes. INTEREST INCOME ON THE DEBT CERTIFICATES GENERAL. Expect as discussed below, interest on a Debt Certificate generally is includable in a Debt Certificateholder's income as ordinary interest income when actually or constructively received, if the Debt Certificateholder uses the cash method of accounting for federal income tax purposes, or when accrued, if the Debt Certificateholder uses an accrual method of accounting for federal income tax purposes. ORIGINAL ISSUE DISCOUNT. Debt Certificates of certain series may be issued with "original issue discount" within the meaning of Section 1273(a) of the Code. Holders of debt issued with original issue discount generally must include original issue discount in gross income for federal income tax purposes as it accrues, in advance of receipt of the cash attributable to such income, under a method that takes account of the compounding of interest. The Code requires that information with respect to the original issue discount accruing on any debt obligation be reported periodically to the IRS and to certain categories of holders. Each trust will report original issue discount, if any, to the Debt Certificateholders based on the Treasury regulations relating to original issue discount (the "OID Regulations"). The OID Regulations concerning contingent payment debt instruments do not apply to prepayable debt instruments, such as the Debt Certificates. The OID Regulations provide that, in the case of prepayable debt instruments, (i) the amount and rate of accrual of original issue discount will be calculated based on a reasonable assumed prepayment rate (the "Prepayment Assumption"), and (ii) adjustments will be made in the amount and rate of accrual of such discount to reflect differences between the actual prepayment rate and the Prepayment Assumption. The method for determining the appropriate assumed prepayment rate will eventually be set forth in Treasury regulations, but those regulations have not yet been issued. The applicable legislative history indicates, however, that such regulations will provide that the assumed prepayment rate for securities such as the Debt Certificates will be the rate used in pricing the initial offering of those securities. If the Debt Certificates of a series are issued with original issue discount, the Prospectus Supplement for that series of Debt Certificates will specify the Prepayment Assumption. However, no representation is made that the Debt Certificates of that series will, in fact, prepay at a rate based on the Prepayment Assumption or at any other rate. In general, a debt obligation will be considered to be issued with original issue discount if its stated redemption price at maturity exceeds its issue price. Except as discussed below under "--Payment Lag Debt Certificates; Initial Period Considerations," and "--Qualified Stated Interest," and in the case of certain Variable Rate Debt Certificates (as defined below) and accrual Debt Certificates, the stated redemption price at maturity of a Debt Certificate is its principal amount. The issue price of a debt obligation is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of the class of obligations is sold. Notwithstanding the general definition of original issue discount, such discount will be considered to be zero for any debt obligation on which such discount is less than 0.25% of its stated redemption price at maturity multiplied by its weighted average life. The weighted average life of a Debt Certificate apparently is computed for purposes of this DE MINIMIS rule as the sum, for all distributions included in the stated redemption price at maturity of the Debt Certificate, of the amounts determined by multiplying (i) the number of complete years (rounding down for partial years) from the applicable closing date to the date on which each such distribution is expected to be made, determined under the Prepayment Assumption, by (ii) a fraction, the numerator of which is the amount of such distribution and the denominator of which is the Debt Certificate's stated redemption price at maturity. The OID Regulations provide that holders will include any DE MINIMIS original issue discount ratably as payments of stated principal are made on the debt obligation. The Debt Certificateholder of a Debt Certificate issued with original issue discount must include in gross income the sum of the "daily portions" of such original issue discount for each day during its taxable year on which it held such Debt Certificate. In the case of an original Debt Certificateholder, the daily portions of original issue discount are determined first by calculating the portion of the original issue discount that accrued during each period (an "accrual period") that begins on the day following a payment date (or in the case of the first such period, begins on the applicable closing date) and ends on the next succeeding payment date. The original issue discount accruing during each accrual period is then allocated ratably to each day during such period to determine the daily portion of original issue discount for that day. The portion of the original issue discount that accrues in any accrual period will equal the excess, if any, of (i) the sum of (A) the present value, as of the end of the accrual period, of all of the distributions to be made on the Debt Certificate, if any, in future periods and (B) the distributions made on the Debt Certificate during the accrual period that are included in such Debt Certificate's stated redemption price at maturity, over (ii) the adjusted issue price of such Debt Certificate at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence will be calculated (i) assuming that the Debt Certificates will be prepaid in future periods at a rate computed in accordance with the Prepayment Assumption and (ii) using a discount rate equal to the original yield to maturity of the Debt Certificates. For these purposes, the original yield to maturity of the Debt Certificates will be calculated based on their issue price and assuming that the Debt Certificates will be prepaid in accordance with the Prepayment Assumption. The adjusted issue price of a Debt Certificate at the beginning of any accrual period will equal the issue price of such Debt Certificate, increased by the portion of the original issue discount that has accrued during prior accrual periods, and reduced by the amount of any distributions made on such Debt Certificate in prior accrual periods that were included in such Debt Certificate's stated redemption price at maturity. The daily portions of original issue discount may increase or decrease depending on the extent to which the actual rate of prepayments diverges from the Prepayment Assumption. If original issue discount accruing during any accrual period computed as described above is negative, a Debt Certificateholder may only be entitled to offset such amount against positive original issue discount accruing on such Debt Certificate in future accrual periods. Such a Debt Certificateholder may be entitled to deduct a loss to the extent that its remaining basis would exceed the maximum amount of future payments to which such Debt Certificateholder is entitled. However, Treasury regulations do not address this issue. A subsequent Debt Certificateholder that purchases a Debt Certificate issued with original issue discount at a cost that is less than its remaining stated redemption price at maturity will also generally be required to include in gross income, for each day on which it holds such Debt Certificate, the daily portions of original issue discount with respect to the Debt Certificate, calculated as described above. However, if (i) the excess of the remaining stated redemption price at maturity over such cost is less than (ii) the aggregate amount of such daily portions for all days after the date of purchase until final retirement of such Debt Certificate, then such daily portions will be reduced proportionately in determining the income of such Debt Certificateholder. QUALIFIED STATED INTEREST. Interest payable on a Debt Certificate which qualifies as "qualified stated interest" for purposes of the OID Regulations will not be includable in the stated redemption price at maturity of the Debt Certificate. Conversely, if the interest on a Debt Certificate does not constitute "qualified stated interest," such interest will be includable in the stated redemption price at maturity of the Debt Certificate and the Debt Certificate, consequently, will have original issue discount. Interest payments will not qualify as qualified stated interest unless the interest payments are "unconditionally payable." The OID Regulations state that interest is unconditionally payable if reasonable legal remedies exist to compel timely payment, or the debt instrument otherwise provides terms and conditions that make the likelihood of late payment (other than a late payment that occurs within a reasonable grace period) or nonpayment of interest a remote contingency, as defined in the OID Regulations. Any terms or conditions that do not reflect arm's length dealing or that the Debt Certificateholder does not intend to enforce are not considered. PREMIUM. A purchaser of a Debt Certificate that purchases such Debt Certificate at a cost greater than its remaining stated redemption price at maturity will be considered to have purchased such Debt Certificate at a premium, and may, under Section 171 of the Code, elect to amortize such premium under a constant yield method over the life of the Debt Certificate. The Prepayment Assumption is probably taken into account in determining the life of the Debt Certificate for this purpose. Except as provided in regulations, amortizable premium will be treated as an offset to interest income on the Debt Certificate. PAYMENT LAG DEBT CERTIFICATES; INITIAL PERIOD CONSIDERATIONS. Certain Debt Certificates may provide for distributions of interest based on a period that is the same length as the interval between payment dates but ends prior to each payment date. Any interest that accrues prior to the applicable closing date may be treated under the OID Regulations either (i) as part of the issue price and the stated redemption price at maturity of the Debt Certificates or (ii) as not included in the issue price or the stated redemption price. The OID Regulations provide a special application of the DE MINIMIS rule for debt instruments with long first accrual periods where the interest payable for the first period is at a rate which is effectively less than that which applies in all other periods. In such cases, for the sole purpose of determining whether original issue discount is DE MINIMIS, the OID Regulations provide that the stated redemption price is equal to the instrument's issue price plus the greater of the amount of foregone interest or the excess (if any) of the instrument's stated principal amount over its issue price. VARIABLE RATE DEBT CERTIFICATES. Under the OID Regulations, Debt Certificates paying interest at a variable rate (each, a "Variable Rate Debt Certificate") are subject to special rules. A Variable Rate Debt Certificate will qualify as a "variable rate debt instrument" if (i) its issue price does not exceed the total noncontingent principal payments due under the Variable Rate Debt Certificate by more than a specified DE MINIMIS amount; (ii) it provides for stated interest, paid or compounded at least annually, at a current value of (a) one or more qualified floating rates, (b) a single fixed rate and one or more qualified floating rates, (c) a single objective rate or (d) a single fixed rate and a single objective rate that is a qualified inverse floating rate; and (iii) it does not provide for any principal payments that are contingent, as defined in the OID Regulations, except as provided in (i), above. Because the OID Regulations relating to contingent payment debt instruments do not apply to prepayable debt instruments, such as the Debt Certificates, principal payments on the Debt Certificates should not be considered contingent for this purpose. A "qualified floating rate" is any variable rate where variations in the value of such rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which the Variable Rate Debt Certificate is denominated. A multiple of a qualified floating rate will generally not itself constitute a qualified floating rate for purposes of the OID Regulations. However, a variable rate equal to (i) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35 or (ii) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate will constitute a qualified floating rate for purposes of the OID Regulations. In addition, under the OID Regulations, two or more qualified floating rates that can reasonably be expected to have approximately the same values throughout the term of the Variable Rate Debt Certificate will be treated as a single qualified floating rate (a "Presumed Single Qualified Floating Rate"). Two or more qualified floating rates with values within 25 basis points of each other as determined on the Variable Rate Debt Certificate's issue date will be conclusively presumed to be a Presumed Single Qualified Floating Rate. Notwithstanding the foregoing, a variable rate that would otherwise constitute a qualified floating rate, but which is subject to one or more restrictions such as a cap or floor, will not be a qualified floating rate for purposes of the OID Regulations unless the restriction is fixed throughout the term of the Variable Rate Debt Certificate or the restriction is not reasonably expected as of the issue date to significantly affect the yield of the Variable Rate Debt Certificate. An "objective rate" is a rate that is not itself a qualified floating rate but which is determined using a single fixed formula and which is based upon objective financial or economic information. The OID Regulations also provide that other variable rates may be treated as objective rates if so designated by the IRS in the future. Despite the foregoing, a variable rate of interest on a Variable Rate Debt Certificate will not constitute an objective rate if it is reasonably expected that the average value of such rate during the first half of the Variable Rate Debt Certificate's term will be either significantly less than or significantly greater than the average value of the rate during the final half of the Variable Rate Debt Certificate's term. Further, an objective rate does not include a rate that is based on information that is within the control of the issuer (or a party related to the issuer) or that is unique to the circumstances of the issuer (or a party related to the issuer). An objective rate will qualify as a "qualified inverse floating rate" if such rate is equal to a fixed rate minus a qualified floating rate and variations in the rate can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate. The OID Regulations also provide that if a Variable Rate Debt Certificate provides for stated interest at a fixed rate for an initial period of less than one year followed by a variable rate that is either a qualified floating rate or an objective rate and if the variable rate on the Variable Rate Debt Certificate's issue date is intended to approximate the fixed rate, then the fixed rate and the variable rate together will constitute either a single qualified floating rate or objective rate, as the case may be (a "Presumed Single Variable Rate"). If the value of the variable rate and the initial fixed rate are within 25 basis points of each other as determined on the Variable Rate Debt Certificate's issue date, the variable rate will be conclusively presumed to approximate the fixed rate. For Variable Rate Debt Certificates that qualify as "variable rate debt instruments" under the OID Regulations and provide for interest at either a single qualified floating rate, a single objective rate, a Presumed Single Qualified Floating Rate or a Presumed Single Variable Rate throughout the term (a "Single Variable Rate Debt Certificate"), original issue discount is computed as described above in "--Interest Income on the Debt Certificates--Original Issue Discount" based on the following: (i) stated interest on the Single Variable Rate Debt Certificate which is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually will constitute qualified stated interest; (ii) by assuming that the variable rate on the Single Variable Rate Debt Certificate is a fixed rate equal to: (a) in the case of a Single Variable Rate Debt Certificate with a qualified floating rate or a qualified inverse floating rate, the value, as of the issue date, of the qualified floating rate or the qualified inverse floating rate or (b) in the case of a Single Variable Rate Debt Certificate with an objective rate (other than a qualified inverse floating rate), a fixed rate which reflects the reasonably expected yield for such Single Variable Rate Debt Certificate; and (iii) the qualified stated interest allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than) the interest assumed to be paid under the assumed fixed rate described in (ii), above. In general, any Variable Rate Debt Certificate other than a Single Variable Rate Debt Certificate (a "Multiple Variable Rate Debt Certificate") that qualifies as a "variable rate debt instrument" will be converted into an "equivalent" fixed rate debt instrument for purposes of determining the amount and accrual of original issue discount and qualified stated interest on the Multiple Variable Rate Debt Certificate. The OID Regulations generally require that such a Multiple Variable Rate Debt Certificate be converted into an "equivalent" fixed rate debt instrument by substituting any qualified floating rate or qualified inverse floating rate provided for under the terms of the Multiple Variable Rate Debt Certificate with a fixed rate equal to the value of the qualified floating rate or qualified inverse floating rate, as the case may be, as of the Multiple Variable Rate Debt Certificate's issue date. Any objective rate (other than a qualified inverse floating rate) provided for under the terms of the Multiple Variable Rate Debt Certificate is converted into a fixed rate that reflects the yield that is reasonably expected for the Multiple Variable Rate Debt Certificate. In the case of a Multiple Variable Rate Debt Certificate that qualifies as a "variable rate debt instrument" and provides for stated interest at a fixed rate in addition to either one or more qualified floating rates or a qualified inverse floating rate, the fixed rate is initially converted into a qualified floating rate (or a qualified inverse floating rate, if the Multiple Variable Rate Debt Certificate provides for a qualified inverse floating rate). Under such circumstances, the qualified floating rate or qualified inverse floating rate that replaces the fixed rate must be such that the fair market value of the Multiple Variable Rate Debt Certificate as of the Multiple Variable Rate Debt Certificate's issue date is approximately the same as the fair market value of an otherwise identical debt instrument that provides for either the qualified floating rate or qualified inverse floating rate rather than the fixed rate. Subsequent to converting the fixed rate into either a qualified floating rate or a qualified inverse floating rate, the Multiple Variable Rate Debt Certificate is then converted into an "equivalent" fixed rate debt instrument in the manner described above. Once the Multiple Variable Rate Debt Certificate is converted into an "equivalent" fixed rate debt instrument pursuant to the foregoing rules, the amounts of original issue discount and qualified stated interest, if any, are determined for the "equivalent" fixed rate debt instrument by applying the original issue discount rules to the "equivalent" fixed rate debt instrument in the manner described above in "--Interest Income on the Debt Certificates--Original Issue Discount." A holder of the Multiple Variable Rate Debt Certificate will account for such original issue discount and qualified stated interest as if the holder held the "equivalent" fixed rate debt instrument. In each accrual period, appropriate adjustments will be made to the amount of qualified stated interest or original issue discount assumed to have been accrued or paid with respect to the "equivalent" fixed rate debt instrument in the event that such amounts differ from the actual amount of interest accrued or paid on the Multiple Variable Rate Debt Certificate during the accrual period. If a Variable Rate Debt Certificate does not qualify as a "variable rate debt instrument" under the OID Regulations, then the Variable Rate Debt Certificate would be treated as a contingent payment debt obligation. The manner in which a Variable Rate Debt Certificate would be taxed if such debt instrument were treated as a contingent payment debt obligation is not governed by the OID Regulations relating to contingent payment debt obligations which do not apply to prepayable debt instruments, such as the Debt Certificates, and Treasury regulations do not otherwise address this point. MARKET DISCOUNT. A Debt Certificateholder that acquires a Debt Certificate at a market discount (that is, a discount that exceeds any unaccrued original issue discount) will recognize gain upon receipt of a principal distribution, regardless of whether the distribution is scheduled or is a prepayment. In particular, the Debt Certificateholder will be required to allocate that principal distribution first to the portion of the market discount on such Debt Certificate that has accrued but has not previously been includable in income, and will recognize ordinary income to that extent. In general terms, unless Treasury regulations when issued provide otherwise, market discount on a Debt Certificate may be treated, at the election of the Debt Certificateholder, as accruing either (i) under a constant yield method, taking into account the Prepayment Assumption, or (ii) in proportion to accruals of original issue discount (or, if there is no original issue discount, in proportion to stated interest on the Debt Certificate). In addition, a Debt Certificateholder may be required to defer deductions for a portion of the Debt Certificateholder's interest expense on any debt incurred or continued to purchase or carry a Debt Certificate purchased with market discount. The deferred portion of any interest deduction would not exceed the portion of the market discount on the Debt Certificate that accrues during the taxable year in which such interest would otherwise be deductible and, in general, would be deductible when such market discount is included in income upon receipt of a principal distribution on, or upon the sale of, the Debt Certificate. The Code requires that information necessary to compute accruals of market discount be reported periodically to the IRS and to certain categories of Debt Certificateholders. Notwithstanding the above rules, market discount on a Debt Certificate will be considered to be zero if such discount is less than 0.25% of the remaining stated redemption price at maturity of such Debt Certificate multiplied by its weighted average remaining life. Weighted average remaining life presumably is calculated in a manner similar to weighted average life (described above under "--Interest Income on the Debt Certificates--Original Issue Discount"), taking into account distributions (including prepayments) prior to the date of acquisition of such Debt Certificate by the subsequent purchaser. If market discount on a Debt Certificate is treated as zero under this rule, the actual amount of such discount must be allocated to the remaining principal distributions on such Debt Certificate in proportion to the amounts of such principal distributions, and when each such distribution is made, gain equal to the discount, if any, allocated to the distribution will be recognized. ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD RULES. The OID Regulations provide that the holder of a debt instrument issued after April 4, 1994 may elect to include in gross income all interest that accrues on such debt instrument using the constant yield method. For purposes of this election, interest includes stated interest, original issue discount, and market discount, as adjusted to account for any premium. Debt Certificateholders should consult their own tax advisors regarding the availability or advisability of such an election. SALES OF DEBT CERTIFICATES If a Debt Certificate is sold, the seller will recognize gain or loss equal to the difference between the amount realized on the sale and its adjusted basis in the Debt Certificate. A holder's adjusted basis in a Debt Certificate generally equals the cost of the Debt Certificate to the holder, increased by income reported by the holder with respect to the Debt Certificate and reduced (but not below zero) by distributions on the Debt Certificate (other than qualified stated interest) received by the holder and by amortized premium. While any such gain or loss generally will be capital gain or loss provided the Debt Certificate is held as a capital asset, gain recognized on the sale of a Debt Certificate by a seller who purchased the Debt Certificate at a market discount would be taxable as ordinary income in an amount not exceeding the portion of such discount that accrued during the period the Debt Certificate was held by such seller, reduced by any market discount includable in income under the rules described above under "--Interest Income on the Debt Certificates--Market Discount." Further, the Debt Certificates will be "evidences of indebtedness" within the meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from a sale of a Debt Certificate by a bank or other financial institution to which such section applies would be ordinary income or loss. SHORT-TERM DEBT CERTIFICATES In the case of a Debt Certificate with a maturity of one year or less from its issue date (a "Short-Term Debt Certificate"), no interest is treated as qualified stated interest, and therefore all interest is included in original issue discount. Debt Certificateholders that report income for federal income tax purposes on an accrual method and some other Debt Certificateholders, including banks and certain dealers in securities, are required to include original issue discount in income on Short-Term Debt Certificates on a straight-line basis, unless an election is made to accrue the original issue discount according to a constant yield method based on daily compounding. Any other Debt Certificateholder of a Short-Term Debt Certificate is not required to accrue original issue discount for federal income tax purposes, unless it elects to do so. In the case of a Debt Certificateholder that is not required, and does not elect, to include original issue discount in income currently, any gain realized on the sale, exchange or retirement of a Short-Term Debt Certificate is ordinary income to the extent of the original issue discount accrued on a straight-line basis, or, if elected, according to a constant yield method based on daily compounding, through the date of sale, exchange or retirement. In addition, Debt Certificateholders that are not required, and do not elect, to include original issue discount in income currently are required to defer deductions for any interest paid on indebtedness incurred or continued to purchase or carry a Short-Term Debt Certificate in an amount not exceeding the deferred interest income with respect to the Short-Term Debt Certificate, which includes both the accrued original issue discount and accrued interest that are payable but that have not been included in gross income, until the deferred interest income is realized. A Debt Certificateholder may elect to apply the foregoing rules, except for the rule characterizing gain on sale, exchange or retirement as ordinary, with respect to "acquisition discount" rather than original issue discount. Acquisition discount is the excess of the stated redemption price at maturity of the Short-Term Debt Certificate over the Debt Certificateholder's basis in the Short-Term Debt Certificate. This election applies to all obligations acquired by the taxpayer on or after the first day of the first taxable year to which the election applies, unless revoked with the consent of the IRS. A Debt Certificateholder's tax basis in a Short-Term Debt Certificate is increased by the amount included in the Debt Certificateholder's income with respect to the Debt Certificate. BACKUP WITHHOLDING ON DEBT CERTIFICATES Distributions made on the Debt Certificates and proceeds from the sale of Debt Certificates to or through certain brokers may be subject to a "backup" withholding tax of 31 percent of "reportable payments" (including interest accruals, original issue discount, and, under certain circumstances, distributions in reduction of principal amount) if the holder of the Debt Certificates fails to comply with certain identification procedures, unless the Debt Certificateholder is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld from distributions on the Debt Certificates would be refunded by the IRS or allowable as a credit against the Debt Certificateholder's federal income tax. TAX CHARACTERIZATION OF THE TRUST. Consistent with the treatment of the Debt Certificates as indebtedness, the trust will be treated as a security device to hold assets securing the repayment of the Debt Certificates. In connection with the issuance of Debt Certificates of any series, Federal Tax Counsel will render an opinion that, based on the assumptions and qualifications set forth therein, under then current law, the applicable trust will not be characterized for federal income tax purposes as an association (or publicly traded partnership) taxable as a corporation. POSSIBLE CLASSIFICATION OF THE TRANSACTION AS A PARTNERSHIP OR AS AN ASSOCIATION TAXABLE AS A CORPORATION. The opinion of Federal Tax Counsel with respect to Debt Certificates will not be binding on the courts or the IRS. It is possible that the IRS could assert that, for federal income tax purposes, the transactions contemplated constitute a sale of the trust's assets (or an interest therein) to the Debt Certificateholders and that the proper classification of the legal relationship between ACE, the originators, and some or all of the Debt Certificateholders resulting from the transactions is that of a partnership (including a publicly traded partnership), a publicly traded partnership taxable as a corporation, or an association taxable as a corporation. Neither ACE nor the trustee intends to comply with the federal income tax reporting requirements that would apply if any Classes of Debt Certificates were treated as interests in a partnership or corporation. If a transaction were treated as creating a partnership between the seller and/or the originators and the Debt Certificateholders, the partnership itself would not be subject to federal income tax (unless it were characterized as a publicly traded partnership taxable as a corporation); rather, the partners of such partnership, including the Debt Certificateholders, would be taxed individually on their respective distributive shares of the partnership's income, gain, loss, deductions and credits. The amount and timing of items of income and deductions of a Debt Certificate could differ if the Debt Certificates were held to constitute partnership interests, rather than indebtedness. Moreover, unless the partnership were treated as engaged in a trade or business, an individual's share of expenses of the partnership would be miscellaneous itemized deductions that, in the aggregate, are allowed as deductions only to the extent they exceed two percent of the individual's adjusted gross income, and would be subject to reduction under Section 68 of the Code if the individual's adjusted gross income exceeded certain limits. As a result, the individual might be taxed on a greater amount of income than the stated rate on the Debt Certificates. Finally, all or a portion of any taxable income allocated to a Debt Certificateholder that is a pension, profit-sharing or employee benefit plan or other tax-exempt entity (including an individual retirement account) may, under certain circumstances, constitute "unrelated business taxable income" which generally would be taxable to the holder under the Code. If it were determined that a transaction created an entity classified as an association or as a publicly traded partnership taxable as a corporation, the trust would be subject to federal income tax at corporate income tax rates on the income it derives from the assets it holds, which would reduce the amounts available for distribution to the Debt Certificateholders. Such classification may also have adverse state and local tax consequences that would reduce amounts available for distribution to Debt Certificateholders. Moreover, distributions on Debt Certificates that are recharacterized as equity in an entity taxable as a corporation would not be deductible in computing the entity's taxable income, and cash distributions on such Debt Certificates generally would be treated as dividends for tax purposes to the extent of such deemed corporation's earnings and profits. FOREIGN INVESTORS IN DEBT CERTIFICATES Except as discussed below, a Debt Certificateholder that is not a "United States person" (as defined below) generally will not be subject to United States income or withholding tax in respect of a distribution on a Debt Certificate provided that (i) the holder complies to the extent necessary with certain certification requirements, which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is not a United States person (as defined below), (ii) the holder is not a "10-percent shareholder" within the meaning of Section 871(h)(3)(B) of the Code, which could be interpreted to include a person that directly or indirectly owns 10% or more of the equity interests in the trust, (iii) the holder is not a "controlled foreign corporation" (as defined in the Code) related to the trust or related to a 10 percent holder of equity interests in the trust, and (iv) the holder is not engaged in a United States trade or business, or otherwise subject to federal income tax as a result of any direct or indirect connection to the United States other than through its ownership of a Debt Certificate. For these purposes, the term "United States person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership (or other entity properly treated as a corporation or partnership for federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate whose income is includable in gross income for United States federal income taxation regardless of its source, and (iv) a trust for which one or more United States fiduciaries have the authority to control all substantial decisions and for which a court of the United States can exercise primary supervision over the trust's administration. A "Foreign Person" is any person that is not a United States person. Each Debt Certificateholder should consult its tax advisors regarding the tax documentation and certifications that must be provided to secure the exemption from United States withholding taxes. Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a Debt Certificate by a Foreign Person generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Foreign Person and (ii) in the case of an individual Foreign Person, the Foreign Person is not present in the United States for 183 days or more in the taxable year. If the interest, gain or income on a Debt Certificate held by a Foreign Person is effectively connected with the conduct of a trade or business in the United States by the Foreign Person (although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected), the holder generally will be subject to United States federal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the Foreign Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its "effectively connected earnings and profits," within the meaning of the Code, for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty (as modified by the branch profits tax rules). If the IRS were to contend successfully that the Debt Certificates are interests in a partnership and if such partnership were considered to be engaged in a trade or business in the United States, the partnership would be subject to a withholding tax on income of the trust that is allocable to a Foreign Person and such Foreign Person would be credited for his or her share of the withholding tax paid by the partnership. In such case, the Foreign Person generally would be subject to United States federal income tax at regular income tax rates, and possibly a branch profits tax in the case of a corporate holder. Alternatively, although there may be arguments to the contrary, if such partnership is not considered to be engaged in a trade or business within the United States and if income with respect to the Debt Certificates is not otherwise effectively connected with the conduct of a trade or business in the United States by the Foreign Person, the Foreign Person would be subject to United States income tax and withholding at a rate of 30% (unless reduced by an applicable tax treaty) on the holder's distributive share of the partnership's interest income. If the trust were recharacterized as an association or publicly traded partnership taxable as a corporation, distribution to Debt Certificateholders that are Foreign Persons, to the extent treated as dividends, would generally be subject to withholding at the rate of 30%, unless such rate were reduced or eliminated by an applicable income tax treaty. If such dividend were effectively connected with the Foreign Person's United States trade or business (and, if necessary, the Foreign Person establishes that it is so effectively connected) the dividend would not be subject to withholding tax, but would be subject to United States federal income tax at regular federal income tax rates, and if the holder is a corporation, might be subject to a branch profits tax. STATE AND LOCAL TAX CONSIDERATIONS The discussion above does not address the tax consequences of purchase, ownership or disposition of certificates under any state or local tax laws. We recommend that investors consult their own tax advisors regarding state and local tax consequences. * * * THE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A DEBT CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS OF DEBT CERTIFICATES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF DEBT CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. ERISA CONSIDERATIONS GENERAL Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit-sharing or other employee benefit plan from engaging in transactions involving "plan assets" with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to the plan. A violation of these "prohibited transaction" rules may generate excise tax and other liabilities under ERISA and the Code for that person. For example, a prohibited transaction would arise, unless an exemption were available, if the certificates of a series or class were viewed as debt of the seller and the seller were a disqualified person or party in interest with respect to a plan that acquired certificates of that series or class. Moreover, additional prohibited transactions could arise if the assets of the trust were deemed to constitute assets of any plan that owned certificates. The Department of Labor ("DOL") has issued a final regulation (the "Plan Assets Regulation") concerning the definition of what constitutes the "plan assets" of an employee benefit plan subject to ERISA or the Code or an individual retirement account ("IRA") (collectively referred to as "Benefit Plans"). Under the Plan Assets Regulation the assets and properties of corporations, partnerships and other entities in which a Benefit Plan acquires an "equity interest" could be deemed to be assets of the Benefit Plan in some circumstances. Accordingly, if Benefit Plans purchase certificates, the trust could be deemed to hold plan assets of the Benefit Plan unless one of the exceptions under the Plan Assets Regulation is applicable to the trust. The Plan Assets Regulation only applies to the purchase by a Benefit Plan of an "equity interest" in an entity. Assuming that the certificates of a series or class are equity interests, the Plan Assets Regulation contains an exception that provides that if a Benefit Plan acquires a "publicly-offered security", the issuer of the security is not deemed to hold plan assets. A publicly-offered security is a security that is o freely transferable, o part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another and o either is o part of a class of securities registered under Section 12(b) or 12(g) of the Exchange Act or o sold to the plan as part of an offering of securities to the public under an effective registration statement under the Securities Act and the class of securities of which the security is a part is registered under the Exchange Act within 120 days, or a later time as may be allowed by the Commission, after the end of the fiscal year of the issuer during which the offering of the securities to the public occurred. The certificates of each series and class must be separately tested under, and may each meet, the criteria of publicly-offered securities as described above. There are no restrictions imposed on the transfer of the certificates. The certificates will be sold as part of an offering under an effective registration statement under the Securities Act, and may or may not be timely registered under the Exchange Act. Based on information provided by the underwriter or placement agent for certificates of any series or class that will be registered under the Exchange Act, the seller will notify the trustee as to whether or not certificates of the series or, if the series consists of more than one class, each class will be held by at least 100 separately named persons at the conclusion of the offering, unless the related prospectus supplement states otherwise. The seller will not determine whether the 100-investor requirement of the exception for publicly offered securities is satisfied as to the certificates of any series or class. Prospective purchasers may obtain a copy of the notification described in the third preceding sentence from the trustee at 101 Barclay Street, New York, New York 10286. If the certificates of any series or class fail to meet the criteria of publicly-offered securities and the trust's assets are deemed to include assets of Benefit Plans that are holders of the certificates, transactions involving the trust and "parties in interest" or "disqualified persons" with respect to the plans might be prohibited under Section 406 of ERISA and Section 4975 of the Code unless an exemption is applicable. Thus, for example, if a participant in any Benefit Plan is an obligor or guarantor of one of the receivables, under DOL interpretations the purchase of the certificates by the plan could constitute a prohibited transaction. There are a number of class exemptions issued by the DOL that may apply in that event. However, even if all of the conditions specified in the exemptions are satisfied, they would probably not apply to all transactions involving the trust's assets. In light of the foregoing, fiduciaries of a Benefit Plan considering the purchase of certificates of any series or class should consult their own counsel as to whether the assets of the trust which are represented by the certificates would be considered plan assets, and the consequences that would apply if the trust's assets were considered plan assets. In addition, based on the reasoning of the United States Supreme Court's decision in John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S. 86 (1993), under some circumstances assets in the general account of an insurance company may be deemed to be plan assets for some purposes. Under that reasoning a purchase of certificates with assets of an insurance company's general account might be subject to the prohibited transaction rules described above. Insurance companies investing assets of their general accounts should also consider the potential effects of the enactment of Section 401(c) of ERISA, Prohibited Transaction Exemption 95-60, and Labor Department Regulation Section 2550.401c-1. Unless the applicable prospectus supplement states otherwise, if the certificates will not be timely registered under the Exchange Act, or if the seller does not notify the trustee, as described above, that the certificates of any particular series or class will be expected to be held by at least 100 persons, the certificates of the series or class, as the case may be, may not be acquired by any Benefit Plan or by any entity investing assets that are treated as assets of a Benefit Plan. Furthermore, in that case, the Pooling and Servicing Agreement, the Series Supplement and each certificate will provide that each holder of the certificate shall be deemed to have represented and warranted that it is not a Benefit Plan and is not purchasing the certificate on behalf of a Benefit Plan or with assets that are treated as assets of a Benefit Plan. PLAN OF DISTRIBUTION The seller may sell certificates offered by this prospectus in any of three ways: o through underwriters or dealers; o directly to one or more purchasers; or o through agents. We will set forth in the related prospectus supplement the terms of the offering of any series certificates, including, without limitation o the names of any underwriters, o the purchase price of the certificates and the proceeds to the seller from the sale, o any underwriting discounts and other items constituting underwriter's compensation, o any initial public offering price and o any discounts or concessions allowed or reallowed or paid to dealers. If the seller uses underwriters in a sale of any certificates of a series, the 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 a fixed public offering price or at varying prices to be determined at the time of sale or at the time of commitment for the certificates. The certificates may be offered to the public either through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Unless we set forth otherwise in the related prospectus supplement, the obligations of the underwriters to purchase the certificates will be subject to conditions precedent, and the underwriters will be obligated to purchase all of the certificates if any of the certificates are purchased. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. Certificates of a series may also be offered and sold, if we so state in the related prospectus supplement, in connection with a remarketing upon their purchase, in accordance with a redemption or repayment under their terms, by one or more firms ("remarketing firms") acting as principals for their own accounts or as agents for the seller. We will identify in the related prospectus supplement any remarketing firm and describe the terms of its agreement, if any, with the seller and its compensation. Remarketing firms may be deemed to be underwriters in connection with the certificates they remarket. Certificates may also be sold directly by the seller or through agents designated by the seller from time to time. We will name any agent involved in the offer or sale of certificates, and we will set forth any commissions payable by the seller to the agent, in the related prospectus supplement. Unless we indicate otherwise in the related prospectus supplement, any agent will act on a best efforts basis for the period of its appointment. Each underwriting agreement and placement agreement will provide that the seller and the originator will indemnify the underwriters and agents, respectively, against civil liabilities, including liabilities under the Securities Act, or contribute to payments the several underwriters and agents, as applicable, may be required to make in respect of those civil liabilities. The trust may, from time to time, invest the funds in its accounts in Eligible Investments acquired from the underwriters, agents or the seller. We will set forth the place and time of delivery for a series of certificates in the prospectus supplement. Until the distribution of the certificates of a series is completed, rules of the Commission may limit the ability of the underwriters and selling group members to bid for and purchase those certificates. As an exception to these rules, the underwriters are permitted to engage in transactions that stabilize the price of those certificates. Those transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the certificates. Purchases of a certificate for the purpose of stabilization could cause the price of the certificate to be higher than it might be in the absence of the purchases. In connection with the offering of a series, the underwriters may make short sales of the certificates of that series and may purchase those certificates on the open market to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of certificates than they are required to purchase in the offering. The underwriters must close out any short position by purchasing certificates in the open market. The underwriters are more likely to create a short position if they are concerned that there may be downward pressure on the price of the certificates in the open market after pricing that could adversely affect investors who purchase in the offering. Similar to other purchase transactions, the underwriters' purchases to cover the short sales may have the effect of raising or maintaining the market price of the certificates or preventing or retarding a decline in the market price of certificates. As a result, the price of the certificates may be higher than the price that might otherwise exist in the open market. Neither the originator, the seller nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the prices of the certificates of any series. In addition, neither the originator, the seller nor any of the underwriters makes any representation that the underwriters will engage in the transactions or that the transactions, once commenced, will not be discontinued without notice. If any certificates of a series are offered in the United Kingdom, each underwriter and placement agent will represent and agree that o it has not offered or sold, and will not offer or sell, any of those certificates to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments, as principal or agent, for the purposes of their businesses or otherwise in circumstances that do not constitute an offer to the public in the United Kingdom for the purposes of the Public Offers of Securities Regulations 1995, o it has complied and will comply with all applicable provisions of the Financial Services Act of 1986 of Great Britain with respect to anything done by it in relation to those securities in, from or otherwise involving the United Kingdom and o it has only issued or passed on and will only issue or pass on in the United Kingdom any document in connection with the issue of those securities to a person who is of a kind described in Article 11(3) of the Financial Services Act of 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom the document may otherwise lawfully be issued or passed on. o If you initially receive an electronic copy of the prospectus and prospectus supplement from an underwriter, you will receive a paper copy of the prospectus and prospectus supplement upon request to the underwriter. Upon receipt of a qualifying request, the underwriter will promptly deliver a paper copy of the prospectus and prospectus supplement to you free of charge. LEGAL MATTERS Certain legal matters relating to the certificates will be passed upon for the seller by Stroock & Stroock & Lavan LLP, New York, New York, and for any underwriters, agents or dealers by the counsel we name in the applicable prospectus supplement, which may be Stroock & Stroock & Lavan LLP. Federal income tax and ERISA matters will be passed upon for the seller and the trust by the counsel we named in the applicable prospectus supplement, which may also be Stroock & Stroock & Lavan LLP. WHERE YOU CAN FIND MORE INFORMATION The seller has filed a Registration Statement (together with all amendments and exhibits, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with the Securities and Exchange Commission (the "Commission") with respect to the certificates offered by this prospectus. This prospectus, which forms part of the Registration Statement, does not contain all of the information contained in the Registration Statement and the exhibits to the Registration Statement. The Registration Statement may be inspected and copied at: o the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 (telephone 1-800-732-0330), o the SEC's regional office at Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661, and o the SEC's regional office at Seven World Trade Center, New York, New York 10048. Also, the Commission maintains a Web site at http://www.sec.gov containing reports, proxy and information statements and other information regarding registrants, including Ace Securities Corp., that file electronically with the SEC. GLOSSARY OF TERMS FOR PROSPECTUS "Accounts" means the revolving financing arrangements with dealers franchised by automobile manufacturers specified in the related prospectus supplement in which the receivables arise. "Accumulation Period" means, for any applicable series, the period beginning at the close of business on the date specified in or determined in the manner specified in the prospectus supplement and ending on the earliest of: o the beginning of a Reinvestment Period with respect to the series, o the beginning of an Early Amortization Period with respect to the series and o payment in full of the outstanding principal amount of the series certificates. "Addition Date" means, in the case of an Additional Account, the date on which the receivables in the Additional Account are first transferred to the trust. "Additional Accounts" means the additional accounts which the seller has the right, subject to conditions, to designate from time to time to be included as Accounts. "Additional Cut-Off Date" means, with respect to any Additional Accounts, the date those Additional Accounts are identified and selected. "Adjusted Invested Amount" means, with respect to a series for any date, an amount equal to the sum of o the Initial Invested Amount of the series, minus unreimbursed Investor Charge-Offs for the series and o the Available Subordinated Amount with respect to the series, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date during the Collection Period in which that date occurs. "Adjustment Payment" means, to the extent that a reduction in the Seller's Interest would reduce the Seller's Participation Amount below the Trust Available Subordinated Amount for the immediately preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date, a cash amount equal to the deficiency which will be deposited by the seller into the Collection Account in immediately available funds on the day on which the adjustment occurs. "Auction Vehicles" means, collectively, the vehicles purchased by a dealer at a closed auction. "Automatic Additional Accounts" means the Additional Accounts which the seller may designate from time to time, at its discretion, subject only to some limitations. "Automatic Removal Date" means the date upon which the Automatic Removed Accounts are to be removed. "Automatic Removed Accounts" means the Accounts, designated by the seller, with respect to which the seller shall have the right to require the reassignment to it of all the trust's right, title and interest in, to and under the receivables then existing and created after that time, all monies due or to become due and all amounts received with respect to those receivables and all proceeds of those receivables in or with respect to the Accounts, upon satisfaction of the following conditions: o on or before the fifth business day immediately preceding the date upon which the Accounts are to be removed, the seller shall have given the trust, each Enhancement provider and the Rating Agencies a Removal Notice specifying the Automatic Removal Date of the Automatic Removed Accounts; o on or prior to the date that is five business days after the Automatic Removal Date, the seller shall have delivered to the trustee a computer file or microfiche or written list containing a true and complete list of the Automatic Removed Accounts stating for each Account, as of the removal notice date, its account number and the aggregate amount of receivables outstanding in the Account; o the seller shall have represented and warranted as of each Automatic Removal Date that the list of Automatic Removed Accounts delivered pursuant to the second clause above, as of the Automatic Removal Date, is true and complete in all material respects; o the trustee shall have received confirmation from each Rating Agency that the removal will not cause the Ratings Agency's rating of any outstanding series or class of certificates to be reduced or withdrawn; o the seller shall have delivered to the trustee, each Rating Agency and any Enhancement providers an officers' certificate, dated the Automatic Removal Date, to the effect that the seller reasonably believes the removal will not cause an Early Amortization Event or Reinvestment Event to occur with respect to any series; and o the seller shall have delivered to the trustee, each Rating Agency and any Enhancement providers a Tax Opinion, dated the Automatic Removal Date, with respect to the removal. "Available Subordinated Amount" means the amount of the subordination for a series. "Bankruptcy Code" means Title 11 of the United States Code. "Benefit Plans" means, collectively, employee benefit plans subject to ERISA or the Code or individual retirement accounts. "Certificateholders' Interest" means, for any series, the undivided beneficial interests in certain assets of the trust allocated to the Interest of the Certificateholders of the series. "certificates" means the Asset Backed Certificates. "Citibank" means Citibank, N.A. "Clearstream" means Clearstream Banking, societe anonyme. "Code" means the Internal Revenue Code of 1986. "Collateral Security" means, in respect of the receivables, a security interest in vehicles and parts inventory, equipment, fixtures, service accounts and, in some cases, realty and a personal guarantee. "Collection Account" means an Eligible Deposit Account which the servicer has established and will maintain for the benefit of the certificateholders in the name of the trustee, on behalf of the trust. "Commission" means the Securities and Exchange Commission. "Controlled Amortization Period" means, for any applicable series, a controlled amortization period which will begin at the close of business on the date stated in or determined in the manner stated in the related prospectus supplement and will end on the earliest of: o the beginning of a Reinvestment Period with respect to the series, o the beginning of an Early Amortization Period with respect to the series and payment in full of the outstanding principal amount of the certificates of that series. "Controlled Deposit Amount" means, for any series, an amount stated in the related prospectus supplement plus, in the case of some distribution dates, any amounts in the Excess Funding Account allocable to the series. "Cooperative" means Euroclear S.C., a Belgian cooperative corporation. "Dealer Overconcentrations" means, on any distribution date, with respect to any Dealer or group of affiliated Dealers, the excess of o the aggregate principal amount of receivables due from the Dealer or group of affiliated Dealers on the last day of the Collection Period immediately preceding that distribution date over o 2% (or another percentage specified in the related prospectus supplment) of the Pool Balance on the last day of the immediately preceding Collection Period. "Dealer Trouble" means a status under which a dealer will be classified by the originator under some circumstances which include o failure to remit any principal or interest payment when due, o any notifications of liens, levies or attachments and o a general deterioration of its financial condition. "dealers" means domestic automobile dealers franchised by automobile manufacturers specified in the related prospectus supplment. "Defaulted Amount" means for any Collection Period will be an amount, which shall not be less than zero, equal to (a) the principal amount of receivables that became Defaulted Receivables during the preceding Collection Period minus (b) the sum of (i) the full amount of any Defaulted Receivables subject to reassignment to the seller or purchase by the servicer for the Collection Period unless events of bankruptcy, insolvency or receivership have occurred with respect to either of the seller or the servicer, in which event the Defaulted Amount will not be reduced for those Defaulted Receivables and (ii) the excess, if any, for the immediately preceding Determination Date of the amount determined pursuant to this clause (b) for that Determination Date over the amount determined pursuant to clause (a) for that Determination Date. "Defaulted Receivables" means on any Determination Date o all receivables which were charged off as uncollectible in respect of the immediately preceding Collection Period and o all receivables which were Eligible Receivables when transferred to the trust, which arose in an Account which became an Ineligible Account after the date of transfer of the receivables to the trust and which were not Eligible Receivables for any six consecutive Determination Dates after that date. "Definitive Certificates" means the certificates of a series or class issued in fully registered, certificated form to certificateholders or their nominees. "Depository" means DTC, together with any successor depository selected by the seller. "Designated Accounts" means the Accounts to be removed from the trust. "Designated Balance" means the aggregate principal balance of receivables in respect of each of the Designated Accounts. "Designated Receivables" means, at any time, the then existing receivables in the Designated Accounts. "Determination Date" means each second business day preceding a Distribution Day. "Distribution Date Statement" means a statement prepared by the servicer and forwarded by the trustee to each certificateholder of record of any series on each distribution date, including each distribution date that corresponds to an interest payment date or any Special Payment Date, that sets forth information with respect to the trust and the certificates of the series, as stated in the related Series Supplement and described in the related prospectus supplement. "DOL" means the Department of Labor. "Early Amortization Event" means any of the events so defined in the related Series Supplement and, described in the related prospectus supplement, as well as each of the following events: o the occurrence of events of bankruptcy, insolvency or receivership relating to the trust, the originator or the seller; and o the trust or the seller becomes an investment company within the meaning of the Investment Company Act of 1940. "Early Amortization Period" means the period beginning on the day on which an Early Amortization Event has occurred with respect to a series and ending on the earliest of: o payment in full of the outstanding principal amount of the certificates of that series, o the recommencement of the Revolving Period in accordance with the related Series Supplement and o the Termination Date for the series. "Eligible Account" means a wholesale financing line of credit extended by the originator, directly or as successor to the originator, to a Dealer, which, as of its date of determination: o is established by the originator, directly or as successor to the originator, in the ordinary course of business pursuant to a floorplan financing agreement, o is in favor of an Eligible Dealer, o is in existence and maintained and serviced by the initial servicer, directly or as successor to the initial servicer, and o in respect of which no amounts have been charged off as uncollectible or are classified as past due or delinquent. "Eligible Dealer" means a Dealer: o which is located in the United States of America, including its territories and possessions, o which has not been identified by the servicer as being the subject of any voluntary or involuntary bankruptcy proceeding or in voluntary or involuntary liquidation, o in which the originator or any affiliate of the originator does not have an equity investment and o which has not been classified by the servicer as being under Dealer Trouble status. "Eligible Deposit Account" means either o a segregated account with an Eligible Institution or o a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States or any one of the states of the United States, or any domestic branch of a foreign bank, having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of the depository institution has a credit rating from each Rating Agency in one of its generic rating categories which signifies investment grade. "Eligible Institution" means o the corporate trust department of the trustee or o a depository institution organized under the laws of the United States or any one of the states of the United States, or the District of Columbia, or a domestic branch of a foreign bank, which at all times (i) has either (x) a long-term unsecured debt rating of A2 or better by Moody's and of AAA or better by Standard & Poor's or (y) a certificate of deposit rating of P-1 by Moody's or A-1+ by Standard & Poor's and (ii) is a member of the FDIC. "Eligible Investments" means book-entry securities, negotiable instruments or physical securities having original or remaining maturities of 30 days or less, but in no event occurring later than the distribution date next succeeding the trustee's acquisition of those securities or instruments, except as otherwise provided in the related Series Supplement. Eligible Investments are limited to: o direct obligations of, and obligations fully guaranteed as to timely payment by, the United States of America; o demand deposits, time deposits or certificates of deposit of any depositary institution or trust company incorporated under the laws of the United States of America or any state of the United States, or any domestic branch of a foreign bank, and subject to supervision and examination by Federal or state banking or depository institution authorities. However, at the time of the trust's investment or contractual commitment to invest in those investments, the commercial paper or other short-term unsecured debt obligations, other than obligations the rating of which is based on the credit of a person or entity other than the depository institution or trust company, of that entity shall have a credit rating from each of the Rating Agencies in its highest investment category; o commercial paper having, at the time of the trust's investment or contractual commitment to invest in the commercial paper, a rating from each of the Rating Agencies in its highest investment category; o except during a Reinvestment Period with respect to any series, investments in money market funds having a rating from each of the Rating Agencies in its highest investment category or o otherwise approved in writing by each of the Rating Agencies; o bankers' acceptances issued by any depository institution or trust company referred to in the second clause of this sentence; o certain repurchase obligations, including those of appropriately rated broker-dealers and financial institutions; and o any other investment consisting of a financial asset that by its terms converts to cash within a finite period of time, provided that each Rating Agency shall have notified the seller, the servicer and the trustee that the trust's investment in that investment will not cause its then rating of any outstanding class or series with respect to which it is a Rating Agency to be reduced or withdrawn. "Eligible Portfolio" means all the wholesale accounts in the Wholesale Portfolio that are Eligible Accounts. "Eligible Receivable" means a receivable o which was originated or acquired by the originator, directly or as successor to the originator, in the ordinary course of business, o which has arisen under an Eligible Account and is payable in United States dollars, o which is owned by the originator at the time of sale to the seller, o which represents the obligation of a Dealer to repay an advance made to the Dealer to finance the acquisition of vehicles, o which at the time of creation and at the time of transfer to the trust is secured by a perfected first priority security interest in the related vehicle, o which was created in compliance in all respects with all requirements of law applicable to it and pursuant to a floorplan financing agreement which complies in all respects with all requirements of law applicable to any party to the agreement, o with respect to which all consents and governmental authorizations required to be obtained by the originator or an affiliate of the originator or the seller in connection with the creation of the receivable or the transfer of the receivable to the trust or the performance by the originator or an affiliate of the originator of the floorplan financing agreement under which the receivable was created, have been duly obtained, o as to which at all times following the transfer of the receivable to the trust, the trust will have good and marketable title to the receivable free and clear of all liens arising prior to the transfer or arising at any time, other than liens permitted under the Pooling and Servicing Agreement, o which has been the subject of a valid transfer and assignment from the seller to the trust of all the seller's interest in the receivable, including any proceeds of the receivable, o which will at all times be the legal and assignable payment obligation of the related Dealer, enforceable against the Dealer in accordance with its terms, except as enforceability may be limited by applicable bankruptcy or other similar laws, o which at the time of transfer to the trust is not subject to any right of rescission, setoff, or any other defense, including defenses arising out of violations of usury laws, of the Dealer, o as to which, at the time of transfer of the Receivable to the trust, the originator and each affiliate of the originator and the seller have satisfied all their respective obligations with respect to the Receivable required to be satisfied at that time, o as to which, at the time of transfer of the Receivable to the trust, neither the originator, any affiliate of the originator nor the seller has taken or failed to take any action which would impair the rights of the trust or the certificateholders, o which constitutes "chattel paper" as defined in Article 9 of the applicable UCC as then in effect and o which was transferred to the trust with all applicable governmental authorization. "Enhancements" means enhancements which may be provided with respect to one or more classes of a series, including one or more of the following: o letter of credit, o surety bond, o cash collateral account, o spread account, o guaranteed rate agreement, o swap, including without limitation currency swaps, or other interest protection agreement, o repurchase obligation, o cash deposit or o another form of credit enhancement described in the related prospectus supplement. "Euroclear" means the Euroclear System. "Euroclear Operator" means Morgan Guaranty trust Company of New York, Brussels, Belgium office. "Euroclear Participants" means participants of Euroclear. "Excess Funded Amount" means, initially, the initial principal balance of the certificates of a series over the Initial Invested Amount of the series. "Excess Funding Account" means an Eligible Account established with the trustee for a series in which the Excess Funding Amount will be maintained, except, to the extent provided in the related Series Supplement, during an Early Amortization Period or Reinvestment Period for the series. "Excess Principal Collections" means the amount of available certificateholder principal collections for each series and any Collection Period remaining after required payments, if any. "Excluded Series" means a series of certificates designated as an excluded series with respect to a Paired Series. "Fleet Receivables" means receivables originated in connection with multiple new vehicle orders of at least five vehicles by specified Dealers. "Foreign Agency Depositaries" means Citibank, when acting in its capacity as depositary for Clearstream, and Morgan, when acting in its capacity as depositary for Euroclear. "Fully Reinvested Date" means the date on which the amount on deposit in the Principal Funding Account with respect to a series equals the outstanding principal amount of the certificates of the series. "Global Securities" means the globally offered certificates. "Holders" means the certificateholders under the Pooling and Servicing Agreement. "Indirect Participants" means entities including banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. "Ineligible Receivables" means any receivable as to which the Certificateholders' Interest with respect to the receivable will be reassigned to the seller on the terms and conditions set forth in this prospectus as a result of a breach by the seller of any representation and warranty described in the first paragraph of "Representations and Warranties" in this prospectus, which breach remains uncured for 30 days or a longer period as may be agreed to by the trustee, after the earlier to occur of the discovery of such breach by the seller or the servicer or receipt of written notice of such breach by the seller or the servicer, and which breach has a materially adverse effect on the Certificateholders' Interest in any receivable or Account. "Initial Cut-Off Date" means the date specified in the related prospectus supplement. "Initial Invested Amount" means with respect to any series and for any date, the amount stated as the "Initial Invested Amount" in the related Series Supplement. The Initial Invested Amount for any series may be increased or decreased from time to time as stated in the related Series Supplement, including as a result of deposits to or withdrawals from the Excess Funding Account, if any, for the series. "Insolvency Laws" means the United States Bankruptcy Code or similar applicable state laws. "Installment Balance Amount" means the portion of the aggregate amount of Installment Balances in respect of which the originator has not received an offsetting payment from the related Dealer on a distribution date. "interest collections" means collections under the receivables that consist of interest and other non-principal charges, including insurance fees, amounts recorded on Defaulted Receivables and insurance proceeds. "Interest Funding Account" means the one or more trust accounts in which collections or other amounts, or the portion allocable to a class, will be deposited if the interest payment dates for a series or class occur less than monthly. "Investor Default Amount" means the portion of the Defaulted Amount allocated to the certificateholders of a series. "IRA" means an individual retirement account. "Miscellaneous Payments" means, for any Collection Period, the sum of o Adjustment Payments and Transfer Deposit Amounts received with respect to the Collection Period and o Unallocated Principal Collections on the distribution date available to be treated as Miscellaneous Payments as described in this prospectus under "Principal Collections for all Series". "Monthly Payment Rate" means, for a Collection Period, the percentage obtained by dividing Principal Collections for the Collection Period by the daily average Pool Balance for the Collection Period. "Monthly Servicing Fee" means, unless a related Series Supplement or prospectus supplement states otherwise, the share of the Servicing Fee allocable to certificateholders of any series with respect to any distribution date, which shall generally be equal to one-twelfth of the product of o the Servicing Fee Rate and o the Invested Amount of the series as of the last day of the second preceding Collection Period. "Moody's" means Moody's Investors Service, Inc. "Morgan" means Morgan Guaranty Trust Company of New York, Brussels, Belgium office. "New Vehicles" means o current and prior model year unmiled vehicles, o current model year miled vehicles purchased at a closed auction conducted by the entity or entity specified in the related prospectus supplement and o prior model year and two year old miled vehicles. "New Withholding Regulations" means the Treasury regulations published in the Federal Register on October 14, 1997. "OID" means original issue discount. "OID regulations" means the Treasury regulations relating to OID. "Overconcentration Amount" means the aggregate principal amount of receivables in the trust on a distribution date which are Dealer Overconcentrations. "Paired Series" means a series of certificates previously issued by the trust as to which the Accumulation Period or Controlled Amortization Period has commenced with respect to which a series of certificates may be designated as an excluded series. "Participants" means the participating organizations of DTC which include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations. "Plan Assets Regulation" means the final regulation issued by DOL concerning the definition of what constitutes the "plan assets" of Benefit Plans. "Pool Balance" means the aggregate amount of the principal balances of the receivables. "Pooling and Servicing Agreement" means the Pooling and Servicing Agreement, as amended and supplemented from time to time, among Ace Securities Corp., as seller of the receivables, the servicer of the receivables, and the trustee. "prime rate" means the rate designated as the "prime rate" from time to time by certain financial institutions selected by the originator or the seller, as applicable. "principal collections" means collections of principal on the receivables. "Principal Funding Account" means the trust account established for the benefit of the certificateholders of a series in which, during the Accumulation Period for the series, Principal Collections and other amounts allocable to the Certificateholders' Interest of the series, which may include some Excess Principal Collections, will be deposited. "principal receivables" means the portion of the receivables that represents principal. "Principal Shortfalls" means any principal distributions to Certificateholders of any series which are either scheduled or permitted and which have not been covered out of Principal Collections and certain other amounts allocated to the series. "Principal Terms" means the terms of a series which, under the Pooling and Servicing Agreement, the seller may specify, including, among other things: o its name or designation, o its initial principal amount, or method for calculating such amount, o its certificate rate, or the method for determining its certificate rate, o a date on which it will begin its Accumulation Period or Controlled Amortization Period, if any, o the method for allocating principal and interest to certificateholders of such series, o the percentage used to calculate monthly servicing fees, o the issuer and terms of any Enhancement or the level of subordination provided by the Seller's Interest, o the terms on which the certificates of such series may be exchanged for certificates of another Series, be subject to repurchase, optional redemption or mandatory redemption by the seller or be remarketed by any remarketing agent, o the Series Termination Date and o any other terms permitted by the Pooling and Servicing Agreement. "Rating Agency" means each rating agency designated by the seller in the related Series Supplement in respect of any outstanding series or class. "Registration Statement" means the registration statement, together with all amendments and exhibits, which the seller has filed under the Securities Act with the Commission with respect to the certificates offered pursuant to this prospectus. "Reinvestment Event" means, for any series, any of the events so defined in the related Series Supplement and described in the related prospectus supplement. "Reinvestment Period" means, for any applicable series, the period beginning on the day on which a Reinvestment Event has occurred and ending on the earliest of: o the beginning of an Early Amortization Period with respect to the series, o the recommencement of the Revolving Period in accordance with the related Series Supplement and o payment in full of the outstanding principal amount of the certificates of that series. "remarketing firms" means one or more firms which, acting as principals for their own accounts or as agents for the seller, may offer and sell the Certificates of a series, if the related prospectus supplement so states, in connection with a remarketing upon their purchase, in accordance with a redemption or repayment pursuant to their terms. "Removal and Repurchase Date" means the Determination Date on which the removal of the Designated Accounts and the purchase of the Designated Receivables will occur. "Removal Commencement Date" means the Determination Date on which removal of one or more Accounts will commence. "Removal Date" means the Determination Date on which the Designated Balance in a Designated Account is reduced to zero. "Removal Notice" means a written notice furnished to the trustee, any Enhancement provider and the Rating Agencies by the seller, or the servicer on its behalf stating the Removal Commencement Date and the Designated Accounts. "Removed Account" means a Designated Account as to which the seller has stopped allocating collections of receivables and which has been deemed removed from the trust for all purposes. "Repurchased Receivables" means Designated Receivables which have been deemed repurchased from the trust for all purposes. "Required Participation Amount" means for any date an amount equal to the sum of: o the sum of the amounts for each series obtained by multiplying the Required Participation Percentage for the series by the Initial Invested Amount for the series at that time. However, each Excluded Series will be excluded from this calculation until the Invested Amount of the related Paired Series is reduced to zero; and o the Trust Available Subordinated Amount on the immediately preceding Determination Date, after giving effect to the allocations, distributions, withdrawals and deposits to be made on the distribution date following that Determination Date. "Required Participation Percentage" means, for a series, the required participation percentage specified in the related Series Supplement. "Revolving Period" means the revolving period, for the certificates of each series and class, during which Principal Collections and other amounts otherwise allocable to the Certificateholders' Interest of that series or class will be o paid to the seller, o deposited to the Excess Funding Account, if any, for that series or o distributed to, or for the benefit of, the certificateholders of other classes or series, A Revolving Period for a series will begin on the Series Cut-off Date and end on the earlier of: o the day immediately before the Accumulation Period commencement date or the controlled amortization period commencement date for the series and o the day immediately before the day on which an Early Amortization Event or a Reinvestment Event occurs with respect to the series. "RPA seller" means the originator, together with its predecessors as appropriate, under the Receivables Purchase Agreement. "Securities Act" means the Securities Act of 1933. "Seller's Certificate" means the certificate evidencing the Seller's Interest. "Seller's Participation Amount" means the Pool Balance minus the aggregate Invested Amounts for all outstanding series. "Series Allocable Defaulted Amount" means, with respect to any series of certificates for any Collection Period, the product of the Series Allocation Percentage for the series and the amount of the Defaulted Amount with respect to the Collection Period. "Series Allocable Interest Collections" means, with respect to any series of certificates for any Collection Period, the product of the Series Allocation Percentage for the series and the amount of Interest Collections, with respect to the Collection Period. "Series Allocable Miscellaneous Payments" means, with respect to any series of certificates for any Collection Period, the product of the Series Allocation Percentage for the series and the amount of Miscellaneous Payments, with respect to the Collection Period. "Series Allocable Principal Collections" means, with respect to any series of certificates for any Collection Period, the product of the Series Allocation Percentage for the series and the amount of Principal Collections, with respect to the Collection Period. "Series Allocation Percentage" means, with respect to a series for any Collection Period, the percentage equivalent of a fraction, the numerator of which is the Adjusted Invested Amount of the series as of the last day of the immediately preceding Collection Period and the denominator of which is the Trust Adjusted Invested Amount as of that last day. "Series Cut-off Date" means, for a series, the date stated in the related prospectus supplement on which a revolving period for the series will begin. "Series Issuance Date" means the date of issuance of any series. "Series Termination Date" means, for any series, the date stated in the related prospectus supplement, on which the last payment of principal and interest on any series of certificates will be due and payable, if not previously paid. "Service Default" means any of the following events: o failure by the servicer to make any payment, transfer or deposit, or to give instructions to the trustee to make any payment, transfer or deposit, on the date the servicer is required to do so under the Pooling and Servicing Agreement, which is not cured within a five business day grace period; o failure by the servicer duly to observe or perform any other covenants or agreements of the servicer in the Pooling and Servicing Agreement which failure has a materially adverse effect on the certificateholders of any outstanding series and which continues unremedied for a period of 30 days after the date written notice of the failure shall have been given to the servicer by the trustee, o the servicer delegates its duties under the Pooling and Servicing Agreement, except as specifically permitted thereunder; o any representation, warranty or certification made by the servicer in the Pooling and Servicing Agreement or in any certificate delivered pursuant to the Pooling and Servicing Agreement proves to have been incorrect in any material respect when made, has a materially adverse effect on the rights of the certificateholders of any outstanding Series, and which materially adverse effect continues for a period of 60 days after written notice of that fact shall have been given to the servicer by the trustee; or o events of bankruptcy, insolvency or receivership occur with respect to the servicer. Notwithstanding the foregoing, a delay in or failure of performance referred to under the first clause for a period of ten business days or referred to under the second, third or fourth clauses for a period of 60 business days, shall not constitute a Service Default if the delay or failure was caused by an act of God or other similar occurrence. "Service Transfer" means, in the event of any Service Default, an action by the trustee, by written notice to the servicer, terminating all of the rights and obligations of the servicer, as servicer, under the Pooling and Servicing Agreement and in and to the receivables and the proceeds thereof and appointing a new servicer. "servicer" means the servicer specified in the related prospectus supplement or any successor servicer. "Servicing Fee" means a monthly servicing fee which constitutes the servicer's compensation with respect to the certificates of a series for its servicing activities and reimbursement for its expenses, unless the related Series Supplement or prospectus supplement states otherwise. "Servicing Fee Rate" means, for a series, the servicing fee rate set forth in the related Series Supplement. "Special Payment Date" means, during an Early Amortization Period for a series, each distribution date beginning with the distribution date following the Collection Period in which the Early Amortization Period begins. "Standard & Poor's" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies. "Supplemental Certificate" means a certificate for which the seller or the seller originator, as applicable, may, from time to time, exchange a portion of the Seller's Certificate for transfer or assignment to a person or entity chosen by the seller, or originator, as applicable upon the execution and delivery of a supplement to the Pooling and Servicing Agreement, if o the seller shall at the time of that exchange and after giving effect to the exchange have an interest of not less than 2% in the Pool Balance, o the seller or originator, as applicable, shall have delivered to the trustee, the Rating Agencies and any Enhancement provider a Tax Opinion with respect to the exchange and o the seller or originator, as applicable, shall have delivered to the trustee written confirmation from the applicable Rating Agencies that the exchange will not result in a reduction or withdrawal of the rating of any outstanding series or class of certificates. Any later transfer or assignment of a Supplemental Certificate is also subject to the second and third conditions described in the preceding sentence. "Tax Counsel" means Stroock & Stroock & Lavan LLP, special federal income tax counsel to the seller and the trust. "Tax Opinion" means an opinion of counsel to the effect that, for federal income and state income and single business tax purposes, o such action (other than some specified actions) will not adversely affect the characterization of the certificates of any outstanding series or class as debt of the seller and o the issuance will not cause a taxable event to any certificateholders. "Terms and Conditions" means, collectively, the Terms and Conditions Governing Use of Euroclear and the related Operative Procedures of the Euroclear System, and applicable Belgian law. "Transfer Date" means the Series Cut-Off Date, or the Additional Cut-Off Date, in the case of any Additional Accounts, or the date any future receivable is generated. "Transfer Deposit Amount" means, for any Determination Date, the amount by which the Seller's Participation Amount would be less than the Trust Available Subordinated Amount, after giving effect to the allocations, distributions, withdrawals and deposits to be made on that distribution date, following a deduction by the servicer of the principal balance of a receivable from the Pool Balance. "trust" means ACE Securities Corp. Dealer Floorplan Master Loan Trust. "Trust Adjusted Invested Amount" means with respect to any Collection Period, the sum of the Adjusted Invested Amounts for all outstanding series. "Trust Available Subordinated Amount" means the aggregate Available Subordinated Amounts for all outstanding series. "UCC" means the Uniform Commercial Code. "Unallocated Principal Collections" means any amount of Principal Collections which are held unallocated. "Used Vehicles" means previously owned vehicles, other than current model year miled vehicles purchased at a closed auction conducted by the entity or entities specified in the related prospectus supplement and prior model year and two year old miled vehicles. "Wholesale Portfolio" means the accounts of domestic dealers financed and serviced by the servicer specified in the related prospectus supplement. ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in limited circumstances, we will make available the globally offered certificates (the "Global Securities") only in book-entry form. Unless we state otherwise in a prospectus supplement for a series, investors in the Global Securities may hold the Global Securities through any of DTC, Clearstream or Euroclear. Investors may trade the Global Securities as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Investors holding Global Securities through Clearstream and Euroclear will conduct secondary market trades between each other in the ordinary way under their normal rules and operating procedures and under conventional eurobond practice, i.e., seven calendar day settlement. Investors holding Global Securities through DTC will conduct secondary market trades between each other under the rules and procedures applicable to U.S. corporate debt obligations. Clearstream or Euroclear and DTC participants holding Global Securities will effect secondary cross-market trades between each other on a delivery-against-payment basis through Citibank, N.A. ("Citibank") and Morgan Guaranty Trust Company of New York ("Morgan") as the respective depositaries of Clearstream and Euroclear and as participants in DTC. Non-U.S. holders of Global Securities will be exempt from U.S. withholding taxes if those holders meet requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT DTC, in the name of Cede & Co. as nominee of DTC, will hold all Global Securities in book-entry form. Financial institutions acting on the behalf of investors as direct and indirect participants in DTC will represent those investors' interests in the Global Securities. As a result, Clearstream and Euroclear will hold positions on behalf of their participants through their respective depositaries, Citibank and Morgan, which in turn will hold those positions in accounts as participants of DTC. Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to securities previously issued by the trust. DTC will credit investor securities custody accounts with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Clearstream or Euroclear will credit Global Securities to the securities custody accounts on the settlement date against payment in same-day funds. SECONDARY MARKET TRADING Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that purchasers and sellers can settle on the desired value date. TRADING BETWEEN DTC PARTICIPANTS. DTC participants will settle secondary market trades between each other using the procedures applicable to securities previously issued by the trust in same-day funds. TRADING BETWEEN CLEARSTREAM AND/OR PARTICIPANTS. Clearstream participants and/or Euroclear participants will settle secondary market trades between each other using the procedures applicable to conventional eurobonds in same-day funds. TRADING BETWEEN DTC SELLER AND CLEARSTREAM OR EUROCLEAR PURCHASER. When a DTC participant desires to transfer Global Securities from its account to the account of a Clearstream participant or a Euroclear participant the purchaser will send instructions to Clearstream or Euroclear through a participant at least one business day prior to settlement. Clearstream or Euroclear will instruct Citibank or Morgan, respectively, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date. For transactions settling on the 31st day of the month, payment will include interest accrued to and excluding the first day of the following month. Citibank or Morgan will then make payment to the DTC participant's account against delivery of the Global Securities. After settlement has been completed, the respective clearing system will credit the Global Securities to its system and, in accordance with its usual procedures, to the Clearstream participant's or Euroclear participant's account. The Global Securities credit will appear the next day, European time, and the cash debit will be back-valued to, and the interest on the Global Securities will accrue from, the value date, which would be the preceding day when settlement occurred in New York. If settlement is not completed on the intended value date, i.e., the trade fails, the Clearstream or Euroclear cash debit will be valued instead as of the actual settlement date. Clearstream participants and Euroclear participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. They may do so the most directly by prepositioning funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream or Euroclear. Under this approach, they may take on credit exposure to Clearstream or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream or Euroclear has extended a line of credit to them, participants can elect not to preposition funds and allow that credit line to be drawn upon to finance settlement. Under this procedure, Clearstream participants or Euroclear participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of the overdraft charges, although this result will depend on each participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC participants can employ their usual procedures for sending Global Securities to Citibank or Morgan for the benefit of Clearstream participants or Euroclear participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC participant a cross-market transaction will settle no differently than a trade between two DTC participants. Trading between Clearstream or Euroclear seller and DTC purchaser. Due to time zone differences in their favor, Clearstream and Euroclear participants may employ their customary procedures for transactions in which they are to transfer Global Securities by the respective clearing system, through Citibank or Morgan, to a DTC participant. The seller will send instructions to Clearstream or Euroclear through a participant at least one business day prior to settlement. In these cases, Clearstream or Euroclear will instruct Citibank or Morgan, as appropriate, to deliver the bonds to the DTC participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date. For transactions settling on the 31st day of the month, payment will include interest accrued to and excluding the first day of the following month. Clearstream or Euroclear will then reflect the payment in the account of the Clearstream participant or Euroclear participant the following day, and back-value to the value date, which would be the preceding day, when settlement occurred in New York, the receipt of the cash proceeds in the Clearstream or Euroclear participant's account. Should the Clearstream or Euroclear participant have a line of credit with its respective clearing system and elect to be in debit in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft charges incurred over that one-day period. If settlement is not completed on the intended value date, i.e., the trade fails, Clearstream or Euroclear would instead value as of the settlement date the receipt of the cash proceeds in the Clearstream or Euroclear participant's account. Finally, day traders that use Clearstream or Euroclear and that purchase Global Securities from DTC participants for delivery to Clearstream participants or Euroclear participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: o borrowing through Clearstream or Euroclear for one day, until the purchase side of the day trade is reflected in their Clearstream or Euroclear accounts, in accordance with the clearing system's customary procedures; o borrowing the Global Securities in the U.S. from a DTC participant no later than one day prior to settlement, which would give the Global Securities enough time to be reflected in their Clearstream or Euroclear account in order to settle the sale side of the trade; or o staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Clearstream participant or Euroclear participant. U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A beneficial owner of Global securities holding securities through Clearstream, Luxembourg or Euroclear, or through DTC will be subject to the 30% U.S. withholding tax that generally applies to payments of interest, including original issue discount, on registered debt issued by U.S. Persons or to 31% backup withholding, unless (1) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between the beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (2) the beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial owners of securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. If the information shown on Form W-8 BEN changes, a new Form W-8 must be filed within 30 days of the change. EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM W-8BEN). Non-U.S. Persons that are beneficial owners of securities residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate, depending on the treaty terms, by filing Form W-8BEN (including Part II thereof). If the treaty provides only for a reduced rate, the beneficial owner may still be entitled to complete exemption from withholding under item (1) above. EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain complete exemption from the withholding tax by filing Form W-9 (Request for Taxpayer Identification Number and Certification). U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a Global Security files by submitting the appropriate form to the person through whom it holds, the clearing agency, in the case of persons holding directly on the books of the clearing agency. Form W-8BEN and Form W-8ECI are generally effective for three calendar years from the close of the calendar year in which it is collected. The term "U.S. Person" means (1) a citizen or resident of the United States, (2) a corporation or partnership (or other entity properly classified as a corporation or partnership for U.S. Federal income tax purposes) organized in or under the laws of the United States or any state or the District of Columbia, (3) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or (4) 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. Notwithstanding the preceding sentence, to the extent provided in regulations, trusts in existence on August 20, 1996 and treated as United States persons prior to that date that elect to continue to be so treated also will be considered U.S. Persons. Treasury regulations provide certain presumptions regarding the entity classification and foreign or U.S. status of a holder that a payor generally must apply in the absence of appropriate documentation from the holder, and provide detailed documentation and procedures for holders claiming withholding tax exemptions through intermediaries. Prospective investors are urged to consult their tax advisors regarding the effect of these regulations on their ability to claim and the means for claiming exemptions from or reduced rates of U.S. withholding taxes. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global securities. Investors are advised to consult their own tax advisers for specific tax advice concerning their holding and disposing of the Global securities. SUBJECT TO COMPLETION, [ ] PROSPECTUS SUPPLEMENT (to prospectus date [ ]) $[ ] (APPROXIMATE) ACE SECURITIES CORP. SPONSOR [ ] EQUIPMENT TRUST SECURITIES [ ]-[ ] OWNER TRUST RECEIVABLE-BACKED NOTES [ ] DEPOSITOR [ ] SERVICER The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS. For a list of capitalized terms used in this prospectus supplement and the prospectus, see the index of defined terms beginning on page S-[ ] of this prospectus supplement and on page [ ] of the prospectus. The notes will represent interests in the trust fund only and will not represent interests in or obligations of any other entity. This prospectus supplement may be used to offer and sell the notes only if accompanied by the prospectus. The owner trust will issue the following classes of notes: Initial Aggregate Interest First Stated Price to Underwriting Class of Principal Rate per Payment Maturity Public Discount Notes Amount annum) Date Date Per Note Per Note - ------------------------------------------------------------------------------- A-1 $ [ ] [ ]% [ ] [ ] [ ]% [ ]% - ------------------------------------------------------------------------------- A-2 $ [ ] [ ]% [ ] [ ] [ ]% [ ]% - ------------------------------------------------------------------------------- A-3 $ [ ] Floating [ ] [ ] [ ]% [ ]% - ------------------------------------------------------------------------------- A-4 $ [ ] [ ]% [ ] [ ] [ ]% [ ]% - ------------------------------------------------------------------------------- A-5 $ [ ] [ ]% [ ] [ ] [ ]% [ ]% - ------------------------------------------------------------------------------- B $ [ ] [ ]% [ ] [ ] [ ]% [ ]% - ------------------------------------------------------------------------------- C $ [ ] [ ]% [ ] [ ] [ ]% [ ]% - ------------------------------------------------------------------------------- D $ [ ] [ ]% [ ] [ ] [ ]% [ ]% - ------------------------------------------------------------------------------- The total price to the public is $[ ]. The total underwriting discount is $[ ]. The total proceeds to the owner trust are $[ ]. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNDERWRITER: DEUTSCHE BANC ALEX. BROWN The date of this prospectus supplement is [ ] IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS: We provide information to you about the notes offered by this prospectus supplement in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your notes, and (2) this prospectus supplement, which describes the specific terms of your notes. IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not offering the notes in any state where the offer is not permitted. We do not claim that the information in this prospectus supplement and prospectus is accurate as of any date other than the dates stated on their respective covers. --------------------- Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the notes and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the notes will be required to deliver a prospectus supplement and prospectus for ninety days following the date of this prospectus supplement. --------------------- We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located. TABLE OF CONTENTS PROSPECTUS SUPPLEMENT PAGE Summary of Terms......................................................... Background Information................................................... Risk Factors............................................................. The Owner Trust.......................................................... The Originators, the Servicer, the Seller and the Depositor.............. The Contracts............................................................ Weighted Average Life Of The Notes....................................... Description Of The Notes And Indenture................................... Ratings of the Notes..................................................... Use of Proceeds.......................................................... Legal Proceedings........................................................ Plan of Distribution..................................................... Legal Matters............................................................ Index of Defined Terms................................................... PROSPECTUS PAGE Risk Factors............................................................. The Sponsor.............................................................. The Depositor............................................................ The Owner Trusts......................................................... The Originators, the Seller and the Servicer............................. The Contracts............................................................ Description of the Notes and Indenture................................... Description of the Pooling and Servicing Agreement........................................................... Certain Legal Matters Affecting the Contracts........................................................... Material Federal Income Tax Consequences........................................................ ERISA Considerations..................................................... Ratings of the Notes..................................................... Use of Proceeds.......................................................... Plan of Distribution..................................................... Legal Matters............................................................ Where You Can Find More Information...................................... Index of Terms........................................................... SUMMARY OF TERMS O THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, IT IS NECESSARY THAT YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. o WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. Owner Trustee....................... The owner trustee is [ ], acting not in its individual capacity but solely as owner trustee under the trust agreement with the sponsor and the depositor, and its telephone number is [ ]. See "THE OWNER TRUST" in this prospectus supplement. Originators......................... [ ] and [ ]. The address of each originator is [ ]. Sponsor............................. ACE Securities Corp., an affiliate of Deutsche Banc Alex. Brown. Neither Deutsche Banc Alex. Brown nor any of its affiliates has guaranteed, will guarantee or is or will be otherwise obligated with respect to any notes. Indenture and Indenture Trustee.......................... The notes will be issued under an indenture. [ ] will serve as indenture trustee. See "DESCRIPTION OF THE NOTES AND INDENTURE-- THE INDENTURE TRUSTEE," in this prospectus supplement. Terms of the Notes: o Payment Dates.................. The [20]th day of each month, beginning [ ], or if that day is not a business day, the next business day. o Interest....................... See the cover page for the rates as to all classes other than Class A-3. The Class A-3 interest rate will be the one-month London interbank offered rate, plus [ ]%. See "DESCRIPTION OF THE NOTES AND INDENTURE-- INTEREST." The owner trust will calculate interest on the Class A-1 and Class A-3 Notes on the basis of the actual number of days elapsed and a 360-day year. The owner trust will calculate interest on the Class A-2, Class A-4, Class A-5, Class B, Class C and Class D Notes on the basis of a 360-day year comprised of twelve 30-day months. On each payment date and after the owner trust repays any outstanding servicer advances and pays the servicer's monthly servicing fee, the owner trust will pay interest on the notes in the following order: CLASS OF RECEIVES INTEREST NOTES BEFORE CLASS -------- ------------------ A-1, A-2, A-3, A-4 and A-5 B C and D B C and D C D D None If the available funds are insufficient to pay interest on all classes of Class A Notes, the owner trust will apply the available funds pro rata to the classes of Class A Notes based on their respective principal balances. See "DESCRIPTION OF THE NOTES AND INDENTURE -- DISTRIBUTIONS" in this prospectus supplement. o Principal...................... After paying interest on the notes, the owner trust will pay principal on the notes on each payment date. The owner trust will pay principal in the following order: BEFORE AN EVENT OF DEFAULT: 1. (A) Until the Class A-1 Note principal amount becomes zero, [ ]% of the total principal payment amount to the Class A-1 Notes and [ ]% of the total principal payment amount to the Class A-5 Notes; (B) on the payment date when the Class A-1 Note principal amount becomes zero, first, the remaining Class A-1 principal amount to the Class A-1 noteholders, second, [ ]% of the total principal payment amount, but not greater than the Class A principal payment amount, to the Class A-5 noteholders and third, the remaining Class A principal payment amount to the Class A-2, A-3, A-4 and A-5 Notes in that order, with each successive class not being entitled to principal until the prior class' principal amount is reduced to zero; (C) after the Class A-1 Note principal amount is reduced to zero, [ ]% of the total principal payment amount, but not greater than the Class A principal payment amount to the Class A-5 Notes and then the remaining Class A principal payment amount to the Class A-2, A-3, A-4 and A-5 Notes in that order, with each successive class not being entitled to principal until the prior class' principal amount is reduced to zero. If the available amount is insufficient for the full payment of the amounts called for in (A), (B), or (C) above, the allocation of the available amount will be as provided in "DESCRIPTION OF THE NOTES AND INDENTURE -- PRINCIPAL" in this prospectus supplement; 2. after the Class A-1 Note principal amount is reduced to zero, the Class B principal payment amount to the Class B Notes; 3. after the Class A-1 Note principal amount is reduced to zero, the Class C principal payment amount to the Class C Notes; and 4. after the Class A-1 Note principal amount is reduced to zero, the Class D principal payment amount to the Class D Notes. The principal payment amount on each class of the notes on each payment date will be based on the difference between the aggregate principal balance of that class of notes on that payment date and the target amount set for the class or in the case of Class B, C and D a floor amount set for the class, if greater than the target amount. AFTER AN EVENT OF DEFAULT: Following an event of default with respect to the notes, the owner trust will pay principal in the following order: CLASS OF NOTES RECEIVES PRINCIPAL BEFORE CLASSES ----- --------------------------------- A-1 A-2, A-3, A-4, A-5, B, C and D A-2 A-3, A-4, A-5, B, C and D A-3 A-4, A-5, B, C and D A-4 A-5, B, C and D A-5 B, C and D B C and D C D D None See "DESCRIPTION OF THE NOTES AND INDENTURE -- DISTRIBUTIONS" in this prospectus supplement. o Class A-3 Swap Agreement...................... The owner trust will enter into a swap agreement with a swap counterparty solely for the benefit of the Class A-3 noteholders. Under the swap agreement, the swap counterparty's payments will be calculated at the Class A-3 Note interest rate and the owner trust's payments will be calculated at the assumed fixed rate of [ ]%. To the extent that interest on any payment date at the Class A-3 Note interest rate exceeds interest calculated at the assumed fixed rate: o the swap counterparty will be obligated to pay an amount equal to the excess to the owner trust, o that payment will constitute a portion of the amount available but only in respect of the Class A-3 Notes and o the Class A-3 Notes will be dependent upon that payment for receipt of interest to the extent of the excess. Likewise under the swap agreement, to the extent that interest calculated at the assumed fixed rate exceeds interest calculated at the Class A-3 Note interest rate o the owner trust will be obligated to pay an amount equal to the excess to the swap counterparty, and o the payment will have the same priority, in terms of application of the amount available, as payment of interest on the Class A-3 Notes. Any shortfall in the payment of interest on the Class A-3 Notes due entirely to the failure of the swap counterparty to make a required payment under the swap agreement will not constitute an event of default under the indenture. Except to the extent the amount available on any payment date exceeds the amount needed to pay: o the servicing fee and servicer advances, o all interest and principal payable on the notes, with Class A-3 Note interest being calculated at the assumed fixed rate for this purpose, and o all amounts payable in connection with the cash collateral account, no amounts in addition to those available under the swap agreement will be available under the indenture to make up the shortfall. The only remedies in these circumstances will be those available to the owner trust under the swap agreement. See "DESCRIPTION OF THE NOTES AND INDENTURE -- THE CLASS A-3 SWAP AGREEMENT" in this prospectus supplement. o Class A-3 Swap Counterparty................... [ ] will be the counterparty to the owner trust under the swap agreement. The swap counterparty currently has an "[ ]" long-term unsecured senior debt credit rating from [ ] and an "[ ]" long-term unsecured senior debt credit rating from [ ]. See "DESCRIPTION OF THE NOTES AND INDENTURE-- THE CLASS A-3 SWAP COUNTERPARTY" in this prospectus supplement. o Stated Maturity Dates........... The notes will mature on the respective dates shown on the cover of this prospectus supplement. However, if the stated maturity date is not a business day, then the stated maturity date will be the next business day. o Optional Purchase of Class A-5 Notes................ The owner trust will have the right to purchase all of the Class A-5 Notes, on any payment date, at a purchase price equal to the principal balance of the Class A-5 Notes plus a premium. Following any purchase, the Class A-5 Notes will not be retired, but will continue to be entitled to interest and principal payments. See "DESCRIPTION OF THE NOTES AND INDENTURE -- OPTIONAL PURCHASE OF CLASS A-5 NOTES" in this prospectus supplement. o Optional Redemption When the Aggregate Note Principal Amount is Less Than 10% of Initial Contract Pool Principal Balance.............. [ ], the seller of contracts to the depositor, has the option to purchase the owner trust's assets when the outstanding note principal balance is less than 10% of the initial contract pool principal balance. If the seller exercises this option, the indenture trustee will redeem all notes on the next payment date. The redemption price for each note will be the note's principal amount plus unpaid accrued interest to but excluding the redemption date. The contract principal balance of any contract is the present value of the unpaid scheduled payments due on that contract discounted at the discount rate, called the "discount rate," of [ ]%. This prospectus supplement uses this discount rate to calculate principal balances of contracts throughout. The "contract pool principal balance" is the aggregate of the individual discounted contract principal balances. See "DESCRIPTION OF THE NOTES AND INDENTURE -- OPTIONAL PURCHASE OF CONTRACTS" in this prospectus supplement. Cut-off Date........................ [ ]. Closing Date........................ On or about [ ]. Servicing; Servicing Fee............ The servicer will be responsible for servicing, managing and administering the contracts and related interests, and enforcing and making collections on the contracts. The servicer may make advances for delinquent scheduled payments, to the extent it determines that advances will be recoverable in future periods. Servicer advances are reimbursable from contract payments. See "Description of the Pooling and Servicing Agreement-- Servicing" in the accompanying prospectus. The servicer's monthly fee will equal the product of o one twelfth of one percent and o the aggregate contract pool principal balance as of the last day of the second preceding collection period. The servicer fee is payable out of contract payments. The servicer will pay any sub-servicer servicing fees from its monthly servicing fee. See "DESCRIPTION OF THE NOTES AND INDENTURE-- SERVICING" in this prospectus supplement. Ratings............................. The owner trust will not issue any class of notes unless [ ], and [ ]. assign at least the following ratings to each class of notes: CLASS [ ] [ ] ----- A-1 A-2 A-3 A-4 A-5 B C D See "RATINGS OF THE NOTES" in this prospectus supplement and the accompanying prospectus. Owner Trust Assets A. The Contracts............... The contracts will consist of the following: o equipment lease contracts, o installment payment agreements, o conditional sales/financing agreements, o promissory notes, and o loan and security agreements. As of [ ]the pool of contracts for the owner trust had the following characteristics. Percentages are based on the contract pool principal balance: o Initial contract pool principal balance..........................$[ ] o Number of contracts [ ] o Average contract principal balance..........................$[ ] o Leases as a percentage of the contracts........................[ ]% o Loans and other financing arrangements as a percentage of the contracts........................[ ]%; o Underlying equipment type concentration: PRINCIPAL BALANCE EQUIPMENT TYPE CONCENTRATION [ ]................................. [ ]% [ ]................................. [ ]% [ ]................................. [ ]% [ ]................................. [ ]% [ ]................................. [ ]% [ ]................................. [ ]% [ ]................................. [ ]% No other single type of equipment accounted for more than 5% of the initial contract pool principal balance. o Geographic concentration: PRINCIPAL BALANCE STATE CONCENTRATION ----- ------------- [ ]................................. [ ]% [ ]................................. [ ]% [ ]................................. [ ]% [ ]................................. [ ]% [ ]................................. [ ] No other state represented more than 5% of the initial contract pool principal balance. o Remaining terms of the contracts.................[ ] month to [ ] months o The weighted average remaining term of the contracts ................[ ] months o Weighted average age of the contracts......[ ] months See "THE CONTRACTS -- STATISTICS RELATING TO THE CUT-OFF DATE CONTRACT POOL" in this prospectus supplement. B. Cash Collateral Account......................... The indenture trustee will establish a cash collateral account having an initial balance of $[ ] ([ ]% of initial contract pool principal balance) for the benefit of the noteholders, which may include proceeds of loans from third party lenders to the owner trust under a cash collateral account loan agreement. The indenture trustee will use cash collateral account funds to pay the following amounts if payments on the contracts are insufficient: o interest due on the notes, with interest on the Class A-3 Notes being calculated for this purpose at the assumed fixed rate of [ ]% in connection with the swap agreement; o the lesser of o losses on liquidation of defaulted contracts during the relevant collection period, and o the excess of the aggregate note principal amount over the contract pool principal balance, including all scheduled payments for the relevant collection period and unpaid scheduled payments from prior periods; and o principal on the notes on the applicable stated maturity date. See "DESCRIPTION OF THE NOTES AND INDENTURE -- CASH COLLATERAL ACCOUNT" in this prospectus supplement. Use of Proceeds..................... After the deposit of funds from the note sale proceeds into the cash collateral account and payment of expenses, the indenture trustee will pay the remaining proceeds of the sale of notes to the depositor. The depositor will pay the proceeds to a warehousing trustor to [ ]. in payment of the purchase price of contracts acquired from them, respectively. See "USE OF PROCEEDS" in this prospectus supplement. Federal Income Tax Considerations...................... Stroock & Stroock & Lavan LLP, special federal tax counsel, will deliver an opinion of counsel that for federal income tax purposes, the notes will be treated as indebtedness and the trust will not be an association, or publicly traded partnership, taxable as a corporation. See "Federal Income Tax Considerations" in this prospectus supplement and "Material Federal Income Tax Consequences" in the accompanying prospectus. Erisa Considerations................ Subject to particular considerations discussed in this prospectus supplement under "ERISA Considerations," the notes are eligible for purchase by employee benefit plans. Legal Investment.................... The Class A-1 Notes will be eligible securities for purchase by money market funds under Rule 2a-7 under the Investment Company Act of 1940. BACKGROUND INFORMATION The information in this section will help you understand the information in this prospectus supplement and the accompanying prospectus. The principal balance of any contract is the present value of the unpaid scheduled payments due on the contract after a cut-off date. The principal balance of a contract excludes all scheduled payments due on or prior to, but not received as of, that date, as well as any scheduled payments due after but received before that date. The principal balance also excludes any prepayments received on or prior to that date. The scheduled payments are discounted monthly at the rate of [ ]% per annum. The aggregate principal balance of the contracts expected to be held by the owner trust as of any particular date is referred to as the contract pool principal balance. The contract pool principal balance, as of the initial cut-off date, is referred to as the initial cut-off date contract pool principal balance or the initial contract pool. The initial cut-off date is [ ] for all contracts transferred to the owner trust on the closing date for the sale of the notes. It will be the first day of the month of transfer to the owner trust for each substitute contract. Contract balance percentages and amounts discussed below are based on the aggregate principal balance of the contracts being transferred to the owner trust as of the initial cut-off date, unless a different date is noted. Changes in the characteristics of the contract pool between the initial cut-off date and the closing date will not affect more than 5% of the initial cut-off date contract pool principal balance. RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE NOTES. FUTURE CONTRACT DELINQUENCY AND The sponsor presents the historical LOSS EXPERIENCE OF THE CONTRACT contract delinquency and loss experience POOL MAY VARY SUBSTANTIALLY FROM of the originators' portfolios of THE ORIGINATORS' HISTORICAL contracts similar to those being EXPERIENCE transferred to the owner trust under "THE CONTRACTS -- STATISTICS RELATING TO DELINQUENCIES AND DEFAULTS." However, the actual results for the owner trust's contracts could be substantially worse. If so, you may not receive note interest and principal payments in the amounts and at the times you expect. SOME NOTE CLASSES WILL BE ENTITLED The owner trust will pay interest, TO INTEREST OR PRINCIPAL PAYMENTS principal or both on some classes of BEFORE OTHER NOTE CLASSES AND notes prior to paying interest, THE SWAP COUNTERPARTY WILL BE principal or both on other classes of ENTITLED TO PAYMENT BEFORE SOME notes. The subordination of some NOTE CLASSES classes of notes to others means that the subordinated classes are more likely to suffer the consequences of delinquent payments and defaults on the contracts than the classes having prior payment rights. See "DESCRIPTION OF THE NOTES AND INDENTURE -- DISTRIBUTIONS," "-- SUBORDINATION OF SUBORDINATE NOTES" and "-- CASH COLLATERAL ACCOUNT" in this prospectus supplement. Similarly, if the owner trust has to pay any amounts to the swap counterparty under the Class A-3 Notes swap agreement, that amount will have the same priority of payment as interest owed to the Class A-3 noteholders. This means that the amount owed to the swap counterparty must be paid before the payment of interest to the Class B, C and D noteholders and before the payment of principal to any noteholders. See "DESCRIPTION OF THE NOTES AND INDENTURE -- CLASS A-3 SWAP AGREEMENT" in this prospectus supplement. Moreover, the more senior classes of notes could lose the credit enhancement provided by the more subordinate classes and the cash collateral account if delinquencies and defaults on contracts increase and the collections on contracts and amounts in the cash collateral account are insufficient to pay even the more senior classes of notes. ANY FAILURE BY THE SWAP The Class A-3 Notes will be COUNTERPARTY TO PAY AMOUNTS dependent upon payments to be made by the OWED UNDER THE SWAP AGREEMENT swap counterparty under the swap WOULD REDUCE THE FUNDS agreement for receipt of the full amount AVAILABLE TO PAY INTEREST of interest on the Class A-3 Notes. This ON THE CLASS A-3 NOTES will be the case if the interest due on the Class A-3 Notes at their floating rate exceeds the amount available to the owner trust to pay the Class A-3 Note interest at the assumed fixed rate of [ ]%. Any shortfall in the payment of interest on the Class A-3 Notes due entirely to the failure of the swap counterparty to make a required payment under the swap agreement will not constitute an event of default under the indenture. Except to the extent the amount available on any payment date exceeds the amount necessary to pay o the servicing fee and servicer advances, o all interest and principal payable on the notes, with Class A-3 Note interest being calculated at the assumed fixed rate for this purpose and o all amounts payable in connection with the cash collateral account, no amounts in addition to those available under the swap agreement will be available under the indenture to make up the shortfall. The only remedies in these circumstances will be those available to the owner trust under the swap agreement. As a general matter, the obligations of the swap counterparty under the swap agreement are unsecured. However, in the event that the swap counterparty's long-term unsecured senior debt ceases to be rated at a level acceptable to [ ] and [ ], the swap counterparty will be obligated either to (a) post collateral or establish other arrangements to secure its obligations under the swap agreement or (b) arrange for a substitute swap counterparty to assume the rights and obligations of the swap counterparty under the swap agreement, in either case so that the ratings of the notes are maintained or, if applicable, restored to their level immediately prior to the downgrading or withdrawal of the swap counterparty's debt. If the swap counterparty fails to take either of these actions, the owner trust will be entitled to terminate the swap agreement and to claim from the swap counterparty the cost of obtaining a replacement swap from a swap counterparty satisfactory to the note rating agencies. The Class A-3 noteholders bear the risk of any failure by the swap counterparty to take the actions required of it and the risk of any inability of the owner trust to obtain a replacement swap agreement. ADVERSE EVENTS IN [ ] HIGH If adverse events or economic CONCENTRATION STATES MAY conditions were particularly severe in a CAUSE INCREASED DEFAULTS geographic region where there is a AND DELINQUENCIES substantial concentration of obligors, the amount of delinquent payments and defaults on the contracts may increase. As a result, the overall timing and amount of collections on the contracts held by the owner trust may differ from what you expect, and you may experience delays or reductions in payments. The following are the approximate percentages of the initial contract pool principal balance of the owner trust's contracts whose obligors are located in the following states: o [ ]% in [ ], o [ ]% in [ ], o [ ]% in [ ], o [ ]% in [ ] and o [ ]% in [ ]. The remaining states accounted for [ ]% of the initial contract pool principal balance, and none of these remaining states accounted for more than 5% of the initial contract pool principal balance. [Although the sponsor does not know of any matters likely to increase the rate of delinquencies or defaults in these states, an example of an adverse event specific to a geographic region is the possibility of a catastrophic earthquake in California. An earthquake in California could have negative regional economic repercussions and potentially cause obligors in that region to delay or reduce their payments on contracts. Additionally, a substantial downturn in the financial services industry, which is highly concentrated in the states of New York and New Jersey, or in the oil and gas industry, which is concentrated in the state of Texas could reduce revenues for obligors in those states and ultimately reduce the associated obligors' ability to make timely payments on their related contracts]. ADVERSE ECONOMIC CONDITIONS If the industries in which there is IN HIGH CONCENTRATION a substantial concentration of contracts INDUSTRIES MAY CAUSE INCREASED experience adverse events or economic DEFAULTS AND DELINQUENCIES conditions, the timing and amount of collections on the contracts held by the owner trust may differ from what you expect. This could result in delays or reduced payments to you. As of the initial cut-off date, of the contract pool principal balance, approximately o [ ]% related to the manufacturing industry, o [ ]% related to equipment used in the services industry, excluding medical and professional services, o [ ]% related to the retail and wholesale trade industry, o [ ]% related to equipment used in transportation, o [ ]% related to equipment used in professional services, and o [ ]% related to the financial services industry. While the sponsor does not know of any industry conditions, practices or other matters likely to increase the rate of delinquencies or defaults on contracts with end-users in these industries, some of them may be adversely affected by various economic conditions. For example, a rise in interest rates may weaken the demand for construction services. Moreover, the retail trade industry is dependent upon the level of consumer confidence and spending. Adverse developments concerning these conditions will tend to increase the rate of delinquencies and defaults by contract obligors in those industries. This, in turn, could result in reductions of or delays in the collection of funds for payment of the notes. The sponsor does not believe that any other industry accounts for more than 5.00% of the contract pool principal balance. However, as shown in the table below under the heading "Types of Obligor," the depositor's records list [ ]% of the contract pool principal balance in the category of "Other" obligor. The depositor has not analyzed this category to determine whether or not the contracts included in it could be grouped into some other more specific type of equipment category. Any contracts in this "Other" category that relate to any particular industry would be subject to all economic and other risks associated with that industry. Any adverse developments in that industry will tend to increase the rate of delinquencies and defaults by contract obligors in that industry. This, in turn, could result in reductions or delays in collection of funds for payment of the notes. PRODUCT DEFECTS OR OBSOLESCENCE [ ], a [ ]and [ ] a [ ] is the OR ADVERSE ECONOMIC EVENTS vendor of equipment for approximately FOR TWO VENDORS ACCOUNTING FOR [ ]% of the contract pool principal HIGH PROPORTIONS OF THE CONTRACTS balance calculated as of the initial MAY CAUSE INCREASED DEFAULTS AND cut-off date. Products of [ ], a leading DELINQUENCIES producer of computer systems, accounted for approximately [ ]% of the contract pool balance calculated as of the initial cut-off date. Although the sponsor is unaware of conditions likely to increase the rate of defaults or delinquencies on contracts pertaining to equipment produced by these two vendors, some events concerning these vendors or their products could have that effect. For example, if either of these vendors were to experience financial difficulties, the obligors' payment performance with respect to the related contracts may decline as the obligors may be less inclined to make payments on contracts with respect to a vendor which is suffering financial difficulties. Additionally, the occurrence of a substantial number of defects in products produced by either of these vendors may result in decisions by the obligors on the contracts relating to equipment that proved defective not to pay the contract amounts, to pay late or to pay smaller amounts. This could result in reductions of or delays in payments you expect on the notes. Moreover, obsolescence of the products of either of these vendors could result in prepayments of contracts that would cause the notes to be paid earlier than you expect. No other single vendor originated more than [ ]% of the contract pool principal balance as of the initial cut-off date. PRODUCT DEFECTS OR OBSOLESCENCE If the types of equipment in which OF TYPES OF EQUIPMENT ACCOUNTING contracts are concentrated suffer FOR HIGH PROPORTIONS OF THE unexpectedly high rates of defects or CONTRACTS MAY CAUSE INCREASED become obsolete, the obligors on the DEFAULTS OR DELINQUENCIES contracts may default, pay late or pay less than the amounts owed on the contracts. This could result in reductions of or delays in payments you expect on the notes. As of the initial cut-off date, of the contract pool principal balance, approximately o [ ]% related to contracts involving telecommunications equipment, o [ ]% related to contracts involving transportation equipment, o [ ]% related to contracts involving computer and point-of-sale equipment, o [ ]% related to contracts involving computer software, o [ ]% related to contracts involving manufacturing, o [ ]% related to contracts involving construction equipment, and o [ ]% related to contracts involving medical equipment. The depositor does not believe that any other type of equipment accounts for more than [ ]% of the contract pool principal balance. However, as shown in the table below under the heading "Types of Equipment," the depositor's records list [ ]% of the contract pool principal balance in the category of "Other" types of equipment. The depositor has not analyzed this category to determine whether or not the contracts included in it could be grouped into some other more specific type of equipment category. Any contracts in this "Other" category that relate to any particular type of equipment would be subject to all defect, obsolescence and other risks associated with that type of equipment. Any adverse developments concerning that type of equipment will tend to increase the rate of delinquencies and defaults by obligors on contracts involving that type of equipment. This, in turn, could result in reductions or delays in collection of funds for payment of the notes. THE OWNER TRUST'S NOT HAVING The owner trust will have no SECURITY INTERESTS IN COMPUTER security interest in computer software SOFTWARE AND SERVICES AND THE and computer services contracts, which OWNER TRUST'S NOT BEING NAMED accounted for [ ]% of the initial AS SECURED PARTY IN MOTOR VEHICLE contract pool balance, and the owner TITLE CERTIFICATES WILL LEAVE trust will not be named as a secured THE OWNER TRUST WITHOUT COLLATERAL party in the title certificates for motor FOR THE ASSOCIATED CONTRACTS vehicle contracts, which accounted for a substantial portion of the [ ]% of the initial contract pool principal balance attributable to the transportation industry. If the obligor on this type of contract fails to pay or is late in paying, the owner trust will have no recourse to the software, services or motor vehicles, as the case may be, underlying the contracts. This increases the risk that the owner trust will be unable to pay or will be late in paying the amounts you expect on the notes. THE TRUST ASSETS ARE THE ONLY All distributions on the notes will SOURCE OF PAYMENTS ON THE NOTES be made from payments by borrowers under the receivables. The Trust has no other assets [other than[ ]] to make distributions on the notes. The receivables are NOT insured or guaranteed by any person. The Trust is the only person that is obligated to make distributions of the notes. THE OWNER TRUST THE OWNER TRUST The sponsor created the owner trust on [ ] under a trust agreement, which the parties will amend and restate on the closing date for the sale of the notes, among the sponsor the depositor and the owner trustee. Under a pooling and servicing agreement, dated as of [ ], among o the depositor, o the owner trust, o [ ], an originator and the seller of contracts to the depositor and o the servicer. The depositor will transfer all of the contracts and the related security interests to the owner trust. As noted in "THE ORIGINATORS, THE SELLER, THE SERVICER AND THE DEPOSITOR "in this prospectus supplement and "THE CONTRACTS -- SOFTWARE AND SERVICES" in the accompanying prospectus, some transferred contracts will not have associated security interests. The owner trust will issue an equity certificate, representing the beneficial ownership interest in the owner trust, to the depositor. The equity certificate will be entitled to any excess amount available on any payment date after reimbursement of servicer advances and payment of servicing fees, principal and interest on the notes, any amount owed to the swap counterparty and amounts payable in connection with the cash collateral account. See "DESCRIPTION OF THE NOTES AND INDENTURE -- DISTRIBUTIONS" in this prospectus supplement. The sponsor is not offering and selling the equity certificate under this prospectus supplement and the accompanying prospectus. THE INDENTURE Under an indenture dated as of [ ] between the owner trust and [ ], as indenture trustee, the indenture trustee will authenticate and deliver the notes. CAPITALIZATION OF THE OWNER TRUST If the issuance and sale of the notes had taken place on the initial cut-off date, the capitalization of the owner trust on that date would have consisted of notes with an aggregate principal amount of $[ ] and an equity certificate. THE OWNER TRUSTEE [ ] will be the owner trustee under the trust agreement. The owner trustee is a [ ] and its principal offices are located at [ ]. THE ORIGINATORS, THE SERVICER, THE SELLER AND THE DEPOSITOR [TO BE INSERTED] ORIGINATION OF THE CONTRACTS [TO BE INSERTED] THE CONTRACTS DESCRIPTION OF THE CONTRACTS All of the contracts are commercial, rather than consumer, leases, loans or agreements. See "THE CONTRACTS" in the accompanying prospectus. STATISTICS RELATING TO THE INITIAL CUT-OFF DATE CONTRACT POOL The initial contract pool principal balance is $[ ]. This amount is based upon the contract pool principal balance determined as of the initial cut-off date, but also includes an amount in respect of scheduled payments on the contracts due prior to, but not received as of, the cut-off date. The following tables set forth the characteristics of the contracts as of the cut-off date. Tables presented in this section may not total due to rounding. COMPOSITION OF THE INITIAL CUT-OFF DATE CONTRACT POOL WEIGHTED WEIGHTED AVERAGE INITIAL AVERAGE AVERAGE CONTRACT CONTRACT POOL ORIGINAL REMAINING PRINCIPAL NUMBER OF PRINCIPAL TERM TERM BALANCE CONTRACTS BALANCE (RANGE) (RANGE) (RANGE) --------- ------------ --------- --------- --------- [ ] $[ ] [ ] months [ ] months $[ ] ([ ] months to ([ ] month to ($[ ] to [ ] months) [ ] months) $[ ])
TYPE OF CONTRACTS AGGREGATE % OF INITIAL AGGREGATE % OF TOTAL CONTRACT CONTRACT POOL NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL TYPE OF CONTRACT CONTRACTS CONTRACTS BALANCE BALANCE ---------------- --------- --------- ------- -------------- True Lease..................... Finance Leases................. Loans/Conditional Sales........ Installment Payment Agreements................. Total................... 100.00% $ 100.00% ========= =========== ========= ===========
GEOGRAPHICAL DIVERSITY AGGREGATE % OF INITIAL AGGREGATE % OF TOTAL CONTRACT CONTRACT POOL NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL STATE CONTRACTS CONTRACTS BALANCE BALANCE ----- --------- --------- -------- ------------- - ---------..................... - ----------.................... - ---------..................... - ---------..................... - -----------................... - ----------.................... - ----------.................... - ----------.................... - --------...................... - ---------..................... - --------...................... - -------....................... - -----......................... - -------....................... - ---------..................... - -------....................... - ---------..................... - --------...................... - --------...................... - --------...................... - ---------..................... - --------...................... - ------........................ - --------...................... - -------....................... Total................. 100.00% $ 100.00% ========= ============ ========= ===========
PAYMENT STATUS AGGREGATE % OF INITIAL AGGREGATE % OF TOTAL CONTRACT CONTRACT POOL NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL DAYS DELINQUENT CONTRACTS CONTRACTS BALANCE BALANCE --------------- --------- --------- --------- ------------ Current, including 1 to 30 day delinquent contracts............. 31 - 60 days delinquent................. Total........................... 100.00% 100.00% ========= ====== ========= ========
TYPES OF EQUIPMENT AGGREGATE % OF INITIAL AGGREGATE % OF TOTAL CONTRACT CONTRACT POOL NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL TYPE OF EQUIPMENT CONTRACTS CONTRACTS BALANCE BALANCE - ----------------- --------- --------- ------- ------------- Telecommunications.................... Transportation........................ Computer.............................. Computer Software..................... Manufacturing......................... Construction.......................... Medical............................... Automotive Diagnostic Equipment.......................... Printing.............................. Resources............................. Office Equipment...................... Commercial Retail Fixtures Industrial............................ Other, including $[ ] as the largest and $[ ] as the average contract principal balance.................. Total........................... 100.00% $ 100.00% ========= ====== ========= ========
The depositor does not believe that any other type of equipment accounts for more than 5% of the contract pool principal balance. However, the depositor has not analyzed the contracts included in the category "Other" in the above table to determine whether or not the contracts included in it could be grouped into some other more specific type of equipment category.
CONTRACT PRINCIPAL BALANCES AGGREGATE % OF INITIAL AGGREGATE % OF TOTAL CONTRACT CONTRACT POOL NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL CONTRACT PRINCIPAL BALANCE CONTRACTS CONTRACTS BALANCE BALANCE -------------------------- --------- --------- ------- ------------- $ 0.01 to $ 5,000.00..... $ 5,000.01 to $ 25,000.00..... $ 25,000.01 to $ 50,000.00..... $ 50,000.01 to $ 100,000.00..... $ 100,000.01 to $ 500,000.00..... $ 500,000.01 to $1,000,000.00 $ 1,000,000.01 to $2,000,000.00..... $ 2,000,000.01 to $3,000,000.00..... $3,000,000.01 to $4,000,000.00 $ 4,000,000.01 to $5,000,000.00..... Over $5,000,000, the largest single contract principal balance being $[ ]........... Total...................... 100.00% $ 100.00% ========= ======== ========= =========
REMAINING TERMS OF CONTRACTS AGGREGATE % OF INITIAL AGGREGATE % OF TOTAL CONTRACT CONTRACT POOL NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL REMAINING TERMS OF CONTRACTS CONTRACTS CONTRACTS BALANCE BALANCE ---------------------------- --------- --------- --------- ------------- (MONTHS) 0 - 12............................. 13 - 24............................ 25 - 36............................ 37 - 48............................ 49 - 60............................ 61 - 72............................ 73 - 84............................ 85 - 96............................ 97 - 108............................ Over 108............................ Total......................... 100.00 $ 100.00 ========= ====== ======== ======
TYPES OF OBLIGOR AGGREGATE % OF INITIAL AGGREGATE % OF TOTAL CONTRACT CONTRACT POOL NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL TYPE OF OBLIGOR CONTRACTS CONTRACTS BALANCE BALANCE - --------------- --------- --------- ------- ------------ Manufacturing...................... Service Organizations.............. Retail & Wholesale................. Transportation..................... Professional....................... Financial Services................. Manufacturing & Construction.................... Machine tools...................... Medical............................ Resources.......................... Government......................... Print Center....................... Other, including $[ ] as the largest and $[ ] as the average principal balance......................... Total......................... 100.00% $ 100.00% =============== ====== ============== ======
The sponsor does not believe that any other industry accounts for more than 5.00% of the contract pool principal balance. However, the depositor has not analyzed the contracts included in the category "Other" in the above table to determine whether or not the contracts could be grouped into some other more specific industry category.
OBLIGOR CONCENTRATION AGGREGATE AGGREGATE CONTRACT % OF INITIAL OBLIGORS (INCLUDING CONTRACTS NUMBER OF PRINCIPAL CONTRACT POOL SECURING VENDOR LOANS) CONTRACTS BALANCE PRINCIPAL BALANCE ---------------------- --------- ------- ----------------- Top 5.............................. [ ] $[ ] [ ]%
STATISTICS RELATING TO DELINQUENCIES AND DEFAULTS The following table shows contract delinquency statistics for the originators' portfolios of receivables similar to the contracts, on an aggregate basis, as of December 31 in each of the past five years and as of [ ] and [ ]. The applicable originators used the underwriting standards described in the prospectus under the section titled "THE ORIGINATORS, THE SERVICER, THE SELLER AND THE DEPOSITOR-- UNDERWRITING--" for all of these receivables. For these purposes, a "DELINQUENCY" means that the obligor on the contract has failed to make a required scheduled payment in an amount equal to at least 90% of the required scheduled payment within 60 days of the due date. For these purposes, any payment made by the obligor on a contract subsequent to the required payment date is applied to the earliest payment which was unpaid. These statistics are not necessarily indicative of the future performance of the contracts. The following table is based on the net investment for all contracts originated by [ ]. and the gross receivable for contracts originated by the other originators. Net investment is the sum of all payments plus any expected equipment residual value under a contract discounted to present value using the contract's implicit interest rate. The gross receivable is the undiscounted sum of all payments under a contract.
CONTRACT DELINQUENCIES PERCENT OF CONTRACT BALANCES WHICH WERE DELINQUENT ----------------------------------------------------- CONTRACT 31 TO 60 61 TO 90 OVER 90 BALANCE DAYS DAYS DAYS TOTAL ------- ---- ---- ---- ----- AS OF (IN THOUSANDS) - ----- 12/31/[ ]........................ $[ ] [ ]% [ ]% [ ]% [ ]% 12/31/[ ]........................ $[ ] [ ]% [ ]% [ ]% [ ]% 12/31/[ ]........................ $[ ] [ ]% [ ]% [ ]% [ ]% 12/31/[ ]........................ [ ] [ ]% [ ]% [ ]% [ ]% 12/31/[ ]........................ $[ ] [ ]% [ ]% [ ]% [ ]% 03/31/[ ]........................ $[ ] [ ]% [ ]% [ ]% [ ]% 03/31/[ ]........................ $[ ] [ ]% [ ]% [ ]% [ ]%
LOSSES AND RECOVERIES The following table shows statistics for gross losses and losses net of recoveries on defaulted contracts within the originators' portfolios of receivables similar to the contracts during the twelve-month period ending December 31 in each of the past five years and the three-month periods ended March 31, [ ] and [ ]. Gross losses means total losses before recoveries measured against the net investment of the contracts, gross of any allowance for losses. Losses net of recoveries means losses after recoveries measured against the net investment of the contracts, gross of any allowance for losses. These statistics are not necessarily indicative of the future performance of the contracts.
AGGREGATE NET GROSS LOSSES AS A NET LOSSES AS A INVESTMENT OF PERCENTAGE OF NET PERCENTAGE OF NET TWELVE MONTHS ENDED CONTRACTS INVESTMENT INVESTMENT ------------------- ------------- --------------- ---------------- (IN THOUSANDS) 12/31/[ ]................... $[ ] [ ]% [ ]% 12/31/[ ]................... $[ ] [ ]% [ ]% 12/31/[ ]................... $[ ] [ ]% [ ]% 12/31/[ ]................... $[ ] [ ]% [ ]% 12/31/[ ]................... $[ ] [ ]% [ ]% THREE MONTHS ENDED - ------------------ 03/31/[ ]................... $[ ] [ ]% [ ]% 03/31/[ ]................... $[ ] [ ]% [ ]%
WEIGHTED AVERAGE LIFE OF THE NOTES The rate of payments on contracts will directly affect o the rate of note principal payments; o the aggregate amount of each note interest payment; and o the yield to maturity of the notes. The payments on the contracts may be in the form of payments scheduled to be made under the terms of the contracts, prepayments or liquidations due to default, casualty and other events which cannot be predicted. [ ] may purchase contracts from the owner trust if the contracts were ineligible for transfer at the time of transfer to the owner trust. Any payments for these reasons, other than scheduled payments may result in distributions to you of amounts which would otherwise have been distributed over the remaining term of the contracts. Each prepayment, liquidation or repurchase of a contract, if the contract is not replaced by the depositor with a comparable substitute contract as described under "THE CONTRACTS -- SUBSTITUTION OF CONTRACTS" in the accompanying prospectus, will shorten the weighted average remaining term of the contracts and the weighted average life of the notes. See "RISK FACTORS -- CONTRACT PREPAYMENT, INELIGIBILITY OR DEFAULT MAY CAUSE EARLIER REPAYMENT OF THE NOTES THAN YOU EXPECT AND YOU MAY NOT BE ABLE TO FIND INVESTMENTS WITH THE SAME YIELD AS THE NOTES AT THE TIME OF REPAYMENT" in the accompanying prospectus. The following chart sets forth the percentage of the initial principal amount of each class of notes which would be outstanding on the distribution dates set forth below assuming the conditional prepayment rates ("CPR") indicated in the chart. This information is hypothetical. The conditional prepayment rate assumes that a fraction of the outstanding contracts is prepaid on each payment date, which implies that each contract in the pool of contracts is equally likely to prepay. This fraction, expressed as a percentage, is annualized to arrive at the conditional prepayment rate for the contracts. The conditional prepayment rate measures prepayments based on the contract pool principal balance, after the payment of all payments scheduled to be made under the terms of the contracts during each collection period. The conditional prepayment rate further assumes that all contracts are the same size and amortize at the same rate. The conditional prepayment rate also assumes that each contract will be either paid as scheduled or prepaid in full. The amounts set forth below are based upon the timely receipt of scheduled monthly contract payments, and assume that: o the seller exercises its option to cause a redemption of the notes when the aggregate note principal balance is less than 10% of the initial aggregate discounted contract balance of the contracts, and o the closing date for the sale of the contracts to the owner trust is [ ]. These tables are based upon the contract pool principal balance determined using the discount rate of [ ]%. In addition, it is assumed for the purposes of these tables only, that the owner trust issues the notes in the following initial principal amounts and at the following fixed interest rates: CLASS INITIAL PRINCIPAL AMOUNT INTEREST RATE ----- ------------------------ ------------- A-1...................... $[ ] [ ]% A-2...................... [ ] [ ] A-3...................... [ ] [ ] A-4...................... [ ] [ ] A-5...................... [ ] [ ] B........................ [ ] [ ] C........................ [ ] [ ] D........................ [ ] [ ]
PERCENTAGE OF THE INITIAL PRINCIPAL OF THE CLASS A-1 NOTES CPR -------------------------------------------------- PAYMENT DATE 0% 6% 9% 12% 18% Closing Date.......................................... _____________......................................... _____________......................................... _____________......................................... ____________.......................................... _____________......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________ ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... ____________.......................................... _____________......................................... ______________........................................ ____________.......................................... _____________......................................... ______________........................................ ___________........................................... Weighted Average Life To Call (in years............... Weighted Average Life To Maturity (in years)..........
PERCENTAGE OF THE INITIAL PRINCIPAL OF THE CLASS A-2 NOTES CPR -------------------------------------------------- PAYMENT DATE 0% 6% 9% 12% 18% ------------ -- -- -- --- --- Closing Date........................................... ________________....................................... _________________...................................... ___________________.................................... ___________________.................................... _______________........................................ __________________..................................... ___________________.................................... _________________...................................... ___________________.................................... __________________..................................... _____________________.................................. _______________........................................ ___________________.................................... _________________...................................... ____________........................................... _________________...................................... _____________________.................................. __________________..................................... ________________....................................... ___________________.................................... ________________....................................... ______________......................................... _________________...................................... ______________......................................... ________________....................................... _____________.......................................... _________________...................................... _________________...................................... _____________________.................................. _______________________................................ ____________________................................... _________________...................................... ______________......................................... _________________...................................... ______________......................................... _________________...................................... ______________......................................... _________________...................................... ______________......................................... ______________......................................... ____________........................................... ______________......................................... _________________...................................... _____________.......................................... ________________....................................... _____________.......................................... ____________........................................... _________________...................................... _____________.......................................... Weighted Average Life To Call (in years)............... Weighted Average Life To Maturity (in years)...........
PERCENTAGE OF THE INITIAL PRINCIPAL OF THE CLASS A-3 NOTES CPR --------------------------------------------------- PAYMENT DATE 0% 6% 9% 12% 18% ------------ -- -- -- --- --- Closing Date........................................... _________________...................................... ________________....................................... ______________......................................... ______________......................................... ____________........................................... ____________........................................... _______________........................................ ____________........................................... ____________........................................... ______________......................................... ______________......................................... ____________........................................... _______________........................................ _________________...................................... _______________........................................ _____________.......................................... ________________....................................... ________________....................................... _________________...................................... ___________________.................................... ________________....................................... ______________......................................... ____________........................................... _______________........................................ _________________...................................... _______________........................................ ___________________.................................... ________________....................................... __________________..................................... ______________......................................... ________________....................................... ______________......................................... _________________...................................... ______________......................................... ______________......................................... _____________.......................................... ________________....................................... ______________......................................... ________________....................................... _________________...................................... ____________________................................... ________________....................................... _______________........................................ _________________...................................... __________________..................................... _______________........................................ ________________....................................... ______________......................................... __________________..................................... ___________ Weighted Average Life To Call (in years)............... Weighted Average Life To Maturity (in years)...........
PERCENTAGE OF THE INITIAL PRINCIPAL OF THE CLASS A-4 NOTES CPR ------------------------------------------------- PAYMENT DATE 0% 6% 9% 12% 18% ------------ -- -- -- --- --- Closing Date........................................... _________________...................................... ________________....................................... ______________......................................... ______________......................................... ____________........................................... ____________........................................... _______________........................................ ____________........................................... ____________........................................... ______________......................................... ______________......................................... ____________........................................... _______________........................................ _________________...................................... _______________........................................ _____________.......................................... ________________....................................... ________________....................................... _________________...................................... ___________________.................................... ________________....................................... ______________......................................... ____________........................................... _______________........................................ _________________...................................... _______________........................................ ___________________.................................... ________________....................................... __________________..................................... ______________......................................... ________________....................................... ______________......................................... _________________...................................... ______________......................................... ______________......................................... _____________.......................................... ________________....................................... ______________......................................... ________________....................................... _________________...................................... ____________________................................... ________________....................................... _______________........................................ _________________...................................... __________________..................................... _______________........................................ ________________....................................... ______________......................................... __________________..................................... _________ Weighted Average Life To Call (in years)............... Weighted Average Life To Maturity (in years)...........
PERCENTAGE OF THE INITIAL PRINCIPAL OF THE CLASS A-5 NOTES CPR -------------------------------------------------- PAYMENT DATE 0% 6% 9% 12% 18% ------------ -- -- -- --- --- Closing Date........................................... _________________...................................... ________________....................................... ______________......................................... ______________......................................... ____________........................................... ____________........................................... _______________........................................ ____________........................................... ____________........................................... ______________......................................... ______________......................................... ____________........................................... _______________........................................ _________________...................................... _______________........................................ _____________.......................................... ________________....................................... ________________....................................... _________________...................................... ___________________.................................... ________________....................................... ______________......................................... ____________........................................... _______________........................................ _________________...................................... _______________........................................ ___________________.................................... ________________....................................... __________________..................................... ______________......................................... ________________....................................... ______________......................................... _________________...................................... ______________......................................... ______________......................................... _____________.......................................... ________________....................................... ______________......................................... ________________....................................... _________________...................................... ____________________................................... ________________....................................... _______________........................................ _________________...................................... __________________..................................... _______________........................................ ________________....................................... ______________......................................... __________________..................................... _________ Weighted Average Life To Call (in years)............... Weighted Average Life To Maturity (in years)...........
PERCENTAGE OF THE INITIAL PRINCIPAL OF THE CLASS B NOTES CPR ------------------------------------------------- PAYMENT DATE 0% 6% 9% 12% 18% ------------ -- -- -- --- --- Closing Date........................................... _________________...................................... ________________....................................... ______________......................................... ______________......................................... ____________........................................... ____________........................................... _______________........................................ ____________........................................... ____________........................................... ______________......................................... ______________......................................... ____________........................................... _______________........................................ _________________...................................... _______________........................................ _____________.......................................... ________________....................................... ________________....................................... _________________...................................... ___________________.................................... ________________....................................... ______________......................................... ____________........................................... _______________........................................ _________________...................................... _______________........................................ ___________________.................................... ________________....................................... __________________..................................... ______________......................................... ________________....................................... ______________......................................... _________________...................................... ______________......................................... ______________......................................... _____________.......................................... ________________....................................... ______________......................................... ________________....................................... _________________...................................... ____________________................................... ________________....................................... _______________........................................ _________________...................................... __________________..................................... _______________........................................ ________________....................................... ______________......................................... __________________..................................... ________ Weighted Average Life To Call (in years)............... Weighted Average Life To Maturity (in years)...........
PERCENTAGE OF THE INITIAL PRINCIPAL OF THE CLASS C NOTES CPR --- CPR -------------------------------------------------- PAYMENT DATE 0% 6% 9% 12% 18% ------------ -- -- -- --- --- Closing Date........................................... _________________...................................... ________________....................................... ______________......................................... ______________......................................... ____________........................................... ____________........................................... _______________........................................ ____________........................................... ____________........................................... ______________......................................... ______________......................................... ____________........................................... _______________........................................ _________________...................................... _______________........................................ _____________.......................................... ________________....................................... ________________....................................... _________________...................................... ___________________.................................... ________________....................................... ______________......................................... ____________........................................... _______________........................................ _________________...................................... _______________........................................ ___________________.................................... ________________....................................... __________________..................................... ______________......................................... ________________....................................... ______________......................................... _________________...................................... ______________......................................... ______________......................................... _____________.......................................... ________________....................................... ______________......................................... ________________....................................... _________________...................................... ____________________................................... ________________....................................... _______________........................................ _________________...................................... __________________..................................... _______________........................................ ________________....................................... ______________......................................... __________________..................................... ________ Weighted Average Life To Call (in years)............... Weighted Average Life To Maturity (in years)...........
DESCRIPTION OF THE NOTES AND INDENTURE This section adds to the information in the accompanying prospectus under the caption "DESCRIPTION OF THE NOTES AND INDENTURE." However, as these statements are only summaries, you should read the pooling and servicing agreement and the indenture. The sponsor filed the forms of these documents as exhibits to the registration statement it filed with the Securities and Exchange Commission for the notes. The notes will be issued under an indenture between the owner trust and the indenture trustee. The owner trust will issue eight classes of notes, consisting of five classes of senior notes, designated as the o Class A-1 Notes, o Class A-2 Notes, o Class A-3 Notes, o Class A-4 Notes and o Class A-5 Notes. These are referred to in this document as "Class A Notes." The owner trust will also issue three classes of subordinate notes, designated as the Class B Notes, the Class C Notes and the Class D Notes. The Class B, Class C and Class D Notes are the "Subordinate Classes." Investors may purchase the notes in book-entry form in minimum denominations of $1,000 and in integral multiples of $1 in excess of $1,000. Each class will initially be represented by one or more notes registered in the name of the nominee of The Depository Trust Company. The owner trustee will pay note interest and principal on the 20th day of each month, or, if not a business day, the next succeeding business day, commencing in [ ], to registered noteholders as of the related record date. So long as the notes remain in book-entry form, the record date for any payment date will be the business day immediately preceding the payment date. If the notes are no longer in book-entry form, the record date will be the last business day of the month immediately preceding the payment date. However, the owner trust will make the final payment on the notes only upon presentation and surrender of the notes to the indenture trustee. The owner trust will make all payments on the notes in immediately available funds. See "DESCRIPTION OF THE NOTES AND INDENTURE -- BOOK-ENTRY REGISTRATION" in the accompanying prospectus. DISTRIBUTIONS The owner trust will pay note principal and interest on each payment date from the "Available Pledged Revenues" for the payment date, as well as amounts permitted to be withdrawn from the cash collateral account. See "--CASH COLLATERAL ACCOUNT" below. The "Available Pledged Revenues" as of any payment date are the sum of (a) the following amounts on deposit in the collection account which the owner trust received during the related collection period (1) scheduled contract payments, except payments in respect of o taxes, o insurance premium reimbursements, o security deposits, o late charges, o documentation fees, o extension fees, o administrative charges or, o maintenance premiums, (2) prepayments of contracts, and (3) proceeds of liquidating defaulted contracts, (b) the purchase price paid by the seller in repurchasing ineligible contracts from the owner trust, (c) the amounts that the seller paid to purchase the contracts in exercise of its option to do so when the aggregate note principal amount is reduced to less than 10% of the initial contract pool principal balance and that were on deposit in the collection account as of the business day before the payment date, (d) investment earnings on amounts held in the collection or note distribution account and (e) to the extent necessary to pay interest, amounts of the type described in (a) above that the owner trust received after the end of the related collection period. However, Available Pledged Revenues do not include any amount allocable to the depositor as representing the residual value of equipment subject to a lease, except to the extent that the end-user or a vendor guaranteed the equipment residual value. On each payment date, the servicer will direct the indenture trustee to apply Available Pledged Revenues to the following payments in the following order of priority: (1) reimbursement of servicer advances; (2) the servicing fee; (3) interest on the notes in the following order of priority: (a) interest on the Class A-1, A-2, A-3, A-4, and A-5 Notes, including any overdue interest, allocated pro rata based on the respective principal amounts of the Class A-1, A-2, A-3, A-4 and A-5 Notes, (b) interest on the Class B Notes, including any overdue interest, (c) interest on the Class C Notes, including any overdue interest, (d) interest on the Class D Notes, including any overdue interest, (4) principal on the notes in the amounts and priority described under "PRINCIPAL" below; (5) any amount necessary to increase the cash collateral account balance to its required level; (6) amounts payable in connection with the cash collateral account; (7) any shortfall in the payment of interest on the Class A-3 Notes due to the failure of the swap counterparty to pay amounts owed to the owner trust under the swap agreement, together with interest on the shortfall; and (8) any remainder to the holder of the equity certificate. The owner trust is to make payments first from the Available Pledged Revenues, and second, but only as to amounts described in clauses (3) and (4) immediately above, from amounts permitted to be withdrawn from the cash collateral account as described under "CASH COLLATERAL ACCOUNT" below. For purposes of the above allocation of Available Pledged Revenues in respect of interest, the Class A-3 interest rate will be assumed to be the assumed fixed rate of [ ]% determined in connection with the swap agreement. INTEREST The priorities of interest payments are set forth under "DISTRIBUTIONS" above. The owner trust will pay interest on each class of notes from and including the closing date to but excluding [ ], and after that date for each successive interest period. Interest on the Class A-1 and A-3 Notes will be computed on the basis of the actual number of days elapsed and a 360-day year. Interest on the other classes of notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. The rates for classes other than Class A-3 are set forth on the cover page of this prospectus supplement. The Class A-3 interest rate shall be the one-month London interbank offered rate, referred to as One-Month LIBOR, plus [ ]%. One-Month LIBOR means as of any LIBOR Determination Date and with respect to the related interest period, the rate of interest per annum equal to the London interbank offered rate for deposits in U.S. dollars having a maturity of one month which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the LIBOR Determination Date. If the rate does not appear on Telerate Page 3750, One-Month LIBOR for the LIBOR Determination Date will be determined on the basis of the rates at which deposits in U.S. dollars having a maturity of one month and in a principal amount of not less than U.S. $1,000,000, are offered at approximately 11:00 a.m., London time, on the LIBOR Determination Date to prime banks in the London interbank market by the Reference Banks. The servicer will request the principal London office of each of the Reference Banks to provide a quotation of its rate to the indenture trustee. If at least two quotations are provided, One-Month LIBOR will be the arithmetic mean, rounded upwards, if necessary, to the nearest .01%, of the offered rates. If fewer than two quotations are provided, One-Month LIBOR will be the arithmetic mean, rounded upwards, if necessary to the nearest .01%, of the rates quoted at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date to the indenture trustee by three major banks in New York, New York, selected by the servicer, for loans in United States dollars to leading European banks having a maturity of one month and in a principal amount of not less than U.S. $1,000,000. However, if those banks do not quote a rate to the indenture trustee as described in this sentence, One-Month LIBOR will be the One-Month LIBOR in effect for the immediately preceding interest period. LIBOR Determination Date means for the interest period from and including the closing date to but excluding [ ] the second business day preceding the closing date for the sale of the notes, and for each subsequent interest period the second business day preceding the interest period. For purposes of computing One-Month LIBOR, a business day is any business day on which dealings in deposits in United States dollars are transacted in the London interbank market. Telerate Page 3750 means the display page so designated on the Dow Jones Telerate Service, or another page replacing that page on that service for the purpose of displaying comparable rates or prices. Reference Banks means four leading banks, selected by the servicer, engaged in transactions in Eurodollar deposits in the international Eurocurrency market and having an established place of business in London. If on any payment date, the owner trust does not have sufficient funds, after payment of servicer advances and the servicing fee, to make a full payment of interest on any class of notes, the amount of the shortfall will be carried forward and, together with interest on the shortfall amount at the applicable interest rate for that class, added to the amount of interest the affected class of noteholders will be entitled to receive on the next payment date. PRINCIPAL This section gives only an overview of how the owner trust will pay principal. The sponsor recommends that you read this section in connection with the more detailed terms set forth in the pooling and servicing agreement included as an exhibit to the registration statement filed with the Securities and Exchange Commission for the notes. OVERVIEW OF PRINCIPAL DISTRIBUTIONS The principal required to be paid on the notes on each payment date will be the amount necessary to pay the notes down so that their aggregate principal balance equals the contract pool principal balance as of the last day of the prior month. This amount will be allocated among the various classes of notes according to the priorities described in this section. For so long as the Class A-1 Notes are outstanding, 100% of the principal will be allocated between the Class A-1 Notes and the Class A-5 Notes. After the Class A-1 note principal balance has been paid to zero, the principal will be allocated: first, among the Class A Notes as a group, between the Class A-5 Notes on one hand and the Class A-2, Class A-3 and Class A-4 Notes, on the other hand, sequentially in that order, then again to the Class A-5 Notes; second, to the Class B Notes; third, to the Class C Notes; and fourth, to the Class D Notes Subject to the operation of the floors for each of the Subordinate Classes, after the payment date on which the Class A-1 note principal amount has been paid to zero, the owner trust will pay principal proportionately, among the Class A Notes as a group, the Class B Notes, the Class C Notes and the Class D Notes, in the priorities listed above. However, the principal paydown rules incorporate a concept of a floor on each class of the Subordinate Classes, which means that the Subordinate Classes, for so long as any notes senior to that class are outstanding, cannot be paid an amount of principal which would reduce that Subordinate Class below its floor principal amount. If a Subordinate Class is at its floor level, that Subordinate Class is "locked out" from receiving further principal payments, with the additional effect of reallocating the principal that would otherwise have been paid to that Subordinate Class to the most senior class then outstanding. The levels of the floors are not static, but are subject to increase if the owner trust experiences contract pool losses that cannot be funded from the current period's Available Pledged Revenues or the cash collateral account. This increase in the level of the floors tends to "lock out" the Subordinate Classes earlier, which accelerates the payment of the reallocated principal to the senior classes. If unfunded losses become severe and the cash collateral account is depleted, the unfunded loss amount could be so large that the principal paydown rules result in a sequential-pay senior subordinated structure among the various note classes, with no principal being paid to a Subordinate Class unless the note principal amount of each class senior to it has been paid in full. The floors operate both before and after an event of default. BEFORE AN EVENT OF DEFAULT This chart summarizes how principal will be paid on the notes before any event of default. The section headed "Definitions Concerning Principal Payments" below defines various terms relating to the payment of principal. CLASS PRINCIPAL PAYMENTS - ------------------------------------------------------------------------------- Class A-1 o Begins receiving principal on first payment date o Receives [ ]% of Total Principal Payment Amount until paid in full, but will receive 100% of the Total Principal Payment Amount if any of its principal is outstanding after its stated maturity date until paid in full - ------------------------------------------------------------------------------- Class A-2 o Begins receiving principal once Class A-1 is paid in full o Receives the Class A Principal Payment Amount reduced by any amount paid to Class A-5, until Class A-2 is paid in full, but will receive 100% of the Class A Principal Payment Amount if any of its principal is outstanding after its stated maturity date, until paid in full o May also receive principal payments reallocated away from the Subordinate Classes through the operation of the floors - ------------------------------------------------------------------------------- Class A-3 o Begins receiving principal once Class A-2 is paid in full o Receives the Class A Principal Payment Amount reduced by any amount paid to Class A-5, until Class A-3 is paid in full, but will receive 100% of the Class A Principal Payment Amount if any of its principal is outstanding after its stated maturity date, until paid in full o May also receive principal payments reallocated away from the Subordinate Classes through the operation of the floors - ------------------------------------------------------------------------------- Class A-4 o Begins receiving principal once Class A-3 is paid in full o Receives the Class A Principal Payment Amount reduced by any amount paid to Class A-5, until Class A-4 is paid in full, but will receive 100% of the Class A Principal Payment Amount if any of its principal is outstanding after its stated maturity date, until paid in full o May also receive principal payments reallocated away from the Subordinate Classes through the operation of the floors - ------------------------------------------------------------------------------- Class A-5 o Begins receiving principal on first payment date o Receives [ ]% of the Total Principal Payment Amount until Class A-1 is paid in full and the same percentage after Class A-1 is paid in full until Class A-4 is paid in full but only to the extent of the Class A Principal Payment Amount o Once Class A-4 is paid in full, Class A-5 receives 100% of the Class A Principal Payment Amount until paid in full o May also receive principal payments reallocated away from the Subordinate Classes through the operation of the floors - ------------------------------------------------------------------------------- Class B o Begins receiving principal once Class A-1 is paid in full o Receives the Class B Principal Payment Amount until paid in full o Through the operation of its floor, Class B's principal payments are subject to reallocation for the benefit of Class A o May also receive principal payments reallocated away from Class C and Class D through the operation of the floors - ------------------------------------------------------------------------------- Class C o Begins receiving principal once Class A-1 is paid in full o Receives the Class C Principal Payment Amount until paid in full o Through the operation of its floor, Class C's principal payments are subject to reallocation for the benefit of Class A and Class B o May also receive principal payments reallocated away from Class D through the operation of the floors - ------------------------------------------------------------------------------- Class D o Begins receiving principal once Class A-1 is paid in full o Receives the Class D Principal Payment Amount until paid in full o Through the operation of its floor, Class D's principal payments are subject to re-allocation for the benefit of Class A, Class B and Class C - ------------------------------------------------------------------------------- DETAILED PRINCIPAL DISTRIBUTION RULES The priority of principal payments will be in the following order: (1) prior to the payment date on which the Class A-1 Note principal amount has been reduced to zero, the Class A Principal Payment Amount will be equal to the Total Principal Payment Amount and will be allocated [ ]% to the Class A-1 Notes and [ ]% to the Class A-5 Notes. However, if the Class A-1 Notes have not been paid to zero by their stated maturity date, 100% of the Class A Principal Payment Amount will be paid to the Class A-1 Notes on their stated maturity date and on each subsequent payment date until their note principal amount is zero; (2) on and after the payment date on which the Class A-1 principal amount has been reduced to zero, and disregarding the amount that must first be applied to reduce the Class A-1 principal amount to zero, the Total Principal Payment Amount will be allocated among the various classes in the following order of priority: (a) the Class A Principal Payment Amount to the Class A noteholders, allocated as follows: (1) [ ]% of the Total Principal Payment Amount, but in no event greater than the Class A Principal Payment Amount, to the Class A-5 noteholders, and (2) the Class A Principal Payment Amount reduced by any payments to the Class A-5 noteholders under clause (2)(a)(1) to the Class A-2 noteholders until the Class A-2 principal amount equals zero, then to the Class A-3 noteholders until the Class A-3 principal amount equals zero, then to the Class A-4 noteholders until the Class A-4 principal amount equals zero and then to the Class A-5 noteholders until the Class A-5 principal amount equals zero; However, if the Class A-2, Class A-3 or Class A-4 Notes have not been paid to zero by their respective stated maturity dates, 100% of the Class A Principal Payment Amount will be paid to that class on its stated maturity date and on each subsequent payment date until its note principal amount is zero; (b) the Class B Principal Payment Amount to the Class B noteholders; (c) the Class C Principal Payment Amount to the Class C noteholders; (d) the Class D Principal Payment Amount to the Class D noteholders; and (e) any Reallocated Principal, sequentially to the Class A-2, Class A-3, Class A-4, Class A-5, Class B, Class C and Class D Notes. PRINCIPAL DISTRIBUTIONS AFTER AN EVENT OF DEFAULT After an event of default occurs, all principal distributions among the classes will be made as follows: CLASS PRINCIPAL PAYMENTS ----- ------------------ Class A-1 100% of the Class A Principal Payment Amount until paid in full Class A-2 100% of the Class A Principal Payment Amount until paid in full Class A-3 100% of the Class A Principal Payment Amount until paid in full Class A-4 100% of the Class A Principal Payment Amount until paid in full Class A-5 100% of the Class A Principal Payment Amount until paid in full Class B 100% of the Class B Principal Payment Amount until paid in full Class C 100% of the Class C Principal Payment Amount until paid in full Class D 100% of the Class D Principal Payment Amount until paid in full The principles described above in the sections labeled "PRINCIPAL--OVERVIEW OF PRINCIPAL DISTRIBUTIONS," "--BEFORE AN EVENT OF DEFAULT" and "DETAILED PRINCIPAL DISTRIBUTION RULES" will also apply after an event of default except that the allocations between Class A-5, on the one hand, and the other classes of Class A Notes, on the other hand, as described in those sections, will not apply after an event of default. Also, any Reallocated Principal will be allocated sequentially to the Class A-1, A-2, A-3, A-4, A-5, B, C and D noteholders in that order. DEFINITIONS CONCERNING PRINCIPAL PAYMENTS The CLASS A BASE PRINCIPAL PAYMENT AMOUNT is: (1) as to any payment date until the payment date on which the Class A-1 principal amount equals zero, 100% of the Total Principal Payment Amount; and (2) for any subsequent payment date, and disregarding any amount first used on the payment date on which the Class A-1 principal amount is paid to zero, the excess of: (x) the sum of the Class A-2, A-3, A-4 and A-5 notes principal amounts over (y) the Class A Target Principal Amount; However, the Class A Principal Payment Amount may not exceed the Class A principal balance. The CLASS A PERCENTAGE will be approximately [ ]%. The CLASS A TARGET PRINCIPAL AMOUNT for any payment date will be the product of (a) the Class A Percentage and (b) the contract pool principal balance as of the last day of the collection period immediately preceding the payment date. The CLASS A PRINCIPAL PAYMENT AMOUNT is the sum of the Class A Base Principal Payment Amount plus the Class A Principal Shortfall Amount. The CLASS A PRINCIPAL SHORTFALL AMOUNT means, for any payment date that is the stated maturity date for a class of Class A Notes and any subsequent payment date until that class' principal amount is zero, the excess of (a) sum of the principal amount of that class, plus, until the Class A-4 principal amount has been reduced to zero, [ ]% of the Total Principal Payment Amount, over (b) the Total Principal Payment Amount. The CLASS B FLOOR for any payment date will equal: (1) [ ]% of the initial contract pool principal balance, plus (2) the Unfunded Loss Amount, if any, for that payment date, minus, (3) the sum of the Class C principal amount, and the Class D principal amount, prior to giving effect to any payments of principal on the Class C or D Notes on that payment date, and the amount on deposit in the cash collateral account after giving effect to withdrawals to be made on the payment date. However, the Class B Floor may not be greater than the Class B principal amount or less than zero. The CLASS B PERCENTAGE will be approximately [ ]%. The CLASS B PRINCIPAL PAYMENT AMOUNT will equal (1) zero until the payment date on which the Class A-1 principal amount equals zero; and (2) for any subsequent payment date the excess, if any, of: (a) the Class B principal amount over (b) the greater of (x) the Class B Target Principal Amount and (y) the Class B Floor. However, the Class B Principal Payment Amount may not exceed the Class B principal amount. The CLASS B TARGET PRINCIPAL AMOUNT for any payment date will be the product of (a) the Class B Percentage and (b) the contract pool principal balance as of the last day of the collection period immediately preceding the payment date. The CLASS C FLOOR for any payment date will equal: (1) [ ]% of the initial contract pool principal balance, plus (2) the Unfunded Loss Amount, if any, for the payment date, minus (3) the sum of the Class D principal amount, prior to giving effect to any payments of principal on the Class D Notes on the payment date, and the amount on deposit in the cash collateral account after giving effect to withdrawals to be made on the payment date. However, the Class C Floor may not be greater than the Class C principal amount or less than zero. Furthermore, if the Class B principal amount immediately prior to any payment date is less than or equal to the Class B Floor for that payment date, the Class C Floor for that payment date will equal the Class C principal amount immediately prior to that payment date. The CLASS C PERCENTAGE will be approximately [ ]%. The CLASS C PRINCIPAL PAYMENT AMOUNT will equal (1) zero until the payment date on which the Class A-1 principal amount equals zero; and (2) for any subsequent payment date, the excess, if any, of: (a) the Class C principal amount over (b) the greater of (x) the Class C Target Principal Amount and (y) the Class C Floor. However, the Class C Principal Payment Amount may not exceed the Class C principal amount. The CLASS C TARGET PRINCIPAL AMOUNT for any payment date will be the product of (a) the Class C Percentage and (b) the contract pool principal balance as of the last day of the collection period immediately preceding the payment date. The CLASS D FLOOR for any payment date will equal: (1) [ ]% of the initial contract pool principal balance, plus (2) the Unfunded Loss Amount, if any, for the payment date, minus, (3) the amount on deposit in the cash collateral account after giving effect to withdrawals to be made on the payment date. However, the Class D Floor may not be greater than the Class D principal amount or less than zero. Furthermore, if the Class C principal amount on any payment date is less than or equal to the Class C Floor on that payment date, the Class D Floor for that payment date will equal the Class D principal amount immediately prior to that payment date. The CLASS D PERCENTAGE will be approximately [ ]%. The CLASS D PRINCIPAL PAYMENT AMOUNT will equal: (1) zero until the payment date on which the Class A-1 principal amount equals zero; and (2) for any subsequent payment date, the excess, if any, of: (a) the Class D principal amount minus (b) the greater of (x) the Class D Target Principal Amount and (y) the Class D Floor. However, Class D Principal Payment Amount may not exceed the Class D principal balance. The CLASS D TARGET PRINCIPAL AMOUNT for any payment date will be the product of (a) the Class D Percentage and (b) the contract pool principal balance as of the last day of the collection period immediately preceding the payment date. The COLLECTION PERIOD for any payment date is the calendar month preceding the month in which the payment date occurs. A DEFAULTED CONTRACT as to any collection period is any contract: (a) which the servicer has determined is uncollectible in accordance with its credit and collection policies and procedures, (b) as to which during the collection period 10% or more of a scheduled payment shall have become delinquent 180 days or more, or (c) as to which the end-user has suffered an insolvency event. PLEDGED REVENUES means the sum of o all scheduled payments on the contracts received on or after the cut-off date; o any prepayment received on the contracts on or after the cut-off date; o the purchase amount of any contracts purchased by the seller; o the amount paid by the depositor to purchase the contracts under its option to purchase all contracts when the aggregate principal amount of the notes is less than 10% of the initial contract pool principal balance; o the liquidation proceeds received in respect of any contracts; and o any earnings on the investment of amounts credited to the collection account or the note distribution account. However, Pledged Revenues shall not include any amounts received with respect to any residual value of leased equipment except to the extent guaranteed by a vendor or end-user. PRINCIPAL AMOUNT means, when used with respect to a class of notes, the initial principal balance of the class set forth on the cover page of this prospectus supplement, less the sum of all distributions previously made to the class and all amounts held on deposit for payment to that class in respect of principal. The REALLOCATED PRINCIPAL for any payment date will equal the excess, if any, of (1) the Total Principal Payment Amount, over (2) the sum of the Class A Principal Payment Amount, the Class B Principal Payment Amount, the Class C Principal Payment Amount and the Class D Principal Payment Amount. The RELATED COLLECTION PERIOD PLEDGED REVENUE means as to any payment date, the amount of Pledged Revenues in the collection account as of the business day preceding the payment date which were received by the depositor during the related collection period, including all liquidation proceeds as to Defaulted Contracts, but not including the residual value of leased equipment except to the extent guaranteed by a vendor or end-user. The REQUIRED PAYOFF AMOUNT as to a collection period for any contract is the sum of (1) the scheduled payment due in that collection period plus any scheduled payments not received that were due in prior collection periods and (2) the contract principal balance determined as if the scheduled payment due in that collection period had been received. The TOTAL PRINCIPAL PAYMENT AMOUNT for any payment date is the excess of (x) the aggregate note principal amount immediately prior to that payment date over (y) the contract pool principal balance as of the last day of the collection period immediately preceding the payment date. For this purpose, the contract pool principal balance will be deemed to be zero on any payment date on which the contract pool principal balance is less than $10,000,000. The contract principal balance of any contract which became a defaulted contract during a given collection period or which was a contract subject to a warranty claim which the depositor was obligated to purchase as of the end of a given collection period will, for purposes of computing the Total Principal Payment Amount and the requisite amount for the cash collateral account, be deemed to be zero on and after the last day of the collection period. The UNFUNDED LOSS AMOUNT for any payment date will equal any excess of: (a) the remainder of (1) the aggregate note principal amount, prior to giving effect to the payment of principal on the notes on the payment date, minus (2) the lesser of (A) the contract pool principal balance as of the last day of the collection period immediately preceding the preceding payment date, minus the contract pool principal balance as of the last day of the collection period immediately preceding the payment date, or (B) the Related Collection Period Pledged Revenue remaining after payment of amounts owing to the servicer and note interest on the payment date plus any withdrawal from the cash collateral account for payment of note principal on the payment date, over (b) the Required Payoff Amount for all contracts as of the end of the related collection period. CLASS A-3 SWAP AGREEMENT The owner trust will enter into a swap agreement with [ ] as swap counterparty for the sole benefit of the Class A-3 Notes. Under the swap agreement, the swap counterparty's payments will be calculated at the Class A-3 Note interest rate and the owner trust's payments will be calculated at an assumed fixed rate of [ ]%. To the extent that on any payment date interest calculated at the Class A-3 Note interest rate exceeds interest calculated at the assumed fixed rate: o the swap counterparty will be obligated to pay an amount equal to the excess to the owner trust, o the payment will constitute a portion of the Available Pledged Revenues, but only in respect of the Class A-3 Notes, and o the Class A-3 Notes will be dependent upon the payment for receipt of the interest to the extent of the excess. Likewise, under the swap agreement to the extent that interest calculated at the assumed fixed rate exceeds interest calculated at the Class A-3 Note interest rate, o the owner trust will be obligated to pay an amount equal to the excess to the swap counterparty, and o the payment will have the same priority, in terms of application of the Available Pledged Revenues, as payment of interest on the Class A-3 Notes. Any shortfall in the payment of interest on the Class A-3 Notes due entirely to the failure of the swap counterparty to make a required payment under the swap agreement will not constitute an event of default under the indenture. Except to the extent the amount available on any payment date exceeds the amount necessary to pay the servicing fee, all interest and principal payable on the notes, with Class A-3 Note interest being calculated at the assumed fixed rate for this purpose, and all amounts payable in connection with the cash collateral account, no amounts in addition to those available under the swap agreement will be available under the indenture to make up the shortfall. The only remedies in these circumstances will be those available to the owner trust under the swap agreement. As a general matter, the obligations of the swap counterparty under the swap agreement are unsecured. However, if the swap counterparty's long-term unsecured senior debt ceases to be rated at a level acceptable to [ ] and [ ], the swap counterparty will be obligated either to (a) post collateral or establish other arrangements to secure its obligations under the swap agreement or (b) arrange for a substitute swap counterparty to assume the rights and obligations of the swap counterparty under the swap agreement, in either case so that the ratings of the notes are maintained or, if applicable, restored to their level immediately prior to the downgrading or withdrawal of the swap counterparty's debt. If the swap counterparty fails to take either of these actions, the owner trust will be entitled to terminate the swap agreement and to claim from the swap counterparty the cost of obtaining a replacement swap agreement from a swap counterparty satisfactory to the note rating agencies. The Class A-3 noteholders bear the risk of any failure by the swap counterparty to take the actions required of it and the risk of any inability of the owner trust to obtain a replacement swap agreement. The swap counterparty currently has an "[ ]" long-term unsecured senior debt credit rating from [ ] and an "[ ]" long-term unsecured senior debt credit rating from [ ]. OPTIONAL PURCHASE OF CLASS A-5 NOTES The depositor may purchase all of the Class A-5 Notes, on any payment date. The purchase price shall be equal to the Class A-5 principal amount plus a premium equal to the excess, discounted as described below, of (1) the scheduled future interest payments on the Class A-5 Notes, over (2) the interest that would have accrued on the Class A-5 Notes over the same period at a per annum rate of interest equal to [ ]% plus the bond equivalent yield to maturity on the fifth business day preceding that payment date on a United States Treasury security maturing on a date closest to the end of the remaining weighted average life of the Class A-5 Notes. That excess shall be discounted to present value to the payment date at the yield described in clause (2) above. For purposes of this paragraph only, the depositor will determine (1) the Class A-5 principal amount upon which interest will be deemed to accrue, and (2) the weighted average remaining life of the Class A-5 Notes, based upon the amortization of the contract pool principal balance remaining at the payment date at a conditional prepayment rate of [ ]%. The depositor will pay the holders of record on the related record date interest payable on the Class A-5 Notes on the payment date in the ordinary manner. Following purchase, the owner trust will not retire the Class A-5 Notes, but will, after the authentication and issuance of replacement notes to the depositor, continue to treat them as being entitled to interest and principal payments on each payment date in the manner described above. Following the giving of proper notice of purchase, all holders of Class A-5 Notes must surrender them for purchase on the relevant purchase date. Effective on the purchase date, the owner trust will not treat the former holders of the Class A-5 Notes as the holders of the notes except for purposes of their right to be paid the purchase price. CASH COLLATERAL ACCOUNT The indenture trustee will establish the cash collateral account on or prior to the closing date. It will be available to the indenture trustee for the benefit of the noteholders. The depositor will initially fund the cash collateral account in the amount of $[ ] ([ ]% of initial contract pool principal balance), which may include proceeds of loans from third party lenders to the owner trust under a cash collateral account loan agreement. Available amounts on deposit from time to time in the cash collateral account shall be used to fund the amounts specified below in the following order of priority to the extent that amounts on deposit in the collection account, after payment of servicer fees and advances, as of any deposit date are insufficient: (1) to pay interest on the notes in the order of priority described under "DISTRIBUTIONS" above; (2) to pay any principal deficiency amount, which is equal to the lesser of: (a) the aggregate Liquidation Losses on all contracts that became Defaulted Contracts during the related collection period, or (b) the excess, if any, of (A) the aggregate principal amount of the notes, after giving effect to all distributions of principal from Available Pledged Revenues on the payment date, over (B) the aggregate of the Required Payoff Amounts for all contracts as of the last day of the related collection period; and (3) to pay principal on the notes at the applicable stated maturity dates and on the first payment date on which the contract pool principal balance is less than $10,000,000. Liquidation Loss means, as to any Defaulted Contract, the excess, if any, of (1) the required payoff amount of the contract for the collection period during which the contract became a Defaulted Contract, over (2) that portion of the liquidation proceeds for the Defaulted Contract allocated to the owner trust, as described under "DESCRIPTION OF THE NOTES AND INDENTURE--LIQUIDATION PROCEEDS" in the accompanying prospectus. To the extent that the amount on deposit in the cash collateral account as of any payment date is less than the required amount, the servicer is to restore this deficiency from the remaining amount available in the collection account, after payment of any servicer advances, the servicing fee, interest and principal on the notes and amounts due to the swap counterparty under the swap agreement, as described under "DISTRIBUTIONS" above. The required amount of the cash collateral account will be (1) for any payment date on or prior to the payment date occurring in [ ], $[ ] ([ ]% of the initial contract pool principal balance), and (2) for any payment date after that, the greater of (a) the sum of (1) [ ]% of the contract pool principal balance for the payment date, plus (2) the excess, if any, of (A) the sum of the principal amounts of the notes, after giving effect to all distributions of principal on the payment date, over (B) the contract pool principal balance for the payment date, and (b) $[ ] ([ ]% of the initial contract pool principal balance). However, in no event will the requisite amount exceed the sum of the principal amounts of the notes. The servicer or the indenture trustee acting at the direction of the servicer will release any amount on deposit in the cash collateral account in excess of the required amount and all investment earnings on funds in the cash collateral account. The indenture trustee will pay these amounts to or upon the servicer's order, and they will not be available to make payments on the notes. The cash collateral account must be maintained with a qualified institution. Funds on deposit in the cash collateral account will be invested in eligible investments, as defined under "DESCRIPTION OF THE NOTES AND INDENTURE--TRUST ACCOUNTS" in the accompanying prospectus. OPTIONAL PURCHASE OF CONTRACTS AND REDEMPTION OF NOTES The seller may purchase all of the contracts on any payment date following the date on which the aggregate note principal amount at the time is less than 10% of the initial contract pool principal balance. The purchase price that the seller would pay in connection with a purchase shall be the sum of the o unpaid servicer fees and advances, o remaining principal amount of the notes, together with accrued interest calculated at the swap agreement assumed fixed rate in the case of the Class A-3 Notes, o unreimbursed servicer advances and unpaid servicer fees, and o any other amounts payable at the time from Available Pledged Revenues, minus o available amounts on deposit in the collection account. If the seller does purchase the contracts, the notes shall be redeemed on the payment date on which the purchase occurs. The redemption price will be the principal amount of the notes redeemed plus accrued and unpaid interest on the principal amount of each class of notes to but excluding the redemption date. REPORTS TO NOTEHOLDERS The servicer will furnish to the indenture trustee, and the indenture trustee will include with each distribution, a statement in respect of the related payment date. The statement shall set forth, among other things, all information necessary to enable the indenture trustee to make the distribution required for the notes and to reconcile all deposits to and withdrawals from accounts. See "DESCRIPTION OF THE NOTES AND INDENTURE--REPORTS TO NOTEHOLDERS" in the accompanying prospectus. You will not receive reports directly from the indenture trustee. The servicer will file the reports with the Securities and Exchange Commission. However, in accordance with the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission, the owner trust expects that its obligation to file these reports will be terminated at the end of [ ]. SERVICING The servicer will be responsible for o managing, o administering, o servicing and o making collections on the contracts. Compensation to the servicer will include (1) a monthly servicing fee, which will be payable to the servicer from the amount available on each payment date, in an amount equal to the product of one-twelfth of one percent per annum multiplied by the contract pool principal balance determined as of the first day of the related collection period; (2) any late fees, late payment interest, documentation fees, insurance administration charges, extension fees and other administrative charges, collectively, the administrative fees, collected with respect to the contracts during the related collection period; and (3) any investment earnings on collections prior to their deposit in the collection account. The indenture trustee may terminate the servicer as servicer under some circumstances, in which event the indenture trustee would appoint a successor servicer to service the contracts. See "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT--SERVICING--EVENTS OF TERMINATION" in the accompanying prospectus. THE INDENTURE TRUSTEE [ ] will serve as the indenture trustee. The indenture trustee may resign at any time, in which event the owner trust will be obligated to appoint a successor trustee. The owner trust may also remove the indenture trustee if (1) the indenture trustee ceases to be eligible to continue as indenture trustee under the indenture, (2) a bankruptcy proceeding results in the event of relief or appointment of a receiver as to the indenture trustee, (3) the indenture trustee commences bankruptcy or similar proceedings or (4) the indenture trustee becomes incapable of acting. Any resignation or removal of the indenture trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by a successor trustee. REPRESENTATION AND WARRANTIES The seller will make representations and warranties with respect to the contracts as described in the accompanying prospectus under "THE CONTRACTS--REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER." On the date that the depositor adds a substitute contract to the contract pool, the seller and the depositor will make the same representations and warranties as if the transfer occurred on the closing date. However, for these purposes (a) the contract pool on the closing date shall be deemed to include the substitute contract in lieu of the contract being replaced or substituted and (b) the contract principal balance of the substitute contract shall be equal to or greater than the contract principal balance of the contract being replaced or substituted as of the related cut-off date. The owner trust shall reassign to the depositor, and the seller will be obligated to purchase from the depositor, any contract transferred by the owner trust at any time there is a breach of any of these representations or warranties. However, the cure of the breach in all material respects, or the waiver of the breach, will be an adequate remedy. This purchase shall occur no later than the second deposit date after the servicer becomes aware, or receives written notice, of the breach. The "deposit date" means the business day preceding a payment date. This purchase obligation will constitute the sole remedy against the depositor and the seller available to the owner trust, the indenture trustee and the noteholders or equity certificateholder for a breach of these representations or warranties. Under the pooling and servicing agreement, a contract transferred by the owner trust shall be reassigned to the seller and the seller shall make a deposit in the collection account in immediately available funds in an amount equal to the contract principal balance of the contract. Any amount the seller deposits into the collection account in connection with the reassignment of a contract transferred by the owner trust shall be considered payment in full of the ineligible contract. This amount shall be treated as Available Pledged Revenues. In the alternative, the seller may cause the depositor to convey to the owner trust a substitute contract satisfying the terms and conditions applicable to substitute contracts in replacement for the affected contract. The affected contract shall be deemed released by the owner trust and indenture trustee and reconveyed to the depositor and by the depositor to the seller. INDEMNIFICATION The pooling and servicing agreement provides that the servicer will indemnify o the depositor, o the sponsor, o the owner trust, o the owner trustee, o the indenture trustee, o the holder of the equity certificate and o the noteholders from and against any loss or injury sustained from third party claims resulting from acts or omissions of the servicer with respect to trust assets or any duty or obligations of the servicer under the agreement, except where the claims result from willful misconduct, gross negligence or bad faith of the indemnified person. AMENDMENTS When the pooling and servicing agreement and the indenture may be amended only with the consent of the required majority of the noteholders, see "DESCRIPTION OF THE NOTES AND INDENTURE--MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT" and "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS--AMENDMENT," the required majority means 66 2/3% of the principal amount of the Class A Notes until paid in full, then of the Class B Notes until paid in full, then of the Class C Notes until paid in full and then of the Class D Notes. The parties may amend the cash collateral account loan agreement without noteholder consent to cure any ambiguity or inconsistency or to address any other matter but only if the amendment will not adversely affect the noteholders. The parties may also amend the cash collateral account loan agreement in any other manner with the consent of the required majority of noteholders determined as provided above. However, without the consent of all noteholders, no amendment may reduce the amount available in the cash collateral account for the payment of interest or principal on notes or reduce the noteholder consent required for any amendment. The parties may amend the swap agreement without noteholder consent to cure any ambiguity or inconsistency or to address any other matter but only if the amendment will not adversely affect the Class A-3 noteholders. The parties may also amend the swap agreement in any other manner with the consent of at least 66 2/3% of the principal amount of the Class A-3 Notes. However, without the consent of all Class A-3 noteholders, no amendment may reduce the amount available under the swap agreement for paying Class A-3 Note interest or reduce the Class A-3 noteholder consent required for any amendment. Also, without the consent of the swap counterparty, the parties may not amend the pooling and servicing agreement so as to adversely affect the priority of payments from the owner trust to the swap counterparty under the swap agreement. Also, any amendment of the cash collateral account loan agreement or the swap agreement requiring noteholder approval will not be effective unless each rating agency confirms that the amendment will not result in a reduction, qualification or withdrawal of the ratings on the relevant notes. RATINGS OF THE NOTES It is a condition of issuance that each of [ ] and [ ]. o rate the Class A-1 Notes [in its highest short-term rating category], o rate the Class A-2, Class A-3, Class A-4 and Class A-5 Notes in its highest long-term rating category, o rate the Class B Notes at least [ ] and [ ], respectively, o rate the Class C Notes at least [ ], [ ] and [ ], respectively, and o rate the Class D Notes at least [ ], [ ] and [ ], respectively. The ratings address the likelihood of the timely receipt of interest and payment of principal on each class of notes on or before the stated maturity date for the class. The ratings will be based primarily upon the Available Pledged Revenues, the cash collateral account and the subordination provided by o the Subordinate Classes, in the case of the Class A Notes, o the Class C and Class D Notes, in the case of the Class B Notes and o the Class D Notes, in the case of the Class C Notes. There is no assurance that any rating will not be lowered or withdrawn by the assigning rating agency. In the event that ratings with respect to the notes are qualified, reduced or withdrawn, no person or entity will be obligated to provide any additional credit enhancement with respect to the notes. The ratings should be evaluated independently from similar ratings on other types of securities. A rating is not a recommendation to buy, sell or hold notes, inasmuch as these ratings do not comment as to market price or suitability for a particular investor. The ratings do not address the likelihood of payment of principal on any class of notes prior to the stated maturity date or the possibility of the imposition of United States withholding tax with respect to non-United States Persons. The term "United States Person" means (1) a citizen or resident of the United States, (2) a corporation or partnership organized in or under the laws of the United States or any political subdivision of the United States, (3) an estate the income of which is includable in gross income for United States federal income tax purposes, regardless of its source, or (4) a trust, (A) with respect to which a court within the United States is able to exercise primary supervision over its administration, and one or more United States persons have the authority to control all of its substantial decisions. FEDERAL INCOME TAX CONSIDERATIONS Upon the issuance of the notes, Stroock & Stroock & Lavan LLP, special federal tax counsel, will deliver an opinion of counsel that for federal income tax purposes, the notes will be treated as indebtedness and the trust will not be an association, or publicly traded partnership, taxable as a corporation. All prospective purchasers of the notes should see "Material Federal Income Tax Consequences" in the accompanying prospectus for a summary of the anticipated federal income tax consequences of the purchase, ownership and disposition of the notes. [The trust does not anticipate treating the Class [ ] Notes as having been issued with original issue discount.] [It is anticipated that the Class [ ] Notes will be treated as issued with original issue discount. The prepayment assumption that will be used in determining the rate of accrual of original issue discount with respect those classes of notes is [ ]. However, this rate does not represent the rate at which prepayments have actually occurred and no representation is made as to the rate at which prepayments actually will occur in the future. See "Material Federal Income Tax Consequences--Tax Consequences to Note Owners--Interest Income on the Notes--Original Issue Discount" in the accompanying prospectus.] ERISA CONSIDERATIONS Subject to particular considerations discussed in this prospectus supplement under "ERISA Considerations," the notes are eligible for purchase by employee benefit plans. USE OF PROCEEDS The owner trust will use the proceeds from the sale of notes, after paying funds into the cash collateral account and paying expenses, to pay the purchase price for the contracts to the depositor. The depositor will use the proceeds to pay amounts owed to another trust for the acquisition of contracts from the trust. The trust from which the owner trust acquired contracts will use the proceeds it receives to pay down a warehouse receivables securitization facility. LEGAL PROCEEDINGS None of o the depositor, o the sponsor, o the servicer, o the originators, o the seller or o the owner trust are parties to any legal proceedings which could have a material adverse impact on noteholders' interests in notes or the owner trust's assets. PLAN OF DISTRIBUTION Under the terms of an underwriting agreement dated [ ], the underwriters have severally agreed to purchase the following respective initial principal amounts of notes at the respective public offering prices less the respective underwriting discounts shown on the cover page of this prospectus supplement:
INITIAL INITIAL INITIAL INITIAL INITIAL INITIAL INITIAL INITIAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS B CLASS C CLASS D UNDERWRITER NOTES NOTES NOTES NOTES NOTES NOTES NOTES NOTES ----------- -------- -------- -------- -------- -------- -------- -------- -------- Deutsche Banc Alex. Brown [ ]
In the underwriting agreement, the underwriters have agreed to purchase all of the notes being offered, if any of the notes are purchased. The underwriters have advised the sponsor that they propose initially to offer the notes to the public at the respective public offering prices shown on the cover page of this prospectus supplement, and to dealers at that price, less a concession not in excess of the amount noted in the table below. The underwriters may allow and the dealers may reallow to other dealers a discount not in excess of the amount noted in the table below. DEALER DEALER CONCESSION DISCOUNT CLASS OF NOTE NOT TO EXCEED NOT TO EXCEED A-1 A-2 A-3 A-4 A-5 B C D After the notes are released for sale to the public, the offering prices and other selling terms may be varied by the underwriters. In connection with the offering of the notes, Deutsche Banc Alex. Brown, on behalf of the underwriters, may engage in overallotment, stabilizing transactions and syndicate covering transactions in accordance with Regulation M under the Securities Exchange Act of 1934. Overallotment involves sales in excess of the offering size, which creates a short position for the underwriters. Stabilizing transactions involve bids to purchase the notes in the open markets for the purpose of pegging, fixing or maintaining the price of the notes. Syndicate covering transactions involve purchases of notes in the open market after the distribution has been completed in order to cover short positions. Stabilizing and syndicate covering transactions may cause the price of the notes to be higher than it would otherwise be in the absence of those transactions. If Deutsche Banc Alex. Brown, on behalf of the Underwriters, engages in stabilizing or syndicate covering transactions, it may discontinue them at any time. The sponsor, the depositor and some of its affiliates have agreed to indemnify the underwriters against some liabilities in connection with the sale of notes, including liabilities under the Securities Act of 1933, as amended. The notes are new issues of securities with no established trading market. The underwriters have advised the sponsor that the underwriters intend to make a market in the notes but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the notes. The sponsor has estimated that it will spend approximately $[ ] for printing, rating agency, trustee and legal fees and other expenses related to the offering. LEGAL MATTERS Stroock & Stroock & Lavan LLP, has provided a legal opinion relating to the notes in its capacity as special counsel to the owner trust, the Underwriters and the sponsor. Other legal matters for the underwriters will be passed upon by [ ]. The indenture, the pooling and servicing agreement, the trust agreement and the notes will be governed by the laws of the State of New York. Index of Defined Terms Available Pledged Revenues.............................................S-36 Class A Base Principal Payment Amount..................................S-43 Class A Percentage.....................................................S-44 Class A Principal Payment Amount.......................................S-44 Class A Principal Shortfall Amount.....................................S-44 Class B Floor..........................................................S-44 Class B Percentage.....................................................S-44 Class B Principal Payment Amount.......................................S-44 Class B Target Principal Amount........................................S-45 Class C Floor..........................................................S-45 Class C Percentage.....................................................S-45 Class C Principal Payment Amount.......................................S-45 Class C Target Principal Amount........................................S-46 Class D Floor..........................................................S-46 Class D Percentage.....................................................S-46 Class D Principal Payment Amount.......................................S-46 Class D Target Principal Amount........................................S-46 collection period......................................................S-10 contract pool principal balance........................................S-10 contract principal balance.............................................S-10 CPR....................................................................S-26 Defaulted Contract.....................................................S-47 delinquency............................................................S-14 deposit date...........................................................S-51 LIBOR Determination Date...............................................S-38 Liquidation Loss.......................................................S-51 One-Month LIBOR........................................................S-38 Pledged Revenues.......................................................S-47 principal amount.......................................................S-47 principal deficiency amount............................................S-51 Reallocated Principal..................................................S-47 Reference Banks........................................................S-38 Related Collection Period Pledged Revenue..............................S-48 Required Payoff Amount.................................................S-48 Subordinate Classes....................................................S-35 Telerate Page 3750.....................................................S-38 Total Principal Payment Amount.........................................S-48 Unfunded Loss Amount...................................................S-48 United States Person...................................................S-57 SUBJECT TO COMPLETION, [ ] PROSPECTUS EQUIPMENT RECEIVABLE-BACKED NOTES (ISSUABLE IN SERIES) ACE SECURITIES CORP. SPONSOR The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. THE OWNER TRUST: The sponsor will form an owner trust for each series of notes. Each owner trust will offer equipment receivable-backed notes under this prospectus and a prospectus supplement. The prospectus supplement will be prepared separately for each series of notes. Each series may include one or more classes of notes. Each owner trust will use the note sale proceeds to acquire a pool of contracts from the depositor specified in your prospectus supplement. The assets in your owner trust are specified in the prospectus supplement for that particular owner trust, while the types of assets that may be included in a owner trust, whether or not in your owner trust, are described in greater detail in this prospectus. THE SECURITIES: ACE Securities Corp. will sell the securities pursuant to a prospectus supplement. The securities will be grouped into one or more series, each having its own distinct designation. Each series will be issued in one or more classes and will evidence beneficial ownership of, or be secured by, the assets in the owner trust that the series relates to. A prospectus supplement for a series will specify all of the terms of the series and of each of the classes in the series. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is [ ] TABLE OF CONTENTS Risk Factors............................................................. The Sponsor.............................................................. The Depositor............................................................ The Owner Trusts......................................................... The Originators, the Seller and the Servicer............................. The Contracts............................................................ Description of the Notes and Indenture................................... Description of the Pooling and Servicing Agreement....................... Certain Legal Matters Affecting the Contracts............................ Material Federal Income Tax Consequences................................. ERISA Considerations..................................................... Ratings of the Notes..................................................... Use of Proceeds.......................................................... Plan of Distribution..................................................... Legal Matters............................................................ Where You Can Find More Information...................................... Index of Terms........................................................... RISK FACTORS THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER, IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT IN THE CERTIFICATES. YOU SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS SUPPLEMENT. THE ABSENCE OF AN EXISTING MARKET There is currently no public market for FOR THE NOTES MAY LIMIT YOUR the notes and the sponsor cannot assure ABILITY TO RESELL THE NOTES you that one will develop. Thus, you may not be able to resell your notes at all, or may be able to do so only at a substantial discount. The underwriters may assist in resales of the notes but they are not obligated to do so. The sponsor does not intend to apply for listing of the notes on any securities exchange or for the inclusion of the notes on any automated quotation system. Even if a secondary market does develop, it may not continue. CONTRACT PREPAYMENT, A higher than anticipated level of INELIGIBILITY OR DEFAULT prepayments or liquidation of contracts MAY CAUSE EARLIER REPAYMENT that become defaulted may cause an owner OF THE NOTES THAN YOU EXPECT trust to pay principal on the notes AND YOU MAY NOT BE ABLE TO sooner than you expected. Also, an owner FIND INVESTMENTS WITH THE trust may pay principal sooner than you SAME YIELD AS THE NOTES AT expected if the depositor or a seller THE TIME OF REPAYMENT repurchases ineligible contracts. Similarly, upon the occurrence of an event of default under the indenture, you may receive principal of the notes sooner than you expected. See "DESCRIPTION OF THE NOTES AND INDENTURE -- EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT." You may not be able to reinvest those distributions of principal at yields equivalent to the yield on the notes; therefore, the ultimate return you receive on your investment in the notes may be less than the return you expected on the notes. The rate of early terminations or repurchases of contracts due to prepayments ineligibility, or defaults is influenced by various factors including: o technological change; o changes in customer requirements; o the level of interest rates; o the level of casualty losses; and o the overall economic environment. Unless otherwise set forth in your prospectus supplement, under the pooling and servicing agreement, the servicer may allow an obligor to prepay a contract at any time if the payment, alone, or together with the contract's remaining contract principal balance and any scheduled payment owed and not yet received, is equal to the entire contract principal balance of the contract. The principal balance of a contract is the present value of the future scheduled payments under the contract, discounted at a discount rate that will be specified in the prospectus supplement for your notes. The sponsor cannot predict the actual rate of prepayments which will be experienced on the contracts. However, your prospectus supplement will present information as to the principal balances of the notes remaining at various times under several hypothetical prepayment rates. See "WEIGHTED AVERAGE LIFE OF THE NOTES" in your prospectus supplement. THE PRICE AT WHICH YOU CAN At any time, the rating agencies RESELL YOUR NOTES MAY DECREASE may lower their respective ratings of IF THE RATINGS OF YOUR NOTES the notes or withdraw their ratings CHANGE entirely. In the event that a rating assigned to any note is subsequently lowered or withdrawn for any reason, you may not be able to resell your notes or to resell them without a substantial discount. For more detailed information regarding the ratings assigned to any class of the notes, see "RATINGS OF THE NOTES" in this prospectus and the prospectus supplement. THE SUBORDINATION OF SOME An owner trust will pay interest CLASSES OF NOTES IS ONLY A and principal on some classes of notes LIMITED FORM OF CREDIT prior to paying interest and principal ENHANCEMENT AND DOES NOT on other classes of notes. The ENSURE PAYMENT OF THE subordination of some classes of notes MORE SENIOR CLASSES to others means that the subordinated classes of notes are more likely to suffer the consequences of delinquent payments and defaults on the contracts than the more senior classes of notes. The more senior classes of notes could lose the credit enhancement provided by the more subordinate classes if delinquencies and defaults on the contracts increase and if the collections on the contracts and any credit enhancement described in your prospectus supplement are insufficient to pay even the more senior classes of notes. Your prospectus supplement will describe any subordination provisions applicable to your notes. LIMITED ASSETS ARE AVAILABLE Each owner trust will be a limited FOR PAYMENT OF THE NOTES; purpose trust with limited assets. NOTEHOLDERS WILL HAVE NO Moreover, you have no recourse to the RECOURSE TO THE ORIGINATORS, general credit of the servicer, sponsor, SPONSOR, DEPOSITOR, SERVICER depositor, originator or their OR THEIR AFFILIATES IN THE affiliates. Therefore, you must rely EVENT DELINQUENCIES AND LOSSES solely upon the contracts and any credit REDUCE THE TRUST'S ASSETS enhancement described in your prospectus supplement for payment of principal and interest on the notes. An increase in delinquent or defaulted payments on contracts could result in your being paid less than you expect on the notes or in delays in payment. If a contract is a vendor loan, you must rely solely upon the end-user contracts securing the vendor loan for payments in respect of that contract. Most vendor loans are non-recourse to the vendors. In non-recourse loans you are limited to recovering amounts due solely from the end-user contracts and related security. EVEN IF AN OWNER TRUST If a contract held by the trust REPOSSESSES AND SELLS THE becomes a defaulted contract, the only EQUIPMENT RELATING TO A sources of payment for amounts owed on CONTRACT AFTER AN OBLIGOR that contract will be the income and DEFAULTS, SHORTFALLS IN proceeds from the sale of any related AMOUNTS AVAILABLE TO PAY equipment and a deficiency judgment, if THE NOTES MAY OCCUR IF THE any, against the obligor under the MARKET VALUE OF THE EQUIPMENT defaulted contract. Since the market HAS DECLINED value of the equipment may decline faster than the discounted contract balance, the owner trust may not recover the entire amount due on the contract and might not receive any recoveries on the equipment. The prospectus supplement for your notes may describe some forms of credit enhancement which are intended to make up for deficiencies in the proceeds and recoveries on the contracts. However, this protection is limited and could be depleted if those deficiencies are larger than the sponsor anticipates. NOT HAVING POSSESSION OF CONTRACT To facilitate servicing and reduce FILES MAY HINDER AN OWNER TRUST'S administrative costs, the servicer or a ABILITY TO REALIZE THE VALUE OF sub-servicer, unless otherwise specified EQUIPMENT SECURING THE CONTRACTS in your prospectus supplement, will retain possession of the documents evidencing the contracts held by the owner trust. As a result, a subsequent purchaser of contracts could take physical possession of the documents without knowledge of their assignment. That subsequent purchaser could then have a security interest in the contracts senior to the owner trust's security interest. In the event that the owner trust must rely upon repossession and sale of the equipment securing defaulted contracts to recover amounts due on the defaulted contracts, the owner trust's ability to realize upon the equipment would be limited by the existence of the third party's senior security interest in those contracts. In this event, there may be a delay or reduction in distributions to you. Similarly, with respect to contracts securing vendor loans, the vendor will retain the original documents associated with some contracts. The applicable originator will file Uniform Commercial Code financing statements reflecting the pledge of those contracts to the applicable originator as security for the vendor loans. However, the related documents will remain in the vendor's possession. If a subsequent purchaser were able to take physical possession of the related documents without knowledge of the pledge to the originator, the owner trust's security interest in those contracts could be defeated. In this event, there may be a delay or reduction in distributions to you. FAILURE TO TAKE ALL STEPS The depositor will receive security NECESSARY TO PERFECT SECURITY interests in financed equipment INTERESTS IN EQUIPMENT, TO securing contracts from the seller of RECORD ASSIGNMENT OF SECURITY such financed equipment, which will INTERESTS TO THE OWNER TRUST obtain security interests in financed OR TO RECORD SECURITY INTERESTS equipment from other originator or IN TITLED EQUIPMENT MAY HINDER through its own origination activities. THE OWNER TRUST'S ABILITY TO The depositor will assign the security REALIZE THE VALUE OF EQUIPMENT interests to the owner trust. However, SECURING THE CONTRACTS in some instances, the originators may not file financing statements for equipment relating to a single obligor in a single jurisdiction when the value of the equipment is less than a minimum amount which will be specified in the related prospectus supplement. As a result, the originator will not acquire, and the depositor and owner trust will not have, a perfected security interest in the equipment. As a result, creditors of the end-user may acquire superior interests in the equipment. Additionally, regardless of equipment value, the sponsor will require the originators to annotate their records to note the depositor's security interest but may not require the filing of assignments of financing statements for the equipment to reflect the depositor's, the owner trust's or the indenture trustee's interests. Because of this, an originator or the servicer could inadvertently release the security interest in the equipment securing a contract. The owner trust would then not have a security interest in the equipment. Also, any transfer to the depositor of an originator's security interest in motor vehicles securing the contracts is subject to state vehicle registration laws. The depositor's transfer of a security interest in motor vehicles to the owner trust is also subject to these registration laws. These registration laws require that the secured party's name appear on the certificate of title or similar registration of title to a motor vehicle in order for the secured party's security interest to be perfected. The applicable originator will be identified on the certificates or similar registrations of title. However, the certificates of title or similar registrations of title will not identify the depositor or owner trust as secured party. In addition, some equipment related to the contracts may constitute fixtures under the real estate or Uniform Commercial Code provisions of the state in which the equipment is located. The relevant originator will not file assignments of fixture filings in favor of the depositor or owner trusts. Therefore, a third party could acquire an interest in the motor vehicles or real estate fixtures superior to that of the owner trusts. REPURCHASE OBLIGATION OF THE Federal or state law may grant SELLER PROVIDES YOU ONLY liens on contracts or equipment that LIMITED PROTECTION AGAINST have priority over the EQUIPMENT owner PRIOR LIENS ON THE CONTRACTS OR trust's interest. If the creditor associated with any prior lien exercises its remedies it is unlikely that sufficient cash proceeds from the contract and related equipment will be available to pay the contract balance to the trust. In that event, there may be a delay or reduction in distributions to you. An example of a lien arising under federal or state law is a tax lien on property of the originator or the depositor arising prior to the time a contract is conveyed to the owner trust. The tax lien has priority over the interest of the owner trust in the contracts. In most cases where vendors have assigned contracts to originators, the vendors have warranted to the originators that there are no prior liens on the contracts. Additionally, where vendors have assigned contracts to originators, the vendors have agreed not to grant any lien on any contracts transferred to the originators. In all cases, the seller will warrant to the depositor and the owner trust that there are no prior liens on the contracts. The seller also will warrant to the depositor and the owner trust that it will not grant any lien on the contracts. In the event that those warranties are not true as to any contract, the seller will be required under the pooling and servicing agreement to repurchase the contract. There can be no assurance that the seller will be able to repurchase a contract at the time when it is asked to do so. IF A BANKRUPTCY COURT RULES Vendors sell contracts to the THAT THE TRANSFER OF CONTRACTS originators, which contracts will be FROM A VENDOR TO AN ORIGINATOR transferred directly or indirectly to WAS NOT A TRUE SALE THEN PAYMENTS the depositor and then the owner trust. ON THE CONTRACTS MAY BE REDUCED If a bankruptcy court decides that the OR DELAYED acquisition of a contract by an originator is not a sale of the contract from the vendor to the originator, the contract would be part of the vendor's bankruptcy estate. Accordingly, the contract would be available to the vendor's creditors. In that case, it is unlikely the trust will receive all of the scheduled payments on the contracts, and there may be a delay or reduction in distributions to you. In order to treat the transfer of contracts to the trust as not being a true sale, the bankruptcy court would recharacterize the transfer as a pledge of the contracts to secure borrowings by the vendor. Additionally, if the transfer of contracts to an originator from a vendor is recharacterized as a pledge, then a tax or government lien on the property of the pledging vendor arising before the contracts came into existence may have priority over the owner trust's interest in the contracts. A BANKRUPTCY COURT DETERMINATION If an originator, the seller or the THAT THE TRANSFER OF CONTRACTS depositor became a debtor in a FROM ORIGINATORS TO THE SELLER, bankruptcy case, creditors of that FROM THE SELLER TO THE DEPOSITOR party, or that party acting as a OR FROM THE DEPOSITOR TO THE debtor-in-possession, may assert that OWNER TRUST WAS NOT A TRUE SALE the transfer of the contracts was THEN PAYMENTS ON THE CONTRACTS COULD ineffective to remove the contracts from BE REDUCED OR DELAYED that party's estate. In that case, the distribution of contract payments to the trust might be subject to the automatic stay provisions of the United States Bankruptcy Code. This would delay the distribution of those payments to the noteholders for an uncertain period of time. Furthermore, if the bankruptcy court rules in favor of the creditors or the debtor in possession, the result may be reductions in payments under the contracts to the trust. In either case, you may experience delays or reduction in distributions to you. In addition, a bankruptcy trustee would have the power to sell the contracts if the proceeds of the sale could satisfy the amount of the debt deemed owed by the originator, the seller or the depositor, as the case may be. The bankruptcy trustee could also substitute other collateral in lieu of the contracts to secure the debt. Additionally, the bankruptcy court could adjust the debt if the originator, the seller or the depositor were to file for reorganization under Chapter 11 of the Bankruptcy Code. Each of these parties will represent and warrant that the conveyance of the contracts by it is in each case a valid sale and transfer of the contracts. In addition, in agreements conveying the contracts, the originators, the seller and the depositor have agreed that they will each treat the transactions described in this prospectus as a sale of the contracts. INSOLVENCY OF THE VENDORS In the event a vendor under a COULD DELAY OR REDUCE PAYMENTS vendor loan becomes subject to TO YOU insolvency proceedings, the end-user contracts and equipment securing the vendor loan as well as the vendor's obligation to make payments would also become subject to the insolvency proceedings. In that event, payments to the owner trust in respect of those vendor contracts may be reduced or delayed. Payments to you may be reduced if collections from the remaining unaffected contracts are insufficient to cover losses to the owner trust. In those cases in which transfers of end-user contracts by vendors to originator provide that the originator have recourse to the vendor for all or a portion of the losses the originator may incur as a result of a default under those end-user contracts, the vendor's bankruptcy, may similarly result in reductions or payment delays in amounts due from the vendor. END-USER BANKRUPTCY MAY Bankruptcy and insolvency laws REDUCE OR DELAY COLLECTIONS could affect your interests in contracts ON THE CONTRACTS, AND with end-user obligors who E become DISPOSITION OF EQUIPMENT subject to bankruptcy proceedings. Those RELATING TO THESE OR OTHER laws could result in contracts of a DEFAULTING ND-USERS MAY BE bankrupt end-user being written off as DELAYED OR MAY NOT RESULT IN uncollectible or result in delay in COMPLETE RECOVERY OF AMOUNTS DUE payments due on the contracts. As a result, you may be subject to delays in receiving payments, and you may also suffer losses if collections from the remaining unaffected contracts are insufficient to cover losses to the trust. Foreclosure sales of equipment and obtaining deficiency judgments following foreclosure sales may not yield sufficient proceeds to pay off the balance owed on a contract. If you must rely on repossession and disposition of equipment to recover amounts due on defaulted contracts, those amounts may be insufficient. Factors that may affect whether you receive the full amount due on a contract include the failure to file financing statements to perfect the originator's or owner trust's security interest in the equipment securing the contract. The depreciation, obsolescence, damage, or loss of any item of equipment will also affect whether you receive the full amount due on a contract. COMMINGLING OF COLLECTIONS COULD Cash held by the servicer may be RESULT IN REDUCED PAYMENTS TO YOU commingled and used for the benefit of the servicer prior to the date on which the collections are required to be deposited in a collection account as described under "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT -- COLLECTIONS ON CONTRACTS." In the event of the insolvency or receivership of the servicer, an owner trust may not have a perfected ownership or security interest in these collections. In that case, you may suffer losses on your investment as a result. BANKRUPTCY OF DEPOSITOR OR THE If an owner trust or the depositor OWNER TRUST MAY CAUSE DELAYS IN becomes insolvent under any federal OR REDUCE COLLECTIONS UNDER THE bankruptcy or similar state laws, the CONTRACTS right of an indenture trustee to foreclose upon and sell the assets of an owner trust is likely to be significantly impaired by applicable bankruptcy laws. This would be the case before or possibly even after an indenture trustee has foreclosed upon and sold the assets of an owner trust. Under the bankruptcy laws, payments on debts are not made, and secured creditors are prohibited from repossessing their security from a debtor in a bankruptcy case or from disposing of security repossessed from the debtor, without bankruptcy court approval. Moreover, the bankruptcy laws may permit the debtor to continue to retain and to use collateral even though the debtor is in default under the applicable debt instruments, if the secured creditor is provided adequate protection. The meaning of the term adequate protection may vary according to circumstances, but it is intended in general to protect the value of the security from any diminution in the value of the collateral as a result of its use by the debtor during the pendency of the bankruptcy case. Because there is no precise definition of the term adequate protection and because the bankruptcy court has broad discretionary powers, it is impossible to predict if or how you would be compensated for any diminution in value of the owner trust assets. THE SELLER'S OBLIGATION TO The seller of contracts to the REPURCHASE CONTACTS COULD BE depositor, will make representations and IMPAIRED BY BANKRUPTCY warranties regarding the contracts, the equipment and other matters. See "THE CONTRACTS -- REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER." If any representation or warranty with regard to a specific contract is breached, is not cured within a specified period of time, and the value of the contract is materially and adversely affected by the breach, the seller must purchase the contract from the applicable owner trust at a price equal to the amount required to pay off the contract. If the seller becomes bankrupt or insolvent, each indenture trustee's right to compel a purchase would both be impaired and have to be satisfied out of any available "assets" of the seller's bankruptcy estate. In that case, you may suffer a loss on your investment in a note as a result. CONTRACTS RELATING TO SOFTWARE Some of the contracts held by the OR RELATED SUPPORT AND CONSULTING owner trust may relate to software that SERVICES ARE NOT SECURED BY THE is not owned by an originator or related SOFTWARE OR RELATED SERVICES support and consulting services. In these cases, the vendor or a licensor traditionally owns the software, and the software and related support and consulting services do not serve as collateral for the contracts. Thus, the owner trust will not have an interest in the software or related support and consulting services. The owner trust will own solely the associated contracts' cash flow. Accordingly, if any of these contracts becomes a defaulted contract, the owner trust will not be able to foreclose on the software or related support and consulting services. Because there will be no proceeds from the software or related support and consulting services which could be used to make payments to you, the owner trust must look solely to the obligor to collect amounts due on the contract. There can be no assurance that the obligor will be able to pay in full amounts due under the contract. LIMITATIONS ON ENFORCEABILITY State law limitations on the OF SECURITY INTERESTS IN THE enforceability of security interests and EQUIPMENT MAY HINDER THE OWNER the manner in which a secured party may TRUST'S ABILITY TO REALIZE dispose of collateral may limit the THE VALUE OF EQUIPMENT SECURING owner trust's ability to obtain or THE CONTRACTS dispose of collateral in a timely fashion. This could reduce or delay the availability of funds to pay the notes. Under these state law limitations: o if the obligor becomes bankrupt or insolvent, the owner trust may need the permission of a bankruptcy court to obtain and sell its collateral; o some jurisdictions require that the obligor be notified of the default and be given a time period within which it may cure the default prior to repossession; and o the obligor may have the right to redeem collateral for its obligations prior to actual sale by paying the lessor or secured party the unpaid balance of the obligation plus the secured party's expenses for repossessing, holding and preparing the collateral for disposition. BANKRUPTCY COURT REJECTION OF A bankruptcy trustee or "TRUE LEASES" MAY REDUCE FUNDS debtor-in-possession S under federal AVAILABLE TO PAY NOTE bankruptcy or similar state laws has the right to assume or reject any executory contract or unexpired lease which is considered to be a "true lease" under applicable law. A "true lease" is a contract under which the applicable originator or vendor holds a residual interest in equipment of more than a nominal amount. Some contracts will be true leases and thus subject to rejection by the lessor under federal bankruptcy or similar state laws. For this reason, the originator, as debtor-in-possession or the originator's bankruptcy trustee may reject the leases of which that originator is the lessor. Upon any rejection, payments to the applicable originator under the rejected contract may terminate and your investment may be subject to losses. In addition, any contract which is a true lease that a vendor originated and transferred to an originator in a transaction in which the vendor continues to be the lessor, will be subject to rejection by the vendor, as debtor in possession, or by the vendor's bankruptcy trustee. An example of this transaction is a transfer by a vendor to an originator of a security interest in the lease contract or a transfer by a vendor to an originator of an interest in the right to payments only under the lease contract. Upon any rejection, payments to the applicable originator under the rejected contract may terminate and your investment may be subject to losses. THE SPONSOR ACE Securities Corp., the sponsor, is a special purpose corporation incorporated in the State of Delaware on June 3, 1998. The principal executive offices of the depositor are located at 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211. Its telephone number is (704) 365-0569. The sponsor does not have, nor is it expected in the future to have, any significant assets. The limited purposes of the depositor are, in general, to acquire, own and sell loans, leases and financial assets; to issue, acquire, own, hold and sell securities and notes secured by or representing ownership interests in loans, leases and other financial assets, collections on the loans, leases and related assets; and to engage in any acts that are incidental to, or necessary, suitable or convenient to accomplish, these purposes. THE DEPOSITOR The depositor will be a special purpose entity specified in your prospectus supplement. The depositor will not be responsible for payment of any principal, interest or any other amount in respect of any series of notes. THE OWNER TRUSTS The sponsor will form each owner trust under a trust agreement among the sponsor, the depositor and the owner trustee, as described in your prospectus supplement. Each owner trust may issue one or more classes of securities, representing debt of or beneficial ownership interests in the owner trust. The trust will not offer the beneficial ownership interests under this prospectus. The assets of each owner trust, as further specified in your prospectus supplement, will consist of: (1) a pool including some or all of the following types of contracts: o equipment lease contracts, o conditional sale/financing agreements, o installment payment agreements, o promissory notes, and o loan and security agreements; (2) amounts on deposit in, and any eligible investments allocated to, accounts established under the related indenture and the pooling and servicing agreement; (3) the depositor's rights under the related purchase and sale agreement or other instrument by which it acquired contracts, if any; and (4) the depositor's rights with respect to any cash collateral account or other form of credit enhancement for the notes. The owner trust will have the right, as set forth in your prospectus supplement, to: o all funds payable under the contracts after the cut-off date, the date on which the owner trust's right to contract payments commences. This includes all scheduled but unpaid amounts due prior to the cut-off date, but excludes any scheduled payments due on or after, but received prior to, the date the depositor transfers the contracts to an owner trust. This does not include contract payments in respect of taxes, insurance premiums, security deposits, late charges, administrative fees or charges; o prepayments, except for any portion allocated to the depositor in respect of equipment leases; o liquidation proceeds received with respect to defaulted contracts, except for any portion allocable to the depositor under an equipment lease; o earnings from the investment of funds in the collection account and note distribution account maintained by the servicer; and o security interests in the equipment related to the contracts, but excluding ownership rights. No owner trust will engage in any business activity unless otherwise specified in your prospectus supplement, other than o issuing notes and ownership interests in the owner trust; o purchasing contracts and related assets; o holding and dealing with the assets of the owner trust; o making payments on the notes and other securities it issued; o entering into and performing the duties, responsibilities and functions required under any of the related pooling and servicing agreement, indenture, contracts, and related documents; and o matters incidental to the above. The assets of an owner trust will be separate from the assets of all other owner trusts the sponsor or depositor creates. Accordingly, the assets of one owner trust will not be available to make payments on the securities issued by any other owner trust. The sponsor will specify the owner trustee of the owner trust for notes being offered to you in your prospectus supplement. The owner trustee's liability in connection with the sale of notes will be limited to the express obligations of the owner trustee in the related trust agreement and indenture. An owner trustee may resign at any time, in which event the depositor or the sponsor, as specified in your prospectus supplement or any designee must appoint a successor owner trustee. The depositor or the sponsor, as specified in your prospectus supplement or any designee may also remove an owner trustee if the owner trustee ceases to be eligible to continue as such under the related trust agreement or if the owner trustee becomes insolvent. Any resignation or removal of an owner trustee will not become effective until acceptance of the appointment of a successor owner trustee. THE ORIGINATORS, THE SELLER AND THE SERVICER Your prospectus supplement will provide information on the originators, the seller and the servicer. THE CONTRACTS With respect to any series of notes, this prospectus and any prospectus supplement refer to the aggregate of the contracts in an owner trust, as of any particular date, as the contract pool. This prospectus and any prospectus supplement refer to the contract pool, as of the cut-off date specified in the prospectus supplement for your notes, as the cut-off date or initial contract pool. This prospectus and any prospectus supplement refer to equipment, software and services collectively as financed items. DESCRIPTION OF THE CONTRACTS The following description of the contracts describes the material terms of the contracts to be included in each contract pool, although an immaterial number of contracts in a contract pool may differ in one or more provisions from the description below. END-USER CONTRACTS Each owner trust will include contracts to which the end-user of the equipment is a party. The sponsor lists the types of contracts under "THE OWNER TRUSTS" above. There will be no limit on the number of contracts in a particular contract pool which may consist of any of those types. Each contract is required, however, to be an "eligible contract," as of the date the depositor transfers the contracts to the respective owner trusts. An eligible contract is a contract as to which the representations and warranties listed below under "--REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER" are true as of the transfer date. CONDITIONAL SALE AGREEMENTS Each originator may offer financing for equipment under conditional sale agreements assigned to the applicable originator by the vendor of the equipment. Each originator will either use its standard pre-printed form or a vendor's standard, pre-printed form to document the conditional sale agreements in a contract pool. The conditional sale agreement sets forth the description of each financed item and the schedule of installment payments. Typically, loans under conditional sale agreements are fixed rate and are for a term of one to seven years. Payments under conditional sale agreements typically are due monthly. Conditional sale agreements typically: o provide for a grant by the end-user of the equipment of a security interest in the equipment, which security interest is assigned by the vendor to the originator; o may allow prepayment of the obligation upon payment, where allowed by applicable state law, of an additional prepayment fee; o require the end-user to maintain the equipment, keep it free and clear of liens and encumbrances and pay all taxes related to the equipment; o restrict the modification or disposal of the equipment without the vendor's, or its assignee's, consent; o include a disclaimer of warranties; o include the end-user's indemnity against liabilities arising from the use, possession or ownership of the equipment; o include the end-user's absolute and unconditional obligation to pay the installment payments on the loan; and o include specific events of default and remedies for default. A conditional sale agreement typically requires each end-user to maintain insurance, the terms of which may vary. The terms of a conditional sale agreement often may be modified at its inception at the end-user's request. LEASES The originators, either directly or by assignment from vendors, may offer financing of equipment, software and services under leases. Leases may consist of individual lease agreements relating to a single, separate transaction and financed item. Alternatively, the individual leases may be governed by a master lease agreement which contains the general terms and conditions of the transaction. Specific terms and conditions, such as descriptions of the specific equipment, software and services being leased or financed and the schedule of related rental payments, are typically contained in a supplement or schedule to the master lease agreement, which is signed by the end-user as lessee, and either the vendor or the originator, as lessor. The supplement to the master lease agreement incorporates the master lease agreement by reference, and is treated by the originator as a separate lease. The originator or the vendor originates each lease in the ordinary course of business. Vendors who originate leases assign them to the originator. An originator also may purchase leases on a portfolio basis. The initial terms of the leases in the contract pool typically range from one to seven years. Each lease provides for the periodic payment by the end-user of rent in advance or arrears, generally monthly or quarterly. The periodic payments represent the amortization, generally on a level basis, of the total amount that an end-user is required to pay throughout the term of a lease. A contract pool will include "NET LEASES" under which the end-user assumes responsibility for o the financed items, including operation, maintenance, repair, and insurance or self-insurance, o return of the equipment at the expiration or termination of the lease, and o the payment of all sales, use and property taxes relating to the financed items during the lease term. The end-user further agrees to indemnify the lessor for any liabilities arising out of the use or operation of the financed items. In most cases, the end-user also authorized the lessor to perform the end-user's obligations under the lease at the end-user's expense, if it so elects, in cases where the end-user has failed to perform. In addition, the leases often contain "HELL OR HIGH WATER" clauses unconditionally obligating the end-user to make periodic payments, without setoff, at the times and in the amounts specified in the lease. If an originator is the lessor, the lease will often contain no express or implied warranties with respect to the financed items other than a warranty of quiet enjoyment. If a vendor is the lessor, the lease or a related agreement may contain representations and warranties with respect to the financed items in addition to a warranty of quiet enjoyment. However, the end-user typically agrees not to assert any warranty claims against any assignee, including the originator, of the vendor by way of setoff, counterclaim or otherwise, and further agrees that it may only bring that type of claim against the vendor. Leases of equipment often require the end-user to maintain, at its expense, casualty insurance covering damage to or loss of the equipment during the lease term or to self-insure against these risks, if approved in advance by the originator or vendor, as applicable. The leases may include both "TRUE LEASES" and leases intended for security as defined in Section 1-201(37) of the Uniform Commercial Code. Under a "TRUE LEASE", the lessor bears the risk of ownership, except for the risk of loss of the equipment, which is passed to the end-user under the leases. The lessor also takes any tax benefits associated with the ownership of depreciable property under applicable law. No title is conferred upon the lessee. The lessee under a "TRUE LEASE" has the right to the temporary use of property for a term shorter than the economic life of the property in exchange for payments at scheduled intervals during the lease term. Additionally, the lessor retains a significant "RESIDUAL" economic interest in the leased property. End of lease options for "TRUE LEASES" include purchase or renewal at fair market value. Under leases intended for security, the lessor in effect finances the "PURCHASE" of the leased property by the lessee and retains a security interest in the leased property. The lessee retains the leased property for substantially all its economic life and the lessor retains no significant residual interest. Such leases are considered conditional sales type leases for federal income tax purposes and, accordingly, the lessor does not take any federal tax benefits associated with the ownership of depreciable property. End of lease options for these leases depend on the terms of the related individual lease agreement or master lease agreement supplement, but often these terms provide for the purchase of the equipment at a prestated price, which may be nominal. The inclusion of "TRUE LEASES" in a contract pool should have no federal income tax impact on holders of notes since the notes are treated as debt for federal income tax purposes. However, the inclusion of "TRUE LEASES" may result in the imposition of state and local taxes which would reduce cash available for payment on the notes. A lease will either prohibit the end-user from altering or modifying the equipment or permit the end-user to alter or modify the equipment only to the extent the alterations or modifications are readily removable without damage to the equipment. Under some master lease agreements, the end-user may assign its rights and obligations under the lease, but only upon receiving the prior written consent of the lessor. Under some leases, the lessee may relocate the equipment upon giving the lessor prompt written notice of the relocation. The right to grant or deny consent or to receive written notice will be exercised by the servicer under the authority delegated to it in the related pooling and servicing agreement. Some leases will permit the end-user to substitute substantially identical leased equipment for leased equipment scheduled to be returned to the lessor under the lease. While the terms and conditions of the leases will not usually permit cancellation by the end-user, the lessor and the end-user may modify or terminate some leases before the end of the lease term. The originator, or a vendor, with the consent of the originator, may permit the modifications to a lease term or early lease terminations. The modifications typically arise in connection with additional financing opportunities from the same end-user. End-users may also negotiate with the originator, at the originator's discretion, an early termination arrangement allowing the end-user to purchase the equipment during the term of a lease. The early-termination purchase price is often equal to or in excess of the present value of the remaining rental payments under the lease plus the anticipated market value of the related equipment as of the end of the lease term. The originator may permit early termination of a lease in connection with the acquisition of new technology requiring replacement of the equipment. In these cases, the end-user returns the related equipment to the vendor or originator and pays an amount generally equal to the present value of the remaining rental payments under the lease plus an early termination fee to the originator. Modifications usually involve repricing a lease or modification of the lease term. Occasionally the lessor and the end-user may modify a lease in connection with an increase in the capacity or performance of equipment by adding additional equipment that includes new technology. Coincident with the financing of an upgrade to the equipment, the originator may reprice and extend the related base lease term to be coterminous with the desired term of the lease relating to the upgrade. In some cases, subject to conditions described under "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS -- SERVICING," base lease extensions may remain in a contract pool. The sponsor expects that the servicer will continue to permit these modifications and terminations with respect to leases included in a contract pool under the authority delegated to it in the related pooling and servicing agreement. The servicer's ability to modify leases is limited by the conditions and covenants of the servicer described under "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS -- SERVICING." The originator may modify the standard terms and conditions of the lease agreement at the inception of a lease at the request of the end-user. Common permitted modifications include, but are not limited to: o prearranged mid-lease purchase options, early termination options and lease extension options as described above; o modifications to the lessor's equipment inspection rights; o modifications to the end-user's insurance requirements permitting the end-user to self-insure against casualty to the equipment; o the end-user's right to assign the lease or sub-lease the financed items to an affiliated entity, so long as the end-user remains liable under the lease and promptly notifies the lessor or its assignee of the assignment or sublease; and o extended grace periods for late payments of rent. In some cases, after a lease term expires the originator may permit the end-user to continue to use the related equipment for so long as the end-user continues to make lease payments. After the expiration of the term of a lease, any continued lease payments will belong to the depositor, not the owner trust. SECURED NOTES Each originator may also provide direct initial financing or refinancing of equipment and software under secured promissory notes, which consist of an installment note and a separate security agreement. In an initial financing transaction, the originator pays to the vendor the purchase price for the equipment or software. In a refinancing transaction, the originator pays off an end-user's existing financing source, and the initial financing or refinancing is documented as a direct loan by the originator to the end-user of the equipment or software using a secured note. In the case of a refinancing transaction, upon payment to the existing financing source, the originator obtains a release of the original financing party's lien on the financed equipment. In either case, the originator records its own lien against the financed equipment or software and takes possession of the secured note. Except for the lack of references to "sale" or "purchase" of equipment, a secured note contains terms and conditions substantially similar to those contained in conditional sale agreements. INSTALLMENT PAYMENT/FINANCING AGREEMENTS Each originator may provide financing for software license fees and related support and consulting services under o installment payment supplements to software license agreements, o separate installment payment agreements, and o other forms of financing agreements assigned to the originator by vendors of software. Each financing agreement of this type: o generally is an unsecured obligation of the end-user; o generally provides for a fixed schedule of payments with no end-user right of prepayment; o generally is noncancellable for its term; o generally contains a "HELL OR HIGH WATER" clause unconditionally obligating the end-user to make periodic payments, without setoff, at the times and in the amounts specified. If a financing agreement does not provide for noncancellability or a "HELL OR HIGH WATER" clause, the financing agreement will typically have the benefit of a vendor guarantee; o generally permits the assignment of the payment agreement to a third party, including the originator, and includes the end-user's agreement not to assert against assignee any claims or defenses the end-user may have against the vendor; and o generally contains default and remedy provisions that usually include acceleration of amounts due and to become due and, in some cases, the right of the vendor, or the originator by assignment, to terminate the underlying software license and all related support and consulting activities. EQUIPMENT The end-user contracts may consist of some or all of the following types of new and used equipment: 1) information technology equipment, including: o computer work stations, o mainframe, mid-range and personal computers, o data storage devices, o media and video production/post production equipment, o servers and o computer related peripheral equipment, 2) communications equipment, such as telephone switching and networking systems, 3) commercial business and industrial equipment, such as: o printing presses, o machine tools and other manufacturing equipment, o photocopiers, facsimile machines and other office equipment, o energy savings and control equipment, o corrugated boards, o plastic injections, o folding cartons o silk screening equipment, o automotive diagnostic and o automated testing equipment, 4) retail equipment, such as o petroleum retail equipment, o fuel dispensers, o ATM units, o convenience store operating equipment, o embroidery machines, o coin operated, vending, amusement and coffee service equipment and o restaurant equipment, 5) medical and dental equipment, such as diagnostic and therapeutic examination equipment for radiology, nuclear medicine and ultrasound and laboratory analysis equipment, 6) resources equipment, such as feller-bunchers and grapplers, 7) transportation and construction equipment, such as: o heavy and medium duty trucks, highway trailers and other title vehicles, o school buses, o bulldozers, o loaders, o graders, o excavators, o machine tools, o forklifts, o other materials handling equipment, o golf carts, o aircraft engines, o other road and off-road machinery and o electronics manufacturing and testing equipment, 8) other equipment o forestry, o pollution control, o mining and steel mill equipment, o laundry, janitorial, and cleaning equipment, o photographic equipment, o refuse equipment and o furniture and fixtures equipment. In each case, the depositor will transfer the security interests of the originator in the equipment subject to each related end-user contract, but not ownership interests in the case of leased equipment, to the relevant owner trust. SOFTWARE AND SERVICES Some end-user contracts may cover license fees and other fees owed by the end-user under either perpetual or term software license agreements and other related agreements in connection with the end-user's use of computer software programs. The end-user contracts may also cover related support and consulting services which are provided by the vendor, an affiliate of the vendor or a third party contract party and which facilitate the obligor's use of the software. Neither the vendors or licensors of the software nor the end-users under the related end-user contracts will convey to the originator any interest in the software or the software license agreement, other than the right to collect the payment of software license fees. However, in some cases, the vendors may convey to the originator the right to exercise rights and remedies under the relevant software license agreement or related agreements. Consequently, unless otherwise specified in your prospectus supplement, an owner trust will not have title to or a security interest in the software, nor will it own the related services, and would not be able to realize any value from the software or related servicer under a related end-user contract upon a default by the end-user. VENDOR LOANS The contracts may include limited recourse loan or repayment obligations of a vendor. These may take the form of promissory notes with related security interests documented by security agreements or specific provisions in related program agreements. Each of the obligations is secured by all of the vendor's interest in an individual end-user contract originated by the vendor and by the equipment related to the end-user contract. The originator may originate vendor loans through, and the vendor loans may incorporate terms and conditions of, a program agreement. See "PROGRAM AGREEMENTS WITH VENDORS." Vendor loans generally are non-recourse to the vendor, meaning that the originator may obtain repayment solely from the proceeds of the end-user contracts and related equipment securing the vendor loan. However, the originator may have recourse to a vendor for nonpayment of a vendor loan through a limited recourse arrangement in the related program agreement or other related agreement. The repayment terms under a vendor loan, including periodic amounts payable and schedule of payments, will correspond to the payment terms of the end-user under the end-user contract collaterally assigned under the vendor loan. Each vendor loan will either include most, if not all, of the representations and warranties regarding the end-user contract and related equipment typically included in a vendor agreement, or incorporate these representations and warranties included in any related program agreement by reference. PROGRAM AGREEMENTS WITH VENDORS An originator's program agreement is typically an agreement with equipment manufacturers, dealers and distributors, or software licensors or distributors, located in the United States. The program agreement provides an originator with the opportunity to finance transactions relating to the acquisition or use by an end-user of a vendor's equipment, software, services or other products. Vendor program arrangements provide an originator with a steady, sustainable flow of new business, often with lower costs of origination than asset-based financings marketed directly to end-users. Some of the program agreements take the form of a referral relationship, which is less formal, and may or may not include credit or remarketing support to the originator from the vendor. Each program agreement under which vendors or another party originate and document contracts and assign them to the originator typically includes vendor representations, warranties and covenants regarding each contract assigned to an originator, including that: o the obligations of the end-user under the assigned contract are absolute, unconditional, noncancellable, enforceable in accordance with their terms and free from any rights of offset, counterclaim or defense; o the originator holds the sole original of the contract and has either title to or a first priority perfected security interest in the equipment, except with respect to situations where no financing statement is filed due to the minimum value involved; o the equipment and the contract are free and clear of all liens, claims or encumbrances except for permitted liens; o the end-user has irrevocably accepted the equipment or the software; and o the end-user duly authorized and signed the assigned contract; Each program agreement under which the originators document and originate contracts typically include vendor representations, warranties and covenants regarding each contract, including that o the equipment has been delivered to and accepted by the end-user; o the vendor has not received any advance payments; o the vendor has good title to the equipment; and o the vendor has not made any misrepresentations to the end-user. In each of the two above described program structures, relevant agreements also typically provide for o remedies for misrepresentations or breaches of warranties or covenants by the vendor regarding an assigned contract. These remedies usually require the vendor to repurchase the affected end-user contract for the originator's investment balance in the contract plus costs incurred by the originator in breaking any underlying funding arrangement; and o the right of an originator to further assign its interests in assigned contracts, all related payments and any related interest in equipment. In addition, the originators may enter into profit sharing arrangements with some vendors. These arrangements typically will provide for sharing of revenues generated under the program and for joint participation in management. Under the terms of these arrangements, the originators typically maintain direct or indirect control over all credit decision-making activities. Also, a program agreement or profit sharing arrangement may include recourse against a vendor with respect to end-user defaults under some end-user contracts, o by specifying that the assignment of the contract from the vendor to the originator is with full recourse against the vendor; o by specifying that the vendor will absorb a limited fixed dollar or percentage amount of "FIRST LOSSES" on the contract; o by inclusion of the contract in an ultimate net loss pool created under the program agreement as well as guarantees by the applicable vendor with respect to certain contracts which are cancelable or which do not contain "HELL OR HIGH WATER" provisions; or o by providing for vendor repurchase of the contract or vendor indemnification payments for breaches of certain representations and warranties made by the vendor with respect to the contract. If an end-user defaults under a contract subject to a net loss pool, the originator may be permitted to draw against the net loss pool up to the amount of the originator's remaining unpaid investment balance in the defaulted contract. The originator may also be permitted to draw against the net loss pool with respect to contracts that are not included in the pool of contracts in a particular owner trust and, accordingly, there can be no assurance that any amounts contributed by a vendor to a net loss pool will be available with respect to a defaulted contract included in the pool of contracts owned by a particular owner trust. The manner in which the vendor assigns contracts to the originator varies from one program agreement to another, depending upon o the nature of the items financed, o the form of the contract, o the accounting treatment sought by the vendor and the end-user, and o tax considerations. For example, an originator might: o accept a vendor loan and collateral assignment of the contract and related equipment or security interest in the equipment from the vendor; or o accept a full assignment of the contract and a collateral assignment of the related equipment or security interest from the vendor, which collateral assignment secures the end-user's obligations under the contract or lease. The originator also may receive, from a vendor with respect to software, a full assignment of leases, installment payment agreements, installment payment supplements to license agreements, and other types of financing agreements used in financing software license payments and related support and consulting services. These assignments may include an assignment of the software vendor's or licensor's right, or the agreement of the vendor or licensor, at the originator's instructions, to terminate the software license covered by the contract and suspend related support in the event of an end-user default under the contract. In some cases, the software vendor also agrees not to relicense the same or similar software to a defaulted end-user for some period of time, e.g., one year, unless the end-user cures its default. Some portion of the contracts included in the pool of contracts, especially in the case of conditional sale agreements, may consist of contracts originated by vendors and assigned to the originator in vendor assignments, each of which relates to an individual contract, rather than under a program agreement. Each vendor assignment will either be with or without recourse against the vendor for end-user defaults. Each vendor assignment will typically contain many, if not all, of the representations, warranties and covenants typically contained in program agreements, as well as a vendor repurchase requirement in the event of a breach by the vendor of the representations, warranties or covenants. Vendor assignments may or may not provide for any vendor remarketing support in the event of an end-user default. RESIDUAL INVESTMENTS Any of the originators may finance all or a portion of the residual interest in the equipment under program agreements and under direct transactions between an obligor and the applicable originator. Any investment by the originator in a residual interest shall be referred to as a residual investment. Program agreements may provide that the originator may, at its sole discretion and in connection with the funding of a lease of equipment, make a residual investment in that equipment by advancing additional funds against a portion of the anticipated residual value of the equipment, and not just against the discounted present value of the rental payments due under the contract. Residual investments may take the form of an advance of the present value of some specified percentage of the anticipated residual value of the equipment or a specified percentage, typically not greater than 10%, of the amount to be paid by the originator in funding the present value of the rental payments due under the contract. With respect to vendor assignments, the originator may advance the entire purchase price of the equipment subject to a true lease, take title to the equipment, and accept an assignment of the true lease contract from a vendor. With respect to the leases originated by the originator the originator may advance the entire purchase price of the equipment to the vendor, take title to the equipment from the vendor, and enter into a true lease contract with an obligor. In either of the two foregoing types of transactions, the originator will have advanced more than the discounted present value of the rents payable under the true lease contracts by paying the purchase price for the equipment, and so will have made a residual investment in the equipment. In some program agreements, the originator may make the residual investment in the form of a full recourse loan of additional funds to the vendor. That loan is repayable by the vendor at the expiration or termination of the contract with interest and is secured by a security interest in the financed equipment. In some transactions involving vendor assignments or direct transactions with obligors under true lease contracts, the originator may obtain the obligation of either the vendor or the obligor to purchase the equipment at the end of the lease term for the full amount of the originator's residual investment in the equipment with accrued interest. Any transaction in which the originator may look to either the vendor or the obligor, and not just the value of equipment itself, to recover its residual investment with interest shall be referred to as a "GUARANTEED RESIDUAL INVESTMENT". Other than guaranteed residual investments, a residual investment will not be included in the discounted contract balance of any contract and, therefore, would not be financed with the proceeds of the notes. This type residual investment is referred to in this prospectus as the "EXCLUDED RESIDUAL INVESTMENT." The seller or an affiliate of the seller will transfer the excluded residual investment associated with any contract included in a pool of contracts to the depositor or another affiliate under the terms of a purchase and sale agreement or other transfer agreement. Unless otherwise specified in your prospectus supplement, the depositor will not transfer the excluded residual investment to an owner trust under the related pooling and servicing agreement. The related owner trust's interest in contracts with associated residual investments, other than with guaranteed residual investments, will typically be limited to the discounted present value of the rental payments due under the contract and a security interest in the related equipment. The originator may assign its excluded residual investment to a third party, including the security interest in the equipment in respect of the residual investment. CONTRACT FILES Each originator will indicate in the appropriate computer files relating to the contracts being transferred to an owner trust that the originator has transferred the contracts for the benefit of the holders of the notes. Each originator will also deliver to the indenture trustee a computer file, microfiche or written list containing a true and complete list of all contracts which it has transferred, identified by account number and by the discounted contract balance of the contracts as of the transfer date. COLLECTION ON CONTRACTS Your prospectus supplement will describe how all collections received with respect to the contracts will be allocated. PAYMENTS GENERALLY The contracts usually require that an obligor make periodic payments on a monthly basis. Some contracts, however, provide for quarterly, semi-annual or annual payments. Obligors typically must make the payments under all of the contracts in United States dollars. Payment requirements usually are fixed and specified, rather than being tied to a formula or are otherwise at a floating rate. Payments under the contracts are ordinarily payable in advance, although a small percentage provide for payments in arrears. EXPENSES RELATING TO EQUIPMENT The contracts require the obligors to assume the responsibility for payment of all expenses of the related equipment including, without limitation, o any expenses in connection with the maintenance and repair of the related equipment, o the payment of any and all premiums for casualty and liability insurance, and o the payment of all taxes relating to the equipment. INSURANCE; REPAIR AND REPLACEMENT Unless otherwise set forth in your prospectus supplement, lease contracts require that the obligors will maintain liability insurance and which must name the lessor as additional insured. o leases, or o loan and security agreements An originator may waive this requirement from time to time. For some lease contracts, the obligor's already existing self-insurance program permits the obligor to self-insure the equipment. The originators may not track or verify insurance coverage as to the equipment related to a contract after the commencement of the contract. Often, the failure to maintain this insurance constitutes an event of default under the applicable contract. Usually, the obligor also agrees to indemnify the originator for all liability and expenses arising from the use, condition or ownership of the equipment. If the equipment is damaged or destroyed, each lease contract, unless otherwise set forth in your prospectus supplement, requires that the obligor: o repair the equipment; o make a termination payment to the lessor in an amount not less than the amount required to pay off the contract; or o in some cases, replace the damaged or destroyed equipment with other equipment of comparable use and value. The related pooling and servicing agreement, unless otherwise set forth in your prospectus supplement, permits the servicer, in the case of the destruction of the equipment related to a particular lease contract, either to: o allow the lessee to replace this equipment, provided that the replacement equipment is, in the judgment of the servicer, of comparable use and at least equivalent value to the value of the equipment which was destroyed, or o accept the termination payment referred to above. ASSIGNMENT OF CONTRACTS Typically the contracts will permit the assignment of the contract by the lessor or secured party without the consent of the obligor. However, occasionally, contracts require notification of the assignment to, or the consent of, the obligor. The seller will represent and warrant in the purchase and sale agreement that these notices have been given, or approvals will have been received, not more than ten days following the date of the transfer of the contract to the depositor. Typically, the contracts do not permit assignment of the contracts, or the related equipment, by the obligor without the prior consent of the lessor or secured party, except the contracts often may permit: o assignments to a parent, subsidiary or affiliate; o the assignment to a third party, provided the obligor remains liable under the contract; or o assignment to a third party with a credit standing, which the originator determines in accordance with its underwriting policy and practice at the time for an equivalent contract type, term and amount, to be equal to or better than the original obligor. Under the related pooling and servicing agreement, the servicer may permit an assignment of a particular contract from an obligor to a third party only if the servicer, utilizing the current underwriting criteria for its contract origination activities, determines that the third party is of sufficient credit quality that the servicer would permit the third party to become an obligor with respect to a contract that the servicer originates. EVENTS OF DEFAULT AND REMEDIES Events of default under the contracts ordinarily include: o the failure to pay all amounts required by the contract when due; o the failure of the obligor to perform its agreements and covenants under the applicable contract; o material misrepresentations made by the obligor; o the bankruptcy or insolvency of the obligor or the appointment of a receiver for the obligor; and o in some cases, default by the obligor under other contracts or agreements. Some of these default provisions are, in some instances, subject to notice provisions and cure periods. Remedies available to the lessor or secured party upon the occurrence of an event of default by the obligor typically include the right o to cancel or terminate in the case of a contract subject to a true lease, o to accelerate payments in the case of a contract subject to financing, o to recover possession of the related equipment and o to receive an amount intended to make the lessor or secured party, as the case may be, whole plus costs and expenses, including legal fees, which the lessor or secured party incurs as a result of the default. Notwithstanding these events of default and remedies, unless otherwise set forth in your prospectus supplement, the pooling and servicing agreement, permits the servicer to take the actions, with respect to delinquent and defaulted contracts, a reasonably prudent creditor would take under similar circumstances. See "DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT -- SERVICING". The originators may occasionally provide payment extensions, typically of three months or less. Longer extensions are occasionally granted to customers experiencing delays in payment due to cash flow shortages or other reasons. However, originators do not intend extensions to be used to provide a temporary solution for a delinquent account. Rather, extensions are intended to be used when, in the judgment of the relevant credit authority, the extension is necessary to avoid a termination and liquidation of the contract and will maximize the amount to be received by the related owner trust with respect to the contract. PREPAYMENTS AND EARLY TERMINATION Any contract may either: o not permit the obligor to prepay the amounts due under the contract or otherwise terminate the contract prior to its scheduled expiration date; o allow for a prepayment or early termination upon payment of an amount that is at least equal to the contract principal balance, determined using a discount rate specified in your prospectus supplement; or o allow for a prepayment or early termination without the payment of the contract principal balance. Some contracts, often written as installment sales contracts, promissory notes or loan and security agreements, permit the obligor to prepay the contract, in whole or in part, at any time at par plus accrued interest. Under each pooling and servicing agreement, the servicer may allow the prepayment of any contract, but only if the amount paid, or, in the case of a partial prepayment, the sum of that amount and the remaining principal balance of the contract after application of that amount, is at least equal to the amount required to pay off the contract. The required payoff amount, with respect to any collection period for any contract, is equal to the sum of: o the scheduled payment due in that collection period and not yet received, together with any scheduled payments due in prior collection periods and not yet received; plus o the discounted contract principal balance of the contract as of the last day of that collection period, after taking into account the scheduled payment due in that collection period. In no event will revenues pledged for a series of notes include, nor will the notes otherwise be payable from, any portion of a prepayment on a contract that exceeds the required payoff amount for that contract. Under the pooling and servicing agreement, the depositor may replace any prepaid contract with a substitute contract. See " -- SUBSTITUTION OF CONTRACTS" below. DISCLAIMER OF WARRANTIES The contracts which are subject to a true lease contain provisions by which the lessor, or the originator, as assignee of the lessor, disclaims all warranties with respect to the equipment. The lessor often assigns the manufacturer's warranties to the obligor for the term of the lease. Under true leases, the obligor accepts the equipment under the applicable contract following delivery and an opportunity to inspect the related equipment. ADDITIONAL EQUIPMENT If specified in your prospectus supplement, some of the contracts which are subject to a true lease constitute leases of additional equipment, generally costing $25,000 or less, with existing obligors. Pursuant to the terms of the original contract between the lessor and the obligor, the parties document leases for additional equipment on a written form that the lessor prepares and delivers to the obligor, but the obligor does not execute, which written form describes all of the terms of the lease. Under the terms of the contract, the obligor agrees that unless it objects in writing within a specified period of time, it is deemed to have accepted the lease of this additional equipment. REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER Unless otherwise set forth in your prospectus supplement, the seller of contracts to the depositor, will make the representations and warranties set forth below regarding the contracts and the related equipment included in each pool of contracts transferred to an owner trust as of the related transfer date. The representations and warranties will also apply to contracts that the depositor reacquires from a trust to which the depositor previously transferred the contracts in connection with a warehouse receivables securitization facility. (1) the information with respect to the contracts is true and correct in all material respects; (2) immediately prior to the transfer of a contract, the contract was owned by the transferring party free and clear of any adverse claim except for permitted claims; (3) the contract is not a defaulted or delinquent contract; (4) no provision of the contract has been waived, altered or modified in any material respect, except by instruments or documents contained in the files relating to the contract; (5) the contract is a valid and binding payment obligation of the obligor and its terms are enforceable, except as may be limited by insolvency, bankruptcy, moratorium, reorganization, or other similar laws affecting enforceability of creditors' rights and the availability of equitable remedies; (6) the contract is not and will not be subject to rights of rescission, setoff, counterclaim or defense; (7) the contract, at the time it was made, did not violate the laws of the United States or any state in any material respect; (8) (A) the contract and any related equipment have not been sold, transferred, assigned or pledged by the originator to any person other than the end-user, the seller, the depositor or any related financing trust; and (B) either (x) the contract is secured by a perfected lien, subject to permitted liens and subject to minimum filing value exceptions, on the related equipment or, in the case of any vendor loan, related end-user contract or equipment or (y) in the case of a contract secured by a vehicle, within 90 calendar days of the origination or a acquisition of the contract by the originator all required state registration or recording procedures were initiated, and the originator's interest will be so noted or recorded within 180 days of the acquisition or origination; (9) if the contract constitutes either an "INSTRUMENT" or "CHATTEL PAPER" for purposes of the Uniform Commercial Code, there is not more than one "SECURED PARTY'S ORIGINAL" counterpart of the contract; (10) all filings necessary to evidence the conveyance or transfer of the contract to the depositor have been made or provided for in all appropriate jurisdictions, except that the parties have not made filings to note the seller; (11) the obligor is not, to the seller's knowledge, subject to bankruptcy or other insolvency proceedings; (12) the contract is a U.S. dollar-denominated obligation and the obligor's billing address is located in the United States or Puerto Rico; (13) the contract does not require the prior written notifications to a consent of an obligor or contain any other restriction on the transfer or assignment of the contract other than notifications that will have been given and consents or waivers of restrictions that will have been obtained within ten days after the date the contract was sold to the trust; (14) the obligations of the related obligor under the contract are irrevocable and unconditional and non-cancelable or, if not irrevocable and unconditional, are guaranteed by the vendor; or in the case of leases with governments, upon a cancellation of the lease, either the vendor is obligated to repurchase the lease or the seller will indemnify the depositor in respect of the cancellation; (15) no adverse selection procedure was used in selecting the contract for transfer; (16) the obligor under the contract is required to maintain casualty insurance with respect to the related equipment or to self-insure against casualty with respect to the related equipment in an amount that is consistent with servicer's normal servicing requirements; (17) the contract constitutes chattel paper, an account, an instrument or a general intangible as defined under the Uniform Commercial Code; (18) no lease is a "CONSUMER LEASE" as defined in Section 2A-103(1)(e) of the Uniform Commercial Code; (19) to the best knowledge of the relevant originator each lessee has accepted the related equipment and has had a reasonable opportunity to inspect the equipment; (20) except as provided in (14) above, the contract is not guaranteed by any originator nor has the originator established any specific credit reserve with respect to the related obligor; (21) each lease is a "TRIPLE NET LEASE" under which the obligor is responsible for the maintenance of the related equipment in a manner that conforms with general industry standards; (22) each vendor loan is secured by an eligible end-user contract(s) having an aggregate contract principal balance(s) equal to the outstanding principal amount of the vendor loan. In this context, an eligible end-user contract is one that A. satisfies all of these representations and warranties except number (2) above and number (8) above, in respect of ownership by the applicable originator; B. in which the relevant originator or financing trust has a perfected lien; and C. in which the transfer of the relevant originator's or financing trust's security interest in the contract to the owner trust creates a duly perfected lien; (23) the obligor is not the United States of America or any agency, department, subdivision or instrumentality of the United States of America; (24) the contract contains customary provisions for this type of financing, and the provisions are sufficient and enforceable, except as listed as noted in (5) above, to enable the relevant originator or its assignees to realize against the financed items securing the contract; and (25) if the obligor is a state or local government entity, the transfer of the contract does not violate any applicable state or local laws restricting or prohibiting transfer. The owner trust may modify the above representations and warranties and will describe any modification in the relevant prospectus supplement. In the event of a breach of any representation or warranty with respect to a contract that materially and adversely affects the owner trust's or any noteholder's or equity certificateholder's interest in the contract or the collectibility of the contract, the owner trust will have a warranty claim against the seller. The seller will then be obligated to repurchase the contract. However, the seller need not do so if the seller cures the breach by the second deposit date after the date on which the servicer becomes aware and gives notice to the seller of the breach. Any purchase shall be made on the deposit date immediately following the end of the second collection period at a price equal to the required payoff amount of the contract. The purchase price will be allocated to the related owner trust plus, if applicable, the book value of the related equipment which will be allocated to the depositor. The related indenture trustee may enforce this purchase obligation on your behalf, and this will constitute your sole remedy available against the seller, the depositor, the trust or the originators for any uncured breach, except that the seller will indemnify o the related indenture trustee, o the related owner trustee, and o the related owner trust against losses, damages, liabilities and claims which may be asserted against any of them as a result of third-party claims arising out of the facts giving rise to that breach. The seller may, in lieu of repurchasing the contract, cause the depositor to deliver a substitute contract as provided in the next-following section of this prospectus. Upon the purchase by the seller of a contract, the depositor will release the contract and related equipment to the seller. SUBSTITUTION OF CONTRACTS The depositor will have the option to substitute one or more contracts having similar characteristics for contracts which are in default or have been prepaid or which have undergone material modification. In addition, in the case of a contract subject to a warranty claim, as described in " -- REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER" above, the seller may choose to replace the contract with a substitute contract. Some contracts may permit the obligor to prepay the amounts due under the contract or otherwise to terminate the contract prior to its scheduled expiration date. The depositor may replace any prepaid contract with a substitute contract in lieu of applying the proceeds of the prepaid contract to the pledged revenues as described in this section. Material modification of a contract means a termination, release, amendment, modification or waiver of a contract that is not otherwise permitted under the pooling and servicing agreement. The depositor may provide substitute contracts for any that have been so materially modified. The depositor may also replace any defaulted contract with a substitute contract. The aggregate contract principal balances of the defaulted contracts for which the depositor may cause substitution is limited to 10% of the cut-off contract pool principal balance. The depositor may replace a prepaid contract with a substitute contract and the seller may choose to replace contracts subject to a warranty claim or a material modification with substitute contracts, in either case without regard to the 10% limitation described above. The same credit criteria and eligibility standards for the contracts in the contract pool on the closing date will also apply to substitute contracts added to the assets of the owner trust. The servicer will include information with respect to these substitute contracts, to the extent the servicer deems them material, in required periodic reports under the Securities Exchange Act of 1934 filed with the Securities and Exchange Commission on behalf of the owner trust. The substitute contracts will have contract principal balances equal to or greater than the contracts being replaced. The representations and warranties the seller makes with respect to the contracts in " -- REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER" above will be equally applicable to substitute contracts. DELINQUENCY AND NET LOSS EXPERIENCE Your prospectus supplement will set forth statistics relating to the delinquency and net loss experience on contracts within the originators' owned and managed portfolios of receivables similar to the contracts in a contract pool. DESCRIPTION OF THE NOTES AND INDENTURE The issuance of each series of notes will be under an indenture, a form of which was filed with the Securities and Exchange Commission as an exhibit to the registration statement of which this prospectus is a part. In addition, a copy of the indenture for a series of notes will be filed with the Securities and Exchange Commission following the issuance of each series. The following summary describes certain material terms which may be common to each indenture and the related notes, but does not purport to be complete and is subject to all of the provisions of the indenture, the related notes and the description set forth in your prospectus supplement. The notes of each series will be issued in fully registered form only and will represent the obligations of a separate owner trust. Payments on the notes will be made by the indenture trustee on each payment date to persons in whose names the notes are registered as of the related record date. Unless otherwise specified in your prospectus supplement, the payment date for the notes will be the 20th day of each month, or if the 20th is not a business day, the next succeeding business day. Unless otherwise specified in your prospectus supplement, for so long as the notes are in book-entry form, the record date for any payment date will be the business day immediately preceding the payment date. Unless otherwise specified in your prospectus supplement, if the owner trust issues certificated notes, the record date will be the last business day of the month immediately preceding the payment date. A business day is any day other than a Saturday, Sunday or legal holiday on which commercial banks in New York City or such other jurisdictions specified in your prospectus supplement are open for regular business. DISTRIBUTIONS Your prospectus supplement will describe as to your series of notes o the timing and priority of distributions, o the amount or method of determining distributions, o allocations of loss and o the interest rates. If specified in the related prospectus supplement, the trust may issue securities from time to time and use the proceeds of this issuance to make principal payments with respect to the notes of your series. CREDIT ENHANCEMENT As further specified in the your prospectus supplement, o a cash collateral account, o a financial guaranty insurance policy, o subordination of one or more classes of notes, o overcollateralization, o letters of credit or liquidity facilities, o repurchase obligations, o third party payments or other support, o cash deposits, o a reserve fund or o other form of credit enhancement which may become suitable in light of credit enhancement practices or developments in the future may be established on or prior to the date the contracts are transferred. The credit enhancement would be available to the related indenture trustee to pay interest and principal on the notes in the manner and to the extent specified in your prospectus supplement. LIQUIDATION AND INSURANCE PROCEEDS The allocation of liquidation proceeds which will consist generally of all amounts the servicer receives in connection with the liquidation of a contract and disposition of the related equipment, net of any related out-of-pocket liquidation expenses, and the allocation of insurance proceeds for physical damage to or loss of equipment covered by contracts, will be as follows unless otherwise specified in your prospectus supplement: 1) with respect to any contract subject to financing, the proceeds will be allocated to the owner trust; and 2) with respect to any contract subject to a lease, the proceeds will, unless otherwise specified in your prospectus supplement, be allocated on a pro rata basis between the depositor, on the one hand, and the owner trust, on the other, based respectively on (a) the book value of the related equipment and (b) the required payoff amount for the contract. However, if the proceeds in respect of any contract subject to a lease and the related equipment exceed the sum of the required payoff amount for the contract and the book value of the equipment, the excess shall be allocated solely to the depositor. For example, if the servicer, in connection with a defaulted contract subject to a lease, derived liquidation proceeds in the amount of $100 from the liquidation of the contract and disposition of the related equipment, and if the required payoff amount of the contract was, as of the collection period during which the contract became a liquidated contract, $120 and the book value of the equipment was $30, the liquidation proceeds would be allocated to the owner trust in the amount of $80 and to the depositor in the amount of $20. All liquidation proceeds which are so allocable to the owner trust will be deposited in a collection account and constitute pledged revenues to be applied to the payment of interest and principal on the notes in accordance with the priorities described under " -- DISTRIBUTIONS" above. OPTIONAL PURCHASE OF CONTRACTS AND REDEMPTION OF NOTES The seller or other entity specified in your prospectus supplement may purchase all of the contracts owned by an owner trust on any payment date following the date on which the unpaid principal balance of the related notes is less than 10%, or such other percentage specified in your prospectus supplement, of the initial contract pool principal balance. Except as otherwise described in the prospectus supplement for your notes, the purchase price to be paid in connection with the purchase shall be at least equal to the sum of o the unpaid principal balance of the related notes as of that payment date, o accrued but unpaid interest, o unreimbursed servicer advances, and o accrued but unpaid servicer fees. If the seller or another entity does purchase the contracts, the related notes shall be redeemed on the payment date on which the purchase occurs. The redemption price will be the principal amount of the notes plus accrued and unpaid interest to but excluding the redemption date. TRUST ACCOUNTS Except as otherwise specified in your prospectus supplement, the applicable indenture trustee will establish and maintain under each indenture segregated trust accounts which need not be deposit accounts, but which must be with a qualified institution. These accounts will include, among others, the "COLLECTION ACCOUNT" and the "DISTRIBUTION ACCOUNT." The accounts may, as described in the prospectus supplement for your notes, also include a cash collateral or reserve fund account as credit enhancement. All of these accounts are referred to collectively as the "TRUST ACCOUNTS." "Qualified institution" means the corporate trust department of the indenture trustee or any other depository institution o organized under the laws of the United States or any state or any domestic branch of a foreign bank, o the deposits of which are insured by the Federal Deposit Insurance Corporation and o which has, or whose parent corporation has, short-term or long-term debt ratings acceptable to Moody's Investors Service, Inc., and Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. The servicer, as agent for the indenture trustee of any series, may designate, or otherwise arrange for the purchase by the indenture trustee of, investments to be made with funds in the trust accounts. All investments shall be eligible investments as defined in the related indenture that will mature not later than the business day preceding the applicable monthly payment date or any other date approved by the rating agencies. Eligible investments include, among other investments: o obligations of the United States or of any agency of the United States backed by the full faith and credit of the United States; o demand deposits, certificates of deposit, time deposits demand notes or bankers acceptance of eligible financial institutions; o highly rated commercial paper or money market funds; o repurchase agreements in respect of United States government securities or securities guaranteed or otherwise backed by the full faith and credit of the United States Government with eligible institutions; and o other investments which have been approved by each rating agency. REPORTS TO NOTEHOLDERS With respect to each series of notes, the servicer will furnish to the applicable indenture trustee, and the indenture trustee will include with each distribution to you, a statement, as specified in your prospectus supplement, in respect of the related payment date. If you purchase a note, you may receive these reports by making a written request to The Depository Trust Company. These reports do not constitute financial statements prepared in accordance with generally accepted accounting principles. None of the depositor, the sponsor, nor the servicer intends to send any of their respective financial reports to owners of notes. The servicer, on behalf of an owner trust, will file with the Securities and Exchange Commission legally required periodic reports concerning the owner trust. With respect to any series, the notes will be registered in the name of a nominee of The Depository Trust Company and will not be registered in the names of the beneficial owners or their nominees. As a result, unless and until definitive notes are issued in the limited circumstances described under " -- ISSUANCE OF CERTIFICATED NOTES AT A LATER DATE" below, the indenture trustee will not recognize you as a noteholder, as that term is used in the related indenture. Hence, until that time, you will receive reports and other information provided for under the related indenture only if, when and to the extent The Depository Trust Company and its participating organizations provide this information. The servicer will file a copy of each report with the Securities and Exchange Commission on Form 8-K to the extent the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission under the Exchange Act require it. BOOK-ENTRY REGISTRATION Unless your prospectus supplement states otherwise, you may hold your notes through The Depository Trust Company, referred to as "DTC," in the United States, or Clearstream, Luxembourg or Euroclear System in Europe, if you are a participant of those systems, or indirectly through organizations that are participants in those systems. DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered under to Section 17A of the Exchange Act. DTC was created to hold securities for its direct participants and to facilitate the clearance and settlement of securities transactions between its direct participants through electronic book-entries, thus eliminating the need for physical movement of certificates. DTC's direct participants include o the underwriters offering the notes to you, o securities brokers and dealers, o banks, o trust companies and o clearing corporations, and may include other organizations. Indirect access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly. To facilitate subsequent transfers, DTC will register all deposited notes in the name of DTC's nominee, Cede & Co. You will maintain beneficial ownership of the notes despite the deposit of notes with DTC and their registration in the name of Cede. DTC has no knowledge of the actual noteholders; DTC's records reflect only the identity of its direct participants to whose accounts the notes are credited, which may or may not be the noteholders. DTC's direct and indirect participants will remain responsible for keeping account of their holdings on behalf of their customers. You have no entitlement to receive a certificate representing your interest in a class of notes. As long as the notes are registered in the name of Cede & Co., any action to be taken by you or any other noteholders will be taken by DTC upon instructions from DTC's participants. All distributions, notices, reports and statements to noteholders will be delivered to Cede, as the registered holder of the notes, for distribution to noteholders in compliance with DTC procedures. You will receive all payments of principal and interest on the notes through direct participants or indirect participants. DTC will forward the payments to its direct participants which will forward them to indirect participants or noteholders. Under a book-entry format, you may experience some delay in their receipt of payments, since payments will be forwarded to Cede as nominee of DTC. The indenture trustee will not recognize you as a noteholder, as that term is used in the indenture. You may exercise the rights of noteholders only indirectly through DTC and its direct participants and indirect participants. Because DTC can act only on behalf of direct participants, who in turn act on behalf of indirect participants, and on behalf of banks, trust companies and other persons approved by it, there may be limits on your ability to pledge the notes to persons or entities that do not participate in the DTC system, or to otherwise act with respect to notes, due to the absence of physical notes for the notes. Arrangements among the various parties govern conveyance of notices and other communications by o DTC to direct participants, o by direct participants to indirect participants and o by direct participants and indirect participants to noteholders, subject to any statutory or regulatory requirements as may be in effect from time to time. Standing instructions and customary practices govern payments by DTC participants to noteholders, as is the case with securities held for the accounts of customers in bearer form or registered in "street name" and will be the responsibility of the DTC participant and not of DTC, the indenture trustee, the owner trustee, the originators or the originator, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the indenture trustee, disbursement of the payments to direct participants shall be the responsibility of DTC and disbursement of payments to noteholders shall be the responsibility of direct participants and indirect participants. Purchases of notes under the DTC system must be made by or through direct participants, which will receive a credit for the notes on DTC's records. The ownership interest of each actual noteholder is in turn to be recorded on the direct participants' and indirect participants' records. Noteholders will not receive written confirmation from DTC of their purchase, but noteholders are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holders, from the direct participant or indirect participant through which the noteholder entered into the transaction. Entries made on the books of DTC's participants acting on behalf of noteholders evidence transfers of ownership interests in the notes. DTC will not comment or vote with respect to the notes. DTC has advised that it will take any action permitted to be taken by a noteholder under the indenture only at the direction of one or more direct participants to whose accounts with DTC the notes are credited. Additionally, DTC has advised that to the extent that the indenture requires that any action may be taken only by noteholders representing a specified percentage of the aggregate outstanding principal amount of the notes, DTC will take the action only at the direction of and on behalf of direct participants, whose holdings include undivided interests that satisfy the specified percentage. DTC may discontinue providing its services as securities depositary with respect to the notes at any time by giving reasonable notice to the indenture trustee. Under these circumstances, in the event that a successor securities depositary is not obtained, fully registered, certificated notes are required to be printed and delivered. The originator may decide to discontinue use of the system of book-entry transfers through DTC or a successor securities depositary. In that event, fully registered, certificated notes will be delivered to noteholders. See " -- ISSUANCE OF DEFINITIVE NOTES AT A LATER DATE." The information in this section concerning DTC and DTC's book-entry system are from sources that the sponsor believes to be reliable, but neither the sponsor nor the owner trustee take any responsibility for the accuracy of this information. Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte, L-2967 Luxembourg ("Clearstream, Luxembourg"), was incorporated in 1970 as "Cedel S.A.", a company with limited liability under Luxembourg law (a societe anonyme). Cedel S.A. subsequently changed its name to Cedelbank. On January 10, 2000, Cedelbank's parent company, Cedel International, societe anonyme ("CI") merged its clearing, settlement and custody business with that of Deutsche Borse Clearing AG ("DBC"). The merger involved the transfer by CI of substantially all of its assets and liabilities (including its shares in CB) to a new Luxembourg company, New Cedel International, societe anonyme ("New CI"), which is 50% owned by CI and 50% owned by DBC's parent company Deutsche Borse AG. The shareholders of these two entities are banks, securities dealers and financial institutions. Cedel International currently has 92 shareholders, including U.S. financial institutions or their subsidiaries. No single entity may own more than 5 percent of Cedel International's stock. Further to the merger, the Board of Directors of New Cedel International decided to rename the companies in the group in order to give them a cohesive brand name. The new brand name that was chosen is "Clearstream". With effect from January 14, 2000 New CI has been renamed "Clearstream International, societe anonyme". On January 18, 2000, Cedelbank was renamed "Clearstream Banking, societe anonyme", and Cedel Global Services was renamed "Clearstream Services, societe anonyme". On January 17, 2000 DBC was renamed "Clearstream Banking AG". This means that there are now two entities in the corporate group headed by Clearstream International which share the name "Clearstream Banking", the entity previously named "Cedelbank" and the entity previously named "Deutsche Brse Clearing AG". Clearstream, Luxembourg holds securities for its customers ("Clearstream, Luxembourg Participants") and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg customers through electronic book-entry changes in accounts of Clearstream, Luxembourg customers, thereby eliminating the need for physical movement of certificates. Transactions may be settled by Clearstream, Luxembourg in any of 36 currencies, including United States Dollars. Clearstream, Luxembourg provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream, Luxembourg also deals with domestic securities markets in over 30 countries through established depository and custodial relationships. Clearstream, Luxembourg is registered as a bank in Luxembourg, and as such is subject to regulation by the Commission de Surveillance du Secteur Financier, "CSSF", which supervises Luxembourg banks. Clearstream, Luxembourg's customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg has approximately 2,000 customers located in over 80 countries, including all major European countries, Canada, and the United States. Indirect access to Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream, Luxembourg. Clearstream, Luxembourg has established an electronic bridge with Morgan Guaranty Trust Company of New York as the Operator of the Euroclear System (MGT/EOC) in Brussels to facilitate settlement of trades between Clearstream, Luxembourg and MGT/EOC. Clearstream, Luxembourg and Euroclear will hold omnibus positions on behalf of the participants in the Clearstream, Luxembourg and Euroclear systems, respectively, through customers' securities accounts in Clearstream, Luxembourg's and Euroclear's names on the books of their respective depositaries which in turn will hold these positions in customers' securities accounts in the depositaries' names on the books of DTC. Clearstream, Luxembourg is incorporated under the laws of Luxembourg as a professional depositary. Clearstream, Luxembourg holds securities for its participants and facilitates the clearance and settlement of securities transactions between its participants through electronic book-entry changes in accounts of its participants, thus eliminating the need for physical movement of certificates. Indirect access to Clearstream, Luxembourg is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream, Luxembourg participant, either directly or indirectly. Euroclear was created in 1968 to hold securities for participants of Euroclear and to clear and settle transactions between Euroclear's participants through simultaneous electronic book-entry delivery against payment, thus eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. The Brussels, Belgium office of Morgan Guaranty Trust Company of New York operates Euroclear, under contract with Euroclear Clearance Systems S.C., a Belgian cooperative corporation. Euroclear's operator conducts all operations and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with Euroclear's operator. Euroclear Clearance Systems S.C. establishes policy for Euroclear on behalf of Euroclear's participants, including banks, securities brokers and dealers, and other professional financial intermediaries. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly. Morgan Guaranty Trust Company of New York is the Belgian branch of a New York banking corporation which is a member bank of the Federal Reserve System. As such, the Board of Governors of the Federal Reserve System and the New York Banking Department, as well as the Belgian Banking Commission, regulates and examines it. Euroclear holds all securities on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear operator acts under the Euroclear Terms and Conditions only on behalf of Euroclear's participants, and has no record of or relationship with persons holding through Euroclear's participants. Transfers between direct participants will comply with DTC rules. Transfers between Clearstream, Luxembourg 's participants and Euroclear's participants will comply with their rules and operating procedures. DTC will effect, under DTC rules, cross-market transfers between persons holding directly or indirectly through DTC in the United States, on the one hand, and directly or indirectly through Clearstream, Luxembourg or Euroclear, on the other, through the relevant European international clearing system through its Depositary; however, these cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in this system as required by its rules and procedures and within its established deadlines, European time. The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment using its normal procedures for same-day funds settlement applicable to DTC. Clearstream, Luxembourg participants and Euroclear participants may not deliver instructions directly to the depositaries. Because of time-zone differences, credits of securities in Clearstream, Luxembourg or Euroclear as a result of a transaction with a DTC participant will be made during the subsequent securities settlement processing day, dated the business day following the DTC settlement date, and the credits or any transactions in the securities settled during the processing day will be reported to the relevant Clearstream, Luxembourg participant or Euroclear participant on that business day. Cash received in Clearstream, Luxembourg or Euroclear as a result of sales of securities by or through a Clearstream, Luxembourg participant or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream, Luxembourg or Euroclear cash account only as of the business day following settlement in DTC. Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of notes among participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no obligation to perform or continue to perform these procedures and these procedures may be discontinued at any time. Except as required by law, none of the seller, the company, any originator, the owner trustee, the depositor or the indenture trustee will have any liability for any aspect of the records relating to, actions taken or implemented by, or payments made on account of, beneficial ownership interests in the notes held through DTC, or for maintaining, supervising or reviewing any records or actions relating to beneficial ownership interests. ISSUANCE OF CERTIFIED NOTES AT A LATER DATE The owner trust will issue notes in fully registered, certificated form to beneficial owners or their nominees rather than to DTC or its nominee, only if: (1) the owner trustee advises the indenture trustee in writing that DTC is no longer willing or able to discharge properly its responsibilities as depository with respect to the notes, and the owner trustee or the indenture trustee is unable to locate a qualified successor, (2) the owner trustee elects to terminate the book-entry system, or (3) after the occurrence of an event of default under the indenture, the holder of at least 66 2/3% of the principal amount of its outstanding notes advises the indenture trustee that the continuation of the book-entry system is met in their best interests. Upon the occurrence of any of the events described in the immediately preceding paragraph, the indenture trustee must notify all beneficial owners for each class of notes held through DTC of the availability of notes in fully registered, certificated form. Upon surrender by DTC of the global note representing the notes and instructions for reregistration, the indenture trustee will issue these fully registered, certificated notes, and the indenture trustee will recognize the holders of fully registered, certificated notes as noteholders under the indenture. Additionally, upon the occurrence of any event described above, the indenture trustee will distribute principal of and interest on the notes directly to you as required by the indenture. Distributions will be made by check, mailed to your address as it appears on the note register. Upon at least five days' notice to noteholders for the class, however, the indenture trustee will make the final payment on any note only upon presentation and surrender of the note at the office or agency specified in the notice of final distribution to noteholders. The indenture trustee will make the final payment in this manner whether the notes are fully registered, certificated notes or the note for the class registered in the name of Cede & Co. representing the notes of the class. You may transfer any fully registered, certificated notes of any class at the offices of the indenture trustee or its agent in New York, New York, which the indenture trustee shall designate on or prior to the issuance of any fully registered, certificated notes with respect to that class. There is no service charge for any registration of transfer or exchange, but the indenture trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection with the transfer or exchange. MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT Unless your prospectus supplement states otherwise, the owner trust and the indenture trustee for a note series may, without your consent, enter into one or more supplemental indentures for any of the following purposes: o to change the collateral description; o to provide for a successor to the owner trust to assume the notes and the indenture obligations; o to add additional covenants for your benefit, or to surrender any rights or power of the owner trust; o to transfer or pledge any property to the indenture trustee; o if not adverse to the interests of noteholders, to correct or supplement any provision in the indenture that is ambiguous or inconsistent with any other provision of the indenture or to make any other provision in respect of matters under the indenture; o to accept a successor indenture trustee or to change the provisions of the indenture to facilitate the administration by more than one trustee; o to comply with the Trust Indenture Act of 1939, as amended; or o to elect to come under the FASIT provision of the Internal Revenue Code, if the owner trust provides an opinion of counsel as to no adverse impact on noteholders. MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT Unless your prospectus supplement states otherwise, with the consent of the required majority of the noteholders determined as described in the prospectus supplement for your notes, prior notice to each rating agency and an opinion of counsel, the owner trustee and the indenture trustee may modify the indenture and your rights under it. Without the consent of the holder of each outstanding note affected, however, no modification of the indenture may: o reduce the note principal amount, interest rate or redemption price or change the timing of payments; o modify the manner of application of payments in respect to contracts to the notes; o impair your right to sue to enforce payment provisions of the indenture; o reduce the percentage needed for consents of noteholders; o permit the creation of any lien on collateral under the indenture ranking prior to or on a parity with the lien of the indenture; o adversely affect the manner of determining notes outstanding or the requisite note for liquidating the trust estate; or o modify the provisions of the indenture relating to these types of indenture modification without the consent of all noteholders. EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT Except as otherwise provided in the prospectus supplement for your notes, events of default under each indenture will consist of: o a default for five calendar days or more in the payment of interest due on any note; o failure to pay the unpaid principal amount of any class of notes on the maturity date for the notes; o failure of the owner trust or the depositor to observe any provisions set forth in the pooling and servicing agreement or the indenture, which failure has a material adverse effect on the noteholders and continues for 60 calendar days after written notice; o any representation or warranty made by the owner trust or the depositor in the pooling and servicing agreement or indenture was incorrect as of the time made, and continues to be incorrect for a period of 60 calendar days after notice is given and as a result of which the noteholders are materially and adversely affected. A breach of a representation or warranty as to a contract will be considered not to have occurred if the seller purchases the contract or effects a substitution for it, as provided in "THE CONTRACTS -- REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER" and " -- SUBSTITUTION OF CONTRACTS" above; o events of bankruptcy, insolvency, receivership or liquidation of the owner trust or the depositor; or o the owner trust becomes an investment company. If an event of default should occur and be continuing with respect to the notes of a series, the required holders may, except as to a bankruptcy or insolvency event of default, deem the event not to have occurred. If the indenture trustee declares the notes of a series due and payable following an event of default, the indenture trustee may: o institute proceedings to collect amounts due or foreclose on the indenture collateral, o exercise remedies as a secured party, or o sell the indenture collateral, or elect to have the owner trust maintain possession of the pledged revenues. Unless otherwise provided in your prospectus supplement, the indenture trustee, however, may not sell the indenture collateral following an event of default, except an event arising from the owner trust's failure to pay interest or principal, unless: o the holders of all the outstanding notes consent to the sale; o the proceeds of the sale distributable to holders of the notes are sufficient to pay in full the principal and accrued interest on all the outstanding notes at the date of the sale; or o the indenture trustee determines, in complete reliance on investment banking or accounting firm certifications, that the trust estate would not be sufficient on an ongoing basis to make all payments on the notes as the payments would have become due if the obligations had not been declared due and payable, and the indenture trustee obtains the consent of the required holders. Following a declaration upon an event of default that the notes are immediately due and payable, the application of any proceeds of liquidation of the pledged revenues will be in the order of priority described in the prospectus supplement for your class of notes. If an event of default occurs and is continuing, the indenture trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any of the holders of the notes, if the indenture trustee reasonably believes it will not be adequately indemnified against the costs, expenses and liabilities which it may incur in complying with that request. A majority of the noteholders will have the right to direct the time, method and place of conducting any proceeding or any remedy available to the indenture trustee. Additionally, a majority of the noteholders may, in some cases, waive any default, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the indenture that cannot be modified without the waiver or consent of all of the holders of the outstanding notes. Unless otherwise provided in your prospectus supplement, no holder of a note will have the right to institute any proceeding with respect to the indenture, unless: o the holder previously has given to the indenture trustee written notice of a continuing event of default; o the holders of not less than 25% in principal amount of the outstanding notes make written request of the indenture trustee to institute the proceeding in its own name as indenture trustee; o the holder or holders offer the indenture trustee reasonable indemnity; o the indenture trustee has for 60 days failed to institute the proceeding; and o no direction inconsistent with that written request has been given to the indenture trustee during the 60-day period by the holders of a majority in principal amount of the outstanding notes. In addition, the indenture trustee and you, by accepting the notes, will covenant that they will not at any time institute against the sponsor, the seller, the depositor or the owner trust any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law. Neither the indenture trustee nor the owner trustee in its individual capacity, nor the sponsor, the seller, the depositor, nor any of their respective owners, beneficiaries, agents, officers, directors, employees, affiliates, successors or assigns will be personally liable for the payment of the notes or for any agreement or covenant of the owner trust contained in the indenture. OWNER TRUST COVENANTS Each indenture will provide that the related owner trust may not consolidate with or merge into any other entity, unless: o the entity formed by or surviving the consolidation or merger is organized under the laws of the United States or any state; o the entity expressly assumes the owner trust's obligation to make due and punctual payments upon the notes and the performance or observance of every agreement and covenant of the owner trust under the indenture; o no event of default shall have occurred and be continuing immediately after the merger or consolidation; o the rating agencies advise the owner trustee that the rating of the notes then in effect would not be reduced or withdrawn as a result of the merger or consolidation; o the owner trustee has received an opinion of counsel to the effect that the consolidation or merger would have no material adverse tax consequence to the owner trust or to any noteholder or equity certificate holder; and o the owner trust or the person, if other than the owner trust, formed by or surviving the consolidation or merger has a net worth, immediately after the consolidation or merger, that is (a) greater than zero and (b) not less than the net worth of the owner trust immediately prior to giving effect to the consolidation or merger. Each owner trust will not, among other things: o except as expressly permitted by the related indenture or trust agreement, transfer any of the assets of the owner trust; o claim any credit on or make any deduction from, the principal and interest payable in respect of the related notes, other than amounts withheld under the bankruptcy code or applicable state law, or assert any claim against any present or former holder of notes because of the payment of taxes levied or assessed upon the owner trust; o dissolve or liquidate in whole or in part; o permit the validity or effectiveness of the indenture to be impaired or permit the release of any person from any covenants or obligations relating to the notes under the indenture except as expressly permitted in the indenture; or o except as expressly permitted in the indenture, the pooling and servicing agreement or the trust agreement, permit any lien or claim to burden any assets of the owner trust. No owner trust may engage in any activity other than as specified above under "THE OWNER TRUSTS." Each owner trust will not incur, assume or guarantee any indebtedness other than indebtedness incurred under the related notes and the related indenture or otherwise in accordance with the related indenture, trust agreement and pooling and servicing agreement. ANNUAL COMPLIANCE STATEMENT Each owner trust will be required to file annually with the applicable indenture trustee a written statement as to the fulfillment of its obligations under the indenture. INDENTURE TRUSTEE'S ANNUAL REPORT Each indenture trustee will be required to mail each year to all noteholders of the related series a brief report relating to: o its eligibility and qualification to continue as indenture trustee under the related indenture, o any amounts advanced by it under the indenture, o the amount, interest rate and maturity date of certain indebtedness owing by the owner trust to the indenture trustee in its individual capacity, o the property and funds physically held by the indenture trustee and o any action taken by it that materially affects the notes and that has not been previously reported. SATISFACTION AND DISCHARGE OF INDENTURE The discharge of an indenture will occur with respect to the collateral securing the notes of a series upon the delivery to the related indenture trustee for cancellation of all the notes or, with certain limitations, upon deposit with the indenture trustee of funds sufficient for the payment in full of all of the notes. THE INDENTURE TRUSTEE The indenture trustee for any series will be specified in your prospectus supplement. An indenture trustee may resign at any time, in which event the depositor or the sponsor will be obligated to appoint a successor trustee. The owner trust may also remove an indenture trustee o if the indenture trustee ceases to be eligible to continue to serve under the indenture, o if the indenture trustee becomes subject to bankruptcy proceedings, or o if the indenture trustee becomes incapable of acting. In these circumstances, the owner trust will be obligated to appoint a successor trustee. Any resignation or removal of an indenture trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by a successor trustee. DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT The following summarizes the material terms of each pooling and servicing agreement, a form of which was filed with the registration statement of which this prospectus is a part. In addition, a copy of the pooling and servicing agreement relating to a series of notes will be filed with the Securities and Exchange Commission following the sale of those notes. This summary describes terms expected to be common to each pooling and servicing agreement, but the sponsor does not intend this summary to be complete. This summary is subject to the provisions of the pooling and servicing agreement relating to a particular series and the description set forth in your prospectus supplement. You should read the form of the pooling and servicing agreement filed as noted above. TRANSFER OF CONTRACTS AND EQUIPMENT Prior to the offering of a series of notes, the seller may have sold contracts to the depositor for deposit into a trust used in connection with temporary financing arrangements. The depositor may reacquire some or all of these contracts for deposit into the owner trust in connection with the offering and sale of a particular series of notes. On or before the applicable closing date, the seller will transfer to the depositor under one or more purchase agreements all of its interest in the following: o the contracts, its security interest in the related equipment and the related equipment, o the right to receive all scheduled payments and prepayments received on the contracts on or after the date of transfer, but excluding any scheduled payments due on or after, but received prior to, the transfer date, o all rights under insurance policies maintained on the equipment under the contracts, o all documents contained in the files and o all proceeds derived from any of the above. Under the pooling and servicing agreement, on the applicable closing date, the depositor will transfer to the owner trust: o all of its rights in the contracts and rights in the equipment and other rights listed above, except that in the case of leased equipment, the depositor will typically retain ownership of the equipment, any rights to payments made or attributable to the leased equipment upon expiration of the related lease contract, of contract prepayments and liquidation proceeds allocable to the depositor under the pooling and servicing agreement and of any portion of the purchase amount attributable to the book value of the leased equipment, other than any guaranteed residual investment; o all funds on deposit from time to time in the trust accounts; and o all its rights under the purchase and sale agreement. Each pooling and servicing agreement will designate the servicer as custodian to maintain possession, as the owner trust's agent, of the contracts and all related documents. To facilitate servicing and save administrative costs, the documents often will not be physically segregated from other similar documents that are in the servicer's possession. Financing statements will be filed on the transfer date in the applicable jurisdictions reflecting: o the transfer of the contracts and the equipment by the originators, other than the seller, to the seller, o the transfer of the contracts and the equipment by the seller to the depositor and, as applicable by any temporary financing trust to the depositor, o the transfer by the depositor to the owner trust, and o the pledge by the owner trust to the indenture trustee. The originators' accounting records and computer systems will also reflect these assignments and this pledge. COLLECTIONS ON CONTRACTS The applicable indenture trustee will maintain a collection account, into which the servicer will deposit the following amounts no later than, unless otherwise set forth in your prospectus supplement, the second business day after their processing: o all scheduled payments made under the contracts; o all prepayments, excluding any portion which your prospectus supplement states is allocable to the depositor; o amounts constituting liquidation proceeds on liquidated contracts, to the extent specified in your prospectus supplement; o all payments made by the seller under the pooling and servicing agreement to repurchase any contract as a result of a breach of a representation or warranty, as described under "THE CONTRACTS -- REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER," excluding, in the case of a lease contract, any portion which your prospectus supplement states is allocable to the depositor; and o the amount paid by the depositor to purchase the contracts, as described under "DESCRIPTION OF THE NOTES AND INDENTURE." So long as no event of termination shall have occurred and be continuing with respect to the servicer, the servicer may make the required remittances to the collection account net of its servicing fees. The servicer may withdraw from the collection account any amounts deposited in error or required to be repaid to an obligor, based on the servicer's good-faith determination that the amount was deposited in error or must be returned to the obligor. The servicer will pay to the depositor all proceeds from the disposition of equipment subject to a true lease, to the extent allocable to the depositor. SERVICING Your prospectus supplement will identify the servicer for your trust. The servicer will be obligated under each pooling and servicing agreement to service the contracts typically with reasonable care, using that degree of skill and attention that the servicer generally exercises with respect to all comparable contracts and related assets that it services for itself or others in accordance with its credit and collections policy and applicable law. The servicer may delegate servicing responsibilities to third parties or affiliates, provided that the servicer will remain obligated to the related owner trust and the depositor for the proper performance of the servicing responsibilities. The servicer is obligated to act in a commercially reasonable manner with respect to the repossession and disposition of equipment following a contract default with a view to realizing proceeds at least equal to the equipment's fair market value. The servicer may choose to dispose of equipment through a new lease or in some other manner which provides for payment for the equipment over time. In these cases, the servicer will be required to pay from its own funds an amount which, in its reasonable judgment, is equal to the fair market value of the equipment, less liquidation expenses, and the servicer will be entitled to all subsequent payments in respect of the equipment. Any amounts the servicer pays will constitute additional liquidation proceeds with respect to the related contract and equipment and will be allocated as described under "DESCRIPTION OF THE NOTES AND INDENTURE -- LIQUIDATION AND INSURANCE PROCEEDS." The servicer is, unless otherwise set forth in your prospectus supplement, responsible for: o reviewing and certifying that the contract files are complete; o monitoring and tracking any property and sales taxes to be paid by obligors; o billing, collecting, and recording payments from obligors; o communicating with and providing billing records to obligors; o depositing funds into the collection account; o receiving payments as the owner trust's agent on the insurance policies maintained by the obligors and communicating with insurers; o issuing reports to the indenture trustee specified in the indenture and in the pooling and servicing agreement; o repossessing and remarketing of equipment following obligor defaults; and o paying the fees and ordinary expenses of the indenture trustee and the owner trustee. The servicer shall be entitled to recover all reasonable out-of-pocket expenses incurred by it in liquidating a contract and disposing of the related equipment. The servicer is entitled to retain, from liquidation proceeds, a reserve for out-of-pocket liquidation expenses in an amount equal to the expenses, in addition to those previously incurred, as it reasonably estimates will be incurred. The servicer is permitted to grant payment extensions on a contract in accordance with its credit and collection policies and procedures if the servicer believes in good faith that an extension is necessary to avoid a termination and liquidation of the contract and will maximize the amount to be received by the owner trust under the contract. The servicer is permitted to agree to modifications or amendments to a contract in accordance with its credit and collection policies and procedures. PREPAYMENTS The servicer may allow a prepayment of any lease contract, but only if the amount paid or, in the case of a partial prepayment, the sum of its prepayment and the remaining contract principal balance, is at least equal to the required payoff amount of the contract. EVIDENCE AS TO COMPLIANCE Annually, the servicer must deliver to the indenture trustee a report from a nationally recognized accounting firm stating that the accounting firm has audited the financial statements of the servicer or its parent and issued an opinion on those financial statements and that the accounting firm has examined and provided a report as to statements of the servicer concerning the servicer's controls over the servicing of: o equipment contracts, o installment sales contracts, o promissory notes, o loan and security agreements and o other similar types of receivables under servicing agreements substantially similar one to another. MATTERS REGARDING THE SERVICER The servicer may not resign from its obligations under a pooling and servicing agreement except if its duties are no longer permissible under applicable law. No resignation will become effective until a successor servicer has assumed the servicer's obligations and duties under the pooling and servicing agreement. Removal of the servicer is permissible only upon the occurrence of an event of termination as discussed below. The servicer typically must maintain an insurance policy or financial guarantee bond in customary form covering errors and omissions by the servicer. SERVICING COMPENSATION AND PAYMENT OF EXPENSES Compensation to the servicer will include a monthly fee equal: o to the product of one-twelfth of a percentage per annum specified in your prospectus supplement multiplied by the contract pool principal balance as of the last day of the second preceding collection period, or o in the case of the servicing fee with respect to the collection period commencing on the date of transfer of the contracts, the contract pool principal balance as of the cut-off date, plus any o late fees, o late payment interest, o documentation fees, o insurance administration charges, other administrative fees and any extension fees collected with respect to the contracts during the prior collection period and investment earnings on collections prior to deposit of these amounts in the collection account. The servicer will pay all expenses incurred by it in connection with its activities under the pooling and servicing agreement and, unless otherwise set forth in your prospectus supplement, the annual fees and expenses of the owner trustee as indenture trustee in connection with the notes. The servicer is authorized to waive any administrative fees or extension fees that may be collected in the ordinary course of servicing any contract. EVENTS OF TERMINATION An event of termination under a pooling and servicing agreement will occur if: o the servicer fails to make any required payment or deposit and the failure continues for five business days after notice from the indenture trustee or discovery by the servicer; o the servicer fails to observe in any material respect any agreements of the servicer set forth in the pooling and servicing agreement and the failure (1) materially and adversely affects the rights of the owner trust, the equity certificate holder or you, and (2) continues unremedied for 30 days after written notice to the servicer; o events of bankruptcy or insolvency occur with respect to the servicer; or o any representation, warranty or statement of the servicer made under the pooling and servicing agreement is incorrect in any material respect, and (1) has a material adverse effect on the owner trust or holders of the notes, and (2) continues uncured for 30 days after the acquiring of written notice. RIGHTS UPON EVENT OF TERMINATION If an event of termination remains unremedied, the indenture trustee may, and at the written direction of the required majority of the noteholders, which shall be the same as that required for amendment of the pooling and servicing agreement, See "AMENDMENT" below, shall, terminate all of the rights and obligations of the servicer under the pooling and servicing agreement. A successor servicer will succeed to all the responsibilities, duties and liabilities of the servicer under the pooling and servicing agreement. The successor servicer will be entitled to similar compensation arrangements, except that any successor servicer will not be liable for any acts or omissions of the prior servicer occurring prior to a transfer of the servicer's servicing and related functions or for any breach by the prior servicer of any of its obligations. A majority of the noteholders may waive any default by the servicer under the pooling and servicing agreement and its consequences. AMENDMENT The parties may amend any pooling and servicing agreement: o to cure any ambiguity, o to correct or supplement any provision in the pooling and servicing agreement that may be inconsistent with any other provision, or o to make any other provisions with respect to matters or questions arising under the pooling and servicing agreement but only if the amendment will not adversely affect in any material respect the interests of the noteholders. Any pooling and servicing agreement may also be amended in any respect by the parties with the consent of the required majority of the noteholders determined as described in the prospectus supplement for your notes, except that no amendment o that reduces the amount or changes the timing of any contract collections on any contracts or payments required to be distributed on any note, o that changes the interest rate on any note, that adversely affects the priority of payment of principal or interest to noteholders or o that reduces the noteholder percentage required to consent to these amendments or any waiver under the pooling and servicing agreement, may be effective without the consent of the holder of each note. Also, an amendment under the foregoing sentence will not be effective unless each rating agency confirms that the amendment will not result in a reduction, qualification or withdrawal of the ratings on the notes. CERTAIN LEGAL MATTERS AFFECTING THE CONTRACTS To the extent provided in your prospectus supplement, certain of the contracts are "chattel paper", "general intangibles" and "accounts" as defined in the Uniform Commercial Code, or the UCC, in effect in the applicable state. Pursuant to the UCC for most purposes, a sale of chattel paper is treated in a manner similar to a transaction creating a security interest in chattel paper. To the extent provided in your prospectus supplement, the depositor will cause the filing of appropriate UCC-1 financing statements to be made with the appropriate governmental authorities. The servicer will be obligated from time to time to take such actions as are necessary to protect and perfect the trust's interests in such contracts and their proceeds. THE SECURITY INTEREST IN THE EQUIPMENT The seller will convey the seller's interest in the equipment to the depositor. The depositor will convey such security interest in the equipment to the trust. UCC financing statements will not be filed to perfect any security interest in the equipment unless otherwise specified in your prospectus supplement. Moreover, in the event of the repossession and resale of equipment, it may be subject to a superior lien. In such case, the senior lienholder may be entitled to be paid the full amount of the indebtedness owed to it out of the sale proceeds before such proceeds could be applied to the payment of claims of the servicer on behalf of the trust. In the event of a default by the lessee, the servicer on behalf of the trust may take action to enforce such defaulted contract by repossession and resale of the leased equipment. Under the UCC in most states, a creditor can, without prior notice to the debtor, repossess assets securing a defaulted contract by the lessee's voluntary surrender of such assets or by "self-help" repossession that does not involve a breach of the peace and by judicial process. In the event of a default by the lessee, some jurisdictions require that the lessee be notified of the default and be given a time period within which it may cure the default prior to repossession. Generally, this right of reinstatement may be exercised on a limited number of occasions in any one-year period. The UCC and other state laws place restrictions on repossession sales, including requirements that the secured party provide the lessee with reasonable notice of the date, time and place of any public sale and/or the date after which any private sale of the collateral may be held and that any such sale be conducted in a commercially reasonable manner. Each pooling and servicing agreement may require the servicer to sell promptly any repossessed item of equipment, reacquire such equipment, re-lease such equipment for the benefit of the noteholders or take such other action as specified in your prospectus supplement. Under most state laws, a lessee has the right to redeem collateral for its obligations prior to actual sale by paying the secured party the unpaid balance of the obligation plus reasonable expenses for repossession, holding and preparing the collateral for disposition and arranging for its sale, plus, to the extent provided for in the written agreement of the parties, reasonable attorneys' fees. In addition, because the market value of the equipment of the type financed pursuant to the contracts generally declines with age and because of obsolescence, the net disposition proceeds of leased equipment at any time during the term of the lease may be less than the outstanding balance on the contract principal balance which it secures. Because of this, and because other creditors may have rights in the related leased equipment superior to those of the trust, the servicer may not be able to recover the entire amount due on a defaulted contract in the event that the servicer elects to repossess and sell such leased equipment at any time. Under the UCC and laws applicable in most states, a creditor is entitled to obtain a deficiency judgment from a lessee for any deficiency on repossession and resale of the asset securing the unpaid balance of such lessee's contract. However, some states impose prohibitions or limitations on deficiency judgments. In most jurisdictions the courts, in interpreting the UCC, would impose upon a creditor an obligation to repossess the equipment in a commercially reasonable manner and to "mitigate damages" in the event of a lessee's failure to cure a default. The creditor would be required to exercise reasonable judgment and follow acceptable commercial practice in seizing and disposing of the equipment and to offset the net proceeds of such disposition against its claim. In addition, a lessee may successfully invoke an election of remedies defense to a deficiency claim in the event that the servicer's repossession and sale of the leased equipment is found to be a retention discharging the lessee from all further obligations under UCC Section 9-505(2). If a deficiency judgment were granted, the judgment would be a personal judgment against the lessee for the shortfall, but a defaulting lessee may have very little capital or sources of income available following repossession. Therefore, in many cases, it may not be useful to seek a deficiency judgment or, if one is obtained, it may be settled at a significant discount. Certain statutory provisions, including federal and state bankruptcy and insolvency laws, may also limit the ability of the servicer to repossess and resell collateral or obtain a deficiency judgment. In the event of the bankruptcy or reorganization of a lessee, various provisions of the Bankruptcy Code of 1978 and related laws may interfere with or eliminate the ability of the servicer or the trustee to enforce its rights under the contracts. If bankruptcy proceedings were instituted in respect of a lessee, the trustee could be prevented from continuing to collect payments due from or on behalf of such lessee or exercising any remedies assigned to such trustee without the approval of the bankruptcy court, and the bankruptcy court could permit the lessee to use or dispose of the leased equipment and provide the trustee with a lien on substitute collateral, so long as such substitute collateral constituted "adequate protection" as defined under the Bankruptcy Code. In addition, certain of the contracts may be leased by the seller to governmental entities. Payment by governmental authorities of amounts due under such contracts may be contingent upon legislative approval. Accordingly, payment delays and collection difficulties as described in your prospectus supplement may limit collections with respect to certain governmental contracts. These UCC and bankruptcy provisions, in addition to the possible decrease in value of a repossessed item of equipment, may limit the amount realized on the sale of the collateral to less than the amount due on the related contract. MATERIAL FEDERAL INCOME TAX CONSEQUENCES The following is a general discussion of the anticipated material United States federal income tax consequences of the purchase, ownership and disposition of the notes. The summary does not purport to deal with federal income tax consequences applicable to all categories of holders, some of which may be subject to special rules. For example, it does not discuss the tax treatment of beneficial owners of notes ("Note Owners") that are insurance companies, regulated investment companies or dealers in securities. Moreover, there are no cases or Internal Revenue Service ("IRS") rulings on similar transactions involving debt interests issued by a trust with terms similar to those of the notes. As a result, the IRS might disagree with all or part of the discussion below. Prospective investors are urged to consult their own tax advisors in determining the federal, state, local, foreign and any other tax consequences to them of the purchase, ownership and disposition of the notes. The following summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations promulgated under the Code and judicial or ruling authority, all of which are subject to change, which change may be retroactive. Each owner trust will be provided with an opinion of tax counsel specified in the related prospectus supplement ("Federal Tax Counsel") regarding some related federal income tax matters discussed below. An opinion of Federal Tax Counsel, however, is not binding on the IRS or the courts. No ruling on any of the issues discussed below will be sought from the IRS. The opinion of Federal Tax Counsel specifically addresses only those issues specifically identified below as being covered by that opinion; however, the opinion also states that the additional discussion set forth below accurately sets forth the advice of Federal Tax Counsel with respect to material federal income tax issues. For purposes of the following summary, references to the owner trust, the notes, and related terms, parties and documents shall be deemed to refer, unless otherwise specified in this prospectus, to each owner trust and the notes, and related terms, parties and documents applicable to the owner trust. TAX CHARACTERIZATION OF THE OWNER TRUSTS Upon the issuance of notes, Federal Tax Counsel will deliver its opinion that the relevant owner trust will not be an association, or publicly traded partnership, taxable as a corporation for federal income tax purposes. The opinion of Federal Tax Counsel will be based on the assumption that the terms of the related trust agreement and documents will be complied with, and on counsel's conclusions that the nature of the income of the owner trust, or restrictions, if any, on transfers of the equity interests in the owner trust, will exempt the owner trust from the rule that some publicly traded partnerships are taxable as corporations. If a owner trust were taxable as a corporation for federal income tax purposes, the owner trust would be subject to corporate income tax on its taxable income. The owner trust's taxable income would include all of its income with respect to the contracts and other assets held by the owner trust, which might be reduced by its interest expense on the notes. Any corporate income tax could materially reduce cash available to make payments of principal and interest on the notes. TAX CONSEQUENCES TO NOTE OWNERS TREATMENT OF THE NOTES AS INDEBTEDNESS The owner trust will agree, and the Note Owners will agree by their purchase of notes, to treat the notes as debt for federal tax purposes. Federal Tax Counsel will, subject to exceptions which, if applicable, will be specified in the related prospectus supplement, advise the owner trust that the notes will be classified as debt for federal income tax purposes, or classified in any other manner as shall be provided in the related prospectus supplement. If, contrary to the opinion of Federal Tax Counsel, the IRS successfully asserted that one or more of the notes did not represent debt for federal income tax purposes, the notes might be treated as equity interests in the owner trust. If so treated, the owner trust might be treated as a publicly traded partnership that would be taxable as a corporation unless it met particular qualifying income tests, and the resulting taxable corporation would not be able to reduce its taxable income by deductions for interest expense on notes recharacterized as equity. Treatment of the notes as equity interests in a partnership could have adverse tax consequences to some holders, even if the owner trust were not treated as a publicly traded partnership taxable as a corporation. For example, income allocable to foreign holders might be subject to United States tax and United States tax return filing and withholding requirements, income allocable to tax-exempt holders might constitute "unrelated business taxable income" (if some, but not all, of the notes were recharacterized as equity in a partnership), individual holders might be subject to limitations on their ability to deduct their share of owner trust expenses, and income from the owner trust's assets would be taxable to Note Owners without regard to whether cash distributions are made to such Note Owners and without regard to the Note Owners' method of tax accounting. The discussion below assumes that the notes will be characterized as debt for federal income tax purposes. INTEREST INCOME ON THE NOTES GENERAL. Expect as discussed below, interest on a note generally is includable in a Note Owner's income as ordinary interest income when actually or constructively received, if the Note Owner uses the cash method of accounting for federal income tax purposes, or when accrued, if the Note Owner uses an accrual method of accounting for federal income tax purposes. ORIGINAL ISSUE DISCOUNT. Notes of certain series may be issued with "original issue discount" within the meaning of Section 1273(a) of the Code. Holders of notes issued with original issue discount generally must include original issue discount in gross income for federal income tax purposes as it accrues, in advance of receipt of the cash attributable to such income, under a method that takes account of the compounding of interest. The Code requires that information with respect to the original issue discount accruing on any note be reported periodically to the IRS and to certain categories of Note Owners. Each owner trust will report original issue discount, if any, to the Note Owners based on the Treasury regulations relating to original issue discount (the "OID Regulations"). The OID Regulations concerning contingent payment debt instruments do not apply to the prepayable debt instruments, such as the notes. The OID Regulations provide that, in the case of debt instruments such as the notes, (i) the amount and rate of accrual of original issue discount will be calculated based on a reasonable assumed prepayment rate (the "Prepayment Assumption"), and (ii) adjustments will be made in the amount and rate of accrual of such discount to reflect differences between the actual prepayment rate and the Prepayment Assumption. The method for determining the appropriate assumed prepayment rate will eventually be set forth in Treasury regulations, but those regulations have not yet been issued. The applicable legislative history indicates, however, that such regulations will provide that the assumed prepayment rate for securities such as the notes will be the rate used in pricing the initial offering of those securities. If the notes of a series are issued with original issue discount, the Prospectus Supplement for that series of notes will specify the Prepayment Assumption. However, no representation is made that the notes of that series will, in fact, prepay at a rate based on the Prepayment Assumption or at any other rate. In general, a note will be considered to be issued with original issue discount if its stated redemption price at maturity exceeds its issue price. Except as discussed below under "--Payment Lag Notes; Initial Period Considerations," and "--Qualified Stated Interest," and in the case of certain Variable Rate Notes (as defined below) and accrual notes, the stated redemption price at maturity of a note is its principal amount. The issue price of a note is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of the class of notes is sold. Notwithstanding the general definition of original issue discount, such discount will be considered to be zero for any note on which such discount is less than 0.25% of its stated redemption price at maturity multiplied by its weighted average life. The weighted average life of a note apparently is computed for purposes of this DE MINIMIS rule as the sum, for all distributions included in the stated redemption price at maturity of the note, of the amounts determined by multiplying (i) the number of complete years (rounding down for partial years) from the applicable closing date to the date on which each such distribution is expected to be made, determined under the Prepayment Assumption, by (ii) a fraction, the numerator of which is the amount of such distribution and the denominator of which is the note's stated redemption price at maturity. The OID Regulations provide that holders will include any DE MINIMIS original issue discount ratably as payments of stated principal are made on the notes. The Note Owner of a note issued with original issue discount must include in gross income the sum of the "daily portions" of such original issue discount for each day during its taxable year on which it held such note. In the case of an original Note Owner, the daily portions of original issue discount are determined first by calculating the portion of the original issue discount that accrued during each period (an "accrual period") that begins on the day following a payment date (or in the case of the first such period, begins on the applicable closing date) and ends on the next succeeding payment date. The original issue discount accruing during each accrual period is then allocated ratably to each day during such period to determine the daily portion of original issue discount for that day. The portion of the original issue discount that accrues in any accrual period will equal the excess, if any, of (i) the sum of (A) the present value, as of the end of the accrual period, of all of the distributions to be made on the note, if any, in future periods and (B) the distributions made on the note during the accrual period that are included in such note's stated redemption price at maturity, over (ii) the adjusted issue price of such note at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence will be calculated (i) assuming that the notes will be prepaid in future periods at a rate computed in accordance with the Prepayment Assumption and (ii) using a discount rate equal to the original yield to maturity of the notes. For these purposes, the original yield to maturity of the notes will be calculated based on their issue price and assuming that the notes will be prepaid in accordance with the Prepayment Assumption. The adjusted issue price of a note at the beginning of any accrual period will equal the issue price of such note, increased by the portion of the original issue discount that has accrued during prior accrual periods, and reduced by the amount of any distributions made on such note in prior accrual periods that were included in such note's stated redemption price at maturity. The daily portions of original issue discount may increase or decrease depending on the extent to which the actual rate of prepayments diverges from the Prepayment Assumption. If original issue discount accruing during any accrual period computed as described above is negative, a Note Owner may only be entitled to offset such amount against positive original issue discount accruing on such note in future accrual periods. Such a Note Owner may be entitled to deduct a loss to the extent that its remaining basis would exceed the maximum amount of future payments to which such Note Owner is entitled. However, Treasury regulations do not address this issue. A subsequent Note Owner that purchases a note issued with original issue discount at a cost that is less than its remaining stated redemption price at maturity will also generally be required to include in gross income, for each day on which it holds such note, the daily portions of original issue discount with respect to the note, calculated as described above. However, if (i) the excess of the remaining stated redemption price at maturity over such cost is less than (ii) the aggregate amount of such daily portions for all days after the date of purchase until final retirement of such note, then such daily portions will be reduced proportionately in determining the income of such Note Owner. QUALIFIED STATED INTEREST. Interest payable on a note which qualifies as "qualified stated interest" for purposes of the OID Regulations will not be includable in the stated redemption price at maturity of the note. Conversely, if the interest on a note does not constitute "qualified stated interest," such interest will be includable in the stated redemption price at maturity of the note and the note, consequently, will have original issue discount. Interest payments will not qualify as qualified stated interest unless the interest payments are "unconditionally payable." The OID Regulations state that interest is unconditionally payable if reasonable legal remedies exist to compel timely payment, or the debt instrument otherwise provides terms and conditions that make the likelihood of late payment (other than a late payment that occurs within a reasonable grace period) or nonpayment of interest a remote contingency, as defined in the OID Regulations. Any terms or conditions that do not reflect arm's length dealing or that the Note Owner does not intend to enforce are not considered. PREMIUM. A purchaser of a note that purchases such note at a cost greater than its remaining stated redemption price at maturity will be considered to have purchased such note at a premium, and may, under Section 171 of the Code, elect to amortize such premium under a constant yield method over the life of the note. The Prepayment Assumption is probably taken into account in determining the life of the note for this purpose. Except as provided in regulations, amortizable premium will be treated as an offset to interest income on the note. PAYMENT LAG NOTES; INITIAL PERIOD CONSIDERATIONS. Certain notes may provide for distributions of interest based on a period that is the same length as the interval between payment dates but ends prior to each payment date. Any interest that accrues prior to the applicable closing date may be treated under the OID Regulations either (i) as part of the issue price and the stated redemption price at maturity of the notes or (ii) as not included in the issue price or the stated redemption price. The OID Regulations provide a special application of the DE MINIMIS rule for debt instruments with long first accrual periods where the interest payable for the first period is at a rate which is effectively less than that which applies in all other periods. In such cases, for the sole purpose of determining whether original issue discount is DE MINIMIS, the OID Regulations provide that the stated redemption price is equal to the instrument's issue price plus the greater of the amount of foregone interest or the excess (if any) of the instrument's stated principal amount over its issue price. VARIABLE RATE NOTES. Under the OID Regulations, notes paying interest at a variable rate (each, a "Variable Rate Note") are subject to special rules. A Variable Rate Note will qualify as a "variable rate debt instrument" if (i) its issue price does not exceed the total noncontingent principal payments due under the Variable Rate Note by more than a specified DE MINIMIS amount; (ii) it provides for stated interest, paid or compounded at least annually, at a current value of (a) one or more qualified floating rates, (b) a single fixed rate and one or more qualified floating rates, (c) a single objective rate or (d) a single fixed rate and a single objective rate that is a qualified inverse floating rate; and (iii) it does not provide for any principal payments that are contingent, as defined in the OID Regulations, except as provided in (i), above. Because the OID Regulations relating to contingent payment debt instruments do not apply to prepayable debt instruments, such as the notes, principal payments on the notes should not be considered contingent for this purpose. A "qualified floating rate" is any variable rate where variations in the value of such rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which the Variable Rate Note is denominated. A multiple of a qualified floating rate will generally not itself constitute a qualified floating rate for purposes of the OID Regulations. However, a variable rate equal to (i) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35 or (ii) the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate will constitute a qualified floating rate for purposes of the OID Regulations. In addition, under the OID Regulations, two or more qualified floating rates that can reasonably be expected to have approximately the same values throughout the term of the Variable Rate Note will be treated as a single qualified floating rate (a "Presumed Single Qualified Floating Rate"). Two or more qualified floating rates with values within 25 basis points of each other as determined on the Variable Rate Note's issue date will be conclusively presumed to be a Presumed Single Qualified Floating Rate. Notwithstanding the foregoing, a variable rate that would otherwise constitute a qualified floating rate, but which is subject to one or more restrictions such as a cap or floor, will not be a qualified floating rate for purposes of the OID Regulations unless the restriction is fixed throughout the term of the Variable Rate Note or the restriction is not reasonably expected as of the issue date to significantly affect the yield of the Variable Rate Note. An "objective rate" is a rate that is not itself a qualified floating rate but which is determined using a single fixed formula and which is based upon objective financial or economic information. The OID Regulations also provide that other variable rates may be treated as objective rates if so designated by the IRS in the future. Despite the foregoing, a variable rate of interest on a Variable Rate Note will not constitute an objective rate if it is reasonably expected that the average value of such rate during the first half of the Variable Rate Note's term will be either significantly less than or significantly greater than the average value of the rate during the final half of the Variable Rate Note's term. Further, an objective rate does not include a rate that is based on information that is within the control of the issuer (or a party related to the issuer) or that is unique to the circumstances of the issuer (or a party related to the issuer). An objective rate will qualify as a "qualified inverse floating rate" if such rate is equal to a fixed rate minus a qualified floating rate and variations in the rate can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate. The OID Regulations also provide that if a Variable Rate Note provides for stated interest at a fixed rate for an initial period of less than one year followed by a variable rate that is either a qualified floating rate or an objective rate and if the variable rate on the Variable Rate Note's issue date is intended to approximate the fixed rate, then the fixed rate and the variable rate together will constitute either a single qualified floating rate or objective rate, as the case may be (a "Presumed Single Variable Rate"). If the value of the variable rate and the initial fixed rate are within 25 basis points of each other as determined on the Variable Rate Note's issue date, the variable rate will be conclusively presumed to approximate the fixed rate. For Variable Rate Notes that qualify as "variable rate debt instruments" under the OID Regulations and provide for interest at either a single qualified floating rate, a single objective rate, a Presumed Single Qualified Floating Rate or a Presumed Single Variable Rate throughout the term (a "Single Variable Rate Note"), original issue discount is computed as described above in "--Interest Income on the Notes--Original Issue Discount" based on the following: (i) stated interest on the Single Variable Rate Note which is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually will constitute qualified stated interest; (ii) by assuming that the variable rate on the Single Variable Rate Note is a fixed rate equal to: (a) in the case of a Single Variable Rate Note with a qualified floating rate or a qualified inverse floating rate, the value, as of the issue date, of the qualified floating rate or the qualified inverse floating rate or (b) in the case of a Single Variable Rate Note with an objective rate (other than a qualified inverse floating rate), a fixed rate which reflects the reasonably expected yield for such Single Variable Rate Note; and (iii) the qualified stated interest allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than) the interest assumed to be paid under the assumed fixed rate described in (ii), above. In general, any Variable Rate Note other than a Single Variable Rate Note (a "Multiple Variable Rate Note") that qualifies as a "variable rate debt instrument" will be converted into an "equivalent" fixed rate debt instrument for purposes of determining the amount and accrual of original issue discount and qualified stated interest on the Multiple Variable Rate Note. The OID Regulations generally require that such a Multiple Variable Rate Note be converted into an "equivalent" fixed rate debt instrument by substituting any qualified floating rate or qualified inverse floating rate provided for under the terms of the Multiple Variable Rate Note with a fixed rate equal to the value of the qualified floating rate or qualified inverse floating rate, as the case may be, as of the Multiple Variable Rate Note's issue date. Any objective rate (other than a qualified inverse floating rate) provided for under the terms of the Multiple Variable Rate Note is converted into a fixed rate that reflects the yield that is reasonably expected for the Multiple Variable Rate Note. (A Multiple Variable Rate Note may not bear more than one objective rate.) In the case of a Multiple Variable Rate Note that qualifies as a "variable rate debt instrument" and provides for stated interest at a fixed rate in addition to either one or more qualified floating rates or a qualified inverse floating rate, the fixed rate is initially converted into a qualified floating rate (or a qualified inverse floating rate, if the Multiple Variable Rate Note provides for a qualified inverse floating rate). Under such circumstances, the qualified floating rate or qualified inverse floating rate that replaces the fixed rate must be such that the fair market value of the Multiple Variable Rate Note as of the Multiple Variable Rate Note's issue date is approximately the same as the fair market value of an otherwise identical debt instrument that provides for either the qualified floating rate or qualified inverse floating rate rather than the fixed rate. Subsequent to converting the fixed rate into either a qualified floating rate or a qualified inverse floating rate, the Multiple Variable Rate Note is then converted into an "equivalent" fixed rate debt instrument in the manner described above. Once the Multiple Variable Rate Note is converted into an "equivalent" fixed rate debt instrument pursuant to the foregoing rules, the amounts of original issue discount and qualified stated interest, if any, are determined for the "equivalent" fixed rate debt instrument by applying the original issue discount rules to the "equivalent" fixed rate debt instrument in the manner described above in "--Interest Income on the Notes--Original Issue Discount." A holder of the Multiple Variable Rate Note will account for such original issue discount and qualified stated interest as if the holder held the "equivalent" fixed rate debt instrument. In each accrual period, appropriate adjustments will be made to the amount of qualified stated interest or original issue discount assumed to have been accrued or paid with respect to the "equivalent" fixed rate debt instrument in the event that such amounts differ from the actual amount of interest accrued or paid on the Multiple Variable Rate Note during the accrual period. If a Variable Rate Note does not qualify as a "variable rate debt instrument" under the OID Regulations, then the Variable Rate Note would be treated as a contingent payment debt obligation. The manner in which a Variable Rate Note would be taxed if such note were treated as a contingent payment debt obligation is not governed by the OID Regulations relating to contingent payment debt obligations which do not apply to prepayable debt instruments, such as the notes, and Treasury regulations do not otherwise address this point. MARKET DISCOUNT. A Note Owner that acquires a note at a market discount (that is, a discount that exceeds any unaccrued original issue discount) will recognize gain upon receipt of a principal distribution, regardless of whether the distribution is scheduled or is a prepayment. In particular, the Note Owner will be required to allocate that principal distribution first to the portion of the market discount on such note that has accrued but has not previously been includable in income, and will recognize ordinary income to that extent. In general terms, unless Treasury regulations when issued provide otherwise, market discount on a note may be treated, at the election of the holder of the note, as accruing either (i) under a constant yield method, taking into account the Prepayment Assumption, or (ii) in proportion to accruals of original issue discount (or, if there is no original issue discount, in proportion to stated interest on the note). In addition, a Note Owner may be required to defer deductions for a portion of the Note Owner's interest expense on any debt incurred or continued to purchase or carry a note purchased with market discount. The deferred portion of any interest deduction would not exceed the portion of the market discount on the note that accrues during the taxable year in which such interest would otherwise be deductible and, in general, would be deductible when such market discount is included in income upon receipt of a principal distribution on, or upon the sale of, the note. The Code requires that information necessary to compute accruals of market discount be reported periodically to the IRS and to certain categories of Note Owners. Notwithstanding the above rules, market discount on a note will be considered to be zero if such discount is less than 0.25% of the remaining stated redemption price at maturity of such note multiplied by its weighted average remaining life. Weighted average remaining life presumably is calculated in a manner similar to weighted average life (described above under "--Interest Income on the Notes--Original Issue Discount"), taking into account distributions (including prepayments) prior to the date of acquisition of such note by the subsequent purchaser. If market discount on a note is treated as zero under this rule, the actual amount of such discount must be allocated to the remaining principal distributions on such note in proportion to the amounts of such principal distributions, and when each such distribution is made, gain equal to the discount, if any, allocated to the distribution will be recognized. ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD RULES. The OID Regulations provide that the holder of a debt instrument issued after April 4, 1994 may elect to include in gross income all interest that accrues on such debt instrument using the constant yield method. For purposes of this election, interest includes stated interest, original issue discount, and market discount, as adjusted to account for any premium. Note Owners should consult their own tax advisors regarding the availability or advisability of such an election. SALES OF NOTES If a note is sold, the seller will recognize gain or loss equal to the difference between the amount realized on the sale and its adjusted basis in the note. A holder's adjusted basis in a note generally equals the cost of the note to the holder, increased by income reported by the holder with respect to the note and reduced (but not below zero) by distributions on the note (other than qualified stated interest) received by the holder and by amortized premium. While any such gain or loss generally will be capital gain or loss provided the Note is held as a capital asset, gain recognized on the sale of a note by a seller who purchased the note at a market discount would be taxable as ordinary income in an amount not exceeding the portion of such discount that accrued during the period the note was held by such seller, reduced by any market discount includable in income under the rules described above under "--Interest Income on the Notes--Market Discount." Further, the notes will be "evidences of indebtedness" within the meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from a sale of a note by a bank or other financial institution to which such section applies would be ordinary income or loss. SHORT-TERM NOTES In the case of a note with a maturity of one year or less from its issue date (a "Short-Term Note"), no interest is treated as qualified stated interest, and therefore all interest is included in original issue discount. Note Owners that report income for federal income tax purposes on an accrual method and some other Note Owners, including banks and certain dealers in securities, are required to include original issue discount in income on Short-Term Notes on a straight-line basis, unless an election is made to accrue the original issue discount according to a constant yield method based on daily compounding. Any other Note Owner of a Short-Term Note is not required to accrue original issue discount for federal income tax purposes, unless it elects to do so. In the case of a Note Owner that is not required, and does not elect, to include original issue discount in income currently, any gain realized on the sale, exchange or retirement of a Short-Term Note is ordinary income to the extent of the original issue discount accrued on a straight-line basis, or, if elected, according to a constant yield method based on daily compounding, through the date of sale, exchange or retirement. In addition, Note Owners that are not required, and do not elect, to include original issue discount in income currently are required to defer deductions for any interest paid on indebtedness incurred or continued to purchase or carry a Short-Term Note in an amount not exceeding the deferred interest income with respect to the Short-Term Note, which includes both the accrued original issue discount and accrued interest that are payable but that have not been included in gross income, until the deferred interest income is realized. A Note Owner may elect to apply the foregoing rules, except for the rule characterizing gain on sale, exchange or retirement as ordinary, with respect to "acquisition discount" rather than original issue discount. Acquisition discount is the excess of the stated redemption price at maturity of the Short-Term Note over the Note Owner's basis in the Short-Term Note. This election applies to all obligations acquired by the taxpayer on or after the first day of the first taxable year to which the election applies, unless revoked with the consent of the IRS. A Note Owner's tax basis in a Short-Term Note is increased by the amount included in the Note Owner's income with respect to the Note. FOREIGN INVESTORS IN NOTES Except as discussed below, a Note Owner that is not a "United States person" (as defined below) generally will not be subject to United States income or withholding tax in respect of a distribution on a note provided that (i) the holder complies to the extent necessary with certain certification requirements, which generally relate to the identity of the beneficial owner and the status of the beneficial owner as a person that is not a United States person (as defined below), (ii) the holder is not a "10-percent shareholder" within the meaning of Section 871(h)(3)(B) of the Code, which could be interpreted to include a person that directly or indirectly owns 10% or more of the equity interests in the owner trust, (iii) the holder is not a "controlled foreign corporation" (as defined in the Code) related to the owner trust or related to a 10 percent holder of equity interests in the owner trust, and (iv) the holder is not engaged in a United States trade or business, or otherwise subject to federal income tax as a result of any direct or indirect connection to the United States other than through its ownership of a note. For these purposes, the term "United States person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership (or other entity properly treated as a corporation or partnership for federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate whose income is includable in gross income for United States federal income taxation regardless of its source, and (iv) a trust for which one or more United States fiduciaries have the authority to control all substantial decisions and for which a court of the United States can exercise primary supervision over the trust's administration. A "Foreign Person" is any person that is not a United States person. Each Note Owner should consult its tax advisors regarding the tax documentation and certifications that must be provided to secure the exemption from United States withholding taxes. Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a note by a Foreign Person generally will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the Foreign Person and (ii) in the case of an individual Foreign Person, the Foreign Person is not present in the United States for 183 days or more in the taxable year. If the interest, gain or income on a note held by a Foreign Person is effectively connected with the conduct of a trade or business in the United States by the Foreign Person (although exempt from the withholding tax previously discussed if the holder provides an appropriate statement establishing that such income is so effectively connected), the holder generally will be subject to United States federal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the Foreign Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its "effectively connected earnings and profits," within the meaning of the Code, for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty (as modified by the branch profits tax rules). BACKUP WITHHOLDING ON NOTES Distributions made on the notes and proceeds from the sale of notes to or through certain brokers may be subject to a "backup" withholding tax of 31 percent of "reportable payments" (including interest accruals, original issue discount, and, under certain circumstances, distributions in reduction of principal amount) if the holder of the notes fails to comply with certain identification procedures, unless the Note Owner is an exempt recipient under applicable provisions of the Code and, if necessary, demonstrates such status. Any amounts so withheld from distributions on the notes would be refunded by the IRS or allowable as a credit against the Note Owner's federal income tax. STATE AND LOCAL TAX CONSIDERATIONS The discussion above does not address the tax consequences of purchase, ownership or disposition of notes under any state or local tax laws. We recommend that investors consult their own tax advisors regarding state and local tax consequences. * * * THE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTE OWNER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. ERISA CONSIDERATIONS GENERAL A fiduciary of a pension, profit-sharing, retirement or other employee benefit plan subject to Title I of ERISA should consider the fiduciary standards under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") in the context of the plan's particular circumstances before authorizing an investment of a portion of such plan's assets in the Notes. Accordingly, pursuant to Section 404 of ERISA, such fiduciary should consider among other factors (i) whether the investment is for the exclusive benefit of plan participants and their beneficiaries; (ii) whether the investment satisfies the applicable diversification requirements; (iii) whether the investment is in accordance with the documents and instruments governing the plan; and (iv) whether the investment is prudent, considering the nature of the investment. Fiduciaries of plans also should consider ERISA's prohibition on improper delegation of control over, or responsibility for, plan assets. In addition, employee benefit plans or other retirement arrangements subject to ERISA, as well as individual retirement accounts, certain types of Keogh plans not subject to ERISA but subject to Section 4975 of the Code, or any entity (including insurance company separate or general accounts) whose underlying assets include plan assets by reason of such plans, arrangements or accounts investing in the entity (each, a "Plan") are prohibited from engaging in a broad range of transactions involving Plan assets and persons having certain specified relationships to a Plan ("parties in interest" and "disqualified persons"). Such transactions are treated as "prohibited transactions" under Sections 406 of ERISA and excise taxes and/or other penalties are imposed upon such persons under ERISA and/or Section 4975 of the Code unless an exemption applies. The depositor, underwriter of the Notes, the servicer, the owner trustee, the indenture trustee and certain of their affiliates might be considered "parties in interest" or "disqualified persons" with respect to a Plan. If so, the acquisition, holding or disposition of Notes by or on behalf of such Plan could be considered to give rise to a "prohibited transaction" within the meaning of ERISA and the Code unless a statutory, regulatory or administrative exception or exemption is available. ERISA CONSIDERATIONS RELATING TO PLAN ASSETS PLAN ASSETS. In 29 C.R.F ss.2510.3-101 (the "Plan Asset Regulations"), the U.S. Department of Labor ("DOL") has defined what constitutes "plan assets" for purposes of ERISA and Section 4975 of the Code. The Plan Asset Regulations provide that if a Plan makes an investment in an "equity interest" in an entity, an undivided portion of the assets of the entity will be considered the assets of such Plan unless certain exceptions set forth in such Regulations apply. As a result, (i) if a Plan is deemed to have acquired an interest in the assets of the owner trust and not merely an interest in the Notes, (ii) the fiduciary investment standards of ERISA could apply to such assets and (iii) transactions occurring in the course of managing, operating and servicing the owner trust and its assets might constitute prohibited transactions, unless a statutory, regulatory or administrative exemption applies. Under the Plan Asset Regulations, the assets of the owner trust would be treated as "plan assets" of a Plan for the purposes of ERISA and the Code only if the Plan acquires an "equity interest" in the owner trust and none of the exceptions contained in the Plan Asset Regulations is applicable. An equity interest is defined under the Plan Asset Regulations as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Assuming that the Notes are treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulations, then such Notes will be eligible for purchase by Plans. However, without regard to whether the Notes are treated as an "equity interest" for such purposes, the acquisition or holding of Notes by or on behalf of a Plan could be considered to give rise to a prohibited transaction if the owner trust or any of its affiliates is or becomes a party in interest or disqualified person with respect to such Plan, or in the event that a Note is purchased in the secondary market and such purchase constitutes a sale or exchange between a Plan and a party in interest or disqualified person with respect to such Plan. There can be no assurance that the owner trust or any of its affiliates will not be or become a party in interest or a disqualified person with respect to a Plan that acquires Notes. UNDERWRITER EXEMPTION GENERAL DISCUSSION. The DOL has granted to Deutsche Bank Alex. Brown an individual exemption, Prohibited Transaction Exemption 94-84, and to Deutsche Morgan Grenfell/C.J. Lawrence Inc., similar approval (FAN 97-03E), which were both amended by Prohibited Transaction Exemption 97-34 ("PTE 97-34") and further recently amended pursuant to Prohibited Transaction Exemption 2000-58 ("PTE 2000-58") (collectively, the "Exemption") which is applicable to asset-backed securities which meet its requirements whenever the Deutsche Banc Alex. Brown or its affiliate is the sole underwriter, manager or co-manager of an underwriting syndicate or is the selling or placement agent. The Exemption generally exempts certain transactions from the application of certain of the prohibited transaction provisions of ERISA and the Code provided that the conditions set forth in the Exemption are satisfied. These transactions include the servicing, managing and operation of investment trusts holding fixed (generally non-revolving pools) of enumerated categories of assets which include those Contracts which are installment obligations and the purchase, sale and holding of securities which represent beneficial ownership interests in the assets of, or obligations of, such trusts. The Exemption does not apply to investment trusts whose assets include Contracts which are leases, as opposed to installment obligations, although the rights to receive the lease payments may serve as collateral in addition to the equipment. GENERAL CONDITIONS OF EXEMPTION. The Exemption sets forth general conditions which must be satisfied for a transaction relating to assets such as the Contracts involving the purchase, sale and holding of asset-backed securities to be eligible for exemptive relief thereunder. First, the acquisition of such securities by Plans must be on terms 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 assets held by the investment trust must be secured. Third, the securities may not be subordinated. Fourth, the securities at the time of acquisition by the Plan must be rated in one of the three highest generic rating categories by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., Moody's Investors Services, Inc. or Fitch, Inc. (each, a "Rating Agency"). Fifth, the owner trustee and the indenture trustee generally cannot be affiliates of any member of the "Restricted Group" which consists of any (i) underwriter as defined in the Exemption, (ii) the depositor, (iii) the servicer, (iv) the counterparty of any "interest swap" (as described below) held as an asset of the investment trust and (v) any obligor with respect to Contracts constituting more than 5% of the aggregate unamortized principal balance of the Contracts held in the investment trust as of the date of initial issuance of the securities. Sixth, the sum of all payments made to, and retained by, such underwriters must represent not more than reasonable compensation for underwriting the securities; the sum of all payments made to, and retained by, the depositor pursuant to the assignment of the Contracts to the related investment trust must represent not more than the fair market value of such Contracts; and the sum of all payments made to, and retained by, the servicer must represent not more than reasonable compensation for such person's services under the Agreement and reimbursement of such person's reasonable expenses in connection therewith. Seventh, (i) the investment pool must consist only of assets of the type enumerated in the Exemption and which have been included in other investment pools; (ii) securities evidencing interests in such other investment pools must have been rated in one of the three highest generic rating categories by one of the Rating Agencies for at least one year prior to a Plan's acquisition of securities; and (iii) securities evidencing interests in such other investment pools must have been purchased by investors other than Plans for at least one year prior to a Plan's acquisition of securities. Finally, the investing Plan must be an accredited investor as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act of 1933, as amended. The depositor assumes that only Plans which are accredited investors under the federal securities laws will be permitted to purchase the securities. RECENT AMENDMENTS TO EXEMPTION. As relevant to the Notes, PTE 2000-58 (the "Amendment") recently amended the Exemption to make the acquisition of asset-backed securities by Plans in an initial offering or in a secondary market transaction and the holding or transfer of securities on or after November 13, 2000 eligible for exemptive relief to a broader range of such securities. Prior to such amendment, such securities had to be pass-through certificates issued by a investment trust which was a grantor trust, REMIC or a FASIT whose corpus could not include certain types of assets such as interest-rate swaps. The Amendment to the Exemption permits investment trusts to issue asset-backed securities which are Notes, as well as pass-through certificates, provided a legal opinion is received to the effect that the noteholders have a perfected security interest in the investment trust's assets. The exemptive relief provided under the Exemption for any prohibited transactions which could be caused as a result of the operation, management or servicing of the investment trust and its assets would not be necessary with respect to Notes with no substantial equity features issued as obligations of the trust. However, effective for the acquisition, holding or transfer of Notes between a Plan and a party in interest which occurs on or after November 13, 2000, the Exemption would provide prohibited transaction exemptive relief. The Amendment has expanded the types of permitted investment trusts to include owner trusts, as well as grantor trusts, REMICs and FASITs. Owner trusts are subject to certain restrictions in their governing documents to ensure that their assets may not be reached by the creditors of the depositor in the event of bankruptcy or other insolvency and must provide certain legal opinions. PERMITTED ASSETS. The Amendment permits an interest-rate swap to be an asset of an investment trust which issues securities acquired by Plans in an initial offering or in the secondary market on or after November 13, 2000 and clarifies the requirements regarding yield supplement agreements. An interest-rate swap (or if purchased by or on behalf of the investment trust) an interest-rate cap contract (collectively, a "Swap" or "Swap Agreement") is a permitted trust asset if it: (a) is an "eligible Swap;" (b) is with an "eligible counterparty;" (c) is purchased by a "qualified plan investor;" (d) meets certain additional specific conditions which depend on whether the Swap is a "ratings dependent Swap" or a "non-ratings dependent Swap" and (e) permits the investment trust to make termination payments to the Swap (other than currently scheduled payments) solely from excess spread or amounts otherwise payable to the servicer or depositor. An "eligible Swap" is one which: (a) is denominated in U.S. dollars; (b) pursuant to which the investment trust pays or receives, on or immediately prior to the respective payment or distribution date for the class of securities to which the Swap relates, a fixed rate of interest or a floating rate of interest based on a publicly available index (E.G., LIBOR or the U.S. Federal Reserve's Cost of Funds Index (COFI)), with the investment trust receiving such payments on at least a quarterly basis and obligated to make separate payments no more frequently than the counterparty, with all simultaneous payments being netted ("Allowable Interest Rate"); (c) has a notional amount that does not exceed either: (i) the principal balance of the class of securities to which the Swap relates, or (ii) the portion of the principal balance of such class represented by obligations ("Allowable Notional Amount"); (d) is not leveraged (I.E., payments are based on the applicable notional amount, the day count fractions, the fixed or floating rates permitted above, and the difference between the products thereof, calculated on a one-to-one ratio and not on a multiplier of such difference) ("Leveraged"); (e) has a final termination date that is either the earlier of the date on which the issuer terminates or the related class of securities are fully repaid and (f) does not incorporate any provision which could cause a unilateral alteration in the interest rate requirements described above or the prohibition against leveraging. An "eligible counterparty" means a bank or other financial institution which has a rating at the date of issuance of the securities, which is in one of the three highest long-term credit rating categories or one of the two highest short-term credit rating categories, utilized by at least one of the Rating Agencies rating the securities; provided that, if a counterparty is relying on its short-term rating to establish eligibility hereunder, such counterparty must either have a long-term rating in one of the three highest long-term rating categories or not have a long-term rating from the applicable Rating Agency. A "qualified plan investor" is a Plan or Plans where the decision to buy such class of securities is made on behalf of the Plan by an independent fiduciary qualified to understand the Swap transaction and the effect the Swap would have on the rating of the securities and such fiduciary is either (a) a "qualified professional asset manager" ("QPAM") under Prohibited Transaction Class Exemption 84-14 ("PTCE 84-14") (see below), (b) an "in-house asset manager" under Prohibited Transaction Class Exemption 96-23 ("PTCE 96-23") (see below) or (c) has total assets (both Plan and non-Plan) under management of at least $100 million at the time the securities are acquired by the Plan. In "ratings dependent Swaps" (where the rating of a class of securities is dependent on the terms and conditions of the Swap), the Swap Agreement must provide that if the credit rating of the counterparty is withdrawn or reduced by any Rating Agency below a level specified by the Rating Agency, the servicer must, within the period specified under the Swap Agreement: (a) obtain a replacement Swap Agreement with an eligible counterparty which is acceptable to the Rating Agency and the terms of which are substantially the same as the current Swap Agreement (at which time the earlier Swap Agreement must terminate); or (b) cause the Swap counterparty to establish any collateralization or other arrangement satisfactory to the Rating Agency such that the then current rating by the Rating Agency of the particular class of securities will not be withdrawn or reduced (and the terms of the Swap Agreement must specifically obligate the counterparty to perform these duties for any class of securities with a term of more than one year). In the event that the servicer fails to meet these obligations, Plan certificateholders must be notified in the immediately following periodic report which is provided to certificateholders but in no event later than the end of the second month beginning after the date of such failure. Sixty days after the receipt of such report, the exemptive relief provided under the Exemption will prospectively cease to be applicable to any class of securities held by a Plan which involves such ratings dependent Swap. "Non-ratings dependent Swaps" (those where the rating of the securities does not depend on the terms and conditions of the Swap) are subject to the following conditions. If the credit rating of the counterparty is withdrawn or reduced below the lowest level permitted above, the servicer will, within a specified period after such rating withdrawal or reduction: (a) obtain a replacement Swap Agreement with an eligible counterparty, the terms of which are substantially the same as the current Swap Agreement (at which time the earlier Swap Agreement must terminate); (b) cause the counterparty to post collateral with the investment trust in an amount equal to all payments owed by the counterparty if the Swap transaction were terminated; or (c) terminate the Swap Agreement in accordance with its terms. An "eligible yield supplement agreement" is any yield supplement agreement or similar arrangement (or if purchased by or on behalf of the investment trust) an interest rate cap contract to supplement the interest rates otherwise payable on obligations held by the investment trust ("EYS Agreement"). If the EYS Agreement has a notional principal amount and/or is written on an International Swaps and Derivatives Association, Inc. (ISDA) form, the EYS Agreement may only be held as an asset of the investment trust with respect to securities purchased by Plans on or after April 7, 1998 if it meets the following conditions: (a) it is denominated in U.S. dollars; (b) it pays an Allowable Interest Rate; (c) it is not Leveraged; (d) it does not allow any of these three preceding requirements to be unilaterally altered without the consent of the owner and indenture trustee; (e) it is entered into between the investment trust and an eligible counterparty and (f) it has an Allowable Notional Amount. LIMITATIONS ON SCOPE OF THE EXEMPTION. If the general conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by ERISA and the Code in connection with the initial acquisition, transfer or holding, and the acquisition or disposition in the secondary market, of the Notes by Plans. However, no exemption is provided from the restrictions of ERISA for the acquisition or holding of a Note on behalf of an "Excluded Plan" by any person who is a fiduciary with respect to the assets of such Excluded Plan. For those purposes, an Excluded Plan is a Plan sponsored by any member of the Restricted Group. Exemptive relief may also be provided for the acquisition, holding and disposition of Notes by Plans if the fiduciary or its affiliate is the obligor with respect to 5% or less of the fair market value of the Contracts in the owner trust provided that: (i) the Plan is not an Excluded Plan, (ii) each Plan's investment in each class of Notes does not exceed 25% of the outstanding Notes in the class, (iii) after the Plan's acquisition of the Notes, no more than 25% of the assets over which the fiduciary has investment authority are invested in securities of a trust containing assets which are sold or serviced by the same entity and (iv) in the case of initial issuance (but not secondary market transactions), at least 50% of each class of securities issued by the owner trust and at least 50% of the aggregate interests in the owner trust are acquired by persons independent of the Restricted Group. In the event that the Exemption is not applicable to the Notes, one or more other prohibited transactions exemptions may be available to Plans purchasing or transferring the Notes depending in part upon the type of Plan fiduciary making the decision to acquire the Notes and the circumstances under which such decision is made. These exemptions include, but are not limited to, Prohibited Transaction Class Exemption 90-1 (regarding investments by insurance company pooled separate accounts), Prohibited Transaction Class Exemption 91-38 (regarding investments by bank collective investments funds), PTCE 84-14 (regarding transactions effected by "qualified professional asset managers"), PTCE 95-60 (regarding investments by insurance company general accounts) and PTCE 96-23 (regarding transactions effected by "in-house asset managers") (collectively, the "Investor-Based Exemptions"). However, even if the conditions specified in these Investor-Based Exemptions are met, the scope of the relief provided under such Exemptions might or might not cover all acts which might be construed as prohibited transactions. EACH PROSPECTUS SUPPLEMENT WILL CONTAIN INFORMATION CONCERNING CONSIDERATIONS RELATING TO ERISA AND THE CODE THAT ARE APPLICABLE TO THE RELATED NOTES. BEFORE PURCHASING NOTES IN RELIANCE ON THE EXEMPTION, THE INVESTOR-BASED EMEMPTIONS OR ANY OTHER EXEMPTION, A FIDUCIARY OF A PLAN SHOULD ITSELF CONFIRM THAT REQUIREMENTS SET FORTH IN SUCH EXEMPTION WOULD BE SATISFIED. ANY PLAN INVESTOR WHO PROPOSES TO USE "PLAN ASSETS" OF ANY PLAN TO PURCHASE NOTES OF ANY SERIES OR CLASS SHOULD CONSULT WITH ITS COUNSEL WITH RESPECT TO THE POTENTIAL CONSEQUENCES UNDER ERISA AND SECTION 4975 OF THE CODE OF THE ACQUISITION AND OWNERSHIP OF SUCH NOTES. Governmental plans and church plans as defined in ERISA are not subject to ERISA or Code Section 4975, although they may elect to be qualified under Section 401(a) of the Code and exempt from taxation under Section 501(a) of the Code and would then be subject to the prohibited transaction rules set forth in Section 503 of the Code. In addition, governmental plans may be subject to federal, state and local laws which are to a material extent similar to the provisions of ERISA or a Code Section 4975 ("Similar Law"). A fiduciary of a governmental plan should make its own determination as to the propriety of an investment in Notes under applicable fiduciary or other investment standards and the need for the availability of any exemptive relief under any Similar Law. RATINGS OF THE NOTES The owner trust will not sell notes of a series unless one or more nationally recognized rating agencies rate the notes of that series in a rating category that signifies investment grade. Any rating that is made may be lowered or withdrawn by the assigning rating agency at any time if, in its judgment, circumstances so warrant. If a rating or ratings of notes is qualified, reduced or withdrawn, no person or entity will be obligated to provide any additional credit enhancement with respect to the notes so qualified, reduced or withdrawn. The rating of the notes should be evaluated independently from similar ratings on other types of securities. A rating is not a recommendation to buy, sell or hold notes, inasmuch as a rating does not comment as to market price or suitability for a particular investor. The ratings of the notes do not address the likelihood of payment of principal on any class of notes prior to the stated maturity date of the notes, or the possibility of the imposition of United States withholding tax with respect to non-United States persons. USE OF PROCEEDS The proceeds from the sale of the notes of each series, after funding a portion of the cash collateral account or other form of credit enhancement for the series and paying the expenses of the sponsor, will be used to pay the purchase price due to the depositor. PLAN OF DISTRIBUTION The sponsor or the owner trust may sell notes to or through underwriters at the prices set forth in your prospectus supplement or in negotiated transactions at varying prices, and also may sell notes directly to other purchasers or through agents. The sponsor intends to offer the notes through these various methods from time to time and that offerings may be made concurrently through more than one of these methods or that an offering of a particular series of notes may be made through a combination of these methods. The underwriters will be obligated to purchase all of the notes described in your prospectus supplement if any such notes are purchased. The place and time of delivery for your notes will be set forth in your prospectus supplement. The sponsor, the originators, the depositor and certain of its affiliates may agree to indemnify the underwriters and agents who participate in the distribution of the notes against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or contribute to payments the underwritten may be required to make. Funds in cash collateral accounts and the trust accounts may, from time to time, be invested in certain investments acquired from the underwriters. If and to the extent required by applicable law or regulation, this prospectus and your prospectus supplement will also be used by the underwriters after the completion of the offering for market-making transactions in the notes. Sales will be made at negotiated prices determined at the time of sales. If and to the extent required by applicable law or regulation, this prospectus and the prospectus supplement will also be used by the underwriter after the completion of the offering in connection with offers and sales related to market-making transactions in the notes in which the underwriter acts as principal. The underwriter may also act as agent in these transactions. Sales will be made at negotiated prices determined at the time of sale. LEGAL MATTERS Stroock & Stroock & Lavan LLP or other counsel specified in your prospectus supplement, will provide a legal opinion relating to the notes in its capacity as special counsel to the sponsor and the underwriters. Other legal matters for underwriters will be passed upon by counsel to underwriters. WHERE YOU CAN FIND MORE INFORMATION Federal securities law requires the filing of certain information with the Securities and Exchange Commission, including annual, quarterly and special reports, proxy statements and other information. You can read and copy these documents at the public reference facility maintained by the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You can also read and copy the reports, proxy statements and other information at the following regional offices of the Securities and Exchange Commission: New York Regional Office Chicago Regional Office Seven World Trade Center Citicorp Center Suite 1300 500 West Madison Street, Suite 1400 New York, NY 10048 Chicago, IL 60661 Please call the Securities and Exchange Commission at 1-800-SEC-0330 for more information about the public reference rooms or visit the Securities and Exchange Commission's web site at http://www.sec.gov to access available filings. The Securities and Exchange Commission allows offerors of securities to incorporate by reference some of the information they file with it. This means that offerors can disclose important information to you by referring you to those documents. The information that the sponsor incorporates by reference is considered to be part of this prospectus, and later information that the sponsor files with the Securities and Exchange Commission will automatically update and supersede this information. All documents filed by the servicer, on behalf of a respective owner trust, under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after the date of this prospectus and prior to the termination of the offering of the notes will be incorporated by reference into this prospectus. If you are a beneficial owner of the notes to whom a prospectus has been delivered, the sponsor will, on request, send you a copy of the information that has been incorporated by reference in this prospectus. The sponsor will provide this information at no cost to you. Please address requests to: ACE Securities Corp., 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211, Telephone No. (704) 365-0569. INDEX OF TERMS Collection Account.......................................................35 Distribution Account.....................................................35 DTC......................................................................36 ERISA....................................................................64 excluded residual investment.............................................24 guaranteed residual investment...........................................24 Material modification....................................................32 PTCE.....................................................................65 Qualified institution....................................................35 true lease................................................................9 Trust Account............................................................35 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The estimated expenses expected to be incurred by the Registrant in connection with the issuance and distribution of the securities being registered, other than underwriting compensation, are as follows: SEC Registration Fee $* Trustee's Fees and Expenses (including counsel fees) * Printing and Engraving Costs * Rating Agency Fees * Legal Fees and Expenses * Blue Sky Fees and Expenses * Accounting Fees and Expenses * Miscellaneous * Total * * To be filed by amendment ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any persons, including officers and directors, who are made, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, for criminal proceedings, had no reasonable cause to believe that his conduct was illegal. A Delaware corporation may indemnify officers and directors in an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director actually and reasonably incurred. The By-laws of the Registrant provide for indemnification of officers and directors to the full extent permitted by the Delaware General Corporation Law. The transaction documents for each series of Securities will provide either that the Registrant and the partners, directors, officers, employees and agents of the Registrant, or that the Servicer or Master Servicer and the partners, directors, officers, employees and agents of the Servicer or Master Servicer, will be entitled to indemnification by the applicable Trust and will be held harmless against any loss, liability or expense incurred in connection with any legal action relating to the transaction documents, other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of his or its duties thereunder or by reason of reckless disregard of his or its obligations and duties thereunder. The Underwriting Agreement for each series of Securities will generally provide that each underwriter will indemnify the Registrant, each of its directors, each of its officers who signs the Registration Statement, and each person who controls the Registrant within the meaning of either the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, against claims, damages, or liability, to which the Registrant may become subject, under the Securities Act or the Exchange Act, or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of material fact furnished by the underwriter for the preparation of a prospectus, or included in any computational materials, term sheets or similar documents delivered to prospective investors by the underwriter (other than any such untrue statement that is based on materials previously provided to the underwriter by the Registrant). ITEM 16. EXHIBITS. 1.1 Form of Underwriting Agreement+ 3.1 Restated Certificate of Incorporation of ACE Securities Corp.+ 4.1.1 Form of Indenture (Owner Trust, Auto Receivables)** 4.1.2 Form of Indenture (Dealer Floorplan Securities)** 4.1.3 Form of Indenture between the Trust and the Indenture Trustee (Owner Trust, Equipment Securities)** 4.1.4 Form of Indenture (Credit Card Securities)** 4.2 Form of Pooling and Servicing Agreement (Mortgage)+ 4.2.1 Form of Trust Sale and Servicing Agreement (Dealer Floorplan Securities)** 4.2.2 Form of Pooling and Servicing Agreement. (Equipment)** 4.2.3 Form of Pooling and Servicing Agreement (Dealer Floorplan Securities)** 4.2.4 Form of Master Pooling and Servicing Agreemenet (Credit Card Securities)** 4.3.1 Form of Administration Agreement (Dealer Floorplan Securities)** 4.3.2 Form of Series Supplement to Pooling and Servicing Agreement (Credit Card Securities)** 4.4.1 Form of Trust Agreement. (Owner Trust, Auto Receivables)** 4.4.2 Form of Trust Agreement (Dealer Floorplan Securities)** 4.4.3 Form of Trust Agreement among the Depositor, the Seller and the Trustee (Owner Trust, Equipment Securities)** 4.4.4 Form of Trust Agreement (Owner Trust, Credit Card Securities)** 4.4.5 Form of Trust Agreement (Grantor Trust, Credit Card Securities)** 5.1 Opinion of Stroock & Stroock & Lavan LLP as to securities offered** 8.1 Opinion of Stroock & Stroock & Lavan LLP with respect to tax matters. (included in Exhibit 5.1)** 10.1.1 Form of Loan Contribution Agreement. (Auto Receivables)** 10.1.2 Form of Receivables Purchase Agreement (Credit Card Securities)** 10.2.1 Form of Sale and Servicing Agreement. (Owner Trust, Auto Receivables)** 23.1 Consent of Stroock & Stroock & Lavan LLP. (included in Exhibits 5.1 and 8.1)** 24.1 Powers of Attorney of directors and officers of ACE Securities Corp. (included in the signature pages to this Registration Statement)*** 25.1 Statement of Eligibility and Qualification of Indenture Trustee**** + Incorporated herein by reference to the Registrant's Registration Statement on Form S-3 (Reg. No. 333-56213), filed with the Commission on June 5, 1999. ** Filed herewith. *** Previously filed. **** To be filed following the effectiveness of the Registration Statement. Item 17. Undertakings A. Undertaking in respect of Rule 415 offering. 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, as amended; (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; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change of such information in the Registration Statement; provided, however, that paragraphs (i) and (iii) do not apply if the information required to be included in the post-effective amendment is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, as amended, 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. Undertaking in respect of filings incorporating subsequent Exchange Act documents by reference. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned Registrant hereby undertakes to provide to the Underwriter at the closing specified in the Underwriting Agreements Notes and Certificates in the denominations and registered in the names as required by the Underwriter to permit prompt delivery to each purchaser. C. Undertaking in respect of indemnification. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue. D. Undertakings for registration statement permitted by Rule 430A. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, as amended, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended, shall be deemed to be part of this Registration Statement as of the time it was declared effective; and (2) For the purpose of determining any liability under the Securities Act of 1933, as amended, each post-effective amendment that contains a form of prospectus 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. E. Undertaking in respect of qualification of Indentures under the Trust Indenture Act of 1939. The Registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act of 1939 in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act of 1939. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Charlotte, North Carolina on the 5th day of February, 2001. ACE SECURITIES CORP. By: /s/ Douglas K. Johnson ------------------------------ Name: Douglas K. Johnson Title: President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date * President and Director February 5, 2001 Douglas K. Johnson (Principal Executive Officer) * Director and Secretary February 5, 2001 Evelyn Echevarria * Treasurer and Director February 5, 2001 Juliana C. Johnson (Principal Financial and Accounting Officer)
* By: /s/ Douglas K. Johnson Name: Douglas K. Johnson Title: President EXHIBIT INDEX 1.1 Form of Underwriting Agreement+ 3.1 Restated Certificate of Incorporation of ACE Securities Corp.+ 4.1.1 Form of Indenture (Owner Trust, Auto Receivables)** 4.1.2 Form of Indenture (Dealer Floorplan Securities)** 4.1.3 Form of Indenture between the Trust and the Indenture Trustee (Owner Trust, Equipment Securities)** 4.1.4 Form of Indenture (Credit Card Securities)** 4.2 Form of Pooling and Servicing Agreement (Mortgage)+ 4.2.1 Form of Trust Sale and Servicing Agreement (Dealer Floorplan Securities)** 4.2.2 Form of Pooling and Servicing Agreement. (Equipment)** 4.2.3 Form of Pooling and Servicing Agreement (Dealer Floorplan Securities)** 4.2.4 Form of Master Pooling and Servicing Agreemenet (Credit Card Securities)** 4.3.1 Form of Administration Agreement (Dealer Floorplan Securities)** 4.3.2 Form of Series Supplement to Pooling and Servicing Agreement (Credit Card Securities)** 4.4.1 Form of Trust Agreement. (Owner Trust, Auto Receivables)** 4.4.2 Form of Trust Agreement (Dealer Floorplan Securities)** 4.4.3 Form of Trust Agreement among the Depositor, the Seller and the Trustee (Owner Trust, Equipment Securities)** 4.4.4 Form of Trust Agreement (Owner Trust, Credit Card Securities)** 4.4.5 Form of Trust Agreement (Grantor Trust, Credit Card Securities)** 5.1 Opinion of Stroock & Stroock & Lavan LLP as to securities offered** 8.1 Opinion of Stroock & Stroock & Lavan LLP with respect to tax matters. (included in Exhibit 5.1)** 10.1.1 Form of Loan Contribution Agreement. (Auto Receivables)** 10.1.2 Form of Receivables Purchase Agreement (Credit Card Securities)** 10.2.1 Form of Sale and Servicing Agreement. (Owner Trust, Auto Receivables)** 23.1 Consent of Stroock & Stroock & Lavan LLP. (included in Exhibits 5.1 and 8.1)** 24.1 Powers of Attorney of directors and officers of ACE Securities Corp. (included in the signature pages to this Registration Statement)*** 25.1 Statement of Eligibility and Qualification of Indenture Trustee**** + Incorporated herein by reference to the Registrant's Registration Statement on Form S-3 (Reg. No. 333-56213), filed with the Commission on June 5, 1999. ** Filed herewith. *** Previously filed. **** To be filed following the effectiveness of the Registration Statement. EX-4.1.1 2 0002.txt EXHIBIT 4.1.1 ============================================================= [ ] Class A-1 [______]% Asset Backed Notes Class A-2 [______]% Asset Backed Notes Class A-3 [______]% Asset Backed Notes Class A-4 [______]% Asset Backed Notes Class A-5 [______]% Asset Backed Notes Class B [______]% Asset Backed Notes -------------------------------- INDENTURE Dated as of [____________] -------------------------------- [ ] Trustee ================================================================ CROSS REFERENCE TABLE1 TIA Indenture Section Section 310 (a) (1) ........................................ 6.11 (a) (2) ........................................ 6.11 (a) (3) ........................................ 6.10 (a) (4) ........................................ N.A.2 (a) (5) ........................................ 6.11 (b) ........................................ 6.8; 6.11 (c) ........................................ N.A. 311 (a) ........................................ 6.12 (b) ........................................ 6.12 (c) ........................................ N.A. 312 (a) ........................................ 7.1 (b) ........................................ 7.2 (c) ........................................ 7.2 (d) ........................................ 7.4 313 (a) ........................................ 7.4 (b) (1) ........................................ 7.4 (b) (2) ........................................ 11.5 (c) ........................................ 7.4 (d) ........................................ 7.3 314 (a) ........................................ 3.9; 11.15 (b) ........................................ 11.1 (c) (1) ........................................ 11.1 (c) (2) ........................................ 11.1 (c) (3) ........................................ 11.1 (d) ........................................ 11.1 (e) ........................................ 11.1 (f) ........................................ 11.1 315 (a) ........................................ 6.1 (b) ........................................ 6.5; 11.5 (c) ........................................ 6.1 (d) ........................................ 6.1 (e) ........................................ 5.13 316 (a) (last sentence)................................ 2.7 (a) (1) (A)........................................ 5.11 (a) (1) (B)........................................ 5.12 (a) (2) ........................................ N.A. (b) ........................................ 5.7 (c) ........................................ N.A 317 (a) (1) ........................................ 5.3 (a) (2) ........................................ 5.32 (b) ........................................ 3.3 318 (a) ........................................ 11.7 ___________________ 1 Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of this Indenture. 2 N.A. means Not Applicable. TABLE OF CONTENTS Page ARTICLE I Definitions and Incorporation by Reference SECTION 1.1 Definitions.....................................................2 SECTION 1.2 Incorporation by Reference of Trust Indenture Act...............9 SECTION 1.3 Rules of Construction...........................................9 ARTICLE II The Notes SECTION 2.1 Form..........................................................10 SECTION 2.2 Execution, Authentication and Delivery........................10 SECTION 2.3 Temporary Notes...............................................11 SECTION 2.4 Registration; Registration of Transfer and Exchange...........11 SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes....................12 SECTION 2.6 Persons Deemed Owner..........................................13 SECTION 2.7 Payment of Principal and Interest; Defaulted Interest.........13 SECTION 2.8 Cancellation..................................................14 SECTION 2.9 Release of Collateral.........................................15 SECTION 2.10 Book-Entry Notes..............................................15 SECTION 2.11 Notices to Clearing Agency....................................16 SECTION 2.12 Definitive Notes..............................................16 SECTION 2.13 Reserved......................................................16 ARTICLE III Covenants SECTION 3.1 Payment of Principal and Interest.............................16 SECTION 3.2 Maintenance of Office or Agency...............................17 SECTION 3.3 Money for Payments To Be Held in Trust........................17 SECTION 3.4 Existence.....................................................18 SECTION 3.5 Protection of Trust Estate....................................19 SECTION 3.6 Opinions as to Trust Estate...................................19 SECTION 3.7 Performance of Obligations; Servicing of Receivables..........20 SECTION 3.8 Negative Covenants............................................22 SECTION 3.9 Annual Statement as to Compliance.............................22 SECTION 3.10 Issuer May Consolidate, Etc. Only on Certain Terms............23 SECTION 3.11 Successor or Transferee.......................................24 SECTION 3.12 No Other Business.............................................25 SECTION 3.13 No Borrowing..................................................25 SECTION 3.14 Servicer's Obligations........................................25 SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities.............25 SECTION 3.16 Capital Expenditures..........................................25 SECTION 3.17 [Reserved]....................................................25 SECTION 3.18 Restricted Payments...........................................25 SECTION 3.19 Notice of Events of Default...................................25 SECTION 3.20 Further Instruments and Acts..................................26 ARTICLE IV Satisfaction and Discharge SECTION 4.1 Satisfaction and Discharge of Indenture........................26 SECTION 4.2 Application of Trust Money.....................................27 SECTION 4.3 Repayment of Moneys Held by Paying Agent.......................27 SECTION 4.4 Notice.........................................................27 ARTICLE V Remedies SECTION 5.1 Events of Default..............................................27 SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.............29 SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.....................................................29 SECTION 5.4 Remedies; Priorities...........................................31 SECTION 5.5 Optional Preservation of the Receivables.......................33 SECTION 5.6 Limitation of Suits............................................33 SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal and Interest...................................................34 SECTION 5.8 Restoration of Rights and Remedies.............................34 SECTION 5.9 Rights and Remedies Cumulative.................................34 SECTION 5.10 Delay or Omission Not a Waiver................................34 SECTION 5.11 Control by Noteholders........................................34 SECTION 5.12 Waiver of Past Defaults.......................................35 SECTION 5.13 Undertaking for Costs.........................................35 SECTION 5.14 Waiver of Stay or Extension Laws..............................36 SECTION 5.15 Action on Notes...............................................36 SECTION 5.16 Performance and Enforcement of Certain Obligations............36 ARTICLE VI The Trustee SECTION 6.1 Duties of Trustee.............................................37 SECTION 6.2 Rights of Trustee.............................................38 SECTION 6.3 Individual Rights of Trustee..................................38 SECTION 6.4 Trustee's Disclaimer..........................................39 SECTION 6.5 Notice of Defaults; Notice of Event of Default................39 SECTION 6.6 Reports by Trustee to Holders.................................39 SECTION 6.7 Compensation and Indemnity....................................39 SECTION 6.8 Replacement of Trustee........................................40 SECTION 6.9 Successor Trustee by Merger...................................41 SECTION 6.10 Appointment of Co-Trustee or Separate Trustee.................41 SECTION 6.11 Eligibility; Disqualification.................................42 SECTION 6.12 Preferential Collection of Claims Against Issuer..............42 ARTICLE VII Noteholders' Lists and Reports SECTION 7.1 Issuer To Furnish Trustee Names and Addresses of Noteholders...43 SECTION 7.2 Preservation of Information; Communications to Noteholders.....43 SECTION 7.3 Reports by Issuer..............................................43 SECTION 7.4 Reports by Trustee.............................................44 ARTICLE VIII Accounts, Disbursements and Releases SECTION 8.1 Collection of Money............................................44 SECTION 8.2 Trust Accounts.................................................44 SECTION 8.3 General Provisions Regarding Accounts..........................45 SECTION 8.4 Release of Trust Estate........................................46 SECTION 8.5 Opinion of Counsel.............................................47 ARTICLE IX Supplemental Indentures SECTION 9.1 Supplemental Indentures without Consent of Noteholders.........47 SECTION 9.2 Supplemental Indentures with Consent of Noteholders............48 SECTION 9.3 Execution of Supplemental Indentures...........................50 SECTION 9.4 Effect of Supplemental Indenture...............................50 SECTION 9.5 Conformity with Trust Indenture Act............................50 SECTION 9.6 Reference in notes to Supplemental Indentures..................50 ARTICLE X Redemption of Notes SECTION 10.1 Redemption....................................................51 SECTION 10.2 Form of Redemption Notice.....................................51 SECTION 10.3 Notes Payable on Redemption Date..............................52 ARTICLE XI Miscellaneous SECTION 11.1 Compliance Certificates and Opinions, etc.....................52 SECTION 11.2 Form of Documents Delivered to Trustee........................54 SECTION 11.3 Acts of Noteholders...........................................55 SECTION 11.4 Notices, etc., to Trustee, Issuer and Rating Agencies.........55 SECTION 11.5 Notices to Noteholders; Waiver................................56 SECTION 11.6 Alternate Payment and Notice Provisions.......................56 SECTION 11.7 Conflict with Trust Indenture Act.............................57 SECTION 11.8 Effect of Headings and Table of Contents......................57 SECTION 11.9 Successors and Assigns........................................57 SECTION 11.10 Separability.................................................57 SECTION 11.11 Benefits of Indenture........................................57 SECTION 11.12 Legal Holidays...............................................57 SECTION 11.13 Governing Law................................................57 SECTION 11.14 Counterparts.................................................58 SECTION 11.15 Recording of Indenture.......................................58 SECTION 11.16 Trust Obligation.............................................58 SECTION 11.17 No Petition..................................................58 SECTION 11.18 Inspection...................................................58 Testimonium, Signatures and Seals Exhibit A Schedule of Receivables Exhibit B Form of Sale and Servicing Agreement Exhibit C Form of Note Depository Agreement Exhibit D Form of Class A-1 Note Exhibit E Form of Class A-2 Note Exhibit F Form of Class A-3 Note Exhibit G Form of Class A-4 Note Exhibit H Form of Class A-5 Note Exhibit I Form of Class B Note INDENTURE dated as of [____________], between [____________________], a Delaware business trust (the "Issuer"), and [____________________], a national banking association, as trustee and not in its individual capacity (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the benefit of the Holders of the Issuer's Class A-1 [_____]% Asset Backed Notes (the "Class A-1 Notes"), Class A-2 [_____]% Asset Backed Notes (the "Class A-2 Notes"), Class A-3 [_____]% Asset Backed Notes (the "Class A-3 Notes"), Class A-4 [_____]% Asset Backed Notes (the "Class A-4 Notes"), Class A-5 [_____]% Asset Backed Notes (the "Class A-5 Notes" and, together with the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes, the "Class A Notes") and Class B [_____]% Asset Backed Notes (the "Class B Notes" and, together with the Class A Notes, the "Notes"): GRANTING CLAUSE The Issuer hereby Grants to the Trustee at the Closing Date, as Trustee for the benefit of the Holders of the Notes, a security interest in and to all of the Issuer's right, title and interest in and to (a) the Receivables, and all moneys received thereon (other than any proceeds from any Dealer commission), on or after the Cutoff Date and, with respect to Receivables which are Actuarial Receivables, all monies received thereon prior to the Cutoff Date that are due on or after the Cutoff Date; (b) the security interests in the Financed Vehicles granted by Obligors pursuant to the Receivables and any other interest of the Issuer in the Financed Vehicles; (c) any proceeds with respect to claims or any physical damage, repossession, loss, skip, credit life and credit accident, vendor's single interest and health insurance policies or certificates relating to the Financed Vehicles or the Obligors; (d) any refunds for the costs of extended service contracts with respect to Financed Vehicles, refunds of unearned premiums with respect to credit life and credit accident and health insurance policies covering Financed Vehicles or Obligors; (e) any proceeds with respect to any Receivable repurchased by a Dealer, pursuant to a Dealer Agreement, as a result of a breach of representation or warranty in the related Dealer Agreement or a default by an Obligor resulting in the repossession of the Financed Vehicle under such Dealer Agreement; (f) all funds on deposit from time to time in the Trust Accounts, including the Reserve Account Initial Deposit, and in all investments and proceeds thereof (including all income thereon); (g) the Sale and Servicing Agreement and the Loan Purchase Agreement; and (h) the proceeds of any and all of the foregoing (collectively, the "Collateral"). The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Class A Notes, equally and ratably, and the Class B Notes on a subordinated basis, equally and ratably without prejudice, priority or distinction except as set forth herein, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture. The Trustee, as Trustee on behalf of the Holders of the Notes, acknowledges such Grant, accepts the trusts under this Indenture in accordance with the provisions of this Indenture and agrees to perform its duties required in this Indenture to the best of its ability to the end that the interests of the Holders of the Notes may be adequately and effectively protected. ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 DEFINITIONS. Except as otherwise specified herein, the following terms have the respective meanings set forth below for all purposes of this Indenture. "ACT" has the meaning specified in Section 11.3(a). "AFFILIATE" means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any 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. "AUTHORIZED OFFICER" means, with respect to the Issuer and the Servicer, any officer or agent acting under a power of attorney of the Owner Trustee or the Servicer, as applicable, who is authorized to act for the Owner Trustee or the Servicer, as applicable, in matters relating to the Issuer and who is identified on the list of Authorized Officers delivered by each of the Owner Trustee and the Servicer to the Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter). "BASIC DOCUMENTS" means the Certificate of Trust, the Trust Agreement, the Sale and Servicing Agreement, the Loan Purchase Agreement, the Note Depository Agreement and other documents and certificates delivered in connection therewith. "BOOK ENTRY NOTES" means a beneficial interest in the Notes, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 2.10. "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on which banking institutions or trust companies in the City of New York, Wilmington, Delaware or Chicago, Illinois are authorized or obligated by law, regulation or executive order to remain closed. "CERTIFICATE OF TRUST" means the certificate of trust of the Issuer substantially in the form of Exhibit B to the Trust Agreement. "CLASS A NOTE" means a Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note and Class A-5 Note. "CLASS A-1 NOTES" means the Class A-1 [_____]% Asset Backed Notes, substantially in the form of Exhibit D. "CLASS A-1 INTEREST RATE" means [_____]% per annum (computed on the basis of the actual number of days elapsed in a 360-day year). "CLASS A-2 NOTES" means the Class A-2 [_____]% Asset Backed Notes, substantially in the form of Exhibit E. "CLASS A-2 INTEREST RATE" means [_____]% per annum (computed on the basis of a 360-day year of twelve 30-day months). "CLASS A-3 NOTES" means the Class A-3 [_____]% Asset Backed Notes, substantially in the form of Exhibit F. "CLASS A-3 INTEREST RATE" means [_____]% per annum (computed on the basis of a 360-day year of twelve 30-day months). "CLASS A-4 NOTES" means the Class A-4 [_____]% Asset Backed Notes, substantially in the form of Exhibit G. "CLASS A-4 INTEREST RATE" means [_____]% per annum (computed on the basis of a 360-day year of twelve 30-day months). "CLASS A-5 NOTES" means the Class A-5 [_____]% Asset Backed Notes, substantially in the form of Exhibit H. "CLASS A-5 INTEREST RATE" means [_____]% per annum (computed on the basis of a 360-day year of twelve 30-day months). "CLASS B NOTES" means the Class B [_____]% Asset Backed Notes, substantially in the form of Exhibit I. "CLASS B INTEREST RATE" means [_____]% per annum (computed on the basis of a 360-day year of twelve 30-day months). "CLEARING AGENCY" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder. "COLLATERAL" has the meaning specified in the Granting Clause of this Indenture. "CORPORATE TRUST OFFICE" means the principal office of the Trustee at which at any particular time its corporate trust business shall be principally administered which office at date of the execution of this Agreement is located at [_________________________], Attention: Corporate Trust (Telephone: [(___) ___-____]; Facsimile: [(___) ___-____] or at such other address as the Trustee may designate from time to time by notice to the Noteholders, the Servicer and the Issuer, or the principal corporate trust office of any successor Trustee (the address of which the successor Trustee will notify the Noteholders and the Issuer). "DEFAULT" means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default. "DEFINITIVE NOTES" has the meaning specified in Section 2.10. "EVENT OF DEFAULT" has the meaning specified in Section 5.1. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXECUTIVE OFFICER" means, with respect to any corporation, the President, Executive Vice President, any Vice President, the Secretary or the Treasurer of such corporation; and with respect to any partnership, any general partner thereof. "GRANT" means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, create, grant a lien upon and a security interest in and right of set-off against, deposit, set over and confirm pursuant to this Indenture. A Grant of the Collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the Granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring proceedings in the name of the Granting party or otherwise and generally to do and receive anything that the Granting party is or may be entitled to do or receive thereunder or with respect thereto. "HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is registered on the Note Register. "INDENTURE" means this Indenture as amended and supplemented from time to time. "INDEPENDENT" means, when used with respect to any specified Person, that the person (a) is in fact independent of the Issuer, any other obligor upon the Notes, the Depositor and any Affiliate of any of the foregoing persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Depositor or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Depositor or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions. "INDEPENDENT CERTIFICATE" means a certificate or opinion to be delivered to the Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.1, made by an Independent appraiser or other expert appointed by an Issuer Order and such opinion or certificate shall state that the signer has read the definition of "Independent" in this Indenture and that the signer is Independent within the meaning thereof. "INTEREST RATE" means, with respect to the (i) Class A-1 Notes, the Class A-1 Interest Rate, (ii) Class A-2 Notes, the Class A-2 Interest Rate, (iii) Class A-3 Notes, the Class A-3 Interest Rate, (iv) Class A-4 Notes, the Class A-4 Interest Rate, (v) Class A-5 Notes, the Class A-5 Interest Rate and (vi) Class B Notes, the Class B Interest Rate. "ISSUER" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the Notes. "ISSUER ORDER" and "ISSUER REQUEST" means a written order or request signed in the name of the Issuer by any one of its Authorized Officers and delivered to the Trustee. "NOTE" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note, a Class A-4 Note, a Class A-5 Note or a Class B Note. "NOTE DEPOSITORY AGREEMENT" means the agreement among the Issuer, the Trustee, the Servicer and The Depository Trust Company, as the initial Clearing Agency, dated one Business Day prior to Closing Date, substantially in the form of Exhibit C. "NOTE OWNER" means, with respect to a Book-Entry Note, the person who is the owner of such Book-Entry Note, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings specified in Section 2.4. "OFFICER'S CERTIFICATE" means a certificate signed by any Authorized Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.1 and TIA ss. 314, and delivered to the Trustee. Unless otherwise specified, any reference in this Indenture to an Officer's Certificate shall be to an Officer's Certificate of any Authorized Officer of the Issuer. "OPINION OF COUNSEL" means one or more written opinions of counsel who may, except as otherwise expressly provided in this Indenture, be employees of or counsel to the Issuer and who shall be satisfactory to the Trustee, and which opinion or opinions shall be addressed to the Trustee as Trustee, shall comply with any applicable requirements of Section 11.1, and shall be in form and substance satisfactory to the Trustee. "OUTSTANDING" means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture except: (i) Notes theretofore canceled by the Note Registrar or delivered to the Note Registrar for cancellation; (ii) Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Notes (provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor, satisfactory to the Trustee); and (iii) Notes in exchange for or in lieu of other Notes which have been authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Trustee is presented that any such Notes are held by a bona fide purchaser; PROVIDED that in determining whether the Holders of the requisite Outstanding Amount of the Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Basic Document, Notes owned by the Issuer, any other obligor upon the Notes, the Depositor or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Trustee either actually knows to be so owned or has received written notice thereof shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, the Depositor or any Affiliate of any of the foregoing Persons. "OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes, or class of Notes, as applicable, Outstanding at the date of determination. "PAYING AGENT" means the Trustee or any other Person that meets the eligibility standards for the Trustee specified in Section 6.11 and is authorized by the Issuer to make the payments to and distributions from the Collection Account and the Note Distribution Account, including payment of principal of or interest on the Notes on behalf of the Issuer. "PAYMENT DATE" means a Distribution Date. "PREDECESSOR NOTE" means, with respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 2.5 in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "PROCEEDING" means any suit in equity, action at law or other judicial or administrative proceeding. "RECORD DATE" means, with respect to a Distribution Date or Redemption Date the day immediately preceding the related Distribution Date or Redemption Date or, in the event Definitive Securities have been issued, the last day of the month immediately preceding the month in which such Distribution Date occurs. "REDEMPTION DATE" means (a) in the case of a redemption of the Notes pursuant to Section 10.1(a) or a payment to Noteholders pursuant to Section 10.1(b), the Distribution Date specified by the Servicer or the Issuer pursuant to Section 10.1(a) or (b) as applicable. "REDEMPTION PRICE" means (a) in the case of a redemption of the Notes pursuant to Section 10.1(a), an amount equal to the unpaid principal amount of the then outstanding Notes plus accrued and unpaid interest thereon to but excluding the Redemption Date, or (b) in the case of a payment made to Noteholders pursuant to Section 10.1(b), the amount on deposit in the Note Distribution Account, but not in excess of the amount specified in clause (a) above. "RESPONSIBLE OFFICER" means, with respect to the Trustee, any officer within the Corporate Trust Office of the Trustee, including any Vice President, Assistant Vice President, Assistant Treasurer, Assistant Secretary, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement dated as of [____________________], among the Issuer, the Depositor, the Sponsor and the Servicer, substantially in the form of Exhibit B as the same may be amended or supplemented from time to time. "SCHEDULE OF RECEIVABLES" means the listing of the Receivables set forth in Exhibit A (which Exhibit may be in the form of microfiche). "STATE" means any one of the 50 states of the United States of America or the District of Columbia. "SUCCESSOR SERVICER" has the meaning specified in Section 3.7(e). "TRUST ESTATE" means all money, instruments, rights and other property that are subject or intended to be subject to the lien and security interest of this Indenture for the benefit of the Noteholders (including all property and interests Granted to the Trustee), including all proceeds thereof. "TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939 as in force on the date hereof, unless otherwise specifically provided. "TRUSTEE" means [____________________], a national banking association, not in its individual capacity but as trustee under this Indenture, or any successor trustee under this Indenture. "UCC" means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time. (a) Except as otherwise specified herein, the following terms have the respective meanings set forth in the Sale and Servicing Agreement as in effect on the Closing Date for all purposes of this Indenture, and the definitions of such terms are equally applicable both to the singular and plural forms of such terms: SECTION OF SALE AND TERM SERVICING AGREEMENT Certificateholders......................................... Section 1.1 Closing Date .............................................. Section 1.1 Collection Account......................................... Section 1.1 Collection Period.......................................... Section 1.1 Contract................................................... Section 1.1 Depositor.................................................. Section 1.1 Depository Agreement....................................... Section 1.1 Distribution Date.......................................... Section 1.1 Eligible Deposit Account................................... Section 1.1 Eligible Investments....................................... Section 1.1 Final Scheduled Distribution Date.......................... Section 1.1 Final Scheduled Maturity Date.............................. Section 1.1 Financed Vehicle........................................... Section 1.1 Initial Pool Balance....................................... Section 1.1 Note Distribution Account.................................. Section 1.1 Noteholders' Distributable Amount.......................... Section 1.1 Noteholders' Percentage.................................... Section 1.1 Obligor.................................................... Section 1.1 Owner Trustee.............................................. Section 1.1 Person..................................................... Section 1.1 Pool Balance............................................... Section 1.1 Purchased Receivable....................................... Section 1.1 Rating Agency ............................................. Section 1.1 Rating Agency Condition.................................... Section 1.1 Receivable................................................. Section 1.1 Reserve Account............................................ Section 1.1 Servicer................................................... Section 1.1 Servicer Default........................................... Section 1.1 Specified Reserve Account Balance.......................... Section 1.1 Total Distribution Amount ................................. Section 1.1 Trust Accounts............................................. Section 1.1 Trust Agreement............................................ Section 1.1 (b) Capitalized terms used herein and not otherwise defined herein or in the Sale and Servicing Agreement have the meanings assigned to them in the Trust Agreement. SECTION 1.2 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the Securities and Exchange Commission. "indenture securities" means the Notes. "indenture security holder" means a Noteholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Issuer and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule have the meaning assigned to them by such definitions. SECTION 1.3 RULES OF CONSTRUCTION. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; (iii) "or" is not exclusive; (iv) "including" means including without limitation; and (v) words in the singular include the plural and words in the plural include the singular. ARTICLE II THE NOTES SECTION 2.1 FORM. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes and the Class B Notes, in each case together with the Trustee's certificate of authentication, shall be in substantially the forms set forth in Exhibits D, E, F, G, H and I, respectively, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. The Definitive Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibit D, E, F, G, H or I are part of the terms of this Indenture. SECTION 2.2 EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be executed on behalf of the Issuer by any of its Authorized Officers. The signature of any such Authorized Officer on the Notes may be manual or facsimile. Notes bearing the manual or facsimile signature of individuals who were at any time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. The Trustee shall upon Issuer Order authenticate and deliver Class A-1 Notes for original issue in an aggregate principal amount of $[____________], Class A-2 Notes for original issue in the aggregate principal amount of $[____________], Class A-3 Notes for original issue in the aggregate principal amount of $[____________], Class A-4 Notes for original issue in the aggregate principal amount of $[____________], Class A-5 Notes for original issue in the aggregate principal amount of $[____________] and Class B Notes for original issue in the aggregate principal amount of $[____________]. The aggregate principal amount of Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class A-5 Notes and Class B Notes outstanding at any time may not exceed such amounts except as provided in Section 2.5. Each Note shall be dated the date of its authentication. The Class A Notes shall be issuable as registered Notes in the minimum denomination of $1,000 and in integral multiples of $1,000 in excess thereof, the Class B Notes shall be issuable as registered Notes in the minimum denomination of $25,000 and in integral multiples of $1,000 in excess thereof (except for one Note of each class which may be issued in a denomination other than an integral multiple of $1,000). No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. SECTION 2.3 TEMPORARY NOTES. Pending the preparation of Definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order the Trustee shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the Definitive Notes in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture as the officers executing such Notes may determine, as evidenced by their execution of such Notes. If temporary Notes are issued, the Issuer will cause Definitive Notes to be prepared without unreasonable delay. After the preparation of Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer to be maintained as provided in Section 3.2, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Issuer shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of Definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as Definitive Notes. SECTION 2.4 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The Issuer shall cause to be kept a register (the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Notes and the registration of transfers of Notes. The Trustee shall be "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. The Note Registrar may resign as such only upon written notice delivered to an Authorized Officer of the Issuer, and upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Note Registrar. If a Person other than the Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Trustee prompt written notice of the appointment of such Note Registrar and of the location, and, upon one of its Authorized Officers receiving written notice thereof, any change in the location, of the Note Register, and the Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by an Executive Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and number of such Notes. Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 3.2, if the requirements of Section 8-401(1) of the UCC are met the Issuer shall execute and upon its request the Trustee shall authenticate and the Noteholder shall obtain from the Trustee, in the name of the designated transferee or transferees, one or more new Notes, in any authorized denominations, of the same class and a like aggregate principal amount. At the option of the Holder, Notes may be exchanged for other Notes in any authorized denominations, of the same class and a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, if the requirements of Section 8-401(1) of the UCC are met the Issuer shall execute and upon its request the Trustee shall authenticate and the Noteholder shall obtain from the Trustee, the Notes which the Noteholder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or exchange shall be (i) duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar which requirements include membership or participation in Securities Transfer Agents Medallion Program ("Stamp") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, Stamp, all in accordance with the Exchange Act, and (ii) accompanied by such other documents as the Trustee may require. No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.3 or 9.6 not involving any transfer. The preceding provisions of this section notwithstanding, the Issuer shall not be required to make and the Note Registrar need not register transfers or exchanges of Notes selected for redemption or of any Note for a period of 15 days preceding the due date for any payment with respect to the Note. SECTION 2.5 MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any mutilated Note is surrendered to the Trustee, or the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Trustee such security or indemnity as may be required by it to hold the Issuer and the Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Trustee that such Note has been acquired by a bona fide purchaser, and provided that the requirements of Section 8-405 of the UCC are met, the Issuer shall execute and upon its request the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note; PROVIDED, HOWEVER, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within seven days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date without surrender thereof. If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer and the Trustee shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Trustee in connection therewith. Upon the issuance of any replacement Note under this Section, the Issuer may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Trustee) connected therewith. Every replacement Note issued pursuant to this Section in replacement of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 2.6 PERSONS DEEMED OWNER. Prior to due presentment for registration of transfer of any Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name any Note is registered (as of the day of determination) as the owner of such Note for the purpose of receiving payments of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and neither the Issuer, the Trustee nor any agent of the Issuer or the Trustee shall be affected by notice to the contrary. SECTION 2.7 PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST. (a) The Notes shall accrue interest as provided in the forms of the Class A-1 Note, the Class A-2 Note, the Class A-3 Note, the Class A-4 Note, the Class A-5 Note and the Class B Note, set forth in Exhibits D, E, F, G, H and I, respectively, and such interest shall be payable on each Distribution Date as specified therein. Any installment of interest or principal, if any, payable on any Note which is punctually paid or duly provided for by the Issuer on the applicable Distribution Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered on the Record Date, by check mailed first-class, postage prepaid, to such Person's address as it appears on the Note Register on such Record Date, except that, unless Definitive Notes have been issued pursuant to Section 2.12, with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payment will be made by wire transfer in immediately available funds to the account designated by such nominee and except for the final installment of principal payable with respect to such Note on a Distribution Date or on the Final Scheduled Distribution Date (and except for the Redemption Price for any Note called for redemption pursuant to Section 10.1(a)) which shall be payable as provided below. The funds represented by any such checks returned undelivered shall be held in accordance with Section 3.3. (b) The principal of each Note shall be payable in installments on each Distribution Date as provided in the forms of the Class A-1 Note, the Class A-2 Note, the Class A-3 Note, the Class A-4 Note, the Class A-5 Note and the Class B Note, set forth in Exhibits D, E, F, G, H and I, respectively. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, if the Trustee or the Holders of the Class A Notes if Outstanding or the Class B Notes if the Class A Notes are no longer Outstanding Notes representing not less than 66 2/3% of the Outstanding Amount of the Class A Notes if Outstanding or the Class B Notes if the Class A Notes are no longer Outstanding Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.2. All principal payments on each class of the Notes shall be made pro rata to the Noteholders of such class entitled thereto. The Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Distribution Date on which the Issuer expects that the final installment of principal of and interest on such Note will be paid. Such notice shall be mailed or transmitted by facsimile prior to such final Distribution Date and shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for payment of such installment. Notices in connection with redemptions of Notes shall be mailed to Noteholders as provided in Section 10.2. (c) If the Issuer defaults in a payment of interest on the Notes, the Issuer shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) at the Interest Rate in any lawful manner. The Issuer may pay such defaulted interest to the Persons who are Noteholders on a subsequent special record date, which date shall be at least five Business Days prior to the payment date. The Issuer shall fix or cause to be fixed any such special record date and payment date, and, at least 15 days before any such special record date, the Issuer shall mail to each Noteholder and the Trustee a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.8 CANCELLATION. All Notes surrendered for payment, registration of transfer, exchange or redemption shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by the Trustee. The Issuer may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly canceled by the Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Notes may be held or disposed of by the Trustee in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Order that they be returned to it; PROVIDED that such Issuer Order is timely and the Notes have not been previously disposed of by the Trustee. SECTION 2.9 RELEASE OF COLLATERAL. Subject to Section 11.1, the Trustee shall release property from the lien of this Indenture only upon receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel and Independent Certificates in accordance with TIA ss. 314(c) and 314(d)(l) or an Opinion of Counsel in lieu of such Independent Certificates to the effect that the TIA does not require any such Independent Certificates. SECTION 2.10 BOOK-ENTRY NOTES. The Notes, upon original issuance, will be issued in the form of typewritten Notes representing the Book-Entry Notes, to be delivered to [ ] as agent for The Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the Issuer. Such Notes shall initially be registered on the Note Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Note Owner will receive a Definitive Note representing such Note Owner's interest in such Note, except as provided in Section 2.12. Unless and until definitive, fully registered Notes (the "Definitive Notes") have been issued to Note Owners pursuant to Section 2.12: (i) the provisions of this Section shall be in full force and effect; (ii) the Note Registrar and the Trustee shall be entitled to deal with the Clearing Agency for all purposes of this Indenture (including the payment of principal of and interest on the Notes and the giving of instructions or directions hereunder) as the sole Holder of the Notes, and shall have no obligation to the Note Owners; (iii) to the extent that the provisions of this Section conflict with any other provisions of this Indenture, the provisions of this Section shall control; (iv) the rights of Note Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Note Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Note Depository Agreement, unless and until Definitive Notes are issued pursuant to Section 2.12, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments of principal of and interest on the Notes to such Clearing Agency Participants; and (v) whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Holders of Notes evidencing a specified percentage of the Outstanding Amount of the Notes, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Note Owners and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Notes and has delivered such instructions to the Trustee. SECTION 2.11 NOTICES TO CLEARING AGENCY. Whenever a notice or other communication to the Noteholders is required under this Indenture, unless and until Definitive Notes shall have been issued to Note Owners pursuant to Section 2.12, the Trustee shall give all such notices and communications specified herein to be given to Holders of the Notes to the Clearing Agency, and shall have no obligation to the Note Owners. SECTION 2.12 DEFINITIVE NOTES. If (i) the Servicer advises the Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Notes, and the Servicer is unable to locate a qualified successor, (ii) the Servicer at its option advises the Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (iii) after the occurrence of an Event of Default, Note Owners representing beneficial interests aggregating at least a majority of the Outstanding Amount of the Notes advise the Trustee through the Clearing Agency in writing that the continuation of a book entry system through the Clearing Agency is no longer in the best interests of the Note Owners, then the Clearing Agency shall notify all Note Owners and the Trustee of the occurrence of any such event and of the availability of Definitive Notes to Note Owners requesting the same. Upon surrender to the Trustee of the typewritten Note or Notes representing the Book-Entry Notes by the Clearing Agency, accompanied by registration instructions, the Issuer shall execute and the Trustee shall authenticate the Definitive Notes in accordance with the instructions of the Clearing Agency. None of the Issuer, the Note Registrar or the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Notes, the Trustee shall recognize the Holders of the Definitive Notes as Noteholders. SECTION 2.13 RESERVED. ARTICLE III COVENANTS SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly and punctually pay the principal of and interest on the Notes in accordance with the terms of the Notes and this Indenture. Without limiting the foregoing, subject to Section 8.2(c), the Issuer will cause to be distributed all amounts on deposit in the Note Distribution Account on a Distribution Date deposited therein pursuant to the Sale and Servicing Agreement (i) for the benefit of the Class A-l Notes, to Class A-1 Noteholders, (ii) for the benefit of the Class A-2 Notes, to Class A-2 Noteholders, (iii) for the benefit of the Class A-3 Notes, to Class A-3 Noteholders, (iv) for the benefit of the Class A-4 Notes, to Class A-4 Noteholders, (v) for the benefit of the Class A-5 Notes, to Class A-5 Noteholders and (vi) for the benefit of the Class B Notes, to Class B Noteholders. Amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest and/or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture. SECTION 3.2 MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in the Borough of Manhattan, The City of New York, an office or agency where Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer hereby initially appoints the Trustee to serve as its agent for the foregoing purposes. The Issuer will give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer hereby appoints the Trustee as its agent to receive all such surrenders, notices and demands. SECTION 3.3 MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in Sections 8.2(a) and (b), all payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the Collection Account and the Note Distribution Account pursuant to Section 8.2(c) shall be made on behalf of the Issuer by the Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection Account and the Note Distribution Account for payments of Notes shall be paid over to the Issuer except as provided in this Section. At least one Business Day prior to each Distribution Date and Redemption Date, the Issuer shall deposit or cause to be deposited in the Note Distribution Account an aggregate sum sufficient to pay the amounts then becoming due under the Notes, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless the Paying Agent is the Trustee) shall promptly notify the Trustee of its action or failure so to act. The Issuer will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee (and if the Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section, that such Paying Agent will: (i) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided; (ii) give the Trustee notice of any default by the Issuer of which it has actual knowledge (or any other obligor upon the Notes) in the making of any payment required to be made with respect to the Notes; (iii) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; (iv) immediately resign as a Paying Agent and forthwith pay to the Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent at the time of its appointment; and (v) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such a payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Subject to applicable laws with respect to the escheat of funds, any money held by the Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and be paid to the Issuer on Issuer Request; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Trustee or such Paying Agent with respect to such trust money shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, shall at the expense of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. The Trustee shall also adopt and employ, at the expense of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Holders whose Notes have been called but have not been surrendered for redemption or whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Trustee or of any Paying Agent, at the last address of record for each such Holder). SECTION 3.4 EXISTENCE. Except as otherwise permitted by the provisions of Section 3.10, the Issuer will keep in full effect its existence, rights and franchises as a business trust under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other state or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes, the Collateral and each other instrument or agreement included in the Trust Estate. SECTION 3.5 PROTECTION OF TRUST ESTATE. The Issuer will from time to time prepare (or shall cause to be prepared), execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, and will take such other action necessary or advisable to: (i) maintain or preserve the lien and security interest (and the priority thereof) of this Indenture or carry out more effectively the purposes hereof; (ii) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture; (iii) enforce any of the Collateral; or (iv) preserve and defend title to the Trust Estate and the rights of the Trustee and the Noteholders in such Trust Estate against the claims of all persons and parties. The Issuer hereby designates the Trustee its agent and attorney- in-fact to execute any financing statement, continuation statement or other instrument required to be executed pursuant to this Section; it being understood that the Trustee has no duty to determine whether any filing or recording is necessary hereunder. SECTION 3.6 OPINIONS AS TO TRUST ESTATE. (a) On the Closing Date, the Issuer shall furnish to the Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto, and any other requisite documents, and with respect to the execution and filing of any financing statements and continuation statements, as are necessary to perfect and make effective the lien and security interest of this Indenture and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make such lien and security interest effective. (b) Within 120 days after the beginning of each calendar year, beginning with the first calendar year beginning more than three months after the Cutoff Date, the Issuer shall furnish to the Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements as are necessary to maintain the lien and security interest created by this Indenture and reciting the details of such action or stating that in the opinion of such counsel no such action is necessary to maintain such lien and security interest. Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any financing statements and continuation statements that will, in the opinion of such counsel, be required to maintain the lien and security interest of this Indenture until April 30 in the following calendar year. SECTION 3.7 PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES. (a) The Issuer will not take any action and will use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person's material covenants or obligations under any instrument or agreement included in the Trust Estate or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as ordered by any bankruptcy or other court or as expressly provided in this Indenture, the Basic Documents or such other instrument or agreement. (b) The Issuer may contract with other Persons to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Trustee in an Officer's Certificate of the Issuer shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer to assist the Issuer in performing its duties under this Indenture. (c) The Issuer will punctually perform and observe all of its obligations and agreements contained in this Indenture, the Basic Documents and in the instruments and agreements included in the Trust Estate, including but not limited to preparing (or causing to prepared) and filing (or causing to be filed) all UCC financing statements and continuation statements required to be filed by the terms of this Indenture and the Sale and Servicing Agreement in accordance with and within the time periods provided for herein and therein. Except as otherwise expressly provided therein, the Issuer shall not waive, amend, modify, supplement or terminate any Basic Document or any provision thereof without the consent of the Trustee or the Holders of at least a majority of the Outstanding Amount of the Notes. (d) If the Issuer shall have knowledge of the occurrence of a Servicer Default under the Sale and Servicing Agreement, the Issuer shall promptly notify the Trustee and the Rating Agencies thereof in accordance with Section 11.4, and shall specify in such notice the action, if any, the Issuer is taking in respect of such default. If a Servicer Default of which the Issuer has knowledge shall arise from the failure of the Servicer to perform any of its duties or obligations under the Sale and Servicing Agreement with respect to the Receivables, the Issuer shall take all reasonable steps available to it to remedy such failure. (e) As promptly as possible after the giving of notice of termination to the Servicer of the Servicer's rights and powers pursuant to Section 8.1 of the Sale and Servicing Agreement, the Issuer shall appoint a successor servicer (the "Successor Servicer"), and such Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Trustee. In the event that a Successor Servicer has not been appointed and accepted its appointment at the time when the Servicer ceases to act as Servicer, the Trustee without further action shall automatically be appointed the Successor Servicer in accordance with Section 8.2 of the Sale and Servicing Agreement. The Trustee may resign as the Servicer by giving written notice of such resignation to the Issuer and in such event will be released from such duties and obligations, such release not to be effective until the date a new servicer enters into a servicing agreement with the Issuer as provided below. Upon delivery of any such notice to the Issuer, the Issuer shall obtain a new servicer as the Successor Servicer under the Sale and Servicing Agreement. Any Successor Servicer other than the Trustee shall (i) be an established financial institution having a net worth of not less than $50,000,000 and whose regular business includes the servicing of Contracts and (ii) enter into a servicing agreement with the Issuer having substantially the same provisions as the provisions of the Sale and Servicing Agreement applicable to the Servicer. If within 30 days after the delivery of the notice referred to above, the Issuer shall not have obtained such a new servicer, the Trustee may appoint, or may petition a court of competent jurisdiction to appoint, a Successor Servicer. In connection with any such appointment, the Trustee may make such arrangements for the compensation of such successor as it and such successor shall agree, subject to the limitations set forth below and in the Sale and Servicing Agreement, and in accordance with Section 8.2 of the Sale and Servicing Agreement, the Issuer shall enter into an agreement with such successor for the servicing of the Receivables (such agreement to be in form and substance satisfactory to the Trustee). If the Trustee shall succeed to the Servicer's duties as servicer of the Receivables as provided herein, it shall do so in its individual capacity and not in its capacity as Trustee and, accordingly, the provisions of Article VI hereof shall be inapplicable to the Trustee in its duties as the successor to the Servicer and the servicing of the Receivables. In case the Trustee shall become successor to the Servicer under the Sale and Servicing Agreement, the Trustee shall be entitled to appoint as Servicer any one of its Affiliates, or delegate any of its responsibilities as Servicer to agents, subject to the terms of the Sale and Servicing Agreement, provided that such appointment or delegation shall not affect or alter in any way the liability of the Trustee as a successor for the performance of the duties and obligations of the Servicer in accordance with the terms hereof. (f) Upon an Authorized Officer of the Issuer acquiring actual knowledge of any termination of the Servicer's rights and powers pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify the Trustee. As soon as a Successor Servicer (other than the Trustee) is appointed, the Issuer shall notify the Trustee of such appointment, specifying in such notice the name and address of such Successor Servicer. (g) Without derogating from the absolute nature of the assignment granted to the Trustee under this Indenture or the rights of the Trustee hereunder, the Issuer agrees that, unless such action is specifically permitted hereunder or under the Basic Documents, it will not, without the prior written consent of the Trustee or the Holders of at least a majority in Outstanding Amount of the Notes, amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, supplement, termination, waiver or surrender of, the terms of any Collateral or the Basic Documents, or waive timely performance or observance by the Servicer, the Sponsor or the Depositor under the Sale and Servicing Agreement; PROVIDED, HOWEVER, that no such amendment shall (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, distributions that are required to be made for the benefit of the Noteholders, or (ii) reduce the aforesaid percentage of the Notes which are required to consent to any such amendment, without the consent of the Holders of all the Outstanding Notes. If any such amendment, modification, supplement or waiver shall be so consented to by the Trustee or such Holders, the Issuer agrees, promptly following a request by the Trustee to do so, to execute and deliver, in its own name and at its own expense, such agreements, instruments, consents and other documents as the Trustee may deem necessary or appropriate in the circumstances. SECTION 3.8 NEGATIVE COVENANTS. So long as any Notes are Outstanding, the Issuer shall not: (i) except as expressly permitted by this Indenture or the Basic Documents, sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Trust Estate, unless directed to do so by the Trustee; (ii) claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts properly withheld from such payments under the Code) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon any part of the Trust Estate; or (iii) (A) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien of this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, (B) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the Trust Estate or any part thereof or any interest therein or the proceeds thereof (other than tax liens, mechanics' liens and other liens that arise by operation of law, in each case on a Financed Vehicle and arising solely as a result of an action or omission of the related Obligor) or (C) permit the lien of this Indenture not to constitute a valid first priority (other than with respect to any such tax, mechanics' or other lien) security interest in the Trust Estate. SECTION 3.9 ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver to the Trustee, within 120 days after the end of each fiscal year of the Issuer (commencing with the fiscal year [_____]), and otherwise in compliance with the requirements of TIA Section 314(a)(4) an Officer's Certificate stating, as to the Authorized Officer signing such Officer's Certificate, that (i) a review of the activities of the Issuer during such year and of performance under this Indenture has been made under such Authorized Officer's supervision; and (ii) to the best of such Authorized Officer's knowledge, based on such review, the Issuer has complied with all conditions and covenants under this Indenture throughout such year, or, if there has been a default in the compliance of any such condition or covenant, specifying each such default known to such Authorized Officer and the nature and status thereof. SECTION 3.10 ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS. (a) The Issuer shall not consolidate or merge with or into any other Person, unless (i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States of America or any state and shall expressly assume, by an indenture supplement hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel (and shall have delivered copies thereof to the Trustee) to the effect that such transaction will not have any material adverse tax consequence to the Trust, any Noteholder or any Certificateholder; (v) any action as is necessary to maintain the lien and security interest created by this Indenture shall have been taken; and (vi) the Issuer shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation or merger and such supplemental indenture comply with this Article III and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filing required by the Exchange Act). (b) The Issuer shall not convey or transfer all or substantially all of its properties or assets, including those included in the Trust Estate, to any Person, unless (i) the Person that acquires by conveyance or transfer the properties and assets of the Issuer the conveyance or transfer of which is hereby restricted shall (A) be a United States citizen or a Person organized and existing under the laws of the United States of America or any state, (B) expressly assume, by an indenture supplement hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein, (C) expressly agree by means of such supplemental indenture that all right, title and interest so conveyed or transferred shall be subject and subordinate to the rights of Holders of the Notes, (D) unless otherwise provided in such supplemental indenture, expressly agree to indemnify, defend and hold harmless the Issuer against and from any loss, liability or expense arising under or related to this Indenture and the Notes and (E) expressly agree by means of such supplemental indenture that such Person (or if a group of persons, then one specified Person) shall prepare (or cause to be prepared) and make all filings with the Commission (and any other appropriate Person) required by the Exchange Act in connection with the Notes; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel (and shall have delivered copies thereof to the Trustee) to the effect that such transaction will not have any material adverse tax consequence to the Trust, any Noteholder or any Certificateholder; (v) any action as is necessary to maintain the lien and security interest created by this Indenture shall have been taken; and (vi) the Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that such conveyance or transfer and such supplemental indenture comply with this Article III and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filing required by the Exchange Act). SECTION 3.11 SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or merger of the Issuer in accordance with Section 3.10(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein. (b) Upon a conveyance or transfer of all the assets and properties of the Issuer pursuant to Section 3.10 (b), [____________________] will be released from every covenant and agreement of this Indenture to be observed or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Trustee stating that [____________________] is to be so released. SECTION 3.12 NO OTHER BUSINESS. The Issuer shall not engage in any business other than financing, purchasing, owning, selling and managing the Receivables in the manner contemplated by this Indenture and the Basic Documents and activities incidental thereto. SECTION 3.13 NO BORROWING. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness except for the Notes. SECTION 3.14 SERVICER'S OBLIGATIONS. The Issuer shall cause the Servicer to comply with Sections 4.9, 4.10, 4.11 and 5.8 of the Sale and Servicing Agreement. SECTION 3.15 GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as contemplated by the Sale and Servicing Agreement or this Indenture, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person. SECTION 3.16 CAPITAL EXPENDITURES. The Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty). SECTION 3.17 [Reserved] SECTION 3.18 RESTRICTED PAYMENTS. The Issuer shall not, directly or indirectly, (i) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuer or otherwise with respect to any ownership or equity interest or security in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for any such purpose; PROVIDED, HOWEVER, that the Issuer may make, or cause to be made, distributions to the Servicer, the Owner Trustee, the Trustee and the Certificateholders as permitted by, and to the extent funds are available for such purpose under, the Sale and Servicing Agreement or Trust Agreement. The Issuer will not, directly or indirectly, make payments to or distributions from the Collection Account except in accordance with this Indenture and the Basic Documents. SECTION 3.19 NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to give the Trustee and the Rating Agencies prompt written notice of each Event of Default hereunder and each default on the part of the Servicer or the Depositor of its obligations under the Sale and Servicing Agreement of which an Authorized Officer of the Issuer acquires actual knowledge. SECTION 3.20 FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1 SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall cease to be of further effect with respect to the Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8, 3.10, 3.12 and 3.13, (v) the rights, obligations and immunities of the Trustee hereunder (including the rights of the Trustee under Section 6.7 and the obligations of the Trustee under Section 4.2) and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them, and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when (A) either (1) all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.5 and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 3.3) have been delivered to the Trustee for cancellation; or (2) all Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable, (ii) will become due and payable at the Final Scheduled Distribution Date within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer, and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be irrevocably deposited with the Trustee cash or direct obligations of or obligations guaranteed by the United States of America (which will mature prior to the date such amounts are payable), in trust for such purpose, in an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation when due to the Final Scheduled Distribution Date or Redemption Date (if Notes shall have been called for redemption pursuant to Section 10.1(a)), as the case may be; (B) the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and (C) the Issuer has delivered to the Trustee an Officer's Certificate, an Opinion of Counsel and (if required by the TIA or the Trustee) an Independent Certificate from a firm of certified public accountants, each meeting the applicable requirements of Section 11.1(a) and each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. SECTION 4.2 APPLICATION OF TRUST MONEY. All moneys deposited with the Trustee pursuant to Section 4.1 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Trustee may determine, to the Holders of the particular Notes for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest; but such moneys need not be segregated from other funds except to the extent required herein or in the Sale and Servicing Agreement or required by law. SECTION 4.3 REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all moneys then held by any Paying Agent other than the Trustee under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Trustee to be held and applied according to Section 3.3 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 4.4 NOTICE. Upon the satisfaction and discharge of this Indenture with respect to the Notes, the Trustee shall notify each Rating Agency of such satisfaction and discharge. ARTICLE V REMEDIES SECTION 5.1 EVENTS OF DEFAULT. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) default in the payment of any interest on any Note when the same becomes due and payable, and such default shall continue for a period of five days; or (ii) default in the payment of the principal of or any installment of the principal of any Note when the same becomes due and payable; or (iii) default in the observance or performance of any covenant or agreement of the Issuer made in this Indenture (other than a covenant or agreement, a default in the observance or performance of which is elsewhere in this Section specifically dealt with), or any representation or warranty of the Issuer made in this Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstance or condition in respect of which such misrepresentation or warranty was incorrect shall not have been eliminated or otherwise cured, for a period of 30 days after there shall have been given, by registered or certified mail, to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% of the Outstanding Amount of the Notes, a written notice specifying such default or incorrect representation or warranty and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (iv) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Trust Estate in an involuntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or ordering the winding-up or liquidation of the Issuer's affairs, and such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; or (v) the commencement by the Issuer of a voluntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of action by the Issuer in furtherance of any of the foregoing. The Issuer shall deliver to the Trustee, within five days after the occurrence thereof, written notice in the form of an Officer's Certificate of any event of which an Authorized Officer of the Issuer has acquired actual knowledge which with the giving of notice and the lapse of time would become an Event of Default under clause (iii), its status and what action the Issuer is taking or proposes to take with respect thereto. SECTION 5.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default should occur and be continuing, then and in every such case the Trustee or the Holders of Class A Notes if Class A Notes are Outstanding or Class B Notes, if the Class A Notes are no longer Outstanding representing not less than 66 2/3% of the Outstanding Amount of such Class A Notes or Class B Notes, as applicable, may declare all the Notes to be immediately due and payable, by a notice in writing to the Issuer (and to the Trustee if given by Noteholders), and upon any such declaration the unpaid principal amount of such Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable. At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article V provided, the Holders of Notes representing 66 2/3% of the Outstanding Amount of the Notes, by written notice to the Issuer and the Trustee, may rescind and annul such declaration and its consequences if: (i) the Issuer has paid or deposited with the Trustee a sum sufficient to pay (A) all payments of principal of and interest on all Notes and all other amounts that would then be due hereunder or upon such Notes if the Event of Default giving rise to such acceleration had not occurred; and (B) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel; and (ii) all Events of Default, other than the nonpayment of the principal of the Notes that has become due solely by such acceleration, have been cured or waived as provided in Section 5.12. No such rescission shall affect any subsequent default or impair any right consequent thereto. SECTION 5.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. (a) The Issuer covenants that if (i) default is made in the payment of any interest on any Note when the same becomes due and payable, and such default continues for a period of five days, or (ii) default is made in the payment of the principal of or any installment of the principal of any Note when the same becomes due and payable, the Issuer will, upon demand of the Trustee, pay to it, for the benefit of the Holders of the Notes, the whole amount then due and payable on such Notes for principal and interest, with interest upon the overdue principal, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the rate borne by the Notes and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel. (b) In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Issuer or other obligor upon such Notes and collect in the manner provided by law out of the property of the Issuer or other obligor upon such Notes, wherever situated, the moneys adjudged or decreed to be payable. (c) If an Event of Default occurs and is continuing, the Trustee may, as more particularly provided in Section 5.4, in its discretion, proceed to protect and enforce its rights and the rights of the Noteholders, by such appropriate proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. (d) In case there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Trust Estate, proceedings under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of negligence, bad faith or willful misconduct) and of the Noteholders allowed in such proceedings; (ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of Notes in any election of a trustee, a standby trustee or person performing similar functions in any such proceedings; (iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Trustee on their behalf; and (iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee or the Holders of Notes allowed in any judicial proceedings relative to the Issuer, its creditors and its property; and any trustee, receiver, liquidator, custodian or other similar official in any such proceeding is hereby authorized by each of such Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith. (e) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. (f) All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes or the production thereof in any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit, as provided herein, of the Holders of the Notes. (g) In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Noteholder a party to any such proceedings. SECTION 5.4 REMEDIES; PRIORITIES. (a) If an Event of Default shall have occurred and be continuing, the Trustee may do one or more of the following (subject to Section 5.5): (i) institute proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and any other obligor upon such Notes moneys adjudged due; (ii) institute proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Trust Estate; (iii) exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Trustee and the Holders of the Notes; and (iv) sell the Trust Estate or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law; PROVIDED, HOWEVER, that the Trustee may not sell or other-wise liquidate the Trust Estate following an Event of Default, other than an Event of Default described in Section 5.1(i) or (ii), unless (A) the Holders of 100% of the Outstanding Amount of the Notes consent thereto, (B) the proceeds of such sale or liquidation distributable to the Noteholders are sufficient to discharge in full all amounts then due and unpaid upon such Notes for principal and interest or (C) the Trustee determines that the Trust Estate will not continue to provide sufficient funds for the payment of principal of and interest on the Notes as they would have become due if the Notes had not been declared due and payable, and the Trustee obtains the consent of Holders of 66-2/3% of the Outstanding Amount of the Notes. In determining such sufficiency or insufficiency with respect to clause (B) and (C), the Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. (b) If the Trustee collects any money or property pursuant to this Article V, it shall pay out such money or property (and other amounts including amounts held on deposit in the Reserve Account) held as Collateral for the benefit of the Noteholders in the following order: FIRST: to the Trustee for amounts due under Section 6.7; SECOND: to Class A Noteholders for amounts due and unpaid on the Class A Notes for interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Class A Notes for interest; THIRD: to Class A Noteholders for amounts due and unpaid on the Class A Notes for principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal until the Outstanding Amount of each class of Class A Notes is reduced to zero; FOURTH: to Class B Noteholders for amounts due and unpaid on the Class B Notes for interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Class B Notes for interest; FIFTH: to Class B Noteholders for amounts due and unpaid on the Class B Notes for principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal until the Outstanding Amount of the Class B Notes is reduced to zero; SIXTH: to the Issuer for distribution to the Certificateholders. The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section. At least 15 days before such record date, the Issuer shall mail to each Noteholder and the Trustee a notice that states the record date, the payment date and the amount to be paid. SECTION 5.5 OPTIONAL PRESERVATION OF THE RECEIVABLES. If the Notes have been declared to be due and payable under Section 5.2 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Trustee may, but need not, elect to maintain possession of the Trust Estate. It is the desire of the parties hereto and the Noteholders that there be at all times sufficient funds for the payment of principal of and interest on the Notes, and the Trustee shall take such desire into account when determining whether or not to maintain possession of the Trust Estate. In determining whether to maintain possession of the Trust Estate, the Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. SECTION 5.6 LIMITATION OF SUITS. No Holder of any Note shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (i) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (ii) the Holders of not less than 25% of the Outstanding Amount of the Notes have made written request to the Trustee to institute such proceeding in respect of such Event of Default in its own name as Trustee hereunder; (iii) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such request; (iv) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such proceedings; and (v) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority of the Outstanding Amount of the Notes; it being understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided. In the event the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes, each representing less than a majority of the Outstanding Amount of the Notes, the Trustee in its sole discretion may determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture. SECTION 5.7 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Notwithstanding any other provisions in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest, if any, on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture (or, in the case of redemption, on or after the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. SECTION 5.8 RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Noteholder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Trustee or to such Noteholder, then and in every such case the Issuer, the Trustee and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Noteholders shall continue as though no such proceeding had been instituted. SECTION 5.9 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.10 DELAY OR OMISSION NOT A WAIVER. No delay or omission of the Trustee or any Holder of any Note to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Noteholders, as the case may be. SECTION 5.11 CONTROL BY NOTEHOLDERS. The Holders of a majority of the Outstanding Amount of the Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Notes or exercising any trust or power conferred on the Trustee; PROVIDED that (i) such direction shall not be in conflict with any rule of law or with this Indenture; (ii) subject to the express terms of Section 5.4, any direction to the Trustee to sell or liquidate the Trust Estate shall be by the Holders of Notes representing not less than 100% of the Outstanding Amount of the Notes; (iii) if the conditions set forth in Section 5.5 have been satisfied and the Trustee elects to retain the Trust Estate pursuant to such Section, then any direction to the trustee by Holders of Notes representing less than 100% of the Outstanding Amount of the Notes to sell or liquidate the Trust Estate shall be of no force and effect; and (iv) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction; PROVIDED, HOWEVER, that, subject to Section 6.1, the Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Noteholders not consenting to such action. SECTION 5.12 WAIVER OF PAST DEFAULTS. Prior to the declaration of the acceleration of the maturity of the Notes as provided in Section 5.2, the Holders of Class A Notes, if any Class A Notes are outstanding or Class B Notes if the Class A Notes are no longer outstanding of not less than 66 2/3% of the Outstanding Amount of the Class A Notes or Class B Notes, as applicable may waive any past Default or Event of Default and its consequences except a Default (a) in payment of principal of or interest on any of the Notes or (b) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Note. In the case of any such waiver, the Issuer, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 5.13 UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to (a) any suit instituted by the Trustee, (b) any suit instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of the Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date). SECTION 5.14 WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 5.15 ACTION ON NOTES. The Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Trust Estate or upon any of the assets of the Issuer. SECTION 5.16 PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a) Promptly following a written request from the Trustee to do so and at the Servicer's expense, the Issuer agrees to take all such lawful action as the Trustee may request to compel or secure the performance and observance by the Depositor, the Sponsor and the Servicer, as applicable, of each of their obligations to the Issuer under or in connection with the Sale and Servicing Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Sale and Servicing Agreement to the extent and in the manner directed by the Trustee, including the transmission of notices of default on the part of the Depositor or the Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Depositor or the Servicer of each of their obligations under the Sale and Servicing Agreement. (b) If an Event of Default has occurred and is continuing, the Trustee may, and, at the direction (which direction shall be in writing or by telephone (confirmed in writing promptly thereafter)) of the Holders of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Depositor or the Servicer under or in connection with the Sale and Servicing Agreement, including the right or power to take any action to compel or secure performance or observance by the Depositor or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale and Servicing Agreement, and any right of the Issuer to take such action shall be suspended. ARTICLE VI THE TRUSTEE SECTION 6.1 DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; however, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.11. (d) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. (e) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture or the Sale and Servicing Agreement. (f) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 6.2 RIGHTS OF TRUSTEE. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officer's Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officer's Certificate or Opinion of Counsel. (c) 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 or a custodian or nominee, and the Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute willful misconduct, negligence or bad faith. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 6.3 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 6.11 and 6.12. SECTION 6.4 TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in the Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee's certificate of authentication. SECTION 6.5 NOTICE OF DEFAULTS; NOTICE OF EVENT OF DEFAULT. (a) If a Default occurs and is continuing and if it is either actually known or written notice of the existence thereof has been delivered to a Responsible Officer of the Trustee, the Trustee shall mail to each Noteholder and the Owner Trustee notice of the Default within 90 days after such knowledge or notice occurs. Except in the case of a Default in payment of principal of or interest on any Note (including payments pursuant to the mandatory redemption provisions of such Note), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Noteholders. (b) Within 5 Business Days of an Event of Default, the Trustee shall deliver notice thereof to the Rating Agencies. SECTION 6.6 REPORTS BY TRUSTEE TO HOLDERS. The Trustee shall deliver to each Noteholder such information as may be reasonably required to enable such Holder to prepare its Federal and state income tax returns. SECTION 6.7 COMPENSATION AND INDEMNITY. The Issuer shall or shall cause the Servicer to pay to the Trustee from time to time compensation for its services in accordance with a separate agreement between the Servicer and the Trustee. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall or shall cause the Servicer to reimburse the Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Issuer shall or shall cause the Servicer to indemnify the Trustee and its officers, directors, employees and agents against any and all loss, liability or expense (including attorneys' fees and expenses) incurred by it in connection with the acceptance or the administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Issuer and the Servicer promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuer and the Servicer shall not relieve the Issuer of its obligations hereunder or the Servicer of its obligations under Article X of the Sale and Servicing Agreement. The Issuer shall or shall cause the Servicer to defend the claim and the Trustee may have separate counsel and the Issuer shall or shall cause the Servicer to pay the fees and expenses of such counsel. Neither the Issuer nor the Servicer need reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own willful misconduct, negligence or bad faith. The Issuer's payment obligations to the Trustee pursuant to this Section shall survive the discharge of this Indenture and the resignation or removal of the Trustee subject to a satisfaction of the Rating Agency Condition. When the Trustee incurs expenses after the occurrence of a Default specified in Section 5.1(iv) or (v) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or similar law. SECTION 6.8 REPLACEMENT OF TRUSTEE. The Trustee may resign at any time by so notifying the Issuer. The Holders of a majority in Outstanding Amount of the Notes may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Issuer shall remove the Trustee if: (i) the Trustee fails to comply with Section 6.11; (ii) the Trustee is adjudged a bankrupt or insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuer shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture subject to satisfaction of the Rating Agency Condition. The successor Trustee shall mail a notice of its succession to Noteholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 6.11, any Noteholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Trustee pursuant to Section 6.8 and payment of all fees and expenses owed to the outgoing Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Issuer's and the Servicer's obligations under Section 6.7 shall continue for the benefit of the retiring Trustee. SECTION 6.9 SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. The Trustee shall provide the Rating Agencies with prior written notice of any such transaction. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have. SECTION 6.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Trust may at the time be located, the Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Trust, or any part hereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.11 and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 6.8 hereof. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder, including acts or omissions of predecessor or successor trustees; and (iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee. (d) Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect 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 invest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 6.11 ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and it shall have a long term debt rating of BBB- by Standard & Poor's and Baa3 by Moody's or better by the Rating Agencies. The Trustee shall comply with TIA ss. 310 (b), including the optional provision permitted by the second sentence of TIA ss. 310(b)(9); PROVIDED, HOWEVER, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures undeR which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. SECTION 6.12 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS SECTION 7.1 ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Trustee (a) not more than five days after the earlier of (i) each Record Date and (ii) three months after the last Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Record Date, (b) at such other times as the Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 10 days prior to the time such list is furnished; PROVIDED, HOWEVER, that so long as the Trustee is the Note Registrar, no such list shall be required to be furnished. SECTION 7.2 PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Note Registrar. The Trustee may destroy any list furnished to it as provided in such Section 7.1 upon receipt of a new list so furnished. (b) Noteholders may communicate pursuant to TIA ss. 312(b) with other Noteholders with respect to their rights under this Indenture or under the Notes. (c) The Issuer, the Trustee and the Note Registrar shall have the protection of TIA ss. 312(c). SECTION 7.3 REPORTS BY ISSUER. (a) The Issuer shall: (i) file with the Trustee, within 15 days after the Issuer is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Issuer may be required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act; (ii) file with the Trustee and the Commission in accordance with rules and regulations prescribed from time to time by the Commission such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (iii) supply to the Trustee (and the Trustee shall transmit by mail to all Noteholders described in TIA ss. 313(c)) such summaries of any information, documents and reports required to be filed by the Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) as may be required by rules and regulations prescribed from time to time by the Commission. (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year. SECTION 7.4 REPORTS BY TRUSTEE. If required by TIA ss. 313(a), within 60 days after each September 1, beginning with September 1, [_____], the Trustee shall mail to each Noteholder as required by TIA ss. 313(c) a brief report dated as of such date that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b). A copy of each report at the time of its mailing to Noteholders shall be filed by the Trustee with the Commission, if required by the Exchange Act, and each stock exchange, if any, on which the Notes are listed. The Issuer shall notify the Trustee if and when the Notes are listed on any stock exchange. ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.1 COLLECTION OF MONEY. Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Trustee pursuant to this Indenture. The Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Trust Estate, the Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V. SECTION 8.2 TRUST ACCOUNTS. (a) On or prior to the Closing Date, the Issuer shall cause the Servicer to establish and maintain, in the name of the Trustee, for the benefit of the Noteholders and the Certificateholders, the Trust Accounts as provided in Section 5.1 of the Sale and Servicing Agreement. (b) On or before each Distribution Date, the Total Distribution Amount with respect to the preceding Collection Period will be deposited in the Collection Account as provided in Section 5.2 of the Sale and Servicing Agreement. On or before each Distribution Date, the Class A Noteholders' Distributable Amount and the Class B Noteholders' Distributable Amount with respect to the preceding Collection Period will be transferred from the Collection Account and/or the Reserve Account to the Note Distribution Account as provided in Sections 5.5 and 5.6 of the Sale and Servicing Agreement. (c) On each Distribution Date and Redemption Date, the Trustee shall distribute all amounts on deposit in the Note Distribution Account to Noteholders in respect of the Notes to the extent of amounts due and unpaid on the Notes for principal and interest in the following amounts and in the following order of priority (except as otherwise provided in Section 5.4(b)): (i) accrued and unpaid interest on the Class A Notes; PROVIDED that if there are not sufficient funds in the Note Distribution Account to pay the entire amount of accrued and unpaid interest then due on the Class A Notes, the amount in the Note Distribution Account shall be applied to the payment of such interest on the Class A Notes pro rata on the basis of the total such interest due on the Class A Notes; (ii) accrued and unpaid interest on the Class B Notes; PROVIDED that if there are not sufficient funds in the Note Distribution Account to pay the entire amount of accrued and unpaid interest then due on the Class B Notes after the distribution pursuant to clause (i) above, the amount in the Note Distribution Account shall be applied to the payment of such interest on the Class B Notes pro rata on the basis of the total such interest due on the Class B Notes; (iii) to the Holders of the Class A-1 Notes until the Outstanding Amount of the Class A-1 Notes is reduced to zero; (iv) to the Holders of the Class A-2 Notes until the Outstanding Amount of the Class A-2 Notes is reduced to zero; (v) to the Holders of the Class A-3 Notes until the Outstanding Amount of the Class A-3 Notes is reduced to zero; (vi) to the Holders of the Class A-4 Notes until the Outstanding Amount of the Class A-4 Notes is reduced to zero; (vi) to the Holders of the Class A-5 Notes until the Outstanding Amount of the Class A-5 Notes is reduced to zero; and (vii) to the Holders of the Class B Notes until the Outstanding Amount of the Class B Notes is reduced to zero Notwithstanding the foregoing, if an Event of Default exists, no amounts shall be paid to Class B Noteholders until the accrued and unpaid interest on the Class A Notes and Outstanding Amount of each class of Class A Notes has been reduced to zero. SECTION 8.3 GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no Default or Event of Default shall have occurred and be continuing, all or a portion of the funds in the Trust Accounts shall be invested in Eligible Investments and reinvested by the Trustee upon Issuer Order, subject to the provisions of Section 5.1(b) of the Sale and Servicing Agreement. All income or other gain from investments of moneys deposited in the Trust Accounts (other than the Payahead Account) shall be deposited (or caused to be deposited) by the Trustee in the Collection Account, and any loss resulting from such investments shall be charged to such account. All income or other gain from investments of monies deposited in the Payahead Account shall be released by the Trustee to the Depositor, net of any loss resulting from such investments charged to the Payahead Account. The Issuer will not direct the Trustee to make any investment of any funds or to sell any investment held in any of the Trust Accounts unless the security interest Granted and perfected in such account will continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Trustee to make any such investment or sale, if requested by the Trustee, the Issuer shall deliver to the Trustee an Opinion of Counsel, acceptable to the Trustee, to such effect. (b) [Reserved] (c) Subject to Section 6.1(c), the Trustee shall not in any way be held liable by reason of any insufficiency in any of the Trust Accounts resulting from any loss on any Eligible Investment included therein except for losses attributable to the Trustee's failure to make payments on such Eligible Investments issued by the Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms. (d) If (i) the Issuer shall have failed to give investment directions for any funds on deposit in the Trust Accounts to the Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by the Issuer and Trustee) on any Business Day; or (ii) a Default or Event of Default shall have occurred and be continuing with respect to the Notes but the Notes shall not have been declared due and payable pursuant to Section 5.2, or, (iii) if such Notes shall have been declared due and payable following an Event of Default but amounts collected or receivable from the Trust Estate are being applied in accordance with Section 5.5 as if there had not been such a declaration; then the Trustee shall, to the fullest extent practicable, invest and reinvest funds in the Trust Accounts in one or more investments under clause (a) of the definition of Eligible Investments. SECTION 8.4 RELEASE OF TRUST ESTATE. (a) Subject to Article VI hereunder, the Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the lien of this Indenture, or convey the Trustee's interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Trustee as provided in this Article VIII shall be bound to ascertain the Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. (b) The Trustee shall, at such time as there are no Notes outstanding and all sums due the Trustee pursuant to Section 6.7 have been paid, release any remaining portion of the Trust Estate that secured the Notes from the lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds then on deposit in the Trust Accounts. The Trustee shall release property from the lien of this Indenture pursuant to this Section 8.4(b) only upon receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if required by the TIA) Independent Certificates in accordance with TIA ss. 314(c) and 314(d)(1) meeting the applicable requirements of Section 11.1. SECTION 8.5 OPINION OF COUNSEL. The Trustee shall receive at least seven days' notice when requested by the Issuer to take any action pursuant to Section 8.4(a), accompanied by copies of any instruments involved, and the Trustee shall also require as a condition to such action, an Opinion of Counsel, in form and substance satisfactory to the Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the security for the Notes or the rights of the Noteholders in contravention of the provisions of this Indenture; PROVIDED, HOWEVER, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the Trust Estate. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Trustee in connection with any such action. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. (a) Without the consent of the Holders of any Notes but with prior notice to the Rating Agencies by the Issuer, as evidenced to the Trustee, the Issuer and the Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof), in form satisfactory to the Trustee, for any of the following purposes: (i) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject to the lien of this Indenture additional property; (ii) to evidence the succession, in compliance with the applicable provisions hereof, of another person to the Issuer, and the assumption by any such successor of the covenants of the Issuer contained herein and in the Notes; (iii) to add to the covenants of the Issuer, for the benefit of the Holders of the Notes, or to surrender any right or power herein conferred upon the Issuer; (iv) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee; (v) to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture which may be inconsistent with any other provision herein or in any supplemental indenture or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; PROVIDED that such action shall not adversely affect the interests of the Holders of the Notes; (vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI; or (vii) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar federal statute hereafter enacted and to add to this Indenture such other provisions as may be expressly required by the TIA. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained. (b) The Issuer and the Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Notes but with prior notice to the Rating Agencies by the Issuer, as evidenced to the Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Noteholder; PROVIDED, FURTHER, that any amendment within the scope of Section 9.2 (i)-(vii) shall be deemed to materially and adversely affect the interests of the Noteholders, as evidenced by an Officer's Certificate of the Servicer delivered to the Trustee. SECTION 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agencies and with the consent of the Holders of not less than a majority of the outstanding Amount of the Notes, of all classes of Notes that would be adversely affected thereby or the related class or classes that would be adversely affected thereby, by Act of such Holders delivered to the Issuer and the Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (i) change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the interest rate thereon or the Redemption Price with respect thereto, change the provision of this Indenture relating to the application of collections on, or the proceeds of the sale of, the Trust Estate to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article V, to the payment of any such amount due on the Notes on or after the respective due dates thereof (or, in the case of redemption, on or after the Redemption Date); (ii) reduce the percentage of the Outstanding Amount of the Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; (iii) modify or alter the provisions of the proviso to the definition of the term "Outstanding"; (iv) reduce the percentage of the Outstanding Amount of the Notes required to direct the Trustee to direct the Issuer to sell or liquidate the Trust Estate pursuant to Section 5.4; (v) modify any provision of this Section except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the Basic Documents cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby; (vi) modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Distribution Date (including the calculation of any of the individual components of such calculation) or to affect the rights of the Holders of Notes to the benefit of any provisions for the mandatory redemption of the Notes contained herein; or (vii) permit the creation of any lien ranking prior to or on a parity with the lien of this Indenture with respect to any part of the Trust Estate or, except as otherwise permitted or contemplated herein or in the Basic Documents, terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security provided by the lien of this Indenture. The Trustee may determine whether or not any Notes would be affected by any supplemental indenture and any such determination shall be conclusive upon the Holders of all Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Trustee shall not be liable for any such determination made in good faith. It shall not be necessary for any Act of Noteholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to this Section, the Trustee shall mail to the Holders of the Notes to which such amendment or supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. The Trustee shall provide copies of each such supplemental indenture to each of the Rating Agencies. SECTION 9.4 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Trustee, the Issuer and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.5 CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article IX shall conform to the requirements of the Trust Indenture Act as then in effect so long as this Indenture shall then be qualified under the Trust Indenture Act. SECTION 9.6 REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Issuer or the Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Notes. ARTICLE X REDEMPTION OF NOTES SECTION 10.1 REDEMPTION. (a) The Notes are subject to redemption in whole, but not in part, (i) at the direction of the Depositor pursuant to Section 9.1(a) of the Sale and Servicing Agreement, on any Distribution Date on which the Depositor exercises its option to purchase the Trust Estate pursuant to said Section 9.1(a) and (ii) upon the mandatory sale of the Receivables pursuant to Section 9.2 of the Sale and Servicing Agreement. The purchase price for the Notes shall be equal to the Redemption Price; PROVIDED, HOWEVER, that the Issuer has available funds sufficient to pay the Redemption Price. The Servicer shall furnish the Rating Agencies notice of such redemption. If the Notes are to be redeemed pursuant to this Section 10.1(a) (i) or (ii), the Servicer shall furnish notice to the Trustee not later than 25 days prior to the Redemption Date and the Issuer shall deposit with the Trustee in the Note Distribution Account, on or before the Redemption Date, the Redemption Price of the Notes to be redeemed whereupon all such Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.2 to each Holder of the Notes. (b) In the event that the assets of the Trust are sold pursuant to Section 9.2 of the Trust Agreement, all amounts on deposit in the Note Distribution Account shall be paid to the Noteholders up to the Outstanding Amount of the Notes and all accrued and unpaid interest thereon. If amounts are to be paid to Noteholders pursuant to this Section 10.1(b), the Servicer shall, to the extent practicable, furnish notice of such event to the Trustee not later than 25 days prior to the Redemption Date whereupon all such amounts shall be payable on the Redemption Date. SECTION 10.2 FORM OF REDEMPTION NOTICE. (a) Notice of redemption under Section 10.1(a) shall be given by the Trustee by facsimile or by first-class mail, postage prepaid, transmitted or mailed not less than five days in the case of Section 10.1(a)(i) and Section 10.1(a)(ii) prior to the applicable Redemption Date to each Holder of Notes, as of the close of business on the Record Date preceding the applicable Redemption Date, at such Holder's address appearing in the Note Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) that the Record Date otherwise applicable to such Redemption Date is not applicable and that payments shall be made only upon presentation and surrender of such Notes and the place where such Notes are to be surrendered for payment of the Redemption Price (which shall be the office or agency of the Issuer to be maintained as provided in Section 3.2); and (iv) that interest on the Notes shall cease to accrue on the Redemption Date. Notice of redemption of the Notes shall be given by the Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of any other Note. (b) Prior notice of redemption under Sections 10.1(b) is not required to be given to Noteholders. SECTION 10.3 NOTES PAYABLE ON REDEMPTION DATE. The Notes to be redeemed shall, following notice of redemption as required by Section 10.2 (in the case of redemption pursuant to Section 10.1(a)), on the Redemption Date become due and payable at the Redemption Price and (unless the Issuer shall default in the payment of the Redemption Price) no interest shall accrue on the Redemption Price for any period after the date to which accrued interest is calculated for purposes of calculating the Redemption Price. ARTICLE XI MISCELLANEOUS SECTION 11.1 COMPLIANCE CERTIFICATES AND OPINIONS, ETC.. (a) Upon any application or request by the Issuer to the Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Trustee (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with and (iii) (if required by the TIA) an Independent Certificate from a firm of certified public accountants meeting the applicable requirements of this Section, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such signatory such condition or covenant has been complied with. (b) (i) Prior to the deposit of any Collateral or other property or securities with the Trustee that is to be made the basis for the release of any property or securities subject to the lien of this Indenture, the Issuer shall, in addition to any obligation imposed in Section 11.1(a) or elsewhere in this Indenture, furnish to the Trustee an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited. (ii) Whenever the Issuer is required to furnish to the Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuer shall also deliver to the Trustee an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is 10% or more of the Outstanding Amount of the Notes, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof to the Issuer as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the Outstanding Amount of the Notes. (iii) Other than with respect to the release of any Purchased Receivables or Liquidated Receivables, whenever any property or securities are to be released from the lien of this Indenture, the Issuer shall also furnish to the Trustee an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof. (iv) Whenever the Issuer is required to furnish to the Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (iii) above, the Issuer shall also furnish to the Trustee an Independent Certificate as to the same matters if the fair value of the property or securities and of all other property other than Purchased Receivables and Defaulted Receivables, or securities released from the lien of this Indenture since the commencement of the then current calendar year, as set forth in the certificates required by clause (iii) above and this clause (iv), equals 10% or more of the Outstanding Amount of the Notes, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the then Outstanding Amount of the Notes. (v) Notwithstanding Section 2.9 or any other provision of this Section, the Issuer may (A) collect, liquidate, sell or otherwise dispose of Receivables as and to the extent permitted or required by the Basic Documents and (B) make cash payments out of the Trust Accounts as and to the extent permitted or required by the Basic Documents. SECTION 11.2 FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, the Depositor or the Issuer, stating that the information with respect to such factual matters is in the possession of the Servicer, the Depositor or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture, in connection with any application or certificate or report to the Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Trustee's right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI. SECTION 11.3 ACTS OF NOTEHOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved in any customary manner of the Trustee. (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 11.4 NOTICES, ETC., TO TRUSTEE, ISSUER AND RATING AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to or filed with: (a) The Trustee by any Noteholder or by the Issuer shall be sufficient for every purpose hereunder if personally delivered, delivered by overnight courier or mailed certified mail, return receipt requested and shall be deemed to have been duly given upon receipt to the Trustee at its Corporate Trust Office, or (b) The Issuer by the Trustee or by any Noteholder shall be in writing and sufficient for every purpose hereunder if personally delivered, delivered by overnight courier or mailed certified mail, return receipt requested and shall be deemed to have been duly given upon receipt to the Issuer addressed to: [____________________], in care of the Owner Trustee, Attention: Corporate Trust Administration at the address of the Owner Trustee's Corporate Trust Office set forth in the Trust Agreement or at any other address previously furnished in writing to the Trustee by Issuer. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Trustee. Notices required to be given to the Rating Agencies by the Issuer, the Trustee or the Owner Trustee shall be in writing, personally delivered, delivered by overnight courier or mailed certified mail, return receipt requested to (i) in the case of Moody's, at the following address: Moody's Investors Service, Inc., 99 Church Street, New York, New York 10004, Attention: ABS Monitoring Department and (ii) in the case of S&P, at the following address: Standard & Poor's Ratings Group, 55 Water Street, New York, New York 10041, Attention of Asset Backed Surveillance Department; or as to each of the foregoing, at such other address as shall be designated by written notice to the other parties. SECTION 11.5 NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at his address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner here in provided shall conclusively be presumed to have been duly given. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver. In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute a Default or Event of Default. SECTION 11.6 ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices, provided that such methods are reasonable and consented to by the Trustee (which consent shall not be unreasonably withheld). The Issuer will furnish to the Trustee a copy of each such agreement and the Trustee will cause payments to be made and notices to be given in accordance with such agreements. SECTION 11.7 CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. The provisions of TIA ss. 310 through 317 that impose duties on any person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein. SECTION 11.8 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 11.9 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.10 SEPARABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.11 BENEFITS OF INDENTURE. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, and any other party secured hereunder, and any other person with an Ownership interest in any part of the Trust Estate, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 11.12 LEGAL HOLIDAYS. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date an which nominally due, and no interest shall accrue for the period from and after any such nominal date. SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 11.14 COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 11.15 RECORDING OF INDENTURE. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel (which may be counsel to the Trustee or any other counsel reasonably acceptable to the Trustee) to the effect that such recording is necessary either for the protection of the Noteholders or any other person secured hereunder or for the enforcement of any right or remedy granted to the Trustee under this Indenture. SECTION 11.16 TRUST OBLIGATION. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Depositor, the Servicer, the Owner Trustee or the Trustee on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Depositor, the Servicer, the Owner Trustee or the Trustee or of any successor or assign of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement. SECTION 11.17 NO PETITION. The Trustee, by entering into this Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree that they will not at any time institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the Basic Documents. SECTION 11.18 INSPECTION. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Trustee, during the Issuer's normal business hours, to examine all the books of account, records, reports, and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by Independent certified public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees, and independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Trustee shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Trustee may reasonably determine that such disclosure is consistent with its Obligations hereunder. [THIS SPACE LEFT INTENTIONALLY BLANK] IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Indenture to be duly executed by their respective officers, thereunto duly authorized, all as of the day and year first above written. [------------------------------], By: [______________________________], not in its individual capacity but solely as Owner Trustee, By:_____________________________ Name: Title: [------------------------------], not in its individual capacity but solely as Trustee, By:_____________________________ Name: Title: [Form of Class A-1 Note] EXHIBIT D REGISTERED $ No. R SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP NO. ______________ [UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [------------------------------] CLASS A-1__% ASSET BACKED NOTES [____________________], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of [] DOLLARS payable on each Distribution Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE) and the denominator of which is $___________ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class A-l Notes pursuant to Section 3.1 of the Indenture; PROVIDED, HOWEVER, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the [____________] Distribution Date (the "Class A-1 Note Final Scheduled Distribution Date") and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. The Issuer will pay interest on this Class A-1 Note at the rate per annum shown above on each Distribution Date commencing in [____________] until the principal of this Class A-1 Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date). Interest on this Note will accrue for each Distribution Date from the most recent Distribution Date on which interest has been paid to but excluding such Distribution Date or, if no interest has yet been paid, from [_______________]. Interest will be computed on the basis the actual number of days in a 360-day year. Such principal of and interest on this Class A-1 Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Class A-1 Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Class A-1 Note. Unless the certificate of authentication hereon has been executed by the Trustee whose name appears below by manual signature, this Class A-1 Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer as of the date set forth below. Date: [______________________________], By: [______________________________], not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By:_______________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Class A-1 __% Asset Backed Notes of [__________________] designated above and referred to in the within-mentioned Indenture. Date: [______________________________], not in its individual capacity but solely as Trustee, By: _________________________ Authorized Signatory [REVERSE OF NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its Class A-1 __% Asset Backed Notes (herein called the "Class A-1 Notes"), all issued under an Indenture dated as of [_______________] (such indenture, as supplemented or amended, is herein called the "Indenture"), between the Issuer and [____________________], as trustee (the "Trustee", which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Trustee and the Holders of the Class A-1 Notes. The Class A-1 Notes are subject to all terms of the Indenture. All terms used in this Class A-1 Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes (together, the "Class A Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. The Class B Notes (and together with the Class A Notes, the "Notes") are and will be equally and ratably secured by the collateral pledged or security thereof as provided in the Indenture on a subordinate basis. Principal of the Class A-1 Notes will be payable on each Distribution Date in an amount described on the face hereof. "Distribution Date" means the fifteenth day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [____________]. As described above, the entire unpaid principal amount of this Note shall be due and payable on the earlier of the Final Scheduled Distribution Date with respect to the Class A-1 Notes and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing and the Trustee or the Holders of the Notes representing not less than a majority of the Outstanding Amount of the Class A Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.2 of the Indenture. All principal payments on the Class A-1 Notes shall be made pro rata to the Class A-1 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Holder hereof as of the Record Date preceding such Distribution Date by notice mailed prior to such Distribution Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Trustee's principal Corporate Trust Office or at the office of the Trustee's agent appointed for such purposes located in the City of New York. The Issuer shall pay interest on overdue installments of interest at the Class A-1 Interest Rate to the extent lawful. As provided in the Indenture, the Notes may be redeemed in whole, but not in part, (i) at the option of the Servicer, on any Distribution Date on or after the date on which the Pool Balance is less than 5% percent of the Initial Pool Balance or (ii) if the Servicer has not exercised its rights in clause (i) within 90 days after the last day of a Collection Period as of which such right can first be exercised, an auction sale shall be conducted (as described in the Sale and Servicing Agreement). As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar which requirements include membership or participation in Securities Transfer Agents Medallion Program ("Stamp") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, Stamp, all in accordance with the Exchange Act, and (ii) accompanied by such other documents as the Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Depositor, the Servicer, the Owner Trustee or the Trustee or of any successor or assign of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture that such Noteholder will not at any time institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings, under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Basic Documents. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes representing a majority of the Outstanding Amount of all affected Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Class A Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Trustee and the Holders of Notes under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Indenture or the Basic Documents, neither [_______________] in its individual capacity, [_______________] in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Owner Trustee for the sole purposes of binding the interests of the Owner Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that except as expressly provided in the Indenture or the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto -------------------------------- (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints _____________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: ___________ _______________________3 Signature Guaranteed: _____________________ 3 NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. EXHIBIT E [Form of Class A-2 Note] REGISTERED $ No. R SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP NO. ______________ [UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [------------------------------] CLASS A-2__% ASSET BACKED NOTES [____________________], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of [] DOLLARS payable on each Distribution Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE) and the denominator of which is $___________ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class A-2 Notes pursuant to Section 3.1 of the Indenture; PROVIDED, HOWEVER, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the [____________] Distribution Date (the "Class A-2 Note Final Scheduled Distribution Date") and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. The Issuer will pay interest on this Class A-2 Note at the rate per annum shown above on each Distribution Date commencing in [____________] until the principal of this Class A-2 Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date). Interest on this Note will accrue for each Distribution Date from the most recent Distribution Date on which interest has been paid to but excluding such Distribution Date or, if no interest has yet been paid, from [_______________]. Interest will be computed on the basis of a 360-day year of twelve 30 day months. Such principal of and interest on this Class A-2 Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Class A-2 Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Class A-2 Note. Unless the certificate of authentication hereon has been executed by the Trustee whose name appears below by manual signature, this Class A-2 Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer as of the date set forth below. Date: [______________________________], By: [______________________________], not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By:_______________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Class A-2 __% Asset Backed Notes of [____________________] designated above and referred to in the within-mentioned Indenture. Date: [______________________________], not in its individual capacity but solely as Trustee, By: _________________________ Authorized Signatory [REVERSE OF NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its Class A-2 __% Asset Backed Notes (herein called the "Class A-2 Notes"), all issued under an Indenture dated as of [_______________] (such indenture, as supplemented or amended, is herein called the "Indenture"), between the Issuer and [____________________], as trustee (the "Trustee", which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Trustee and the Holders of the Class A-2 Notes. The Class A-2 Notes are subject to all terms of the Indenture. All terms used in this Class A-2 Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes (together, the "Class A Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. The Class B Notes (and together with the Class A Notes, the "Notes") are and will be equally and ratably secured by the collateral pledged or security thereof as provided in the Indenture on a subordinate basis. Principal of the Class A-2 Notes will be payable on each Distribution Date in an amount described on the face hereof. "Distribution Date" means the fifteenth day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [__________]. As described above, the entire unpaid principal amount of this Note shall be due and payable on the earlier of the Final Scheduled Distribution Date with respect to the Class A-2 Notes and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing and the Trustee or the Holders of the Notes representing not less than a majority of the Outstanding Amount of the Class A Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.2 of the Indenture. All principal payments on the Class A-2 Notes shall be made pro rata to the Class A-2 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Holder hereof as of the Record Date preceding such Distribution Date by notice mailed prior to such Distribution Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Trustee's principal Corporate Trust Office or at the office of the Trustee's agent appointed for such purposes located in the City of New York. The Issuer shall pay interest on overdue installments of interest at the Class A-2 Interest Rate to the extent lawful. As provided in the Indenture, the Notes may be redeemed in whole, but not in part, (i) at the option of the Servicer, on any Distribution Date on or after the date on which the Pool Balance is less than 5% percent of the Initial Pool Balance or (ii) if the Servicer has not exercised its rights in clause (i) within 90 days after the last day of a Collection Period as of which such right can first be exercised, an auction sale shall be conducted (as described in the Sale and Servicing Agreement). As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar which requirements include membership or participation in Securities Transfer Agents Medallion Program ("Stamp") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, Stamp, all in accordance with the Exchange Act, and (ii) accompanied by such other documents as the Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Depositor, the Servicer, the Owner Trustee or the Trustee or of any successor or assign of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture that such Noteholder will not at any time institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings, under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Basic Documents. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes representing a majority of the Outstanding Amount of all affected Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Class A Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Trustee and the Holders of Notes under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Indenture or the Basic Documents, neither [_______________] in its individual capacity, [_______________] in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Owner Trustee for the sole purposes of binding the interests of the Owner Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that except as expressly provided in the Indenture or the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto -------------------------------- (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints _____________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: ___________ _______________________4 Signature Guaranteed: ___________________ 4 NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. EXHIBIT F [Form of Class A-3 Note] REGISTERED $ No. R SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP NO. ______________ [UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [------------------------------] CLASS A-3__% ASSET BACKED NOTES [____________________], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of [] DOLLARS payable on each Distribution Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE) and the denominator of which is $___________ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class A-3 Notes pursuant to Section 3.1 of the Indenture; PROVIDED, HOWEVER, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the [_______________] Distribution Date (the "Class A-3 Note Final Scheduled Distribution Date") and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. The Issuer will pay interest on this Class A-3 Note at the rate per annum shown above on each Distribution Date commencing in [_______________] until the principal of this Class A-3 Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date). Interest on this Note will accrue for each Distribution Date from the most recent Distribution Date on which interest has been paid to but excluding such Distribution Date or, if no interest has yet been paid, from [_______________]. Interest will be computed on the basis of a 360-day year of twelve 30 day months. Such principal of and interest on this Class A-3 Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Class A-3 Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Class A-3 Note. Unless the certificate of authentication hereon has been executed by the Trustee whose name appears below by manual signature, this Class A-3 Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer as of the date set forth below. Date: [______________________________], By: [____________________], not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By:_______________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Class A-3 __% Asset Backed Notes of [2-*] designated above and referred to in the within-mentioned Indenture. Date: [______________________________], not in its individual capacity but solely as Trustee, By: _________________________ Authorized Signatory [REVERSE OF NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its Class A-3 __% Asset Backed Notes (herein called the "Class A-3 Notes"), all issued under an Indenture dated as of [_______________] (such indenture, as supplemented or amended, is herein called the "Indenture"), between the Issuer and [____________________], as trustee (the "Trustee", which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Trustee and the Holders of the Class A-3 Notes. The Class A-3 Notes are subject to all terms of the Indenture. All terms used in this Class A-3 Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-31Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes (together, the "Class A Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. The Class B Notes (and together with the Class A Notes, the "Notes") are and will be equally and ratably secured by the collateral pledged or security thereof as provided in the Indenture on a subordinate basis. Principal of the Class A-3 Notes will be payable on each Distribution Date in an amount described on the face hereof. "Distribution Date" means the fifteenth day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [_______________]. As described above, the entire unpaid principal amount of this Note shall be due and payable on the earlier of the Final Scheduled Distribution Date with respect to the Class A-3 Notes and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing and the Trustee or the Holders of the Notes representing not less than a majority of the Outstanding Amount of the Class A Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.2 of the Indenture. All principal payments on the Class A-3 Notes shall be made pro rata to the Class A-3 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Holder hereof as of the Record Date preceding such Distribution Date by notice mailed prior to such Distribution Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Trustee's principal Corporate Trust Office or at the office of the Trustee's agent appointed for such purposes located in the City of New York. The Issuer shall pay interest on overdue installments of interest at the Class A-3 Interest Rate to the extent lawful. As provided in the Indenture, the Notes may be redeemed in whole, but not in part, (i) at the option of the Servicer, on any Distribution Date on or after the date on which the Pool Balance is less than 5% percent of the Initial Pool Balance or (ii) if the Servicer has not exercised its rights in clause (i) within 90 days after the last day of a Collection Period as of which such right can first be exercised, an auction sale shall be conducted (as described in the Sale and Servicing Agreement). As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar which requirements include membership or participation in Securities Transfer Agents Medallion Program ("Stamp") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, Stamp, all in accordance with the Exchange Act, and (ii) accompanied by such other documents as the Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Depositor, the Servicer, the Owner Trustee or the Trustee or of any successor or assign of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture that such Noteholder will not at any time institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings, under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Basic Documents. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes representing a majority of the Outstanding Amount of all affected Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Class A Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Trustee and the Holders of Notes under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Indenture or the Basic Documents, neither [____________________] in its individual capacity, [____________________] in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Owner Trustee for the sole purposes of binding the interests of the Owner Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that except as expressly provided in the Indenture or the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto -------------------------------- (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints _____________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: ___________ _______________________5 Signature Guaranteed: 5 NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. EXHIBIT G [Form of Class A-4 Note] REGISTERED $ No. R SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP NO. ______________ [UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [------------------------------] CLASS A-4__% ASSET BACKED NOTES [____________________], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of [] DOLLARS payable on each Distribution Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE) and the denominator of which is $___________ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class A-4 Notes pursuant to Section 3.1 of the Indenture; PROVIDED, HOWEVER, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the [_______________] Distribution Date (the "Class A-4 Note Final Scheduled Distribution Date") and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. The Issuer will pay interest on this Class A-4 Note at the rate per annum shown above on each Distribution Date commencing in [_______________] until the principal of this Class A-4 Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date). Interest on this Note will accrue for each Distribution Date from the most recent Distribution Date on which interest has been paid to but excluding such Distribution Date or, if no interest has yet been paid, from [_______________]. Interest will be computed on the basis of a 360-day year of twelve 30 day months. Such principal of and interest on this Class A-4 Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Class A-4 Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Class A-4 Note. Unless the certificate of authentication hereon has been executed by the Trustee whose name appears below by manual signature, this Class A-4 Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer as of the date set forth below. Date: [______________________________], By: [____________________], not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By:_______________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Class A-4 __% Asset Backed Notes of [____________________] designated above and referred to in the within-mentioned Indenture. Date: [______________________________], not in its individual capacity but solely as Trustee, By: _________________________ Authorized Signatory [REVERSE OF NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its Class A-4 __% Asset Backed Notes (herein called the "Class A-4 Notes"), all issued under an Indenture dated as of [_______________] (such indenture, as supplemented or amended, is herein called the "Indenture"), between the Issuer and [____________________], as trustee (the "Trustee", which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Trustee and the Holders of the Class A-4 Notes. The Class A-4 Notes are subject to all terms of the Indenture. All terms used in this Class A-4 Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes (together, the "Class A Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. The Class B Notes (and together with the Class A Notes, the "Notes") are and will be equally and ratably secured by the collateral pledged or security thereof as provided in the Indenture on a subordinate basis. Principal of the Class A-4 Notes will be payable on each Distribution Date in an amount described on the face hereof. "Distribution Date" means the fifteenth day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [_______________]. As described above, the entire unpaid principal amount of this Note shall be due and payable on the earlier of the Final Scheduled Distribution Date with respect to the Class A-4 Notes and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing and the Trustee or the Holders of the Notes representing not less than a majority of the Outstanding Amount of the Class A Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.2 of the Indenture. All principal payments on the Class A-4 Notes shall be made pro rata to the Class A-4 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Holder hereof as of the Record Date preceding such Distribution Date by notice mailed prior to such Distribution Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Trustee's principal Corporate Trust Office or at the office of the Trustee's agent appointed for such purposes located in the City of New York. The Issuer shall pay interest on overdue installments of interest at the Class A-4 Interest Rate to the extent lawful. As provided in the Indenture, the Notes may be redeemed in whole, but not in part, (i) at the option of the Servicer, on any Distribution Date on or after the date on which the Pool Balance is less than 5% percent of the Initial Pool Balance or (ii) if the Servicer has not exercised its rights in clause (i) within 90 days after the last day of a Collection Period as of which such right can first be exercised, an auction sale shall be conducted (as described in the Sale and Servicing Agreement). As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar which requirements include membership or participation in Securities Transfer Agents Medallion Program ("Stamp") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, Stamp, all in accordance with the Exchange Act, and (ii) accompanied by such other documents as the Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Depositor, the Servicer, the Owner Trustee or the Trustee or of any successor or assign of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture that such Noteholder will not at any time institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings, under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Basic Documents. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes representing a majority of the Outstanding Amount of all affected Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Class A Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Trustee and the Holders of Notes under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Indenture or the Basic Documents, neither [____________________] in its individual capacity, [____________________] in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Owner Trustee for the sole purposes of binding the interests of the Owner Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that except as expressly provided in the Indenture or the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto -------------------------------- (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints _____________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: ___________ _______________________6 Signature Guaranteed: 6 NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. EXHIBIT H [Form of Class A-5 Note] REGISTERED $ No. R SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP NO. ______________ [UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [------------------------------] CLASS A-5__% ASSET BACKED NOTES [____________________], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of [] DOLLARS payable on each Distribution Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE) and the denominator of which is $___________ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class A-5 Notes pursuant to Section 3.1 of the Indenture; PROVIDED, HOWEVER, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the [_______________] Distribution Date (the "Class A-5 Note Final Scheduled Distribution Date") and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. The Issuer will pay interest on this Class A-5 Note at the rate per annum shown above on each Distribution Date commencing in [_______________] until the principal of this Class A-5 Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date). Interest on this Note will accrue for each Distribution Date from the most recent Distribution Date on which interest has been paid to but excluding such Distribution Date or, if no interest has yet been paid, from [_______________]. Interest will be computed on the basis of a 360-day year of twelve 30 day months. Such principal of and interest on this Class A-5 Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Class A-5 Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Class A-5 Note. Unless the certificate of authentication hereon has been executed by the Trustee whose name appears below by manual signature, this Class A-5 Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer as of the date set forth below. Date: [______________________________], By: [____________________], not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By:_______________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Class A-5 __% Asset Backed Notes of [____________________] designated above and referred to in the within-mentioned Indenture. Date: [______________________________], not in its individual capacity but solely as Trustee, By: _________________________ Authorized Signatory [REVERSE OF NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its Class A-5 __% Asset Backed Notes (herein called the "Class A-5 Notes"), all issued under an Indenture dated as of [_______________] (such indenture, as supplemented or amended, is herein called the "Indenture"), between the Issuer and [____________________], as trustee (the "Trustee", which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Trustee and the Holders of the Class A-5 Notes. The Class A-5 Notes are subject to all terms of the Indenture. All terms used in this Class A-5 Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes (together, the "Class A Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. The Class B Notes (and together with the Class A Notes, the "Notes") are and will be equally and ratably secured by the collateral pledged or security thereof as provided in the Indenture on a subordinate basis. Principal of the Class A-5 Notes will be payable on each Distribution Date in an amount described on the face hereof. "Distribution Date" means the fifteenth day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [_______________]. As described above, the entire unpaid principal amount of this Note shall be due and payable on the earlier of the Final Scheduled Distribution Date with respect to the Class A-5 Notes and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing and the Trustee or the Holders of the Notes representing not less than a majority of the Outstanding Amount of the Class A Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.2 of the Indenture. All principal payments on the Class A-5 Notes shall be made pro rata to the Class A-5 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Holder hereof as of the Record Date preceding such Distribution Date by notice mailed prior to such Distribution Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Trustee's principal Corporate Trust Office or at the office of the Trustee's agent appointed for such purposes located in the City of New York. The Issuer shall pay interest on overdue installments of interest at the Class A-5 Interest Rate to the extent lawful. As provided in the Indenture, the Notes may be redeemed in whole, but not in part, (i) at the option of the Servicer, on any Distribution Date on or after the date on which the Pool Balance is less than 5% percent of the Initial Pool Balance or (ii) if the Servicer has not exercised its rights in clause (i) within 90 days after the last day of a Collection Period as of which such right can first be exercised, an auction sale shall be conducted (as described in the Sale and Servicing Agreement). As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar which requirements include membership or participation in Securities Transfer Agents Medallion Program ("Stamp") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, Stamp, all in accordance with the Exchange Act, and (ii) accompanied by such other documents as the Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Depositor, the Servicer, the Owner Trustee or the Trustee or of any successor or assign of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture that such Noteholder will not at any time institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings, under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Basic Documents. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes representing a majority of the Outstanding Amount of all affected Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Class A Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Trustee and the Holders of Notes under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Indenture or the Basic Documents, neither [____________________] in its individual capacity, [____________________] in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Owner Trustee for the sole purposes of binding the interests of the Owner Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that except as expressly provided in the Indenture or the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto -------------------------------- (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints _____________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: ___________ _______________________7 Signature Guaranteed: ________________ 7 NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. EXHIBIT I [Form of Class B Note] REGISTERED $ No. R SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP NO. ______________ [UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [------------------------------] CLASS B__% ASSET BACKED NOTES [____________________], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of [] DOLLARS payable on each Distribution Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE) and the denominator of which is $___________ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class B Notes pursuant to Section 3.1 of the Indenture; PROVIDED, HOWEVER, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the [_______________] Distribution Date (the "Class B Note Final Scheduled Distribution Date") and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. The Issuer will pay interest on this Class B Note at the rate per annum shown above on each Distribution Date commencing in [_______________] until the principal of this Class B Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date). Interest on this Note will accrue for each Distribution Date from the most recent Distribution Date on which interest has been paid to but excluding such Distribution Date or, if no interest has yet been paid, from [_______________]. Interest will be computed on the basis of a 360-day year of twelve 30 day months. Such principal of and interest on this Class B Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Class B Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Class B Note. Unless the certificate of authentication hereon has been executed by the Trustee whose name appears below by manual signature, this Class B Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer as of the date set forth below. Date: [______________________________], By: [____________________], not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By:_______________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Class B __% Asset Backed Notes of [____________________] designated above and referred to in the within-mentioned Indenture. Date: [______________________________], not in its individual capacity but solely as Trustee, By: _________________________ Authorized Signatory [REVERSE OF NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its Class B __% Asset Backed Notes (herein called the "Class B Notes"), all issued under an Indenture dated as of [_______________] (such indenture, as supplemented or amended, is herein called the "Indenture"), between the Issuer and [____________________], as trustee (the "Trustee", which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Trustee and the Holders of the Class B Notes. The Class B Notes are subject to all terms of the Indenture. All terms used in this Class B Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes (together, the "Class A Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. The Class B Notes (and together with the Class A Notes, the "Notes") are and will be equally and ratably secured by the collateral pledged or security thereof as provided in the Indenture on a subordinate basis. Principal of the Class B Notes will be payable on each Distribution Date in an amount described on the face hereof. "Distribution Date" means the fifteenth day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [_______________]. As described above, the entire unpaid principal amount of this Note shall be due and payable on the earlier of the Final Scheduled Distribution Date with respect to the Class B Notes and the Redemption Date, if any, pursuant to Section 10.1(a) (i) or (ii) or Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing and the Trustee or the Holders of the Notes representing not less than a majority of the Outstanding Amount of the Class B Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.2 of the Indenture. All principal payments on the Class B Notes shall be made pro rata to the Class B Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Holder hereof as of the Record Date preceding such Distribution Date by notice mailed prior to such Distribution Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Trustee's principal Corporate Trust Office or at the office of the Trustee's agent appointed for such purposes located in the City of New York. The Issuer shall pay interest on overdue installments of interest at the Class B Interest Rate to the extent lawful. As provided in the Indenture, the Notes may be redeemed in whole, but not in part, (i) at the option of the Servicer, on any Distribution Date on or after the date on which the Pool Balance is less than 5% percent of the Initial Pool Balance or (ii) if the Servicer has not exercised its rights in clause (i) within 90 days after the last day of a Collection Period as of which such right can first be exercised, an auction sale shall be conducted (as described in the Sale and Servicing Agreement). As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar which requirements include membership or participation in Securities Transfer Agents Medallion Program ("Stamp") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, Stamp, all in accordance with the Exchange Act, and (ii) accompanied by such other documents as the Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Depositor, the Servicer, the Owner Trustee or the Trustee or of any successor or assign of the Depositor, the Servicer, the Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture that such Noteholder will not at any time institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings, under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Basic Documents. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes representing a majority of the Outstanding Amount of all affected Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Class A Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Trustee and the Holders of Notes under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Indenture or the Basic Documents, neither [_______________] in its individual capacity, [_______________] in its individual capacity, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Owner Trustee for the sole purposes of binding the interests of the Owner Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that except as expressly provided in the Indenture or the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto -------------------------------- (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints _____________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: ___________ _______________________8 Signature Guaranteed: ______________________ 8 NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. EX-4.1.2 3 0003.txt EXHIBIT 4.1.2 ________________________ TRUST _____ ASSET BACKED TERM NOTES ASSET BACKED REVOLVING NOTES ------------------------------------------------------------------ INDENTURE DATED AS OF ________ ----------------------------------------------------------------------- ________________________________, A ________________ BANKING CORPORATION, INDENTURE TRUSTEE CROSS-REFERENCE TABLE TIA INDENTURE SECTION SECTION TIA SECTION INDENTURE SECTION 310 (a)(1)......................... 6.11 (a)(2)......................... 6.11 (a)(3)......................... 6.10 (a)(4)......................... 6.14 (b)............................ 6.11 (c)............................ N.A. 311 (a)............................ 6.12 (b)............................ 6.12 (c)............................ N.A. 312 (a)............................ 7.1, 7.2 (b)............................ 7.2 (c)............................ 7.2 313 (a)............................ 7.4(a), 7.4(b) (b)(1)......................... 7.4(a) (b)(2)......................... 7.4(a) (c)............................ 7.4(a) (d)............................ 7.4(a) 314 (a)............................ 7.3(a), 3.9 (b)............................ 3.6 (c)(1)......................... 2.1, 2.9, 4.1, 11.1(a) (c)(2)......................... 2.1, 2.9, 4.1, 11.1(a) (c)(3)......................... 2.9, 4.1, 11.1(a) (d)............................ 2.9, 11.1(b) (e)............................ 11.1(a) (f)............................ 11.1(a) 315 (a)............................ 6.1(b) (b)............................ 6.5 (c)............................ 6.1(a) (d)............................ 6.2, 6.1(c) (e)............................ 5.13 316 (a) last sentence.............. 1.1 (a)(1)(A)...................... 5.11 (a)(1)(B)...................... 5.12 (a)(2)......................... Omitted 316 (b), (c)....................... 5.7 317 (a)(1)......................... 5.3(b) (a)(2)......................... 5.3(d) (b)............................ 3.3 318 (a)............................ 11.7 N.A means Not Applicable. Note: This cross reference table shall not, for any purpose, be deemed to be part of this Indenture. TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions.................................................9 SECTION 1.2 Incorporation by Reference of Trust Indenture Act...........9 ARTICLE II THE NOTES SECTION 2.1 Issuance of Notes; Execution, Authentication and Delivery....9 SECTION 2.2 Form of Notes and Authentication Agent's Certificate of Authentication..............................................12 SECTION 2.3 Temporary Notes.............................................13 SECTION 2.4 Registration; Registration of Transfer and Exchange of Notes13 SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes..................15 SECTION 2.6 Persons Deemed Noteholders..................................16 SECTION 2.7 Payment of Principal and Interest...........................16 SECTION 2.8 Cancellation of Notes.......................................17 SECTION 2.9 Release of Collateral.......................................18 SECTION 2.10 Book-Entry Notes............................................18 SECTION 2.11 Notices to Clearing Agency..................................19 SECTION 2.12 Definitive Term Notes.......................................19 SECTION 2.13 Seller as Noteholder........................................19 SECTION 2.14 Tax Treatment...............................................19 SECTION 2.15 Special Terms Applicable to Subsequent Transfers of Certain Notes...............................................20 SECTION 2.16 CUSIP Numbers...............................................21 ARTICLE III COVENANTS SECTION 3.1 Payment of Principal and Interest...........................21 SECTION 3.2 Maintenance of Agency Office................................21 SECTION 3.3 Money for Payments To Be Held in Trust......................21 SECTION 3.4 Existence...................................................23 SECTION 3.5 Protection of Trust Estate; Acknowledgment of Pledge........23 SECTION 3.6 Opinions as to Trust Estate.................................24 SECTION 3.7 Performance of Obligations; Servicing of Receivables........25 SECTION 3.8 Negative Covenants..........................................25 SECTION 3.9 Annual Statement as to Compliance...........................26 SECTION 3.10 Consolidation, Merger, etc., of Issuer; Disposition of Trust Assets................................................26 SECTION 3.11 Successor or Transferee.....................................28 SECTION 3.12 No Other Business...........................................29 SECTION 3.13 No Borrowing................................................29 SECTION 3.14 Guarantees, Loans, Advances and Other Liabilities...........29 SECTION 3.15 Servicer's Obligations......................................29 SECTION 3.16 Capital Expenditures........................................29 SECTION 3.17 Removal of Administrator....................................29 SECTION 3.18 Restricted Payments.........................................30 SECTION 3.19 Notice of Events of Default.................................30 SECTION 3.20 Further Instruments and Acts................................30 SECTION 3.21 Trustee's Assignment of Interests in Certain Receivables....30 SECTION 3.22 Representations and Warranties by the Issuer to the Indenture Trustee...........................................31 ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1 Satisfaction and Discharge of Indenture.....................31 SECTION 4.2 Application of Trust Money..................................32 SECTION 4.3 Repayment of Monies Held by Paying Agent....................32 SECTION 4.4 Duration of Position of Indenture Trustee...................33 ARTICLE V DEFAULT AND REMEDIES SECTION 5.1 Events of Default...........................................33 SECTION 5.2 Acceleration of Maturity; Rescission and Annulment..........34 SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Indenture Trustee...........................................35 SECTION 5.4 Remedies; Priorities........................................37 SECTION 5.5 Optional Preservation of the Trust Estate...................38 SECTION 5.6 Limitation of Suits.........................................38 SECTION 5.7 Rights of Noteholders To Receive Principal and Interest.....39 SECTION 5.8 Restoration of Rights and Remedies..........................39 SECTION 5.9 Rights and Remedies Cumulative..............................39 SECTION 5.10 Delay or Omission Not a Waiver..............................40 SECTION 5.11 Control by Noteholders......................................40 SECTION 5.12 Waiver of Past Defaults.....................................40 SECTION 5.13 Undertaking for Costs.......................................41 SECTION 5.14 Waiver of Stay or Extension Laws............................41 SECTION 5.15 Action on Notes.............................................41 SECTION 5.16 Performance and Enforcement of Certain Obligations..........42 ARTICLE VI THE INDENTURE TRUSTEE SECTION 6.1 Duties of Indenture Trustee.................................43 SECTION 6.2 Rights of Indenture Trustee.................................44 SECTION 6.3 Indenture Trustee May Own Notes.............................45 SECTION 6.4 Indenture Trustee's Disclaimer..............................45 SECTION 6.5 Notice of Defaults..........................................45 SECTION 6.6 Reports by Indenture Trustee to Holders.....................46 SECTION 6.7 Compensation; Indemnity.....................................46 SECTION 6.8 Replacement of Indenture Trustee............................46 SECTION 6.9 Merger or Consolidation of Indenture Trustee................47 SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture Trustee...........................................48 SECTION 6.11 Eligibility; Disqualification...............................49 SECTION 6.12 Preferential Collection of Claims Against Issuer............49 SECTION 6.13 Representations and Warranties of Indenture Trustee.........49 SECTION 6.14 Indenture Trustee May Enforce Claims Without Possession of Notes.........................................50 SECTION 6.15 Suit for Enforcement........................................50 SECTION 6.16 Rights of Noteholders to Direct Indenture Trustee...........50 ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses of Noteholders....................................51 SECTION 7.2 Preservation of Information, Communications to Noteholders..51 SECTION 7.3 Reports by Issuer...........................................51 SECTION 7.4 Reports by Indenture Trustee................................52 ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.1 Collection of Money.........................................52 SECTION 8.2 Designated Accounts; Payments...............................53 SECTION 8.3 General Provisions Regarding Designated Accounts............53 SECTION 8.4 Release of Trust Estate.....................................53 SECTION 8.5 Opinion of Counsel..........................................54 ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1 Supplemental Indentures Without Consent of Noteholders......54 SECTION 9.2 Supplemental Indentures With Consent of Noteholders.........56 SECTION 9.3 Execution of Supplemental Indentures........................57 SECTION 9.4 Effect of Supplemental Indenture............................57 SECTION 9.5 Conformity with Trust Indenture Act.........................58 SECTION 9.6 Reference in Notes to Supplemental Indentures...............58 ARTICLE X REDEMPTION OF TERM NOTES SECTION 10.1 Redemption..................................................58 SECTION 10.2 Form of Redemption Notice...................................58 SECTION 10.3 Term Notes Payable on Redemption Date.......................59 ARTICLE XI MISCELLANEOUS SECTION 11.1 Compliance Certificates and Opinions, etc...................59 SECTION 11.2 Form of Documents Delivered to Indenture Trustee............61 SECTION 11.3 Acts of Noteholders.........................................62 SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer and Rating Agencies.............................................62 SECTION 11.5 Notices to Noteholders; Waiver..............................63 SECTION 11.6 Alternate Payment and Notice Provisions.....................63 SECTION 11.7 Conflict with Trust Indenture Act...........................64 SECTION 11.8 Effect of Headings and Table of Contents....................64 SECTION 11.9 Successors and Assigns......................................64 SECTION 11.10 Severability................................................64 SECTION 11.11 Benefits of Indenture.......................................64 SECTION 11.12 Legal Holidays..............................................64 SECTION 11.13 GOVERNING LAW...............................................65 SECTION 11.14 Counterparts................................................65 SECTION 11.15 Recording of Indenture......................................65 SECTION 11.16 No Recourse.................................................65 SECTION 11.17 No Petition.................................................66 SECTION 11.18 Inspection..................................................66 EXHIBIT A Form of Transfer Certificate EXHIBIT B Form of Undertaking Letter INDENTURE, dated as of ____________, between _______________________, a __________ business trust (the "Issuer" or the "Trust"), and ________________________________, a ________________ banking corporation, as trustee and not in its individual capacity (the "Indenture Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Notes and (only to the extent expressly provided herein) the Certificates: GRANTING CLAUSE The Issuer hereby grants to the Indenture Trustee, as trustee for the benefit of the Noteholders and (only to the extent expressly provided herein) the Certificateholders, all of the Issuer's right, title and interest in, to and under (a) all Eligible Receivables, all Collateral Security with respect thereto, all monies due or to become due thereon and all amounts received with respect thereto and all proceeds thereof (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries), (b) all Cash Accumulation Accounts and all Distribution Accounts with respect to Notes, (c) the Trust Sale and Servicing Agreement (including the rights of ACE Securities Corp. (the "Seller") under the Pooling and Servicing Agreement assigned to the Issuer pursuant to the Trust Sale and Servicing Agreement), (d) each Basis Swap and any other Specified Support Arrangement, including the right to receive payments thereunder and (e) any proceeds of any of the foregoing (collectively with the items described in clauses (a), (b), (c) and (d), the "Issuer Collateral"). The Seller has granted a security interest in each ________ Reserve Fund to the Indenture Trustee pursuant to the terms of the Trust Sale and Servicing Agreement (the "Seller Collateral," and collectively with the Issuer Collateral, the "Collateral"). The foregoing grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes, equally and ratably without prejudice, priority or distinction (except as otherwise provided in any Officer's Issuance Certificate or supplement hereto), to secure (only to the extent expressly provided herein) distributions of Certificate Balance with respect to and interest on the Certificates, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture. This Indenture constitutes a security agreement under the UCC. The foregoing grant includes all rights, powers and options (but none of the obligations, if any) of the Issuer under any agreement or instrument included in the Collateral, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of the Receivables included in the Collateral and all other monies payable under the Collateral, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the Issuer or otherwise and generally to do and receive anything that the Issuer is or may be entitled to do or receive under or with respect to the Collateral. The Indenture Trustee, as trustee on behalf of the Noteholders and (only to the extent expressly provided herein) the Certificateholders, acknowledges such grant and accepts the trusts under this Indenture in accordance with the provisions of this Indenture. ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions. Certain capitalized terms used in this Indenture shall have the respective meanings assigned them in Part I of Appendix A to the Trust Sale and Servicing Agreement dated as of the date hereof (as amended from time to time, the "Trust Sale and Servicing Agreement") among the Issuer, the Seller and ________________________________________ ("________________"). All references herein to "this Indenture" are to this Indenture as it may be amended, supplemented or modified from time to time, and all references herein to Articles, Sections, subsections and exhibits are to Articles, Sections, subsections and exhibits of this Indenture unless otherwise specified. All terms defined in this Indenture shall have the defined meanings when used in any certificate, notice, Note or other document made or delivered pursuant hereto unless otherwise defined therein. The rules of construction set forth in Part II of such Appendix A shall be applicable to this Indenture. SECTION 1.2 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the Securities and Exchange Commission. "indenture securities" means the Notes. "indenture trustee" means the Indenture Trustee. "obligor" on the indenture securities means the Issuer and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by reference to another statute or defined by a Commission rule have the respective meanings assigned to them by such definitions. ARTICLE II THE NOTES SECTION 2.1 Issuance of Notes; Execution, Authentication and Delivery. (a) Term Notes and Revolving Notes may be issued by the Issuer upon execution of this Indenture and from time to time thereafter, in each case, in accordance with the terms and conditions authorized by or pursuant to an Officer's Issuance Certificate. The Term Notes may be issued in one or more series. The Revolving Notes may be issued in one or more series. The aggregate principal amount of the Revolving Notes and the Term Notes of all series that may be authenticated and delivered and outstanding under this Indenture is not limited. (b) The Notes shall be executed on behalf of the Issuer by any of its Authorized Officers. The signature of any such Authorized Officer on the Notes may be manual or facsimile. Notes bearing the manual or facsimile signature of individuals who were at any time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such office prior to the authentication and delivery of such Notes or did not hold such office at the date of such Notes. (c) Prior to or concurrently with the delivery of any Note to the Indenture Trustee for authentication, the Seller shall execute and deliver to the Indenture Trustee, or cause to be executed and delivered to the Indenture Trustee, an Officer's Issuance Certificate and an Opinion of Counsel. (i) The Officer's Issuance Certificate shall set forth, in addition to all other requirements of such certificate: (A) the designation of the particular series (which shall distinguish such series from all other series); (B) the aggregate principal amount of the series which may be authenticated and delivered under this Indenture (except for Notes authenticated and delivered upon registration and transfer of, or in exchange for, or in lieu of, other Notes of such series pursuant to this Indenture); (C) the amount of or method for determining principal payments and the timing of such payments, including the Targeted Final Payment Date, if any, and the Stated Final Payment Date; (D) the rate or rates at which the Notes of such series shall bear interest, if any, or the initial interest rate and the method for determining subsequent interest rates, the date or dates from which such interest shall accrue, the date or dates on which such interest shall be payable and the record date or dates for the interest payable; (E) the obligations or rights, if any, of the Issuer to redeem or purchase Term Notes of such series or other redemption provisions and the price or prices at which and the terms and conditions upon which Term Notes of such series shall be redeemed or purchased; (F) if other than the principal amount thereof, the portion of the principal amount of Notes of such series which shall be payable upon acceleration of the maturity thereof; (G) without limiting the generality of the foregoing, and to the extent applicable, the extent to which payments on the Notes are senior, subordinate or pari passu in right of payment of principal and interest to other Notes; (H) without limiting the generality of the foregoing, if the Notes of such series are Revolving Notes, the Revolver Interest Rate and the Specified Maximum Revolver Balance; (I) whether and the extent to which Section 2.15 shall apply and, if the Notes of such series are Term Notes, whether such Notes will be issued as Book-Entry Notes and whether such Notes will be issued in bearer or registered form; and (J) any other terms or provisions of such series which may supersede the provisions of this Indenture. The terms of each series of Notes as provided for in an Officer's Issuance Certificate are part of the terms of this Indenture. (ii) The Opinion of Counsel shall provide, in addition to all other requirements of such opinion: (A) that the form and terms of such Notes have been established by or pursuant to an Officer's Issuance Certificate in conformity with the terms of this Indenture; (B) that Notes in such form, when completed by appropriate insertions and executed and delivered by the Issuer to the Authentication Agent for authentication in accordance with this Indenture, authenticated and delivered by the Authentication Agent in accordance with this Indenture and sold in the manner specified in such Opinion of Counsel, will be valid and legally binding obligations of the Issuer; (C) that no approval, authorization, consent or order of any court or governmental agency or body which has not already been obtained or given is required in connection with the valid and proper authorization, issuance and sale of such series of Notes pursuant to this Indenture subject to certain exceptions, including but not limited to, state securities and Blue Sky laws and routine renewals of existing licenses and payments; and (D) for such other matters as the Authentication Agent may reasonably request. (d) Upon execution and delivery of an Officer's Issuance Certificate and Opinion of Counsel to the Indenture Trustee, the Indenture Trustee or, if provided in an Officer's Issuance Certificate, with respect to a series of Notes, an authentication agent for such series of Notes acting on behalf of the Indenture Trustee (the Indenture Trustee or other person authenticating such Notes, the "Authentication Agent") shall thereupon authenticate and deliver the related Notes to or upon the written order of the Issuer, signed by any Authorized Officer. SECTION 2.2 Form of Notes and Authentication Agent's Certificate of Authentication. (a) The Notes shall be in the forms provided from time to time by or pursuant to an Officer's Issuance Certificate in accordance with the terms of this Indenture and may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the Issuer may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Notes may be listed or to conform to usage. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. The Definitive Term Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the Authorized Officer executing such Notes, as evidenced by such officer's execution of such Notes. (b) The Authentication Agent certificate of authentication shall be substantially in the applicable following form: INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. The ________________, not in its individual capacity but solely as Indenture Trustee By: Name: Title: Dated: ________________________ or _____________________, not in its individual capacity but solely as Authentication Agent By: Name: Title: Dated: ________________________ (c) Each Note shall be dated the date of its authentication. Unless otherwise provided in the related Officer's Issuance Certificate, (i) each Term Note shall be issuable as a registered Note in the minimum denomination of $1,000 and in integral multiples thereof, (ii) each Revolving Note shall be issuable as a registered Note in the minimum denomination of $100,000 and in any amount in excess thereof and (iii) Revolving Notes shall be issued as Definitive Notes and Sections 2.10, 2.11 and 2.12 of this Indenture shall not apply to the Revolving Notes. SECTION 2.3 Temporary Notes. (a) Pending the preparation of Definitive Term Notes, if any, to be issued in exchange for Book-Entry Notes, the Issuer may execute, and upon receipt of an Issuer Order the Authentication Agent shall authenticate and deliver, such Temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the Definitive Term Notes in lieu of which they are issued and with such variations as are consistent with the terms of this Indenture as the officers executing such Notes may determine, as evidenced by their execution of such Notes. (b) If Temporary Notes are issued, the Issuer shall cause Definitive Term Notes to be prepared without unreasonable delay. After the preparation of Definitive Term Notes, the Temporary Notes shall be exchangeable for Definitive Term Notes upon surrender of the Temporary Notes at the Agency Office of the Issuer or a Paying Agent, if so specified in the applicable Officer's Issuance Certificate, to be maintained as provided in Section 3.2, without charge to the Noteholder. Upon surrender for cancellation of any one or more Temporary Notes, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor a like principal amount of Definitive Term Notes of authorized denominations. Until so delivered in exchange, the Temporary Notes shall in all respects be entitled to the same benefits under this Indenture as Definitive Term Notes. SECTION 2.4 Registration; Registration of Transfer and Exchange of Notes. (a) The Issuer shall cause to be kept a Note Register, for each series of Notes, in which, subject to such reasonable regulations as the Issuer may prescribe, the Issuer shall provide for the registration of the Notes and the registration of transfers and exchanges of the Notes. The Indenture Trustee shall initially be the Note Registrar for the purpose of registering the Notes and transfers of the Notes as herein provided, unless with respect to a specific series of Notes, the Officer's Issuance Certificate applicable to such series of Notes provides otherwise. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor Note Registrar or, if it elects not to make such an appointment, assume the duties of the Note Registrar. (b) If a Person other than the Indenture Trustee is appointed by the Issuer as Note Registrar, the Issuer shall give the Indenture Trustee prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register. The Indenture Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof. The Indenture Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by an Executive Officer thereof as to the names and addresses of the Noteholders and the principal amounts and number of such Notes. (c) Upon surrender for registration of transfer of any Note at the Corporate Trust Office of the Indenture Trustee or the Agency Office of the Issuer (and following the delivery, in the former case, of such Notes to the Issuer by the Indenture Trustee), the Issuer shall execute, the Authentication Agent shall authenticate and the Noteholder shall obtain from the Authentication Agent, in the name of the designated transferee or transferees, one or more new Notes of the same series in any authorized denominations of a like aggregate principal amount. (d) At the option of the Noteholder, Notes may be exchanged for other Notes of the same series in any authorized denominations, of a like aggregate principal amount, upon surrender of such Notes to be exchanged at the Corporate Trust Office of the Authentication Agent or the Agency Office of the Issuer (and following the delivery, in the former case, of such Notes to the Issuer by the Indenture Trustee), the Issuer shall execute, and the Authentication Agent shall upon receipt of a written order, authenticate and the Noteholder shall obtain from the Indenture Trustee, such Notes which the Noteholder making the exchange is entitled to receive. (e) All Notes issued upon any registration of transfer or exchange of other Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. (f) Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee and the Note Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located, in the City of New York or the place or places specified in the applicable Officer's Issuance Certificate or the city in which the Corporate Trust Office of the Indenture Trustee is located, or having a correspondent in another place or places which is specified in the applicable Officer's Issuance Certificate; and such other documents as the Indenture Trustee may require. (g) No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer or Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Sections 2.3 or 9.6 not involving any transfer. (h) The preceding provisions of this Section 2.4 notwithstanding, the Issuer shall not be required to transfer or make exchanges, and the Note Registrar need not register transfers or exchanges, (i) of Notes that have been selected for redemption pursuant to Article X, if applicable; (ii) of Notes that are due for repayment within 15 days of submission to the Corporate Trust Office or the Agency Office; or (iii) if Section 2.15 has not been complied with in connection with such transfer. SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes. (a) If (i) any mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and upon the Issuer's written request the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note of a like series and aggregate principal amount; provided, however, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within seven days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer or Paying Agent, as applicable, may make payment to the Holder of such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date, if applicable, without surrender thereof. (b) If, after the delivery of a replacement Note or payment in respect of a destroyed, lost or stolen Note pursuant to subsection (a), a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer and the Indenture Trustee shall be entitled to recover such replacement Note (or such payment) from (i) any Person to whom it was delivered, (ii) the Person taking such replacement Note from the Person to whom such replacement Note was delivered or (iii) any assignee of such Person, except a bona fide purchaser, and the Issuer and the Indenture Trustee shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith. (c) In connection with the issuance of any replacement Note under this Section 2.5, the Issuer may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including all fees and expenses of the Indenture Trustee) connected therewith. (d) Any duplicate Note issued pursuant to this Section 2.5 in replacement for any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be found at any time or be enforced by any Person, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. (e) The provisions of this Section 2.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 2.6 Persons Deemed Noteholders. Prior to due presentment for registration of transfer of any Note, the Issuer, the Indenture Trustee, the Paying Agent and any other agent of the Issuer or the Indenture Trustee may treat the Person in whose name any Note is registered (as of the day of determination) as the Noteholder for the purpose of receiving payments of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and neither the Issuer, the Indenture Trustee, the Paying Agent nor any other agent of the Issuer or the Indenture Trustee shall be affected by notice to the contrary. SECTION 2.7 Payment of Principal and Interest. (a) Interest on each series of Notes shall accrue and be payable as provided in Section 8.2 and the applicable Officer's Issuance Certificate. Unless otherwise provided in the applicable Officer's Issuance Certificate, any installment of interest payable on any Note shall be punctually paid or duly provided for by a deposit by or at the direction of the Issuer or Paying Agent, on behalf of the Issuer if so directed by the applicable Officer's Issuance Certificate into the applicable Term Note Distribution Account or Revolver Distribution Account, as applicable, on or before the applicable Payment Date and shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered on the applicable Record Date, by wire transfer or check mailed first-class, postage prepaid to such Person's address as it appears on the Note Register on such Record Date; provided, however, that, with respect to Revolving Notes and with respect to Book-Entry Notes registered on the applicable Record Date in the name of the Note Depository for which Definitive Term Notes have not been issued pursuant to Section 2.12, payment shall be made by wire transfer in immediately available funds to the account designated by such Holder. (b) The principal of each series of Notes shall be payable as provided in the applicable Officer's Issuance Certificate. All principal payments on each series of Notes shall be made pro rata to the Noteholders of such series entitled thereto unless, with respect to any series of Revolving Notes, otherwise provided in the related Officer's Issuance Certificate or otherwise agreed among the Seller and the holders of such Revolving Notes. Unless otherwise provided in the applicable Officer's Issuance Certificate, any instalment of principal payable on any Note shall be punctually paid or duly provided for by a deposit by or at the direction of the Issuer or Paying Agent on behalf of the Issuer if so directed by the applicable Officer's Issuance Certificate into the applicable Term Note Distribution Account in the case of the Term Notes or the Revolver Distribution Account in the case of the Revolving Notes on or before the applicable Payment Date and shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered on the applicable Record Date, by wire transfer or check mailed first-class, postage prepaid to such Person's address as it appears on the Note Register on such Record Date; provided, however, that, with respect to Revolving Notes and with respect to Book-Entry Notes registered on the Record Date in the name of the Note Depository for which Definitive Term Notes have not been issued pursuant to Section 2.12, payment shall be made by wire transfer in immediately available funds to the account designated by such Holder, except for the final instalment of principal on any such Note and the Redemption Price for any Term Notes, if so called, which, in each case, shall be payable as provided herein. The funds represented by any such checks in respect of interest or principal returned undelivered shall be held in accordance with Section 3.3. (c) With respect to any Payment Date on which the final instalment of principal and interest on a series of Notes is to be paid, the Indenture Trustee shall notify each Noteholder of such series of Notes as of the Record Date for such Payment Date of the fact that the final instalment of principal of and interest on such Note is to be paid on such Payment Date. With respect to Book- Entry Notes for which Definitive Term Notes have not been issued, such notice shall be sent on the Business Day prior to such Payment Date by facsimile, and with respect to Definitive Term Notes and Revolving Notes, such notice shall be sent not later than three Business Days after such Record Date in accordance with Section 11.5(a), and, in each case, shall specify that such final instalment shall be payable only upon presentation and surrender of such Note and shall specify the place or places where such Note may be presented and surrendered for payment of such instalment. Notices in connection with redemptions of Term Notes shall be mailed to Noteholders as provided in Section 10.2. SECTION 2.8 Cancellation of Notes. All Notes surrendered for payment, redemption, exchange or registration of transfer shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever (other than for deposit in the Reserve Fund), and all Notes so delivered shall be promptly canceled by the Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 2.8, except as expressly permitted by this Indenture. All canceled Notes may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Order that they be returned to it; provided, however, that such Issuer Order is timely and the Notes have not been previously disposed of by the Indenture Trustee. The Indenture Trustee shall certify to the Issuer that surrendered Notes have been duly canceled and retained or destroyed, as the case may be. SECTION 2.9 Release of Collateral. The Indenture Trustee shall release property from the lien of this Indenture, other than as permitted by Sections 3.21, 8.2, 8.4 and 11.1, only upon receipt of an Issuer Request accompanied by an Officers' Certificate, an Opinion of Counsel and (to the extent required by the TIA) Independent Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1). SECTION 2.10 Book-Entry Notes. Unless otherwise provided in the applicable Officer's Issuance Certificate, each series of Term Notes, upon original issuance, shall be issued in the form of a typewritten Note or Notes representing the Book-Entry Notes, to be delivered to The Depository Trust Company, the initial Clearing Agency, by or on behalf of the Issuer and such Note or Notes shall be registered on the Note Register in the name of the Note Depository (initially, __________). No Note Owner shall receive a Definitive Term Note representing such Note Owner's interest in such Note, except as provided in Section 2.12. Unless and until Definitive Term Notes with respect to such Notes have been issued to such Note Owners pursuant to Section 2.12, with respect to such Notes: (a) the provisions of this Section 2.10 shall be in full force and effect; (b) the Note Registrar and the Indenture Trustee shall be entitled to deal with the Clearing Agency for all purposes of this Indenture (including the payment of principal of and interest on such Notes and the giving of instructions or directions hereunder) as the sole Holder of such Notes and shall have no obligation to the Note Owners; (c) to the extent that the provisions of this Section 2.10 conflict with any other provisions of this Indenture, the provisions of this Section 2.10 shall control; (d) the rights of the Note Owners shall be exercised only through the Clearing Agency and shall be limited to those rights established by law and agreements between such Note Owners and the Clearing Agency and/or the Clearing Agency Participants, and unless and until Definitive Term Notes are issued pursuant to Section 2.12, the initial Clearing Agency shall make book-entry transfers between the Clearing Agency Participants and receive and transmit payments of principal of and interest on such Notes to such Clearing Agency Participants, pursuant to the Note Depository Agreement; and (e) whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Holders of Notes evidencing a specified percentage of the Outstanding Amount of the Notes, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has (i) received written instructions to such effect from Note Owners and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Notes and (ii) delivered such instructions to the Indenture Trustee. SECTION 2.11 Notices to Clearing Agency. With respect to any Term Notes issued as Book-Entry Notes, whenever a notice or other communication to the Noteholders is required under this Indenture, unless and until Definitive Term Notes representing such Term Notes shall have been issued to the related Note Owners pursuant to Section 2.12, the Indenture Trustee shall give all such notices and communications specified herein to be given to the related Noteholders to the Clearing Agency and shall have no other obligation to such Note Owners. SECTION 2.12 Definitive Term Notes. If for any Term Notes issued as Book-Entry Notes (i) the Administrator advises the Indenture Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to such Notes and the Issuer is unable to locate a qualified successor; (ii) the Administrator, at its option, advises the Indenture Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency; or (iii) after the occurrence of an Event of Default or a Servicing Default, Note Owners representing beneficial interests aggregating at least a majority of the Outstanding Amount of such Notes advise the Clearing Agency in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of such Note Owners, then the Clearing Agency shall notify all Note Owners and the Indenture Trustee of the occurrence of any such event and of the availability of Definitive Term Notes to such Note Owners requesting the same. Upon surrender to the Indenture Trustee of the typewritten Note or Notes representing such Book-Entry Notes by the Clearing Agency, accompanied by registration instructions, the Issuer shall execute and the Authentication Agent shall authenticate the related Definitive Term Notes in accordance with the instructions of the Clearing Agency within 60 days of the occurrence of the relevant event. None of the Issuer, the Note Registrar or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of such Definitive Term Notes, the Indenture Trustee shall recognize the Holders of such Definitive Term Notes as Noteholders. The terms and conditions of any affected series of Notes, the Indenture, the related Officer's Issuance Certificate and any related paying agent agreement or related document shall be amended in such manner as the Indenture Trustee reasonably requires to take account of the issue of such Definitive Term Notes. The manner of the issuance of such Definitive Term Notes, for any series may be subject to such additional or different provisions as are specified in the related Officer's Issuance Certificate. SECTION 2.13 Seller as Noteholder. The Seller in its individual or any other capacity may become the owner or pledgee of Notes of any series and may otherwise deal with the Issuer or its affiliates with the same rights it would have if it were not the Seller. SECTION 2.14 Tax Treatment. The Issuer and the Indenture Trustee, by entering into this Indenture, and the Noteholders and the Note Owners, by acquiring any Note or interest therein, (i) express their intention that the Notes qualify under applicable tax law as indebtedness secured by the Collateral and (ii) unless otherwise required by appropriate taxing authorities, agree to treat the Notes as indebtedness secured by the Collateral for the purpose of federal income, state and local income and franchise taxes, [ ] single business tax, and any other taxes imposed upon, measured by or based upon gross or net income. SECTION 2.15 Special Terms Applicable to Subsequent Transfers of Certain Notes. (a) The Revolving Notes will not, and certain series of Term Notes may not, be registered under the Securities Act, or the securities laws of any other jurisdiction. Consequently, such Notes (the "Unregistered Notes") are not transferable other than pursuant to an exemption from the registration requirements of the Securities Act and satisfaction of certain other provisions specified herein or in the related Officer's Issuance Certificate. Unless otherwise provided in the related Officer's Issuance Certificate, no sale, pledge or other transfer of any Unregistered Note (or interest therein) after the date thereof may be made by any Person unless either (i) such sale, pledge or other transfer is made to a "qualified institutional buyer" (as defined under Rule 144A under the Securities Act) or to an institutional investor that is an "accredited investor" (as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and, if so requested by the Seller or the Indenture Trustee, such proposed transferee executes and delivers a certificate, substantially in the form attached hereto as Exhibit A or otherwise in form and substance satisfactory to the Indenture Trustee and the Seller, (ii) such sale, pledge or other transfer occurs outside of the United States to a non- United States Person in accordance with Regulation S of the Securities Act, or (iii) such sale, pledge or other transfer is otherwise made in a transaction exempt from the registration requirements of the Securities Act, in which case (A) the Indenture Trustee shall require that both the prospective transferor and the prospective transferee certify to the Indenture Trustee and the Seller in writing the facts surrounding such transfer, which certification shall be in form and substance satisfactory to the Indenture Trustee and the Seller, and (B) the Indenture Trustee shall require a written opinion of counsel (which shall not be at the expense of the Seller, the Servicer or the Indenture Trustee) satisfactory to the Seller and the Indenture Trustee to the effect that such transfer will not violate the Securities Act. Unless otherwise provided in the related Officer's Issuance Certificate, no sale, pledge or other transfer of any Revolving Note that is an Unregistered Note (or interest therein) may be made by any Person unless the Seller shall have consented in writing to such transfer. Neither the Seller nor the Indenture Trustee shall be obligated to register any Unregistered Notes under the Securities Act, qualify any Unregistered Notes under the securities laws of any state or provide registration rights to any purchaser or holder thereof. (b) Unless otherwise provided in the related Officer's Issuance Certificate, the Unregistered Notes may not be acquired by or for the account of a Benefit Plan and, by accepting and holding an Unregistered Note, the Holder thereof shall be deemed to have represented and warranted that it is not a Benefit Plan and, if requested to do so by the Seller or the Indenture Trustee, the Holder of an Unregistered Note shall execute and deliver to the Indenture Trustee an Undertaking Letter in the form set forth in Exhibit B. (c) Unless otherwise provided in the related Officer's Issuance Certificate, Unregistered Notes shall be issued in the form of Definitive Notes, shall be in fully registered form and Sections 2.10, 2.11 and 2.12 of this Indenture shall not apply thereto. (d) Each Unregistered Note shall bear legends to the effect set forth in subsections (a) and (b) (if subsection (b) is applicable) above. SECTION 2.16 CUSIP Numbers. The Issuer in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption, if any, as a convenience to Holders; provided that such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other indemnification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer will promptly notify the Indenture Trustee of any change in the "CUSIP" numbers. ARTICLE III COVENANTS SECTION 3.1 Payment of Principal and Interest. The Issuer shall duly and punctually pay the principal of and interest on the Notes in accordance with the terms of the Notes and this Indenture. On each date on which any payments are to be made, the Issuer or the Paying Agent, as applicable, shall cause amounts on deposit in the applicable Term Note Distribution Account and Revolver Distribution Account to be paid to the Term Noteholders and Revolving Noteholders, respectively, in accordance with the terms of the Notes and this Indenture, less amounts properly withheld under the Code or the laws of any applicable foreign jurisdiction by any Person from a payment to any Noteholder of interest and/or principal. Any amounts so withheld shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture. SECTION 3.2 Maintenance of Agency Office. As long as any of the Notes remains outstanding, unless otherwise specified in the Officer's Issuance Certificate, the Issuer shall maintain in the Borough of Manhattan, the City of New York, an office (the "Agency Office"), being an office or agency where Notes may be surrendered to the Issuer for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. Unless another person shall otherwise be appointed in the Officer's Issuance Certificate, the Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the foregoing purposes. The Issuer shall give prompt written notice to the Indenture Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office of the Indenture Trustee, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders, notices and demands. SECTION 3.3 Money for Payments To Be Held in Trust. (a) All payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the applicable Term Note Distribution Account or Revolver Distribution Account pursuant to the applicable Officer's Issuance Certificate shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the applicable Term Note Distribution Account or the Revolver Distribution Account for payments of Term Notes or Revolving Notes, respectively, shall be paid over to the Issuer except as provided in this Section 3.3. (b) On or before each date on which payments are to be made or the Redemption Date (if applicable), the Issuer shall deposit or cause to be deposited in the applicable Term Note Distribution Account and the Revolver Distribution Account (including pursuant to Section 4.5 of the Trust Sale and Servicing Agreement) aggregate sums sufficient to pay the amounts then becoming due with respect to the Term Notes and Revolving Notes, respectively, such sums to be held in trust for the benefit of the Persons entitled thereto. (c) The Issuer shall cause each Paying Agent, other than the Indenture Trustee, to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section 3.3, that such Paying Agent shall: (i) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided; (ii) give the Indenture Trustee notice of any default by the Issuer (or any other obligor upon the Notes) of which it has actual knowledge in the making of any payment required to be made with respect to the Notes; (iii) at any time during the continuance of any such default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent; (iv) immediately resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent in effect at the time of determination; and (v) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. (d) The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money. (e) Subject to applicable laws with respect to escheat of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for one year after such amount has become due and payable shall be discharged from such trust and be paid by the Indenture Trustee to the Issuer; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; provided, however, that the Indenture Trustee or such Paying Agent, before being required to make any such payment, may at the expense of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining shall be paid to the Issuer. The Indenture Trustee may also adopt and employ, at the expense of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Holders whose Notes have been called but have not been surrendered for redemption or whose right to or interest in monies due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder). SECTION 3.4 Existence. The Issuer shall keep in full effect its existence, rights and franchises as a business trust under the laws of the State of _________ (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other State or of the United States of America, in which case the Issuer shall keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and shall obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be most effective to protect the validity and enforceability of this Indenture, the Notes, the Collateral and each other instrument or agreement included in the Trust Estate. SECTION 3.5 Protection of Trust Estate; Acknowledgment of Pledge. (a) The Issuer shall from time to time execute and deliver all such supplements and amendments hereto and all such financing statements, amendments thereto, continuation statements, assignments, certificates, instruments of further assurance and other instruments, and shall take such other action necessary or advisable to: (i) maintain or preserve the lien and security interest (and the priority thereof) of this Indenture or carry out more effectively the purposes hereof, including by making the necessary filings of financing statements or amendments thereto within sixty days after the occurrence of any of the following: (A) any change in the Issuer's name, (B) any change in the location of the Issuer's principal place of business, (C) any merger or consolidation or other change in the Issuer's identity or organizational structure and by promptly notifying the Indenture Trustee of any such filings and (D) any other change or occurrence that would make any financing statement or amendment seriously misleading within the meaning of Section 9-402(7) of the UCC; (ii) perfect, publish notice of or protect the validity of any grant of a security interest made or to be made by this Indenture; (iii) enforce the rights of the Indenture Trustee and the Noteholders in any of the Collateral; or (iv) preserve and defend title to the Trust Estate and the rights of the Indenture Trustee and the Noteholders in such Trust Estate against the claims of all Persons and parties, and the Issuer hereby designates the Indenture Trustee its agent and attorney-in-fact to execute any financing statement, continuation statement or other instrument required pursuant to this Section 3.5. (b) The Indenture Trustee acknowledges the pledge by the Seller to the Indenture Trustee pursuant to Section 4.6(c) of the Trust Sale and Servicing Agreement of all of the Seller's right, title and interest in and to the Reserve Accounts in order to provide for the payment to the Noteholders, the Certificateholders and the Servicer in accordance with Section 4.5(c) and (d) of the Trust Sale and Servicing Agreement, to assure availability of the amounts maintained in the ________ Reserve Funds for the benefit of the Noteholders, the Certificateholders and the Servicer, and as security for the performance by the Seller of its obligations under the Trust Sale and Servicing Agreement. SECTION 3.6 Opinions as to Trust Estate. (a) On the Initial Closing Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto and any other requisite documents, and with respect to the execution and filing of any financing statements and continuation statements as are necessary to perfect and make effective the lien and security interest of this Indenture and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make such lien and security interest effective. (b) On or before ____________ in each calendar year, beginning _______, _____, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements as is necessary to maintain the lien and security interest created by this Indenture and reciting the details of such action or stating that in the opinion of such counsel no such action is necessary to maintain the lien and security interest created by this Indenture. Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any financing statements and continuation statements that will, in the opinion of such counsel, be required to maintain the lien and security interest of this Indenture until __________ in the following calendar year. SECTION 3.7 Performance of Obligations; Servicing of Receivables. (a) The Issuer shall not take any action and shall use its reasonable efforts not to permit any action to be taken by others that would release any Person from any of such Person's material covenants or obligations under any instrument or agreement included in the Trust Estate or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as otherwise expressly provided in this Indenture, the Trust Sale and Servicing Agreement, the Pooling and Servicing Agreement, the Administration Agreement or such other instrument or agreement. (b) The Issuer may contract with other Persons to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee herein or in the Basic Documents or an Officers' Certificate of the Issuer shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer and the Administrator to assist the Issuer in performing its duties under this Indenture. (c) The Issuer shall punctually perform and observe all of its obligations and agreements contained in this Indenture, the Basic Documents and in the instruments and agreements included in the Trust Estate, including but not limited to filing or causing to be filed all UCC financing statements and continuation statements required to be filed under the terms of this Indenture, the Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement in accordance with and within the time periods provided for herein and therein. (d) If the Issuer shall have knowledge of the occurrence of a Servicing Default under the Trust Sale and Servicing Agreement, the Issuer shall promptly notify the Indenture Trustee and the Rating Agencies thereof, and shall specify in such notice the response or action, if any, the Issuer has taken or is taking with respect of such default. If a Servicing Default shall arise from the failure of the Servicer to perform any of its duties or obligations under the Trust Sale and Servicing Agreement or the Pooling and Servicing Agreement with respect to the Receivables in the Accounts in the Pool of Accounts, the Issuer and the Indenture Trustee shall take all reasonable steps available to them pursuant to the Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement to remedy such failure. SECTION 3.8 Negative Covenants. So long as any Notes are Outstanding, the Issuer shall not: (a) sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, except the Issuer may: (i) collect, liquidate, sell or otherwise dispose of the Trust's interest in Receivables (including Warranty Receivables, Administrative Receivables and Defaulted Receivables), (ii) make cash payments out of the Designated Accounts and the Certificate Distribution Account and (iii) take other actions, in each case as contemplated by the Basic Documents; (b) claim any credit on, or make any deduction from the principal or interest payable in respect of the Notes (other than amounts properly withheld from such payments (including, but not limited to, withholding tax) under the Code or applicable foreign or state law) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon any part of the Trust Estate; (c) voluntarily commence any insolvency, readjustment of debt, marshaling of assets and liabilities or other proceeding, or apply for an order by a court or agency or supervisory authority for the winding-up or liquidation of its affairs or any other event specified in Section 5.1(f); or (d) either (i) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien of this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, (ii) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the Trust Estate or any part thereof or any interest therein or the proceeds thereof (other than tax liens, mechanics' liens and other liens that arise by operation of law or as otherwise contemplated by the Basic Documents) or (iii) permit the lien of this Indenture not to constitute a valid first -priority security interest in the Trust Estate (other than with respect to any such tax, mechanics' or other lien). SECTION 3.9 Annual Statement as to Compliance. The Issuer shall deliver to the Indenture Trustee, on or before ________ of each year, beginning ______________, an Officer's Certificate signed by an Authorized Officer, dated as of ________ of such year, stating that: (a) a review of the activities of the Issuer during such fiscal year and of performance under this Indenture has been made under such Authorized Officer's supervision; and (b) to the best of such Authorized Officer's knowledge, based on such review, the Issuer has fulfilled in all material respects all of its obligations under this Indenture throughout such year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such Authorized Officer and the nature and status thereof. A copy of such certificate may be obtained by any Noteholder by a request in writing to the Issuer addressed to the Corporate Trust Office of the Indenture Trustee. SECTION 3.10 Consolidation, Merger, etc., of Issuer; Disposition of Trust Assets. (a) The Issuer shall not consolidate or merge with or into any other Person, unless: (i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States of America, or any State and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form satisfactory to the Indenture Trustee, the due and timely payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein; (ii) immediately after giving effect to such merger or consolidation, no Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction and such Person for each then outstanding series of Notes; (iv) any action as is necessary to maintain the lien and security interest created by this Indenture shall have been taken; and (v) the Issuer shall have delivered to the Indenture Trustee an Officers' Certificate and an Opinion of Counsel addressed to the Issuer, each stating: (A) that such consolidation or merger and such supplemental indenture comply with this Section 3.10; (B) that such consolidation or merger and such supplemental indenture shall have no material adverse tax consequence to the Issuer or any Noteholder or Certificateholder; and (C) that all conditions precedent herein provided for in this Section 3.10 have been complied with, which shall include any filing required by the Exchange Act. (b) Except as otherwise expressly permitted by this Indenture or the other Basic Documents, the Issuer shall not sell, convey, exchange, transfer or otherwise dispose of any material portion of the properties and assets included in the Trust Estate to any Person, unless: (i) the Person that acquires such properties or assets of the Issuer (A) shall be a United States citizen or a Person organized and existing under the laws of the United States of America or any State and (B) by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form satisfactory to the Indenture Trustee: (1) expressly assumes the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture (and so long as any Specified Support Arrangement is in effect, such Specified Support Arrangements and all related documents) on the part of the Issuer to be performed or observed, all as provided herein; (2) expressly agrees that all right, title and interest so sold, conveyed, exchanged, transferred or otherwise disposed of shall be subject and subordinate to the rights of Noteholders; (3) unless otherwise provided in such supplemental indenture, expressly agrees to indemnify, defend and hold harmless the Issuer against and from any loss, liability or expense arising under or related to this Indenture and the Notes; and (4) expressly agrees that such Person (or if a group of Persons, then one specified Person) shall make all filings with the Commission (and any other appropriate Person) required by the Exchange Act in connection with the Notes; (ii) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction and such Person for each then outstanding series of Notes; (iv) any action as is necessary to maintain the lien and security interest created by this Indenture shall have been taken; and (v) the Issuer shall have delivered to the Indenture Trustee an Officers' Certificate and an Opinion of Counsel addressed to the Issuer, each stating that: (A) such sale, conveyance, exchange, transfer or disposition and such supplemental indenture comply with this Section 3.10; (B) such sale, conveyance, exchange, transfer or disposition and such supplemental indenture have no material adverse tax consequence to the Issuer or to any Noteholders or Certificateholders; and (C) that all conditions precedent herein provided for in this Section 3.10 have been complied with, which shall include any filing required by the Exchange Act. SECTION 3.11 Successor or Transferee. (a) Upon any consolidation or merger of the Issuer in accordance with Section 3.10(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein. (b) Upon a conveyance or transfer of all the assets and properties of the Issuer pursuant to Section 3.10(b), the Issuer shall be released from every covenant and agreement of this Indenture to be observed or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Indenture Trustee from the Person acquiring such assets and properties stating that the Issuer is to be so released. SECTION 3.12 No Other Business. The Issuer shall not engage in any business or activity other than acquiring, holding and managing the Collateral and the proceeds therefrom in the manner contemplated by the Basic Documents, issuing the Notes and the Certificates, making payments on the Notes and the Certificates and such other activities that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto, as set forth in Section 2.3 of the Trust Agreement, including entering into and making payments under any Specified Support Arrangements. SECTION 3.13 No Borrowing. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness for money borrowed other than indebtedness for money borrowed in respect of the Notes or in accordance with the Basic Documents. SECTION 3.14 Guarantees, Loans, Advances and Other Liabilities. Except as contemplated by this Indenture or the other Basic Documents, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person. SECTION 3.15 Servicer's Obligations. The Issuer shall use its best efforts to cause the Servicer to comply with its obligations under Section 3.05 of the Pooling and Servicing Agreement and Sections 4.1, 4.2 and 4.8 of the Trust Sale and Servicing Agreement. SECTION 3.16 Capital Expenditures. The Issuer shall not make any expenditure (whether by long-term or operating lease or otherwise) for capital assets (either real, personal or intangible property) other than the purchase of the Receivables and other property and rights from the Seller on the Initial Closing Date and from time to time thereafter pursuant to the Trust Sale and Servicing Agreement. SECTION 3.17 Removal of Administrator. So long as any Notes are Outstanding, the Issuer shall not remove the Administrator without cause unless the Rating Agency Condition for each series of Notes then outstanding shall have been satisfied in connection with such removal. SECTION 3.18 Restricted Payments. Except for payments of principal or interest on or redemption of the Notes, so long as any Notes are Outstanding, the Issuer shall not, directly or indirectly: (a) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuer or otherwise, in each case with respect to any ownership or equity interest or similar security in or of the Issuer or to the Servicer; (b) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or similar security; or (c) set aside or otherwise segregate any amounts for any such purpose; provided, however, that the Issuer may make, or cause to be made, distributions to the Servicer, the Seller, the Indenture Trustee, the Owner Trustee and the Certificateholders as permitted by, and to the extent funds are available for such purpose under, the Trust Sale and Servicing Agreement, the Trust Agreement or the other Basic Documents. The Issuer shall not, directly or indirectly, make payments to or distributions from the Collection Account or any other Designated Account except in accordance with the Basic Documents. SECTION 3.19 Notice of Events of Default. The Issuer agrees to give the Indenture Trustee and the Rating Agencies written notice of each Event of Default hereunder, each Servicing Default, any Insolvency Event with respect to the Seller, each default on the part of the Seller or the Servicer of its respective obligations under the Trust Sale and Servicing Agreement and each default on the part of the Original Seller or the Servicer of its respective obligations under the Pooling and Servicing Agreement, in each case promptly after the discovery thereof by the Issuer. SECTION 3.20 Further Instruments and Acts. Upon request of the Indenture Trustee, the Issuer shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 3.21 Trustee's Assignment of Interests in Certain Receivables. The Indenture Trustee shall assign, without recourse, representation or warranty, to the Servicer, the Original Seller or the Seller, as the case may be, all of the Indenture Trustee's right, title and interest in and to any Receivable assigned by the Issuer to the Servicer, the Original Seller or the Seller, as applicable, pursuant to the Pooling and Servicing Agreement or the Trust Sale and Servicing Agreement (including, without limitation, Section 9.3 thereof) (in each case, to the extent so assigned and upon the receipt of any related payment, if applicable), such assignment being an assignment outright and not for security; and the Servicer, the Original Seller or the Seller, as applicable, shall thereupon own the interest purchased in such Receivable, free of any further obligation to the Indenture Trustee, the Noteholders or the Certificateholders with respect thereto. If in any enforcement suit or legal proceeding it is held that the Servicer may not enforce a Receivable on the ground that it is not a real party in interest or a holder entitled to enforce such Receivable, the Indenture Trustee shall, at the Servicer's expense, take such steps as the Servicer deems necessary to enforce the Receivable, including bringing suit in the Indenture Trustee's name or the names of the Noteholders or the Certificateholders. SECTION 3.22 Representations and Warranties by the Issuer to the Indenture Trustee. The Issuer hereby represents and warrants to the Indenture Trustee as follows: (a) Good Title. No interest in any Receivable conveyed to the Issuer has been sold, transferred, assigned or pledged by the Issuer to any Person other than the Indenture Trustee; immediately prior to the conveyance of such Receivables pursuant to this Indenture, the Issuer had good and marketable title thereto, free of any Lien; and, upon execution and delivery of this Indenture by the Issuer, the Indenture Trustee shall have all of the right, title and interest of the Issuer in, to and under such Receivables, free of any Lien; and (b) All Filings Made. All filings (including, without limitation, UCC filings) necessary in any jurisdiction to give the Indenture Trustee, upon the acquisition by the Issuer of any Eligible Receivable, a first priority perfected security interest in such Eligible Receivable have been made. ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect with respect to the Notes except as to: (i) rights of registration of transfer and exchange; (ii) substitution of mutilated, destroyed, lost or stolen Notes; (iii) rights of Noteholders to receive payments of principal thereof and interest thereon; (iv) Sections 3.3, 3.4, 3.5, 3.8, 3.10, 3.12, 3.13, 3.19 and 3.21; (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.7 and the obligations of the Indenture Trustee under Sections 4.2 and 4.4); and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them, and the Indenture Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, if: (a) either: (i) all Notes theretofore authenticated and delivered (other than (A) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.5 and (B) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 3.3) have been delivered to the Indenture Trustee for cancellation; or (ii) all Notes not theretofore delivered to the Indenture Trustee for cancellation: (A) have become due and payable, (B) will be due and payable on their respective Stated Final Payment Dates within one year, or (C) are to be called for redemption within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name, and at the expense, of the Issuer, and the Issuer, in the case of (A), (B) or (C) of subsection 4.1(a)(ii) above, has irrevocably deposited or caused to be irrevocably deposited with the Indenture Trustee cash or direct obligations of or obligations guaranteed by the United States of America (which will mature prior to the date such amounts are payable), in trust for such purpose, in an amount sufficient to pay and discharge the entire unpaid principal and accrued interest on such Notes not theretofore delivered to the Indenture Trustee for cancellation when due; (b) the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and (c) the Issuer has delivered to the Indenture Trustee an Officer's Certificate of the Issuer, an Opinion of Counsel and (if required by the TIA or the Indenture Trustee) an Independent Certificate from a firm of certified public accountants, each meeting the applicable requirements of Section 11.1(a) and each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. SECTION 4.2 Application of Trust Money. All monies deposited with the Indenture Trustee pursuant to Section 4.1 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture and the applicable provisions of the Trust Sale and Servicing Agreement, including without limitation Section 4.5 thereof, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Notes for the payment or redemption of which such monies have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal and interest; but such monies need not be segregated from other funds except to the extent required herein or in the Trust Sale and Servicing Agreement or by applicable law. SECTION 4.3 Repayment of Monies Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture with respect to each series of Notes, all monies then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture with respect to all such Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 3.3 and thereupon such Paying Agent shall be released from all further liability with respect to such monies. SECTION 4.4 Duration of Position of Indenture Trustee. Notwithstanding the earlier payment in full of all principal and interest due to all Noteholders under the terms of the Notes of each series and the cancellation of such Notes pursuant to Section 3.1, the Indenture Trustee shall continue to act in the capacity as Indenture Trustee hereunder and, for the benefit of the Certificateholders, shall comply with its obligations under Sections 6.1(a), 8.2 and 8.3 of the Trust Sale and Servicing Agreement, as appropriate, until such time as all distributions in respect of Certificate Balance and interest due to the Certificateholders have been paid in full. ARTICLE V DEFAULT AND REMEDIES SECTION 5.1 Events of Default. For the purposes of this Indenture, "Event of Default" wherever used herein, means any one of the following events: (a) failure to pay any interest on any Note as and when the same becomes due and payable, and such default shall continue unremedied for a period of five (5) days; or (b) except as set forth in Section 5.1(c), failure to pay any installment of the principal of any Note as and when the same becomes due and payable, and such default continues unremedied for a period of thirty (30) days after there shall have been given, by registered or certified mail, written notice thereof to the Servicer by the Indenture Trustee or to the Servicer and the Indenture Trustee by the Holders of not less than 25% of the Outstanding Amount of the Notes, a written notice specifying such default and demanding that it be remedied and stating that such notice is a "Notice of Default" hereunder; or (c) failure to pay in full the Outstanding Amount attributable to any series of Notes on or prior to the Stated Final Payment Date for such series; or (d) default in the observance or performance in any material respect of any covenant or agreement of the Issuer made in this Indenture (other than a covenant or agreement, a default in the observance or performance of which is specifically dealt with elsewhere in this Section 5.1) which failure materially and adversely affects the rights of the Noteholders, and such default shall continue or not be cured for a period of 30 days after there shall have been given, by registered or certified mail, to the Issuer and the Seller (or the Servicer, as applicable) by the Indenture Trustee or to the Issuer and the Seller (or the Servicer, as applicable) and the Indenture Trustee by the Holders of at least 25% of the Outstanding Amount of the Notes, a written notice specifying such default and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) the filing of an order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Trust Estate in an involuntary case under the Bankruptcy Code, and such order shall have continued undischarged or unstayed for a period of 90 days; or the filing of a decree or order by a court having jurisdiction in the premises approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of the Issuer under any other Insolvency Law, and such decree or order shall have continued undischarged or unstayed for a period of 90 days; or the filing of a decree or order of a court having jurisdiction in the premises appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or ordering the winding-up or liquidation of the Issuer's affairs, and such decree or order shall have continued undischarged and unstayed for a period of 90 consecutive days; or (f) the commencement by the Issuer of a voluntary case under the Bankruptcy Code; or the filing of a petition or answer or consent by the Issuer seeking reorganization, arrangement, adjustment or composition under any other Insolvency Law, or consent to the filing of any such petition, answer or consent; or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or the making by the Issuer of an assignment for the benefit of creditors, or the admission in writing of its inability to pay its debts generally as such debts become due; or (g) any other event designated as such in an Officer's Issuance Certificate. The Issuer shall deliver to the Indenture Trustee within five Business Days after learning of the occurrence thereof, written notice in the form of an Officer's Certificate of any event which with the giving of notice and the lapse of time would become an Event of Default under Section 5.1(d), its status and what action the Issuer is taking or proposes to take with respect thereto. SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. (a) If an Event of Default should occur and be continuing, then and in every such case, unless the principal amount of the Notes shall have already become due and payable, either the Indenture Trustee or the Holders of Notes representing not less than a majority of the Outstanding Amount of the Notes may declare all the Notes to be immediately due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee if given by the Noteholders) setting forth the Event or Events of Default, and upon any such declaration the unpaid principal amount of such Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable. (b) At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter provided in this Article V, the Holders of Notes representing a majority of the Outstanding Amount of the Notes, by written notice to the Issuer and the Indenture Trustee, may rescind and annul such declaration and its consequences; provided, however, that no such rescission and annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereto; and provided, further, that if the Indenture Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission and annulment or for any other reason, or shall have been determined adversely to the Indenture Trustee, then and in every such case, the Indenture Trustee, the Issuer and the Noteholders, as the case may be, shall be restored to their respective former positions and rights hereunder, and all rights, remedies and powers of the Indenture Trustee, the Issuer and the Noteholders, as the case may be, shall continue as though no such proceedings had been commenced. SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Indenture Trustee. (a) The Issuer covenants that if there shall occur an Event of Default under Sections 5.1(a), (b) or (c) that has not been waived pursuant to Section 5.12, then the Issuer shall, upon demand of the Indenture Trustee, pay to the Indenture Trustee, for the ratable benefit of the parties to receive such amounts pursuant to the terms of this Indenture, the entire amount then due and payable on the Notes for principal and interest, with interest upon the overdue principal for each series of Notes, at the rate borne by such Notes and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel, with all such amounts applied as described in clause SECOND of Section 5.4(b). (b) If the Issuer shall fail forthwith to pay such amounts upon such demand, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or other obligor upon such Notes and collect in the manner provided by law out of the property of the Issuer or other obligor upon such Notes, wherever situated, the monies adjudged or decreed to be payable. (c) If an Event of Default occurs and is continuing, the Indenture Trustee may, as more particularly provided in Section 5.4, in its discretion, proceed to protect and enforce its rights and the rights of the Noteholders, by such appropriate Proceedings as the Indenture Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture or by applicable law. (d) If there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Trust Estate, Proceedings under any Insolvency Law, or if a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Indenture Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section 5.3, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor trustee, except as a result of negligence or bad faith) and of the Noteholders allowed in such Proceedings; (ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of Notes in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings; (iii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Indenture Trustee on their behalf; and (iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders of Notes allowed in any judicial proceedings relative to the Issuer, its creditors and its property; and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Indenture Trustee for application in accordance with the priorities set forth in the Basic Documents, and, if the Indenture Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor trustee except as a result of negligence or bad faith. (e) Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person. (f) All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any trial or other Proceedings relative thereto, and any such Proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor trustee and their respective agents and attorneys, shall be for the ratable benefit of the Noteholders. (g) In any Proceedings brought by the Indenture Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all the Noteholders, and it shall not be necessary to make any Noteholder a party to any such Proceedings. SECTION 5.4 Remedies; Priorities. (a) If an Event of Default shall have occurred and be continuing and the Notes have been accelerated under Section 5.2(a), the Indenture Trustee may (but shall not be required to) do one or more of the following (subject to Section 5.5): (i) institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then due and payable on the Notes or under this Indenture with respect thereto, whether by declaration of acceleration or otherwise, enforce any judgment obtained, and collect from the Issuer and any other obligor upon such Notes monies adjudged due; (ii) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Trust Estate; (iii) exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee and the Noteholders; and (iv) sell the Trust Estate or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law or elect to have the Issuer maintain possession of the Trust Estate, including the Receivables included therein, and continue to apply Collections on such Receivables as if there had been no declaration of acceleration; provided, however, that the Indenture Trustee may not sell or otherwise liquidate the Trust Estate following an Event of Default and acceleration of the Notes, unless (A) the Holders of all of the aggregate Outstanding Amount of the Notes and the Holders of Certificates representing all of the Voting Interests consent thereto, (B) the proceeds of such sale or liquidation distributable to the Securityholders are sufficient to discharge in full the principal of and the accrued interest on the Notes and the Certificate Balance of and accrued interest on the Certificates, in each case as of the date of such sale or liquidation or (C) (i) there has been an Event of Default under Section 5.1(a), (b) or (c) or otherwise arising from a failure to make a required payment of principal on any Notes, (ii) the Indenture Trustee determines that the Trust Estate will not continue to provide sufficient funds for the payment of principal of and interest on the Notes as and when they would have become due if the Notes had not been declared due and payable and (iii) the Indenture Trustee obtains the consent of Holders of a majority of the aggregate Outstanding Amount of the Notes. In determining such sufficiency or insufficiency with respect to clauses (B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. (b) If the Indenture Trustee collects any money or property pursuant to this Article V, it shall pay out the money or property in the following order: FIRST: to the Indenture Trustee for amounts due under Section 6.7; and SECOND: to the Collection Account for distribution pursuant to Section 4.5 of the Trust Sale and Servicing Agreement, with such amounts being deemed to be Available Trust Principal and Available Trust Interest in the same proportion as the outstanding principal balance of the Notes bears to the accrued and unpaid interest on the Notes (and, if any series of Notes has Specified Support Arrangements, the amount unpaid under such Specified Support Arrangement). SECTION 5.5 Optional Preservation of the Trust Estate. If the Notes have been declared to be due and payable under Section 5.2 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to take and maintain possession of the Trust Estate. It is the desire of the parties hereto and the Noteholders that there be at all times sufficient funds for the payment of principal of and interest on the Notes, and the Indenture Trustee shall take such desire into account when determining whether or not to take and maintain possession of the Trust Estate. In determining whether to take and maintain possession of the Trust Estate, the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. SECTION 5.6 Limitation of Suits. No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a) such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default; (b) the Holders of not less than 25% of the Outstanding Amount of the Notes have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder; (c) such Holder or Holders have offered to the Indenture Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in complying with such request; (d) the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and (e) no written direction inconsistent with such written request has been given to the Indenture Trustee during such 60-day period by the Holders of a majority of the Outstanding Amount of the Notes; it being understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders of Notes or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Notes. For the protection and enforcement of the provisions of this Section 5.6, each and every Noteholder shall be entitled to such relief as can be given either at law or in equity. If the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes, each representing less than a majority of the Outstanding Amount of the Notes, the Indenture Trustee in its sole discretion may determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture. SECTION 5.7 Rights of Noteholders To Receive Principal and Interest. Notwithstanding any other provisions in this Indenture, the Holders of Notes shall have the right to receive payment of the principal of and interest on such Notes, as allocated to it under the Trust Sale and Servicing Agreement and applicable Officer's Issuance Certificate, on or after the respective due dates thereof expressed in such Notes or in this Indenture (or, in the case of redemption, if applicable, on or after the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holders. SECTION 5.8 Restoration of Rights and Remedies. If the Indenture Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Noteholder, then and in every such case the Issuer, the Indenture Trustee and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and to their respective former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders shall continue as though no such Proceeding had been instituted. SECTION 5.9 Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.10 Delay or Omission Not a Waiver. No delay or omission of the Indenture Trustee or any Holder of any Note to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be. SECTION 5.11 Control by Noteholders. The Holders of a majority of the Outstanding Amount of the Notes shall, subject to provision being made for indemnification against costs, expenses and liabilities in a form satisfactory to the Indenture Trustee, have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Notes or exercising any trust or power conferred on the Indenture Trustee; provided, however, that: (a) such direction shall not be in conflict with any rule of law or with this Indenture; (b) subject to the express terms of Section 5.4, any direction to the Indenture Trustee to sell or liquidate the Trust Estate shall be by the Holders of Notes representing not less than 100% of the Outstanding Amount of the Notes; (c) if the conditions set forth in Section 5.5 have been satisfied and the Indenture Trustee elects to retain the Trust Estate pursuant to Section 5.5, then any direction to the Indenture Trustee by Holders of Notes representing less than 100% of the Outstanding Amount of the Notes to sell or liquidate the Trust Estate shall be of no force and effect; and (d) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction; provided, however, that, subject to Section 6.1, the Indenture Trustee need not take any action that it determines might cause it to incur any liability (y) with respect to which the Indenture Trustee shall have reasonable grounds to believe that adequate indemnity against such liability is not assured to it and (z) which might materially adversely affect the rights of any Noteholders not consenting to such action. SECTION 5.12 Waiver of Past Defaults. (a) Prior to the declaration of the acceleration of the maturity of the Notes as provided in Section 5.2, the Holders of not less than a majority of the Outstanding Amount of the Notes may waive any past Default or Event of Default and its consequences except a Default (i) in the payment of principal of or interest on any of the Notes or (ii) in respect of a covenant or provision hereof that cannot be modified or amended without the consent of the Holder of each such Note. In the case of any such waiver, the Issuer, the Indenture Trustee and the Noteholders shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. (b) Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 5.13 Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any Proceeding for the enforcement of any right or remedy under this Indenture, or in any Proceeding against the Indenture Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such Proceeding of an undertaking to pay the costs of such Proceeding, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such Proceeding, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.13 shall not apply to: (a) any Proceeding instituted by the Indenture Trustee; (b) any Proceeding instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of the Outstanding Amount of the Notes; or (c) any Proceeding instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date). SECTION 5.14 Waiver of Stay or Extension Laws. The Issuer covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture. The Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 5.15 Action on Notes. The Indenture Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Trust Estate or upon any of the assets of the Issuer. Any money or property collected by the Indenture Trustee shall be applied in accordance with Section 5.4(b) hereof. SECTION 5.16 Performance and Enforcement of Certain Obligations. (a) Promptly following a request from the Indenture Trustee to do so and at the Administrator's expense, the Issuer agrees to take all such lawful action as the Indenture Trustee may request to compel or secure the performance and observance by the Seller and the Servicer of their respective obligations to the Issuer under or in connection with the Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement or by the Original Seller of its obligations under or in connection with the Pooling and Servicing Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of default on the part of the Seller or the Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Seller or the Servicer of each of their obligations under the Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement. (b) If an Event of Default has occurred and is continuing, the Indenture Trustee may, and, at the direction (which direction shall be in writing or by telephone (confirmed in writing promptly thereafter)) of the Holders of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller or the Servicer under or in connection with the Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement, including the right or power to take any action to compel or secure performance or observance by the Seller or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Trust Sale and Servicing Agreement, and any right of the Issuer to take such action shall be suspended. (c) Promptly following a request from the Indenture Trustee to do so and at the Administrator's expense, the Issuer agrees to take all such lawful action as the Indenture Trustee may request to compel or secure the performance and observance by the Original Seller and the Servicer of each of their obligations to the Seller under or in connection with the Pooling and Servicing Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Pooling and Servicing Agreement to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of default on the part of the Seller thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Original Seller and the Servicer of each of their obligations under the Pooling and Servicing Agreement. (d) If an Event of Default has occurred and is continuing, the Indenture Trustee may, and, at the direction (which direction shall be in writing or by telephone (confirmed in writing promptly thereafter)) of the Holders of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights, remedies, powers, privileges and claims of the Seller against the Original Seller and the Servicer under or in connection with the Pooling and Servicing Agreement, including the right or power to take any action to compel or secure performance or observance by the Original Seller and the Servicer of each of their obligations to the Seller thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Pooling and Servicing Agreement, and any right of the Seller to take such action shall be suspended. ARTICLE VI THE INDENTURE TRUSTEE SECTION 6.1 Duties of Indenture Trustee. (a) If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs, including without limitation, continuing to hold the Trust Estate and receive collections on the Receivables included therein and provided in the Trust Sale and Servicing Agreement. (b) Except during the continuance of an Event of Default: (i) the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and the Trust Sale and Servicing Agreement and no implied covenants or obligations shall be read into this Indenture or the Trust Sale and Servicing Agreement against the Indenture Trustee; and (ii) in the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; provided, however, that the Indenture Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of any mathematical calculations or other facts stated therein). (c) The Indenture Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) this Section 6.1(c) does not limit the effect of Section 6.1(b); (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.11. (d) The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer. (e) Money held in trust by the Indenture Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture or the Trust Sale and Servicing Agreement or the Trust Agreement. (f) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayments of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (g) Every provision of this Indenture relating to the Indenture Trustee shall be subject to the provisions of this Section 6.1 and to the provisions of the TIA. SECTION 6.2 Rights of Indenture Trustee. (a) The Indenture Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Indenture Trustee need not investigate any fact or matter stated in the document. (b) Before the Indenture Trustee acts or refrains from acting, it may require an Officer's Certificate from the Issuer or an Opinion of Counsel that such action or omission is required or permitted hereunder. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate or Opinion of Counsel. (c) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder. (d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Indenture Trustee's conduct does not constitute wilful misconduct, negligence or bad faith. (e) The Indenture Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel (f) The Indenture Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Indenture Trustee security or indemnity satisfactory to the Indenture Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (g) The Indenture 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 direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Indenture Trustee, in its direction, may make such further inquiry or investigation into such facts or matters as it may see fit. (h) The Indenture Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Indenture Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Indenture Trustee at the Corporate Trust Office of the Indenture Trustee, and such notice references the Securities and this Indenture. (i) The rights, privileges, protections, immunities and benefits given to the Indenture Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Indenture Trustee in each of its capacities hereunder. SECTION 6.3 Indenture Trustee May Own Notes. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer, the Servicer or any of their respective Affiliates with the same rights it would have if it were not Indenture Trustee; provided, however, that the Indenture Trustee shall comply with Sections 6.10 and 6.11. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same with like rights. SECTION 6.4 Indenture Trustee's Disclaimer. The Indenture Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in the Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Indenture Trustee's certificate of authentication. SECTION 6.5 Notice of Defaults. If a Default occurs and is continuing and if it is known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall mail to each Noteholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Note, the Indenture Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Noteholders. SECTION 6.6 Reports by Indenture Trustee to Holders. The Indenture Trustee shall deliver to each Noteholder the information and documents set forth in Article VII, and, in addition, all such information with respect to the Notes as may be required by the terms of the Trust Sale and Servicing Agreement to be provided to Holders by the Indenture Trustee to enable such Holder to prepare its federal and state income tax returns. SECTION 6.7 Compensation; Indemnity. (a) The Issuer shall cause the Servicer pursuant to Section 3.03 of the Pooling and Servicing Agreement to pay to the Indenture Trustee from time to time such compensation for its services as shall be agreed upon in writing. The Indenture Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall cause the Servicer pursuant to Section 3.03 of the Pooling and Servicing Agreement to reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall cause the Servicer pursuant to the Trust Sale and Servicing Agreement to indemnify the Indenture Trustee in accordance with Section 7.1 of the Trust Sale and Servicing Agreement. (b) The Issuer's obligation to cause the Servicer to honor the Issuer's obligations to the Indenture Trustee specified in Section 6.7(a) shall survive the discharge of this Indenture. When the Indenture Trustee incurs expenses after the occurrence of a Default specified in Section 5.1(e) or (f) with respect to the Issuer, if the Servicer has failed to honor such obligation the expenses are intended to constitute expenses of administration under any Insolvency Law. SECTION 6.8 Replacement of Indenture Trustee. (a) The Indenture Trustee may at any time give notice of its intent to resign by so notifying the Issuer; provided, however, that no such resignation shall become effective and the Owner Trustee shall not resign prior to the time set forth in Section 6.8(c). The Holders of a majority in Outstanding Amount of the Notes may remove the Indenture Trustee by so notifying the Indenture Trustee and may appoint a successor Indenture Trustee. Such resignation or removal shall become effective in accordance with Section 6.8(c). The Issuer shall remove the Indenture Trustee if: (i) the Indenture Trustee fails to comply with Section 6.11; (ii) the Indenture Trustee is adjudged bankrupt or insolvent; (iii) a receiver or other public officer takes charge of the Indenture Trustee or its property; or (iv) the Indenture Trustee otherwise becomes incapable of acting. (b) If the Indenture Trustee gives notice of its intent to resign or is removed or if a vacancy exists in the office of Indenture Trustee for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee), the Issuer shall promptly appoint and designate a successor Indenture Trustee. (c) A successor Indenture Trustee shall deliver a written acceptance of its appointment and designation to the retiring Indenture Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee under this Indenture. The successor Indenture Trustee shall mail a notice of its succession to Noteholders. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee. (d) If a successor Indenture Trustee does not take office within 60 days after the retiring Indenture Trustee gives notice of its intent to resign or is removed, the retiring Indenture Trustee, the Issuer or the Holders of a majority of the Outstanding Amount of the Notes may petition any court of competent jurisdiction for the appointment and designation of a successor Indenture Trustee. (e) If the Indenture Trustee fails to comply with Section 6.11, any Noteholder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee. (f) Notwithstanding the replacement of the Indenture Trustee pursuant to this Section 6.8, the Issuer's obligations under Section 6.7 and the Servicer's corresponding obligations under the Trust Sale and Servicing Agreement shall continue for the benefit of the retiring Indenture Trustee. SECTION 6.9 Merger or Consolidation of Indenture Trustee. (a) Any corporation into which the Indenture Trustee may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Indenture Trustee, shall be the successor of the Indenture Trustee under this Indenture; provided, however, that such corporation shall be eligible under the provisions of Section 6.11, without the execution or filing of any instrument or any further act on the part of any of the parties to this Indenture, anything in this Indenture to the contrary notwithstanding. (b) If at the time such successor or successors by merger or consolidation to the Indenture Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Indenture Trustee. In all such cases such certificate of authentication shall have the same full force as is provided anywhere in the Notes or herein with respect to the certificate of authentication of the Indenture Trustee. SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture Trustee. (a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Issuer or any Dealer may at the time be located, the Indenture Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons approved by the Indenture Trustee to act as a co-trustee or co-trustees, jointly with the Indenture Trustee, or separate trustee or separate trustees, of all or any part of the Issuer, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders and (only to the extent expressly provided herein) the Certificateholders, such title to the Issuer, or any part hereof, and, subject to the other provisions of this Section 6.10, such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.11 and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 6.8. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Issuer or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (iii) the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee. (d) Any separate trustee or co-trustee may at any time appoint the Indenture Trustee as its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 6.11 Eligibility; Disqualification. The Indenture Trustee shall at all times satisfy the requirements of TIA ss. 310(a) and Section 26(a) of the Investment Company Act. The Indenture Trustee shall have a combined capital and surplus, and an aggregate capital, surplus and undivided profits, of at least $________________ as set forth in its most recent published annual report of condition and (unless waived by ________) it shall have a long term unsecured debt rating of ________ or better by ________. The Indenture Trustee shall comply with TIA ss. 310(b); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. SECTION 6.12 Preferential Collection of Claims Against Issuer. The Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. SECTION 6.13 Representations and Warranties of Indenture Trustee. The Indenture Trustee represents and warrants as of the Closing Date that: (a) the Indenture Trustee is a ________ banking corporation and the eligibility requirements set forth in Section 6.11 are satisfied with respect to the Indenture Trustee; (b) the Indenture Trustee has full power, authority and legal right to execute, deliver and perform this Indenture, and has taken all necessary action to authorize the execution, delivery and performance by it of this Indenture; (c) the execution, delivery and performance by the Indenture Trustee of this Indenture (i) shall not violate any provision of any law or regulation governing the banking and trust powers of the Indenture Trustee or any order, writ, judgment or decree of any court, arbitrator, or Governmental Authority applicable to the Indenture Trustee or any of its assets, (ii) shall not violate any provision of the corporate charter or by-laws of the Indenture Trustee or (iii) shall not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust Estate pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have a materially adverse effect on the Indenture Trustee's performance or ability to perform its duties under this Indenture or on the transactions contemplated in this Indenture; (d) the execution, delivery and performance by the Indenture Trustee of this Indenture shall not require the authorization, consent or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any Governmental Authority or agency regulating the banking and corporate trust activities of the Indenture Trustee; and (e) this Indenture has been duly executed and delivered by the Indenture Trustee and constitutes the legal, valid and binding agreement of the Indenture Trustee, enforceable in accordance with its terms. SECTION 6.14 Indenture Trustee May Enforce Claims Without Possession of Notes. All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Indenture Trustee shall be brought in its own name as Indenture Trustee. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, be for the ratable benefit of the Noteholders and (only to the extent expressly provided herein) the Certificateholders in respect of which such judgment has been obtained. SECTION 6.15 Suit for Enforcement. If an Event of Default shall occur and be continuing, the Indenture Trustee, in its discretion may, subject to the provisions of Section 6.1, proceed to protect and enforce its rights and the rights of the Noteholders under this Indenture by a Proceeding whether for the specific performance of any covenant or agreement contained in this Indenture or in aid of the execution of any power granted in this Indenture or for the enforcement of any other legal, equitable or other remedy as the Indenture Trustee, being advised by counsel, shall deem necessary to protect and enforce any of the rights of the Indenture Trustee or the Noteholders. SECTION 6.16 Rights of Noteholders to Direct Indenture Trustee. Holders of Notes evidencing not less than a majority of the Outstanding Amount of the Notes shall have the right to direct in writing the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee or exercising any trust or power conferred on the Indenture Trustee; provided, however, that subject to Section 6.1, the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, determines that the action so directed may not lawfully be taken, or if the Indenture Trustee in good faith shall, by a Responsible Officer, determine that the proceedings so directed would be illegal or subject it to personal liability or be unduly prejudicial to the rights of Noteholders not parties to such direction; and provided, further, that nothing in this Indenture shall impair the right of the Indenture Trustee to take any action deemed proper by the Indenture Trustee and which is not inconsistent with such direction by the Noteholders. ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses of Noteholders. The Issuer shall furnish or cause to be furnished by the Servicer to the Indenture Trustee (a) not more than five days before each date on which payments are to be made, a list, in such form as the Indenture Trustee may reasonably require, of the names and addresses of the Holders of Notes as of the close of business on the related Record Date, and (b) at such other times as the Indenture Trustee may request in writing, within 14 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 10 days prior to the time such list is furnished; provided, however, that so long as the Indenture Trustee is the Note Registrar, no such list shall be required to be furnished. SECTION 7.2 Preservation of Information, Communications to Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders of Notes contained in the most recent list furnished to the Indenture Trustee as provided in Section 7.1 and the names and addresses of Holders of Notes received by the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any list furnished to it as provided in such Section 7.1 upon receipt of a new list so furnished. (b) Noteholders may communicate pursuant to TIA ss. 312(b) with other Noteholders with respect to their rights under this Indenture or under the Notes. (c) The Issuer, the Indenture Trustee and the Note Registrar shall have the protection of TIA ss. 312(c). SECTION 7.3 Reports by Issuer. (a) The Issuer shall: (i) file with the Indenture Trustee, within 15 days after the Issuer is required to file the same with the Commission or any applicable state agencies, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Issuer may be required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act or any applicable state agencies pursuant to comparable regulation; (ii) file with the Indenture Trustee and the Commission or any applicable state agencies in accordance with rules and regulations prescribed from time to time by the Commission or any applicable state agencies such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (iii) supply to the Indenture Trustee (and the Indenture Trustee shall transmit by mail to all Noteholders described in TIA ss. 313(c)) such summaries of any information, documents and reports required to be filed by the Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) as may be required by rules and regulations prescribed from time to time by the Commission or any applicable state agencies. (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of such year. SECTION 7.4 Reports by Indenture Trustee. (a) If required by TIA ss. 313(a), within 60 days after each _________, beginning with ________, _______, the Indenture Trustee shall mail to each Noteholder as required by TIA ss. 313(c) a brief report dated as of such date that complies with TIA ss. 313(a). The Indenture Trustee also shall comply with TIA ss. 313(b). A copy of any report delivered pursuant to this Section 7.4(a) shall, at the time of its mailing to Noteholders, be filed by the Indenture Trustee with the Commission and each stock exchange, if any, on which the Notes are listed. The Issuer shall notify the Indenture Trustee if and when the Notes are listed on any stock exchange. (b) On each Payment Date, the Indenture Trustee shall include with each payment to each Noteholder a copy of the statement for the Collection Period or Periods applicable to such Payment Date as required pursuant to Section 4.8 of the Trust Sale and Servicing Agreement. ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.1 Collection of Money. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall apply all such money received by it as provided in this Indenture, the Pooling and Servicing Agreement and the Trust Sale and Servicing Agreement. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Trust Estate, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim an Event of Default under this Indenture and any right to proceed thereafter as provided in Article V. SECTION 8.2 Designated Accounts; Payments. (a) On or prior to the Closing Date, the Issuer shall cause the Servicer to establish and maintain, in the name of the Indenture Trustee, for the benefit of the Noteholders and the Certificateholders, the Designated Accounts as provided in Articles IV and VI of the Trust Sale and Servicing Agreement (or with respect to any Designated Account for any series of Notes issued after the Closing Date, on or prior to the closing date with respect to such series of Notes). (b) Notwithstanding anything to the contrary herein, all investment earnings on funds on deposit in the applicable Term Note Distribution Account and the Revolver Distribution Account, net of losses and investment expenses, shall constitute Investment Proceeds and be applied as described in the Trust Sale and Servicing Agreement. SECTION 8.3 General Provisions Regarding Designated Accounts. (a) Subject to Section 6.1(c), the Indenture Trustee shall not in any way be held liable by reason of any insufficiency in any of the Designated Accounts resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee's failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms. (b) If (i) the Servicer shall have failed to give investment directions for any funds on deposit in the Designated Accounts to the Indenture Trustee by 11:00 a.m., New York City time (or such other time as may be agreed by the Servicer and the Indenture Trustee) on any Business Day or (ii) an Event of Default shall have occurred and be continuing with respect to a series of Notes but the Notes shall not have been declared due and payable pursuant to Section 5.2, or, if such series of Notes shall have been declared due and payable following an Event of Default, but amounts collected or receivable from the Trust Estate are being applied in accordance with Section 5.5 as if there had not been such a declaration, then the Indenture Trustee shall, to the fullest extent practicable, invest and reinvest funds in the Designated Accounts in one or more Eligible Investments selected by the Indenture Trustee. SECTION 8.4 Release of Trust Estate. (a) Subject to the payment of its fees and expenses pursuant to Section 6.7, the Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the lien of this Indenture, or convey the Indenture Trustee's interest in the same, in a manner and under circumstances that are consistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article VIII shall be bound to ascertain the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any monies. (b) The Indenture Trustee shall, at such time as there are no Notes Outstanding and all sums due to the Indenture Trustee pursuant to Section 6.7 have been paid, notify the Issuer thereof in writing and upon receipt of an Issuer Request, release any remaining portion of the Trust Estate that secured the Notes from the lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds then on deposit in the applicable Term Note Distribution Account and the Revolver Distribution Account. The Indenture Trustee shall (i) release any remaining portion of the Trust Estate that secured the Certificates from the lien of this Indenture and (ii) release to the Issuer or any other Person entitled thereto any funds then on deposit in the ________ Reserve Fund or the Collection Account only at such time as (x) there are no Notes Outstanding, (y) all payments in respect of the Certificate Balance and interest due to the Certificateholders have been paid in full and (z) all sums due to the Indenture Trustee pursuant to Section 6.7 have been paid. SECTION 8.5 Opinion of Counsel. The Indenture Trustee shall receive at least seven days' notice when requested by the Issuer to take any action pursuant to Section 8.4(a), accompanied by copies of any instruments involved, and the Indenture Trustee shall also require as a condition to such action, an Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action shall not materially and adversely impair the security for the Notes or the rights of the Noteholders in contravention of the provisions of this Indenture; provided, however, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the Trust Estate. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee pursuant to the provisions of this Indenture in connection with any such action. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1 Supplemental Indentures Without Consent of Noteholders. (a) Without the consent of the Holders of any Notes but with prior notice to the Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee, for any of the following purposes: (i) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject additional property to the lien of this Indenture; (ii) to evidence the succession, in compliance with Section 3.10 and the applicable provisions hereof, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer contained herein and in the Notes; (iii) to add to the covenants of the Issuer for the benefit of the Noteholders; (iv) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee; (v) to cure any ambiguity or to correct or supplement any provision herein or in any supplemental indenture which may be inconsistent with any other provision herein or in any supplemental indenture; (vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Notes and the Indenture and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI; (vii) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar federal statute hereafter enacted and to add to this Indenture such other provisions as may be expressly required by the TIA, and the Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained; (viii) to increase or decrease the Specified Maximum Revolver Balance with respect to the Revolving Notes, subject to the satisfaction of the Rating Agency Condition, in the case of an increase, and the other conditions set forth in the Trust Sale and Servicing Agreement; or (ix) to add provisions to or delete or modify the existing provisions of this Indenture as appropriate to allow the Trust to issue foreign currency-denominated Notes, including without limitation adding provisions granting rights under this Indenture to counterparties of the currency swaps that may be entered into in connection with the issuance of such foreign currency-denominated Notes. (b) The Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Noteholders but with prior notice to the Rating Agencies, at any time and from time to time enter into one or more indentures supplemental hereto for the purpose of adding any provisions to, changing in any manner, or eliminating any of the provisions of, this Indenture or modifying in any manner the rights of the Noteholders under this Indenture; provided, however, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Noteholder. SECTION 9.2 Supplemental Indentures With Consent of Noteholders. (a) The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agencies and with the consent of the Holders of not less than a majority of the Outstanding Amount of the Notes, by Act of such Holders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, changing in any manner, or eliminating any of the provisions of, this Indenture or modifying in any manner the rights of the Noteholders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (i) change the due date of any instalment of principal of or interest on any Note, or reduce the principal amount thereof, the interest rate applicable thereto, or the Redemption Price with respect thereto, change any place of payment where, or the coin or currency in which, any Note or any interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article V, to the payment of any such amount due on the Notes on or after the respective due dates thereof (or, in the case of redemption, on or after the Redemption Date); (ii) reduce the percentage of the Outstanding Amount of the Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences as provided for in this Indenture; (iii) modify or alter the provisions of the proviso to the definition of the term "Outstanding"; (iv) reduce the percentage of the Outstanding Amount of the Notes required to direct the Indenture Trustee to sell or liquidate the Trust Estate pursuant to Section 5.4 if the proceeds of such sale would be insufficient to pay the principal amount of and accrued but unpaid interest on the Outstanding Notes; (v) modify any provision of this Section 9.2 to decrease the required minimum percentage necessary to approve any amendments to any provisions of this Indenture; (vi) modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date (including the calculation of any of the individual components of such calculation) (it being understood that the issuance of any Notes and the specification of the terms and provisions thereof pursuant to an Officer's Issuance Certificate shall not be deemed to have such effect for purposes hereof), or modify or alter the provisions of the Indenture regarding the voting of Notes held by the Issuer, the Seller or any Affiliate of either of them; or (vii) permit the creation of any Lien ranking prior to or on a parity with the lien of this Indenture with respect to any part of the Trust Estate or, except as otherwise permitted or contemplated herein, terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security afforded by the lien of this Indenture. (b) The Indenture Trustee may in its discretion determine whether or not any Notes would be affected (such that the consent of each Noteholder would be required) by any supplemental indenture proposed pursuant to this Section 9.2 and any such determination shall be conclusive and binding upon the Holders of all Notes, whether authenticated and delivered thereunder before or after the date upon which such supplemental indenture becomes effective. The Indenture Trustee shall not be liable for any such determination made in good faith. (c) It shall be sufficient if an Act of Noteholders approves the substance, but not the form, of any proposed supplemental indenture. (d) Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.2, the Indenture Trustee shall mail to the Noteholders to which such amendment or supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.3 Execution of Supplemental Indentures. In executing, or permitting the additional trusts created by any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and that all conditions precedent to the execution of any such amendment have been satisfied. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer and the Noteholders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.5 Conformity with Trust Indenture Act. Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article IX shall conform to the requirements of the TIA as then in effect so long as this Indenture shall then be qualified under the TIA. SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Issuer or the Indenture Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes of the same series. ARTICLE X REDEMPTION OF TERM NOTES SECTION 10.1 Redemption. A series of Term Notes shall be subject to redemption if and to the extent provided in the related Officer's Issuance Certificate. The purchase price for any Term Notes shall be equal to the applicable Redemption Price set forth in the related Officer's Issuance Certificate, provided the Issuer has available funds sufficient to pay such amount. The Issuer shall furnish the Rating Agencies notice of any such redemption. If any Term Notes are to be redeemed pursuant to this Section 10.1, the Issuer shall furnish notice thereof to the Indenture Trustee not later than 25 days prior to the applicable Redemption Date and the Issuer shall deposit into the applicable Term Note Distribution Account on or before the applicable Redemption Date, the aggregate Redemption Price of the Term Notes to be redeemed, whereupon all such Term Notes shall be due and payable on the Redemption Date. SECTION 10.2 Form of Redemption Notice. (a) Notice of redemption of any Term Notes under Section 10.1 shall be given by the Indenture Trustee by first-class mail, postage prepaid, mailed not less than five days prior to the applicable Redemption Date to each Term Noteholder of record of the Term Notes to be redeemed at such Term Noteholder's address appearing in the Note Register. (b) All notices of redemption shall state: (i) the applicable Redemption Date; (ii) the applicable Redemption Price; (iii) the place where the Term Notes are to be surrendered for payment of the Redemption Price (which shall be the Agency Office of the Indenture Trustee to be maintained as provided in Section 3.2); (iv) the CUSIP number, if applicable; and (v) the principal amount of Notes to be redeemed. (c) Notice of redemption of the Term Notes shall be given by the Indenture Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Term Note shall not impair or affect the validity of the redemption of any other Term Note. SECTION 10.3 Term Notes Payable on Redemption Date. With respect to any Term Notes, such Term Notes shall, following notice of redemption as required by Section 10.2 (in the case of redemption pursuant to Section 10.1), on the applicable Redemption Date cease to be Outstanding for purposes of this Indenture and shall thereafter represent only the right to receive the applicable Redemption Price and (unless the Issuer shall default in the payment of such Redemption Price) no interest shall accrue on such Redemption Price for any period after the date to which accrued interest is calculated for purposes of calculating such Redemption Price. ARTICLE XI MISCELLANEOUS SECTION 11.1 Compliance Certificates and Opinions, etc. (a) Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee: (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with and (iii) (if required by the TIA) an Independent Certificate from a firm of certified public accountants meeting the applicable requirements of this Section 11.1, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the judgment of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with. (b) (i) Prior to the deposit with the Indenture Trustee of any Collateral or other property or securities that is to be made the basis for the release of any property or securities subject to the lien of this Indenture, the Issuer shall, in addition to any obligation imposed in Section 11.1(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officers' Certificate certifying or stating the opinion of each Person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited. (ii) Whenever the Issuer is required to furnish to the Indenture Trustee an Officers' Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (b)(i) above, the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (b)(ii), is 10% or more of the Outstanding Amount of the Notes, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof to the Issuer as set forth in the related Officers' Certificate is less than $________ or less than one percent of the Outstanding Amount of the Notes. (iii) Other than with respect to the release of any Warranty Receivables, Administrative Receivables or Defaulted Receivables, whenever any property or securities are to be released from the lien of this Indenture, the Issuer shall also furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of each Person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such Person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof. (iv) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signatory thereof as to the matters described in clause (b)(iii) above, the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities and of all other property, other than Warranty Receivables, Administrative Receivables or Defaulted Receivables, or securities released from the lien of this Indenture since the commencement of the then current calendar year, as set forth in the certificates required by clause (b)(iii) above and this clause (b)(iv), equals 10% or more of the Outstanding Amount of the Notes, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer's Certificate is less than $________ or less than one percent of the then Outstanding Amount of the Notes. (v) Notwithstanding Section 2.9 or any other provision of this Section 11.1, the Issuer may (A) collect, liquidate, sell or otherwise dispose of Receivables and related Collateral Security and proceeds of both as and to the extent permitted or required by the Basic Documents, (B) make cash payments out of the Designated Accounts and the Certificate Distribution Account as and to the extent permitted or required by the Basic Documents and (C) take any other action not inconsistent with the TIA. SECTION 11.2 Form of Documents Delivered to Indenture Trustee. (a) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. (b) Any certificate or opinion of an Authorized Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, the Seller, the Issuer or the Administrator, stating that the information with respect to such factual matters is in the possession of the Servicer, the Seller, the Issuer or the Administrator, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. (c) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. (d) Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee's right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI. SECTION 11.3 Acts of Noteholders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders or a series of Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 11.3. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient. (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes (or any one or more Predecessor Notes) shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer and Rating Agencies. Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to or filed with: (a) the Indenture Trustee by any Noteholder or by the Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Indenture Trustee at its Corporate Trust Office, or (b) the Issuer by the Indenture Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in writing and either sent by electronic facsimile transmission (with hard copy to follow via first class mail) or mailed, by certified mail, return receipt requested to the Issuer and the Owner Trustee each at the address specified in Appendix B to the Trust Sale and Servicing Agreement. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee and the Indenture Trustee shall likewise promptly transmit any notice received by it from the Noteholders to the Issuer. (c) Notices required to be given to the Rating Agencies by the Issuer, the Indenture Trustee or the Owner Trustee shall be delivered as specified in Appendix B to the Trust Sale and Servicing Agreement. SECTION 11.5 Notices to Noteholders; Waiver. (a) Where this Indenture provides for notice to Noteholders of any condition or event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if it is in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at such Person's address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. If notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given regardless of whether such notice is in fact actually received. (b) Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Indenture Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver. (c) In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event of Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. (d) Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute an Event of Default. SECTION 11.6 Alternate Payment and Notice Provisions. Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Indenture Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer shall furnish to the Indenture Trustee a copy of each such agreement and the Indenture Trustee shall cause payments to be made and notices to be given in accordance with such agreements. SECTION 11.7 Conflict with Trust Indenture Act. (a) If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the TIA, such required provision shall control. (b) The provisions of TIA Sections 310 through 317 that impose duties on any Person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein. SECTION 11.8 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 11.9 Successors and Assigns. (a) All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. (b) All covenants and agreements of the Indenture Trustee in this Indenture shall bind its successors and assigns, whether so expressed or not. SECTION 11.10 Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.11 Benefits of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Noteholders and the Note Owners and (only to the extent expressly provided herein) the Certificateholders and the Certificate Owners and any other party secured hereunder, and any other Person with an ownership interest in any part of the Trust Estate, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 11.12 Legal Holidays. If the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day, with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date. SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 11.14 Counterparts. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 11.15 Recording of Indenture. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee) to the effect that such recording is necessary either for the protection of the Noteholders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture. SECTION 11.16 No Recourse. (a) Each Noteholder will agree by acceptance of a Note (or interest therein) that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against: (i) the Indenture Trustee or the Owner Trustee in its individual capacity; (ii) any owner of a beneficial interest in the Issuer; or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Indenture Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any instalment or call owing to such entity. For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust Agreement. (b) Except as expressly provided in the Basic Documents, neither the Seller, the Servicer, the Indenture Trustee nor the Owner Trustee in their respective individual capacities, any owner of a beneficial interest in the Issuer, nor any of their respective partners, owners, beneficiaries, agents, officers, directors, employees or successors or assigns, shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Notes or this Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Owner Trustee solely as the Owner Trustee in the assets of the Issuer. Each Noteholder or Note Owner by the acceptance of a Note (or beneficial interest therein) will agree that, except as expressly provided in the Basic Documents, in the case of an Event of Default under this Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in this Indenture or in the Notes. SECTION 11.17 No Petition. The Indenture Trustee, by entering into this Indenture, and each Noteholder and Note Owner, by accepting a Note (or interest therein) issued hereunder, hereby covenant and agree that they shall not, prior to the date which is one year and one day after the termination of the Trust Agreement, acquiesce, petition or otherwise invoke or cause the Seller or the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Seller or the Issuer under any Insolvency Law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Seller or the Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Seller or the Issuer. SECTION 11.18 Inspection. The Issuer agrees that, on reasonable prior notice, it shall permit any representative of the Indenture Trustee, during the Issuer's normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by Independent certified public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees and Independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. * * * * * IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this Indenture to be duly executed by their respective officers, thereunto duly authorized, all as of the day and year first above written. _______________________________ _________________ By: ________________________________, not in its individual capacity but solely as Owner Trustee By: Name: Title: ______________________________, as Indenture Trustee By: Name: Title: EXHIBIT A TRANSFER CERTIFICATE ACE Securities Corp. 6525 Morrison Boulevard Suite 318 Charlotte, North Carolina _________________________ _________________________ Attn: _________________________ _________________________ Ladies and Gentlemen: In connection with the purchase of a Note subject to Section 2.15 of the Indenture dated as of ______, 20__ (the "Unregistered Note") of the _____________________________ _____________, the undersigned buyer ("Buyer") hereby acknowledges, represents and agrees that: (a) The Buyer has received the [describe offering document] relating to the offering of the Unregistered Note (including exhibits thereto). (b) The Buyer understands that the Unregistered Note has not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be sold except as permitted in the following sentence. The Buyer agrees, on its own behalf and on behalf of any accounts for which it is acting as hereinafter stated, that such Unregistered Note may be resold, pledged or transferred only (i) to an institutional investor that is an "Accredited Investor" as defined in Rule 501(a)(1),(2),(3) or (7) (an "Institutional Accredited Investor") under the Securities Act acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are Institutional Accredited Investors unless the holder is a bank acting in its fiduciary capacity) that, if so requested by the Seller or the Indenture Trustee, executes a certificate in the form hereof, (ii) so long as such Unregistered Note is eligible for resale pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person whom the Buyer reasonably believes after due inquiry to be a "qualified institutional buyer" (as defined in Rule 144A) acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are "qualified institutional buyers") that, if so requested by the Seller or the Indenture Trustee, executes a certificate in the form hereof or (iii) in a sale, pledge or other transfer made in a transaction otherwise exempt from the registration requirements of the Securities Act, in which case (A) the Indenture Trustee shall require that both the prospective transferor and the prospective transferee certify to the Indenture Trustee and the Seller in writing the facts surrounding such transfer, which certification shall be in form and substance satisfactory to the Indenture Trustee and the Seller, and (B) the Indenture Trustee shall require a written opinion of counsel (which will not be at the expense of the Seller, the Servicer or the Indenture Trustee) satisfactory to the Seller and the Indenture Trustee to the effect that such transfer will not violate the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. The Buyer will notify any purchaser of the Unregistered Note from it of the above resale restrictions, if then applicable. The Buyer further understands that in connection with any transfer of the Unregistered Note by it that the Seller and the Indenture Trustee may request, and if so requested the Buyer will furnish, such certificates and other information as they may reasonably require to confirm that any such transfer complies with the foregoing restrictions. (c) [CHECK ONE] [ ] (1) The Buyer is an institutional investor and an "accredited investor" (as defined in Rule 501(a)(1),(2),(3) or (7) of Regulation D under the Securities Act) acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are Institutional Accredited Investors unless the Buyer is bank acting in its fiduciary capacity). The Buyer has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Unregistered Note, and the Buyer and any accounts for which it is acting are able to bear the economic risk of investment in the Unregistered Note for an indefinite period of time. The Buyer is acquiring the Unregistered Note for investment and not with a view to, or for offer and sale in connection with, a public distribution. [ ] (2) The Buyer is a "qualified institutional buyer" as defined under Rule 144A under the Securities Act and is acquiring the Unregistered Note for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are "qualified institutional buyers"). The Buyer is familiar with Rule 144A under the Securities Act and is aware that the seller of the Unregistered Note and other parties intend to rely on the statements made herein and the exemption from the registration requirements of the Securities Act provided by Rule 144A. (d) You are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Print Name of Buyer By: Name: Title: Date: EXHIBIT B UNDERTAKING LETTER ACE Securities Corp. 6525 Morrison Boulevard Suite 318 Charlotte, North Carolina _________________________ _________________________ Attn: _________________________ _________________________ Ladies and Gentlemen: In connection with our purchase of record or beneficial ownership of a Note subject to the provisions of Section 2.15 of the Indenture dated as of _____, 20__ (the "Unregistered Note") of the ___________________________________, the undersigned purchaser, record owner or beneficial owner hereby acknowledges, represents and warrants that such purchaser, record owner or beneficial owner: (1) is not, and has not acquired the Unregistered Note by or for the benefit of, (i) an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended, or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in such entity; and (2) acknowledges that you and others will rely on our acknowledgments, representations and warranties, and agrees to notify you promptly in writing if any of our acknowledgments, representations or warranties herein cease to be accurate and complete. Name of Note Owner By: Name: Title: Date: EX-4.1.3 4 0004.txt EXHIBIT 4.1.3 [ ] EQUIPMENT TRUST [ ], as Issuer, and [ ] not in its individual capacity but solely in its capacity as Indenture Trustee ----------------------------------- INDENTURE Dated as of [ ], [ ] ----------------------------------- [ ] Class A-1 Receivable-Backed Notes [ ] Class A-2 Receivable-Backed Notes [ ] Class A-3 Receivable-Backed Notes [ ] Class A-4 Receivable-Backed Notes [ ] Class A-5 Receivable-Backed Notes [ ] Class B Receivable-Backed Notes [ ] Class C Receivable-Backed Notes [ ] Class D Receivable-Backed Notes
TABLE OF CONTENTS PAGE ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE.....................................................................1 Section 1.01. Definitions..............................................................................1 Section 1.02. Incorporation by Reference of Trust Indenture Act........................................7 ARTICLE TWO THE NOTES......................................................................................................9 Section 2.01. Form.....................................................................................9 Section 2.02. Execution, Authentication and Delivery...................................................9 Section 2.03. Temporary Notes.........................................................................10 Section 2.04. Registration; Registration of Transfer and Exchange; Transfer Restriction...............10 Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes..............................................11 Section 2.06. Persons Deemed Owner....................................................................12 Section 2.07. Payment of Principal and Interest; Defaulted Interest...................................12 Section 2.08. Cancellation............................................................................13 Section 2.09. Book-Entry Notes........................................................................13 Section 2.10. Notices to Clearing Agency..............................................................14 Section 2.11. Definitive Notes........................................................................14 Section 2.12. Release of Collateral...................................................................15 Section 2.13. Tax Treatment...........................................................................15 ARTICLE THREE COVENANTS; REPRESENTATIONS AND WARRANTIES.....................................................................15 Section 3.01. Payment of Principal and Interest.......................................................15 Section 3.02. Maintenance of Office or Agency.........................................................15 Section 3.03. Money for Payments to be Held in Trust..................................................16 Section 3.04. Existence...............................................................................17 Section 3.05. Protection of Collateral................................................................17 Section 3.06. [Reserved]..............................................................................18 Section 3.07. Performance of Obligations; Servicing of Contracts......................................18 Section 3.08. Negative Covenants......................................................................19 Section 3.09. Issuer May Consolidate, etc.............................................................20 Section 3.10. Successor or Transferee.................................................................21 Section 3.11. No Other Business.......................................................................22 Section 3.12. No Borrowing............................................................................22 Section 3.13. Notice of Events of Default.............................................................22 Section 3.14. Further Instruments and Acts............................................................22 Section 3.15. Compliance with Laws....................................................................22 Section 3.16. Amendments of Trust Agreement...........................................................22 Section 3.17. Removal of Administrator................................................................22 Section 3.18. Representations and Warranties of Issuer................................................22 ARTICLE FOUR SATISFACTION AND DISCHARGE....................................................................................24 Section 4.01. Satisfaction and Discharge of Indenture.................................................24 Section 4.02. Application of Trust Money..............................................................25 Section 4.03. Repayment of Moneys Held by Paying Agent................................................25 Section 4.04. Release of Collateral...................................................................25 ARTICLE FIVE REMEDIES......................................................................................................26 Section 5.01 Events of Default.......................................................................26 Section 5.05. Rights Upon Event of Default; Notice....................................................27 Section 5.06. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee; Authority of Indenture Trustee......................................................................27 Section 5.07. Remedies................................................................................30 Section 5.08. Optional Preservation of the Contracts..................................................30 Section 5.09. Priorities..............................................................................31 Section 5.10. Limitation of Suits.....................................................................31 Section 5.11. Unconditional Rights of Noteholders to Receive Principal and Interest...................32 Section 5.12. Restoration of Rights and Remedies......................................................32 Section 5.13. Rights and Remedies Cumulative..........................................................32 Section 5.14. Delay or Omission Not a Waiver..........................................................32 Section 5.15. Control by Noteholders..................................................................32 Section 5.16. Waiver of Past Defaults.................................................................33 Section 5.17. Undertaking for Costs...................................................................33 Section 5.18. Waiver of Stay or Extension Laws........................................................33 Section 5.19. Action on Notes.........................................................................34 Section 5.20. Performance and Enforcement of Certain Obligations......................................34 ARTICLE SIX THE INDENTURE TRUSTEE.........................................................................................35 Section 6.01. Duties of Indenture Trustee.............................................................35 Section 6.02. Rights of Indenture Trustee.............................................................36 Section 6.03. Individual Rights of Indenture Trustee..................................................37 Section 6.04. Indenture Trustee's Disclaimer..........................................................37 Section 6.05. Notice of Defaults......................................................................37 Section 6.06. Reports by Indenture Trustee to Holders.................................................37 Section 6.07. Compensation and Indemnity..............................................................37 Section 6.08. Replacement of Indenture Trustee........................................................38 Section 6.09. Successor Indenture Trustee by Merger...................................................39 Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee.......................40 Section 6.11. Eligibility.............................................................................41 Section 6.12. Preferential Collection of Claims Against Issuer........................................41 Section 6.13. Representations and Warranties of Indenture Trustee.....................................41 Section 6.14. Execution of Transaction Documents......................................................42 ARTICLE SEVEN NOTEHOLDERS' LISTS AND REPORTS................................................................................43 Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders..................43 Section 7.02. Preservation of Information: Communication to Noteholders...............................43 Section 7.03. Reports by Issuer.......................................................................43 Section 7.04. Reports by Indenture Trustee............................................................44 ARTICLE EIGHT ACCOUNTS, DISBURSEMENTS AND RELEASES..........................................................................45 Section 8.01. Collection of Money.....................................................................45 Section 8.02. Trust Accounts..........................................................................45 Section 8.03. General Provisions Regarding Accounts...................................................45 Section 8.04. Release of Collateral...................................................................46 Section 8.05. Opinion of Counsel......................................................................46 ARTICLE NINE SUPPLEMENTAL INDENTURES.......................................................................................48 Section 9.01. Supplemental Indentures Without Consent of Noteholders..................................48 Section 9.02. Supplemental Indentures With Consent of Noteholders.....................................49 Section 9.03. Execution of Supplemental Indentures....................................................50 Section 9.04. Effect of Supplemental Indenture........................................................50 Section 9.05. Conformity With Trust Indenture Act.....................................................51 Section 9.06. Reference in Notes to Supplemental Indentures...........................................51 ARTICLE TEN REDEMPTION OF NOTES...........................................................................................52 Section 10.01. Redemption..............................................................................52 Section 10.02. Form of Redemption Notice...............................................................52 Section 10.03. Notes Payable on Redemption Date........................................................53 Section 10.04. Optional Purchase of Class A-5 Notes by Depositor.......................................53 Section 10.05. Form of Purchase Note...................................................................53 Section 10.06. Class A-5 Notes to be Purchased on Purchase Date........................................54 ARTICLE ELEVEN MISCELLANEOUS.................................................................................................55 Section 11.01. Compliance Certificates and Opinions, etc...............................................55 Section 11.02. Form of Documents Delivered to Indenture Trustee........................................56 Section 11.03. Acts of Noteholders.....................................................................57 Section 11.04. Notices.................................................................................58 Section 11.05. Notices to Noteholders; Waiver..........................................................58 Section 11.06. Alternate Payment and Notice Provisions.................................................58 Section 11.07. Effect of Headings and Table of Contents................................................59 Section 11.08. Successors and Assigns..................................................................59 Section 11.09. Separability............................................................................59 Section 11.10. Benefits of Indenture...................................................................59 Section 11.11. Legal Holidays..........................................................................59 Section 11.12. Governing Law...........................................................................59 Section 11.13. Counterparts............................................................................59 Section 11.14. Recording of Indenture..................................................................59 Section 11.15. Trust Obligation........................................................................60 Section 11.16. No Petition.............................................................................60 Section 11.17. Inspection..............................................................................60 Section 11.18. Conflict with Trust Indenture Act.......................................................60 Section 11.19. Communication by Noteholders With Other Noteholders.....................................60 EXHIBITS Exhibit A-1 - Form of Class A-1 Note..................................................................A-1-1 Exhibit A-2 - Form of Class A-2 Note..................................................................A-1-1 Exhibit A-3 - Form of Class A-3 Note..................................................................A-3-1 Exhibit A-4 - Form of Class A-4 Note..................................................................A-4-1 Exhibit A-5 - Form of Class A-5 Note..................................................................A-5-1 Exhibit B - Form of Class B Note......................................................................B-1 Exhibit C - Form of Class C Note......................................................................C-1 Exhibit D - Form of Class D Note......................................................................D-1 Exhibit E - RESERVED..................................................................................E-1 Exhibit F - Form of Note Depository Agreement.........................................................F-1 Exhibit G - Form of Note Assignment...................................................................G-1
CROSS-REFERENCE TABLE TRUST INDENTURE ACT OF 1939 INDENTURE SECTION SECTION 310(a)..........................................................6.11 310(b)..........................................................6.11 310(c)..........................................................N.A. 311(a)..........................................................6.12 311(b)..........................................................6.12 311(c)..........................................................N.A. 312(a)....................................................7.01, 7.02 312(b)..........................................................7.02 312(c)..........................................................7.02 313(a)..........................................................7.04 313(b)..........................................................7.04 313(c)..........................................................7.04 314(a)..........................................................7.03 314(b)....................................................3.05, 7.03 314(c).........................................................11.01 314(d).........................................................11.01 314(e).........................................................11.01 314(f)..........................................................N.A. 315(a)..........................................................6.01 315(b)..........................................................6.05 315(c)..........................................................6.01 315(d)..........................................................6.01 315(e)..........................................................5.14 316(a)....................................................2.07, 5.04 316(b)..........................................................9.02 316(c)..........................................................N.A. 317(a)..........................................................5.03 317(b)..........................................................3.03 318(a).........................................................11.18 This Indenture, dated as of [ ], [ ] (this "Indenture"), is between [ ]Equipment Trust Securities [ ], a Delaware business trust (the "Issuer") and [ ], in its capacity as indenture trustee (the "Indenture Trustee") and not in its individual capacity. Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Issuer's [ ]% Class A-1 Receivable-Backed Notes (the "Class A-1 Notes"), [ ] % Class A-2 Receivable-Backed Notes (the "Class A-2 Notes"), [ ]% Class A-3 Receivable-Backed Notes (the "Class A-3 Notes"), [ ]% Class A-4 Receivable-Backed Notes (the "Class A-4 Notes"), [ ] Class A-5 Receivable-Backed Notes (the "Class A-5 Notes"), [ ]% Class B Receivable-Backed Notes (the "Class B Notes"), [ ]% Class C Receivable-Backed Notes (the "Class C Notes"), and [ ]% Class D Receivable-Backed Notes (the "Class D Notes"); and, together with the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class A-5 Notes, Class B Notes, Class C Notes and Class D Notes, the "Notes"): GRANTING CLAUSE The Issuer hereby grants, transfers, assigns and otherwise conveys to the Indenture Trustee on the Closing Date, on behalf of and for the benefit of the Holders of the Notes, without recourse, all of the Issuer's right, title and interest in, to and under the Transferred Assets as may be held from time to time by the Issuer (as each such defined term is defined in Section 1.01) (collectively, the "Collateral"). The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes, equally and ratably without prejudice, priority or distinction and all other sums owing by the Issuer hereunder or under any other Transaction Document, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture. The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the Notes, acknowledges such Grant, accepts the trust under this Indenture in accordance with the provisions of this Indenture and agrees to perform its duties required in this Indenture to the best of its ability to the end that the interests of the Holders of the Notes may be adequately and effectively protected. ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. DEFINITIONS. (a) Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. "Act" shall have the meaning specified in Section 11.03(a). "Administration Agreement" means the Administration Agreement, dated as of the date hereof, among the Administrator, the Issuer, the Trust Depositor and the Indenture Trustee. "Administrator" means [ ] or any successor Administrator under the Administration Agreement. "Authorized Officer" means, with respect to the Issuer, any officer of the Owner Trustee who is authorized to act for the Owner Trustee in matters relating to the Issuer and who is identified on the list of Authorized Officers delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter) and, so long as the Administration Agreement is in effect, any Vice President or more senior officer of the Administrator who is authorized to act for the Administrator in matters relating to the Issuer and to be acted upon by the Administrator pursuant to the Administration Agreement and who is identified on the list of Authorized Officers delivered by the Administrator to the Indenture Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter). "Book Entry Notes" means a beneficial interest in the Notes, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 2.09. "Business Day" means any day other than a Saturday, Sunday or other day on which banking institutions in the cities of [ ], [ ] or New York, New York are authorized or obligated by law, executive order or governmental decree to be closed. "Class" means all Notes whose form is identical except for variation in denomination, principal amount or owner. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Collateral" means the Collateral Granted to the Indenture Trustee under this Indenture, including all proceeds thereof. "Corporate Trust Office" means the principal office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered which office at date of the execution of this Indenture is located at [ ]; or at such other address as the Indenture Trustee may designate from time to time by notice to the Noteholders and the Issuer, or the principal corporate trust office of any successor Indenture Trustee (the address of which the successor Indenture Trustee will notify the Noteholders and the Issuer). "Default" means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default. "Definitive Notes" shall have the meaning specified in Section 2.09. "DTC" means The Depository Trust Company, and its successors. "Eligible Deposit Account" means either (a) a segregated account with a Qualified Institution, or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States or any one of the states thereof, including the District of Columbia (or any domestic branch of a foreign bank), and acting as a trustee for funds deposited in such account, so long as any of the securities of such depository institution shall have a credit rating from each Rating Agency in one of its short-term credit rating categories which signifies investment grade. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Event of Default" shall have the meaning specified in Section 5.01. "Executive Officer" means, with respect to any corporation, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, Executive Vice President, any Vice President, the Secretary or the Treasurer of such corporation; and with respect to any partnership, any general partner thereof. "Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, create and grant a lien upon and a security interest in and right of set-off against, deposit, set over and confirm pursuant to this Indenture. A Grant of the Collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. "Holder" means, with respect to a Book-Entry Note, the Person who is the owner of such Book-Entry Note, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency) and with respect to a Definitive Note the Person in whose name a Note is registered on the Note Register. "Indenture Securities" means the Notes. "Indenture Security Holder" means a Noteholder. "Indenture Trustee" means [ ], as Indenture Trustee under this Indenture, or any successor Indenture Trustee under this Indenture. "Independent" means, when used with respect to any specified Person, that the Person (i) is in fact independent of the Issuer, any other obligor upon the Notes, the Trust Depositor, [ ] and any of their respective Affiliates, (ii) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, [ ] or any of their respective Affiliates, and (iii) is not connected with the Issuer, any such other obligor, [ ] or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. "Independent Certificate" means a certificate or opinion to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01, made by an Independent appraiser or other expert appointed by an Issuer Order and approved by the Indenture Trustee in the exercise of reasonable care, and such opinion or certificate shall state that the signer has read the definition of "Independent" in this Indenture and that the signer is Independent within the meaning thereof. "Interest Rate" means, as the context may require, the Class A-1 Interest Rate, the Class A-2 Interest Rate, the Class A-3 Interest Rate, the Class A-4 Interest Rate, the Class A-5 Interest Rate, the Class B Interest Rate, the Class C Interest Rate and the Class D Interest Rate, or any of them, in each case as defined in the Pooling and Servicing Agreement. "Issuer Order" and "Issuer Request" means a written order or request signed in the name of the Issuer by any one of its Authorized Officers and delivered to the Indenture Trustee. "Majority in Interest" has the same meaning given the term Required Holders in the Pooling and Servicing Agreement. "Note Depository Agreement" means the agreement dated as of the Closing Date, among the Issuer, the Administrator, the Indenture Trustee and DTC, as the initial Clearing Agency, relating to the Notes, substantially in the form of Exhibit F hereto. "Note Register" and "Note Registrar" have the respective meanings specified in Section 2.04. "Noteholder" means, with respect to a Book-Entry Note, the Person who is the owner of such Book-Entry Note, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency) and with respect to a Definitive Note the Person in whose name a Note is registered on the Note Register. "Officer's Certificate" means a certificate signed by any Authorized Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01, and delivered to, the Indenture Trustee. Unless otherwise specified, any reference in this Indenture to an Officer's Certificate shall be to an Officer's Certificate of any Authorized Officer of the Issuer. "Opinion of Counsel" means one or more written opinions of counsel who may, except as otherwise expressly provided in this Indenture, be employees of or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee and which shall comply with any applicable requirements of Section 11.01, and shall be in form and substance satisfactory to the Indenture Trustee. "Outstanding" means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture except: (a) Notes theretofore canceled by the Note Registrar or delivered to the Note Registrar for cancellation; (b) Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Notes (provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision for such notice has been made, satisfactory to the Indenture Trustee, has been made); and (c) Notes in exchange for or in lieu of other Notes which have been authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a bona fide purchaser; provided, however, that in determining whether the Holders of the requisite Outstanding Amount have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any other Transaction Document, Notes owned by the Issuer, any other obligor upon the Notes, the Trust Depositor, [ ] or any of their respective Affiliates shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Indenture Trustee knows to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, the Trust Depositor, [ ] or any of their respective Affiliates. "Outstanding Amount" means the aggregate principal amount of all Notes of one Class or of all Classes, as the case may be, Outstanding at the date of determination. "Owner Trustee" means [ ], not in its individual capacity but solely as Owner Trustee under the Trust Agreement, or any successor trustee under the Trust Agreement. "Paying Agent" means the Indenture Trustee or any other Person that meets the eligibility standards for the Indenture Trustee specified in Section 6.11 and is authorized by the Issuer to make the distributions from the Note Distribution Account, including payment of principal of or interest on the Notes on behalf of the Issuer. "Payment Date" means the twentieth (20th) day (or if any such date is not a Business Day, then on the next succeeding Business Day) of each calendar month commencing [ ],[ ]. "Predecessor Note" means, with respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and for the purpose of this definition, any Note authenticated and delivered under Section 2.05 in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "Proceeding" means any suit in equity, action at law or other judicial or administrative proceeding. "Record Date" means, with respect to any Payment Date, the calendar day immediately preceding such Payment Date; provided, however, that with any Definitive Note the Record Date shall be the last calendar day of the month preceding the month in which such Payment Date occurs. "Redemption Date" means in the case of a redemption of the Notes pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section 10.01(b), the Payment Date specified by the Servicer or the Issuer pursuant to Section 10.01(a) or 10.01(b), as the case may be. "Redemption Date Amount" means (i) in the case of a redemption of the Notes pursuant to Section 10.01(a), an amount equal to the unpaid principal amount of the Notes redeemed plus accrued and unpaid interest thereon at the weighted average of the Interest Rate for each Class of Notes being so redeemed to but excluding the Redemption Date, or (ii) in the case of a payment made to Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note Distribution Account, but not in excess of the amount specified in clause (i) above. "Registered Holder" means the Person in whose name a Note is registered on the Note Register on the applicable Record Date. "Responsible Officer" means, with respect to the Indenture Trustee, any officer within the Corporate Trust Office (or any successor group of the Indenture Trustee), including any Vice President, assistant secretary or other officer or assistant officer of the Indenture Trustee customarily performing functions similar to those performed by the people who at such time shall be officers, respectively, or to whom any corporate trust matter is referred at the Corporate Trust Office of the Indenture Trustee because of his knowledge of and familiarity with the particular subject. "Pooling and Servicing Agreement" means the Pooling and Servicing Agreement, dated as of the date hereof, among the Issuer, the Trust Depositor, the Servicer and the Indenture Trustee. "State" means any one of the 50 states of the United States, or the District of Columbia or any of its territories. "Targeted Holder" means any holder of a right to receive interest or principal with respect to the Notes or other interests in the Trust (other than a Note or other interest with respect to which an opinion is or has been rendered that such interest will be treated as debt for federal income tax purposes) and any holder of a right to receive any amount in respect of the Certificate; provided, that any Person holding more than one interest each of which would cause such Person to be a Targeted Holder shall be treated as a single Targeted Holder. "Termination Date" means the date on which the Indenture Trustee shall have received payment and performance of all amounts and obligations which the Issuer may owe to or on behalf of the Indenture Trustee for the benefit of the Noteholders under this Indenture or the Notes. "Trust Agreement" means the Trust Agreement, dated as of the date hereof, between the Trust Depositor and the Owner Trustee. "Trust Certificate" means the Equity Certificate of the Issuer substantially in the form of Exhibit B to the Trust Agreement. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939. "UCC" means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time. (d) Except as otherwise specified herein or as the context may otherwise require, capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Pooling and Servicing Agreement. Section 1.02 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the Securities and Exchange Commission. "indenture securities" means the Notes. "indenture security holder" means a Noteholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Indenture Trustee. "obligor" on the indenture securities means the Issuer and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule have the meaning assigned to them by such definitions. Section 1.03 Rules of Construction. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; (iii) "or" is not exclusive; (iv) "including" means including without limitation; (v) words in the singular include the plural and words in the plural include the singular. (vi) any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; references to a Person are also to its permitted successors and assigns; and (vii) the words "hereof," "herein" and "hereunder" and words of similar import when used in this Indenture shall refer to this Indenture as a whole and not to any particular provision of this Indenture; Section, subsection and Schedule references contained in this Indenture are references to Sections, subsections and Schedules in or to this Indenture unless otherwise specified. [remainder of this page intentionally left blank] ARTICLE TWO THE NOTES Section 2.01 FORM. The Notes, in each case together with the Indenture Trustee's certificate of authentication, shall be in substantially the forms set forth as Exhibits to this Indenture with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibits hereto are part of the terms of this Indenture. Section 2.02 EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be executed on behalf of the Issuer by any of its Authorized Officers. The signature of any such Authorized Officer on the Notes may be manual or facsimile. Notes bearing the manual or facsimile signature of individuals who were at any time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. The Indenture Trustee shall, upon receipt of an Issuer Order, authenticate and deliver for original issue (i) Class A-1 Notes in an aggregate principal amount of [$ ], (ii) Class A-2 Notes in an aggregate principal amount of [$ ], (iii) Class A-3 Notes in an aggregate principal amount of [$ ], (iv) Class A-4 Notes in an aggregate principal amount of [$ ], (v) Class A-5 Notes in an aggregate principal amount of [$ ], (vi) Class B Notes in an aggregate principal amount of [$ ], (vii) Class C Notes in an aggregate principal amount of [$ ], and (viii) Class D Notes in an aggregate principal amount of [$ ]. The aggregate principal amount of such Classes of Notes Outstanding at any time may not exceed such respective amounts, except as otherwise provided in Section 2.05. Each Note shall be dated the date of its authentication. The Notes shall be issuable as registered Notes in the minimum denomination of $1,000 and in integral multiples of $1,000 in excess thereof or in such other denomination as shall be necessary. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein by the Indenture Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. Section 2.03 TEMPORARY NOTES. Pending the preparation of Book-Entry Notes or Definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture Trustee shall authenticate and deliver, temporary Notes that are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the definitive Notes in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture as the officers executing such Notes may determine, as evidenced by their execution of such Notes. If temporary Notes are issued, the Issuer will cause Book-Entry Notes or Definitive Notes to be prepared without unreasonable delay. After the preparation of Book-Entry Notes or Definitive Notes, the temporary Notes shall be exchangeable for Book-Entry Notes or Definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer to be maintained as provided in Section 3.02, without charge to the Holder. Upon surrender for cancellation of any one or more Notes, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor a like tenor and principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as Book-Entry Notes or Definitive Notes. Section 2.04 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE; TRANSFER RESTRICTION. The Issuer shall cause to be kept a register (the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Notes and the registration of transfers of Notes. The Indenture Trustee shall be "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Note Registrar. If a Person other than the Indenture Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register, and the Indenture Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by an Executive Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and the amounts and number of such Notes. Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 3.02, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Notes of the same Class in any authorized denominations, of a like aggregate principal amount. At the option of the Holder, Notes may be exchanged for other Notes of the same Class in any authorized denominations, of a like aggregate amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, the Notes which the Noteholder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located in the city in which the Corporate Trust Office is located, or by a member firm of a national securities exchange, and such other documents as the Indenture Trustee may require. No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer or the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.03 not involving any transfer. The preceding provisions of this Section notwithstanding, the Issuer shall not be required to make and the Note Registrar need not register transfers or exchanges of Notes selected for redemption or of any Note for a period of 15 days preceding the due date for any payment with respect to the Note. Neither the Indenture Trustee nor the Registrar shall have any responsibility to monitor or restrict the transfer of beneficial ownership in any Note an interest in which is transferable through the facilities of the Clearing Agency. Section 2.05 MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee such security or indemnity as may be required by them to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and upon its written request the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note of the same Class; provided, however, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within seven days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date without surrender thereof. If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer, and the Indenture Trustee shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith. Upon the issuance of any replacement Note under this Section, the Issuer or the Indenture Trustee may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee or the Note Registrar) connected therewith. Every replacement Note issued pursuant to this Section in replacement of any mutilated, destroyed, lost of stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. Section 2.06 PERSONS DEEMED OWNER. Prior to due presentment for registration of transfer of any Note, the Issuer, the Indenture Trustee, and any of their respective agents may treat the Person in whose name any Note is registered (as of the day of determination) as the owner of such Note for the purpose of receiving payments of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Indenture Trustee nor any of their respective agents shall be affected by notice to the contrary. Section 2.07 PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST. (a) Each Class of Notes shall accrue interest at the related Interest Rate, and such interest shall be payable on each Payment Date, subject to Section 3.01. Any installment of interest or principal, if any, payable on any Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered on the Record Date, by wire transfer in immediately available funds to the account designated by such nominee and except for the final installment of principal payable with respect to such Note on a Payment Date or on the related final Payment Date, as the case may be (and except for the Redemption Price for any Note called for redemption pursuant to Section 10.01(a)), which shall be payable as provided below. (b) The principal of each Note shall be payable on each Payment Date to the extent provided in the form of the related Note set forth as an Exhibit hereto. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, unless the Required Holders have waived such Event of Default in the manner provided in Section 5.02. All principal payments on each Class of Notes shall be made pro rata to the Noteholders of such Class entitled thereto. The Indenture Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and interest on such Note will be paid. Such notice shall be mailed within five Business Days of receipt of notice of termination of the Trust pursuant to Section 9.01(c) of the Trust Agreement and shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for payment of such installment. Notices in connection with redemptions of Notes shall be mailed to Noteholders as provided in Section 10.02. (c) If the Issuer defaults in a payment of interest on the Notes, the Issuer shall pay defaulted interest at the applicable Interest Rate in any lawful manner. The Issuer may pay such defaulted interest to the Persons who are Noteholders on any Payment Date in the manner and to the extent provided in the Pooling and Servicing Agreement. (d) All payments to be made by the Issuer under this Indenture shall be made only from the income and proceeds from the Collateral and only to the extent that the Issuer shall have sufficient income or proceeds from the Collateral to enable the Issuer to make payments in accordance with the terms hereof. The Indenture Trustee is not personally liable for any amounts payable under this Indenture, except as expressly provided herein. Section 2.08 CANCELLATION. All Notes surrendered for payment, registration of transfer, exchange or redemption shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly canceled by the Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Notes may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Order that they be destroyed or returned to it; provided that such Issuer Order is timely and the Notes have not been previously disposed of by the Indenture Trustee. Section 2.09 BOOK-ENTRY NOTES. The Notes, upon original issuance, will be issued in the form of a typewritten Note or Notes representing the Book-Entry Notes, to be delivered to DTC, the initial Depository, by, or on behalf of, the Issuer. Such Notes shall initially be registered on the Note Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Noteholder of such Notes will receive a Definitive Note representing such Noteholder's interest in such Note, except as provided in Section 2.11. Unless and until definitive, fully registered Notes (the "Definitive Notes") have been issued to Noteholders pursuant to Section 2.11: (a) the provisions of this Section shall be in full force and effect; (b) the Note Registrar and the Indenture Trustee shall be entitled to deal with the Clearing Agency for all purposes of this Indenture (including the payment of principal of and interest on the Notes and the giving of instructions or directions hereunder) as the sole holder of the Notes, and shall have no obligation to the Noteholders; (c) to the extent that the provisions of this Section conflict with any other provisions of this Indenture, the provisions of this Section shall control; (d) the rights of Noteholders shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Noteholders and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Note Depository Agreement, unless and until Definitive Notes are issued pursuant to Section 2.11, the Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments of principal of and interest on the Notes to such Clearing Agency Participants; and (e) whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Noteholders evidencing a specified percentage of the Outstanding Amount, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Noteholders and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Notes and has delivered such instructions to the Indenture Trustee. Section 2.10 NOTICES TO CLEARING AGENCY. Whenever a notice or other communication to the Noteholders is required under this Indenture, unless and until Definitive Notes shall have been issued to Noteholders pursuant to Section 2.11, the Indenture Trustee shall give all such notices and communications specified herein to be given to Noteholders to the Clearing Agency, and shall have no obligation to the Noteholders. Section 2.11 DEFINITIVE NOTES. With respect to the Classes of Notes, if (i)(A) the Administrator advises the Indenture Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities as described in the Note Depository Agreement, and (B) the Indenture Trustee or the Administrator is unable to locate a qualified successor, (ii) the Administrator at its option advises the Indenture Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency, or (iii) after the occurrence of an Event of Default, Holders of Notes representing not less than 66 2/3% of the Outstanding Amount of such Class of Notes advise the Indenture Trustee and the Clearing Agency through the Clearing Agency Participants in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the related Noteholders, then the Indenture Trustee shall notify all Noteholders of the related Class or Classes of Notes, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Notes of the related Class of Notes to Noteholders requesting the same. Upon surrender to the Indenture Trustee of the Note or Notes representing the Book-Entry Notes by the Clearing Agency, accompanied by registration instructions, the Issuer shall execute and the Indenture Trustee shall authenticate the Definitive Notes in accordance with the instructions of the Clearing Agency. None of the Issuer, the Note Registrar or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Notes of a Class, the Indenture Trustee shall recognize the holders of the Definitive Notes as Noteholders hereunder. The Indenture Trustee shall not be liable if the Indenture Trustee or the Administrator is unable to locate a qualified successor Clearing Agency. Definitive Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. Section 2.12 RELEASE OF COLLATERAL. Subject to Section 11.01 and the terms of the Transaction Documents, the Indenture Trustee shall release property from the lien of this Indenture only upon receipt of an Issuer Request accompanied by an Officer's Certificate. Section 2.13 TAX TREATMENT. The Issuer and the purchasers of the Notes intend, and will take all actions consistent with the intention, that the Notes be treated as indebtedness which is solely secured by the assets of the Trust for all federal, state, local, and foreign income and franchise tax purposes and that, pursuant to Treasury Regulations Section 301.7701-3(b)(1)(ii) as in effect for periods after January 1, 1997, the Trust be disregarded as a separate entity from the Trust Depositor for federal income tax purposes. The Issuer, by entering into this Indenture, and each Noteholder, by its acceptance of its Note agrees to treat the Notes for federal, state and local income, single business and franchise tax purposes as indebtedness. ARTICLE THREE COVENANTS; REPRESENTATIONS AND WARRANTIES Section 3.01 PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly and punctually pay the principal of and interest, if any, on the Notes in accordance with the terms of the Notes and this Indenture. Without limiting the foregoing, subject to Section 8.02(c), the Issuer and the Indenture Trustee will cause to be deposited into the Note Distribution Account amounts allocated pursuant to Section 7.05 of the Pooling and Servicing Agreement, and cause to be distributed all such amounts on a Payment Date as deposited therein (i) for the benefit of the Class A-1 Notes, to the Class A-1 Noteholders, (ii) for the benefit of the Class A-2 Notes, to the Class A-2 Noteholders, (iii) for the benefit of the Class A-3 Notes, to the Class A-3 Noteholders, (iv) for the benefit of the Class A-4 Notes, to the Class A-4 Noteholders, (v) for the benefit of its Class A-5 Noteholder, to the Class A-5 Noteholder, (vi) for the benefit of the Class B Notes, to the Class B Noteholders, (vi) for the benefit of the Class C Notes, to the Class C Noteholders and (viii) for the benefit of the Class D Notes, to the Class D Noteholders, in each case as further specified herein. Amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest and/or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture. Section 3.02 MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in New York, New York, an office or agency where Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the foregoing purposes. The Issuer will give prompt written notice to the Indenture Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders, notices and demands. Section 3.03 MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in Section 8.02, all payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the Collection Account and the Note Distribution Account pursuant to Section 8.02(b) shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection Account and the Note Distribution Account for payments of Notes shall be paid over to the Issuer except as provided in this Section. On or before the Business Day immediately preceding each Payment Date and Redemption Date, upon written notice and instruction from the Servicer, the Indenture Trustee shall withdraw from the Collection Account and deposit or cause to be deposited in the Note Distribution Account an aggregate sum sufficient to pay the amounts then becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless the Paying Agent is the Indenture Trustee) shall promptly notify the Indenture Trustee of its action or failure to so act. The Issuer will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided; (b) give the Indenture Trustee notice of any default by the Issuer (or any other obligor upon the Notes) in the making of any payment required to be made with respect to the Notes; (c) at any time during the continuance of any such default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent; (d) immediately resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent at the time of its appointment; and (e) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money. Subject to applicable laws with respect to escheat of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and upon receipt of an Issuer Request shall be deposited by the Indenture Trustee in the Collection Account; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof, and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; provided, however, that if such money or any portion thereof had been previously deposited by the Issuer with the Indenture Trustee for the payment of principal or interest on the Notes, and provided, further, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to or for the account of the Issuer. The Indenture Trustee may also adopt and employ, at the expense of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Holders whose Notes have been called but not have not been surrendered for redemption or whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder). Section 3.04 EXISTENCE. The Issuer will keep in full effect its existence, rights and franchises as a business trust under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other state or of the United States, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes, the Collateral and each other instrument or agreement included in the Collateral. Section 3.05 PROTECTION OF COLLATERAL. The Issuer intends the security interest Granted pursuant to this Indenture in favor of the Indenture Trustee on behalf of the Noteholders to be prior to all other liens in respect of the Collateral, and the Issuer shall take all actions necessary to obtain and maintain, for the benefit of the Indenture Trustee on behalf of the Noteholders, a first lien on and a first priority, perfected security interest in the Collateral. In connection therewith, pursuant to Section 2.06 of the Pooling and Servicing Agreement, the Issuer shall cause to be delivered into the possession of the Indenture Trustee as pledgee hereunder, indorsed in blank, any "instruments" (within the meaning of the UCC), not constituting part of chattel paper, evidencing any Contract which is part of the Collateral. The Indenture Trustee agrees to maintain continuous possession of such delivered instruments as pledgee hereunder until this Indenture shall have terminated in accordance with its terms or until, pursuant to the terms hereof or of the Pooling and Servicing Agreement, the Indenture Trustee is otherwise authorized to release such instrument from the Collateral. The Issuer will from time to time execute, deliver and file all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, all as prepared by the Servicer and delivered to the Issuer, and will take such other action necessary or advisable to: (a) Grant more effectively all or any portion of the Collateral; (b) maintain or preserve the lien and security interest (and the priority thereof) created by this Indenture or carry out more effectively the purposes hereof; (c) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture; (d) enforce any of the Collateral; (e) preserve and defend title to the Collateral and the rights of the Indenture Trustee and the Noteholders in such Collateral against the claims of all persons and parties; and (f) pay all taxes or assessments levied or assessed upon the Collateral when due. The Issuer hereby designates the Indenture Trustee its agent and attorney-in-fact to execute all financing statements, continuation statements or other instruments required to be executed pursuant to this Section. Section 3.06 [RESERVED]. Section 3.07 PERFORMANCE OF OBLIGATIONS; SERVICING OF CONTRACTS. (a) The Issuer will not take any action and will use its best efforts not to permit any action to be taken by others that would release any Person from any such Person's material covenants or obligations under any instrument or agreement included in the Collateral or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as expressly provided in the Transaction Documents or such other instrument or agreement. (b) The Issuer may contract with other Persons to assist it in performing its duties and obligations under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee in an Officer's Certificate shall be deemed to be action taken by the Issuer. The Indenture Trustee shall not be responsible for the action or inaction of the Servicer or the Administrator. Initially, the Issuer has contracted with the Servicer and the Administrator to assist the Issuer in performing its duties under this Indenture. (c) The Issuer will punctually perform and observe all of its obligations and agreements contained in this Indenture, the other Transaction Documents and in the instruments and agreements included in the Collateral, including but not limited to filing or causing to be filed all UCC financing statements and continuation statements required to be filed by the terms of this Indenture and the Pooling and Servicing Agreement in accordance with and within the time periods provided for herein and therein. Except as otherwise expressly provided therein, the Issuer shall not waive, amend, modify, supplement or terminate any Transaction Document or any provision thereof without the consent of the Indenture Trustee or the Required Holders. (d) If the Issuer shall have knowledge of the occurrence of a Servicer Default, the Issuer shall promptly notify the Indenture Trustee and each Rating Agency thereof. Upon any termination of the Servicer's rights and powers pursuant to the Pooling and Servicing Agreement, the Issuer shall promptly notify the Indenture Trustee. As soon as a Successor Servicer is appointed, the Issuer shall notify the Indenture Trustee and the Rating Agencies of such appointment (to the extent such party has not already been notified pursuant to the Pooling and Servicing Agreement), specifying in such notice the name and address of such Successor Servicer. (e) The Issuer agrees that it will not waive timely performance or observance by the Servicer or [ ] of their respective duties under the Transaction Documents if the effect thereof would adversely affect the Holders of the Notes. Section 3.08 NEGATIVE COVENANTS. Until the Termination Date, the Issuer shall not: (a) except as expressly permitted by the Transaction Documents, sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Collateral, unless directed to do so by the Indenture Trustee; (b) claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts properly withheld from such payments under the Code or applicable state law) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon any part of the Collateral; or (c) (A) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien created by this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenant; or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, (B) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the Collateral or any part thereof or any interest therein or the proceeds thereof (other than Permitted Liens), (C) permit the lien created by this Indenture not to constitute a valid first priority (other than with respect to any such tax, mechanics' or other lien) security interest in the Collateral, or (D) amend, modify or fail to comply with the provisions of the Transaction Documents without the prior written consent of the Indenture Trustee, except where the Transaction Documents allow for amendment or modification without the consent or approval of the Indenture Trustee; or (d) dissolve or liquidate in whole or in part. Section 3.09 ISSUER MAY CONSOLIDATE, ETC. Only on Certain Terms. (a) The Issuer shall not consolidate or merge with or into any other Person, unless: (i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States or any State and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture and each other Transaction Document on the part of the Issuer to be performed or observed, all as provided herein; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel which shall be delivered to and shall be satisfactory to the Indenture Trustee to the effect that such transaction will not have any material adverse tax consequence to the Trust, any Noteholder or any Certificateholder; (v) any action as is necessary to maintain the lien and security interest created by this Indenture shall have been taken; (vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel (which shall describe the actions taken as required by clause (v) above or that no such actions will be taken) each stating that such consolidation or merger and such supplemental indenture comply with this Article Three and that all conditions precedent herein provided for relating to such transaction have been complied with; and (vii) the Person (if other than the Issuer) formed by or surviving such consolidation or merger has a net worth, immediately after such consolidation or merger, that is (A) greater than zero and (B) not less than the net worth of the Issuer immediately prior to giving effect to such consolidation or merger. (b) The Issuer shall not convey or transfer all or substantially all of its properties or assets, including those included in the Collateral, to any Person (except as expressly permitted by the Transaction Documents), unless: (i) the Person that acquires by conveyance or transfer the properties and assets of the Issuer shall (A) be a United States citizen or a Person organized and existing under the laws of the United States or any State, (B) expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture and each other Transaction Document on the part of the Issuer to be performed or observed, all as provided herein, (C) expressly agree by means of such supplemental indenture that all right, title and interest so conveyed or transferred shall be subject and subordinate to the rights of Holders of the Notes and (D) unless otherwise provided in such supplemental indenture, expressly agree to indemnify, defend and hold harmless the Issuer against and from any loss, liability or expense arising under or related to this Indenture and the Notes; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel which shall be delivered to and shall be satisfactory to the Indenture Trustee to the effect that such transaction will not have any material adverse tax consequence to the Trust, any Noteholder or the Equity Certificateholder; (v) any action as is necessary to maintain the lien and security interest created by this Indenture shall have been taken; (vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel (which shall describe the actions taken as required by clause (v) above or that no such actions will be taken) each stating that such conveyance or transfer and such supplemental indenture comply with this Article Three and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filings required by Exchange Act); and (vii) the Issuer has a net worth, immediately after such conveyance or transfer, that is (A) greater than zero and (B) not less than the net worth of the Issuer immediately prior to giving effect to such conveyance or transfer. Section 3.10 SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or merger of the Issuer in accordance with Section 3.09(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with same effect as if such Person has been named as the Issuer herein. (b) Upon a conveyance or transfer of all or substantially all the assets or properties of the Issuer pursuant to Section 3.09(b), the Issuer will be released from every covenant and agreement of this Indenture to be observed or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Indenture Trustee stating that the Issuer is to be so released. Section 3.11 NO OTHER BUSINESS. The Issuer shall not engage in any business other than financing, purchasing, owning, selling and managing the Contracts in the manner contemplated by this Indenture and the other Transaction Documents and activities incidental thereto. Section 3.12 NO BORROWING. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any Indebtedness except for (i) the Notes and (ii) any other Indebtedness permitted by or arising under the other Transaction Documents. The proceeds of the Notes and the Equity Certificate shall be used exclusively to fund the Issuer's purchase of the Contracts and the other assets specified in the Pooling and Servicing Agreement, to fund the Cash Collateral Account and to pay the transactional expenses of the Issuer. Section 3.13 NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to give the Indenture Trustee and each Rating Agency prompt written notice of each Event of Default hereunder and of a Servicer Default under the Pooling and Servicing Agreement. Section 3.14 FURTHER INSTRUMENTS AND ACTS. Upon request of the Indenture Trustee, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. Section 3.15 COMPLIANCE WITH LAWS. The Issuer shall comply with the requirements of all applicable laws, the non-compliance with which would, individually or in the aggregate, materially and adversely affect the ability of the Issuer to perform its obligations under the Notes, this Indenture or any other Transaction Document. Section 3.16 AMENDMENTS OF TRUST AGREEMENT. The Issuer shall not agree to any amendment to Section 11.01 of the Trust Agreement to eliminate the requirements thereunder that the Indenture Trustee or the Holders of the Notes consent to amendments thereto as provided therein. Section 3.17 REMOVAL OF ADMINISTRATOR. So long as any Notes are issued and outstanding, the Issuer shall not remove the Administrator without cause unless the Rating Agency Condition shall have been satisfied in connection with such removal. Section 3.18 REPRESENTATIONS AND WARRANTIES OF ISSUER. The Issuer represents and warrants as follows: (a) Power and Authority. It has full power, authority and legal right to execute, deliver and perform its obligations as Issuer under this Indenture and the Notes (the foregoing documents, the "Issuer Documents"). (b) Due Authorization; Binding Obligation. The execution and delivery of the Issuer Documents and the consummation of the transactions provided for therein have been duly authorized by all necessary action on its part. Issuer Documents constitute the legal, valid and binding obligation of the Issuer enforceable in accordance with their terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. (c) No Conflict. The execution and delivery of the Issuer Documents, the performance of the transactions contemplated thereby and the fulfillment of the terms thereof will not conflict with, result in any breach of any of the materials terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Issuer is a party or by which it or any of its property is bound. (d) No Violation. The execution and delivery of the Issuer Documents, the performance of the transactions contemplated thereby and the fulfillment of the terms thereof will not conflict with or violate, in any material respect, any Requirements of Law applicable to the Issuer. (e) All Consents Required. All approvals, authorizations, consents, orders or other actions of any Person or any Governmental Authority required in connection with the execution and delivery of the Issuer Documents, the performance of the transactions contemplated thereby and the fulfillment of the terms thereof have been obtained. (f) Location. The Issuer has its chief executive office and place of business (as such terms are used in Article 9 of the UCC) in [ ], [ ]. The Issuer agrees that it will not change the location of such office to a location outside of [ ], [ ], without at least thirty (30) days prior written notice to [ ], the Servicer, the Indenture Trustee and the Rating Agencies. [remainder of this page intentionally left blank] ARTICLE FOUR SATISFACTION AND DISCHARGE Section 4.01 SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall cease to be of further effect with respect to the Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments of principal thereof and interest thereon, (iv) Sections 3.01, 3.03, 3.04, 3.05, 3.07, 3.08, 3.10, 3.12, 3.13, 3.15 and 3.16, (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.07 and the obligations of the Indenture Trustee under Section 4.02) and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them, and the Indenture Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when (A) either 1. all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.05 and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 3.03) have been delivered to the Indenture Trustee for cancellation; 2. all Notes not theretofore delivered to the Indenture Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at the applicable Maturity Date within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name, and at the expense, of the Issuer, and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be irrevocably deposited with the Indenture Trustee cash or direct obligations of or obligations guaranteed by the United States (which will mature prior to the date such amounts are payable), in trust in an Eligible Deposit Account (which shall be the Collection Account or Note Distribution Account) for such purpose, in an amount sufficient to pay and discharge the entire indebtedness on such Note not theretofore delivered to the Indenture Trustee for cancellation when due to the final scheduled Payment Date (if Notes shall have been called for redemption pursuant to Section 10.01(a)), as the case may be; (B) the Issuer has paid or performed or caused to be paid or performed all amounts and obligations which the Issuer may owe to or on behalf of the Indenture Trustee for the benefit of the Noteholders under this Indenture or the Notes; and (C) the Issuer has delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel and (if required by the TIA or the Indenture Trustee) an Independent Certificate from a firm of certified public accountants, each meeting the applicable requirements of Section 11.01(a) and, subject to Section 11.02, stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and the Rating Agency Condition has been satisfied. Section 4.02 APPLICATION OF TRUST MONEY. Except as provided in Section 5.06, all moneys deposited with the Indenture Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Notes for the payment or redemption of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal and interest; but such moneys need not be segregated from other funds except to the extent required herein or in the Pooling and Servicing Agreement or required by law. Section 4.03 REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all moneys then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 3.03 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 4.04 RELEASE OF COLLATERAL. Subject to Section 11.01 and the terms of the Transaction Documents, the Indenture Trustee shall release property from the lien of this Indenture only upon receipt of an Issuer Request accompanied by an Officer's Certificate and an Opinion of Counsel and Independent Certificates in accordance with TIA 'SS"SS'314(c) and 314(d)(1) or an Opinion of Counsel in lieu of such Independent Certificates to the effect that the TIA does not require any such Independent Certificates. [remainder of this page intentionally left blank] ARTICLE FIVE REMEDIES Section 5.01 EVENTS OF DEFAULT." "Events of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) failure to pay on any Payment Date the full amount of accrued interest on any Note and which continues unremedied for five (5) or more calendar days after such Payment Date; (b) failure to pay the then outstanding principal amount of any Note, if any, on its related Maturity Date; (c) (i) failure on the part of [ ] to make any payment or deposit required under the Pooling and Servicing Agreement or Purchase and Sale Agreement within three (3) Business Days after the date the payment or deposit is required to be made, or (ii) failure on the part of [ ], the Trust Depositor or the Owner Trustee to observe or perform any other covenants or agreements of such entity set forth in the Purchase and Sale Agreement, Pooling and Servicing Agreement or the Indenture, which failure has a material adverse effect on the Noteholders and which continues unremedied for a period of sixty (60) calendar days after written notice; provided, that no such sixty (60) calendar day cure period shall apply in the case of a failure by [ ] to perform its agreement to repurchase or substitute for Ineligible Contracts, and further provided, that only a five (5) day cure period shall apply in the case of a failure by [ ] or the Owner Trustee to observe their respective covenants not to grant a security interest in or otherwise intentionally create a lien on the Contracts; (d) any representation or warranty made by [ ], the Trust Depositor, the Indenture Trustee or the Owner Trustee in the Pooling and Servicing Agreement or the Indenture or any information required to be given by [ ] or the Trust Depositor to the Indenture Trustee to identify the Contracts proves to have been incorrect in any material respect when made and continues to be incorrect in any material respect for a period of (sixty) 60 days after written notice and as a result of which the interests of the Noteholders are materially and adversely affected; provided, however, that an Event of Default shall not be deemed to occur thereunder if [ ] has repurchased the related Contracts through the Trust Depositor during such period in accordance with the provisions of the Pooling and Servicing Agreement and the Purchase and Sale Agreement; (e) the occurrence of an Insolvency Event relating to [ ], the Trust Depositor or the Issuer; or (f) the Issuer becomes an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 5.02 RIGHTS UPON EVENT OF DEFAULT; NOTICE. If an Event of Default referred to in subparagraph (e) of Section 5.01 has occurred, then and in every such case the unpaid principal of the Notes, together with interest accrued but unpaid thereon, and all other amounts due to the Noteholders under the Indenture, shall immediately and without further act become due and payable. If any other Event of Default has occurred, the Required Holders by written notice to the Trustee may require the Trustee to, or the Trustee may without such notice, declare by written notice to the Trust Depositor and the Owner Trustees (with a copy to each Rating Agency) that the unpaid principal of the Notes together with interest accrued but unpaid thereon, and all other amounts due to the Noteholder under the Indenture shall immediately and without further act become due and payable. In the case of any event described in clause (a), (b), (c), (d) or (f) above, an Event of Default with respect to the Notes shall not be deemed to have occurred if the Required Holders waive such Event of Default pursuant to a written notice to the Trust Depositor, Indenture Trustee and the Servicer. In the event the Indenture Trustee has actual knowledge of an Event of Default, it shall give written notice thereof to the Trust Depositor, [ ], the Servicer, the Owner Trustee and the Rating Agencies. The Indenture Trustee shall not be deemed to have notice of an Event of Default unless it shall have received a written notice pursuant to this Section 5.02 or it has actual knowledge of an Event of Default. If an Insolvency Event relating to the Trust Depositor occurs, pursuant to the Trust Agreement and the Pooling and Servicing Agreement, on the day of such Insolvency Event, the Trust Depositor shall promptly give notice to the Indenture Trustee of the Insolvency Event, and the Indenture Trustee shall, unless notified to the contrary by the Required Holders, promptly act pursuant to and in accordance with the terms thereof to sell, dispose of or otherwise liquidate the Collateral in a commercially reasonable manner and on commercially reasonable terms. The proceeds from any such sale, disposition or liquidation of Contracts shall be deposited in the Collection Account and allocated as described in the Pooling and Servicing Agreement and herein. Promptly following its receipt of notice hereunder or under any other Transaction Document of any Event of Default, the Indenture Trustee shall send a copy thereof to the Issuer and each Rating Agency. Section 5.03 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY INDENTURE TRUSTEE; AUTHORITY OF INDENTURE TRUSTEE. (a) The Issuer covenants that if the Notes are accelerated following the occurrence of an Event of Default, the Issuer will, upon demand of the Indenture Trustee, pay to it, for the benefit of the Holders of the Notes, the whole amount then due and payable on such Notes for principal and interest, with interest, with interest upon the overdue principal, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the applicable Interest Rate and in addition thereto such further amount as shall be sufficient to cover costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel. (b) The Indenture Trustee following the occurrence of an Event of Default, shall have full right, power and authority to take, or defer from taking, any and all acts with respect to the administration, maintenance or disposition of the Collateral. (c) If an Event of Default occurs, the Indenture Trustee may in its discretion (except as provided in Section 5.03(d)), proceed to protect and enforce its rights and the rights of the Noteholders, by such appropriate Proceedings as the Indenture Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture or by law. (d) Notwithstanding anything to the contrary contained in this Indenture if an Event of Default shall have occurred, and if the Issuer fails to perform its obligations under Section 10.01(b) when and as due, the Indenture Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Noteholders by such appropriate Proceedings as the Indenture Trustee shall deem most effective to protect and enforce any such rights, whether for specific performance of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture or by law, provided that the Indenture Trustee shall only be entitled to take any such actions to the extent such actions (i) are taken only to enforce the Issuer's obligations to redeem the principal amount of Notes, and (ii) are taken only against the Collateral, any investments therein and any proceeds thereof. (e) In case there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Collateral, Proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Indenture Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Noteholders allowed in such Proceedings; (ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of Notes in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings; (iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Indenture Trustee on their behalf; and (iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders of Notes allowed in any judicial proceedings relative to the Issuer, its creditors and its property; and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith. (f) Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or compensation affecting the Notes or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person. (g) All rights of action and of asserting claims under this Indenture or under any of the Notes, may be enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any trial or other Proceedings relative thereto, and any such action or Proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Notes. (h) In any Proceedings brought by the Indenture Trustee (including any Proceedings involving the interpretation of any provision of this Indenture), the Indenture Trustee shall be held to represent all of the Holders of the Notes, and it shall not be necessary to make any Noteholder a party to any such proceedings. Section 5.04 REMEDIES. If an Event of Default shall have occurred the Indenture Trustee (subject to Section 5.05) may, and shall (subject to Section 6.02) if so directed by the Required Holders in writing: (a) institute Proceedings in its own name and as or on behalf of a trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and any other obligor upon such Notes moneys adjudged due; (b) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral; (c) exercise any remedies of a secured party under the UCC and any other remedy available to the Indenture Trustee and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee on behalf of the Noteholders under this Indenture or the Notes; and (d) direct the Owner Trustee to sell the Collateral or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law; provided, however, that the Indenture Trustee may not sell or otherwise liquidate the Collateral following an Event of Default, other than an Event of Default described in Section 5.01(a) or (b), unless (A) the Holders of 100% of the Principal Amount of the Notes consent thereto, (B) the proceeds of such sale or liquidation distributable to the Noteholders are sufficient to discharge in full all amounts then due and unpaid upon such Notes for principal and interest or (C) the Indenture Trustee determines that the Collateral will not continue to provide sufficient funds for the payment of principal of and interest on the Notes as they would have become due if the Notes had not been declared due and payable, and the Indenture Trustee provides prior written notice to each Rating Agency and obtains the consent of the Required Holders. In determining such sufficiency or insufficiency with respect to clauses (B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm or national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose; provided, however, upon the occurrence of an Event of Default described in Section 5.01(e), caused solely from an event described in such subparagraph occurring with respect to the Trust Depositor, the Collateral will be liquidated by the Indenture Trustee and the Trust will be terminated 90 days after the date of such Insolvency Event, unless, before the end of such 90-day period, the related Trustee shall have received written instructions from the Required Holders, to the effect that such Required Holders disapprove of the liquidation of such Collateral and termination of such Trust. Section 5.05 OPTIONAL PRESERVATION OF THE CONTRACTS. Following an Event of Default and except as otherwise provided above, the Indenture Trustee may, but need not, elect to maintain possession of the Collateral. It is the desire of the parties hereto and the Noteholders that there be at all times sufficient funds for the payment of principal and interest on the Notes, and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the Collateral. In determining whether to maintain possession of the Collateral, the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose. Section 5.06 PRIORITIES. (a) If the Indenture Trustee collects any money or property pursuant to this Article Five, it shall pay out the money or property in the order and priority set forth in Section 7.05(b) of the Pooling Agreement. (b) The Indenture Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section. At least 15 days before such record date, the Issuer shall mail to each Noteholder and the Indenture Trustee a notice that states the record date, the payment date and the amount to be paid. Section 5.07 LIMITATION OF SUITS. No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (and in all events subject to Section 11.16): (a) such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default; (b) the Holders of not less than 25% of the Outstanding Amount of the Notes have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder; (c) such Holder or Holders have offered to the Indenture Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in complying with such request; (d) the Indenture Trustee for sixty (60) days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and (e) no direction inconsistent with such written request has been given to the Indenture Trustee during such sixty (60) day period by the Holders of a majority of the Outstanding Amount of the Notes, voting together as a single class. It is understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided. In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes, each representing less than a majority of the Outstanding Amount of the Notes, the Indenture Trustee in its sole discretion may determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture. Section 5.08 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Notwithstanding any other provisions in the Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture (or, in the case of redemption, on or after the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Section 5.09 RESTORATION OF RIGHTS AND REMEDIES. If the Indenture Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Noteholder, then and in every such case the Indenture Trustee and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders shall continue as though no such Proceeding had been instituted. Section 5.10 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11 DELAY OR OMISSION NOT A WAIVER. No delay or omission of the Indenture Trustee or any Holder of any Note to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article Five or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be. Section 5.12 CONTROL BY NOTEHOLDERS. The Required Holders shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Notes or exercising any trust or power conferred on the Indenture Trustee (in all events subject to Section 6.02(f)); provided that: (a) such direction shall not be in conflict with any rule of law or with any other provision of this Indenture; (b) subject to the terms of Section 5.04, any direction to the Indenture Trustee to sell or liquidate the Collateral shall be by the Holders of Notes representing not less than 100% of the Outstanding Amount of the Notes; (c) if the conditions set forth in Section 5.05 have been satisfied and the Indenture Trustee elects to retain the Collateral pursuant to such Section, then any direction to the Indenture Trustee by Holders of Notes representing less than 100% of the Outstanding Amount of the Notes to sell or liquidate the Collateral shall be of no force and effect; and (d) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction. Notwithstanding the rights of Noteholders set forth in this Section, subject to Section 6.01, the Indenture Trustee need not take any action that it determines might involve it in liability or might materially and adversely affect the rights of any Noteholders not consenting to such action. Section 5.13 WAIVER OF PAST DEFAULTS. In the case of any waiver of an Event of Default, the Issuer, the Indenture Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereto. Upon any such waiver, such Event of Default shall cease to exist and be deemed to have been cured and not to have occurred, for every purpose of this Indenture. Section 5.14 UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to (i) any suit instituted by the Indenture Trustee, (ii) any suit instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of the Outstanding Amount of the Notes or (iii) any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date). Section 5.15 WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantages of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 5.16 ACTION ON NOTES. The Indenture Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer. Any money or property collected by the Indenture Trustee shall be applied in accordance with Section 5.06. Section 5.17 PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a) Promptly following a request from the Indenture Trustee to do so and at the Administrator's expense, the Issuer shall take all such lawful action as the Indenture Trustee may request to compel or secure the performance and observance by the Trust Depositor and the Servicer as applicable, of each of their obligations to the Issuer under or in connection with the Pooling and Servicing Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Pooling and Servicing Agreement to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of default on the part of the Trust Depositor or the Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Trust Depositor or the Servicer of each of their obligations under the Pooling and Servicing Agreement. (b) If an Event of Default has occurred and is continuing, the Indenture Trustee may, and at the direction (which direction shall be in writing, including facsimile) of the Required Holders shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Trust Depositor or the Servicer under or in connection with the Pooling and Servicing Agreement, including the right or power to take any action to compel or secure performance or observance by the Trust Depositor or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Pooling and Servicing Agreement, and any right of the Issuer to take such action shall be suspended. [remainder of this page intentionally left blank] ARTICLE SIX THE INDENTURE TRUSTEE Section 6.01 Duties of Indenture Trustee. (a) If an Event of Default has occurred, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and in the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except upon and after the occurrence of an Event of Default: (i)the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and (ii) in the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the factual statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; however, the Indenture Trustee shall examine the certificates and opinions to determine whether or not they conform on their face to the requirements of this Indenture and the other Transaction Documents to which the Indenture Trustee is a party. (c) The Indenture Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) this paragraph does not limit the effect of Section 6.01(b); (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.12. (d) Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer. (f) Money held in trust by the Indenture Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture or the Pooling and Servicing Agreement. (g) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayments of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) The Indenture Trustee shall have no discretionary duties other than those explicitly set forth in this Indenture. (i) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this section and to the provisions of the TIA. Section 6.02 RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Indenture Trustee need not investigate any fact or matter stated in the document. (b) Before the Indenture Trustee acts or refrains from acting, it may require an Officer's Certificate (with respect to factual matters) or an Opinion of Counsel, as applicable. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officer's Certificate or Opinion of Counsel. (c) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee. (d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Indenture Trustee's conduct does not constitute wilful misconduct, negligence or bad faith. (e) The Indenture Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Indenture Trustee shall, upon the occurrence of an Event of Default (that has not been cured), exercise the rights and powers vested in it by this Indenture in a manner consistent with Section 6.01; provided, however, that the Indenture Trustee shall be under no obligation to institute, conduct or defend any litigation under this Indenture or in relation to this Indenture, at the request, order or direction of any of the Holders of Notes, pursuant to the provisions of this Indenture, unless such Holders of Notes shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby. (g) The Indenture 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 so requested by the Holders of Notes evidencing not less than 25% of the Outstanding Amount of the Notes; provided, however, that if the payment within a reasonable time to the Indenture 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 Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture or the Pooling and Servicing Agreement, the Indenture Trustee may require reasonable indemnity against such cost, expense or liability as a condition to so proceeding; the reasonable expense of every such examination shall be paid by the Person making such request, or, if paid by the Indenture Trustee, shall be reimbursed by the Person making such request upon demand. Section 6.03 INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Indenture Trustee is required to comply with Section 6.11. Section 6.04 INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Collateral or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in the Transaction Documents or in any document issued in connection with the sale of the Notes or in the Notes other than the Indenture Trustee's certificate of authentication. Section 6.05 NOTICE OF DEFAULTS. If a Default occurs and if it is known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall mail to each Noteholder notice of the Default within ninety (90) days after it occurs. A Default shall be known to a Responsible Officer of the Indenture Trustee if the Indenture Trustee has actual knowledge of such Default or has received notice thereof pursuant to Section 5.02. Except in the case of an Event of Default in payment of principal of or interest on any Note (including payments pursuant to the redemption of such Notes), the Indenture Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Noteholders. Section 6.06 REPORTS BY INDENTURE TRUSTEE TO HOLDERS. The Indenture Trustee shall deliver to each Noteholder such information, including without limitation, IRS Form 1099, as may be required to enable such holder to prepare its federal and state income tax returns. Section 6.07 COMPENSATION AND INDEMNITY. The Issuer shall pay or shall cause the Administrator or Servicer to pay to the Indenture Trustee from time to time reasonable compensation for its services. The Indenture Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall or shall cause the Administrator or Servicer to reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall indemnify or shall cause the Administrator or Servicer to indemnify the Indenture Trustee and its officers, directors, employees and agents against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Indenture Trustee shall notify the Issuer and the Administrator promptly of any claim for which it may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and the Administrator shall not relieve the issuer or the Administrator of its obligations hereunder. The Issuer shall defend or shall cause the Administrator or Servicer to defend any such claim, and the Indenture Trustee may have separate counsel and the Issuer shall pay or shall cause the Administrator or Servicer to pay the fees and expenses of such counsel. Neither the Issuer nor the Administrator or Servicer need reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indenture Trustee's own willful misconduct, negligence or bad faith. The parties hereto agree and acknowledge that, notwithstanding anything to the contrary, all payments required to be made pursuant to this Section 6.07 shall not be made from the Trust Assets; provided, however, if an Event of Default has occurred payments required to be made pursuant to this Section 6.07, to the extent unpaid, shall be paid in accordance with Section 5.06; provided, further, that any payments required to be made pursuant to this Section 6.07, if unpaid, shall not constitute a general recourse claim against the Issuer. The Issuer's, Servicer's and Administrator's payment obligations to the Indenture Trustee pursuant to this Section shall survive the discharge of this Indenture. When the Indenture Trustee incurs expenses after the occurrence of a Default specified in Section 5.01(e) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or similar law. Section 6.08 REPLACEMENT OF INDENTURE TRUSTEE. The Indenture Trustee may resign at any time by so notifying the Issuer and the Servicer. The Issuer may remove the Indenture Trustee if: (a) the Indenture Trustee fails to comply with Section 6.11; (b) a court having jurisdiction in the premises in respect of the Indenture Trustee in an involuntary case or proceeding under federal or state banking or bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, shall have entered a decree or order granting relief or appointing a receiver, liquidator, assignee, custodian, trustee, conservator, sequestrator (or similar official) for the Indenture Trustee or for any substantial part of the Indenture Trustee's property, or ordering the winding-up or liquidation of the Indenture Trustee's affairs, provided any such decree or order shall have continued unstayed and in effect for a period of thirty (30) consecutive days; (c) the Indenture Trustee commences a voluntary case under any federal or state banking or bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, conservator, sequestrator or other similar official for the Indenture Trustee or for any substantial part of the Indenture Trustee's property, or makes any assignment for the benefit of creditors or fails generally to pay its debts as such debts become due or takes any corporate action in furtherance of any of the foregoing; or (d) the Indenture Trustee otherwise becomes incapable of acting. If the Indenture Trustee resigns or is removed, the Issuer shall promptly appoint a successor Indenture Trustee. A successor Indenture Trustee shall deliver a written acceptance of its appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee under this Indenture. The Issuer or the successor Indenture Trustee shall mail a notice of its succession to Noteholders. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee. If a successor Indenture Trustee does not take office within 60 days after the retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the Notes may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee. If the Indenture Trustee fails to comply with Section 6.11, any Noteholder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee. Any resignation or removal of the Indenture Trustee and appointment of a successor Indenture Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Indenture Trustee pursuant to this Section and payment of all fees and expenses owed to the outgoing Indenture Trustee. Notwithstanding the replacement of the Indenture Trustee pursuant to this Section, the retiring Indenture Trustee shall be entitled to payment or reimbursement of such amounts as such Person is entitled pursuant to Section 6.07. Section 6.09 SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Indenture Trustee; provided, that such corporation or banking association shall be otherwise qualified and eligible under Section 6.11. The Indenture Trustee shall provide each Rating Agency prompt notice of any such transaction. In case at the time such successor or successors by merger, conversion or consolidation to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Indenture Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Indenture Trustee shall have. Section 6.10 APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE TRUSTEE. (a) Notwithstanding any other provision of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Collateral may at the time be located, the Indenture Trustee and the Administrator acting jointly shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-Indenture Trustee or co-Indenture Trustees, jointly with the Indenture Trustee, or separate Indenture Trustee or separate Indenture Trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Collateral, or any part hereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Indenture Trustee and the Administrator may consider necessary or desirable. If the Administrator shall not have joined in such appointment within fifteen (15) days after the receipt by it of a request so to do, the Indenture Trustee alone shall have the power to make such appointment. No co-Indenture Trustee or separate Indenture Trustee hereunder shall be required to meet the terms of eligibility of a successor Indenture Trustee under Section 6.11 and no notice to Noteholders of the appointment of any co-Indenture Trustee or separate Indenture Trustee shall be required under Section 6.08. (b) Every separate Indenture Trustee and co-Indenture Trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate Indenture Trustee or co-Indenture Trustee jointly (it being understood that such separate Indenture Trustee or co-Indenture Trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate Indenture Trustee or co-Indenture Trustee, but solely at the direction of the Indenture Trustee; (ii) no Indenture Trustee hereunder shall be personally liable by reason of any act or omission of any other Indenture Trustee hereunder; and (iii) the Indenture Trustee and the Administrator may at any time accept the resignation of or remove any separate Indenture Trustee or co-Indenture Trustee. (c) Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate Indenture Trustees and co-Indenture Trustees, as effectively as if given to each of them. Every instrument appointing any separate Indenture Trustee or co-Indenture Trustee shall refer to this Agreement and the conditions of this Article. Each separate Indenture Trustee and co-Indenture Trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of co-appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee and a copy thereof given to the Administrator. (d) Any separate Indenture Trustee or co-Indenture Trustee may at any time constitute the Indenture Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate Indenture Trustee or co-Indenture Trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor Indenture Trustee. Notwithstanding anything to the contrary in this Indenture, the appointment of any separate Indenture Trustee or co-Indenture Trustee shall not relieve the Indenture Trustee of its obligations and duties under this Indenture. Section 6.11 ELIGIBILITY. The Indenture Trustee shall at all times satisfy the requirements of TIA 'SS'310(a). The Indenture Trustee hereunder shall at all times be a financial institution organized and doing business under the laws of the United States of America or any state, authorized under such laws to exercise corporate trust powers, whose long term unsecured debt is rated at least Baa3 by Moody's and shall have a combined capital and surplus of at least $50,000,000 or shall be a member of a bank holding system the aggregate combined capital and surplus of which is $50,000,000 and subject to supervision or examination by federal or state authority, provided that the Trustee's separate capital and surplus shall at all times be at least the amount required by Section 310(a)(2) of the TIA. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of a supervising or examining authority, then for the purposes of this Section 6.ll, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.ll, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.08. The Indenture Trustee shall comply with TIA 'SS'310(b); provided, however, that there shall be excluded from the operation of TIA 'SS'310(b)(1) any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA 'SS'310(b)(1) are met. Section 6.12 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The Indenture Trustee shall comply with TIA 'SS'311(a), excluding any creditor relationship listed in TIA 'SS'311(b). An Indenture Trustee who has resigned or been removed shall be subject to TIA 'SS'311(a) to the extent indicated. Section 6.13 REPRESENTATIONS AND WARRANTIES OF INDENTURE TRUSTEE. The Indenture Trustee in its individual capacity and as Indenture Trustee represents and warrants as follows: (a) Organization and Corporate Power. It is a duly organized and validly existing [ ] banking corporation in good standing under the laws of each jurisdiction where its business so requires. It has full corporate power, authority and legal right to execute, deliver and perform its obligations as Indenture Trustee under this Indenture and the Pooling and Servicing Agreement (the foregoing documents, the "Indenture Trustee Documents") and to authenticate the Notes. (b) Due Authorization; Binding Obligation. The execution and delivery of the Indenture Trustee Documents, the consummation of the transactions provided for therein and the authentication of the Notes have been duly authorized by all necessary corporate action on its part, either in its individual capacity or as Indenture Trustee, as the case may be. The Indenture Trustee Documents constitute the legal, valid and binding obligation of the Indenture Trustee enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditor's rights generally and by the availability of equitable remedies. (c) No Conflict. The execution and delivery of the Indenture Trustee Documents, the performance of the transactions contemplated thereby and the fulfillment of the terms thereof (including the authentication of the Notes), will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Indenture Trustee is a party or by which it or any of its property is bound. (d) No Violation. The execution and delivery of the Indenture Trustee Documents, the performance of the transactions contemplated thereby and the fulfillment of the terms thereof (including the authentication of the Notes), will not conflict with or violate, in any material respect, any Requirements of Law applicable to the Indenture Trustee. (e) All Consents Required. All approvals, authorizations, consents, orders or other actions of any Person or any Governmental Authority applicable to the Indenture Trustee, required in connection with the execution and delivery of the Indenture Trustee Documents, the performance by the Indenture Trustee of the transactions contemplated thereby and the fulfillment by the Indenture Trustee of the terms thereof (including the authentication of the Notes), have been obtained. (f) Validity, Etc. Each Indenture Trustee Document constitutes a legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms, except as such enforceability may be limited by Insolvency Laws and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity) or by an implied covenant of good faith and fair dealing. Section 6.14 EXECUTION OF TRANSACTION DOCUMENTS. The Issuer hereby requests and the Indenture Trustee agrees to execute and deliver the Pooling and Servincing Agreement and Administration Agreement. [remainder of this page intentionally left blank] ARTICLE SEVEN NOTEHOLDERS' LISTS AND REPORTS Section 7.01 ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Indenture Trustee (i) not more than five days after the earlier of (a) each Record Date and (b) three months after the last Record Date, a list, in such form as the Indenture Trustee may reasonably require, of the names and addresses of the Noteholders as of such Record Date and (ii) at such other times as the Indenture Trustee may request in writing, within (thirty) 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than ten days prior to the time such list is furnished; provided, however, that so long as the Indenture Trustee is the Note Registrar, no such list shall be required to be furnished. Section 7.02 PRESERVATION OF INFORMATION: COMMUNICATION TO NOTEHOLDERS. (a) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Noteholders contained in the most recent list furnished to the Indenture Trustee as provided in Section 7.01 and the names and addresses of Noteholders received by the Indenture Trustee in its capacity as Note Registrar and shall otherwise comply with TIA 'SS'312(a). The Indenture Trustee may destroy any list furnished to it as provided in such Section 7.01 upon receipt of a new list so furnished. (b) Noteholders may communicate pursuant to TIA 'SS'312(b) with other Noteholders with respect to their rights under this Indenture or under the Notes. (c) The Issuer, the Indenture Trustee and the Note Registrar shall have the protection of TIA 'SS'312(c). Section 7.03 REPORTS BY ISSUER. (a) The Issuer shall: (i) file with the Indenture Trustee, within fifteen (15) days after the Issuer or the Trust Depositor is required (if at all) to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) that the Issuer or Trust Depositor may be required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act; (ii) file with the Indenture Trustee and the Commission in accordance with rules and regulations prescribed from time to time by the Commission such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (iii) supply to the Indenture Trustee (and the Indenture Trustee shall transmit by mail to all Noteholders described in TIA 'SS'313(c)) such summaries of any information, documents and reports required to be filed by the issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and by rules and regulations prescribed from time to time by the Commission; (iv) file with the Indenture Trustee reports in compliance with TIA 'SS'314(a) and TIA 'SS'314(b). (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year. Section 7.04. REPORTS BY INDENTURE TRUSTEE. If required by TIA 'SS'313(a), within sixty (60) days after [ ] beginning with [ ], the Indenture Trustee shall mail to each Noteholder as required by TIA 'SS'313(c) a brief report dated as of such date that complies with TIA 'SS'313(a). The Indenture Trustee also shall comply with TIA 'SS'313(b). A copy of each report at the time of its mailing to Noteholders shall be filed by the Indenture Trustee with the Commission and each stock exchange, if any, on which the Notes are listed. The Issuer shall notify the Indenture Trustee if and when the Notes are listed on any stock exchange. [remainder of this page intentionally left blank] ARTICLE EIGHT ACCOUNTS, DISBURSEMENTS AND RELEASES Section 8.01 Collection of Money. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture and the Pooling and Servicing Agreement. The Indenture Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Collateral, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article Five. Section 8.02 TRUST ACCOUNTS. (a) On or prior to the Closing Date, the Indenture Trustee shall establish and maintain, in the name of the Indenture Trustee, for the benefit of the Noteholders and the Certificateholder, the Trust Accounts as provided in Section 7.01 of the Pooling and Servicing Agreement. (b) On or before each Payment Date, all amounts required to be disbursed to the Indenture Trustee with respect to the preceding Collection Period pursuant to Section 7.01 of the Pooling and Servicing Agreement will be transferred from the Collection Account and/or the Cash Collateral Account and deposited by the Indenture Trustee upon receipt to the Note Distribution Account. (c) On each Payment Date, the Indenture Trustee shall distribute all amounts on deposit in the Note Distribution Account to Noteholders in respect of the Notes to the extent of amounts due and unpaid on the Notes for principal and interest in the order and priority set forth in Section 7.05(a) of the Pooling and Servicing Agreement: Section 8.03 GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no Default or Event of Default shall have occurred, all or a portion of the funds in the Trust Accounts shall be invested in accordance with the provisions of Section 7.03 of the Pooling and Servicing Agreement. Except as otherwise provided in Section 7.03 of the Pooling and Servicing Agreement, all income or other gain from investments of moneys deposited in such Trust Accounts shall be deposited by the Indenture Trustee in the Collection Account, and any loss resulting from such investments shall be charged to the related Trust Account. The Issuer will not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in any of the Trust Accounts unless the security interest granted and perfected in such account will continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Indenture Trustee to make any such investment or sale, if requested by the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the Indenture Trustee, to such effect. (b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way be held liable by reason of any insufficiency in any of the Trust Accounts resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee's failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as Indenture Trustee, in accordance with their terms. (c) If (i) the Issuer shall have failed to give written investment directions for any funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00 a.m., New York City time (or such other time as may be agreed by the Issuer and Indenture Trustee), on any Business Day or (ii) a Default or Event of Default shall have occurred and be continuing with respect to the Notes but the Notes shall not have been declared due and payable pursuant to Section 5.02 or (iii) if such Notes shall have been declared due and payable following an Event of Default, but amounts collected or receivable from the Collateral are being applied in accordance with Section 5.05 as if there had not been such a declaration, then the Indenture Trustee shall, to the fullest extent practicable, invest and reinvest funds in the Trust Accounts in Eligible Investments described in clause (vi) of the definition thereof in the Pooling and Servicing Agreement. Section 8.04 RELEASE OF COLLATERAL. (a) Subject to the payment of its fees and expenses pursuant to Section 6.07, the Indenture Trustee may, and when required by the provisions of this Indenture or the Pooling and Servicing Agreement shall, execute instruments to release property from the lien of this Indenture, or convey the Indenture Trustee's interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article shall be bound to ascertain the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. (b) The Indenture Trustee shall, at such time as there are no Notes Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have been paid, release any remaining portion of the Collateral that secured the Notes from the lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds then on deposit in the Trust Accounts. The Indenture Trustee shall release property from the lien of this Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if required by the TIA as so stated in the Opinion of Counsel) Independent Certificates in accordance with TIA 'SS"SS'314(c) and 314(d)(1) and in each case meeting the applicable requirements of Section 11.01. Section 8.05 OPINION OF COUNSEL. The Indenture Trustee shall receive at least seven days prior written notice when requested by the Issuer to take any action pursuant to Section 8.04(a), accompanied by copies of any instruments involved, and the Indenture Trustee shall also require, as a condition to such action, an Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the security for the Notes or the rights of the Noteholders in contravention of the provisions for this Indenture; provided, however, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the Collateral. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee in connection with any such action. [remainder of this page intentionally left blank] ARTICLE NINE SUPPLEMENTAL INDENTURES Section 9.01 Supplemental Indentures Without Consent of Noteholders. Without the consent of the Holders of any Notes and with prior notice to each Rating Agency, the Issuer and the Indenture Trustee, when authorized by an Issuer Order and upon receipt by the Indenture Trustee of an Opinion of Counsel, and the other parties hereto at any time from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the TIA as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee, for any of the following purposes: (i) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the lien created by this Indenture, or to subject to the lien created by this Indenture additional property; (ii) to evidence the succession, in compliance with the applicable provisions hereof, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Notes contained; (iii) to add to the covenants of the Issuer, for the benefit of the Holders of the Notes, or to surrender any right or power herein conferred upon the Issuer; (iv) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee; (v) to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture which may be inconsistent with any other provision herein or in any supplemental indenture or the Transaction Documents or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; provided that such action shall not adversely affect the interests of the Holders of the Notes; (vi) to evidence and provide for the acceptance of the appointment hereunder by a successor Indenture Trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one Indenture Trustee, pursuant to the requirements of Article Six; (vii) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar federal statute hereafter enacted and to add to this Indenture such other provisions as may be expressly required by the TIA; and (viii) to elect into the FASIT provisions of the Code, provided an Opinion of Counsel to the effect that such election will not adversely affect the Noteholders, is delivered to the Issuer and Indenture Trustee. The Indenture Trustee is hereby authorized to join in the exemption of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained. Section 9.02 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The Issuer and the Indenture Trustee, when authorized by an Issuer Order and upon receipt by the Indenture Trustee of an Opinion of Counsel, also may, with prior notice to each Rating Agency, and with the consent of a Majority in Interest, by Act of such Holders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided, however, that, no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (i) change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the interest rate thereon or the Redemption Date Amount with respect thereto, change the provisions of this Indenture relating to the application of collections on, or the proceeds of the sale of, the Collateral to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article Five, to the payment of any such amount due on the Notes on or after the respective due dates thereof (or, in the case of redemption, on or after the Redemption Date); (ii) reduce the percentage of the Outstanding Amount of the Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; (iii) modify or alter the provisions of the second proviso to the definition of the term "Outstanding"; (iv) reduce the percentage of the Outstanding Amount of the Notes required to direct the Indenture Trustee to sell or liquidate the Collateral pursuant to Section 5.04 or amend the provisions of this Article which specify the percentage of the Outstanding Amount of the Notes required to amend this Indenture or the other Transaction Documents; (v) modify any provision of this Section except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the other Transaction Documents cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby; or (vi) permit the creation of any lien ranking prior to or on a parity with the lien created by this Indenture with respect to any part of the Collateral or, except as otherwise permitted or contemplated herein, terminate the lien created by this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security provided by the lien created by this Indenture. Neither the Issuer, the Indenture Trustee nor any of their respective affiliates shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Noteholder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture, the Pooling and Servicing Agreement or the Notes unless such consideration is offered to be paid to all Noteholders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. The Indenture Trustee may in its discretion determine whether or not any Notes would be affected by any supplemental indenture and any such determination shall be conclusive upon the Holders of the Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Indenture Trustee shall not be liable for any such determination made in good faith. It shall not be necessary for any Act of Noteholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution by the parties hereto of any supplemental indenture pursuant to this Section, the Indenture Trustee shall mail to the Holders of the Notes to which such amendment or supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 9.03 EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and subject to Sections 6.01 and 6.02 shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. Section 9.04 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the parties hereto and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 9.05 CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect so long as this Indenture shall then be qualified under the Trust Indenture Act. Section 9.06 REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and if required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Issuer or the Indenture Trustee shall so determine, new notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture. If the Issuer or the Indenture Trustee shall so determine, new notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes. [remainder of this page intentionally left blank] ARTICLE TEN REDEMPTION OF NOTES Section 10.01 REDEMPTION. (a) In the event that [ ] pursuant to Section 7.08 of the Pooling and Servicing Agreement purchases (through the Trust Depositor) the corpus of the Trust, the Notes are subject to redemption in whole, but not in part, on the Payment Date on which such repurchase occurs, for a purchase price equal to the outstanding principal, and accrued interest on the Notes (the "Redemption Price"); provided, however, that the Issuer has available funds sufficient to pay such amounts. [ ], the Servicer or the Issuer shall furnish each Rating Agency notice of such redemption. If the Notes are to be redeemed pursuant to this Section 10.01(a), the Servicer or the Issuer shall furnish notice of such election to the Indenture Trustee not later than twenty (20) days prior to the Redemption Date and the Issuer shall deposit with the Indenture Trustee in the Note Distribution Account the Redemption Price of the Notes to be redeemed whereupon all such Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.02 to each Holder of the Notes. (b) In the event that the assets of the Trust are sold pursuant to Section 9.02 of the Trust Agreement or Section 5.02(b) of this Indenture, the proceeds of such sale shall be distributed as provided in Section 5.06. If amounts are to be paid to Noteholders pursuant to this Section 10.01(b), the Servicer or the Issuer shall, to the extent practicable, furnish notice of such event to the Indenture Trustee not later than twenty (20) days prior to the Redemption Date whereupon all such amounts shall be payable on the Redemption Date. Section 10.02 Form of Redemption Notice. Notice of redemption under section 10.01(a) shall be given by the Indenture Trustee by first-class mail, postage prepaid, mailed not less than five days prior to the applicable Redemption Date to each Holder of Notes, as of the close of business on the Record Date preceding the applicable Redemption Date, at such Holder's address appearing in the Note Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Date Amount; and (iii) the place where such Notes are to be surrendered for payment of the Redemption Date Amount (which shall be the office or agency of the Issuer to be maintained as provided in Section 3.02). Notice of redemption of the Notes shall be given by the Indenture Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of any other Note. Section 10.03 NOTES PAYABLE ON REDEMPTION DATE. The Notes or portions thereof to be redeemed shall, following notice of redemption (if any) as required by Section 10.02, on the Redemption Date become due and payable at the Redemption Date Amount and (unless the Issuer shall default in the payment of the Redemption Date Amount) no interest shall accrue on the Redemption Date Amount for any period after the date to which accrued interest is calculated for purposes of calculating the Redemption Date Amount. Section 10.04 OPTIONAL PURCHASE OF CLASS A-5 NOTES BY DEPOSITOR. The Trust Depositor shall have the right to purchase, on any Payment Date, all, but not less than all, of the Class A-5 Notes, at a price equal to the principal balance thereof, plus a premium equal to the excess, discounted as described below, of (i) the amount of interest that would have accrued on the Class A-5 Notes at the Class A-5 Interest Rate during the period commencing on and including the Payment Date on which the Class A-5 Notes are to be so purchased to but excluding Class A-5 Maturity Date, Over (ii) the amount of interest that would have accrued on the Class A-5 Notes over the same period at a per annum rate of interest equal to the bond equivalent yield to maturity on the fifth Business Day preceding such Payment Date of a United States Treasury security, which is trading in the public securities market, maturing on a date closest to the date equal to the remaining weighted average life of the Class A-5 Notes. Such excess shall be discounted to present value to such Payment Date at the yield described in clause (ii) above. For purposes of the preceding two sentences only, (i) the Class A-5 principal balance upon which interest will de deemed to accrue, and (ii) the weighted average remaining life of the Class A-5 Notes, shall be determined based upon the amortization of the Contract Pool Principal Balance remaining at such Payment Date at a rate to [ ] CPR. Interest payable on the Class A-5 Notes on such Payment Date shall be paid to the Holders of Class A-5 Notes on the related Record Date in the ordinary manner. If the Trust Depositor elects to purchase the Class A-5 Notes as described in this paragraph, the Trust Depositor shall furnish notice of such election and the Payment Date on which the purchase is to be made (the "Purchase Date") to the Trustee no less than 25 days (or such lesser number of days as shall be satisfactory to the Trustee) prior to such Purchase Date, and shall thereafter deposit, or cause to be deposited, into the Note Distribution Account the purchase price of the Class A-5 Notes, whereupon all Class A-5 Notes shall be subjected to purchase on such Purchase Date upon the furnishing of a notice complying with Section 10.05 to each Holder of Class A-5 Notes. Section 10.05 FORM OF PURCHASE NOTE. Notice of purchase under section 10.04 shall be given by the Trustee not less than five days prior to the Purchase Date by first-class mail, postage prepaid, mailed to each Holder of Class A-5 Notes, as of the close of business on the Record Date with respect to the Payment Date immediately preceding the Purchase Date, at such Holder's address appearing in the Note Register. All notices of purchase shall state: (i) the Purchase Date; (ii) the purchase price; (iii) the place where such Notes are to be surrendered for payment of the purchase price (the "Place of Purchase," which shall be the office or agency of the Issuer to be maintained as provided in Section [ ]); and (iv) that interest payable on the Class A-5 Notes on such Purchase Date shall be paid to the Holders of record on the related Record Date in the ordinary manner. Notice of purchase of the Notes shall be given by the Trustee in the name and at the expense of the Trust Depositor. Failure to give notice of purchase, or any defect therein, to any Holder of any Class A-5 Note shall not impair or effect the validity of the purchase of any other Class A-5 Note. Section 10.06 CLASS A-5 NOTES TO BE PURCHASED ON PURCHASE DATE. (a) The Class A-5 Notes shall, following notice of purchase as required by Section 10.05, be purchased on the Purchase Date, but solely from the moneys deposited in the Note Distribution Account for such purpose, at the purchase price therefor, such purchase price to be payable upon presentation and surrender of the Class A-5 Notes to the Trustee at the Place of Purchase. (b) All Class A-5 Notes must be surrendered for purchase on the Purchase Date and, provided that funds are available and on hand with the Trustee to pay the purchase price thereof, (1) the Class A-5 Notes shall be "deemed purchased" on the Purchase Date, whether or not received by the Trustee on such date, (2) interest on the Class A-5 Notes, whether or not such class A-5 Notes are received by the Trustee, shall cease to accrue on the Purchase Date and the former Holders of such Class A-5 Notes shall have no further interest or rights in such Class A-5 Notes except that said former Holders shall be entitled to payment of the purchase price thereof, exclusively from moneys in the Note Distribution Account held by the Trustee for such payment, upon presentation of such Class A-5 Notes to the Trustee at the Place of Purchase at or before 10:00 a.m., New York City time, on such Purchase Date or any Business Day thereafter, (3) on and after the Purchase Date, the Trustee, the Note Regristar and each Paying Agent shall no longer treat the former Holders of such Class A-5 Notes as the Holders thereof except for purposes of such Holders' right to receive payment of the purchase price of such Class A-5 Notes, and (4) on the Purchase Date, the Trustee shall authenticate one or more new Class A-5 Notes, of authorized denominations and in the aggregate principal amount of the Class A-5 Notes, in the name of the Trust Depositor or any other Person or Persons designated by the Depositor, as provided in and subject to the terms of this Indenture. (c) Any Class A-5 Notes issued in lieu of Class A-5 Notes purchased or otherwise deemed purchased pursuant to this Section 10.06 shall not be canceled or the indebtedness represented thereby otherwise extinguished, it being the intention of the Issuer and the Trust Depositor that such Class A-5 Notes remain outstanding and represent a continuing indebtedness of the Issuer, whether such Class A-5 Notes are held by the Trust Depositor or any other purchase. ARTICLE ELEVEN MISCELLANEOUS Section 11.01 COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, and (iii) (if required by the TIA as so stated in the Opinion of Counsel) an Independent Certificate from a firm of certified public accountants meeting the applicable requirements of this section and TIA 'SS'314(c), except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with. (b) (i) Prior to the deposit of any Collateral or other property or securities with the Indenture Trustee that is to be made the basis for authentication and delivery of the Notes or the release of any property subject to the lien created by this Indenture, the Issuer shall, in addition to any obligation imposed in Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of the signer thereof as to the fair value (within ninety (90) days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited. (ii) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the named matters, if the fair value to the Issuer of the property to be so deposited and of all other such property made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is 10% or more of the Outstanding Amount of the Notes, but such a certificate need not be furnished with respect to any property so deposited, if the fair value thereof to the Issuer as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the Outstanding Amount of the Notes. (iii) Other than with respect to any release described in clause (A) or (B) of Section 11.01(b)(v), whenever any property or securities are to be released from the lien created by this Indenture, the Issuer shall also furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within ninety (90) days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security created by this Indenture in contravention of the provisions hereof. (iv) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (iii) above, the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities and of all other property or securities (other than property described in clauses (A) or (B) of Section 11.01(b)(v)) released from the lien created by this Indenture since the commencement of the then current fiscal year, as set forth in the certificates required by clause (iii) above and this clause (iv), equals 10% or more of the Outstanding Amount of the Notes, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the then Outstanding Amount of the Notes. (v) Notwithstanding any other provision of this Section, the Issuer may, without compliance with the other provisions of this Section, (A) collect, liquidate, sell or otherwise dispose of the Contracts as and to the extent permitted or required by the Transaction Documents, (B) make cash payments out of the Trust Accounts as and to the extent permitted or required by the Transaction Documents, so long as the Issuer shall deliver to the Indenture Trustee every twelve months, commencing on the December [ ] Payment Date, an Officer's Certificate stating that all the dispositions of Collateral described in clauses (A) or (B) that occurred during the preceding twelve calendar months were in the ordinary course of the Issuer's business and that the proceeds thereof were applied in accordance with the Transaction Documents. Section 11.02 FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Person as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, [ ] or the Issuer, stating that the information with respect to such factual matters is in the possession of the Servicer, [ ] or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee's right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article Six. Section 11.03 Acts of Noteholders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient. (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. Section 11.04 NOTICES. All notices, demands, certificates, requests and communications hereunder ("Notices") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an Authorized Officer of the party to which sent, or (d) on the date transmitted by legible telecopier transmission with a confirmation of receipt, in all cases addressed to the recipient at the address specified in the Pooling and Servicing Agreement for such recipient. Each party hereto may, by Notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent Notices shall be sent. Section 11.05 NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture provides for Notice to Noteholders of any event, such Notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at his address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such Notice. In any case where Notice to Noteholders is given by mail, neither the failure to mail such Notice nor any defect in any Notice so mailed to any particular Noteholder shall affect the sufficiency of such Notice with respect to other Noteholders, and any Notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given. Where this Indenture provides for Notice in any manner, such Notice may be waived in writing by any Person entitled to receive such Notice, either before or after the event, and such waiver shall be the equivalent of such Notice. Waivers of Notice by Noteholders shall be filed with the Indenture Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver. In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event of Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute a Default or Event of Default. Section 11.06 ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding any provisions of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Indenture Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Indenture Trustee a copy of each such agreement and the Indenture Trustee will cause payments to be made and notices to be given in accordance with such agreements. Section 11.07 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 11.08 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Indenture Trustee in this Indenture shall bind its successors, co-Indenture Trustees and agents. Section 11.09 SEPARABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 11.10 BENEFITS OF INDENTURE. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 11.11 LEGAL HOLIDAYS. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date. Section 11.12 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 11.13 COUNTERPARTS. This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 11.14 RECORDING OF INDENTURE. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee) to the effect that such recording is necessary either for the protection of the Noteholders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture. Section 11.15 TRUST OBLIGATION. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficiary interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Indenture Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Article Six, Seven and Eight of the Trust Agreement. Section 11.16 NO PETITION. The parties hereto, by entering into this Indenture, and each Noteholder, by accepting a Note or a beneficial interest in a Note, hereby covenant and agree that they will not at any time institute against [ ], the Trust Depositor or the Issuer, or join in any institution against [ ], the Trust Depositor or the Issuer, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the other Transaction Documents. Section 11.17 INSPECTION. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee, during the Issuer's normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by independent certified public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees and independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. Section 11.18 CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. Section 11.19 COMMUNICATION BY NOTEHOLDERS WITH OTHER NOTEHOLDERS. Noteholders may communicate with other Noteholders with respect to their rights under this Indenture or the Notes pursuant to Section 312(b) of the TIA. Every Noteholder, by receiving and holding the same, agrees with the Issuer and the Indenture Trustee that none of the Issuer and the Indenture Trustee nor any agent of the Issuer and the Indenture Trustee shall be deemed to be in violation of any existing law, or any law hereafter enacted which does not specifically refer to Section 312 of the TIA, by reason of the disclosure of any such information as to the names and addresses of the Noteholders in accordance with Section 312 of the TIA, regardless of the source from which such information was derived, and that the Indenture Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the TIA. The provisions of TIA 'SS"SS'310 through 317 that impose duties on any person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein. [signature page follows] IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and delivered as of the day and year first above written. [ ] EQUIPMENT TRUST [ ] By: [ ], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee under the Trust Agreement By: -------------------------------------- Printed Name: ---------------------------- Title: ----------------------------------- [ ], not in its individual capacity but solely as Indenture Trustee By: -------------------------------------- Printed Name: ----------------------------- Title:------------------------------------ STATE OF_____ ) ) ss COUNTY OF_____ ) On__________ before me,_______________________________________________, [insert date] [Here insert name and title of notary] personally appeared______________________________________________________________________, personally known to me, or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ties), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which such person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature _____________________________________ [Seal] STATE OF_____ ) ) ss COUNTY OF_____ ) On__________ before me,_______________________________________________, [insert date] [Here insert name and title of notary] personally appeared______________________________________________________________________, personally known to me, or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ties), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which such person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature _____________________________________ [Seal] EXHIBIT A-1 FORM OF CLASS A-1 NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [ ] EQUIPMENT TRUST [ ] [ ]% CLASS A-1 RECEIVABLE-BACKED NOTES REGISTERED $[ ] No. R-1 CUSIP NO. [ ] [ ] Equipment Trust Securities [ ], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of [ ] Dollars ([$ ]) payable on the earlier of [ ] (the "Class A-1 Maturity Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in Section 3.01 of the Indenture. Interest on this Note will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Distribution Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year and actual days elapsed. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by an Authorized Officer, as of the date set forth below. Date: [ ] [ ], [ ] [ ] EQUIPMENT TRUST [ ] By: [ ], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By:____________________________________ Printed Name:__________________________ Title:_________________________________ INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [ ], not in its individual capacity but solely as Indenture Trustee By:__________________________________ Authorized Signatory [REVERSE OF CLASS A-1 NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [ ]% Class A-1 Receivable-Backed Notes (the "Class A-1 Notes"), all issued under an Indenture, dated as of [ ], [ ] (the "Indenture"), between the Issuer and [ ], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-1 Notes and the other Notes described in the Indenture (collectively, the "Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture subject to the priorities of allocations as to interest and principal payments as described therein and in the Pooling and Servicing Agreement. Principal of the Class A-1 Notes will be payable on the earlier of the Class A-1 Maturity Date and the Redemption Date, if any, selected pursuant to the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Class A-1 Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing unless the Required Holders have waived such Event of Default. Payments of interest on this Note due and payable on each Payment Date shall be made by check to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed within five (5) days of such Payment Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Corporate Trust Office of the Indenture Trustee or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of [ ]. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01 of the Indenture, in whole, but not in part, at the option of [ ], on the Payment Date on or after the date on which the Contract Pool Principal Balance is less than 10% of the Contract Pool Principal Balance on the Initial Cutoff Date. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class A-1 Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder by acceptance of a Note or a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness which is solely secured by the Collateral and that the Trust will be disregarded as a separate entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by acceptance of a Note (and each Noteholder by acceptance of a beneficial interest in a Note), agrees to treat the Notes for federal, state and local income, single business and franchise tax purposes as indebtedness. Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer and the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Noteholders under the Indenture at any time by the Issuer and the Required Holders. The Indenture also contains provisions permitting the Noteholders representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Noteholders, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Noteholder (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Noteholders and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Noteholders issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. EXHIBIT A-2 FORM OF CLASS A-2 NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [ ] EQUIPMENT TRUST [ ] [ ]% CLASS A-2 RECEIVABLE-BACKED NOTES REGISTERED $[ ] No. R-1 CUSIP NO. [ ] [ ] Equipment Trust [ ], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of [ ] Dollars ($___________) payable on the earlier of [ ], (the "Class A-2 Maturity Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in the Indenture. Interest on this Note will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Payment of interest and principal on the Class A-2 Notes is subject to certain prior payments rights of Holders of Class A-1 and Class A-5 Notes as set forth in the Indenture. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. Date: [ ] [ ], [ ] [ ] EQUIPMENT TRUST [ ] By: [ ], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By:_____________________________________________ Printed Name:___________________________________ Title:__________________________________________ INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [ ], not in its individual capacity but solely as Indenture Trustee By: ____________________________________ Authorized Signatory [REVERSE OF CLASS A-2 NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [ ]% Class A-2 Receivable-Backed Notes (the "Class A-2 Notes"), all issued under an Indenture, dated as of [ ], [ ] (the "Indenture"), between the Issuer and [ ], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-2 Notes and the other Classes of Notes described in the Indenture (collectively, the "Notes") are and will be equally and ratably secured by the Collateral pledged as security therefor as provided in the Indenture subject to the priorities of allocations as to interest and principal payments as described therein and in the Pooling and Servicing Agreement. Principal of the Class A-2 Notes will be payable on the earlier of the Class A-2 Maturity Date and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Class A-2 Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing unless the Required Holders waive such Event of Default. Payments of interest on this Note due and payable on each Payment Date shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed within five (5) days of such Payment Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of [ ]. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01 of the Indenture, in whole, but not in part, at the option of [ ], on any Payment Date on or after the date on which the Contract Pool Principal Balance is less than 10% of the Contract Pool Principal Balance as of the Initial Cutoff Date. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class A-2 Notes of authorized denomination and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in their individual capacities, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in their individual capacities, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer, of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness which is solely secured by the Collateral and that the Trust will be disregarded as a separate entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by acceptance of a Note or of a beneficial interest in a Note, agrees to treat the Notes for the federal, state and local income, single business and franchise tax purposes as indebtedness. Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Required Holders. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. EXHIBIT A-3 FORM OF CLASS A-3 NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [ ] EQUIPMENT TRUST [ ] [ ]% CLASS A-3 RECEIVABLE-BACKED NOTES REGISTERED $[ ] No. R-1 CUSIP NO. [ ] [ ] Equipment Trust [ ], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of [ ] Dollars ($___________) payable on the earlier of [ ] (the "Class A-3 Maturity Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in the Indenture. Interest on this Note will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Payment of principal and interest on the Class A-3 Notes is subject to certain prior payment rights of Holders of Class A-1, Class A-2 and Class A-5 Notes as set forth in the Indenture. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. Date[ ] [ ], [ ] [ ]EQUIPMENT TRUST [ ] By: [ ], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By:_________________________________________________ Printed Name: Title:______________________________________________ INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [ ], not in its individual capacity but solely as Indenture Trustee By:____________________________________________ Authorized Signatory [REVERSE OF CLASS A-3 NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [ ]% Class A-3 Receivable-Backed Notes (the "Class A-3 Notes"), all issued under an Indenture, dated as of [ ], [ ] (the "Indenture"), between the Issuer and [ ], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-3 Notes and the other Classes of Notes described in the Indenture (collectively, the "Notes") are and will be equally and ratably secured by the Collateral pledged as security therefor as provided in the Indenture subject to the priorities of allocations as to interest and principal payments as described therein and in the Pooling and Servicing Agreement. Principal of the Class A-3 Notes will be payable on the earlier of the Class A-3 Maturity Date and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Class A-3 Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing unless the Required Holders waive such Event of Default. Payments of interest on this Note due and payable on each Payment Date shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed within five (5) days of such Payment Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of [ ]. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01 of the Indenture, in whole, but not in part, at the option of [ ], on any Payment Date on or after the date on which the Contract Pool Principal Balance is less then 10% of the Contract Pool Principal Balance as of the Initial Cutoff Date. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class A-3 Notes of authorized denomination and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in their individual capacities, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in their individual capacities, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer, of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness which is solely secured by the Collateral and that the Trust will be disregarded as a separate entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by acceptance of a Note or of a beneficial interest in a Note, agrees to treat the Notes for the federal, state and local income, single business and franchise tax purposes as indebtedness. Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Required Holders. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. EXHIBIT A-4 FORM OF CLASS A-4 NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [ ] EQUIPMENT TRUST [ ] [ ]% CLASS A-4 RECEIVABLE-BACKED NOTES REGISTERED $[ ] No. R-1 CUSIP NO. [ ] [ ] Equipment Trust [ ], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of [ ] Dollars ($___________) payable on the earlier of [ ], (the "Class A-4 Maturity Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in the Indenture. Interest on this Note will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Payment of interest and principal on the Class A-4 Notes is subject to certain prior payment rights of the Holders of Class A-1, Class A-2, Class A-3 and Class A-5 Notes as set forth in the Indenture. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. Date: [ ] [ ], [ ] [ ] EQUIPMENT TRUST [ ] By: [ ], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By:___________________________________________ Printed Name:_________________________________ Title:________________________________________ INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [ ], not in its individual capacity but solely as Indenture Trustee By:______________________________________ Authorized Signatory [REVERSE OF CLASS A-4 NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [ ]% Class A-4 Receivable-Backed Notes (the "Class A-4 Notes"), all issued under an Indenture, dated as of [ ], [ ] (the "Indenture"), between the Issuer and [ ], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-4 Notes and the other Classes of Notes described in the Indenture (collectively, the "Notes") are and will be equally and ratably secured by the Collateral pledged as security therefor as provided in the Indenture subject to the priorities of allocations as to interest and principal payments as described therein and in the Pooling and Servicing Agreement. Principal of the Class A-4 Notes will be payable on the earlier of the Class A-4 Maturity Date and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Class A-4 Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing unless the Required Holders waive such Event of Default. Payments of interest on this Note due and payable on each Payment Date shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed within five (5) days of such Payment Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of [ ]. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01 of the Indenture, in whole, but not in part, at the option of [ ], on any Payment Date on or after the date on which the Contract Pool Principal Balance is less than 10% of the initial Contract Pool Principal Balance as of the Initial Cutoff Date. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class A-4 Notes of authorized denomination and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in their individual capacities, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in their individual capacities, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer, of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness which is solely secured by the Collateral and that the Trust will be disregarded as a separate entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by acceptance of a Note or of a beneficial interest in a Note, agrees to treat the Notes for the federal, state and local income, single business and franchise tax purposes as indebtedness. Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Required Holders. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. EXHIBIT A-5 FORM OF CLASS A-5 NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [ ] EQUIPMENT TRUST [ ] [ ]% CLASS A-5 RECEIVABLE-BACKED NOTES REGISTERED $[ ] No. R-1 CUSIP NO. [ ] [ ] Equipment Trust [ ], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of [ ] Dollars ([$ ]) payable on the earlier of [ ], (the "Class A-5 Maturity Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in the Indenture. Interest on this Note will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Payment of interest and principal on the Class A-4 Notes is subject to certain prior payment rights of the Holders of Class A-1, Class A-2, Class A-3 and Class A-4 Notes as set forth in the Indenture. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. Date: [ ] [ ], [ ] [ ] EQUIPMENT TRUST By: [ ], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By:____________________________________________ Printed Name:__________________________________ Title:_________________________________________ INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [ ], not in its individual capacity but solely as Indenture Trustee By:____________________________________ Authorized Signatory [REVERSE OF CLASS A-5 NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [ ]% Class A-5 Receivable-Backed Notes (the "Class A-5 Notes"), all issued under an Indenture, dated as of [ ], [ ] (the "Indenture"), between the Issuer and [ ], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-5 Notes and the other Classes of Notes described in the Indenture (collectively, the "Notes") are and will be equally and ratably secured by the Collateral pledged as security therefor as provided in the Indenture subject to the priorities of allocations as to interest and principal payments as described therein and in the Pooling and Servicing Agreement. Principal of the Class A-5 Notes will be payable on the earlier of the Class A-5 Maturity Date and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Class A-5 Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing unless the Required Holders waive such Event of Default. Payments of interest on this Note due and payable on each Payment Date shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed within five (5) days of such Payment Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of [ ]. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01 of the Indenture, in whole, but not in part, at the option of [ ], on any Payment Date on or after the date on which the Contract Pool Principal Balance is less than 10% of the initial Contract Pool Principal Balance as of the Initial Cutoff Date. The Trust Depositor will have the right to purchase all of the Class A-5 Notes on any Payment Date (the "Purchase Date"), at a purchase price equal to the principal balance thereof plus a premium equal to the excess, discounted as described below, of (i) the amount of interest that would have accrued on the Class A-5 Notes at the Class A-5 Interest Rate during the period commencing on and including the Payment Date on which the Class A-5 Notes are to be so purchased to but excluding Class A-5 Maturity Date, over the (ii) the amount of interest that would have accrued on the Class A-5 Notes over the same period at a per annum rate of interest equal to the bond equivalent yield to maturity on the fifth Business Day preceding such Payment Date of a United States Treasury security, which is trading in the public securities market, maturing on a date closest to the date equal to the remaining weighted average life of the Class A-5 Notes. Such excess shall be discounted to present value to such Payment Date at the yield described in clause (ii) above. For purposes of the preceding two sentences only, (i) the Class A Principal Balance upon which interest will be deemed to accrue, and (ii) the weighted average remaining life of the Class A-5 Notes, shall be determined based upon the amortization of the Contract Pool Principal Balance remaining at such Payment at a rate equal to [ %] CPR. Interest payable on the Class A-5 notes on any such Payment Date shall be paid to the Holders of record on the related Record Date in the ordinary manner. Following such purchase, the Class A-5 Notes will not be retired, but will continue to be entitled to interest and principal payments on each Payment Date in the manner described above. At such time as the Depositor elects to so purchase the Class A-5 Notes and notice thereof has been given as provided in the Indenture, provided moneys are on deposit with the Trustee in the amount necessary, and available, to pay the purchase price thereof, (1) this Note shall be "deemed purchased" on the Purchase Date, whether or not received by the Trustee on such date, (2) interest hereon, whether or not this Note is received by the Trustee, shall cease to accrue on the Purchase Date and the former Holder of this Note shall have no further interest or rights in this Note except that said former Holder shall be entitled to payment of the purchase price hereof, exclusively from moneys held by the Trustee for such payment, upon presentation of this Note to the Trustee at the Place of Purchase at or before 10:00 a.m., New York City time, on such Purchase Date or any Business Day thereafter, and (3) on and after the Purchase Date, the Trustee, the Note Registrar and each Paying Agent shall no longer treat the former Holder of this Note as the Holder hereof except for purposes of such Holder's right to receive payment of the purchase price hereof. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class A-5 Notes of authorized denomination and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in their individual capacities, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in their individual capacities, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer, of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness which is solely secured by the Collateral and that the Trust will be disregarded as a separate entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by acceptance of a Note or of a beneficial interest in a Note, agrees to treat the Notes for the federal, state and local income, single business and franchise tax purposes as indebtedness. Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Required Holders. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. EXHIBIT B FORM OF CLASS B NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [ ] EQUIPMENT TRUST [ ] [ ]% CLASS B RECEIVABLE-BACKED NOTES REGISTERED $[ ] No. R-1 CUSIP NO. [ ] [ ] Equipment Trust [ ], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of [ ] Dollars [($ )] payable on the earlier of [ ] (the "Class B Maturity Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in the Indenture. Interest on this Note will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. The payment of interest and principal on the Class B Notes is subject to certain prior payment rights of the Holders of Class A Notes, as set forth in the Indenture. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. Date: [ ] [ ], [ ] [ ] EQUIPMENT TRUST [ ] By: The [ ], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By:____________________________________________ Printed Name:__________________________________ Title:_________________________________________ INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [ ], not in its individual capacity but solely as Indenture Trustee By:_____________________________________ Authorized Signatory [REVERSE OF CLASS B NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [ ]% Class B Receivable-Backed Notes (the "Class B Notes"), all issued under an Indenture, dated as of [ ], [ ] (the "Indenture"), between the Issuer and [ ], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class B Notes and the other Classes of Notes described in the Indenture (collectively, the "Notes") are and will be equally and ratably secured by the Collateral pledged as security therefor as provided in the Indenture subject to the priorities of allocations as to interest and principal payments as described therein and in the Pooling and Servicing Agreement. Principal of the Class B Notes will be payable on the earlier of the Class B Maturity Date and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Class B Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing unless the Required Holders waive such Event of Default. Payments of interest on this Note due and payable on each Payment Date shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed within five (5) days of such Payment Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of [ ]. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01 of the Indenture, in whole, but not in part, at the option of [ ], on any Payment Date on or after the date on which the Contract Pool Principal Balance is less than 10% of the initial Contract Pool Principal Balance as of the Initial Cutoff Date. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class B Notes of authorized denomination and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in their individual capacities, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in their individual capacities, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer, of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness which is solely secured by the Collateral and that the Trust will be disregarded as a separate entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by acceptance of a Note or of a beneficial interest in a Note, agrees to treat the Notes for the federal, state and local income, single business and franchise tax purposes as indebtedness. Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Required Holders. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. EXHIBIT C FORM OF CLASS C NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [ ] EQUIPMENT TRUST [ ] [ ]% CLASS C RECEIVABLE-BACKED NOTES REGISTERED $[ ] No. R-1 CUSIP NO. [ ] [ ] Equipment Trust [ ], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of [ ] Dollars [($ )] payable on the earlier of [ ] (the "Class C Maturity Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in the Indenture. Interest on this Note will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. Payment of interest and principal on the Class C Notes is subject to certain prior payment rights of the Holders of Class A and Class B Notes as set forth in the Indenture. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. Date: [ ] [ ], [ ] [ ] EQUIPMENT TRUST[ ] By: [ ], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By:____________________________________________ Printed Name:__________________________________ Title:_________________________________________ INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [ ], not in its individual capacity but solely as Indenture Trustee By:____________________________________ Authorized Signatory [REVERSE OF CLASS C NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [ ]% Class C Receivable-Backed Notes (the "Class C Notes"), all issued under an Indenture, dated as of [ ], [ ] (the "Indenture"), between the Issuer and [ ], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class C Notes and the other Classes of Notes described in the Indenture (collectively, the "Notes") are and will be equally and ratably secured by the Collateral pledged as security therefor as provided in the Indenture subject to the priorities of allocations as to interest and principal payments as described therein and in the Pooling and Servicing Agreement. Principal of the Class C Notes will be payable on the earlier of the Class C Maturity Date and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Class C Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing unless the Required Holders waive such Event of Default. Payments of interest on this Note due and payable on each Payment Date shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed within five (5) days of such Payment Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of [ ]. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01 of the Indenture, in whole, but not in part, at the option of [ ], on any Payment Date on or after the date on which the Contract Pool Principal Balance is less than 10% of the initial Contract Pool Principal Balance as of the Initial Cutoff Date. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class C Notes of authorized denomination and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder, by acceptance of a Note or beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in their individual capacities, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in their individual capacities, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness which is solely secured by the Collateral and that the Trust will be disregarded as a separate entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by acceptance of a Note or of a beneficial interest in a Note, agrees to treat the Notes for the federal, state and local income, single business and franchise tax purposes as indebtedness. Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Required Holders. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. EXHIBIT D FORM OF CLASS D NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. [ ] EQUIPMENT TRUST [ ] [ ]% CLASS D RECEIVABLE-BACKED NOTES REGISTERED $[ ] No. R-1 [ ] Equipment Trust [ ], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to [ ]., or its registered assigns, the principal sum of [ ] Dollars ([$ ]) payable on the earlier of [ ] (the "Class D Maturity Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in the Indenture. Interest on this Note will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Payment of interest and principal on the Class D Notes is subject to certain prior payment rights of the Holders of Class A, Class B and Class C Notes as set forth in the Indenture. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. Date: [ ] [ ], [ ] [ ] EQUIPMENT TRUST SECURITIES [ ] By: [ ], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By:____________________________________________ Printed Name:__________________________________ Title:_________________________________________ INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [ ], not in its individual capacity but solely as Indenture Trustee By:______________________________________ Authorized Signatory [REVERSE OF CLASS D NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [ ]% Class D Receivable-Backed Notes (the "Class D Notes"), all issued under an Indenture, dated as of [ ], [ ] (the "Indenture"), between the Issuer and [ ], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class D Notes and the other Classes of Notes described in the Indenture (collectively, the "Notes") are and will be equally and ratably secured by the Collateral pledged as security therefor as provided in the Indenture subject to the priorities of allocations as to interest and principal payments as described therein and in the Pooling and Servicing Agreement. Principal of the Class D Notes will be payable on the earlier of the Class D Maturity Date and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Class D Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing unless the Required Holders waive such Event of Default. Payments of interest on this Note due and payable on each Payment Date shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed within five (5) days of such Payment Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of [ ]. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01 of the Indenture, in whole, but not in part, at the option of [ ], on any Payment Date on or after the date on which the Contract Pool Principal Balance is less than 10% of the initial Contract Pool Principal Balance as of the Initial Cutoff Date. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class D Notes of authorized denomination and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in their individual capacities, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in their individual capacities, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness which is solely secured by the Collateral and that the Trust will be disregarded as a separate entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by acceptance of a Note or of a beneficial interest in a Note, agrees to treat the Notes for the federal, state and local income, single business and franchise tax purposes as indebtedness. Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Required Holders. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. EXHIBIT F FORM OF NOTE ASSIGNMENT EXHIBIT G FORM OF NOTE DEPOSITORY AGREEMENT EX-4.1.4 5 0005.txt FORM OF INDENTURE EXHIBIT 4.1.4 [FORM OF INDENTURE] between CARD ACCOUNT TRUST, SERIES [ ], as Issuer and [TRUSTEE NAME], as Indenture Trustee Dated as of [ ] TABLE OF CONTENTS PAGE ARTICLE I: DEFINITIONS AND INCORPORATION BY REFERENCE....................1 SECTION 1.01. Definitions.................................1 SECTION 1.02. Incorporation by Reference of Trust Indenture Act...............................8 SECTION 1.03. Rules of Construction.......................8 ARTICLE II: THE NOTES.....................................................9 SECTION 2.01. Form........................................9 SECTION 2.02. Execution, Authentication and Delivery......9 SECTION 2.03. Temporary Notes............................10 SECTION 2.04. Registration; Registration of Transfer and Exchange...............................10 SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes...............................11 SECTION 2.06. Persons Deemed Owner.......................12 SECTION 2.07. Payment of Principal and Interest; Defaulted Interest.........................12 SECTION 2.08. Cancellation...............................13 SECTION 2.09. Release of Collateral......................14 SECTION 2.10. Book-Entry Notes...........................14 SECTION 2.11. Notices to Clearing Agency.................15 SECTION 2.12. Definitive Notes...........................15 SECTION 2.13. Tax Treatment..............................15 ARTICLE III: COVENANTS....................................................15 SECTION 3.01. Payment of Principal and Interest..........15 SECTION 3.02. Maintenance of Office or Agency............16 SECTION 3.03. Money for Payments To Be Held in Trust.....16 SECTION 3.04. Existence..................................17 SECTION 3.05. Protection of Trust Estate.................18 SECTION 3.06. Opinions as to Trust Estate................18 SECTION 3.07. Performance of Obligations.................19 SECTION 3.08. Negative Covenants.........................19 SECTION 3.09. Annual Statement as to Compliance..........20 SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms....................20 SECTION 3.11. Successor or Transferee....................21 SECTION 3.12. No Other Business..........................22 SECTION 3.13. No Borrowing...............................22 SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities................................22 SECTION 3.15. Capital Expenditures.......................22 SECTION 3.16. Restricted Payments........................22 SECTION 3.17. Notice of Events of Default................22 SECTION 3.18. Further Instruments and Acts...............22 ARTICLE IV: SATISFACTION AND DISCHARGE...................................22 SECTION 4.01. Satisfaction and Discharge of Indenture....23 SECTION 4.02. Application of Trust Money.................24 SECTION 4.03. Repayment of Moneys Held by Paying Agent...24 ARTICLE V: REMEDIES.....................................................24 SECTION 5.01. Events of Default..........................24 SECTION 5.02. Acceleration of Maturity; Rescission and Annulment..................................25 SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee...........26 SECTION 5.04. Remedies; Priorities.......................28 SECTION 5.05. Optional Preservation of the Trust Estate..29 SECTION 5.06. Limitation of Suits........................29 SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal and Interest.............30 SECTION 5.08. Restoration of Rights and Remedies.........30 SECTION 5.09. Rights and Remedies Cumulative.............31 SECTION 5.10. Delay or Omission Not a Waiver.............31 SECTION 5.11. Control by Noteholders.....................31 SECTION 5.12. Waiver of Past Defaults....................31 SECTION 5.13. Undertaking for Costs......................32 SECTION 5.14. Waiver of Stay or Extension Laws...........32 SECTION 5.15. Action on Notes............................32 SECTION 5.16. Performance and Enforcement of Certain Obligations................................32 ARTICLE VI: THE INDENTURE TRUSTEE........................................33 SECTION 6.01. Duties of Indenture Trustee................33 SECTION 6.02. Rights of Indenture Trustee................34 SECTION 6.03. Individual Rights of Indenture Trustee.....35 SECTION 6.04. Indenture Trustee's Disclaimer.............35 SECTION 6.05. Notice of Defaults.........................35 SECTION 6.06. Reports by Indenture Trustee to Holders....35 SECTION 6.07. Compensation and Indemnity.................35 SECTION 6.08. Replacement of Indenture Trustee...........36 SECTION 6.09. Successor Indenture Trustee by Merger......36 SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee.................37 SECTION 6.11. Eligibility; Disqualification..............38 SECTION 6.12. Preferential Collection of Claims Against Issuer.....................................38 ARTICLE VII: NOTEHOLDERS' LISTS AND REPORTS...............................38 SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses of Noteholders...............38 SECTION 7.02. Preservation of Information; Communications to Noteholders..............39 SECTION 7.03. Reports by Issuer..........................39 SECTION 7.04. Reports by Indenture Trustee...............39 ARTICLE VIII: ACCOUNTS, DISBURSEMENTS AND RELEASES.........................40 SECTION 8.01. Collection of Money........................40 SECTION 8.02. Trust Accounts.............................40 SECTION 8.03. General Provisions Regarding Accounts......40 SECTION 8.04. Release of Trust Estate....................41 SECTION 8.05. Opinion of Counsel.........................42 ARTICLE IX: SUPPLEMENTAL INDENTURES......................................42 SECTION 9.01. Supplemental Indentures Without Consent of Noteholders................................42 SECTION 9.02. Supplemental Indentures with Consent of Noteholders.............................43 SECTION 9.03. Execution of Supplemental Indentures.......45 SECTION 9.04. Effect of Supplemental Indentures..........45 SECTION 9.05. Conformity with Trust Indenture Act........45 SECTION 9.06. Reference in Notes to Supplemental Indentures.................................45 ARTICLE X: REDEMPTION OF NOTES..........................................45 SECTION 10.01. Redemption.................................45 SECTION 10.02. Form of Redemption Notice..................46 SECTION 10.03. Notes Payable on Redemption Date...........46 ARTICLE XI: MISCELLANEOUS................................................47 SECTION 11.01. Compliance Certificates and Opinions, etc........................................47 SECTION 11.02. Form of Documents Delivered to Indenture Trustee..........................49 SECTION 11.03. Acts of Noteholders........................49 SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating Agencies.................50 SECTION 11.05. Notices to Noteholders; Waiver.............50 SECTION 11.06. Alternate Payment and Notice Provisions....51 SECTION 11.07. Conflict with Trust Indenture Act..........51 SECTION 11.08. Effect of Headings and Table of Contents...51 SECTION 11.09. Successors and Assigns.....................52 SECTION 11.10. Separability...............................52 SECTION 11.11. Benefits of Indenture......................52 SECTION 11.12. Legal Holidays.............................52 SECTION 11.13. GOVERNING LAW..............................52 SECTION 11.14. Counterparts...............................52 SECTION 11.15. Recording of Indenture.....................52 SECTION 11.16. Trust Obligation...........................52 SECTION 11.17. No Petition................................53 SECTION 11.18. Inspection.................................53 INDENTURE dated as of [ ], between CARD ACCOUNT TRUST, SERIES [ ], a [ ] business trust, as Issuer (the "Issuer"), and[TRUSTEE NAME], a [ ] banking corporation, as trustee and not in its individual capacity (the "Indenture Trust"). RECITALS Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Issuer's [Class [A]] [Adjustable Rate] [Variable Rate] [Floating Rate] [ %] Asset Backed Notes (the "[Class [A]] Notes") and [Class [B]] [Adjustable Rate] [Variable Rate] [Floating Rate] [ %] Asset Backed Notes (the "[Class [B]] Notes" and, together with the [Class [A]] Notes, the "Notes"): GRANTING CLAUSE The Issuer hereby Grants to the Indenture Trustee at the Closing Date, as Indenture Trustee for the benefit of the Holders of the Notes, all of the Issuer's right, title and interest in and to (a) the CRB Securities (as defined herein), (b) all moneys due thereon on or after the Cutoff Date, (c) all funds on deposit from time to time in the Trust Accounts, including the Reserve Fund and in all investments and proceeds thereof (including all income thereon); (d) all present and future claims, demands, causes of action and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all proceeds of the conversion thereof, voluntary or involuntary, into cash or other liquid property, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing (collectively, the "Collateral"). The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes, equally and ratably without prejudice, priority or distinction, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture. The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the Notes, acknowledges such Grant, accepts the trusts under this Indenture in accordance with the provisions of this Indenture and agrees to perform its duties required in this Indenture to the best of its ability to the end that the interests of the Holders of the Notes may be adequately and effectively protected. ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. Except as otherwise specified herein or as the context may otherwise require, the following terms have the meanings set forth below for all purposes of this Indenture. "ACT" has the meaning specified in Section 11.03(a). "AFFILIATE" means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AGREEMENT[S]" mean[s] the [Pooling and Servicing Agreement] [Master Pooling and Servicing Agreement] [and] [Trust Agreement] dated [ ] among the [Seller] [Depositor] [and] [the Servicer] [and] the CRB Securities Trustee [as supplemented by that certain Series [ ] Supplement dated [ ] pursuant to which the CRB Securities were issued. "AGREEMENT PAYMENT DATE" has the meaning specified in the Agreement. "AUTHORIZED OFFICER" means, with respect to the Issuer, any officer of the Owner Trustee who is authorized to act for the Owner Trustee in matters relating to the Issuer and who is identified on the list of Authorized Officers delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list may be modified or supplemented form time to time thereafter). "BASIC DOCUMENTS" means the Certificate of Trust, the Trust Agreement, the Note Depository Agreement, the Certificate Depository Agreement and other documents and certificates delivered in connection therewith. "BENEFICIAL OWNER" means, with respect to any Note, the Person who is the beneficial owner of such Note as reflected on the books of the Depository or on the books of a Person maintaining an account with such Depository (directly as a Depository Participant or indirectly through a Depository Participant, in accordance with the rules of such Depository). "BOOK-ENTRY NOTES" means a beneficial interest in the [Class [A]] Notes and the [Class [B]] Notes, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 2.10. "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on which banking institutions or trust companies in the City of New York are authorized or obligated by law, regulation or executive order to remain closed. "CERTIFICATE DEPOSITORY AGREEMENT" has the meaning specified in Section 1.01 of the Trust Agreement. "CERTIFICATE OF TRUST" means the certificate of trust of the Issuer substantially in the form of Exhibit B to the Trust Agreement. "CERTIFICATEHOLDER" means "[CLASS [A]] NOTE INTEREST RATE" means [[ %] per annum] [insert interest rate formula] (computed on the basis of a 360-day year consisting of twelve 30- day months). "[CLASS [A]] NOTES" means the [Class [A]] [Adjustable Rate] [Variable Rate] [Floating Rate] [ %] Asset Backed Notes, substantially in the form of Exhibit A. "[CLASS [B]] NOTE INTEREST RATE" means [[ %] per annum] [insert interest rate formula] (computed on the basis of a 360-day year consisting of twelve 30- day months). "[CLASS [B]] NOTES" means the [Class [B]] _____% Asset Backed Notes, substantially in the form of Exhibit B. "CLEARING AGENCY" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "CLOSING DATE" means [ ]. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder. "COLLATERAL" has the meaning specified in the Granting Clause of this Indenture. "COMPANY" means ACE Securities Corp., a Delaware corporation and any successor in interest. "CORPORATE TRUST OFFICE" means the principal office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Agreement is located at [ ], Attention: [ ], or at such other address as the Indenture Trustee may designate from time to time by notice to the Noteholders and the Issuer, or the principal corporate trust office of any successor Trustee at the address designated by such successor Indenture Trustee by notice to the Noteholders and the Issuer. "CRB SECURITIES INTEREST PAYMENT" means, as to each Payment Date, the payments of interest on the CRB Securities received by the Trustee and due to be paid on such Payment Date. "CRB SECURITIES PRINCIPAL PAYMENT" means, as to each Payment Date, the payment of principal of the CRB Securities received by the Trustee and due to be paid on any Principal Payment Date. "CRB SECURITIES SCHEDULE" means the schedule attached hereto as Schedule II, such schedule setting forth as to each CRB Securities Security (i) the original principal balance and (ii) the principal balance at the Closing Date. "CRB SECURITIES" means the certificates or notes designated [ ], Series [ ] with an initial [approximate] principal amount of $[ ] issuance pursuant to [an Agreement]. "CRB SECURITIES TRUSTEE" means [ ] or its successor in interest in its capacity as trustee under the Agreement, or any successor trustee appointed as therein provided. "CUTOFF DATE" means [ ]. "DEFAULT" means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default. "DEFINITIVE NOTES" has the meaning specified in Section 2.12. "EVENT OF DEFAULT" has the meaning specified in Section 5.01. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXECUTIVE OFFICER" means, with respect to any corporation, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, Executive Vice President, any Vice President, the Secretary or the Treasurer of such corporation; and with respect to any partnership, any general partner thereof. "GRANT" means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, create, and grant a lien upon and a security interest in and a right of set-off against, deposit, set over and confirm pursuant to this Indenture. A Grant of the Collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. "HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is registered on the Note Register. "INDENTURE TRUSTEE" means [ ], a [ ] banking corporation, as Indenture Trustee under this Indenture, or any successor Indenture Trustee under this Indenture. "INDEPENDENT" means, when used with respect to any specified Person, that the Person (a) is in fact independent of the Issuer, any other obligor on the Notes, the Company and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Company or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Company or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. "INDEPENDENT CERTIFICATE" means a certificate or opinion to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01, made by an Independent appraiser or other expert appointed by an Issuer Order and approved by the Indenture Trustee in the exercise of reasonable care, and such opinion or certificate shall state that the signer has read the definition of "Independent" in this Indenture and that the signer is Independent within the meaning thereof. "INTEREST ACCRUAL PERIOD" means, with respect to any Distribution Date, the period from and including the first day of the calendar month immediately preceding the month in which such Distribution Date occurs (or, in the case of the first Distribution Date, the Closing Date) to and including the last day of such calendar month. "INTEREST RATE" means the [Class [A]] Interest Rate or the [Class [B]] Interest Rate. "ISSUER" means Card Account Trust, Series [ ], until a successor replaces it and, thereafter, means such successor and, for the purposes of any provision contained herein and required by the TIA, each other obligor on the Notes. "ISSUER ORDER" or "ISSUER REQUEST" means a written order or request signed in the name of the Issuer by any one of its Authorized Officers and delivered to the Indenture Trustee. "NOTE" means a [Class [A]] Note or a [Class [B]] Note. "NOTE DEPOSITORY AGREEMENT" means the agreement dated [ ], among the Issuer, the Indenture Trustee and the Depository Trust Company, as the initial Clearing Agency, relating to the Notes, substantially in the form of Exhibit B. "NOTE OWNER" means, with respect to a Book-Entry Note, the Person who is the beneficial owner of such Book-Entry Note, as reflected on the books of the Clearing Agency or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings specified in Section 2.05. "OFFICER'S CERTIFICATE" means a certificate signed by any Authorized Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01, and delivered to the Indenture Trustee. Unless otherwise specified, any reference in this Indenture to an Officer's Certificate shall be to an Officer's Certificate of any Authorized Officer of the Issuer. "OPINION OF COUNSEL" means one or more written opinions of counsel who may, except as otherwise expressly provided in this Indenture, be employees of or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee, and which opinion or opinions shall be addressed to the Indenture Trustee as Indenture Trustee, shall comply with any applicable requirements of Section 11.01 and shall be in form and substance satisfactory to the Indenture Trustee. "OUTSTANDING" means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture except: (i) Notes theretofore canceled by the Note Registrar or delivered to the Note Registrar for cancellation; (ii) Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Notes (PROVIDED, HOWEVER, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision for such notice has been made, satisfactory to the Indenture Trustee); and (iii) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a bona fide purchaser; PROVIDED, that in determining whether the Holders of the requisite Outstanding Amount of the Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Basic Document, Notes owned by the Issuer, any other obligor upon the Notes, the Company or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Indenture Trustee knows to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, the Company or any Affiliate of any of the foregoing Persons. "OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes, or Class of Notes, as applicable, Outstanding at the date of determination. "OWNER TRUSTEE" means [ ], not in its individual capacity but solely as Owner Trustee under the Trust Agreement, or any successor Owner Trustee under the Trust Agreement. "PAYING AGENT" means the Indenture Trustee or any other Person that meets the eligibility standards for the Indenture Trustee specified in Section 6.11 and is authorized by the Issuer to make payments to and distributions from the Collection Account and the Note Distribution Account, including payments of principal of or interest on the Notes on behalf of the Issuer. "PAYMENT DATE" means a Distribution Date. "PERSON" means any individual, corporation, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "PREDECESSOR NOTE" means, with respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 2.06 in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "PROCEEDING" means any suit in equity, action at law or other judicial or administrative proceeding. "RATING AGENCY CONDITION" means, with respect to any action, that each Rating Agency shall have been given 10 days (or such shorter period as is acceptable to each Rating Agency) prior notice thereof and that each of the Rating Agencies shall have notified the Company and the Issuer in writing that such action will not result in a reduction or withdrawal of the then current rating of the Notes. "RATING AGENCY" means Moody's Investors Service, Inc. or Standard & Poor's Rating Group, a division of McGraw-Hill, Inc., or, if neither such organization or successor is any longer in existence, a nationally recognized statistical rating organization or other comparable Person designated by the Issuer, notice of which designation shall be given to the Indenture Trustee and the Owner Trustee. "RECORD DATE" means, with respect to a Distribution Date or Redemption Date, the close of business on the day immediately preceding such Distribution Date or Redemption Date. "REDEMPTION DATE" means in the case of a redemption of the Notes pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section 10.01(b), the Distribution Date specified by the Issuer pursuant to Section 10.01(a) or (b), as applicable. "REDEMPTION PRICE" means (a) in the case of a redemption of the Notes pursuant to Section 10.01(a), an amount equal to the unpaid principal amount of the Notes redeemed plus accrued and unpaid interest thereon at the weighted average of the Interest Rates for each Class of Notes being so redeemed to but excluding the Redemption Date, or (b) in the case of a payment made to Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note Distribution Account, but not in excess of the amount specified in clause (a) above. "REGISTERED HOLDER" means the Person in whose name a Note is registered on the Note Register on the applicable Record Date. "RESPONSIBLE OFFICER" means, with respect to the Indenture Trustee, any officer within the Corporate Trust Office of the Indenture Trustee, including any Vice President, Assistant Vice President, Treasurer, Assistant Treasurer, Secretary, Assistant Secretary or any other officer of the Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "SECURITIES ACT" means the Securities Act of 1933, as amended. "STATE" means any one of the 50 States of the United States of America or the District of Columbia. "TRUST ESTATE" means all money, instruments, rights and other property that are subject or intended to be subject to the lien and security interest of this Indenture for the benefit of the Noteholders (including, without limitation, all property and interests Granted to the Indenture Trustee), including all proceeds thereof. "TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939 as in force on the date hereof, unless otherwise specifically provided. "UCC" means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time. SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the Securities and Exchange Commission; "indenture securities" means the Notes; "indenture security holder" means a Noteholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Indenture Trustee; and "obligor" on the indenture securities means the Issuer and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule have the meaning assigned to them by such definitions. SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; (iii) "or" is not exclusive; (iv) "including" means including without limitation; (v) words in the singular include the plural and words in the plural include the singular; and (vi) any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; references to a Person are also to its permitted successors and assigns. ARTICLE II THE NOTES SECTION 2.01. FORM. The [Class [A]] Notes and the [Class [B]] Notes, in each case together with the Indenture Trustee's certificate of authentication, shall be in substantially the form set forth in Exhibit A and Exhibit B, respectively, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. The definitive Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibit A and Exhibit B are part of the terms of this Indenture. SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be executed on behalf of the Issuer by any of its Authorized Officers. The signature of any such Authorized Officer on the Notes may be manual or facsimile. Notes bearing the manual or facsimile signature of individuals who were at any time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. The Indenture Trustee shall upon Issuer Order authenticate and deliver [Class [A]] Notes for original issue in an aggregate principal amount of $[ ] and [Class [B]] Notes for original issue in an aggregate principal amount of $ [ ]. The aggregate principal amount of [Class [A]] Notes and [Class [B]] Notes outstanding at any time may not exceed such respective amounts except as provided in Section 2.05. Each Note shall be dated the date of its authentication. The Notes shall be issuable as registered Notes in the minimum denomination of $1,000 and in integral multiples of $1,000 in excess thereof. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Indenture Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. SECTION 2.03. TEMPORARY NOTES. Pending the preparation of definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order, the Indenture Trustee shall authenticate and deliver temporary Notes that are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the definitive Notes in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture as the officers executing such Notes may determine, as evidenced by their execution of such Notes. If temporary Notes are issued, the Issuer shall cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer to be maintained as provided in Section 3.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver in exchange therefor, a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes. SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The Issuer shall cause to be kept a register (the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Notes and the registration of transfers of Notes. The Indenture Trustee initially shall be the "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Note Registrar. If a Person other than the Indenture Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register, and the Indenture Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by an Executive Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and number of such Notes. Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 3.02, if the requirements of Section 8-401(1) of the UCC are met, then the Issuer shall execute, and the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Notes of the same Class in any authorized denominations of a like aggregate principal amount. At the option of the Holder, Notes may be exchanged for other Notes of the same Class in any authorized denominations of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, if the requirements of Section 8-401(1) of the UCC are met, then the Issuer shall execute, and the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, the Notes which the Noteholder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act. No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.03 or 9.06 not involving any transfer. The preceding provisions of this Section notwithstanding, the Issuer shall not be required to make, and the Note Registrar need not register, transfers or exchanges of Notes selected for redemption or of any Note for a period of 15 days preceding the due date for any payment with respect to such Note. SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If: (i) any mutilated Note is surrendered to the Indenture Trustee or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note; and (ii) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a bona fide purchaser, and provided that the requirements of Section 8-405 of the UCC are met, the Issuer shall execute, and upon its request the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated destroyed, lost or stolen Note, a replacement Note of the same Class; PROVIDED, HOWEVER, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within seven days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date without surrender thereof. If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, then the Issuer and the Indenture Trustee shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith. Upon the issuance of any replacement Note under this Section, the Issuer may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee) connected therewith. Every replacement Note issued pursuant to this Section in replacement of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 2.06. PERSONS DEEMED OWNER. Prior to due presentment for registration of transfer of any Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name any Note is registered (as of the day of determination) as the owner of such Note for the purpose of receiving payments of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by notice to the contrary. SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST. (a) The [Class [A]] Notes and the [Class [B]] Notes shall accrue interest at the [Class [A]] Interest Rate and the [Class [B]] Interest Rate, respectively, as set forth in Exhibit A and Exhibit B, respectively, and such interest shall be payable on each Distribution Date as specified therein, subject to Section 3.01. Any installment of interest or principal payable on a Note that is punctually paid or duly provided for by the Issuer on the applicable Distribution Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered on the Record Date by check mailed first-class postage prepaid to such Person's address as it appears on the Note Register on such Record Date, except that (i) unless Definitive Notes have been issued pursuant to Section 2.12, with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payment will be made by wire transfer in immediately available funds to the account designated by such nominee and (ii) the final installment of principal payable with respect to such Note on a Distribution Date or on the applicable class final scheduled Distribution Date (and except for the Redemption Price for any Note called for redemption pursuant to Section 10.01(a)) will be payable as provided below. The funds represented by any such checks returned undelivered shall be held in accordance with Section 3.03. (b) The principal of each Note shall be payable in installments on each Distribution Date as provided in the forms of the Notes set forth in Exhibit A and Exhibit B. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, if the Indenture Trustee or Holders of the Notes representing not less than a majority of the Outstanding Amount of the Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.02. All principal payments with respect to the Notes of a Class shall be made pro rata to the Noteholders of such Class entitled thereto. The Indenture Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Distribution Date on which the Issuer expects that the final installment of principal of and interest on such Note will be paid. Such notice shall be mailed or transmitted by facsimile prior to such final Distribution Date and shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for payment of such installment. Notices in connection with redemptions of Notes shall be mailed to Noteholders as provided in Section 10.02. (c) If the Issuer defaults in a payment of interest on the Notes, then the Issuer shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) at the applicable Interest Rate in any lawful manner. The Issuer may pay such defaulted interest to the persons who are Noteholders on a subsequent special record date, which date shall be at least five Business Days prior to the payment date. The Issuer shall fix or cause to be fixed any such special record date and payment date and, at least 15 days before any such special record date, shall mail to each Noteholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.08. CANCELLATION. All Notes surrendered for payment, registration of transfer, exchange or redemption shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder that the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly canceled by the Indenture Trustee. No notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section except as expressly permitted by this Indenture. All canceled Notes may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time, unless the Issuer shall direct by an Issuer Order that they be destroyed or (provided that such Issuer Order is timely and the Notes have not been previously disposed of by the Indenture Trustee) returned to it. SECTION 2.09. RELEASE OF COLLATERAL. Subject to Section 11.01 and the terms of the Basic Documents, the Indenture Trustee shall release property from the lien of this Indenture only upon receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel and Independent Certificates in accordance with TIA (S)(S) 314(c) and 314(d)(1) or an Opinion of Counsel in lieu of such Independent Certificates to the effect that the TIA does not require any such Independent Certificates. SECTION 2.10. BOOK-ENTRY NOTES. The Notes, upon original issuance, will be issued in form of typewritten Notes representing the Book-Entry Notes, to be delivered to The Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the Issuer. The Book-Entry Notes shall be registered initially on the Note Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Owner thereof will receive a definitive Note representing such Note Owner's interest in such Note, except as provided in Section 2.12. Unless and until definitive, fully registered Notes (the "Definitive Notes") have been issued to such Note Owners pursuant to Section 2.12: (i) the provisions of this Section shall be in full force and effect; (ii) the Note Registrar and the Indenture Trustee shall be entitled to deal with the Clearing Agency for all purposes of this Indenture (including the payment of principal of and interest on the Notes and the giving of instructions or directions hereunder) as the sole holder of the Notes, and shall have no obligation to the Note Owners; (iii) to the extent that the provisions of this Section conflict with any other provisions of this Indenture, the provisions of this Section shall control; (iv) the rights of Note Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Note Owners and the Clearing Agency and/or the Clearing Agency Participants pursuant to the Note Depository Agreement. Unless and until Definitive Notes are issued pursuant to Section 2.12, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments of principal of and interest on the Notes to such Clearing Agency Participants; and (v) whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Holders of Notes evidencing a specified percentage of the Outstanding Amount of the Notes, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Note Owners and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Notes and has delivered such instructions to the Indenture Trustee. SECTION 2.11. NOTICES TO CLEARING AGENCY. Whenever a notice or other communication to the Noteholders is required under this Indenture, unless and until Definitive Notes shall have been issued to Note Owners pursuant to Section 2.12, the Indenture Trustee shall give all such notices and communications specified herein to be given to Holders of the Notes to the Clearing Agency, and shall have no obligation to such Note Owners. SECTION 2.12. DEFINITIVE NOTES. If: (i) the Company advises the Indenture Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Book-Entry Notes and the Company is unable to locate a qualified successor, (ii) the Company at its option advises the Indenture Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency, or (iii) after the occurrence of an Event of Default, Owners of the Book-Entry Notes representing beneficial interests aggregating at least a majority of the Outstanding Amount of such Notes advise the Clearing Agency in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of such Note Owners, then the Clearing Agency shall notify all Note Owners and the Indenture Trustee of the occurrence of such event and of the availability of Definitive Notes to Note Owners requesting the same. Upon surrender to the Indenture Trustee of the typewritten Notes representing the Book-Entry Notes by the Clearing Agency, accompanied by registration instructions, the Issuer shall execute and the Indenture Trustee shall authenticate the Definitive Notes in accordance with the instructions of the Clearing Agency. None of the Issuer, the Note Registrar or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the Holders of the Definitive Notes as Noteholders. SECTION 2.13. TAX TREATMENT. The Issuer has entered into this Indenture, and the Notes will be issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer secured by the Trust Estate. The Issuer, by entering into this Indenture, and each Noteholder, by its acceptance of a Note (and each Note Owner by its acceptance of an interest in the applicable Book-Entry Note), agree to treat the Notes for federal, state and local income, single business and franchise tax purposes as indebtedness of the Issuer. ARTICLE III COVENANTS SECTION 3.01. PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly and punctually pay the principal of and interest, if any, on the Notes in accordance with the terms of the Notes and this Indenture. Without limiting the foregoing, subject to Section 8.02(c), the Issuer will cause to be distributed all amounts on deposit in the Note Distribution Account on a Distribution Date by the Trust with respect to the CRB Securities (i) for the benefit of the [Class [A]] Notes, to the [Class [A]] Noteholders and (ii) for the benefit of the [Class [B]] Notes, to the [Class [B]] Noteholders. Amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest and/or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture. SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in the Borough of Manhattan, the City of New York, an office or agency where Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the foregoing purposes. The Issuer will give prompt written notice to the Indenture Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders, notices and demands. SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in Section 8.02(a) and (b), all payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the Collection Account and the Note Distribution Account pursuant to Section 8.02(c) shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection Account and the Note Distribution Account for payments of Notes shall be paid over to the Issuer except as provided in this Section. On or before the Business Day preceding each Distribution Date and Redemption Date, the Issuer shall deposit or cause to be deposited in the Note Distribution Account an aggregate sum sufficient to pay the amounts then becoming due under the Notes, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless the Paying Agent is the Indenture Trustee) shall promptly notify the Indenture Trustee of its action or failure to so act. The Issuer will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section, that such Paying Agent will: (i) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided; (ii) give the Indenture Trustee notice of any default by the Issuer (or any other obligor upon the Notes) of which it has actual knowledge in the making of any payment required to be made with respect to the Notes; (iii) at any time during the continuance of any such default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent; (iv) immediately resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent at the time of its appointment; and (v) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent, and upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money. Subject to applicable laws with respect to escheat of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and be paid to the Issuer on Issuer Request; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; PROVIDED, HOWEVER, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, shall at the expense and direction of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. The Indenture Trustee shall also adopt and employ, at the expense and direction of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Holders whose Notes have been called but have not been surrendered for redemption or whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder). SECTION 3.04. EXISTENCE. The Issuer will keep in full effect its existence, rights and franchises as a business trust under the laws of the State of [ ] (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other State or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes, the Collateral and each other instrument or agreement included in the Trust Estate. SECTION 3.05. PROTECTION OF TRUST ESTATE. The Issuer will from time to time execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, and will take such other action necessary or advisable to: (i) maintain or preserve the lien and security interest (and the priority thereof) of this Indenture or carry out more effectively the purposes hereof; (ii) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture; (iii) enforce any of the Collateral; or (iv) preserve and defend title to the Trust Estate and the rights of the Indenture Trustee and the Noteholders in such Trust Estate against the claims of all persons and parties. The Issuer hereby designates the Indenture Trustee its agent and attorney-in- fact to execute any financing statement, continuation statement or other instrument required to be executed pursuant to this Section 3.05. SECTION 3.06. OPINIONS AS TO TRUST ESTATE. (a) On the Closing Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements as is necessary to perfect and make effective the lien and security interest of this Indenture and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make such lien and security interest effective. (b) On or before [ ] in each calendar year, beginning in [ ], the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements as is necessary to maintain the lien and security interest created by this Indenture and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to maintain such lien and security interest. Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any financing statements and continuation statements that will, in the opinion of such counsel, be required to maintain the lien and security interest of this Indenture until [ ] in the following calendar year. SECTION 3.07. PERFORMANCE OF OBLIGATIONS. (a) The Issuer will not take any action and will use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person's material covenants or obligations under any instrument or agreement included in the Trust Estate or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as expressly provided in this Indenture or such other instrument or agreement. (b) Without derogating from the absolute nature of the assignment granted to the Indenture Trustee under this Indenture or the rights of the Indenture Trustee hereunder, the Issuer agrees (i) that it will not, without the prior written consent of the Indenture Trustee or the Holders of at least a majority in Outstanding Amount of the Notes, amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, supplement, termination, waiver or surrender of, the terms of any Collateral or the Basic Documents, or waive timely performance or observance by the Company under the Trust Agreement or any CRB Issuer under any Agreement; and (ii) that any such amendment shall not (A) increase or reduce in any manner the amount of, or accelerate or delay the timing of, distributions that are required to be made for the benefit of the Noteholders or (B) reduce the aforesaid percentage of the Notes that is required to consent to any such amendment, without the consent of the Holders of all the Outstanding Notes. If any such amendment, modification, supplement or waiver shall be so consented to by the Indenture Trustee or such Holders, the Issuer agrees, promptly following a request by the Indenture Trustee to do so, to execute and deliver, in its own name and at its own expense, such agreements, instruments, consents and other documents as the Indenture Trustee may deem necessary or appropriate in the circumstances. SECTION 3.08. NEGATIVE COVENANTS. So long as any Notes are Outstanding, the Issuer shall not: (i) except as expressly permitted by this Indenture, sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Trust Estate, unless directed to do so by the Indenture Trustee; (ii) claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts properly withheld from such payments under the Code) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon any part of the Trust Estate; or (iii) (A) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien of this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, (B) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the Trust Estate or any part thereof or any interest therein or the proceeds thereof (other than tax liens, mechanics' liens and other liens that arise by operation of law) or (C) permit the lien of this Indenture not to constitute a valid first priority (other than with respect to any such tax, mechanics' or other lien) security interest in the Trust Estate. SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver to the Indenture Trustee, within 120 days after the end of each fiscal year of the Issuer (commencing with the fiscal year [ ]), an Officer's Certificate stating, as to the Authorized Officer signing such Officer's Certificate, that: (i)......a review of the activities of the Issuer during such year and of its performance under this Indenture has been made under such Authorized Officer's supervision; and (ii) to the best of such Authorized Officer's knowledge, based on such review, the Issuer has complied with all conditions and covenants under this Indenture throughout such year, or, if there has been a default in its compliance with any such condition or covenant, specifying each such default known to such Authorized Officer and the nature and status thereof. SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. (a) The Issuer shall not consolidate or merge with or into any other Person, unless: (i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States of America or any State and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel (and shall have delivered copies thereof to the Indenture Trustee) to the effect that such transaction will not have any material adverse tax consequence to the Issuer, any Noteholder or any Certificateholder; (v) any action that is necessary to maintain the lien and security interest created by this Indenture shall have been taken; and (vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation or merger and such supplemental indenture comply with this Article III and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filing required by the Exchange Act). (b) The Issuer shall not convey or transfer any of its properties or assets, including those included in the Trust Estate, to any Person, unless: (i) the Person that acquires by conveyance or transfer the properties and assets of the Issuer the conveyance or transfer of which is hereby restricted (A) shall be a United States citizen or a Person organized and existing under the laws of the United States of America or any State, (B) expressly assumes, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein, (C) expressly agrees by means of such supplemental indenture that all right, title and interest so conveyed or transferred shall be subject and subordinate to the rights of Holders of the Notes, (D) unless otherwise provided in such supplemental indenture, expressly agrees to indemnify, defend and hold harmless the Issuer against and from any loss, liability or expense arising under or related to this Indenture and the Notes and (E) expressly agrees by means of such supplemental indenture that such Person (or if a group of Persons, then one specified Person) shall make all filings with the Commission (and any other appropriate Person) required by the Exchange Act in connection with the Notes; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel (and shall have delivered copies thereof to the Indenture Trustee) to the effect that such transaction will not have any material adverse tax consequence to the Issuer, any Noteholder or any Certificateholder; (v) any action that is necessary to maintain the lien and security interest created by this Indenture shall have been taken; and (vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel each stating that such conveyance or transfer and such supplemental indenture comply with this Article III and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filing required by the Exchange Act). SECTION 3.11. SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or merger of the Issuer in accordance with Section 3.10(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein. (b) Upon a conveyance or transfer of all the assets and properties of the Issuer pursuant to Section 3.10(b), Card Account Trust, Series [ ] will be released from every covenant and agreement of this Indenture to be observed or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Indenture Trustee stating that Card Account Trust, Series [ ] is to be so released. SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any business other than financing, purchasing, owning, selling and managing the CRB Securities in the manner contemplated by this Indenture and the Basic Documents and activities incidental thereto. SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness except for the Notes. SECTION 3.14. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. The Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person. SECTION 3.15. CAPITAL EXPENDITURES. The Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty). SECTION 3.16. RESTRICTED PAYMENTS. The Issuer shall not, directly or indirectly, pay any dividend or make any distribution (by reduction of capital or otherwise) whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuer or otherwise with respect to any ownership or equity interest or security in or of the Issuer, redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or set aside or otherwise segregate any amounts for any such purpose; PROVIDED, HOWEVER, that the Issuer may make, or cause to be made, distributions to the Owner Trustee and the Certificateholders as contemplated by, and to the extent funds are available for such purpose under the Trust Agreement. The Issuer will not directly or indirectly, make payments to or distributions from the Collection Account except in accordance with this Indenture and the Basic Documents. SECTION 3.17. NOTICE OF EVENTS OF DEFAULT. The Issuer shall give the Indenture Trustee and the Rating Agencies prompt written notice of each Event of Default hereunder and each default on the part of the Company of its obligations. SECTION 3.18. FURTHER INSTRUMENTS AND ACTS. Upon request of the Indenture Trustee, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall cease to be of further effect with respect to the Notes except as to rights of registration of transfer and exchange, substitution of mutilated, destroyed, lost or stolen Notes, rights of Noteholders to receive payments of principal thereof and interest thereon, Sections 3.03, 3.04, 3.05, 3.08, 3.10, 3.12 and 3.13, the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.07 and the obligations of the Indenture Trustee under Section 4.02) and the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them, and the Indenture Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when (A) either (1) all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.05 and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 3.03) have been delivered to the Indenture Trustee for cancellation; or (2) all Notes not theretofore delivered to the Indenture Trustee for cancellation a. have become due and payable. b. will become due and payable at the Final Scheduled Distribution Date within one year, or c. are to be called for redemption within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name, and at the expense, of the Issuer. and the Issuer, in the case of a., b. or c. above, has irrevocably deposited or caused to be irrevocably deposited with the Indenture Trustee cash or direct obligations of or obligations guaranteed by the United States of America (which will mature prior to the date such amounts are payable), in trust for such purpose, in an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Indenture Trustee for cancellation when due to the applicable final scheduled Distribution Date or Redemption Date (if Notes shall have been called for redemption pursuant to Section 10.01(a)), as the case may be; (B) the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and (C) the Issuer has delivered to the Indenture Trustee an Officer's Certificate, an Opinion of Counsel and (if required by the TIA or the Indenture Trustee) an Independent Certificate from a firm of certified public accountants, each meeting the applicable requirements of Section 11.01(a) and, subject to Section 11.02, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. SECTION 4.02. APPLICATION OF TRUST MONEY. All moneys deposited with the Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Notes for the payment or redemption of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal and interest; but such moneys need not be segregated from other funds except to the extent required herein or required by law. SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all moneys then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 3.03 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. ARTICLE V REMEDIES SECTION 5.01. EVENTS OF DEFAULT. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) default in the payment of any interest on any Note when the same becomes due and payable, and such default shall continue for a period of five days; or (ii) default in the payment of the principal of any Note when the same becomes due and payable; or (iii) default in the observance or performance of any covenant or agreement of the Issuer made in this Indenture (other than a covenant or agreement, a default in the observance or performance of which is elsewhere in this Section specifically dealt with), or any representation or warranty of the Issuer made in this Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstance or condition in respect of which such misrepresentation or warranty was incorrect shall not have been eliminated or otherwise cured, for a period of 30 days after there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least 25% of the Outstanding Amount of the Notes, a written notice specifying such default or incorrect representation or warranty and requiring it to be remedied and stating that such notice is a notice of Default hereunder; or (iv) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Trust Estate in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or ordering the winding-up or liquidation of the Issuer's affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (v) the commencement by the Issuer of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of any action by the Issuer in furtherance of any of the foregoing. The Issuer shall deliver to the Indenture Trustee, within five days after the occurrence thereof, written notice in the form of an Officer's Certificate of any event which with the giving of notice and the lapse of time would become an Event of Default under clause (iii), its status and what action the Issuer is taking or proposes to take with respect thereto. SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default should occur and be continuing, then and in every such case the Indenture Trustee or the Holders of Notes representing not less than a majority of the Outstanding Amount of the Notes may declare all the Notes to be immediately due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee if given by Noteholders), and upon any such declaration the unpaid principal amount of such Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable. At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter in this Article V provided, the Holders of Notes representing a majority of the Outstanding Amount of the Notes, by written notice to the Issuer and the Indenture Trustee, may rescind and annul such declaration and its consequences if: (i) the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay: (A) all payments of principal of and interest on all Notes and all other amounts that would then be due hereunder or upon such Notes if the Event of Default giving rise to such acceleration had not occurred; and (B) all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel; and (ii) all Events of Default, other than the nonpayment of the principal of the Notes that has become due solely by such acceleration, have been cured or waived as provided in Section 5.12. No such rescission shall affect any subsequent default or impair any right consequent thereto. SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY INDENTURE TRUSTEE. (a) The Issuer covenants that if (i) default is made in the payment of any interest on any Note when the same becomes due and payable, and such default continues for a period of five days, or (ii) default is made in the payment of the principal of or any installment of the principal of any Note when the same becomes due and payable, then the Issuer will, upon demand of the Indenture Trustee, pay to it, for the benefit of the Holders of the Notes, the whole amount then due and payable on such Notes for principal and interest, with interest on the overdue principal, and, to the extent payment at such rate of interest shall be legally enforceable, on overdue installments of interest at the rate borne by the Notes, and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel. (b) In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or other obligor upon such Notes and collect in the manner provided by law out of the property of the Issuer or other obligor upon such Notes, wherever situated, the moneys adjudged or decreed to be payable. (c) If an Event of Default occurs and is continuing, the Indenture Trustee may, as more particularly provided in Section 5.04, in its discretion, proceed to protect and enforce its rights and the rights of the Noteholders, by such appropriate Proceedings as the Indenture Trustee shall deem most effective to protect and enforce any such right, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture or by law. (d) In case there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Trust Estate, Proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, or liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Indenture Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred and all advances made by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Noteholders allowed in such Proceedings; (ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of Notes in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings; (iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Indenture Trustee on their behalf; and (iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders of Notes allowed in any Proceedings relative to the Issuer, its creditors and its property; and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Indenture Trustee and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, an all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith. (e) Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person. (f) All rights of action and asserting of claims under this Indenture, or under any of the Notes, may be enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any trial or other Proceedings relative thereto, and any such action or Proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Notes. (g) In any Proceedings brought by the Indenture Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Noteholder a party to any such Proceedings. SECTION 5.04. REMEDIES; PRIORITIES. (a) If an Event of Default shall have occurred and be continuing, then the Indenture Trustee may do one or more of the following (subject to Section 5.05): (i) institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with respect thereto, by declaration or otherwise, enforce any judgment obtained and collect from the Issuer and any other obligor upon such Notes moneys adjudged due; (ii) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Trust Estate; (iii) exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee and the Holders of the Notes; and (iv) sell the Trust Estate or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law; PROVIDED, HOWEVER, that the Indenture Trustee may not sell or otherwise liquidate the Trust Estate following an Event of Default, other than an Event of Default described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of the Outstanding Amount of the Notes consent thereto, (B) the proceeds of such sale or liquidation distributable to the Noteholders are sufficient to discharge in full all amounts then due and unpaid upon such Notes for principal and interest or (C) the Indenture Trustee (1) determines that the Trust Estate will not continue to provide sufficient funds for the payment of principal and interest on the Notes as they would have become due if the Notes had not been declared due and payable and (2) obtains the consent of Holders of 66-2/3% of the Outstanding Amount of the Notes. In determining such sufficiency or insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. (b) If the Indenture Trustee collects any money or property pursuant to this Article V, it shall pay out such money or property in the following order: FIRST: to the Indenture Trustee for amounts due under Section 6.07; SECOND: to Noteholders for amounts due and unpaid on the Notes for interest (including any premium), ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest (including any premium); THIRD: to Holders of the [Class [A]] Notes for amounts due and unpaid on the [Class [A]] Notes for principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the [Class [A]] Notes for principal, until the Outstanding Amount of the [Class [A]] Notes is reduced to zero; FOURTH: to Holders of the [Class [B]] Notes for amounts due and unpaid on the [Class [B]] Notes for principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the [Class [B]] Notes for principal, until the Outstanding Amount of the [Class [B]] Notes is reduced to zero; and FIFTH: to the Issuer for amounts required to be distributed to the Certificateholders pursuant to the Trust Agreement. The Indenture Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section. At least 15 days before such record date, the Issuer shall mail to each Noteholder and the Indenture Trustee a notice that states the record date, the payment date and the amount to be paid. SECTION 5.05. OPTIONAL PRESERVATION OF THE TRUST ESTATE. If the Notes have been declared to be due and payable under Section 5.02 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of the Trust Estate. It is the desire of the parties hereto and the Noteholders that there be at all times sufficient funds for the payment of principal of and interest on the Notes, and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the Trust Estate. In determining whether to maintain possession of the Trust Estate, the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. SECTION 5.06. LIMITATION OF SUITS. No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (i) such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default; (ii) the Holders of not less than 25% of the Outstanding Amount of the Notes have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder; (iii) such Holder or Holders have offered to the Indenture Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in complying with such request; (iv) the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and (v) no direction inconsistent with such written request has been given to the Indenture Trustee during such 60-day period by the Holders of a majority of the Outstanding Amount of the Notes. It is understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided. In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes, each representing less than a majority of the Outstanding Amount of the Notes, the Indenture Trustee in its sole discretion may determine what action, if any, shall be taken, notwithstanding any other provision of this Indenture. SECTION 5.07. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Notwithstanding any other provisions in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest, if any, on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture (or, in the case of redemption, on or after the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. SECTION 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Noteholder, then and in every such case the Issuer, the Indenture Trustee and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders shall continue as though no such Proceeding had been instituted. SECTION 5.09. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder or otherwise shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission of the Indenture Trustee or any Holder of any Note to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be. SECTION 5.11. CONTROL BY NOTEHOLDERS. The Holders of a majority of the Outstanding Amount of the Notes shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Notes or exercising any trust or power conferred on the Indenture Trustee; PROVIDED that: (i) such direction shall not be in conflict with any rule of law or with this Indenture; (ii) subject to the express terms of Section 5.04, any direction to the Indenture Trustee to sell or liquidate the Trust Estate shall be by Holders of Notes representing not less than 100% of the Outstanding Amount of the Notes; (iii) if the conditions set forth in Section 5.05 have been satisfied and the Indenture Trustee elects to retain the Trust Estate pursuant to such Section, then any direction to the Indenture Trustee by Holders of Notes representing less than 100% of the Outstanding Amount of the Notes to sell or liquidate the Trust Estate shall be of no force and effect; and (iv) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction. Notwithstanding the rights of Noteholders set forth in this Section, subject to Section 6.01, the Indenture Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Noteholders not consenting to such action. SECTION 5.12. WAIVER OF PAST DEFAULTS. Prior to the declaration of the acceleration of the maturity of the Notes as provided in Section 5.02, the Holders of Notes of not less than a majority of the Outstanding Amount of the Notes may waive any past Default or Event of Default and its consequences, except a Default (a) in payment of principal of or interest on any of the Notes or (b) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Note. In the case of any such waiver, the Issuer, the Indenture Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of a Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of the Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date). SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to the extent that it may lawfully do so) that if will not at any time insist upon, or plead or in any manner whatsoever claim or take the benefit or advantage of any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 5.15. ACTION ON NOTES. The Indenture Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Trust Estate or upon any of the assets of the Issuer. Any money or property collected by the Indenture Trustee shall be applied in accordance with Section 5.04(b). SECTION 5.16. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a) If an Event of Default has occurred and is continuing, the Indenture Trustee may, and at the direction (which direction shall be in writing or by telephone (confirmed in writing promptly thereafter)) of the Holders of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Company or the CRB Issuer under or in connection with any CRB Agreement including the right or power to take any action to compel or secure performance or observance by the Company or the CRB Issuer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, and any right of the Issuer to take such action shall be suspended. ARTICLE VI THE INDENTURE TRUSTEE SECTION 6.01. DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and (ii) in the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; PROVIDED, HOWEVER, that the Indenture Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Indenture Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.11. (d) Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this Section. (e) The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer. (f) Money held in trust by the Indenture Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture. (g) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 6.02. RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Indenture Trustee need not investigate any fact or matter stated in such document. (b) Before the Indenture Trustee acts or refrains from acting, it may require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officer's Certificate or Opinion of Counsel. (c) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder. (d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; PROVIDED, that such conduct by the Indenture Trustee does not constitute willful misconduct, negligence or bad faith. (e) The Indenture Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes, and may otherwise deal with the Issuer or its Affiliates with the same rights that it would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12. SECTION 6.04. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in the Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Indenture Trustee's certificate of authentication. SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is continuing and if it is known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall mail to each Noteholder notice of such Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Note (including payments pursuant to the mandatory redemption provisions of such Note), the Indenture Trustee may withhold such notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Noteholders. SECTION 6.06. REPORTS BY INDENTURE TRUSTEE TO HOLDERS. The Indenture Trustee shall deliver to each Noteholder such information as may be required to enable such holder to prepare its federal and state income tax returns. SECTION 6.07. COMPENSATION AND INDEMNITY. The Issuer shall pay to the Indenture Trustee from time to time reasonable compensation for its services. The Indenture Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall indemnify the Indenture Trustee against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Indenture Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend any such claim, and the Indenture Trustee may have separate counsel and the Issuer shall pay the fees and expenses of such counsel. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indenture Trustee's own willful misconduct, negligence or bad faith. The Issuer's payment obligations to the Indenture Trustee pursuant to this Section shall survive the discharge of this Indenture. When the Indenture Trustee incurs expenses after the occurrence of a Default specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or similar law. SECTION 6.08. REPLACEMENT OF INDENTURE TRUSTEE. No resignation or removal of the Indenture Trustee and no appointment of a successor Indenture Trustee shall become effective until the acceptance of appointment by the successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee may resign at any time by so notifying the Issuer. The Holders of a majority in Outstanding Amount of the Notes may remove the Indenture Trustee by so notifying the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if: (i) the Indenture Trustee fails to comply with Section 6.11; (ii) the Indenture Trustee is adjudged a bankrupt or insolvent; (iii) a receiver or other public officer takes charge of the Indenture Trustee or its property; or (iv) the Indenture Trustee otherwise becomes incapable of acting. If the Indenture Trustee resigns or is removed or if a vacancy exists in the office of Indenture Trustee for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee), the Issuer shall promptly appoint a successor Indenture Trustee. A successor Indenture Trustee shall deliver a written acceptance of its appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee under this Indenture. The successor Indenture Trustee shall mail a notice of its succession to Noteholders. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee. If a successor Indenture Trustee does not take office within 60 days after the retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the Notes may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee. If the Indenture Trustee fails to comply with Section 6.11, any Noteholder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee. Notwithstanding the replacement of the Indenture Trustee pursuant to this Section, the Issuer's obligations under Section 6.07 shall continue for the benefit of the retiring Indenture Trustee. SECTION 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Indenture Trustee; PROVIDED, that such corporation or banking association shall be otherwise qualified and eligible under Section 6.11. The Indenture Trustee shall provide the Rating Agencies prior written notice of any such transaction. If at the time such successor or successors by merger, conversion or consolidation to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor trustee and deliver such Notes so authenticated; and if at that time any of the Notes shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Indenture Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Indenture Trustee shall have. SECTION 6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE TRUSTEE. (a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Trust Estate may at the time be located, the Indenture Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Trust Estate, or any part hereof, and subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.11 and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 6.08 hereof. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co- trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Estate or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (iii) the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee. (d) Any separate trustee or co-trustee may at any time constitute the Indenture Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co- trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee shall at all times satisfy the requirements of TIA (S) 310(a). The Indenture Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and it or its parent shall have a long-term debt rating of Baa3 or better by Moody's or shall otherwise be acceptable to Moody's. The Indenture Trustee shall comply with TIA (S) 310(b), including the optional provision permitted by the second sentence of TIA (S) 310(b)(9); PROVIDED, HOWEVER, that there shall be excluded from the operation of TIA (S) 310(b)(1) any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met. SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The Indenture Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). An Indenture Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated. ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Indenture Trustee (a) not more than five days after the earlier of (i) each Record Date and (ii) three months after the last Record Date, a list, in such form as the Indenture Trustee may reasonably require, of the names and addresses of the Holders of Notes as of such Record Date and (b) at such other times as the Indenture Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 10 days prior to the time such list is furnished; provided, however, that so long as the Indenture Trustee is the Note Registrar, no such list shall be required to be furnished. SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS. (a) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders of Notes contained in the most recent list furnished to the Indenture Trustee as provided in Section 7.01 and the names and addresses of Holders of Notes received by the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any list furnished to it as provided in Section 7.01 upon receipt of a new list so furnished. (b) Noteholders may communicate pursuant to TIA (S) 312(b) with other Noteholders with respect to their rights under this Indenture or under the Notes. (c) The Issuer, the Indenture Trustee and the Note Registrar shall have the protection of TIA (S) 312(c). SECTION 7.03. REPORTS BY ISSUER. (a) The Issuer shall: (i) file with the Indenture Trustee, within 15 days after the Issuer is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) that the Issuer may be required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act; (ii) file with the Indenture Trustee and the Commission in accordance with rules and regulations prescribed from time to time by the Commission such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (iii) supply to the Indenture Trustee (and the Indenture Trustee shall transmit by mail to all Noteholders described in TIA (S) 313(c)) such summaries of any information, documents and reports required to be filed by the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and by rules and regulations prescribed from time to time by the Commission. (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year. SECTION 7.04. REPORTS BY INDENTURE TRUSTEE. If required by TIA (S) 313(a), within 30 days after each [ ] beginning with [ ], the Indenture Trustee shall mail to each Noteholder as required by TIA (S) 313(c) a brief report dated as of such date that complies with TIA (S) 313(a). The Indenture Trustee also shall comply with TIA (S) 313(b). A copy of each report at the time of its mailing to Noteholders shall be filed by the Indenture Trustee with the Commission and each stock exchange, if any, on which the Notes are listed. The Issuer shall notify the Indenture Trustee if and when the Notes are listed on any stock exchange. ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Trust Estate, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V. SECTION 8.02. TRUST ACCOUNTS. (a) On each Distribution Date and Redemption Date, the Indenture Trustee shall distribute all amounts on deposit in the [ ] to Noteholders in respect of the Notes to the extent of amounts due and unpaid on the Notes for principal and interest (including any premium) in the following amounts and in the following order of priority (except as otherwise provided in Section 5.04(b)): (i) accrued and unpaid interest on the Notes; provided, that if there are not sufficient funds in the Note Distribution Account to pay the entire amount of accrued and unpaid interest then due on the Notes, the amount in the Note Distribution Account shall be applied to the payment of such interest on the Notes pro rata on the basis of the total such interest due on the Notes; (ii) to the Holders of the [Class [A]] Notes on account of principal until the Outstanding Amount of the [Class [A]] Notes is reduced to zero; and (iii) to the Holders of the [Class [B]] Notes on account of principal until the Outstanding Amount of the [Class [B]] Notes is reduced to zero. SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no Default or Event of Default shall have occurred and be continuing, all or a portion of the funds in the Trust Accounts shall be invested in Eligible Investments and reinvested by the Indenture Trustee upon Issuer Order. All income or other gain from investments of moneys deposited in the Trust Accounts shall be deposited by the Indenture Trustee in the Collection Account, and any loss resulting from such investments shall be charged to such account. The Issuer will not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in any of the Trust Accounts unless the security interest Granted and perfected in such account will continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Indenture Trustee to make any such investment or sale, if requested by the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the Indenture Trustee, to such effect. (b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way be held liable by reason of any insufficiency in any of the Trust Accounts resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee's failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms. (c) If: (i) the Issuer shall have failed to give investment directions for any funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by the Issuer and Indenture Trustee) on any Business Day, or (ii) a Default or Event of Default shall have occurred and be continuing with respect to the Notes but the Notes shall not have been declared due and payable pursuant to Section 5.02, or (iii) such Notes shall have been declared due and payable following an Event of Default, and amounts collected or receivable from the Trust Estate are being applied in accordance with Section 5.05 as if there had not been such a declaration, then the Indenture Trustee shall, to the fullest extent practicable, invest and reinvest funds in the Trust Accounts in one or more Eligible Investments. SECTION 8.04. RELEASE OF TRUST ESTATE. (a) Subject to the payment of its fees and expenses pursuant to Section 6.07, the Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the lien of this Indenture, or convey the Indenture Trustee's interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article VIII shall be bound to ascertain the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. (b) The Indenture Trustee shall, at such time as there are no Notes Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have been paid, release any remaining portion of the Trust Estate that secured the Notes from the lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds then on deposit in the Trust Accounts. The Indenture Trustee shall release property from the lien of this Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if required by the TIA) Independent Certificates in accordance with TIA (S)(S) 314(c) and 314(d)(1) meeting the applicable requirements of Section 11.01. SECTION 8.05. OPINION OF COUNSEL. The Indenture Trustee shall receive at least seven days' notice when requested by the Issuer to take any action pursuant to Section 8.04(a), accompanied by copies of any instruments involved, and the Indenture Trustee shall also require, as a condition to such action, an Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the security for the Notes or the rights of the holders in contravention of the provisions of this Indenture; provided, HOWEVER, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the Trust Estate. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee in connection with any such action. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. (a) Without the consent of the Holders of any Notes but with prior notice to the Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee, for any of the following purposes: (i) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject to the lien of this Indenture additional Property; (ii) to evidence the succession, in compliance with the applicable provisions hereof, of another person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Notes contained; (iii) to add to the covenants of the Issuer, for the benefit of the Holders of the Notes, or to surrender any right or power herein conferred upon the Issuer; (iv) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee; (v) to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture that may be inconsistent with any other provision herein or in any supplemental indenture or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; provided, that such action shall not adversely affect the interests of the Holders of the Notes; (vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI; or (vii) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar federal statute hereafter enacted and to add to this Indenture such other provisions as may be expressly required by the TIA. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained. (b) The Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Notes but with prior notice to the Rating Agencies, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner, the rights of the Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Noteholder. SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agencies and with the consent of the Holders of not less than a majority of the Outstanding Amount of the Notes, by Act of such Holders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (i) change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the interest rate thereon or the Redemption Price with respect thereto, change the provisions of this Indenture relating to the application of collections on, or the proceeds of the sale of, the Trust Estate to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article V, to the payment of any such amount due on the Notes on or after the respective due dates thereof (or, in the case of redemption, on or after the Redemption Date); (ii) reduce the percentage of the Outstanding Amount of the Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; (iii) modify or alter the provisions of the proviso to the definition of the term "Outstanding"; (iv) reduce the percentage of the Outstanding Amount of the Notes required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the Trust Estate pursuant to Section 5.04; (v) modify any provision of this Section except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the Basic Documents cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby; (vi) modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Distribution Date (including the calculation of any of the individual components of such calculation) or to affect the rights of the Holders of Notes to the benefit of any provisions for the mandatory redemption of the Notes contained herein; or (vii) permit the creation of any lien ranking prior to or on a parity with the lien of this Indenture with respect to any part of the Trust Estate or, except as otherwise permitted or contemplated herein, terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security provided by the lien of this Indenture. The Indenture Trustee may in its discretion determine whether or not any Notes would be affected by any supplemental indenture and any such determination shall be conclusive upon the Holders of all Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Indenture Trustee shall not be liable for any such determination made in good faith. It shall not be necessary for any Act of Noteholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this Section, the Indenture Trustee shall mail to the Holders of the Notes to which such amendment or supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modification thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and shall be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article IX shall conform to the requirements of the Trust Indenture Act as then in effect so long as this Indenture shall then be qualified under the Trust Indenture Act. SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Issuer or the Indenture Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes. ARTICLE X REDEMPTION OF NOTES SECTION 10.01. REDEMPTION. (a) The [Class [B]] Notes are subject to redemption in whole, but not in part, at the direction of the Servicer pursuant to Section 9.01(a) of the Sale and Servicing Agreement, on any Distribution Date on which the Servicer exercises its option to purchase the Trust Estate pursuant to said Section 9.01(a) for a purchase price equal to the Redemption Price; PROVIDED, that the Issuer has available funds sufficient to pay the Redemption Price. The Servicer or the Issuer shall furnish the Rating Agencies notice of such redemption. If the [Class [B]] Notes are to be redeemed pursuant to this Section 10.01(a), the Servicer or the Issuer shall furnish notice of such election to the Indenture Trustee not later than 20 days prior to the Redemption Date and the Issuer shall deposit by 10:00 A.M. New York City time on the Redemption Date with the Indenture Trustee in the Note Distribution Account the Redemption Price of the [Class [B]] Notes to be redeemed, whereupon all such [Class [B]] Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.02 to each Holder of the Notes. (b) In the event that the assets of the Trust are sold pursuant to Section 9.02 of the Trust Agreement, all amounts on deposit in the Note Distribution Account shall be paid to the Noteholders up to the Outstanding Amount of the Notes and all accrued and unpaid interest thereon. If amounts are to be paid to Noteholders pursuant to this Section 10.01(b), the Servicer or the Issuer shall, to the extent practicable, furnish notice of such event to the Indenture Trustee not later than 20 days prior to the Redemption Date, whereupon all such amounts shall be payable on the Redemption Date. SECTION 10.02. FORM OF REDEMPTION NOTICE. (a) Notice of redemption under Section 10.01(a) shall be given by the Indenture Trustee by first-class mail, postage prepaid, or by facsimile mailed or transmitted not later than 10 days prior to the applicable Redemption Date to each Holder of Notes, as of the close of business on the Record Date preceding the applicable Redemption Date at such Holder's address or facsimile number appearing in the Note Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; and (iii) the place where such Notes are to be surrendered for payment of the Redemption Price (which shall be the office or agency of the Issuer to be maintained as provided in Section 3.02). Notice of redemption of the Notes shall be given by the Indenture Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of any other Note. (b) Prior notice of redemption under Section 10.01(b) is not required to be given to Noteholders. SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE. The Notes or portions thereof to be redeemed shall, following notice of redemption as required by Section 10.02 (in the case of redemption pursuant to Section 10.01(a)), on the Redemption Date become due and payable at the Redemption Price and (unless the Issuer shall default in the payment of the Redemption Price) no interest shall accrue on the Redemption Price for any period after the date to which accrued interest is calculated for purposes of calculating the Redemption Price. ARTICLE XI MISCELLANEOUS SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with and (iii) (if required by the TIA) an Independent Certificate from a firm of certified public accountants meeting the applicable requirements of this Section, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with. (b) (i) Prior to the deposit of any Collateral or other property or securities with the Indenture Trustee that is to be made the basis for the release of any property or securities subject to the lien of this Indenture, the Issuer shall, in addition to any obligation imposed in Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited. (ii) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is 10% or more of the Outstanding Amount of the Notes, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof to the Issuer as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the Outstanding Amount of the Notes. (iii) Whenever any property or securities are to be released from the lien of this Indenture, the Issuer shall also furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof. (iv) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (iii) above, the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities and of all other property, other than property as contemplated by clause (v) below or securities released from the lien of this Indenture since the commencement of the then-current calendar year, as set forth in the certificates required by clause (iii) above and this clause (iv), equals 10% or more of the Outstanding Amount of the Notes, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the then Outstanding Amount of the Notes. (v) Notwithstanding Section 2.09 or any other provision of this Section, the Issuer may, without compliance with the requirements of the other provisions of this Section, (A) collect, liquidate, sell or otherwise dispose of Receivables and Financed Vehicles as and to the extent permitted or required by the Basic Documents and (B) make cash payments out of the Trust Accounts as and to the extent permitted or required by the Basic Documents, so long as the Issuer shall deliver to the Indenture Trustee every six months, commencing __________________, ____, an Officer's Certificate of the Issuer stating that all the dispositions of Collateral described in clauses (A) or (B) above that occurred during the preceding six calendar months were in the ordinary course of the Issuer's business and that the proceeds thereof were applied in accordance with the Basic Documents. SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any case where several matters are required to be certified by, or covered by the opinion of only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officer's certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, the Company, or the Issuer, stating that the information with respect to such factual matters is in the possession of the Servicer, the Company, or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee's right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI. SECTION 11.03. ACTS OF NOTEHOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient. (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 11.04. NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER AND RATING AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other documents provided or permitted by this Indenture shall be in writing and if such request, demand, authorization, direction, notice, consent, waiver or act of Noteholders is to be made upon, given or furnished to or filed with: (i) the Indenture Trustee by any Noteholder or by the Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Indenture Trustee at its Corporate Trust Office, or (ii) the Issuer by the Indenture Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed first-class, postage prepaid to the Issuer addressed to: Card Account Trust, Series [ ] in care of [ ] Attention: [ ] or at any other address previously furnished in writing to the Indenture Trustee by the Issuer. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee. Notices required to be given to the Rating Agencies by the Issuer, the Indenture Trustee or the Owner Trustee shall be in writing, personally delivered or mailed by certified mail, return receipt requested, to: (i) in the case of the Rating Agencies to: ----------------------------------------- ----------------------------------------- ----------------------------------------- or as to each of the foregoing, at such other address as shall be designated by written notice to the other parties. SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at such Holder's address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Indenture Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver. In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute a Default or Event of Default. SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Indenture Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Indenture Trustee a copy of each such agreement and the Indenture Trustee will cause payments to be made and notices to be given in accordance with such agreements. SECTION 11.07. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. The provisions of TIA (S)(S) 310 through 317 that impose duties on any person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein. SECTION 11.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 11.09. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Indenture Trustee in this Indenture shall bind its successors, co-trustees and agents. SECTION 11.10. SEPARABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.11. BENEFITS OF INDENTURE. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Trust Estate, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 11.12. LEGAL HOLIDAYS. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date. SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 11.14. COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 11.15. RECORDING OF INDENTURE. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee) to the effect that such recording is necessary either for the protection of the Noteholders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture. SECTION 11.16. TRUST OBLIGATION. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Indenture Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement. SECTION 11.17. NO PETITION. The Indenture Trustee, by entering into this Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree that they will not at any time institute against the Company or the Issuer, or join in any institution against the Company or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the Basic Documents. SECTION 11.18. INSPECTION. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee, during the Issuer's normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by Independent certified public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees and Independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee shall, and shall cause its representatives to, hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this Indenture to be duly executed by their respective officers, thereunto duly authorized and duly attested, all as of the day and year first above written. CARD ACCOUNT TRUST, SERIES [ ], By: [OWNER TRUSTEE NAME] not in its individual capacity but solely as Owner Trustee By: ____________________________________ Name: Title: [INDENTURE TRUSTEE NAME], not in its individual capacity but solely as Indenture Trustee By: ____________________________________ Name: Title: STATE OF NEW YORK ) ) ss.: COUNTY OF ) BEFORE ME, the undersigned authority, a Notary Public in and for said county and state, on this day personally appeared _________________, known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of the said Card Account Trust, Series [ ], a [ ] business trust, and that he/she executed the same as the act of said business trust for the purpose and consideration therein expressed, and in the capacities therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this_____ day of _________. --------------------------------- Notary Public in and for the State of ______. My commission expires: - ---------------------------- STATE OF NEW YORK ) ) ss.: COUNTY OF ) BEFORE ME, the undersigned authority, a Notary Public in and for said county and state, on this day personally appeared _________________, known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of __________________________, a ____________ banking corporation, and that he/she executed the same as the act of said corporation for the purpose and consideration therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this_____ day of _________. --------------------------------- Notary Public in and for the State of ______. My commission expires: - ---------------------------- SCHEDULE I [To be provided on the Closing Date] SCHEDULE II CRB SECURITIES [To be provided on the Closing Date] EXHIBIT A [FORM OF [CLASS [A]] NOTE] Unless this Note is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. REGISTERED $__________ No. R- CUSIP NO. ___________ CARD ACCOUNT TRUST, SERIES [ ] [CLASS [A]] [ %] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE] ASSET BACKED NOTES Card Account Trust, Series [ ], a business trust organized and existing under the laws of the State of [ ] (herein referred to as the "Issuer"), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of $[ ] DOLLARS payable on each Distribution Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of which is $[ ] by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the [Class [A]] Notes pursuant to Section 3.01 of the Indenture dated as of [ ], [ ] "Indenture"), between the Issuer and [ ], a [ ] banking corporation, as Indenture Trustee (the "Indenture Trustee"); PROVIDED HOWEVER, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the [ ] Distribution Date (the "[Class [A]] Final Scheduled Distribution Date") and the Redemption Date, if any, pursuant to Section 10.01(a) of the Indenture. Capitalized terms used but not defined herein are defined in Article I of the Indenture, which also contains rules as to construction that shall be applicable herein. The Issuer will pay interest on this Note at the rate per annum shown above on each Distribution Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date), subject to certain limitations contained in Section 3.01 of the Indenture. Interest on this Note will accrue for each Distribution Date from the [ ] day of the month [preceding] the month of such Distribution Date (in the case of the first Distribution Date, from the Closing Date) to and including the [ ] day of the month of such Distribution Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer, as of the date set forth below. CARD ACCOUNT TRUST, SERIES [ ] By: [OWNER TRUSTEE NAME], not in its individual capacity but solely as Owner Trustee under the Trust Agreement By:________________________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. Date: By: [INDENTURE TRUSTEE NAME], not in its individual capacity but solely as Indenture Trustee By:________________________________ Authorized Signatory This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [Class [A]] [Adjustable Rate] [Variable Rate] [Floating Rate] [ %] Asset Backed Notes (herein called the "[Class [A]] Notes"), all issued under the Indenture, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The [Class [A]] Notes are subject to all terms of the Indenture. The [Class [A]] Notes and [Class [B]] Notes (collectively, the "Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. Principal of the [Class [A]] Notes will be payable on each Distribution Date in an amount described on the face hereof. "Distribution Date" means the [ ] day of each month or, if any such date is not a Business Day, the next succeeding Business Day, commencing [ ]. As described above, the entire unpaid principal amount of this Note shall be due and payable on the earlier of the [Class [A]] Final Scheduled Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a) of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders of Notes representing not less than a majority of the Outstanding Amount of the Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. All principal payments on the [Class [A]] Notes shall be made pro rata to the [Class [A]] Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date, together with installments of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Distribution Date by notice mailed or transmitted by facsimile prior to such Distribution Date, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of New York. The Issuer shall pay interest on overdue installments of interest at the [Class [A]] Interest Rate to the extent lawful. As provided in the Indenture, the [Class [B]] Notes may be redeemed in whole but not in part, at the option of the Issuer on any Distribution Date on and after the date on which the Pool Balance is less than or equal to [5%] of the Cutoff Date Pool Balance. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder or Note Owner will not at any time institute against the Company or the Issuer, or join in any institution against the Company or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Basic Documents. The Issuer has entered into the Indenture and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each Note Owner by acceptance of a beneficial interest in a Note), agrees to treat the Notes for federal, state and local income, single business and franchise tax purposes as indebtedness of the Issuer. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes representing a majority of the Outstanding Amount of all Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Holders of Notes under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, none of [ ] in its individual capacity, [ ] in its individual capacity, any owner of a beneficial interest in the Issuer, or any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on this Note or performance of, or failure to perform, any of the covenants, obligations or indemnifications contained in the Indenture. The Holder of this Note by its acceptance hereof agrees that, except as expressly provided in the Basic Documents in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee: - ----------------------------------------------------------------------------- FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto: - ----------------------------------------------------------------------------- (name and address of assignee) the within Note and all rights thereunder, hereby irrevocably constitutes and appoints: _______________________________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated:_________________________ ________________________/1/ Signature Guaranteed: ------------------------ - ------------------ /1/ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. EXHIBIT B [FORM OF [CLASS [B]] NOTE] Unless this Note is presented by an authorized representative of the Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. REGISTERED $___________ No. R- CUSIP NO. ___________ CARD ACCOUNT TRUST, SERIES [ ] [CLASS [B]] [ %] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE] ASSET BACKED NOTES Card Account Trust, Series [ ], a business trust organized and existing under the laws of the State of [ ] (herein referred to as the "Issuer"), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of $[ ] DOLLARS payable on each Distribution Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of which is $ [ ] by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the [Class [B]] Notes pursuant to Section 3.01 of the Indenture dated as of [ ] (the "Indenture"); between the Issuer and [ ], a [ ] banking corporation, as Indenture Trustee (the "Indenture Trustee"); PROVIDED, HOWEVER, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the [ ] Distribution Date (the "[Class [B]] Final Scheduled Distribution Date") and the Redemption Date, if any, pursuant to Section 10.01(a) of the Indenture. [No payments of principal of the [Class [B]] Notes shall be made until the [Class [A]] Notes have been paid in full.] Capitalized terms used but not defined herein are defined in Article I of the Indenture, which also contains rules as to construction that shall be applicable herein. The Issuer will pay interest on this Note at the per annum rate shown above on each Distribution Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date), subject to certain limitations contained in Section 3.01 of the Indenture. Interest on this Note will accrue for each Distribution Date from the [ ] day of the month [preceding] the month of such Distribution Date in the case of the first Distribution Date, from the Closing Date) to and including the [ ] day of the month of such Distribution Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer, as of the date set forth below. Date: CARD ACCOUNT TRUST, SERIES [ ] By: [OWNER TRUSTEE NAME], not in its individual capacity but solely as Owner Trustee under the Trust Agreement By:________________________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within- mentioned Indenture. Date: By: [INDENTURE TRUSTEE NAME], not in its individual capacity but solely as Indenture Trustee By:_____________________________ Authorized Signatory This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [Class [B]] [Adjustable Rate] [Variable Rate] [Floating Rate] [ %] Asset Backed Notes (herein called the "[Class [B]] Notes"), all issued under the Indenture, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The [Class [B]] Notes are subject to all terms of the indenture. This [Class [A]] Notes and the [Class [B]] Notes (collectively, the "Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. Principal of the [Class [B]] Notes will be payable on each Distribution Date in an amount described on the face hereof. "Distribution Date" means the [ ] day of each month or, if any such date is not a Business Day, the next succeeding Business Day, commencing [ ]. As described above, the entire unpaid principal amount of this Note shall be due and payable on the earlier of the [Class [B]] Final Scheduled Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a) of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders of Notes representing not less than a majority of the Outstanding Amount of the Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. All principal payments on the [Class [B]] Notes shall be made pro rata to the [Class [B]] Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date, together with installments of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Distribution Date by notice mailed or transmitted by facsimile prior to such Distribution Date, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of New York. The Issuer shall pay interest on overdue installments of interest at the [Class [B]] Interest Rate to the extent lawful. As provided in the Indenture, the [Class [B]] Notes may be redeemed in whole but not in part, at the option of the Issuer on any Distribution Date on and after the date on which the Pool Balance is less than or equal to [5%] of the Cutoff Date Pool Balance. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder or Note Owner will not at any time institute against the Company or the Issuer, or join in any institution against the Company or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Basic Documents. The Issuer has entered into the Indenture and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each Note Owner by acceptance of a beneficial interest in a Note), agrees to treat the Notes for federal, state and local income, single business and franchise tax purposes as indebtedness of the Issuer. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes representing a majority of the Outstanding Amount of all Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Holders of Notes under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, none of [ ] in its individual capacity, [ ] in its individual capacity, any owner of a beneficial interest in the Issuer, or any of their respective partners, beneficiaries agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on this Note or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Indenture. The Holder of this Note by its acceptance hereof agrees that, except as expressly provided in the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee: - ------------------------------------------------------- FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto: - ----------------------------------------------------------------------------- (name and address of assignee) the within Note and all rights thereunder, hereby irrevocably constitutes and appoints __________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated:_________________________ ________________________/*/ Signature Guaranteed: ------------------------ - ------------ /*/ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, in accordance with the Securities Exchange Act of 1934, as amended. EXHIBIT C [Form of Note Depository Agreement] Letter of Representations [To be Completed by Issuer and Trustee] ---------------------------- [Name of Issuer] ---------------------------- [Name of Trustee] (Date) Attention: General Counsel's Office The Depository Trust Company 55 Water Street: 49th Floor New York, NY 10041-0099 Re: ______________________________________________________ ______________________________________________________ ______________________________________________________ (Issue Description) Ladies and Gentlemen: This letter sets forth our understanding with respect to certain matters relating to the above-referenced issue (the "Securities"). Trustee will act as trustee with respect to the Securities pursuant to a trust indenture dated _________________, (the "Document"). ______________________ (the "Underwriter") is distributing the Securities through The Depository Trust Company ("DTC"). To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance with its Rules with respect to the Securities, Issuer and Trustee make the following representations to DTC: (a) Prior to closing on the Securities on __________________, there shall be deposited with DTC one Security certificate registered in the name of DTC's nominee, Cede & Co., for each stated maturity of the Securities in the face amounts set forth on Schedule A hereto, the total of which represents 100% of the principal amount of such Securities. If, however, the aggregate principal amount of any maturity exceeds $200 million, one certificate will be issued with respect to each $200 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount. Each $200 million certificate shall bear the following legend: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC). ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. (b) In the event of any solicitation of consents from or voting by holders of the Securities, Issuer or Trustee shall establish a record date for such purposes (with no provision for revocation of consents or votes by subsequent holders) and shall, to the extent possible, send notice of such record date to DTC not less than 15 calendar days in advance of such record date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and receipt of such notices shall be confirmed by telephoning (212) 709-6870. Notices to DTC pursuant to this Paragraph by mail or by any other means shall be sent to DTC's Reorganization Department as indicated in Paragraph 4. (c) In the event of a full or partial redemption, Issuer or Trustee shall send a notice to DTC specifying: (a) the amount of the redemption or refunding; (b) in the case of a refunding, the maturity date(s) established under the refunding; and (c) the date such notice is to be mailed to Security holders or published (the "Publication Date"). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before or, if possible, two business days before the Publication Date. Issuer or Trustee shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be not less than 30 days nor more than 60 days prior to the redemption date or, in the case of an advance refunding, the date that the proceeds are deposited in escrow. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Call Notification Department at (516) 227-4039 or (516) 227-4190. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (516) 227-4070. Notices to DTC pursuant to this Paragraph by mail or by any other means shall be sent to: Manager, Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, NY 11530-4719 (d) In the event of an invitation to tender the Securities, notice by Issuer or Trustee to Security holders specifying the terms of the tender and the Publication Date of such notice shall be sent to DTC by a secure means in the manner set forth in the preceding Paragraph. Notices to DTC pursuant to this Paragraph and notices of other corporate actions (including mandatory tenders, exchanges, and capital changes) by telecopy shall be sent to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC pursuant to the above by mail or by any other means shall be sent to: Manager, Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square; 23rd Floor New York, NY 10004-2695 (e) All notices and payment advices sent to DTC shall contain the CUSIP number of the Securities. (f) Trustee shall send DTC written notice with respect to the dollar amount per $1,000 original face value (or other minimum authorized denomination if less than $1,000 face value) payable on each payment date allocated as to the interest and principal portions thereof, preferably 5, but not less than 2, business days prior to such payment date. Such notices, which shall also contain the current pool factor and Trustee contact's name and telephone number, shall be sent by telecopy to DTC's Dividend Department at (212) 709-1723, or if by mail or by any other means to: Manager, Announcements Dividend Department The Depository Trust Company 7 Hanover Square; 22nd Floor New York, NY 10004-2695 (g) [NOTE: Issuer must represent one of the following, and CROSS OUT the other:] [The interest accrual period is record date to record date.] [The interest accrual period is payment date to payment date.] (h) Interest payments and principal payments that are part of periodic principal-and-interest payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns in same-day funds on each payment date (or the equivalent in accordance with existing arrangements between Issuer or Trustee and DTC). Such payments shall be made payable to the order of Cede & Co. Absent any other existing arrangements, such payments shall be addressed as follows: Manager, Cash Receipts Dividend Department The Depository Trust Company 7 Hanover Square; 24th Floor New York, NY 10004-2695 (i) [NOTE: Issuer must represent one of the following, and CROSS OUT the other.] Securities Eligible for DTC's Same-Day Funds Settlement ("SDFS") System. Other principal payments (redemption payments) shall be made in same-day funds by Trustee in the manner set forth in the SDFS Paying Agent Operating Procedures, a copy of which previously has been furnished to Trustee. Securities Eligible for DTC's Next-Day Funds Settlement ("NDFS") System. Other principal payments (redemption payments) shall be made in next-day funds by Trustee to Cede & Co., as nominee of DTC, or its registered assigns, on each payment date. Such payments shall be made payable to the order of Cede & Co., and shall be addressed as follows: NDFS Redemptions Manager Reorganization/Redemptions Department The Depository Trust Company 7 Hanover Square: 23rd Floor New York, NY 10004-2695 (j) DTC may direct Issuer or Trustee to use any other number or address as the number or address to which notices or payments of interest or principal may be sent. (k) In the event of a redemption, acceleration, or any other similar transaction (e.g., tender made and accepted in response to Issuer's or Trustee's invitation) necessitating a reduction in the aggregate principal amount of Securities outstanding or an advance refunding of part of the Securities outstanding, DTC, in its discretion: (a) may request Issuer or Trustee to issue and authenticate a new Security certificate; or (b) may make an appropriate notation on the Security certificate indicating the date and amount of such reduction in principal except in the case of final maturity, in which case the certificate will be presented to Issuer or Trustee prior to payment, if required. (l) In the event that Issuer determines that beneficial owners of Securities shall be able to obtain certificated Securities, Issuer or Trustee shall notify DTC of the availability of certificates. In such event, Issuer or Trustee shall issue, transfer, and exchange certificates in appropriate amounts, as required by DTC and others. (m) DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Trustee (at which time DTC will confirm with Issuer or Trustee the aggregate principal amount of Securities outstanding). Under such circumstances, at DTC's request Issuer and Trustee shall cooperate fully with DTC by taking appropriate action to make available one or more separate certificates evidencing Securities to any DTC Participant having Securities credited to its DTC accounts. (n) Issuer: (a) understands that DTC has no obligation to, and will not, communicate to its Participants or to any person having an interest in the Securities any information contained in the Security certificate(s); and (b) acknowledges that neither DTC's Participants nor any person having an interest in the Securities shall be deemed to have notice of the provisions of the Security certificates by virtue of submission of such certificate(s) to DTC. (o) Nothing herein shall be deemed to require Trustee to advance funds on behalf of Issuer. Notes: Very truly yours, A. If there is a trustee (as defined ___________________________ in this Letter of Representations). (Issuer) Trustee as well as Issuer must sign this Letter. If there is no Trustee, in signing this Letter Issuer itself undertakes to perform all of the obligations set forth herein. By:_________________________ (Authorized Officer's Signature) B. Schedule B contains statements that DTC believes accurately describe DTC, the method of effecting book-entry transfers of securities distributed through DTC, and certain related matters. _____________________________ (Trustee) By:_________________________ (Authorized Officer's Signature) Received and Accepted: THE DEPOSITORY TRUST COMPANY By:__________________________ cc: Underwriter Underwriter's Counsel SCHEDULE A (Describe Issue) CUSIP Principal Amount Maturity Date Interest Rate ----- ---------------- ------------- ------------- EX-4.2.1 6 0006.txt EXHIBIT 4.2.1 TRUST SALE AND SERVICING AGREEMENT AMONG ----------------------------------------------- SERVICER ACE SECURITIES CORP. SELLER AND ---------------------------------------------- ISSUER DATED AS OF ______, 20__ TABLE OF CONTENTS PAGE ARTICLE I CERTAIN DEFINITIONS SECTION 1.1 Definitions.................................................5 ARTICLE II CONVEYANCE OF ELIGIBLE RECEIVABLES; ISSUANCE OF INITIAL SECURITIES SECTION 2.1 Conveyance of Eligible Receivables..........................6 SECTION 2.2 Custody of Documentation....................................7 SECTION 2.3 Acceptance by the Issuer; Other Acknowledgments.............7 SECTION 2.4 Representations and Warranties under the Pooling and Servicing Agreement.........................................8 SECTION 2.5 Repurchase of Receivables Upon Breach of Warranty; Administrative Receivables..................................8 SECTION 2.6 Covenants...................................................9 SECTION 2.7 Addition of Accounts.......................................10 SECTION 2.8 Optional Removal of Accounts...............................11 SECTION 2.9 Removal of Ineligible Accounts.............................12 ARTICLE III THE SELLER SECTION 3.1 Representations of the Seller..............................13 SECTION 3.2 Liability of Seller........................................16 SECTION 3.3 Merger or Consolidation of, or Assumption of the Obligations of, Seller; Amendment of Certificate of Incorporation..............................................16 SECTION 3.4 Limitation on Liability of Seller and Others...............17 SECTION 3.5 Seller May Own Notes or Certificates.......................17 ARTICLE IV SERVICER'S COVENANTS; DISTRIBUTIONS; RESERVE FUNDS; STATEMENTS TO SECURITYHOLDERS SECTION 4.1 Annual Statement as to Compliance; Notice of Servicing Default....................................................18 SECTION 4.2 Annual Independent Accountants' Report.....................18 SECTION 4.3 Access to Certain Documentation and Information Regarding Accounts and Receivables.........................19 SECTION 4.4 Enforcement of Receivables.................................19 SECTION 4.5 Allocations; Distributions.................................19 SECTION 4.6 ______________________ Reserve Funds and the Reserve Fund...............................................27 SECTION 4.7 Net Deposits...............................................28 SECTION 4.8 Statements to Securityholders..............................29 SECTION 4.9 New Issuances; Changes in Specified Maximum Revolver Balance...........................................30 ARTICLE V SERVICING FEE SECTION 5.1 Servicing Compensation.....................................32 ARTICLE VI SECURITYHOLDER ACCOUNTS; COLLECTIONS, DEPOSITS AND INVESTMENTS; ADVANCES SECTION 6.1 Establishment of Accounts; Deposits; Investments...........32 SECTION 6.2 Collections................................................37 ARTICLE VII LIABILITIES OF SERVICER AND OTHERS SECTION 7.1 Liability of Servicer; Indemnities.........................38 SECTION 7.2 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer...............................39 SECTION 7.3 Limitation on Liability of Servicer and Others.............39 SECTION 7.4 Delegation of Duties.......................................40 SECTION 7.5 Servicer Not to Resign.....................................40 ARTICLE VIII DEFAULT SECTION 8.1 Servicing Defaults.........................................41 SECTION 8.2 Consequences of a Servicing Default........................42 SECTION 8.3 Indenture Trustee to Act; Appointment of Successor.........43 SECTION 8.4 Notification to Securityholders............................44 SECTION 8.5 Waiver of Past Defaults....................................44 SECTION 8.6 Repayment of Advances......................................44 ARTICLE IX EARLY AMORTIZATION EVENTS; TERMINATION SECTION 9.1 Early Amortization Events..................................44 SECTION 9.2 Insolvency Events..........................................47 SECTION 9.3 Optional Purchase by the Servicer..........................47 SECTION 9.4 Termination................................................48 SECTION 9.5 Recommencement of Revolving Period.........................48 ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1 Amendment..................................................50 SECTION 10.2 Protection of Title to the Owner Trust Estate..............52 SECTION 10.3 Notices....................................................54 SECTION 10.4 GOVERNING LAW..............................................54 SECTION 10.5 Severability of Provisions.................................54 SECTION 10.6 Assignment.................................................54 SECTION 10.7 Third-Party Beneficiaries..................................54 SECTION 10.8 Counterparts...............................................55 SECTION 10.9 Headings...................................................55 SECTION 10.10 Assignment to Indenture Trustee............................55 SECTION 10.11 No Petition Covenants......................................55 SECTION 10.12 Further Assurances.........................................55 SECTION 10.13 No Waiver; Cumulative Remedies.............................55 SECTION 10.14 Merger and Integration.....................................55 SECTION 10.15 Limitation of Liability of Indenture Trustee and Owner Trustee..............................................56 EXHIBIT A Form of Assignment for this Initial Closing Date EXHIBIT B Locations of Schedule of Accounts EXHIBIT C Form of Assignment for Each Addition Date EXHIBIT D Form of Opinion of Counsel with Respect to Addition of Accounts APPENDIX A Definitions and Rules of Construction APPENDIX B Notices and Addresses THIS TRUST SALE AND SERVICING AGREEMENT is made as of ____, 20__, by and among ____________________, a __________ corporation ("________") and in its capacity as Servicer under the Pooling and Servicing Agreement and hereunder (the "Servicer"), ACE SECURITIES CORP., a Delaware corporation (the "Seller"), and ______________________, a Delaware business trust (the "Issuer" or the "Trust"). WHEREAS, on the Initial Closing Date, the Original Seller has sold the Eligible Receivables in the Accounts in the Pool of Accounts to the Seller and, as Servicer, has agreed to service all Receivables in such Accounts pursuant to the Pooling and Servicing Agreement; WHEREAS, the Seller desires to sell the Eligible Receivables in the Accounts in the Pool of Accounts to the Issuer on the Initial Closing Date in exchange for the Initial Securities pursuant to the terms of this Agreement and to sell to the Issuer any Eligible Receivables thereafter arising in such Accounts, and the Issuer desires to purchase all such Eligible Receivables; WHEREAS, the Servicer desires to perform the servicing obligations set forth herein for and in consideration of the fees and other benefits set forth in this Agreement and in the Pooling and Servicing Agreement; and WHEREAS, the Seller and the Issuer wish to set forth the terms pursuant to which the Eligible Receivables in the Accounts in the Pool of Accounts and all related Collateral Security are to be sold by the Seller to the Issuer on the Initial Closing Date and thereafter and all Receivables in such Accounts serviced by the Servicer. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINITIONS SECTION 1.1 Definitions. Certain capitalized terms used in the above recitals and in this Agreement are defined in and shall have the respective meanings assigned to them in Part I of Appendix A to this Agreement. All references herein to "the Agreement" or "this Agreement" are to this Trust Sale and Servicing Agreement as it may be amended, supplemented or modified from time to time, the exhibits hereto and the capitalized terms used herein which are defined in Appendix A, and all references herein to Articles, Sections and subsections are to Articles, Sections or subsections of this Agreement unless otherwise specified. The rules of construction set forth in Part II of Appendix A shall be applicable to this Agreement. ARTICLE II CONVEYANCE OF ELIGIBLE RECEIVABLES; ISSUANCE OF INITIAL SECURITIES SECTION 2.1 Conveyance of Eligible Receivables. (a) In consideration of the Issuer's delivery on the Initial Closing Date of the ______ Term Notes and the _____ Certificates with an initial Certificate Balance of $__________ to, or upon the order of, the Seller, the Seller does hereby enter into this Agreement and agree to fulfill all of its obligations hereunder and does hereby sell, transfer, assign and otherwise convey to the Issuer, without recourse (except as expressly provided herein), pursuant to an assignment in the form of Exhibit A hereto, on the Initial Closing Date, (i) all of its right, title and interest in, to and under all of the Eligible Receivables existing in the Accounts listed on the Schedule of Accounts (which is on file at the locations set forth in Exhibit B hereto) as of the close of business on the Initial Cut-Off Date and all monies due or to become due thereon after the Initial Cut-Off Date, all Collateral Security with respect thereto and all amounts received with respect thereto (including all Interest Collections received in the calendar month in which the Initial Cut-Off Date occurs, whether or not received prior to the Initial Cut-Off Date), (ii) all of its right, title and interest in, to and under Article IV and Sections 3.04(c) and 6.03 of the Pooling and Servicing Agreement with respect to such Receivables, including the right of the Seller to cause the Original Seller or the Servicer to repurchase Receivables under certain circumstances, (iii) all of its right, title and interest in, to and under the Custodian Agreement with respect to such Receivables and (iv) all of its right, title and interest in all proceeds of the foregoing (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries). (b) As of each Receivables Purchase Date, the Seller does hereby sell, transfer, assign and otherwise convey to the Trust, without recourse (except as expressly provided herein), (i) all of its right, title and interest in, to and under all Eligible Receivables created or deemed created in the Accounts in the Pool of Accounts on such date and all monies due or to become due thereon after such Receivables Purchase Date, all Collateral Security with respect thereto and all amounts received with respect thereto, (ii) all of its right, title and interest in, to and under Article IV and Sections 3.04(c) and 6.03 of the Pooling and Servicing Agreement, including the right of the Seller to cause the Original Seller or the Servicer to repurchase Receivables under certain circumstances, (iii) all of its right, title and interest in, to and under the Custodian Agreement with respect to such Receivables and (iv) all of its right, title and interest in all proceeds of the foregoing (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries). The Trust shall pay for the property purchased on any Receivables Purchase Date as set forth in Section 4.5(d)(i), with the purchase price equal to the principal balance of the Receivables so purchased on such date. (c) It is the intention of the Seller and the Issuer that the transfers and assignments contemplated by this Agreement shall constitute sales of the property described in Sections 2.1(a) and (b) from the Seller to the Issuer and that the beneficial interest in and title to such property shall not be part of the Seller's estate in the event of the filing of a bankruptcy petition by or against the Seller under any Insolvency Law. Notwithstanding the foregoing, in the event a court of competent jurisdiction determines that such transfers and assignments did not constitute such sales or that such beneficial interest is a part of the Seller's estate, then the Seller shall be deemed to have granted to the Issuer a first priority perfected security interest in all of the Seller's right, title and interest in, to and under such property, and the Seller hereby grants such security interest. For purposes of such grant, this Agreement shall constitute a security agreement under the UCC. The foregoing sales, transfers, assignments and conveyances and any subsequent sales, transfers, assignments and conveyances do not constitute, and are not intended to result in, the creation or an assumption by the Issuer of any obligation of the Seller or any other Person in connection with the Receivables described above or under any agreement or instrument relating thereto, including any obligation to any Dealers. (d) Within two Business Days after the Initial Closing Date (or such later date as may be permitted pursuant to Section 6.2), the Original Seller as directed by the Seller pursuant to Section 3.06 of the Pooling and Servicing Agreement, shall cause to be deposited into the Collection Account the collections with respect to the Receivables described in Section 3.06 of the Pooling and Servicing Agreement. SECTION 2.2 Custody of Documentation. In connection with the sale, transfer, assignment and conveyance of the Receivables in the Accounts in the Pool of Accounts and related Collateral Security to the Issuer hereunder, _______, as Custodian under the Custodian Agreement, agrees to act as Custodian thereunder for the benefit of the Issuer. The Issuer hereby accepts and agrees to the terms and provisions of the Custodian Agreement and designates _____ as custodian with respect to the documents and instruments (as more fully described in the Custodian Agreement) associated with the Receivables related to the Accounts in the Pool of Accounts. SECTION 2.3 Acceptance by the Issuer; Other Acknowledgments. (a) The Issuer hereby acknowledges its acceptance of all right, title and interest previously held by the Seller to the property, now existing and hereafter created, conveyed by the Seller pursuant to Section 2.1, and declares that it shall hold such consideration upon the trust set forth in the Trust Agreement for the benefit of the Securityholders, subject to the terms and conditions of the Indenture, the Trust Agreement and this Agreement. The Issuer hereby agrees and accepts the appointment and authorization of ______ as Servicer hereunder and under the Pooling and Servicing Agreement. The Issuer further acknowledges that, prior to or simultaneously with the execution and delivery of this Agreement, the Seller delivered to the Owner Trustee the Schedule of Accounts. The parties agree that the rights, duties and obligations of _____ as Servicer under the Pooling and Servicing Agreement are subject to the provisions hereof, including Sections 7.2, 7.4, 7.5 and 10.2 and Article VIII. The Trust and the Indenture Trustee hereby confirm the authorization and empowerment of the Servicer under Section 3.02 of the Pooling and Servicing Agreement. (b) The Issuer acknowledges and agrees to the provisions of Collateral and accepts the interests and rights in Collateral Security sold and Section 6.03 of the Pooling and Servicing Agreement relating to Common assigned to it hereunder subject to the terms and conditions set forth in such Section 6.03. SECTION 2.4 Representations and Warranties under the Pooling and Servicing Agreement. The Seller hereby represents and warrants to the Issuer that the Seller has taken no action which would cause the representations and warranties of the Original Seller in Section 4.01(a) of the Pooling and Servicing Agreement to be false in any material respect. The foregoing representation and warranty speaks as of the Initial Cut-Off Date (as to Sections 4.01(a)(i) and (ii)), as of the related Additional Cut-Off Date with respect to each Additional Account (as to Section 4.01(a)(iii)) and as of the related Receivables Purchase Date with respect to Receivables purchased and sold after the Initial Closing Date (as to Section 4.01(a)(iv)), and shall survive the sales, transfers and assignments under Section 2.1 to the Issuer and the pledge of the Issuer's assets to the Indenture Trustee pursuant to the Indenture. The Seller further acknowledges that the Issuer relies on the representations and warranties of the Seller under this Agreement and of the Original Seller under the Pooling and Servicing Agreement in accepting the Receivables hereunder and delivering the Securities. The Servicer acknowledges that the Issuer is relying on the representations, warranties and covenants of the Servicer in Section 3.04 of the Pooling and Servicing Agreement in acquiring and holding Receivables and the related Collateral Security hereunder and in issuing the Securities. SECTION 2.5 Repurchase of Receivables Upon Breach of Warranty; Administrative Receivables. (a) Upon discovery by the Seller, the Servicer, the Owner Trustee or the Indenture Trustee (i) of a breach of any of the representations and warranties in Section 4.01(a) of the Pooling and Servicing Agreement or in Section 2.4 or Section 3.1 of this Agreement that materially and adversely affects the interests of the Trust in any Receivable or (ii) that the payment of all or any portion of the principal amount of any Receivable held by the Trust is deferred pursuant to [DPP] or any other installment sales program or similar arrangement, the party discovering such breach shall give prompt written notice thereof to the others. No later than the second Business Day following discovery or receipt of notice of breach or deferral by the Seller and the Servicer, unless and to the extent, in the case of breach, such breach shall have been cured in all material respects, in the event of a breach of the representations and warranties made by the Seller in Section 2.4 or Section 3.1(b), the Seller shall repurchase such Receivable, or in the event of a breach of a representation and warranty under Section 4.01(a) of the Pooling and Servicing Agreement or a deferral, the Seller and the Servicer shall use reasonable efforts to enforce the obligation of the Original Seller under Section 4.01 of the Pooling and Servicing Agreement to repurchase such Receivable from the Issuer on such date; provided, however, that with respect to any breach of a representation or warranty or a deferral that affects less than the entire principal amount of any Receivable, although the Warranty Payment shall be paid promptly as described below, no repurchase and assignment shall be required until the remaining principal amount of such Receivable is collected in full or written off as uncollectible. The purchase price to be paid by the Seller or the Original Seller shall be an amount equal to the principal amount of such Receivable (in the case of a breach or a deferral affecting less than the entire principal amount of a Receivable, to the extent of the breach or deferral) plus all accrued and unpaid interest thereon through the date of purchase (the "Warranty Payment") to the extent of such breach of a representation or warranty or deferral (a "Warranty Receivable"), and shall be deposited into the Collection Account on such date of purchase. Without limiting the generality of the foregoing, a Receivable shall not be an Eligible Receivable, and thus shall be a Warranty Receivable and subject to repurchase, if and to the extent that (A) the Servicer adjusts downward the principal amount of such Receivable because of a rebate, refund, credit adjustment or billing error to the related Dealer or (B) such Receivable was credited in respect of a Vehicle which was refunded or returned by the related Dealer. It is understood and agreed that the obligation of the Original Seller or the Seller, as applicable, to repurchase any Receivable as to which a breach of a representation or warranty made in Section 2.4 or Section 3.1 hereof or Section 4.01(a) of the Pooling and Servicing Agreement has occurred and is continuing or as to which any such deferral occurs, and the obligation of the Seller and the Servicer to enforce the Original Seller's obligation to repurchase such Receivable pursuant to the Pooling and Servicing Agreement shall constitute the sole remedy against the Seller, the Servicer or the Original Seller for such breach or deferral available to the Issuer, the Securityholders, the Owner Trustee or the Indenture Trustee. (b) The Servicer also acknowledges its obligations to repurchase from the Issuer Administrative Receivables pursuant to Section 3.04(c) of the Pooling and Servicing Agreement. Upon discovery by the Indenture Trustee or the Owner Trustee of a breach of any of the covenants of the Servicer in Sections 3.04(a)(viii), (ix) or (x) of the Pooling and Servicing Agreement, such party shall give prompt written notice to the other, the Servicer and the Seller. (c) Upon each payment of the Administrative Purchase Payment or the Warranty Payment with respect to a Receivable, except as provided in Section 2.5(a), the Trust shall automatically and without further action be deemed to have sold, transferred, assigned and otherwise conveyed to the Seller or Servicer, as appropriate, without recourse, representation or warranty, as of the date of such payment, all right, title and interest of the Trust in, to and under such Receivable, all monies due or to become due with respect thereto on and after such payment date and all proceeds thereof and, if such repurchase is made in connection with the repurchase hereunder of all other Receivables in the related Account held by the Trust, the related Collateral Security. The Owner Trustee and the Indenture Trustee shall execute such documents and instruments of transfer or assignment and take such other actions as shall be reasonably requested by the Seller or the Servicer, as the case may be, to evidence such conveyance. SECTION 2.6 Covenants. The Seller hereby covenants that: (a) Negative Pledge. Except for the conveyances hereunder and the pledge of the Trust Estate to the Indenture Trustee pursuant to the Indenture, and as provided in Section 6.03 of the Pooling and Servicing Agreement, the Seller shall not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist, any Lien on any Eligible Receivable in any Account in the Pool of Accounts (and any related Vehicle Collateral Security), whether now existing or hereafter created, or any interest therein, or the Seller's rights, remedies, powers or privileges under the Pooling and Servicing Agreement conveyed to the Trust hereunder and the Seller shall defend the right, title and interest of the Trust and any Interested Party in, to and under such property, whether now existing or hereafter created against all claims of third parties claiming through or under the Seller. The Seller shall notify the Issuer promptly after becoming aware of any Lien on such property other than the conveyances contemplated hereunder. (b) Delivery of Collections. If the Seller or the Original Seller receives payments by or on behalf of a Dealer in respect of Receivables in any Account in the Pool of Accounts or any Collateral Security (except as contemplated in Section 6.03 of the Pooling and Servicing Agreement with respect to any property constituting Common Collateral that is not Vehicle Collateral Security in connection with Other Indebtedness), the Seller and the Original Seller shall deliver such payments to the Servicer as soon as practicable after receipt thereof, but in no event later than two Business Days after the receipt thereof. (c) Pooling and Servicing Agreement Matters. If the Original Seller breaches any of its covenants in Sections 3.01, 3.02, 3.03, 3.05, 5.01, 6.01(a), 7.01 or 7.03 of the Pooling and Servicing Agreement and such breach has a material adverse effect on the interests of the Securityholders, the Seller shall enforce its rights under the Pooling and Servicing Agreement arising from such breach. SECTION 2.7 Addition of Accounts. (a) Voluntary Addition. The Seller may from time to time, in its sole discretion, subject to the conditions specified in Section 2.7(b) below, designate one or more Accounts as Additional Accounts to be included in the Pool of Accounts by giving (or causing the Servicer to give on its behalf) a written notice to the Indenture Trustee, the Owner Trustee and the Rating Agencies specifying the Additional Cut-Off Date and the Addition Date (the "Addition Notice"). An Addition Notice shall be provided on or before the fifth Business Day but not more than the thirtieth day prior to the related Addition Date. If Additional Accounts are to be included in the Pool of Accounts, effective as of the related Addition Date, the Seller shall sell and assign to the Trust, and the Trust shall purchase from the Seller, all of the Seller's right, title and interest in, to and under the Eligible Receivables in the Additional Accounts and the related Collateral Security, as more fully described in the assignment referred to in subsection (b)(ii) below. (b) Conditions. The Seller may convey to the Trust all Eligible Receivables and the related Collateral Security in any Additional Accounts in accordance with Section 2.7(a) only upon satisfaction of each of the following conditions on or prior to the related Addition Date: (i) the Seller shall represent and warrant that as of the related Additional Cut-Off Date each such Additional Account is an Eligible Account and that each Receivable arising thereunder identified as an Eligible Receivable and conveyed to the Trust on such Addition Date is an Eligible Receivable; (ii) the Seller shall have delivered to the Owner Trustee a duly executed written assignment in substantially the form of Exhibit C hereto and the list required to be delivered pursuant to Section 10.2(e); (iii) the Seller shall have agreed to deposit in the Collection Account all Collections with respect to Eligible Receivables arising in such Additional Accounts since the Additional Cut-Off Date within two Business Days after such Addition Date (or such later date as may be permitted pursuant to Section 6.2(b); (iv) as of the Addition Date, neither the Original Seller nor the Seller is insolvent nor shall any of them have been made insolvent by such transfer nor is either of them aware of any pending insolvency; (v) the Rating Agency Condition shall have been satisfied with respect to such addition for each series or class of Securities then outstanding; (vi) the Seller shall represent and warrant that the designation of such Additional Accounts, the inclusion of such Additional Accounts in the Pool of Accounts and the purchase of the related Receivables shall not, in the reasonable belief of the Seller, result in the occurrence of an Early Amortization Event; (vii) the Schedule of Accounts shall have been amended to reflect such Additional Accounts and the Schedule of Accounts as so amended shall be true and correct as of the Addition Date; (viii) the Seller shall have delivered to the Indenture Trustee and the Owner Trustee a certificate of an Authorized Officer of the Seller confirming the items set forth in clauses (i) through (vii) above; and (ix) the Seller shall have delivered to the Owner Trustee an Opinion of Counsel substantially in the form of Exhibit D hereto. SECTION 2.8 Optional Removal of Accounts. (a) The Seller shall have the right from time to time as described in this Section 2.8 to require the removal of Accounts from the Pool of Accounts. To so remove Accounts, the Seller (or the Servicer on its behalf) shall take the following actions and make the following determinations: (i) not less than five Business Days but not more than 30 days prior to the Removal Commencement Date, furnish to the Indenture Trustee, the Owner Trustee and the Rating Agencies a written notice (the "Removal Notice") specifying the date (the "Removal Commencement Date") on which removal of one or more Accounts will commence (the "Selected Accounts"); and (ii) determine on the Removal Commencement Date with respect to such Selected Accounts the aggregate principal balance of Eligible Receivables in respect of each such Selected Account (the "Removal Balance") and amend the Schedule of Accounts by delivering to the Owner Trustee a true and complete list of the Selected Accounts, specifying for each Selected Account as of the Removal Commencement Date its account number and the Removal Balance. (b) The removal of any of such Accounts shall be subject to the following conditions: (i) the Seller shall represent and warrant that such removal shall not, in the reasonable belief of the Seller, result in the occurrence of an Early Amortization Event; (ii) the Rating Agency Condition shall have been satisfied with respect to such removal for each series or class of Securities then outstanding; and (iii) on or before the related Removal Commencement Date, the Seller shall have delivered to the Owner Trustee a certificate of an Authorized Officer confirming the items set forth in clauses (i) and (ii) above. (c) Subject to the satisfaction of the conditions set forth in Section 2.8(b), from and after the Removal Commencement Date with respect to a Selected Account, (i) the Seller shall not transfer Receivables with respect to such Selected Account to the Trust, and (ii) until the Removal Balance has been reduced to zero all Principal Collections with respect to such Selected Account shall be allocated to the oldest outstanding principal balance of Receivables arising under such Selected Accounts and amounts so allocated to Receivables owned by the Trust shall constitute Trust Principal Collections and shall reduce the Removal Balance. The Removal Balance shall also be reduced to the extent Receivables in the Selected Accounts held by the Trust on the Removal Commencement Date become Defaulted Receivables. (d) After the Removal Balance with respect to any such Selected Account is reduced to zero, Collections thereon shall cease to be allocated in accordance with Section 2.8(c) and such Selected Account shall be deemed removed from the Pool of Accounts for all purposes (a "Removed Account") and the Servicer shall amend the Schedule of Accounts accordingly. At any time after the date (the "Removal Date") on which the Removal Balance is reduced to zero with respect to a Removed Account, the Owner Trustee shall assign to the Seller, without recourse, representation or warranty, effective as of the Removal Date all of the Trust's right, title and interest in, to and under the Receivables arising in such Account and related Collateral Security. SECTION 2.9 Removal of Ineligible Accounts. (a) On or before the fifth Business Day after the date on which an Account becomes an Ineligible Account (which Business Day shall be deemed to be the Removal Commencement Date with respect to such Account) such Account shall be deemed a Selected Account. Within five Business Days after the Removal Commencement Date with respect to any Account that became a Selected Account pursuant to this Section 2.9, the Seller shall furnish a Removal Notice to the Owner Trustee stating that the Removal Commencement Date for such Ineligible Account has occurred and specifying for each such Selected Account as of the Removal Commencement Date its account number and the Removal Balance. The Schedule of Accounts shall be amended to reflect such designation as of the Removal Commencement Date. (b) From and after the Removal Commencement Date with respect to a Selected Account subject to this Section 2.9, the Seller shall not transfer Receivables with respect to such Selected Account to the Trust and, until the Removal Balance has been reduced to zero, all Principal Collections with respect to such Selected Account shall be allocated to the oldest outstanding principal balance of Receivables arising under such Selected Account and amounts so allocated to Receivables owned by the Trust shall constitute Trust Principal Collections. After the Removal Balance with respect to any such Selected Account has been reduced to zero, Collections thereon shall cease to be allocated in accordance with the preceding sentence and such Selected Account shall be a Removed Account and the Servicer shall amend the Schedule of Accounts accordingly. At any time after the Removal Date with respect to such Removed Account, the Owner Trustee shall assign to the Seller, without recourse, representation or warranty, effective as of the Removal Date, all of the Trust's right, title and interest in, to and under the Receivables arising in such Account and related Collateral Security. ARTICLE III THE SELLER SECTION 3.1 Representations of the Seller. The Seller hereby makes, and any successor to the Seller under this Agreement or under the Pooling and Servicing Agreement shall make, as of each Closing Date (and as of the date of such succession) the following representations and warranties on which the Issuer relies in acquiring and holding the Receivables hereunder and the related Collateral Security and issuing the Securities. The following representations and warranties shall survive the sale, transfer and assignment of the Eligible Receivables in the Accounts in the Pool of Accounts to the Issuer and the pledge thereof to the Indenture Trustee. (a) Representations and Warranties as to the Seller. (i) Organization and Good Standing. The Seller has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently conducted, and had at all relevant times, and now has, power, authority and legal right to acquire and own the Eligible Receivables in the Accounts in the Pool of Accounts and the Collateral Security related thereto. (ii) Due Qualification. The Seller is duly qualified to do business and, where necessary, is in good standing as a foreign corporation (or is exempt from such requirement) and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualifications, except where the failure to so qualify or obtain licenses or approvals would not have a material adverse effect on its ability to perform its obligations under this Agreement. (iii) Power and Authority. The Seller has the power and authority to execute and deliver this Agreement, to carry out its terms and to consummate the transactions contemplated herein, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by the Seller by all necessary corporate action on the part of the Seller. (iv) Valid Sale; Binding Obligations. With respect to the Initial Accounts and the related assignment to be delivered on the Initial Closing Date, this Agreement constitutes or, in the case of Additional Accounts, the related assignment as described in Section 2.7(b), when duly executed and delivered, shall constitute a valid sale, transfer and assignment to the Issuer of all right, title and interest of the Seller in, to and under the related Eligible Receivables and the related Collateral Security, whether then existing or thereafter created, and the proceeds thereof, enforceable against creditors of and purchasers from the Seller; and this Agreement when duly executed and delivered, shall constitute a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights in general and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law, and, upon the filing of the financing statements described in Section 10.2(a) (and, in the case of Eligible Receivables hereafter created in the Accounts in the Pool of Accounts and the proceeds thereof, upon the creation thereof) the Trust shall have a first priority perfected ownership interest in such property, except for Liens permitted under Section 2.6(a). Except as otherwise provided in this Agreement or the Pooling and Servicing Agreement, neither the Seller nor any Person claiming through or under the Seller has any claim to or interest in the Trust Estate. (v) No Violation. The execution of this Agreement and the consummation of the transactions contemplated by this Agreement by the Seller and the fulfillment of the terms of this Agreement by the Seller shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice or lapse of time) a default under, the certificate of incorporation or by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument (other than pursuant to the Basic Documents), or violate any law or, to the best of the Seller's knowledge, any order, rule or regulation applicable to the Seller of any Governmental Authority having jurisdiction over the Seller or any of its properties, except where any such conflict or violation would not have a material adverse effect on its ability to perform its obligations with respect to the Issuer or any Interested Party under this Agreement or the Pooling and Servicing Agreement. (vi) No Proceedings. To the Seller's knowledge, there are no Proceedings or investigations pending, or threatened, against the Seller before any Governmental Authority having jurisdiction over the Seller or its properties (A) asserting the invalidity of this Agreement, the Securities, the Indenture, the Trust Agreement, the Custodian Agreement, the Administration Agreement or any Specified Support Arrangement, (B) seeking to prevent the issuance of the Securities, the execution of this Agreement or the consummation of any of the transactions contemplated by this Agreement, the Indenture, the Trust Agreement, the Custodian Agreement, the Administration Agreement or any Specified Support Arrangement, (C) seeking any determination or ruling that might materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, this Agreement, the Notes, the Certificates, the Indenture, the Trust Agreement, the Custodian Agreement, the Administration Agreement or any Specified Support Arrangement or (D) seeking to adversely affect the federal income tax attributes of the Notes or the Certificates. (b) Representations and Warranties as to the Eligible Receivables. (i) Good Title. No Eligible Receivables included in the Accounts in the Pool of Accounts have been sold, transferred, assigned or pledged by the Seller to any Person other than the Issuer; immediately prior to the conveyance of the Eligible Receivables in the Accounts included in the Pool of Accounts pursuant to this Agreement the Seller had good and marketable title to such Receivables, free of any Lien; and, upon execution and delivery of this Agreement by the Seller, the Issuer shall have all of the right, title and interest of the Seller in, to and under the Eligible Receivables in the Accounts included in the Pool of Accounts, free of any Lien. (ii) All Filings Made. All filings (including, without limitation, UCC filings) necessary in any jurisdiction to give the Issuer a first priority perfected ownership interest in the Eligible Receivables in the Accounts in the Pool of Accounts shall have been made. (c) Reassignment of All Receivables. (i) If any representation or warranty under Section 3.1(a) or (b) is not true and correct as of the date specified therein and such breach has a material adverse effect on the interests of the Securityholders, then any of the Indenture Trustee, the Owner Trustee and the holders of outstanding Securities evidencing not less than a majority of the Outstanding Amount and a majority of the Voting Interests of all outstanding Certificates, by written notice to the Seller with a copy to the Servicer, the Indenture Trustee and the Owner Trustee, may direct the Seller to accept the reassignment of all Receivables held by the Trust and the related Collateral Security pursuant to this Section 3.1(c) within 60 days of such notice, or within such longer period specified in such notice and pay the Reassignment Amount on any Monthly Distribution Date within such period; provided, however, that no such reassignment shall be made if, prior to the time such reassignment is to occur, the breached representation or warranty shall then be true and correct in all material respects and any material adverse effect caused thereby shall have been cured. (ii) Upon the reassignment of all Receivables held by the Trust and the related Collateral Security, subject to the payment to the Trust of the Reassignment Amount, the Trust shall automatically and without further action be deemed to sell, transfer, assign and otherwise convey to the Seller, without recourse, representation or warranty, all the right, title and interest of the Trust in and to such Receivables and such related Collateral Security. Each of the Indenture Trustee and the Owner Trustee shall execute such documents and instruments of transfer or assignment and take such other actions as they shall reasonably be requested by the Seller to effect the conveyance pursuant to this Section 3.1(c). (iii) It is understood and agreed that the obligation of the Seller to repurchase the Receivables (and the related Collateral Security) in the event of a breach of a representation or warranty made in Section 3.1(a) or (b) has occurred and is continuing and the obligation of the Seller to pay the Reassignment Amount therefor shall, if such obligations are fulfilled, constitute the sole remedy against the Seller for such breach available to the Issuer, the Securityholders, the Owner Trustee or the Indenture Trustee. SECTION 3.2 Liability of Seller. The Seller shall be liable in accordance with this Agreement only to the extent of the obligations in this Agreement specifically undertaken by the Seller. SECTION 3.3 Merger or Consolidation of, or Assumption of the Obligations of, Seller; Amendment of Certificate of Incorporation. (a) Any Person (i) into which the Seller may be merged or consolidated, (ii) resulting from any merger or consolidation to which the Seller shall be a party, (iii) succeeding to the business of the Seller or (iv) more than 50% of the voting interests of which is owned directly or indirectly by ______________________, which Person in any of the foregoing cases (other than the Seller as the surviving entity of such merger or consolidation) executes an agreement of assumption to perform every obligation of the Seller under this Agreement shall be the successor to the Seller under this Agreement without the execution or filing of any document or any further act on the part of any of the parties to this Agreement, anything in this Agreement to the contrary notwithstanding. The Seller shall provide 10 days' prior notice of any merger, consolidation or succession pursuant to this Section 3.3 to the Rating Agencies. (b) The Seller hereby agrees that during the term of this Agreement it shall not (i) take any action prohibited by Article Fourth of its certificate of incorporation, (ii) without the prior written consent of the Indenture Trustee and the Owner Trustee and without giving prior written notice to the Rating Agencies, amend Article Third or Fourth of its certificate of incorporation or (iii) incur any indebtedness, or assume or guaranty indebtedness of any other entity, other than as contemplated by the Basic Documents or pursuant to the Intercompany Advance Agreement (without giving effect to any amendment to the Intercompany Advance Agreement after the date hereof, unless the Rating Agency Condition for each series or class of Securities then outstanding was satisfied in connection therewith) if such action would result in a downgrading of the then current rating of any outstanding series or class of Securities by a Rating Agency for such series or class. SECTION 3.4 Limitation on Liability of Seller and Others. (a) Neither the Seller nor any of the directors, officers, employees or agents of the Seller in its capacity as such shall be under any liability to the Issuer, the Indenture Trustee, the Owner Trustee, the Securityholders or any other Person, except as specifically provided in this Agreement, for any action taken or for refraining from the taking of any action pursuant to the Basic Documents or for errors in judgment; provided, however, that this provision shall not protect the Seller or any such Person against any liability that would otherwise be imposed by reason of wilful misfeasance, bad faith or negligence (except errors in judgment) in the performance of duties or by reason of reckless disregard of obligations and duties under the Basic Documents. The Seller and any director or officer or employee or agent of the Seller may rely in good faith on the advice of counsel or on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under the Basic Documents. (b) The Seller and any director, officer or employee of the Seller shall be reimbursed by the Owner Trustee for any contractual damages, liability or expense incurred by reason of such trustee's wilful misfeasance, bad faith or negligence (except errors in judgment) in the performance of such trustee's duties under such agreement or the Trust Agreement or by reason of reckless disregard of its obligations and duties under such agreements. The Seller shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its obligations as Seller of the Receivables and related Collateral Security under this Agreement and that in its opinion may involve it in any expense or liability. SECTION 3.5 Seller May Own Notes or Certificates. Each of the Seller and any Affiliate of the Seller may in its individual or any other capacity become the owner or pledgee of Notes or Certificates with the same rights (except as otherwise specifically provided in the Basic Documents) as it would have if it were not the Seller or an Affiliate thereof. Except as otherwise specifically provided in the Basic Documents, Notes or Certificates so owned by or pledged to the Seller or such Affiliate shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority or distinction as among all of such Notes or Certificates, respectively. ARTICLE IV SERVICER'S COVENANTS; DISTRIBUTIONS; RESERVE FUNDS; STATEMENTS TO SECURITYHOLDERS SECTION 4.1 Annual Statement as to Compliance; Notice of Servicing Default. (a) The Servicer shall deliver to the Indenture Trustee and the Owner Trustee, on or before ______________ of each year, beginning ________, an officer's certificate signed by the President or any Vice President of the Servicer, dated as of ________ of such year, stating that (i) a review of the activities of the Servicer during the preceding 12-month period (or, with respect to the first such certificate, such period as shall have elapsed from the Initial Closing Date to the date of such certificate) and of its performance under this Agreement and under the Pooling and Servicing Agreement has been made under such officer's supervision and (ii) to such officer's knowledge, based on such review, the Servicer has fulfilled all its obligations under such agreements throughout such period, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officer and the nature and status thereof. A copy of such certificate may be obtained by any Securityholder by a request in writing to the Issuer addressed to the Corporate Trust Office of the Indenture Trustee or the Owner Trustee, as applicable. (b) The Servicer shall deliver to the Indenture Trustee, the Owner Trustee and the Rating Agencies promptly after having obtained knowledge thereof, but in no event later than five Business Days thereafter, written notice in an officer's certificate of any event which, with the giving of notice or lapse of time, or both, would become a Servicing Default under Section 8.1. The Seller shall deliver to the Indenture Trustee, the Owner Trustee, the Servicer and the Rating Agencies, promptly after having obtained knowledge thereof, but in no event later than five Business Days thereafter, written notice in an officer's certificate of any event which, with the giving of notice or lapse of time, or both, would become a Servicing Default under clause (b) of Section 8.1. SECTION 4.2 Annual Independent Accountants' Report. (a) The Servicer shall cause a firm of Independent accountants, who may also render other services to the Servicer or the Seller, to deliver to the Indenture Trustee, the Owner Trustee and the Rating Agencies on or before ___________ of each year, beginning _____________ with respect to the twelve months ended on the immediately preceding _____________ (or, with respect to the first such report, such period as shall have elapsed from the Initial Closing Date to the date of such certificate), a report (the "Accountants' Report") addressed to the Board of Directors of the Servicer and to the Indenture Trustee and the Owner Trustee, to the effect that such firm has audited the financial statements of the Servicer and issued its report thereon and that such audit (i) was made in accordance with generally accepted auditing standards, (ii) included tests relating to wholesale receivables (including financing arrangements with automobile dealers to finance their automobile and light-duty truck inventory) serviced for others in accordance with the requirements of the Uniform Single Audit Program for Mortgage Bankers (the "Program"), to the extent the procedures in the Program are applicable to the servicing obligations set forth in this Agreement and the Pooling and Servicing Agreement and (iii) except as described in the report, disclosed no exceptions or errors in the records relating to wholesale receivables (including financing arrangements with automobile dealers to finance their automobile and light-duty truck inventory) serviced for others that, in the firm's opinion, paragraph four of the Program requires such firm to report. (b) The Accountants' Report shall also indicate that the firm is independent of the Seller and the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants. (c) A copy of the Accountants' Report may be obtained by any Securityholder by a request in writing to the Issuer addressed to the Corporate Trust Office of the Indenture Trustee or the Owner Trustee. SECTION 4.3 Access to Certain Documentation and Information Regarding Accounts and Receivables. The Servicer shall provide to the Indenture Trustee and the Owner Trustee reasonable access to the documentation regarding the Accounts in the Pool of Accounts and the Receivables arising thereunder. The Servicer shall provide such access to any Securityholder only in such cases where a Securityholder is required by applicable statutes or regulations to review such documentation. In each case, such access shall be afforded without charge but only upon reasonable request and during normal business hours at offices of the Servicer designated by the Servicer. Nothing in this Section 4.3 shall derogate from the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding any Dealer, and the failure of the Servicer to provide access as provided in this Section 4.3 as a result of such obligation shall not constitute a breach of this Section 4.3. SECTION 4.4 Enforcement of Receivables. If in any Proceeding it is held that the Servicer may not enforce a Receivable that has been transferred to the Trust on the ground that it is not a real party in interest or a holder entitled to enforce such Receivable, the Indenture Trustee or the Owner Trustee, as applicable, shall, at the Servicer's expense, take such steps as the Servicer deems necessary to enforce such Receivable, including bringing suit in the name of such Person or the names of the Securityholders. The Indenture Trustee and the Owner Trustee agree to the provisions of Section 3.02 of the Pooling and Servicing Agreement as such provisions apply to Interested Parties (as used therein). SECTION 4.5 Allocations; Distributions. (a) Trust's Share of Collections. The Trust, as the holder of the Receivables transferred hereunder, shall be entitled to Principal Collections and Interest Collections to the extent of Trust Principal Collections and Trust Interest Collections and the Original Seller, as the holder of the Retained Property, shall be entitled to such Principal Collections and Interest Collections in excess thereof. Any Principal Collections or Interest Collections on deposit in the Collection Account which do not represent Trust Principal Collections or Trust Interest Collections shall be paid to the Original Seller as holder of the Retained Property. (b) Servicer Calculations. The Servicer shall calculate, in a manner consistent with the Indenture (including all Officer's Issuance Certificates) and the Trust Agreement, (i) no later than each Determination Date, Available Trust Interest, the Monthly Servicing Fee, Aggregate Noteholders' Interest, Aggregate Revolver Interest, Aggregate Certificateholders' Interest, any payment due under any Specified Support Arrangement and, for a specific number of Determination Dates immediately preceding the Determination Date preceding the Targeted Final Payment Date for any series of Term Notes (which specific number shall be set forth in the Officer's Issuance Certificate of such series), the Required Payment Period Length and, (ii) no later than each Determination Date for the Wind Down Period, an Early Amortization Period, the Payment Period for any series of Notes or, if principal payments are then required to be made (or set aside) under any series of Notes, the Revolving Period, Available Trust Principal, Aggregate Noteholders' Principal, Aggregate Revolver Principal, Aggregate Certificateholders' Principal, the Required Revolver Payment, unreimbursed Trust Charge-Offs, the Trust Defaulted Amount and the Principal Allocation Percentage for each series of Notes, and in each case, all other amounts required to determine the amounts to be deposited in or paid from each of the Collection Account, the Accumulation Accounts, the Term Note Distribution Account, the Revolver Distribution Account, the Certificate Distribution Account, the ______________________ Reserve Funds and any other Designated Account on the next succeeding Monthly Distribution Date and (iii) on each Business Day that any series of Notes requires Available Trust Principal to be retained or set aside with respect to such series of Notes, the Principal Allocation Percentage and the maximum amount required to be set aside for such series of Notes. The Servicer shall calculate on a daily basis the Daily Trust Balance, the Daily Trust Invested Amount and all related amounts to the extent necessary to determine the Cash Collateral Amount for such date as described in Section 4.5(d). (c) Application of Interest Collections. (i) Basic Interest Waterfall. With respect to each Monthly Distribution Date and the related Collection Period, the Indenture Trustee (based on the information contained in the Servicer's Accounting delivered on the related Determination Date pursuant to Section 3.05 of the Pooling and Servicing Agreement) shall apply Available Trust Interest and other funds specified below to pay interest and other amounts in the priority specified in clauses (1), (2) and (3) below: CLAUSE (1) For each Collection Period, the Indenture Trustee will apply Trust Interest Collections together with the other amounts comprising Available Trust Interest for the related Monthly Distribution Date in the following order of priority: (a) an amount equal to the Monthly Servicing Fee for such Monthly Distribution Date will be paid to the Servicer; and (b) an amount equal to the Trust Interest Allocation for each series of Notes will be made available to that series and applied in clause (2) below. CLAUSE (2) On each Monthly Distribution Date, for each series of Notes in accordance with the terms of such series, the Indenture Trustee will apply the Trust Interest Allocation together with the other amounts comprising the Monthly Available Amount for such series to pay the Monthly Carrying Costs for such series of Term Notes. Shortfalls in such applications will be treated as a Series Shortfall for such series and excess amounts will be treated as Remaining Interest Amounts. CLAUSE (3) On each Monthly Distribution Date, the Indenture Trustee will aggregate the Remaining Interest Amounts from all series of Notes and apply such amounts in the following order of priority: (a) with respect to any series of Notes which has a Series Shortfall, pro rata on the basis of the respective Series Shortfalls, an amount equal to the Series Shortfall for that series of Notes for that Monthly Distribution Date will be transferred to (i) the account specified in the Officer's Issuance Certificate applicable to such series; (b) an amount equal to the net payment, if any, due from the Trust under the ______________________ Certificates Basis Swap and under any Basis Swap with respect to any other class of Certificates will be paid in accordance with each such Basis Swap; (c) an amount equal to the Aggregate Certificateholders' Interest for such Monthly Distribution Date will be transferred to the Certificate Distribution Account; (d) an amount equal to any Servicer Advances not previously reimbursed will be paid to the Servicer, except as otherwise provided in this Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement; (e) an amount equal to any Reserve Fund Deposit Amount for such Monthly Distribution Date will be deposited into the Reserve Fund; (f) an amount equal to the Cash Accumulation Reserve Fund Deposit Amount with respect to any series of Term Notes for such Monthly Distribution Date will be deposited into the Cash Accumulation Reserve Fund and any other deposit required under the terms of any other Specified Support Arrangements will be deposited into the Cash Accumulation Reserve Fund of such series or the account designated by the terms of such Specified Support Arrangement, as applicable, pro rata among all such amounts; (g) an amount equal to any Trust Defaulted Amount will be treated as Additional Trust Principal on such Monthly Distribution Date; (h) an amount equal to the aggregate amount of unreimbursed Trust Charge-Offs will be treated as Additional Trust Principal on such Monthly Distribution Date. (ii) Liquidity and Credit Enhancement; Trust Charge-Offs. To the extent that Available Trust Interest and the other funds comprising the Monthly Available Amount are not sufficient to make all payments required by clauses (1), (2) and (3) of Section 4.5(c)(i), then the funds described below will be applied in the following order: First, if any Monthly Carrying Costs or any amounts specified in Section 4.5(c)(i) clause 1(a) and clauses 3(a), (b) and (c) remain unpaid, then a "Deficiency Amount" will exist for such Monthly Distribution Date, and the Servicer shall make a Servicer Advance equal to such Deficiency Amount to complete the applications pursuant to such Section (but only to the extent that the Servicer, in its sole discretion, expects to recover such Servicer Advance from Remaining Interest Amounts, applied as described above on subsequent Monthly Distribution Dates, and from amounts applied to reimburse Servicer Advances pursuant to the terms of any Officer's Issuance Certificate and such Servicer Advances will be applied to reduce such Deficiency Amount in the priorities set forth above in Section 4.5(c)(i) clauses (1), (2) and (3); and Second, if any Monthly Carrying Costs or any amounts specified in Section 4.5(c)(i) clauses (3)(a), (b), (c), (d), (g) and (h) for such Monthly Distribution Date (calculated after the adjustment, if any, to Trust Interest Collections described in subsection (v) below) remain unpaid after the application described in the preceding clause First, then an "Unsatisfied Deficiency Amount" will exist for such Monthly Distribution Date, and the Servicer shall instruct the Indenture Trustee to withdraw funds from the Reserve Fund and apply such funds to reduce such Unsatisfied Deficiency Amount in the priorities set forth in Section 4.5 (c)(i) clauses (1), (2) and (3); provided that no amount shall be withdrawn from the Reserve Fund and paid to the Servicer pursuant to Section 4.5(c)(i)clause (3)(c) in order to reimburse the Servicer for Servicer Advances with respect to Receivables that are not Eligible Receivables (as determined by the Servicer in accordance with its servicing procedures) and no amount shall be applied to clauses (3)(e) or (f) of Section 4.5(c)(i). To the extent that, after application of the funds in the Reserve Fund, the full amount of the Trust Defaulted Amount has not been treated as Additional Trust Principal pursuant to Section 4.5(c)(i) clause (3)(g), the amount of such deficiency shall be added to unreimbursed Trust Charge- Offs. (iii) To the extent any Available Trust Interest (calculated after the adjustment, if any, to Trust Interest Collections described in subsection (v) below) is available on any Monthly Distribution Date after making the applications described in Section 4.5(c)(i), such amount shall be allocated and paid to the Seller as compensation for making the initial and any other deposits into the ______________________ Reserve Funds. (iv) On each Monthly Distribution Date, the Servicer shall pay to the Original Seller, as the holder of the Retained Property, any Interest Collections for the related Collection Period that do not constitute Trust Interest Collections (calculated after the adjustment, if any, described in subsection (v) below) to the extent not previously so paid to the Original Seller. (v) If the Servicer does not make a Servicer Advance in the amount of the full Deficiency Amount for a Monthly Distribution Date, the Servicer shall calculate for each Account in the Pool of Accounts in which the full amount of interest due for the related Collection Period was not collected, the product of (i) the amount of interest collected with respect to such Collection Period and (ii) the difference between (A) the percentage equivalent (which shall never exceed 100%) of a fraction, the numerator of which is the average daily aggregate principal balance of the Eligible Receivables in such Account during the related Collection Period and the denominator of which is the average daily aggregate principal balance of all Receivables (including Receivables included in the Retained Property) in such Account during the related Collection Period and (B) the Trust Percentage for such Monthly Distribution Date. With respect to each such Account, the absolute value of such amount so calculated shall be (1) added to Trust Interest Collections for such Monthly Distribution Date to the extent such amount is greater than zero or (2) subtracted from Trust Interest Collections for such Monthly Distribution Date to the extent such amount is less than zero. No adjustment to Trust Interest Collections shall be made with respect to the other Accounts in the Pool of Accounts. (i) Application of Principal Collections. The Indenture Trustee (based on the information contained in the Servicer's Accounting delivered on any such date or the related Determination Date pursuant to Section 3.05 of the Pooling and Servicing Agreement, as applicable) shall apply Trust Principal Collections and Available Trust Principal in the following manner: (i) On each Business Day during the Revolving Period, all Trust Principal Collections and Additional Trust Principal shall be applied as follows: (A) if no series of Notes is then in a Payment Period or a Rapid Amortization Period which is not an Early Amortization Period during which Available Trust Principal is required to be retained or set aside or paid to fund principal payments, then (1) if any Servicer Liquidity Advance for any series of Term Notes is outstanding, an amount not to exceed the product of Trust Principal Collections and a fraction, the numerator of which is the outstanding principal balance of such series of Term Notes and the denominator of which is the outstanding principal balance of all Notes as of such Business Day, shall be paid to the Servicer in reimbursement of such Servicer Liquidity Advance and (2) all remaining Trust Principal Collections shall be applied as provided in Section 4.5(d)(iii); (B) if one or more series of Notes is then in a Payment Period or a Rapid Amortization Period which is not an Early Amortization Period during which Available Trust Principal is required to be retained or set aside or paid to fund principal payments, then (1) if any Servicer Liquidity Advance is outstanding for any series of Term Notes that does not then require Available Trust Principal to be retained or set aside to fund principal payments with respect thereto, an amount not to exceed the product of Trust Principal Collections and a fraction, the numerator of which is the outstanding principal balance of such series of Term Notes, and the denominator of which is the outstanding principal balance of all Notes as of such Business Day, shall be paid to the Servicer in reimbursement of such Servicer Liquidity Advance, and (2) each such series that requires Available Trust Principal to be retained or set aside shall be allocated its Principal Allocation Percentage of the Available Trust Principal (prior to giving effect to any reimbursement of Servicer Liquidity Advances with respect to such series for such Business Day) and such amounts shall, first, be applied to reimburse the Servicer for any outstanding Servicer Liquidity Advances, if any, related to such series and, second, to the extent specified in the Officer's Issuance Certificate with respect to such series, be retained or set aside in the account specified in the Officer's Issuance Certificate with respect to such series, and (3) any amounts in excess of the amount required to be reimbursed, retained or set aside in the foregoing clauses (1) and (2) shall be applied as provided in Section 4.5(d)(iii); (ii) On each Business Day during the Revolving Period, proceeds from the issuance of Securities and additional borrowings under any Revolving Notes shall be applied (A) first, if so directed by the Seller, to the payment of principal of any series of Notes then in a Payment Period, (B) second, if so directed by the Seller, to the reimbursement of Servicer Liquidity Advances and (C) thereafter, as provided in Section 4.5(d)(iii); (iii) On each Business Day during the Revolving Period, after making the applications specified in Sections 4.5(d)(i) and 4.5(d)(ii), the Indenture Trustee shall apply the amounts in the Collection Account in respect of Trust Principal Collections for such Business Day, the Cash Collateral Amount from the prior Business Day, proceeds from the issuance of Securities and additional borrowings under the Revolving Notes, and (if such Business Day is a Monthly Distribution Date) Additional Trust Principal as follows: (A) if the Business Day on which the Trust Principal Collections occurred is on or after the Fully Funded Date for each series of Notes, then the Indenture Trustee shall transfer to the Certificate Distribution Account for allocation in accordance with the Trust Agreement an amount not to exceed the Aggregate Certificateholders' Principal, (B) the Indenture Trustee shall set aside in the Collection Account as the Cash Collateral Amount such amount of remaining funds as is necessary to maintain Trust Equilibrium, and (C) the Indenture Trustee shall apply any remaining such funds, if so directed by the Seller in its sole discretion, to Trust Receivables Purchases or to make payments of principal on any series of Revolving Notes (to the extent permitted under the Officer's Issuance Certificate with respect to such Revolving Notes); (iv) On each Business Day during the Wind Down Period or an Early Amortization Period, the Indenture Trustee shall (A) with respect to each series of Notes, (1) allocate to such series its Principal Allocation Percentage of Available Trust Principal for such Business Day, (2) unless otherwise set forth in the Officer's Issuance Certificate with respect to such series, after the reimbursement of any Servicer Liquidity Advance with respect to such series, set aside in the account specified in the Officer's Issuance Certificate for such series its Principal Allocation Percentage of Available Trust Principal, and (3) on each related Monthly Distribution Date pay or set aside the amounts set aside along with the Principal Allocation Percentage for such series of Available Trust Principal for such Monthly Distribution Date as provided in the Officer's Issuance Certificate with respect to such series of Notes; (B) to the extent of any Available Trust Principal remaining after the applications described in the preceding clause (A), allocate such amounts to Priority Payment Amounts and distribute them as specified in the applicable Officer's Issuance Certificate or Certificate Issuance Order; (C) to the extent of any Available Trust Principal remaining after the applications described in the preceding clauses (A) and (B), allocate to the Certificates any remaining amounts up to the Aggregate Certificateholders' Principal for the related Monthly Distribution Date and pay to the Certificateholders on the date specified in the Trust Agreement or the Certificate Issuance Order, as applicable, the amounts set aside along with any unallocated Available Trust Principal for such Monthly Distribution Date; and (D) to the extent of any Available Trust Principal remaining after the applications described in the preceding clauses (A) through (C), pay such amounts to the Seller. (v) Except as set forth in Section 4.5(d)(iii)(A), the Indenture Trustee shall not make payments of principal with respect to the Certificate Balance on any Certificates until all Term Notes and all Revolving Notes are paid in full (or otherwise fully provided for) and any Priority Payment Amount, if any, has been paid in full. (j) Servicer Liquidity Advances. Unless otherwise set forth in the Officer's Issuance Certificate with respect to a series of Term Notes, if the terms of any series of Term Notes provide for a Servicer Liquidity Advance in the event a Required Payment on such series cannot be made from other available funds, then to the extent that a Required Payment for any Monthly Distribution Date during a Payment Period for such series cannot be made as provided by the terms of such series (after giving effect to all issuances of securities and additional borrowings under the Revolving Notes on such Monthly Distribution Date), the Servicer shall make a Servicer Liquidity Advance in an amount sufficient to complete such series' Required Payment, to the extent that the Servicer, in its sole discretion, expects to recover such Servicer Liquidity Advance from subsequent Trust Principal Collections allocated as provided in subsection 4.5(d)(i), and such Servicer Liquidity Advance shall be used to make such Required Payment. (k) On each Monthly Distribution Date for the Wind Down Period or an Early Amortization Period, the Seller shall (or shall use reasonable efforts to cause the Original Seller on its behalf to) deposit in the Collection Account an amount equal to the Supplemental Principal Allocation for such Monthly Distribution Date. The Seller shall be entitled to reimbursement of the aggregate amount of Supplemental Principal Allocations for all Monthly Distribution Dates following the payment in full of all Securities. The Trust's obligation to so reimburse the Seller shall be limited to collections on Receivables (as and when such amounts are received) and amounts on deposit in the Reserve Fund. (l) To the extent unreimbursed Trust Charge-Offs for any Monthly Distribution Date exceed the Certificate Balance (calculated without reduction for Trust Charge-Offs), such excess shall be applied to reduce the Outstanding Amount attributable to each series of Notes, pro rata on the basis of the Outstanding Amount attributable to each such series (calculated without reduction for Trust Charge-Offs after giving effect to any amounts to be paid on such Monthly Distribution Date). SECTION 4.6 ______________________ Reserve Funds and the Reserve Fund. (a) Each of the ______________________ Reserve Funds shall include the money and other property deposited and held therein pursuant to this Section 4.6 and Section 4.5. The Seller shall make such deposits into any of the ______________________ Reserve Funds on the Initial Closing Date and from time to time thereafter in connection with the issuance of Additional Securities or an increase in the Specified Maximum Revolver Balance (at which time the formula for the Reserve Fund Required Amount or the required amount for any other ______________________ Reserve Fund may be adjusted) as are specified herein or in any Officer's Issuance Certificate or Certificate Issuance Order. None of the ______________________ Reserve Funds shall under any circumstances be deemed to be part of or otherwise included in the Trust. (b) On the Initial Closing Date, the Seller shall deposit the Reserve Fund Initial Deposit into the Reserve Fund. In addition, the Seller, in its sole discretion, may at any time make an additional deposit into the Reserve Fund in an amount up to 1% of the Maximum Pool Balance as of the date such additional deposit is to be made. If the amount on deposit in the Reserve Fund on any Monthly Distribution Date (after giving effect to all deposits therein or withdrawals therefrom on such Monthly Distribution Date) exceeds the Reserve Fund Required Amount for such Monthly Distribution Date, the Servicer shall instruct the Indenture Trustee to distribute an amount equal to any such excess to the Seller, unless otherwise agreed to by the Seller. (c) In order to provide for timely payments in accordance with Section 4.5 and the terms of any Securities, to assure availability of the amounts maintained in the Reserve Fund for the benefit of the Noteholders and the Servicer, and as security for the performance by the Seller of its obligations hereunder, the Seller on behalf of itself and its successors and assigns, hereby pledges to the Indenture Trustee and its successors and assigns, all its right, title and interest in and to (i) the Reserve Fund and all proceeds of the foregoing, including, without limitation, all other amounts and investments held from time to time in the Reserve Fund (whether in the form of deposit accounts, Physical Property, book-entry securities, uncertificated securities or otherwise) and (ii) the Reserve Fund Initial Deposit and all proceeds thereon ((i) and (ii), collectively, the "Reserve Fund Property"), to have and to hold all the aforesaid property, rights and privileges unto the Indenture Trustee, its successors and assigns, in trust for the uses and purposes, and subject to the terms and provisions, set forth in this Section 4.6. The Indenture Trustee hereby acknowledges such transfer and accepts the trust hereunder and shall hold and distribute the Reserve Fund Property in accordance with the terms and provisions of this Agreement. By its authentication of any series of Notes issued pursuant to an Officer's Issuance Certificate, the Indenture Trustee shall acknowledge and accept such trusts as are specified therein with respect to any ______________________ Reserve Fund established thereunder. (d) Each of the Seller and the Servicer agrees to take or cause to be taken such further actions, to execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments (including, without limitation, any UCC financing statements or this Agreement) as may be determined to be necessary, in an Opinion of Counsel to the Seller delivered to the Indenture Trustee, in order to perfect the interests created by this Section 4.6 and any Officers' Issuance Certificate in any ______________________ Reserve Fund and otherwise fully to effectuate the purposes, terms and conditions of this Section 4.6 and any Officer's Issuance Certificate. The Seller shall: (i) promptly execute, deliver and file any financing statements, amendments, continuation statements, assignments, certificates and other documents with respect to such interests and perform all such other acts as may be necessary in order to perfect or to maintain the perfection of the Indenture Trustee's security interest; and (ii) make the necessary filings of financing statements or amendments thereto within sixty days after the occurrence of any of the following: (A) any change in their respective corporate names or any trade names, (B) any change in the location of their respective chief executive offices or principal places of business and (C) any merger or consolidation or other change in their respective identities or corporate structures; and shall promptly notify the Indenture Trustee of any such filings. SECTION 4.7 Net Deposits. (a) The Servicer, the Seller, the Indenture Trustee and the Owner Trustee may make any remittances pursuant to this Article IV net of amounts to be distributed by the applicable recipient to such remitting party. Nonetheless, each such party shall account for all of the above described remittances and distributions as if the amounts were deposited and/or transferred separately. (b) Notwithstanding anything in this Agreement or the Indenture (including all Officer's Issuance Certificates) to the contrary, for so long as the conditions specified in the first sentence of Section 6.2(b) are satisfied, the Servicer, the Seller, the Indenture Trustee and the Owner Trustee shall not be required to make any distributions, deposits or other remittances in respect of any Notes or to the related Distribution Account pursuant to this Article IV (including deposits by the Servicer into the Collection Account) which are to be made on an Exempt Deposit Date with respect to such Notes. Distributions, deposits and other remittances on Exempt Deposit Dates which are not required to be made by virtue of the preceding sentence shall nonetheless be accounted for as having been distributed, deposited or remitted for purposes of determining other amounts required to be distributed, deposited or otherwise remitted on such Exempt Deposit Date or the Monthly Distribution Date preceding the next succeeding Payment Date. On the Monthly Distribution Date preceding the Payment Date next succeeding any Exempt Deposit Date on which any of the Servicer, the Seller, the Indenture Trustee or the Owner Trustee did not make distributions, deposits and other remittances in reliance upon the second preceding sentence, each such Person shall be required to distribute, deposit or otherwise remit the cumulative amount of all such distributions, deposits and other remittances for such Payment Date and the immediately preceding Exempt Deposit Date or Dates in respect of such Notes and the related Distribution Account. SECTION 4.8 Statements to Securityholders. (a) On or before each Payment Date, the Owner Trustee shall (except as otherwise provided in the Trust Agreement) include with each distribution to each Certificateholder to be made on such date and the Indenture Trustee shall include with each distribution to each Term Noteholder and each Revolving Noteholder to be made on such date, a statement (which statement shall also be provided to the Rating Agencies) prepared by the Servicer based on information in the Servicer's Accounting furnished pursuant to Section 3.05 of the Pooling and Servicing Agreement. Except as otherwise set forth in the Officer's Issuance Certificate with respect to any series of Notes, each such statement to be delivered to Securityholders shall set forth the following information concerning the Term Notes, the Revolving Notes or the Certificates, as appropriate, with respect to such Payment Date or the preceding Collection Period: (i) the amount, if any, of the distribution allocable to principal on each series of Term Notes and Revolving Notes and to the Certificate Balance; (ii) the amount, if any, of the distribution allocable to interest on or with respect to each series or class of Securities; (iii) the aggregate Outstanding Amount for each series of Term Notes, the Outstanding Amount of the Revolving Notes and the Certificate Balance, each as of such date and after giving effect to all payments reported under clause (i) above (or, in the case of any Revolving Notes during the Revolving Period, unless principal payments thereon are required on such Payment Date, as of the last day of such Collection Period); (iv) the amount of outstanding Servicer Advances on such date; (v) the amount of the Monthly Servicing Fee paid to the Servicer with respect to the related Collection Period or Periods, as the case may be; (vi) the per annum interest rate for the next Payment Date, for any series or class of Securities with a variable or adjustable interest rate; (vii) the amount, if any, withdrawn from or credited to each of the ______________________ Reserve Funds; (viii) the accumulated interest and principal shortfalls, if any, on each series or class of Securities and the change in each of such amounts from the preceding Payment Date; (ix) the Trust Charge-Offs allocated to each series or class of Securities and the change in such amounts from the preceding Payment Date; and (x) the balance of each of the ______________________ Reserve Funds, if any, on such date after giving effect to changes therein or any distributions therefrom on such date. Each amount set forth pursuant to clauses (i), (ii) and (viii) above with respect to the Term Notes or the Certificates shall be expressed as a dollar amount per $1,000 of initial principal amount of the Term Notes or of Certificate Balance, as applicable. (b) Within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of this Agreement, the Indenture Trustee and the Owner Trustee shall furnish (or cause to be furnished), to each Person who at any time during such calendar year shall have been a holder of record of Notes or Certificates, respectively, and received any payment thereon, a statement containing such information as may be required by the Code and applicable Treasury Regulations to enable such Securityholder to prepare its federal income tax returns. (c) A copy of each statement provided pursuant to Section 4.8(a) shall be made available for inspection at the Corporate Trust Office. SECTION 4.9 New Issuances; Changes in Specified Maximum Revolver Balance. (a) The Seller may from time to time after the Initial Closing Date direct the Indenture Trustee or the Owner Trustee, as applicable, on behalf of the Trust, to issue one or more series of Term Notes or Revolving Notes, or Revolving Notes of any series outstanding pursuant to the Indenture or increase or decrease the Specified Maximum Revolver Balance or issue additional Certificates (including Certificates of a different class) pursuant to the Trust Agreement. Except as otherwise provided in any supplement hereto or any Officer's Issuance Certificate or Certificate Issuance Order, the Term Notes of all outstanding series, the Revolving Notes of all outstanding series and the Certificates of all outstanding classes shall be equally and ratably entitled as and to the extent provided herein to the benefits of this Agreement, the Indenture and the Pooling and Servicing Agreement without preference, priority or distinction. (b) The obligation of the Indenture Trustee or the Owner Trustee, as applicable, to issue Term Notes or Revolving Notes of a new series, to increase or decrease the Specified Maximum Revolver Balance (including any Series Specified Maximum Revolver Balance) or to issue any additional Certificates and to execute and deliver any related documents, including a supplement hereto or to the Indenture, is subject to the following conditions: (i) on or before the fifth Business Day immediately preceding the related Closing Date, the Seller shall have given the Indenture Trustee, the Owner Trustee, the Servicer and each Rating Agency notice of such issuance or of such increase or decrease in the Specified Maximum Revolver Balance and the Closing Date; (ii) with respect to the issuance of a new series of Term Notes or Revolving Notes, the Seller shall have delivered to the Indenture Trustee and the Owner Trustee the related supplement and/or Officer's Issuance Certificate, in form reasonably satisfactory to such Trustees; (iii) with respect to the issuance of Certificates, the Seller shall have delivered to the Owner Trustee the related Certificate Issuance Order, in form reasonably satisfactory to the Owner Trustee; (iv) the Seller shall have delivered to the Indenture Trustee or the Owner Trustee, as applicable, any related Specified Support Arrangement executed by each of the parties thereto, other than such Trustee; (v) the Rating Agency Condition shall have been satisfied with respect to such issuance of any additional Series of Notes or increase in the Specified Maximum Revolver Balance; provided that any decrease in the Specified Maximum Revolver Balance shall not be subject to such condition; (vi) the Seller shall have delivered to the Indenture Trustee and the Owner Trustee a certificate of a Vice President or more senior officer, dated the Closing Date, to the effect that the Seller reasonably believes that such issuance or increase or decrease shall not result in the occurrence of an Early Amortization Event; (vii) after giving effect to all issuances of Securities and all changes in the Specified Maximum Revolver Balance on the Closing Date, the quotient of (A) the outstanding Certificate Balance of all then outstanding Certificates over (B) the Maximum Pool Balance shall equal or exceed the Specified Certificate Percentage; and (viii) with respect to the issuance of additional Certificates (unless otherwise agreed by the holders of all outstanding Certificates or unless the Rating Agency Condition is satisfied) the initial Certificate Balance of the Certificates to be issued on the Closing Date shall be less than or equal to the lowest Certificate Balance outstanding at all times during the twelve-month period preceding such issuance. Upon satisfaction of the above conditions with respect to the issuance of additional Term Notes or Revolving Notes, the Indenture Trustee shall, to the extent necessary, execute a supplement to the Indenture and execute and authenticate such Term Notes or Revolving Notes pursuant to the Indenture. Upon satisfaction of the above conditions with respect to the increase or decrease of the Specified Maximum Revolver Balance, the Indenture Trustee shall, to the extent necessary, amend the Revolving Notes or the Indenture. Upon satisfaction of the above conditions with respect to the issuance of additional Certificates, the Owner Trustee shall execute and authenticate such additional Certificates pursuant to the Trust Agreement. In any such case, upon satisfaction of the above conditions, and upon payment in full of any series of Term Notes, the Owner Trustee shall, to the extent necessary, terminate, amend or modify the terms of any Specified Support Arrangements (including the Basis Swaps) and enter into additional Specified Support Arrangements. ARTICLE V SERVICING FEE SECTION 5.1 Servicing Compensation. The Monthly Servicing Fee shall be payable to the Servicer, in arrears, on each Monthly Distribution Date through and including the Monthly Distribution Date on which the final distribution on the Securities is made, in an amount equal to the product of (a) one-twelfth of the Servicing Fee Rate and (b) the average daily balance of the Daily Trust Invested Amount for the related Collection Period; provided, however, that with respect to the first Monthly Distribution Date, the Monthly Servicing Fee shall be equal to the product of (a) 14/360 of the Servicing Fee Rate and (b) the average daily balance of the Daily Trust Invested Amount during the period from and including the Initial Cut-Off Date through and including the last day of the Collection Period in which the Initial Cut-Off Date occurs. ARTICLE VI SECURITYHOLDER ACCOUNTS; COLLECTIONS, DEPOSITS AND INVESTMENTS; ADVANCES SECTION 6.1 Establishment of Accounts; Deposits; Investments. (a) (i) The Servicer, for the benefit of the Securityholders, shall establish and maintain in the name of the Indenture Trustee an Eligible Deposit Account known as the ______________________ Collection Account (the "Collection Account"), bearing an additional designation clearly indicating that the funds deposited therein are held for the benefit of the Securityholders. (ii) The Servicer, for the benefit of the holders of each series of Term Notes separately shall establish and maintain in the name of the Indenture Trustee an Eligible Deposit Account known as the ______________________ Term Note Distribution Account (the "Term Note Distribution Account"), bearing an additional designation clearly indicating that the funds deposited therein are held for the benefit of the holders of the Term Notes of the relevant series. Upon the commencement of a Payment Period for a series of Term Notes, the Servicer, for the benefit of the Term Noteholders, shall establish a subaccount of the Term Note Distribution Account (a "Term Note Distribution Subaccount") (which account may be kept only on the books of the Trust) in which to maintain all the funds deposited in the Term Note Distribution Account in respect of principal for the series of Term Notes beginning its Payment Period. (iii) In connection with the first issuance by the Trust of Revolving Notes, the Servicer, for the benefit of the Revolving Noteholders, shall establish and maintain in the name of the Indenture Trustee an Eligible Deposit Account known as the ______________________ Revolver Distribution Account (the "Revolver Distribution Account"), bearing an additional designation clearly indicating that the funds deposited therein are held for the benefit of the Revolving Noteholders. (iv) Pursuant to the Trust Agreement, the Servicer, for the benefit of the Certificateholders, shall establish and maintain at ____________________ in the name of the Issuer an Eligible Deposit Account known as the ______________________ Certificate Distribution Account (the "Certificate Distribution Account") bearing an additional designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders. (v) The Servicer, for the benefit of the Securityholders, shall establish and maintain in the name of the Indenture Trustee an Eligible Deposit Account known as the ______________________ Reserve Fund (the "Reserve Fund") bearing an additional designation clearly indicating that the funds deposited therein are held for the benefit of the Securityholders. (vi) The Servicer, for the benefit of the respective Noteholders, shall establish and maintain in the name of the Indenture Trustee any Eligible Deposit Accounts and subaccounts as set forth in the Officer's Issuance Certificates with respect to such series of Notes (each, an "Accumulation Account", and together with the Cash Accumulation Account, the "Accumulation Accounts"), each bearing an additional designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders of such series of Notes. (b) (i) Each of the Designated Accounts shall be initially established with the Indenture Trustee and shall be maintained with the Indenture Trustee so long as (A) the short-term unsecured debt obligations of the Indenture Trustee have the Required Deposit Rating or (B) each of the Designated Accounts are maintained in the corporate trust department of the Indenture Trustee and any securities of the Indenture Trustee have a credit rating from each Rating Agency then rating such securities in one of its generic rating categories that signifies investment grade. All amounts held in the Designated Accounts (other than the Cash Accumulation Account and any other Designated Account with respect to a series of Notes specified otherwise in the Officer's Issuance Certificate with respect to such Series of Notes) (including amounts, if any, which the Servicer is required to remit daily to the Collection Account pursuant to Section 6.2) shall, to the extent permitted by applicable laws, rules and regulations, be invested, at the written direction of the Servicer (provided, however, with respect to a series of Term Notes, the Officer's Issuance Certificate with respect to such series of Term Notes may provide that under specified conditions a person other than the Servicer shall direct the investment of funds in deposit in the Designated Accounts with respect to such series of Term Notes on the terms set forth in such Officer's Issuance Certificate), by such bank or trust company in Eligible Investments (in the name of the Indenture Trustee or its nominee). Such written direction shall constitute certification by the Servicer (or such other Person) that any such investment is authorized by this Section 6.1. Funds deposited in each of the ______________________ Reserve Funds shall be invested in Eligible Investments and except, and then only to the extent, as shall be otherwise permitted by the Rating Agencies, such investments shall not be sold or disposed of prior to their maturity. Should the short-term unsecured debt obligations of the Indenture Trustee (or any other bank or trust company with which the Designated Accounts are maintained) no longer have the Required Deposit Rating, then the Servicer shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency shall consent), with the Indenture Trustee's assistance as necessary, cause the Designated Accounts (A) to be moved to a bank or trust company, the short-term unsecured debt obligations of which shall have the Required Deposit Rating, or (B) so long as any securities of the Indenture Trustee have a credit rating from each Rating Agency then rating such securities in one of its generic rating categories that signifies investment grade, to be moved to the corporate trust department of the Indenture Trustee. On each Monthly Distribution Date, Shared Investment Proceeds shall be included in Available Trust Interest and applied as set forth in Section 4.5(c). The Indenture Trustee or the other Person holding the Designated Accounts as provided in this Section 6.1(b)(i) shall be the "Securities Intermediary." If the Securities Intermediary shall be a Person other than the Indenture Trustee, the Servicer shall obtain the express agreement of such Person to the obligations of the Securities Intermediary set forth in this Section 6.1 and an Opinion of Counsel that such Person can perform such Obligations. (ii) With respect to the Designated Account Property, the Indenture Trustee agrees, by its acceptance hereof, that: (A) Any Designated Account Property that is held in deposit accounts shall be held solely in Eligible Deposit Accounts. The Designated Accounts are accounts to which Financial Assets will be credited. (B) All securities or other property underlying any Financial Assets credited to the Designated Accounts shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary and in no case will any Financial Asset credited to any of the Designated Accounts be registered in the name of the Issuer, the Servicer or the Seller, payable to the order of the Issuer, the Servicer or the Seller or specially indorsed to the Issuer, the Servicer or the Seller except to the extent the foregoing have been specially indorsed to the Securities Intermediary or in blank. (C) All property delivered to the Securities Intermediary pursuant to this Agreement will be credited upon receipt of such property to the appropriate Designated Account. (D) Each item of property (whether investments, investment property, Financial Asset, security, instrument or cash) credited to a Designated Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the New York UCC. (E) If at any time the Securities Intermediary shall receive any order from the Indenture Trustee directing transfer or redemption of any Financial Asset relating to the Designated Accounts, the Securities Intermediary shall comply with such order without further consent by the Trust, the Servicer, the Seller or any other Person. (F) The Designated Accounts shall be governed by the laws of the State of New York, regardless of any provision in any other agreement. For purposes of the UCC, New York shall be deemed to be the Securities Intermediary's jurisdiction and the Designated Accounts (as well as the Security Entitlements related thereto) shall be governed by the laws of the State of New York. (G) The Securities Intermediary has not entered into, and until the termination of this Agreement will not enter into, any agreement with any other Person relating to the Designated Accounts and/or any Financial Assets or other property credited thereto pursuant to which it has agreed to comply with entitlement orders (as defined in Section 8-102(a)(8) of the New York UCC) of such other Person and the Securities Intermediary has not entered into, and until the termination of this Agreement will not enter into, any agreement with the Issuer, the Seller, the Servicer or the Indenture Trustee purporting to limit or condition the obligation of the Securities Intermediary to comply with entitlement orders as set forth in Section 6.1(b)(ii)(E) hereof. (H) Except for the claims and interest of the Indenture Trustee in the Designated Accounts, the Securities Intermediary has no knowledge of claims to, or interests in, the Designated Accounts or in any Financial Asset credited thereto. If any other Person asserts any Lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Designated Accounts or in any Financial Asset carried therein, the Securities Intermediary will promptly notify the Indenture Trustee, the Servicer and the Issuer thereof. (I) The Securities Intermediary will promptly send copies of all statements, confirmations and other correspondence concerning the Designated Accounts and/or any Designated Account Property simultaneously to each of the Servicer and the Indenture Trustee, at the addresses set forth in Appendix B to this Agreement. (J) The Indenture Trustee shall maintain each item of Designated Account Property in the particular Designated Account to which such item originated and shall not commingle items from different Designated Accounts. (K) The Servicer or other Person directing the investment of funds in the Designated Accounts shall not direct the Indenture Trustee to: (1) invest in any Physical Property, any Uncertificated Security that is not a Federal Book-Entry Security or any Certificated Security unless the Indenture Trustee takes Delivery of such item; or (2) invest in any Security Entitlement or Federal Book-Entry Security unless the Indenture Trustee obtains Control over such investment. (iii) The Servicer shall have the power, revocable by the Indenture Trustee (or by the Owner Trustee with the consent of the Indenture Trustee) to instruct the Indenture Trustee to make withdrawals and payments from the Designated Accounts for the purpose of permitting the Servicer or the Owner Trustee to carry out its respective duties hereunder or permitting the Indenture Trustee to carry out its duties under the Indenture. (iv) The Indenture Trustee shall possess all right, title and interest in and to all funds on deposit from time to time in the Designated Accounts and in all proceeds thereof (except Investment Proceeds). Except as otherwise provided herein or in the Indenture, the Designated Accounts shall be under the exclusive dominion and control of the Indenture Trustee for the benefit of the Securityholders and the Indenture Trustee shall have sole signature power and authority with respect thereto. (v) The Servicer shall not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in any of the Designated Accounts unless the security interest granted and perfected in such account shall continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Indenture Trustee to make any such investment or sale, if requested by the Indenture Trustee, the Servicer shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the Indenture Trustee, to such effect. (c) Pursuant to the Trust Agreement, the Owner Trustee shall possess all right, title and interest in and to all funds on deposit from time to time in the Certificate Distribution Account and in all proceeds thereof (except Investment Proceeds). Except as otherwise provided herein or in the Trust Agreement, the Certificate Distribution Account shall be under the sole dominion and control of the Owner Trustee for the benefit of the Certificateholders. All amounts in the Certificate Distribution Account shall, to the extent permitted by applicable laws, rules and regulations, be invested, at the written direction of the Servicer, by the bank or trust company at which the Certificate Distribution Account is maintained in Eligible Investments. Such written direction shall constitute certification by the Servicer that any such investment is authorized by this Section 6.1(c). Investments in Eligible Investments shall be made in the name of the Owner Trustee or its nominee. If, at any time, the Certificate Distribution Account ceases to be an Eligible Deposit Account, the Servicer shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Certificate Distribution Account as an Eligible Deposit Account and shall cause the Owner Trustee to transfer any cash and/or any investments in the old Certificate Distribution Account to such new Certificate Distribution Account. (d) The Indenture Trustee, the Owner Trustee, the Securities Intermediary and each other Eligible Deposit Institution with whom a Designated Account or the Certificate Distribution Account is maintained waives any right of set-off, counterclaim, security interest or bankers' lien to which it might otherwise be entitled. SECTION 6.2 Collections. (a) Except as otherwise provided in Section 6.2(b), the Servicer shall deposit Collections into the Collection Account as promptly as possible after the date such Collections are processed by the Servicer, but in no event later than the second Business Day after such processing date. (b) Notwithstanding anything in this Agreement to the contrary, for so long as (i) ______________________ is the Servicer, (ii) no Servicing Default has occurred and is continuing, (iii) (A) ______________________ maintains a short-term rating of at least A-1 by Standard & Poor's and P-1 by Moody's, (B) ______________________ arranges for and maintains a letter of credit or other form of Specified Support Arrangement in respect of the Servicer's obligations to make deposits of Collections in the Collection Account that is acceptable in form and substance to each Rating Agency or (C) ______________________ otherwise obtains the written confirmation from each Rating Agency that the failure by ______________________ to make daily deposits shall not result in a downgrade, suspension or withdrawal of the rating of any outstanding series or class of Securities with respect to which it is a Rating Agency, and (iv) no Daily Remittance Period specified in the Officer's Issuance Certificate of any series of Notes is in effect (each of clause (i), (ii), (iii) and (iv), a "Monthly Remittance Condition"), then, subject to any limitations in the confirmations described in (C) above, if then applicable, the Servicer need not deposit Trust Principal Collections and Trust Interest Collections into the Collection Account on a daily basis during a Collection Period or make the deposits on any dates during such Collection Period otherwise specified in Sections 2.1(d), 2.6(b) and 2.7(b)(iii), but may make a single deposit into the Collection Account in same-day or next-day funds not later than 12:00 noon, New York City time, on the Business Day immediately preceding the related Monthly Distribution Date (or, with the consent of the Indenture Trustee, in same-day funds not later than 10:00 a.m., New York City time, on a Monthly Distribution Date) in a net amount equal to the amount which would have been on deposit in the Collection Account on such Monthly Distribution Date; provided that the amount of the Cash Collateral Amount for the last day of any Collection Period shall be deposited into the Collection Account (to the extent not already on deposit therein) no later than the second Business Day of the following Collection Period. If and so long as a Monthly Remittance Condition ceases to be satisfied, the Servicer shall commence, if not already doing so, making deposits in accordance with Section 6.2(a) no later than the first day of the first Collection Period that begins at least two Business Days after the day on which such Monthly Remittance Condition ceases to be satisfied. ARTICLE VII LIABILITIES OF SERVICER AND OTHERS SECTION 7.1 Liability of Servicer; Indemnities. (a) The Servicer shall be liable in accordance with this Agreement only to the extent of the obligations in this Agreement and the Pooling and Servicing Agreement specifically undertaken by the Servicer in its capacity as Servicer. Such obligations shall include the following: (i) The Servicer shall indemnify, defend and hold harmless the Indenture Trustee, the Owner Trustee, the Issuer and the Securityholders from and against any taxes that may at any time be asserted against any such Person with respect to the transactions contemplated in this Agreement, including, without limitation, any sales, gross receipts, general corporation, tangible personal property, privilege or license taxes (but not including any taxes asserted with respect to, and as of the date of, the sale of any Eligible Receivables to the Issuer hereunder or the issuance and original sale of any Securities, or asserted with respect to ownership or sale of any Eligible Receivables in the Accounts in the Pool of Accounts or the Securities, or federal or other income taxes arising out of distributions or receipt of payment on the Securities, or any fees or other compensation payable to any such Person) and costs and expenses in defending against the same; (ii) The Servicer shall indemnify, defend and hold harmless the Indenture Trustee, the Owner Trustee, the Issuer and the Securityholders from and against any and all costs, expenses, losses, claims, damages and liabilities to the extent that such cost, expense, loss, claim, damage or liability arose out of, or was imposed upon the Indenture Trustee, the Owner Trustee, the Issuer or the Securityholders through the negligence, wilful misfeasance or bad faith of the Servicer in the performance of its duties under this Agreement, the Pooling and Servicing Agreement, the Indenture or the Trust Agreement or by reason of reckless disregard of its obligations and duties under this Agreement, the Pooling and Servicing Agreement, the Indenture or the Trust Agreement; and (iii) The Servicer shall indemnify, defend and hold harmless the Indenture Trustee and the Owner Trustee, and their respective agents and servants, from and against all costs, expenses, losses, claims, damages and liabilities arising out of or incurred in connection with (x) in the case of the Owner Trustee, the Indenture Trustee's performance of its duties under the Indenture, (y) in the case of the Indenture Trustee, the Owner Trustee's performance of its duties under the Trust Agreement or (z) the acceptance, administration or performance by, or action or inaction of, the Indenture Trustee or the Owner Trustee, as applicable, of the trusts and duties contained in this Agreement, the Basic Documents, the Indenture (in the case of the Indenture Trustee), including the administration of the Owner Trust Estate, and the Trust Agreement (in case of the Owner Trustee), including the administration of the Trust Estate, except in each case to the extent that such cost, expense, loss, claim, damage or liability: (A) is due to the wilful misfeasance, bad faith or negligence (except for errors in judgment) of the Person seeking to be indemnified, (B) to the extent otherwise payable to the Indenture Trustee, arises from the Indenture Trustee's breach of any of its representations or warranties in Section 6.13 of the Indenture, (C) to the extent otherwise payable to the Owner Trustee, arises from the Owner Trustee's breach of any of its representations or warranties set forth in Section 6.6 of the Trust Agreement or (D) shall arise out of or be incurred in connection with the performance by the Indenture Trustee of the duties of successor Servicer hereunder. (b) Indemnification under this Section 7.1 shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation. If the Servicer has made any indemnity payments pursuant to this Section 7.1 and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts collected to the Servicer, without interest. SECTION 7.2 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer. Any Person (a) into which the Servicer may be merged or consolidated, (b) resulting from any merger, conversion or consolidation to which the Servicer shall be a party, (c) succeeding to the business of the Servicer or (d) more than 50% of the voting interests of which is owned, directly or indirectly, by ______________________ and which is otherwise servicing dealer receivables, which Person in any of the foregoing cases (other than the Servicer as the surviving entity of any such merger or consolidation) executes an agreement of assumption to perform every obligation of the Servicer under this Agreement and the Pooling and Servicing Agreement, shall be the successor to the Servicer under this Agreement and the Pooling and Servicing Agreement without the execution or filing of any document or any further act on the part of any of the parties to this Agreement, anything in this Agreement or in the Pooling and Servicing Agreement to the contrary notwithstanding. The Servicer shall provide notice of any merger, consolidation or succession pursuant to this Section 7.2 to the Rating Agencies. SECTION 7.3 Limitation on Liability of Servicer and Others. (a) Neither the Servicer nor any of the directors, officers, employees or agents of the Servicer in its capacity as such shall be under any liability to the Issuer, the Indenture Trustee, the Owner Trustee, the Securityholders or any other Person, except as specifically provided in this Agreement and in the Pooling and Servicing Agreement, for any action taken or for refraining from the taking of any action pursuant to the Basic Documents or for errors in judgment; provided, however, that this provision shall not protect the Servicer or any such Person against any liability that would otherwise be imposed by reason of wilful misfeasance, bad faith or negligence (except errors in judgment) in the performance of duties or by reason of reckless disregard of obligations and duties under the Basic Documents. The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on the advice of counsel or on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under the Basic Documents. (b) The Servicer and any director, officer or employee of the Servicer shall be reimbursed by the Owner Trustee for any contractual damages, liability or expense (including, without limitation, any obligation of the Servicer to the Indenture Trustee pursuant to subsection 7.1(a)(iii)(y) or (z)) incurred by reason of the Owner Trustee's wilful misfeasance, bad faith or negligence (except errors in judgment) in the performance of such trustee's duties under this Agreement or the Trust Agreement or by reason of reckless disregard of its obligations and duties under such agreements. (c) Except as provided in this Agreement or in the Pooling and Servicing Agreement, the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its duties to service the Receivables arising under the Accounts in the Pool of Accounts in accordance with this Agreement and the Pooling and Servicing Agreement and that in its opinion may cause it to incur any expense or liability; provided, however, that the Servicer may undertake any reasonable action that it may deem necessary or desirable in respect of the Basic Documents and the rights and duties of the parties to the Basic Documents and the interests of the Securityholders under the Basic Documents. In such event, the legal expenses and costs for such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust and the Servicer shall be entitled to be reimbursed therefor. (d) The Applicable Trustee shall distribute out of the Collection Account on a Monthly Distribution Date any amounts permitted for reimbursement pursuant to subsection 7.3(c) not therefor reimbursed; provided, however, that the Applicable Trustee shall not distribute such amounts if the amount on deposit in the Reserve Fund (after giving effect to all withdrawals pursuant to Section 4.5, on such Monthly Distribution Date) is less than the Reserve Fund Required Amount. SECTION 7.4 Delegation of Duties. So long as ______________________ acts as Servicer, the Servicer may, at any time without notice or consent, delegate any duties under this Agreement or under the Pooling and Servicing Agreement to any Person more than 50% of the voting interests of which is owned, directly or indirectly, by ______________________. The Servicer may at any time perform specific duties as Servicer through sub-contractors who are in the business of servicing dealer floor plan automotive or similar receivables; provided, however, that no such delegation shall relieve the Servicer of its responsibility with respect to such duties. SECTION 7.5 Servicer Not to Resign. Subject to the provisions of Section 7.2, the Servicer shall not resign from the obligations and duties imposed on it by this Agreement and the Pooling and Servicing Agreement as Servicer except upon determination that the performance of its duties under this Agreement or under the Pooling and Servicing Agreement, as the case may be, is no longer permissible under applicable law. Any such determination permitting the resignation of the Servicer shall be evidenced by an Opinion of Counsel to such effect delivered to the Indenture Trustee and the Owner Trustee. No such resignation shall become effective until the Indenture Trustee or a successor servicer shall have assumed the responsibilities and obligations of the Servicer under the Basic Documents in accordance with Section 7.2. ARTICLE VIII DEFAULT SECTION 8.1 Servicing Defaults. Each of the following shall constitute a "Servicing Default": (a) any failure by the Servicer to deliver to the Indenture Trustee for deposit in any of the Designated Accounts or to the Owner Trustee for deposit in the Certificate Distribution Account any required payment or to direct the Indenture Trustee or the Owner Trustee to make any required distribution therefrom, which failure continues unremedied for a period of five Business Days after written notice is received by the Servicer from the Indenture Trustee or the Owner Trustee or after discovery of such failure by an officer of the Servicer; (b) any failure on the part of the Servicer duly to observe or perform in any material respect any other covenant or agreement of the Servicer set forth in this Agreement, the Pooling and Servicing Agreement, the Indenture or the Trust Agreement, which failure (i) materially and adversely affects the rights of Securityholders and (ii) continues unremedied for a period of 90 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Indenture Trustee or the Owner Trustee, or to the Servicer, the Indenture Trustee and the Owner Trustee by Noteholders whose Notes evidence not less than 25% of the Outstanding Amount of the Notes as of the close of the preceding Monthly Distribution Date or by Certificateholders whose Certificates evidence not less than 25% of the Voting Interests as of the close of the preceding Monthly Distribution Date or after discovery of such failure by an officer of the Servicer; (c) any representation, warranty or certification made by the Servicer in this Agreement or in any certificate delivered pursuant to this Agreement proves to have been incorrect when made and such inaccuracy has a material adverse effect on the rights of the Securityholders and such material adverse effect continues for a period of 60 days after the date on which written notice thereof, requiring the same to be remedied, shall have been given to the Servicer by the Indenture Trustee or the Owner Trustee; or (d) the entry of a decree or order by a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver or liquidator for the Servicer, in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding up or liquidation of their respective affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or (e) the consent by the Servicer 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 Seller or the Servicer or of or relating to substantially all of their respective property; or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency, bankruptcy or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of all or substantially all of its obligations. Notwithstanding the foregoing, there shall be no Servicing Default where a Servicing Default would otherwise exist due to a delay in or failure of performance under Section 8.1(a) for a period of 10 Business Days, or under Section 8.1(b) or (c) for a period of 60 days, if the delay or failure giving rise to such Servicing Default was caused by an act of God or the public enemy, acts of declared or undeclared war, public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods or similar causes. The preceding sentence shall not relieve the Servicer from using its best efforts to perform its obligations in a timely manner in accordance with the terms of this Agreement and the Pooling and Servicing Agreement and the Servicer shall provide the Indenture Trustee, the Owner Trustee, the Seller and the Securityholders with prompt notice of such failure or delay by it, together with a description of its efforts so to perform its obligations. The Servicer shall immediately notify the Indenture Trustee and the Owner Trustee in writing of any Servicing Default. SECTION 8.2 Consequences of a Servicing Default. If a Servicing Default shall occur and be continuing, either the Indenture Trustee or the Noteholders whose Notes evidence not less than a majority of the Outstanding Amount attributable to such Notes as of the close of the preceding Monthly Distribution Date (or, if the Notes have been paid in full and the Indenture has been discharged with respect thereto, the Owner Trustee or Certificateholders whose Certificates evidence not less than a majority of the Voting Interests as of the close of the preceding Monthly Distribution Date), by notice then given in writing to the Servicer and the Owner Trustee and to the Indenture Trustee if given by the Noteholders or the Certificateholders) may terminate all, but not less than all, of the rights and obligations (other than its obligations that have accrued up to the time of such termination) of the Servicer under this Agreement and the Pooling and Servicing Agreement. On or after the receipt by the Servicer of such written notice, all authority and power of the Servicer under this Agreement and the Pooling and Servicing Agreement, whether with respect to the Notes, the Certificates, the Accounts in the Pool of Accounts, the related Receivables (including those held by the Trust and those retained by the Original Seller) or otherwise, shall pass to and be vested in the Indenture Trustee pursuant to and under this Section 8.2. The Indenture Trustee is hereby authorized and empowered (upon the failure of the Servicer to cooperate) to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of the Receivables arising under the Accounts in the Pool of Accounts and related documents, or otherwise. The Servicer agrees to cooperate with the Indenture Trustee and the Owner Trustee in effecting the termination of the responsibilities and rights of the Servicer under this Agreement and the Pooling and Servicing Agreement, including, without limitation, the transfer to the Indenture Trustee or the Owner Trustee for administration by it of all Collections that shall at the time be held by the Servicer for deposit, or that shall have been deposited by the Servicer in the Collection Account, the Term Note Distribution Account, the Revolver Distribution Account, the Certificate Distribution Account or any other Designated Account or thereafter received with respect to the Receivables in the Accounts in the Pool of Accounts that shall at that time be held by the Servicer. In addition to any other amounts that are then payable to the Servicer under this Agreement, the Servicer shall be entitled to receive from the successor Servicer, as described in Section 8.6, reimbursements for any outstanding Servicer Advances made during the period prior to the notice pursuant to this Section 8.2 which terminates the obligation and rights of the Servicer under this Agreement. To the extent that compliance with this Section 8.2 shall require the Servicer to disclose to the successor Servicer information of any kind which the Servicer reasonably deems to be confidential, the successor Servicer shall be required to enter into such customary licensing and confidentiality agreements as the Servicer shall deem necessary to protect its interest. SECTION 8.3 Indenture Trustee to Act; Appointment of Successor. (a) On and after the time the Servicer receives a notice of termination pursuant to Section 8.2, the Indenture Trustee shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the Pooling and Servicing Agreement and the transactions set forth or provided for in this Agreement and the Pooling and Servicing Agreement, and shall be subject to all the responsibilities, restrictions, duties and liabilities relating thereto placed on the Servicer by the terms and provisions of this Agreement and the Pooling and Servicing Agreement. As compensation therefor, the Indenture Trustee shall be entitled to such compensation (whether payable out of the Collection Account or otherwise) as the Servicer would have been entitled to under this Agreement if no such notice of termination had been given. Notwithstanding the above, the Indenture Trustee may, if it is unwilling to so act, or shall, if it is legally unable so to act, appoint, or petition a court of competent jurisdiction for the appointment of, a successor (i) having a net worth of not less than $100,000,000, (ii) a long-term unsecured debt rating from Moody's of at least Baa3 (unless such requirement is expressly waived by Moody's) and (iii) whose regular business includes the servicing of dealer floor plan automotive receivables, as the successor to the Servicer under this Agreement and the Pooling and Servicing Agreement in the assumption of all or any part of the responsibilities, duties or liabilities of the Servicer under this Agreement and the Pooling and Servicing Agreement (except that such successor shall not be liable for any liabilities incurred by any predecessor Servicer). Any successor to the Servicer shall automatically agree to be bound by the terms and provisions of any Specified Support Arrangement. In connection with such appointment and assumption, the Indenture Trustee may make such arrangements for the compensation of such successor out of Collections as it and such successor shall agree; provided, however, that no such compensation shall be in excess of that permitted the Servicer under this Agreement and the Pooling and Servicing Agreement. The Indenture Trustee and such successor shall take such action, consistent with this Agreement and the Pooling and Servicing Agreement, as shall be necessary to effectuate any such succession. (b) All authority and power granted to any successor Servicer under this Agreement shall automatically cease and terminate upon termination of the Trust pursuant to Section 7.1 of the Trust Agreement, and shall pass to and be vested in the Seller and, without limitation, the Seller is hereby authorized and empowered to execute and deliver, on behalf of the successor Servicer, as attorney-in-fact or otherwise, all documents and other instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights. The successor Servicer agrees to cooperate with the Seller in effecting the termination of the responsibilities and rights of the successor Servicer under this Agreement and the Pooling and Servicing Agreement. The successor Servicer shall transfer to the Seller its electronic records relating to the Accounts and the Receivables serviced hereunder in such electronic form as the Seller may reasonably request and shall transfer to the Seller all other records, correspondence and documents in the manner and at such times as the Seller shall reasonably request. To the extent that compliance with this Section 8.3 shall require the successor Servicer to disclose to the Seller information of any kind which the successor Servicer deems to be confidential, the Seller shall be required to enter into such customary licensing and confidentiality agreements as the successor Servicer shall deem necessary to protect its interests. SECTION 8.4 Notification to Securityholders. Upon any termination of, or appointment of a successor to, the Servicer pursuant to this Article VIII, the Indenture Trustee shall give prompt written notice thereof to the Term Noteholders, the Revolving Noteholders, the Rating Agencies and the Owner Trustee shall give prompt written notice thereof to the Certificateholders. SECTION 8.5 Waiver of Past Defaults. Noteholders whose Notes evidence not less than a majority of the Outstanding Amount of the Notes as of the close of the preceding Monthly Distribution Date (or, if all of the Notes have been paid in full and the Indenture has been discharged in accordance with its terms, Certificateholders whose Certificates evidence not less than a majority of the Voting Interests as of the close of the preceding Monthly Distribution Date) voting as a single class, may, on behalf of all Securityholders, waive any default by the Servicer in the performance of its obligations hereunder and under the Pooling and Servicing Agreement and its consequences, except a Servicing Default under Section 8.1(a) of this Agreement. Upon any such waiver of a past default, such default shall cease to exist, and any Servicing Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement and the Pooling and Servicing Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 8.6 Repayment of Advances. If the identity of the Servicer shall change, the predecessor Servicer shall be entitled to receive, to the extent of available funds, reimbursement for Servicer Advances in the manner specified in Section 4.5, with respect to all previously unreimbursed Servicer Advances made by such predecessor Servicer prior to the reimbursement of any Servicer Advances made by the successor Servicer. ARTICLE IX EARLY AMORTIZATION EVENTS; TERMINATION SECTION 9.1 Early Amortization Events. If any one of the following events shall occur: (a) an Insolvency Event with respect to the Seller or the Servicer (or the Original Seller, if it is not the Servicer); (b) ______________________ shall file a petition commencing a voluntary case under any chapter of the Federal bankruptcy laws; or ______________________ shall file a petition or answer or consent seeking reorganization, arrangement, adjustment or composition under any other similar applicable Federal law, or shall consent to the filing of any such petition, answer or consent; or ______________________ shall appoint, or consent to the appointment of, a custodian, receiver, liquidator, trustee, assignee, sequestrator or other similar official in bankruptcy or insolvency of it or of any substantial part of its property; or ______________________ shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due; (c) any order for relief against ______________________ shall have been entered by a court having jurisdiction in the premises under any chapter of the Federal bankruptcy laws, and such order shall have continued undischarged or unstayed for a period of 60 days; or a decree or order by a court having jurisdiction in the premises shall have been entered approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of ______________________ under any other similar applicable Federal law, and such decree or order shall have continued undischarged or unstayed for period of 120 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a custodian, receiver, liquidator, trustee, assignee, sequestrator or other similar official in bankruptcy or insolvency of ______________________ or of any substantial part of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have remained in force undischarged or unstayed for a period of 120 days; (d) failure on the part of the Seller, the Servicer or the Original Seller, as applicable, (i) to pay (or set aside for payment) pursuant to Section 4.5(d)(ii), (iii) and (iv) all amounts required to be paid as principal on any Notes or distributed as Certificate Balance on any Certificates on the applicable Stated Final Payment Date; (e) failure on the part of the Seller, the Servicer or the Original Seller, as applicable, to duly observe or perform in any material respect any other covenants or agreements of the Seller, the Servicer or the Original Seller, as the case may be, set forth in this Agreement or the Pooling and Servicing Agreement, which failure continues unremedied for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given by the Indenture Trustee or the Owner Trustee to the Seller, provided, however, that no Early Amortization Event shall be deemed to occur if the Receivables affected by such failure are repurchased by the Seller or the Servicer or the Original Seller (if the Original Seller is not the Servicer), as applicable, in accordance with the Basic Documents; (f) any representation or warranty made by the Original Seller in the Pooling and Servicing Agreement or the Seller in this Agreement or any information contained on the Schedule of Accounts, (i) shall prove to have been incorrect in any material respect when made or when delivered, and shall continue to be incorrect in any material respect for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Indenture Trustee or the Owner Trustee and (ii) as a result of such incorrectness the interests of the Securityholders are materially and adversely affected, provided, however, that no Early Amortization Event shall be deemed to occur if the Receivables relating to such representation or warranty are repurchased by the Original Seller or the Seller, as applicable, in accordance with the Basic Documents; (g) on any Monthly Distribution Date, the average of the Monthly Payment Rates for the three preceding Collection Periods is less than 25%; (h) on any three consecutive Monthly Distribution Dates, the amount on deposit in the Reserve Fund is less than the Reserve Fund Required Amount; (i) on any Monthly Distribution Date, as of the last day of the related Collection Period, the aggregate principal balance of Receivables owned by the Trust which were advanced against Used Vehicles exceeded 20% of the Daily Trust Balance (for purposes of this clause (i), ______________________ vehicles that are sold to daily rental car operations, repurchased pursuant to ______________________ repurchase agreements and subsequently sold at auction to a ______________________-franchised dealer shall not be considered to be Used Vehicles); (j) a notice setting forth one or more Events of Default under the Indenture and declaring the unpaid principal amount of Outstanding Notes (together with accrued and unpaid interest thereon) immediately due and payable has been given pursuant to Section 5.2(a) of the Indenture; provided, however, that if no other Early Amortization Event has occurred and is continuing and so long as the Scheduled Revolving Period Termination Date has not occurred, if the Seller so elects, the Early Amortization Period resulting from such occurrence shall terminate and the Revolving Period (and, if the Seller so elects, any then occurring Payment Periods if and to the extent set forth in the related Officer's Issuance Certificate) shall recommence if a notice rescinding and annulling such declaration has been given pursuant to the Indenture; (k) on any Monthly Distribution Date, the Reserve Fund Required Amount for such Monthly Distribution Date exceeds the amount on deposit in the Reserve Fund by more than the Reserve Fund Trigger Amount; (l) on any Monthly Distribution Date, the average Daily Trust Balance is less than 75% of the sum of the average Outstanding Amount of the Term Notes and the average Certificate Balance (in each case, such average being determined over the six Collection Periods immediately preceding such Monthly Distribution Date (or, if shorter, the period from the Initial Closing Date through and including the last day of the immediately preceding Collection Period)); (m) except for a termination, amendment or modification of the terms of any Basis Swap or entry into any other Specified Support Arrangement in connection with the issuance of additional Securities, the payment in full of any series of Term Notes or a change in the Specified Maximum Revolver Balance or any Series Specified Maximum Revolver Balance so long as the conditions set forth in Section 4.9 for such issuance or change are satisfied, any Basis Swap or Specified Support Arrangement related to any Securities is terminated, revoked, withdrawn, rescinded or found by a court of competent jurisdiction to be unenforceable or an Insolvency Event with respect to a Basis Swap Counterparty; (n) on any Monthly Distribution Date, as of the last day of each of the two immediately preceding Collection Periods, the aggregate principal balance of all Available Receivables is less than 70% of the aggregate principal balance of all Receivables (including Receivables included in the Retained Property) in the Accounts in the Pool of Accounts; or (o) any other Early Amortization Event set forth in the Officer's Issuance Certificate related to any series of Notes; then, subject to applicable law, and after the applicable grace period, if any, an amortization event (an "Early Amortization Event") shall occur without any notice or other action on the part of any party immediately upon the occurrence of such event. SECTION 9.2 Insolvency Events. (a) Upon any sale, disposition or other liquidation of the assets of the Trust pursuant to Article V of the Indenture, the Servicer shall instruct the Indenture Trustee to deposit into the Collection Account the amounts specified in Section 5.4(b) of the Indenture (the "Insolvency Proceeds"). The Servicer shall determine conclusively the amount of the Insolvency Proceeds which are deemed to be Trust Interest Collections and Trust Principal Collections. The Insolvency Proceeds shall be allocated and distributed to the Securityholders in accordance with Article IV on the next Monthly Distribution Date and the Trust (if not already so terminated) and the Trust Agreement shall terminate as provided in Section 7.1 of the Trust Agreement. (b) Subject to Section 6.1(b), any investments on deposit in any of the ______________________ Reserve Funds which shall not mature on or before such Monthly Distribution Date shall be sold by the Indenture Trustee at such time as shall result in the Indenture Trustee receiving the proceeds from such sale not later than the day immediately preceding such Monthly Distribution Date. Any Insolvency Proceeds remaining after the deposits described above shall be paid to the Seller. SECTION 9.3 Optional Purchase by the Servicer. At any time from and after the time that, (a) the Daily Trust Balance is less than or equal to 10% of an amount equal to the highest sum, on any date since the Initial Closing Date, of the Daily Trust Balance plus the Cash Collateral Amount plus the total of amounts on deposit in the Cash Accumulation Accounts and the Term Note Distribution Account (all such amounts being calculated as of the close of business on such day), and (b) either (i) there are no Term Notes then outstanding or (ii) the Wind Down Period is then in effect, the Servicer shall have the option to purchase, as of the last day of any Collection Period, the assets of the Trust other than the Designated Accounts and the Certificate Distribution Account. To exercise such option, with respect to any Collection Period, the Servicer shall deposit in the Collection Account an amount equal to the aggregate Administrative Purchase Payments for the Receivables (including Defaulted Receivables) held by the Trust on the last day of such Collection Period, plus the appraised value of any such other property held by the Trust, such value to be determined by an appraiser mutually agreed upon by the Servicer, the Owner Trustee and the Indenture Trustee (such amount will not be less than the outstanding principal balance and unpaid interest on all Notes). Thereupon, the Servicer shall succeed to all interests in and to the assets of the Trust (other than the Designated Accounts and the Certificate Distribution Account) and the Trust shall assign all such interest to the Servicer. The amount so paid to the Trust shall be treated as Trust Principal Collections received during such Collection Period to the extent of the principal portion of the aggregate Administrative Purchase Payment so paid, with the remainder being treated as Trust Interest Collections received during such Collection Period. SECTION 9.4 Termination. Notice of any termination of the Trust and the Trust Agreement shall be given by the Servicer to the Owner Trustee and the Indenture Trustee as soon as practicable after the Servicer has received notice thereof. Following the satisfaction and discharge of the Indenture and the payment in full of principal and interest on the Term Notes and the Revolving Notes, the Certificateholders shall succeed to the rights of the Term Noteholders and the Revolving Noteholders hereunder and the Owner Trustee shall succeed to the rights of, and assume the obligations of, the Indenture Trustee pursuant to this Agreement (subject to the continuing obligations of the Indenture Trustee set forth in Section 4.4 of the Indenture). After payment to the Indenture Trustee, the Owner Trustee, the Securityholders (including any deposit into the Distribution Accounts for the benefit of the Securityholders) and the Servicer of all amounts required to be paid (or so deposited) under this Agreement, the Indenture and the Trust Agreement, any amounts on deposit in each of the ______________________ Reserve Funds and the Collection Account (after all other distributions required to be made from each of the ______________________ Reserve Funds have been made and all distributions to the Original Seller on account of the Retained Property have been made) and any other assets of the Trust, including any Receivables held by the Trust, shall be paid and delivered to the Seller and this Agreement (except for Section 7.1) shall be terminated. SECTION 9.5 Recommencement of Revolving Period. (a) If an Early Amortization Event described in Section 9.1(i), (j) or (l) has occurred with the result that the Revolving Period has terminated and the Early Amortization Period has commenced, the Seller may nonetheless elect to terminate the Early Amortization Period and recommence the Revolving Period, but only if (i) such recommencement begins no later than the first anniversary of the termination of the Revolving Period; (ii) as of the date of recommencement, if the event giving rise to such Early Amortization Event was Section 9.1(i) or (l), such event was not reoccurring on each of the three Monthly Distribution Dates immediately preceding the date of recommencement or, if the event giving rise to such Early Amortization Event was Section 9.1(j), the provisions of the proviso thereof have been satisfied; (iii) the Final Revolving Period Termination Date has not occurred; (iv) the long term debt obligations of the Original Seller are rated at least "Baa3" by Moody's; (v) the Reserve Fund Funding Condition is satisfied; and (vi) after giving effect to all issuances of Securities and all changes in the Specified Maximum Revolver Balance on the date of the recommencement, the quotient of (A) the outstanding Certificate Balance of all outstanding Certificates over (B) the Maximum Pool Balance shall equal or exceed the Specified Certificate Percentage. Written notice of such election to recommence the Revolving Period must be given to the Servicer, the Owner Trustee, the Indenture Trustee and the Rating Agencies at least ten Business Days prior to the proposed date of recommencement. (b) If the Revolving Period has terminated and the Wind Down Period has commenced prior to the Final Revolving Period Termination Date, the Seller may nonetheless elect to terminate the Wind Down Period and recommence the Revolving Period, but only if (i) such recommencement begins no later than the first anniversary of the termination of the Revolving Period; (ii) if an Early Amortization Event has occurred, the Revolving Period was or on or before the recommencement date will be recommenced in accordance with Section 9.5(a); (iii) the Final Revolving Period Termination Date has not occurred; (iv) the Reserve Fund Funding Condition is satisfied; and (v) after giving effect to all issuances of securities and all changes in the Specified Maximum Revolver Balance on the date of the recommencement, the quotient of (A) the outstanding Certificate Balance of all outstanding ______________________ Certificates over (B) the Maximum Pool Balance shall equal or exceed the Specified Certificate Percentage. Written notice of such election to recommence the Revolving Period must be given to the Servicer, the Owner Trustee, the Indenture Trustee and the Rating Agencies at least ten Business Days prior to the proposed date of recommencement. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1 Amendment. (a) This Agreement may be amended by the Seller, the Servicer and the Owner Trustee with the consent of the Indenture Trustee, but without the consent of any of the Securityholders, (i) to cure any ambiguity, (ii) to correct or supplement any provision in this Agreement that may be defective or inconsistent with any other provision in this Agreement or any other Basic Documents, (iii) to add or supplement any Specified Support Arrangement for the benefit of any Securityholders (provided that if any such addition shall affect any series or class of Securityholders differently than any other series or class of Securityholders, then such addition shall not, as evidenced by an Opinion of Counsel, materially and adversely affect in any material respect the interests of any series or class of Securityholders), (iv) to add to the covenants, restrictions or obligations of the Seller, the Servicer, the Owner Trustee or the Indenture Trustee for the benefit of the Securityholders, (v) to add provisions to or delete or modify the existing provisions of this Trust Sale and Servicing Agreement as appropriate to allow the Trust to issue foreign currency-denominated Notes, including without limitation adding provisions granting rights under this Trust Sale and Servicing Agreement to counterparties of the currency swaps that may be entered into in connection with the issuance of such foreign currency-denominated Notes, or (vi) to add, change or eliminate any other provision of this Agreement in any manner that shall not, as evidenced by an Opinion of Counsel, materially and adversely affect the interests of the Securityholders. (b) This Agreement may also be amended from time to time by the Seller, the Servicer and the Owner Trustee with the consent of the Indenture Trustee, the consent of Noteholders whose Notes evidence not less than a majority of the Outstanding Amount of the Notes as of the close of the preceding Monthly Distribution Date and the consent of Certificateholders whose Certificates evidence not less than a majority of the Voting Interests as of the close of the preceding Monthly Distribution Date (which consent, whether given pursuant to this Section 10.1 or pursuant to any other provision of this Agreement, shall be conclusive and binding on such Person and on all future holders of such Security and of any Security issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made upon the Security) 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 Securityholders; provided, however, that no such amendment shall (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, distributions or payments that shall be required to be made on any Security without the consent of the holder thereof (it being understood that the issuance of any Securities after the Initial Closing Date as contemplated by this Agreement, the Indenture and the Trust Agreement and the specification of the terms and provisions thereof pursuant to an Officer's Issuance Certificate (with respect to any Notes) or a Certificate Issuance Order (with respect to any Certificates) shall not be deemed to have such effect for purposes hereof), (ii) adversely affect the rating of any series or class of Securities by any Rating Agency without the consent of the holders of two-thirds of the Outstanding Amount of such series of Notes or the Voting Interests of such class of Certificates, as appropriate, or (iii) reduce the aforesaid percentage required to consent to any such amendment, without the consent of such aforesaid percentage of Securityholders. (c) Prior to the execution of any such amendment, supplement or consent, the Servicer shall furnish written notification of the substance of such amendment or consent to the Rating Agencies. (d) Promptly after the execution of any such amendment, supplement or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to each Securityholder. (e) It shall not be necessary for the consent of Securityholders pursuant to subsection 10.1(b) to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Securityholders provided for in this Agreement or in any other Basic Document) and of evidencing the authorization of the execution thereof by Securityholders shall be subject to such reasonable requirements as the Indenture Trustee or the Owner Trustee may prescribe, including the establishment of record dates pursuant to paragraph number 2 of the Depository Agreements. (f) Prior to the execution of any amendment to this Agreement, the Indenture Trustee and the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and the Opinion of Counsel referred to in subsection 10.2(i). The Indenture Trustee and the Owner Trustee may, but shall not be obligated to, enter into any such amendment which affects such trustee's own rights, duties or immunities under this Agreement or otherwise. (g) Each of the Original Seller and the Seller agrees that such Person shall not amend or agree to any amendment of the Pooling and Servicing Agreement unless such amendment would be permissible under the terms of this Section 10.1 as if this Section 10.1 were contained in the Pooling and Servicing Agreement. SECTION 10.2 Protection of Title to the Owner Trust Estate. (a) The Seller or the Servicer or both shall execute and file such financing statements and cause to be executed and filed such continuation statements or other statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Securityholders, the Indenture Trustee and the Owner Trustee hereunder in the Receivables in the Accounts in the Pool of Accounts and the related Collateral Security and in the proceeds thereof (including, without limitation, the filing of UCC-1 financing statements on or prior to the Initial Closing Date). The Seller or the Servicer or both shall deliver (or cause to be delivered) to the Indenture Trustee and the Owner Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. The Seller agrees to use reasonable efforts to cause the Original Seller to comply with its obligations under Section 7.02 of the Pooling and Servicing Agreement. (b) Within 60 days after the Seller or the Servicer make any change in its name, identity or corporate structure that would make any financing statement or continuation statement filed in accordance with paragraph (a) above seriously misleading within the meaning of Section 9-402(7) of the UCC, the Seller or the Servicer as applicable shall give the Indenture Trustee and the Owner Trustee notice of any such change. (c) Each of the Seller and the Servicer shall give the Indenture Trustee and the Owner Trustee at least 60 days prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement. The Servicer shall at all times maintain each office from which it services Receivables arising under the Accounts in the Pool of Accounts and its principal executive office within the United States of America. (d) The Servicer shall maintain accounts and records as to each Eligible Receivable arising under an Account in the Pool of Accounts accurately and in sufficient detail to permit (i) the reader thereof to know at any time the status of such Receivable, including payments and recoveries made and payments owing (and the nature of each) and (ii) reconciliation between payments or recoveries on (or with respect to) each such Receivable and the amounts from time to time deposited in the Collection Account. (e) In connection with the sale and transfer hereunder of the Receivables in the Accounts in the Pool of Accounts and the related Collateral Security from the Seller to the Trust, the Seller shall, at its own expense, on or prior to the Initial Closing Date, in the case of the Initial Accounts, and on or prior to the applicable Addition Date, in the case of Additional Accounts, (i) indicate in its computer files and cause the Original Seller to indicate in its computer files as required by the Pooling and Servicing Agreement, that the Eligible Receivables in the Accounts in the Pool of Accounts have been sold and transferred, and the Collateral Security assigned, to the Seller pursuant to the Pooling and Servicing Agreement and that such property has been sold and transferred to the Trust pursuant to this Agreement for the benefit of the Securityholders and (ii) deliver (or cause the Original Seller to deliver) a true and complete list of all such Accounts to the Owner Trustee specifying for each such Account, as of the Initial Cut-Off Date, in the case of the Initial Accounts, and as of the applicable Additional Cut-Off Date, in the case of Additional Accounts, its account number and the outstanding principal balance of Eligible Receivables in such Account. Such list, as supplemented from time to time to reflect Additional Accounts, Selected Accounts and Removed Accounts (including Accounts removed as described in Section 2.9), shall be the Schedule of Accounts to this Agreement and is hereby incorporated into and made a part of this Agreement. The Owner Trustee shall be under no obligation whatsoever to verify the accuracy or completeness of the information contained in the Schedule of Accounts from time to time. (f) If at any time the Seller or the Servicer proposes to sell, grant a security interest in, or otherwise transfer any interest in dealer floor plan automotive receivables to any prospective purchaser, lender or other transferee, the Servicer shall give to such prospective purchaser, lender or other transferee computer tapes, records or print-outs (including any restored from back-up archives) that, if they refer in any manner whatsoever to any Eligible Receivable arising under an Account in the Pool of Accounts indicate clearly that an interest in such Receivable has been sold and is owned by the Issuer. (g) The Servicer shall permit the Indenture Trustee and the Owner Trustee and their respective agents at any time to inspect, audit and make copies of and abstracts from the Servicer's records regarding any Receivable then or previously included in the Owner Trust Estate. (h) The Servicer shall furnish to the Indenture Trustee and the Owner Trustee at any time upon request a list of all Accounts then included in the Pool of Accounts, together with a reconciliation of such list to the Schedule of Accounts as initially furnished hereunder and to each notice furnished before such request indicating removal from or addition to the Accounts in the Pool of Accounts. Upon request, the Servicer shall furnish a copy of any such list to the Seller. The Indenture Trustee, the Owner Trustee and the Seller shall hold any such list and the Schedule of Accounts and a copy of the Pooling and Servicing Agreement, the Trust Sale and Servicing Agreement and the Indenture for examination by interested parties during normal business hours at their respective Corporate Trust Offices or, in the case of the Seller, at its office, located at the addresses set forth in Section 10.3. (i) The Servicer shall deliver to the Indenture Trustee and the Owner Trustee promptly after the execution and delivery of this Agreement and of each amendment or supplement hereto, an Opinion of Counsel either (a) stating that, in the opinion of such counsel, all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Indenture Trustee and the Owner Trustee in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (b) stating that, in the opinion of such counsel, no such action is necessary to preserve and protect such interest. (j) To the extent required by law, the Seller shall cause the Term Notes (other than any Unregistered Notes) to be registered with the Securities and Exchange Commission pursuant to Section 12(b) or Section 12(g) of the Exchange Act within the time periods specified in such sections. SECTION 10.3 Notices. All demands, notices and communications upon or to the Seller, the Servicer, the Indenture Trustee, the Owner Trustee or the Rating Agencies under this Agreement shall be delivered as specified in Appendix B hereto. SECTION 10.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF OR OF ANY OTHER JURISDICTION, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 10.5 Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed enforceable to the fullest extent permitted, and if not so permitted, 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 any of the Securities or rights of any Interested Parties. SECTION 10.6 Assignment. Notwithstanding anything to the contrary contained herein, this Agreement may not be assigned by the Seller without the prior written consent of Noteholders whose Notes evidence not less than 66% of the Outstanding Amount of the Notes as of the close of the preceding Monthly Distribution Date and of Certificateholders whose Certificates evidence not less than 66% of the Voting Interests as of the close of the preceding Monthly Distribution Date. The Seller shall provide notice of any such assignment to the Rating Agencies. SECTION 10.7 Third-Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the parties hereto, the Securityholders and their respective successors and permitted assigns. Except as otherwise provided in Section 7.1 or in this Article X, no other person shall have any right or obligation hereunder. SECTION 10.8 Counterparts. This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 10.9 Headings. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. SECTION 10.10 Assignment to Indenture Trustee. The Seller hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the Noteholders and (only to the extent expressly provided herein and in the Indenture) the Certificateholders of all right, title and interest of the Issuer in, to and under the Receivables and/or the assignment of any or all of the Issuer's rights and obligations hereunder to the Indenture Trustee. SECTION 10.11 No Petition Covenants. Notwithstanding any prior termination of this Agreement, the Servicer and the Seller shall not, prior to the date which is one year and one day after the final distribution with respect to the Securities to any of the Distribution Accounts, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Issuer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer. SECTION 10.12 Further Assurances. The Seller, the Owner Trustee and the Indenture Trustee agree to do and perform from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other more fully to effect the purposes of this Agreement, including the execution of any financing statements or continuation statements relating to the Accounts for filing under the provisions of the UCC of any applicable jurisdiction and to evidence the repurchase of any interest in any Receivable by the Original Seller, the Seller or the Servicer. SECTION 10.13 No Waiver; Cumulative Remedies. No failure or delay on the part of the Owner Trustee or the Indenture Trustee in exercising any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, power and privileges provided by law. SECTION 10.14 Merger and Integration. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived or supplemented except as provided herein. SECTION 10.15 Limitation of Liability of Indenture Trustee and Owner Trustee. (a) Notwithstanding anything contained herein to the contrary, this Agreement has been acknowledged and accepted by _______________________ not in its individual capacity but solely as Indenture Trustee and in no event shall ___________________have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer. For all purposes of this Agreement, in the performance of its duties or obligations hereunder, the Indenture Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Article VI of the Indenture. (b) Notwithstanding anything contained herein to the contrary, this Agreement has been executed by _______________________________ not in its individual capacity but solely in its capacity as Owner Trustee of the Issuer and in no event shall ______________________ in its individual capacity or, except as expressly provided in the Trust Agreement, as Owner Trustee of the Issuer have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer. For all purposes of this Agreement, in the performance of its duties or obligations hereunder or in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Article VI of the Trust Agreement. * * * * * IN WITNESS WHEREOF, the parties hereto have caused this Trust Sale and Servicing Agreement to be duly executed by their respective officers hereunto duly authorized as of the day and year first above written. ____________________________________, Issuer By: __________________________________not in its individual capacity but solely as Owner Trustee on behalf of the Trust By: __________________________________ Name: __________________________________ Title: __________________________________ ACE SECURITIES CORP., Seller By: __________________________________ Name: __________________________________ Title: __________________________________ ______________________________________________, SERVICER By: __________________________________ Name: __________________________________ Title: __________________________________ Acknowledged and Accepted: ____________________, not in its individual capacity but solely as Indenture Trustee, By: __________________________________ Name: __________________________________ Title: __________________________________ _________________________________, not in its individual capacity but solely as Owner Trustee, By: __________________________________ Name: __________________________________ Title: __________________________________ EXHIBIT A FORM OF ASSIGNMENT FOR THE INITIAL CLOSING DATE For value received, in accordance with the Trust Sale and Servicing Agreement, dated as of _________ (the "Trust Sale and Servicing Agreement"), between _____________________, a ________ corporation, as Servicer ("______"), ACE Securities Corp., a Delaware corporation (the "Seller"), and ______________________ (the "Trust"), the Seller does hereby sell, assign, transfer and otherwise convey unto the Trust, without recourse, all of its right, title and interest in, to and under (i) all of the Eligible Receivables existing in the Accounts listed in the Schedule of Accounts as of the close of business on the Initial Cut-Off Date and, so long as each such Account is included in the Pool of Accounts, all Eligible Receivables created or deemed created thereunder on each Receivables Purchase Date, all monies due or to become due thereon after the Initial Cut-Off Date or such Receivables Purchase Date, as appropriate, all Collateral Security with respect thereto and all amounts received with respect thereto, (ii) Article IV and Sections 3.04(c) and 6.03 of the Pooling and Servicing Agreement, dated as of _________, between the Original Seller and the Seller, with respect to such Receivables, (iii) the Custodian Agreement with respect to such Receivables and (iv) all proceeds of the foregoing (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries), in each case, as more fully described in the Trust Sale and Servicing Agreement. The foregoing sale, transfer, assignment and conveyance and any sales, transfers, assignments and conveyances subsequent to the date hereof do not constitute, and are not intended to result in, the creation or an assumption by the Trust of any obligation of the Seller, the Original Seller, ______________________ or any other Person in connection with the Accounts, the Receivables or under any agreement or instrument relating thereto, including any obligation to any Dealers. It is the intention of Seller and the Trust that the transfers and assignments contemplated by this Assignment, including transfers and assignments subsequent to the date hereof, shall constitute a sale of the property described herein and in the Pooling and Servicing Agreement from the Seller to the Trust and the beneficial interest in and title to such property shall not be part of the Seller's estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. This Assignment is made pursuant to and upon the representations, warranties and agreements on the part of the undersigned contained in the Trust Sale and Servicing Agreement and is to be governed by the Trust Sale and Servicing Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Trust Sale and Servicing Agreement. * * * * * IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly executed as of _____________. ACE SECURITIES CORP. By: __________________________________ Name: Title: EXHIBIT B LOCATIONS OF SCHEDULE OF ACCOUNTS The Schedule of Accounts is on file at the offices of: 1. The Indenture Trustee 2. The Owner Trustee 3. The Original Seller 4. ACE Securities Corp. EXHIBIT C FORM OF ASSIGNMENT FOR EACH ADDITION DATE For value received, in accordance with the Trust Sale and Servicing Agreement, dated as of ___________ (the "Trust Sale and Servicing Agreement"), between ____________________, a __________ corporation, as Servicer ("______________________"), ACE Securities Corp., a Delaware corporation (the "Seller") and ______________________ (the "Trust"), the Seller does hereby sell, assign, transfer and otherwise convey unto the Trust, without recourse, with respect to the Additional Accounts to which this Assignment relates, all of its right, title and interest in, to and under (i) all of the Eligible Receivables as of the close of business on the related Additional Cut-Off Date in such Additional Accounts and, so long as each such Account is included in the Pool of Accounts, all Eligible Receivables created or deemed created thereunder on each Receivables Purchase Date, all monies due or to become due thereon after such Additional Cut-Off Date or such Receivables Purchase Date, as appropriate, all Collateral Security with respect thereto and all amounts received with respect thereto, (ii) Article IV and Sections 3.04(c) and 6.03 of the Pooling and Servicing Agreement, dated as of ____________, between the Original Seller and the Seller, with respect to such Receivables, including the right of the Seller to cause the Original Seller to repurchase Receivables under certain circumstances, (iii) the Custodian Agreement with respect to such Receivables and (iv) all proceeds of the foregoing (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries), in each case as more fully described in the Trust Sale and Servicing Agreement. The foregoing sale, transfer, assignment and conveyance and any sales, transfers, assignments and conveyances subsequent to the date hereof do not constitute, and are not intended to result in, the creation or an assumption by the Trust of any obligation of the Seller, the Original Seller, ______________________ or any other Person in connection with the Accounts, the Receivables or under any agreement or instrument relating thereto, including any obligation to any Dealers. It is the intention of the Seller and the Trust that the transfers and assignments contemplated by this Assignment, including transfers and assignments subsequent to the date hereof, shall constitute a sale of the property described herein and the Pooling and Servicing Agreement from the Seller to the Trust and the beneficial interest in and title to such property shall not be part of the Seller's estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. This Assignment is made pursuant to and upon the representations, warranties and agreements on the part of the undersigned contained in the Trust Sale and Servicing Agreement and is to be governed by the Trust Sale and Servicing Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Trust Sale and Servicing Agreement. * * * * * IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly executed as of _______________, _____. ACE SECURITIES CORP. By: __________________________________ Name: __________________________________ Title: __________________________________ EXHIBIT D FORM OF OPINION OF COUNSEL WITH RESPECT TO ADDITION OF ACCOUNTS Provision to be Included in Opinion of Counsel Delivered Pursuant to Section 2.7(b)(ix) of the Trust Sale and Servicing Agreement The opinion set forth below is subject to standard qualifications, assumptions, limitations and exceptions. Capitalized terms used but not defined herein are used as defined in the Trust Sale and Servicing Agreement dated as of ______________ among _______________, as servicer, ACE Securities Corp., as Seller (the "Seller"), and ______________________. The Assignment delivered on the Addition Date has been duly authorized, executed and delivered by the Seller, and constitutes the valid and legally binding obligation of the Seller, enforceable against the Seller in accordance with its terms. APPENDIX A PART I - DEFINITIONS All terms defined in this Appendix shall have the defined meanings when used in the Basic Documents, unless otherwise defined therein. ______________________ Certificate Basis Swap: The ______________________ Certificate Basis Swap dated as of the Initial Closing Date between the Trust and ______________________, as the Basis Swap Counterparty. ______________________ Certificates: The Floating Rate Asset Backed Certificates, Class ______________________ described in the Trust Agreement. Account: An individual line of credit or related lines of credit represented by a Floor Plan Financing Agreement extended or maintained by the Original Seller to a United States corporation or other Person located in the United States engaged generally in the business of purchasing Vehicles from a manufacturer or distributor thereof and holding such Vehicles for sale or lease in the ordinary course of business. Accountants' Report: The report described in Section 4.2 of the Trust Sale and Servicing Agreement. Accumulation Account: With respect to any series of Notes, an Eligible Deposit Account established and maintained by the Servicer with the Indenture Trustee, in the name of the Indenture Trustee, on behalf of the holders of such series of Notes, which shall constitute a Designated Account, and which shall have such additional terms and provisions as shall be set forth in the Officer's Issuance Certificate with respect to such series of Notes. ACE: ACE Securities Corp., a Delaware corporation. Act: An Act as specified in Section 11.3(a) of the Indenture. Actual/360 Day Count: (i) If applicable with respect to any series of Notes, the calculation method set forth as such in the relevant Officer's Issuance Certificate, and (ii) if applicable with respect to any class of Certificates, the calculation method set forth as such in the Trust Agreement or the relevant Certificate Issuance Order, as the case may be. Addition Date: The date as of which an Additional Account is added to the Pool of Accounts. Addition Notice: The notice specified in Section 2.7(a) of the Trust Sale and Servicing Agreement. Additional Account: An Account as described in Section 2.03(a) of the Pooling and Servicing Agreement to be included in the Pool of Accounts after the Initial Cut-Off Date. Additional Cut-Off Date: The date specified in the ______________________ Addition Notice described in Section 2.03(a) of the Pooling and Servicing Agreement. Additional Trust Principal: With respect to any Monthly Distribution Date, the amount, if any, of Available Trust Interest and funds in the Reserve Fund applied to cover the Trust Defaulted Amount or to cover unreimbursed Trust Charge-Offs on such Monthly Distribution Date. Administration Agreement: That certain Administration Agreement, dated as of the Initial Closing Date, among ______________________, as Administrator, the Issuer and the Indenture Trustee, as amended and supplemented from time to time. Administrative Purchase Payment: means: (i) the payment described in Section 3.04(d) of the Pooling and Servicing Agreement and (ii) any payment by the Servicer pursuant to Section 9.3 of the Trust Sale and Servicing Agreement (which payment, in the case of this clause (ii), shall equal the greater of (A) the amount computed as specified in Section 3.04 of the Pooling and Servicing Agreement with respect to the Receivables and (B) the outstanding principal balance and accrued and unpaid interest on all Notes on the related Monthly Distribution Date). Administrative Receivable: A Receivable described in Section 3.04(c) of the Pooling and Servicing Agreement. Administrator: ______________________ or any successor Administrator under the Administration Agreement. Affiliate: With respect to any specified Person, any other Person controlling, controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. Agency Office: The office of the Issuer maintained pursuant to Section 3.2 of the Indenture. Aggregate Certificateholders' Interest: With respect to any Monthly Distribution Date, an amount equal to the sum of (a) the Certificateholders' Interest for all classes of Certificates for such Monthly Distribution Date and (b) the Certificateholders' Interest Carryover Shortfall for the preceding Monthly Distribution Date. Aggregate Certificateholders' Principal: With respect to any Monthly Distribution Date, the lesser of (i) the excess, if any, of Available Trust Principal over the sum of the Aggregate Noteholders' Principal and the Required Revolver Payment and (ii) the outstanding Certificate Balance. Aggregate Certificateholders' Principal shall equal zero until the Outstanding Amount for all Notes shall have been paid (or provided for) in full, the obligations of the Trust to the Basis Swap Counterparty shall have been paid in full and either (x) such Monthly Distribution Date relates to the Wind Down Period or an Early Amortization Period or is the Targeted Final Distribution Date for the ______________________ Certificates or (y) the Servicer has exercised its option under Section 9.3 of the Trust Sale and Servicing Agreement. Aggregate Noteholders' Interest: With respect to any Monthly Distribution Date, the sum of the Noteholders' Interest for all series of Term Notes. Aggregate Noteholders' Principal: With respect to any Monthly Distribution Date, the sum of the amounts required to be paid (or set aside for payment in an Accumulation Account, or in the Term Note Distribution Account or otherwise) as principal on each series of Term Notes on such Monthly Distribution Date pursuant to the Indenture and the Trust Sale and Servicing Agreement. Aggregate Revolver Interest: With respect to any Monthly Distribution Date, the sum of (a) the Revolver Interest for all series of Revolving Notes for such Monthly Distribution Date and (b) the Revolver Interest Carryover Shortfall for the preceding Monthly Distribution Date. Aggregate Revolver Principal: With respect to any Monthly Distribution Date, the sum of the amounts required to be paid (or set aside for payment in an Accumulation Account, or in the Revolver Distribution Account or otherwise) as principal on each series of Revolving Notes on such Monthly Distribution Date pursuant to the Indenture and the Trust Sale and Servicing Agreement. Applicable Trustee: So long as the Outstanding Amount for any series of Term Notes or the Revolving Notes is greater than zero and the Indenture has not been discharged in accordance with its terms, the Indenture Trustee, and thereafter, the Owner Trustee. Auction Vehicles: Under the Original Seller's current practices and policies, Vehicles purchased at a closed auction conducted by ______________________ or others. Authentication Agent: With respect to a series of Notes, the authentication agent for such series of Notes acting on behalf of the Indenture Trustee designated as such by or pursuant to Section 2.1 of the Indenture. Authorized Officer: With respect to the Issuer, any officer of the Owner Trustee who is authorized to act for the Owner Trustee in matters relating to the Issuer and who is identified on the list of Authorized Officers delivered by the Owner Trustee to the Indenture Trustee on the Initial Closing Date (as such list may be modified or supplemented from time to time thereafter) and, so long as the Administration Agreement is in effect, any Vice President or more senior officer of the Administrator who is authorized to act for the Administrator in matters relating to the Issuer and to be acted upon by the Administrator pursuant to the Administration Agreement and who is identified on the list of Authorized Officers delivered by the Administrator to the Indenture Trustee on the Initial Closing Date (as such list may be modified or supplemented from time to time thereafter). With respect to any other Person, any Vice President or more senior officer of such Person who is authorized to act for such Person with respect to such matters. Available Receivable: A Receivable that is identified by the Original Seller as satisfying the criteria set forth in clauses (a) through (p) of the definition of Eligible Receivable. Available Trust Interest: With respect to any Monthly Distribution Date, the sum of: (11) Trust Interest Collections, (12) Shared Investment Proceeds, excluding the Cash Accumulation Account Earnings, (13) the net amounts, if any, paid to the Trust under any other Specified Support Arrangements which have not been designated as specific to any series or class of Securities, (14) the net amounts, if any, paid to the Trust under all Basis Swaps entered into with respect to a class of Certificates, including the ______________________ Certificate Basis Swap, and (15) if the Servicer exercises its option to purchase the assets of the Trust under Section 9.3 of the Trust Sale and Servicing Agreement, the amount described in such section as being treated as Available Trust Interest. Available Trust Principal: (i) With respect to any day during a Collection Period, Trust Principal Collections for such day minus any amounts paid out of Trust Principal Collections on such day to the Servicer as reimbursement for outstanding Servicer Liquidity Advances, and (ii) On the Monthly Distribution Date related to such Collection Period, the sum of (a) Additional Trust Principal, if any, for such Monthly Distribution Date; (b) The Cash Collateral Amount on such Monthly Distribution Date; and (c) or each Monthly Distribution Date related to the Wind Down Period or an Early Amortization Period or the Payment Period for the ______________________ Term Notes, if the amount on deposit in the Reserve Fund on such Monthly Distribution Date exceeds zero, the Supplemental Principal Allocation for such current Monthly Distribution Date. Bankruptcy Code: Title 11 of the United States Code, as the same may be amended from time to time. Basic Documents: The Certificate of Trust, the Trust Agreement, the Pooling and Servicing Agreement, the Trust Sale and Servicing Agreement, the Custodian Agreement, the Administration Agreement, the Indenture (including all Officer's Issuance Certificates), any Note Depository Agreement, any paying agent agreement, the Specified Support Arrangements and the other documents and certificates delivered in connection therewith from time to time. Basis Swap Counterparty: The Original Seller. Basis Swaps: Each of the ______________________ Term Notes Basis Swap, the ______________________ Certificate Basis Swap and any other basis swap for a series of Notes or class of Certificates. Benefit Plan: Any one of (a) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1)(I) of the Code or (c) any entity whose underlying assets include plan assets by reason of a plan's investment in such entity. Book-Entry Certificates: Certificates in which ownership and transfers shall be made through book entries by a Clearing Agency as described in Section 3.11 of the Trust Agreement. Book-Entry Notes: Term Notes in which ownership and transfers shall be made through book entries by a Clearing Agency as described in Section 2.10 of the Indenture. Business Day: Unless otherwise defined in an Officer's Issuance Certificate (with respect to the series of Notes issued thereunder) or a Certificate Issuance Order (with respect to the class of Certificates issued thereunder), any day other than a Saturday, a Sunday or any other day on which banks in New York, New York or _______, _______, may, or are required to, be closed. Business Trust Statute: Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code ss.3801 et seq., as the same may be amended from time to time. Cash Accumulation Account: With respect to any series of Term Notes, an Eligible Deposit Account designated as such in the Officer's Issuance Certificate applicable to such series of Term Notes. Cash Accumulation Account Earnings: With respect to any series of Term Notes, the investment earnings on funds deposited in the Cash Accumulation Account, with respect to such series designated as such in the Officer's Issuance Certificate applicable to such series of Term Notes. Cash Accumulation Event: With respect to any series of Term Notes, any of the events designated as such in the Officer's Issuance Certificate applicable to such series of Term Notes. Cash Accumulation Period: With respect to any series of Term Notes, the period designated as such in the Officer's Issuance Certificate applicable to such series of Term Notes. Cash Accumulation Reserve Fund: With respect to any series of Term Notes, the fund designated as such in the Officer's Issuance Certificate applicable to such series of Term Notes. Cash Accumulation Reserve Fund Deposit Amount: For any Monthly Distribution Date, the excess, if any, of the Cash Accumulation Reserve Fund Required Amount over the amount on deposit in the Cash Accumulation Reserve Fund. Cash Accumulation Reserve Fund Initial Deposit: With respect to any series of Term Notes, the amount designated as such in the Officer's Issuance Certificate applicable to such series of Term Notes. Cash Accumulation Reserve Fund Release Amount: With respect to any series of Term Notes, the amount designated as such in the Officer's Issuance Certificate applicable to such series of Term Notes. Cash Accumulation Reserve Fund Required Amount: With respect to any series of Term Notes, the amount designated as such in the Officer's Issuance Certificate applicable to such series of Term Notes. Cash Collateral Amount: As specified in Section 4.5(d)(iii) of the Trust Sale and Servicing Agreement, with respect to any date, the amount that is required to be held on behalf of the Trust in order to maintain Trust Equilibrium. Cede: CEDE & Co., as the nominee of DTC. Certificate: Any one of the asset backed certificates executed by the Owner Trustee and authenticated by the Owner Trustee (i) with respect to the ______________________ Certificates in substantially the form set forth in Exhibit A to the Trust Agreement and (ii) with respect to any other class of Certificates in substantially the form attached to the Certificate Issuance Order applicable to such other class of Certificates, if any. Certificate Balance: With respect to any Monthly Distribution Date or a related Certificate Payment Date, (i) with respect to the __________________ Certificates (a) $____________, plus (b) the initial certificate balance of the ______________________ Certificates issued after the Initial Closing Date, minus (c) all distributions in respect of Certificate Balance of the ______________________ Certificates actually made on or prior to such date, minus (d) unreimbursed Trust Charge-Offs on such Monthly Distribution Date (determined after giving effect to the application of Available Trust Interest and other amounts available to reimburse Trust Charge-Offs on such date) allocated to the ________ Certificates, up to the Certificate Balance of the ______________________ Certificates on such Monthly Distribution Date calculated without regard to this clause (d); and (ii) with respect to any other class of Certificates, the amount designated as such in the terms of such class of Certificates. Any unreimbursed Trust Charge-Offs applied to reduce the Certificate Balance shall be applied against each class of Certificates on such Certificate Payment Date, pro rata on the basis of the Certificate Balance of the Certificates of such class outstanding on the preceding Certificate Payment Date (calculated without reduction for any unreimbursed Trust Charge-Offs). Certificate Depository: With respect to any Book-Entry Certificates for which Definitive Certificates have not been issued, any depository selected from time to time by the Owner Trustee on behalf of the Trust in whose name the relevant Certificates are registered. Certificate Depository Agreement: With respect to any class of Certificates originally issued as Book-Entry Certificates, the agreement, dated as of the Closing Date for such class, among the Issuer, the Owner Trustee and the Clearing Agency relating to such Certificates, as the same may be amended and supplemented from time to time. Certificate Distribution Account: The account designated as such, established and maintained pursuant to Section 6.1(a)(v) of the Trust Agreement. Certificate Issuance Order: An order establishing the terms of any Certificates to be issued after the Initial Closing Date pursuant to Section 3.3(b) of the Trust Agreement. Certificate of Trust: The certificate of trust of the Issuer substantially in the form of Exhibit B to the Trust Agreement to be filed for the Trust pursuant to Section 3810(a) of the Business Trust Statute. Certificate Owner: With respect to a Book-Entry Certificate, the Person who is the beneficial owner of such Book Entry Certificate, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). Certificate Payment Date: With respect to a class of Certificates, each date specified for payment of interest or distributions in respect of Certificate Balance pursuant to the Trust Agreement or a Certificate Issuance Order, as the case may be. Certificate Rate: With respect to any Certificate Payment Date, the amount designated as such pursuant to the Trust Agreement and in the related Certificate Issuance Order. Certificate Register: The register of Certificates specified in Section 3.4(a) of the Trust Agreement. Certificate Registrar: The registrar at any time of the Certificate Register, appointed pursuant to Section 3.4(a) of the Trust Agreement. Certificated Security: As of any date, has the meaning given to such term under the applicable UCC in effect on such date. Certificateholder: A Person in whose name a Certificate is registered on the Certificate Register. Certificateholders' Interest: With respect to any Monthly Distribution Date, for any class of Certificates, the product of (a) the Certificate Balance (without reduction for unreimbursed Trust Charge-Offs) for such class on the prior Monthly Distribution Date (or, in the case of the first Monthly Distribution Date following the issuance of such class of Certificates, on the related Closing Date) plus the initial Certificate Balance (without reduction for unreimbursed Trust Charge-Offs) of any Certificates of such class issued since such prior Monthly Distribution Date and (b) the Certificate Rate for such Monthly Distribution Date. Certificateholders' Interest Carryover Shortfall: With respect to any Monthly Distribution Date, the excess of (a) the Aggregate Certificateholders' Interest for such Monthly Distribution Date over (b) the amount that was actually deposited in the Certificate Distribution Account on such Monthly Distribution Date in respect of Aggregate Certificateholders' Interest. Clearing Agency: An organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. The Clearing Agency for the ______________________ Term Notes and the Class ______________________ Certificates shall be DTC. Unless otherwise specified in an Officer's Issuance Certificate (with respect to the series of Notes issued thereunder) or a Certificate Issuance Order (with respect to the class of Certificates issued thereunder), the Clearing Agency for any other Security shall be DTC. Clearing Agency Participant: A securities broker, dealer, bank, trust company, clearing corporation or other financial institution or other Person for whom from time to time a Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. Closing Date: Each of the Initial Closing Date and any subsequent date on which Term Notes, Certificates or Revolving Notes are issued or the Specified Maximum Revolver Balance is increased or decreased pursuant to Section 4.9 of the Trust Sale and Servicing Agreement. Code: The Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. Collateral: The collateral specified in the granting clause of the Indenture. Collateral Security: With respect to an Account included in the Pool of Accounts and the Receivables arising in such Account, all collateral security granted to secure the obligations of the related Dealer in connection therewith and any proceeds therefrom, including all Vehicle Collateral Security, and, to the extent applicable, other motor vehicles, parts inventory, equipment, fixtures, service accounts, realty and guarantees. Collection Account: The account designated as such, established and maintained pursuant to Section 6.1(a)(i) of the Trust Sale and Servicing Agreement. Collection Period: With respect to any Monthly Distribution Date, the calendar month preceding the month in which such Monthly Distribution Date occurs; provided, however, that for the initial Monthly Distribution Date, the related Collection Period shall include such preceding calendar month and that portion of the second preceding calendar month occurring on and after the Initial Cut-Off Date. Collections: Interest Collections and Principal Collections. Common Collateral: The property constituting Collateral Security described as such in Section 6.03(a) of the Pooling and Servicing Agreement. Control: (x) The Indenture Trustee shall have obtained "Control" over a Security Entitlement if: (i) (a) the Indenture Trustee is the Securities Intermediary for the Designated Account in which such Security Entitlement is held, or (b) the Indenture Trustee (1) is identified in the records of the Securities Intermediary as the person having such a Security Entitlement against the Securities Intermediary, or (2) has obtained the agreement, in writing, of the Securities Intermediary for such Security Entitlement that it will comply with orders of the Indenture Trustee regarding the sale or redemption of the Security Entitlement without further consent of any other person, and (ii) the Securities Intermediary for such Security Entitlement (a) is the registered owner of the related Financial Asset, (b) is the holder of the Security Certificate for the related Financial Asset, or (c) holds its interest in the related Financial Asset directly through a clearing corporation (as defined in Revised Article 8); and (y) the Indenture Trustee shall have obtained "Control" over a Federal Book- Entry Security if: (i) (a) the Indenture Trustee is a participant in the book entry system maintained by the Federal Reserve Bank that is acting as fiscal agent for the issuer of such Federal Book-Entry Security; and (b) such Federal Reserve Bank has indicated by book entry that such Federal Book-Entry Security has been credited to the Indenture Trustee's securities account in such book entry system; or (ii) (a) the Indenture Trustee (1) is identified in the records of a Securities Intermediary as the Person having a Security Entitlement in respect of such Federal Book-Entry Security against such Securities Intermediary; or (2) has obtained the agreement, in writing, of the Securities Intermediary for such Security Entitlement that it will comply with orders of the Trustee regarding the sale or redemption of the Security Entitlement without further consent of any other Person; and (b) the Securities Intermediary for such Security Entitlement is a participant in the book entry system maintained by the Federal Reserve Bank that is acting as fiscal agent for the issuer of such Federal Book-Entry Security; and (c) such Federal Reserve Bank has indicated by book entry that such Federal Book-Entry Security has been credited to the Securities Intermediary's securities account in such book entry system. Controlled Deposit Amount: With respect to any series or class of Securities, on any date, the amount provided by the terms of such Securities; provided, however, that the Controlled Deposit Amount for any series of Term Notes shall not exceed the then Outstanding Amount of such Notes. Corporate Trust Office: With respect to the Indenture Trustee or the Owner Trustee, the principal office at which at any particular time the corporate trust business of the Indenture Trustee or Owner Trustee, respectively, shall be administered, which offices at the Initial Closing Date are located: in the case of the Indenture Trustee, at: _______________________ _______________________ _______________________ ____________________________ and in the case of the Owner Trustee, at: _______________________ _______________________ _______________________ ____________________________ provided that, when the definition of "Corporate Trust Office" is used in connection with providing notice to the Owner Trustee, a copy of such notice shall also be sent to: _______________________ _______________________ _______________________ ____________________________ Custodian: ______________________, as Servicer, or another custodian named from time to time pursuant to the Custodian Agreement. Custodian Agreement: The Custodian Agreement, dated as of the Initial Closing Date, between the Custodian, ________________ and _____, as amended and supplemented from time to time. Daily Remittance Period: The periods designated as such in the Officer's Issuance Certificate of any series of Notes. Daily Trust Balance: For any date, the aggregate principal balance of all Receivables held by the Trust on such date (which shall not include the Retained Property). Daily Trust Invested Amount: For any date during a Collection Period, an amount equal to (without duplication) (a) the aggregate Outstanding Amount of the Term Notes on such date plus (b) the outstanding Certificate Balance on such date plus (c) the Net Revolver Balance for such date minus (d) the Cash Collateral Amount for such date minus (e) any amounts held on such date in a related Distribution Account, Cash Accumulation Account or other account for payment of principal on the Notes or distribution of Certificate Balance on the Certificates. Dealer: Any corporation, entity or other Person the Receivables of which are included in the Trust. Dealer Overconcentration Percentage: __%, or such higher percentage not to exceed __% in any event as the Seller shall select upon satisfaction of the Rating Agency Condition. Dealer Overconcentration Receivables: With respect to any date, with respect to any Dealer or group of affiliated Dealers (as determined in accordance with the Servicer's standard procedures for identifying and tracking accounts of affiliated Dealers), the outstanding Available Receivables with respect to such Dealer or group of affiliated Dealers to the extent, if any, of the excess of (a) the aggregate principal balance of all such Available Receivables on such date over (b) the Dealer Overconcentration Percentage of the sum of (i) the Specified Maximum Revolver Balance and (ii) the aggregate Outstanding Amount for all Term Notes as of such date or, if applicable, as of the commencement of any then occurring Early Amortization Period, Wind Down Period or Payment Period. If, on any date, there exist Dealer Overconcentration Receivables with respect to a Dealer or group of affiliated Dealers, those Receivables constituting Eligible Receivables shall be those Available Receivables that were originated on the earliest dates, with the more recently originated Receivables being Dealer Overconcentration Receivables. If not all Available Receivables originated on any date are Eligible Receivables, a Receivable related to a Vehicle with a lower vehicle identification number shall constitute an Eligible Receivable before a Receivable related to a Vehicle with a higher vehicle identification number. All Available Receivables that are not Eligible Receivables pursuant to the foregoing shall be Dealer Overconcentration Receivables. If an Available Receivable that is a Dealer Overconcentration Receivable on the date such Receivable is created subsequently ceases to be a Dealer Overconcentration Receivable such that such Receivable becomes an Eligible Receivable pursuant to the foregoing, such Eligible Receivable shall be deemed created on the date it so becomes an Eligible Receivable. Default: Any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default. Defaulted Receivables: For any Monthly Distribution Date, all Receivables held by the Trust that were charged-off as uncollectible during the related Collection Period, other than any such Receivables that are subject to repurchase by the Seller or the Original Seller or purchase by the Servicer on such Monthly Distribution Date (unless certain events of bankruptcy, insolvency or receivership have occurred with respect to the Seller, the Original Seller or the Servicer, as the case may be, in which event Defaulted Receivables shall include the principal amount of such otherwise excluded Receivables). Deficiency Amount: The amounts determined to be Deficiency Amounts in Section 4.5(c)(ii) of the Trust Sale and Servicing Agreement. Definitive Certificates: The Certificates issued pursuant to the Trust Agreement in definitive form either upon original issuance or upon termination of book-entry registration with respect to such Certificates pursuant to Section 3.13 of the Trust Agreement. Definitive Notes: The Notes issued pursuant to the Indenture in definitive form. Definitive Term Notes: The Term Notes issued pursuant to the Indenture in definitive form either upon original issuance or upon termination of book-entry registration with respect to such Term Notes pursuant to Section 2.12 of the Indenture. Delivery: When used with respect to Designated Account Property, "Delivery" means: (i) (a) with respect to Physical Property or any Certificated Security, transfer thereof to the Indenture Trustee or its nominee or custodian by physical delivery to the Indenture Trustee or its nominee or custodian endorsed to, or registered in the name of, the Indenture Trustee or its nominee or custodian or endorsed in blank; and (b) with respect to a Security Certificate or any other Designated Account Property that constitutes Physical Property and that is not a Security Entitlement transfer of such Security Certificate or other Designated Account Property to the Indenture Trustee or its nominee or custodian by physical delivery to the Indenture Trustee or its nominee or custodian endorsed to, or registered in the name of, the Indenture Trustee or its nominee or custodian or endorsed in blank; and (ii) with respect to any Uncertificated Security that is not a Federal Book-Entry Security: (a) if the issuer of such Uncertificated Security is organized under the laws of a jurisdiction that has not adopted Revised Article 8, registration on the books and records of the issuer thereof in the name of the financial intermediary, the sending of a confirmation by the financial intermediary of the transfer to the Indenture Trustee or its nominee or custodian of such Uncertificated Security and the making by such financial intermediary of entries on its books and records identifying such Uncertificated Securities as belonging to the Indenture Trustee or its nominee or custodian; and (b) if the issuer of such Uncertificated Security is organized under the laws of a jurisdiction that has adopted Revised Article 8, (x) the issuer registers the Indenture Trustee as the registered owner or (y) the Indenture Trustee otherwise satisfies the requirements for obtaining "control" under Section 8-106(c) of Revised Article 8. Depository Agreement: The Note Depository Agreement and any similar agreement executed in connection with the issuance of any series of Securities originally issued as Book-Entry Notes or Book-Entry Certificates. Designated Account Property: The Designated Accounts, all amounts and investments held from time to time in any Designated Account (whether in the form of deposit accounts, Physical Property, book-entry securities, uncertificated securities or otherwise), including the Reserve Fund Initial Deposit, and all proceeds of the foregoing. Designated Accounts: The Collection Account, the Term Note Distribution Account, the Revolver Distribution Account, the Accumulation Accounts, the Reserve Fund, all Cash Accumulation Reserve Funds and any other account so designated in an Officer's Issuance Certificate, collectively. Determination Date: The tenth day of each calendar month, or if such tenth day is not a Business Day, the next succeeding Business Day. Distribution Accounts: The Term Note Distribution Account, Certificate Distribution Account and Revolver Distribution Account. DPP: Delayed Payment Privilege, a policy of the Original Seller under which the Original Seller may agree with a dealer not to require payment of principal promptly upon the sale or lease of the vehicle to a customer. DTC: The Depository Trust Company, a limited-purpose trust company certified under the New York Banking Law. Early Amortization Event: An event described as such in Section 9.1 of the Trust Sale and Servicing Agreement or any amendment or supplement. Early Amortization Period: The period commencing on the day on which an Early Amortization Event is deemed to have occurred, and ending on the first to occur of (a) the payment in full of all outstanding Securities, (b) the recommencement of the Revolving Period as described in Sections 9.1(j) and 9.5 of the Trust Sale and Servicing Agreement and (c) the Trust Termination Date. A Monthly Distribution Date is related to an Early Amortization Period if the last day of the related Collection Period occurred during an Early Amortization Period. Eligible Account: An Account which, as of the date of determination thereof: (a) is in favor of a Person that is not subject to voluntary or involuntary liquidation, that is not classified in "programmed" or "no credit" status and in which ______________________ or an Affiliate does not have a more than 20% equity interest, (b) has been established by the Original Seller or ______________________, (c) is maintained and serviced by the Original Seller. (d) is not a Fleet Account or a Marine Account, (e) with respect to which, during the preceding 12 months, the Original Seller has not charged off, without recovering, any amount in excess of $25,000 and (f) there has been no material breach by the related obligor of its obligation to pay the related Receivable upon sale of the Vehicle related thereto (a material breach, for these purposes, includes, without limitation, any failure to pay such Receivable which the Original Seller knows to be attributable in whole or in part to such obligor's unwillingness or financial inability to pay). Eligible Deposit Account: Either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof (or any domestic branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account so long as any of the securities of such depository institution has a credit rating from each Rating Agency then rating such securities in one of its generic rating categories which signifies investment grade. Eligible Institution: Either (a) the corporate trust department of the Indenture Trustee or the Owner Trustee, as applicable, or (b) a depository institution organized under the laws of the United States of America or any one of the States thereof (or any domestic branch of a foreign bank), (i) which has either (A) a long-term unsecured debt rating acceptable to the Rating Agencies or (B) a short-term unsecured debt rating or certificate of deposit rating acceptable to the Rating Agencies and (ii) whose deposits are insured by the FDIC or any successor thereto. Eligible Investments: Book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form which (at the time made) evidence: (a) direct obligations of, and obligations fully guaranteed as to timely payment by, the United States of America; (b) demand deposits, time deposits or certificates of deposit of any depository institution or trust company incorporated under the laws of the United States of America or any State thereof (or any domestic branch of a foreign bank) and subject to supervision and examination by Federal or State banking or depository institution authorities; provided, however, that at the time of the investment or contractual commitment to invest therein, the commercial paper or other short-term unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such depository institution or trust company) thereof shall have a credit rating from each of the Rating Agencies then rating such obligations in the highest investment category granted thereby; (c) commercial paper having, at the time of the investment or contractual commitment to invest therein, a rating from each of the Rating Agencies then rating such commercial paper in the highest investment category granted thereby; (d) investments in money market or common trust funds having a rating from each of the Rating Agencies then rating such funds in the highest investment category granted thereby for money market funds (including funds for which the Indenture Trustee or the Owner Trustee or any of their respective affiliates is investment manager or advisor, so long as such fund shall have such rating, provided, however, that no funds in the Cash Accumulation Account or the Term Note Distribution Subaccount for the ______________________ Term Notes shall be invested in Eligible Investments described in this clause (d)); (e) bankers' acceptances issued by any depository institution or trust company referred to in clause (b) above; (f) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a Person with the Required Deposit Rating or otherwise approved by the Rating Agencies; and (g) any other investment permitted by each of the Rating Agencies; in each case, other than as permitted by the Rating Agencies, maturing (i) not later than the Business Day immediately preceding the next Monthly Distribution Date or (ii) on such next Monthly Distribution Date if either (A) such investment is in the institution with which the Term Note Distribution Account, the Certificate Distribution Account or the Accumulation Accounts, as the case may be, is then maintained or (B) the Indenture Trustee (so long as the short-term unsecured debt obligations of the Indenture Trustee are rated at least P-1 by Moody's and A-1 by Standard & Poor's on the date such investment is made) shall advance funds on such Monthly Distribution Date to the Term Note Distribution Account, the Certificate Distribution Account or the Accumulation Accounts, as the case may be, in the amount payable on such investment on such Monthly Distribution Date pending receipt thereof to the extent necessary to make distributions on the Notes or the Certificates, as the case may be, on such Monthly Distribution Date. For purposes of the foregoing, unless the Indenture Trustee objects at the time an investment is made, the Indenture Trustee shall be deemed to have agreed to make such advance with respect to such investment. As used in this definition, a rating is in the "highest investment category" of a rating category which has relative gradations within that category only if it has the highest rating within that category (so that, for example, commercial paper with a rating of A-1 is not considered to be in the "highest investment category," but a rating of A-1+ is within the "highest investment category"). Eligible Receivable: With respect to any date, a Receivable: (a) which was originated by the Original Seller in the ordinary course of business or which was originated by ______________________ in the ordinary course of business and acquired by the Original Seller; (b) which arose under an Account that was an Eligible Account (and not a Selected Account) at the time of the transfer of such Receivable from the Original Seller to the Seller; (c) which is payable in United States dollars; (d) to which the Original Seller had good and marketable title immediately prior to the transfer thereof by the Original Seller to the Seller and which has been the subject of a valid transfer and assignment from the Original Seller to the Seller of all of the Original Seller's right, title and interest therein and the related Vehicle Collateral Security (including any proceeds thereof); (e) which is advanced against a Vehicle; (f) which at the time of transfer thereof by the Original Seller to the Seller is secured by a first priority perfected security interest in the Vehicle related thereto; (g) with respect to which all consents, licenses and approvals of any Governmental Authority in connection with the transfer thereof to the Seller and to the Trust have been obtained and are in full force and effect; (h) which was created in compliance in all material respects with all Requirements of Law applicable thereto; (i) as to which, at all times following the transfer of such Receivable to the Trust, the Trust has either a first priority perfected security interest or good and marketable title thereto, free and clear of all Liens (other than Liens permitted pursuant to the Trust Sale and Servicing Agreement); (j) which has been the subject of a valid transfer and assignment from the Seller to the Trust of all the Seller's right, title and interest therein and the related Vehicle Collateral Security (including any proceeds thereof); (k) which is the legal, valid, binding and assignable payment obligation of the Dealer relating thereto, enforceable against such Dealer in accordance with its terms, except as such enforceability may be limited by the Insolvency Laws; (l) which at the time of transfer thereof by the Original Seller to the Seller is not subject to any valid right of rescission, setoff or any other defense (including defenses arising out of violations of usury laws) of the related Dealer; (m) as to which, at the time of transfer thereof to the Trust, the Original Seller and the Seller have satisfied in all material respects all their respective obligations with respect to such Receivable required to be satisfied at such time; (n) as to which, at the time of transfer thereof to the Trust, neither the Original Seller nor the Seller has taken or failed to take any action that would impair the rights of the Trust or the Securityholders therein; (o) which constitutes "chattel paper", an "account" or a "general intangible" as defined in Article 9 of the UCC as then in effect in the State of Michigan; (p) with respect to which the related Dealer has not postponed principal payment pursuant to DPP (or any similar arrangement) or any other installment payment program; (q) which, at the time of transfer thereof to the Trust, does not constitute a Dealer Overconcentration Receivable and (r) which, at the time of transfer thereof to the Trust, does not constitute an Excess Available Receivable. Notwithstanding the foregoing, any other Receivable identified by the Original Seller as an Eligible Receivable shall also be deemed an Eligible Receivable unless and until such Receivable is thereafter determined not to satisfy the eligibility criteria set forth above and reassigned by the Trust to the Original Seller or the Seller pursuant to the Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement (it being understood that any such subsequent determinations shall not affect any prior transfers of such Receivable and such Receivable shall be reassigned to the Original Seller and the Seller only as specifically provided in the Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement). An Eligible Receivable shall be deemed created or originated on the date it is identified by the Original Seller as an Eligible Receivable. With respect to any Dealer, Eligible Receivables shall be determined net of any funds held by the Original Seller for such Dealer for cash management, liquidity and working capital purposes. Within any such Account, Eligible Receivables shall be those Available Receivables originated on the earliest dates. If not all Available Receivables originated on any date are Eligible Receivables, a Receivable relating to a Vehicle with a lower vehicle identification number shall constitute an Eligible Receivable before a Receivable relating to a Vehicle with a higher vehicle identification number. If there is a reduction on any date of the amount so held for such Dealer, a Receivable or Receivables shall be deemed created on such date to the extent of such reduction and such Receivable(s) shall be Eligible Receivable(s) if the eligibility criteria set forth above are satisfied and based on such date of origination and the vehicle identification number of the related Vehicle as described above. ERISA: The Employee Retirement Income Security Act of 1974, as amended. Event of Default: An event described in Section 5.1 of the Indenture. Excess Available Receivables: For any date, Available Receivables to the extent, if any, of the excess of: (a) the aggregate principal balance of Available Receivables less the aggregate principal balance of Dealer Overconcentration Receivables over (b) the Maximum Pool Balance. If, on any date, there exist Excess Available Receivables, a pro rata portion of the Receivables in each Account in the Pool of Accounts shall constitute Excess Available Receivables (based on the aggregate principal balance of the Receivables in each such Account). Within each such Account, Eligible Receivables shall be those Available Receivables that were originated on the earliest dates, with the more recently originated Receivables being Excess Available Receivables. If not all Available Receivables originated on any date within an Account are Eligible Receivables, a Receivable related to a Vehicle with a lower vehicle identification number shall constitute an Eligible Receivable before a Receivable related to a Vehicle with a higher vehicle identification number. All Available Receivables that are not Eligible Receivables pursuant to the foregoing shall be Excess Available Receivables. If an Available Receivable that is an Excess Available Receivable on the date such Receivable is originated or created subsequently ceases to be an Excess Available Receivable such that such Receivable becomes an Eligible Receivable pursuant to the foregoing, such Eligible Receivable shall be deemed originated or created on the date it so becomes an Eligible Receivable. Exchange Act: The Securities Exchange Act of 1934, as amended. Executive Officer: With respect to any corporation, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, Executive Vice President, any Vice President, the Secretary or the Treasurer of such corporation; and with respect to any partnership, any general partner thereof. Exempt Deposit Date: With respect to any Notes, a Monthly Distribution Date which is not a Payment Date for such Notes. FDIC: The Federal Deposit Insurance Corporation or any successor thereto. Federal Book-Entry Security: An obligation issued by the U.S. Treasury, the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association, or any other direct obligation of, or obligation fully guaranteed as to timely payment of principal and interest by, the United States of America, that is a book-entry security held through the Federal Reserve System pursuant to Federal Book-entry regulations. Final Revolving Period Termination Date: _________________ Financial Asset: Has the meaning given such term in Article 8 of the New York UCC. As used herein, the Financial Asset "related to" a Security Entitlement is the Financial Asset in which the entitlement holder (as defined in Article 8 of the New York UCC) holding such Security Entitlement has the rights and property interest specified in Article 8 of the New York UCC. Fitch: Fitch Fleet Accounts: Credit lines or accounts pursuant to which advances may be made to finance Vehicles intended for sale to fleet customers, generally in lots of more than 10. Floor Plan Financing Agreement: Collectively, the Wholesale Security Agreement, and the related agreements between the Original Seller and a Dealer or the Wholesale Installment Sales Finance Agreement and related agreements between the Original Seller and a Dealer, or, in each case, any successor agreements, pursuant to which the Original Seller or ______________________, as the case may be, agrees to extend credit to such Dealer to purchase or finance Vehicles and other vehicles and related items, and pursuant to which such Dealer grants to the Original Seller or to ______________________, as the case may be, a security interest in the specific Vehicles financed by the Original Seller or by ______________________, certain other vehicles, certain other collateral and the proceeds thereof. Floor Plan Financing Guidelines: The Servicer's written policies and procedures, as such policies and procedures may be amended from time to time, relating to (a) the operation of its floor plan financing business, including the policies and procedures for determining the interest rates charged to Dealers and other terms and conditions relating to the Servicer's wholesale financing accounts, the creditworthiness of Dealers and the extension of credit to Dealers, and (b) the maintenance of accounts and collection of receivables. Fully Funded Date: With respect to any series of Notes, the date designated as such in the Officer's Issuance Certificate applicable to such series of Notes. Governmental Authority: The United States of America, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. Holder: The Person in whose name a Note or Certificate, as the case may be, is registered on the Note Register or the Certificate Register, as applicable. Indenture: The Indenture, dated as of the Initial Closing Date, between the Issuer and the Indenture Trustee, as amended and supplemented from time to time, including all Officer's Issuance Certificates. Indenture Trustee: _______________, a _________ banking corporation, not in its individual capacity but solely as trustee under the Indenture, or any successor trustee under the Indenture. Independent: When used with respect to any specified Person, that the Person (a) is in fact independent of the Issuer, any other obligor upon the Notes, the Seller and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. Independent Certificate: A certificate or opinion to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.1 of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and approved by the Indenture Trustee in the exercise of reasonable care, and such opinion or certificate shall state that the signer has read the definition of "Independent" and that the signer is Independent within the meaning thereof. Indirect Participant: A securities broker, dealer, bank, trust company or other Person that clears through or maintains a custodial relationship with a Clearing Agency Participant, either directly or indirectly. Ineligible Account: An Account that does not satisfy the criteria to be an Eligible Account. Initial Account: An Account identified on the Schedule of Accounts as in the Pool of Accounts as of the Initial Cut-Off Date. Initial Closing Date: ____________ Initial Cut-Off Date: ____________ Initial Quarterly Distribution Date: ______________ Initial Securities: The ______________________ Term Notes and the ______________________ Certificates. Insolvency Event: With respect to a specified Person, (a) the entry of a decree or order by a court, agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver, trustee or liquidator for such Person, in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of such Person's affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days,(b) the consent by such Person to the appointment of a conservator, receiver or liquidator in any insolvency, bankruptcy, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to such Person or of or relating to substantially all of such Person's property or (c) such Person 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, bankruptcy or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations. Insolvency Laws: The Bankruptcy Code and any other applicable federal or State bankruptcy, insolvency or other similar law. Insolvency Proceeds: The proceeds described in Section 9.2(a) of the Trust Sale and Servicing Agreement. Intercompany Advance Agreement: The Intercompany Advance Agreement dated as of _______________ between ______________ and the Original Seller, as amended and supplemented from time to time. Interest Collections: For any Collection Period, collections received during such Collection Period on the Receivables existing under the Accounts in the Pool of Accounts that the Servicer attributes to interest and other non-principal charges pursuant to the Floor Plan Financing Guidelines, including Administrative Purchase Payments and Warranty Payments in excess of the principal portion thereof. Interest Rate: With respect to any series of Notes the rate or rates designated as such in the Officer's Issuance Certificate applicable to such series of Notes. Interested Party: The Original Seller, the Seller, the Issuer and each other party identified or described in the Pooling and Servicing Agreement or in the Trust Sale and Servicing Agreement as having an interest in Receivables as owner, trustee, secured party or holder of the Securities. Investment Company Act: The Investment Company Act of 1940, as amended. Investment Proceeds: With respect to any Monthly Distribution Date, investment earnings on funds deposited in the Designated Accounts and the Certificate Distribution Account net of losses and investment expenses during the related Collection Period. Involuntary Case: Any Proceeding provided for any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to any Person or relating to all or substantially all of its property. Issuer: The party named as such in the Pooling and Servicing Agreement, the Trust Sale and Servicing Agreement and the Indenture until a successor replaces it and, thereafter, the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the Notes. Issuer Order and Issuer Request: A written order or request signed in the name of the Issuer by any one of its Authorized Officers and delivered to the Indenture Trustee. LIBOR Business Day: Any day on which commercial banks in London are open for business (including dealings in foreign exchange and foreign currency deposits). Lien: Any security interest, lien, charge, pledge, equity or encumbrance of any kind, other than tax liens, mechanics' liens and any liens that attach by operation of law. Marine Accounts: Credit lines or accounts pursuant to which advances are made to finance new and used boats and related items. Maximum Pool Balance: The sum of (a) the Maximum Revolver Balance, (b) the aggregate outstanding principal balance of all Term Notes (after giving effect to any amounts on deposit in the Term Note Distribution Accounts and any Accumulation Accounts for payments of principal), and (c) the aggregate outstanding Certificate Balance of all Certificates (after giving effect to any amounts on deposit in the Certificate Distribution Account for distributions with respect to Certificate Balance). Maximum Revolver Balance: At any time, the Specified Maximum Revolver Balance, as such amount may be increased or decreased from time to time in accordance with the Trust Sale and Servicing Agreement; provided, however, that at any time additional borrowings may not be made under a Revolving Note (including, if applicable, during the Wind Down Period or an Early Amortization Period), the Maximum Revolver Balance shall include the Specified Maximum Revolver Balance attributable to such Note only to the extent of the Net Revolver Balance with respect to such Note. For purposes of the foregoing, if and so long as the holder of any Revolving Notes has determined not to make any further advances thereunder but additional borrowings are otherwise then permitted thereunder, the proviso to the previous sentence shall be applicable in determining Excess Available Receivables but shall otherwise be inapplicable. Monthly Available Amount: With respect to a Monthly Distribution Date, the aggregate of the amounts designated as such for each series of Notes separately in the Officer's Issuance Certificate applicable to each such series of Notes. Monthly Carrying Costs: With respect to a Monthly Distribution Date, the aggregate of the costs designated as such for each series of Notes separately in the Officer's Issuance Certificate applicable to each such series of Notes. Monthly Distribution Date: The fifteenth day of each calendar month or, if such fifteenth day is not a Business Day, the next succeeding Business Day, commencing ____________. A Monthly Distribution Date is related to the Collection Period prior to the Collection Period in which such Monthly Distribution Date occurs. Monthly Payment Rate: For any Collection Period, the percentage obtained by dividing Principal Collections for such Collection Period by the average daily aggregate principal balance of all Receivables (including Receivables included in the Retained Property) included in the Accounts in the Pool of Accounts during such Collection Period. Monthly Remittance Condition: Any of the conditions specified in Section 6.2(b) of the Trust Sale and Servicing Agreement. Monthly Servicing Fee: The fee described in Section 5.1 of the Trust Sale and Servicing Agreement. Moody's: Moody's Investors Service, Inc. Net Revolver Balance: For any date, the aggregate outstanding principal balance under the Revolving Notes minus any amounts on deposit in the Revolver Distribution Account on such date for the payment of principal. New Vehicles: Under the Original Seller's current practices and policies, Vehicles of any model year that are not Auction Vehicles, that generally have been driven less than 200 miles and that are either (a) untitled or (b) titled solely for purposes of State laws requiring demonstration vehicles to be titled. New York UCC: The UCC as in effect in the State of New York. Note Depository: With respect to any Book-Entry Notes for which Definitive Term Notes have not been issued, any depository selected from time to time by the Indenture Trustee on behalf of the Trust in whose name a series of Notes is registered. The Note Depository for the ______________________ Term Notes shall be Cede & Co., the nominee of the Clearing Agency for such series. Note Depository Agreement: With respect to any series of Term Notes originally issued as Book-Entry Notes, the agreement, dated as of the Closing Date for such series, among the Issuer, the Indenture Trustee and the Clearing Agency relating to such Term Notes, as the same may be amended and supplemented from time to time. Note Owner: With respect to any Term Note issued as a Book Entry Note, the Person who is the beneficial owner of such Book Entry Note, as reflected on the books of the related Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an Indirect Participant, in each case in accordance with the rules of such Clearing Agency). Note Register: With respect to any series of Notes, the register of such Notes specified in Section 2.4 of the Indenture. Note Registrar: The registrar at any time of the Note Register, appointed pursuant to Section 2.4 of the Indenture. Noteholders: Holders of record of the Notes pursuant to the Indenture and, with respect to any series of Notes, holders of record of such series of Notes pursuant to the Indenture. Noteholders' Interest: With respect to a series of Notes, for any Monthly Distribution Date, the amount specified as such in the Officer's Issuance Certificate applicable to such series of Notes. Notes: The Term Notes and the Revolving Notes. Officer's Certificate: A certificate signed by any Authorized Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.1 of the Indenture, and delivered to the Indenture Trustee. Unless otherwise specified, any reference in the Indenture to an officer's certificate shall be to an Officer's Certificate of any Authorized Officer of the Issuer. Officer's Issuance Certificate: An Officer's Certificate establishing the terms of any series of Notes pursuant to Section 2.1 of the Indenture. Opinion of Counsel: A written opinion of counsel, who may, except as otherwise expressly provided, be an employee of the Seller, the Servicer or the Original Seller. In addition, for purposes of the Indenture: (a) such counsel shall be satisfactory to the Indenture Trustee, (b) the opinion shall be addressed to the Indenture Trustee as Trustee and (c) the opinion shall comply with any applicable requirements of Section 11.1 of the Indenture and shall be in form and substance satisfactory to the Indenture Trustee. Original Seller: The Person executing the Pooling and Servicing Agreement as the seller, or its successor in interest pursuant to Section 5.01 of the Pooling and Servicing Agreement. Original Seller Addition Notice: The notice described in Section 2.03(a) of the Pooling and Servicing Agreement. Original Seller Removal Notice: The notice described in Section 2.04 of the Pooling and Servicing Agreement. Other Indebtedness: The indebtedness of Dealers to the Original Seller defined in Section 6.03(a) of the Pooling and Servicing Agreement. Outstanding: With respect to any Notes, as of the date of determination, subject to Section 4.5(g) of the Trust Sale and Servicing Agreement, all such Notes theretofore authenticated and delivered under the Indenture except: (a) Notes theretofore canceled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation; (b) Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Notes; provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefore, satisfactory to the Indenture Trustee, has been made; and (c) Notes in exchange for or in lieu of other Notes which have been authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a bona fide purchaser; provided, however, that in determining whether the Holders of the requisite Outstanding Amount of the Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Basic Document, Notes owned by the Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Indenture Trustee knows to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgor's right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of the foregoing Persons. Outstanding Amount: As of any date, with respect to any series of Term Notes or Revolving Notes, the aggregate principal amount of such Notes Outstanding at such date. Owner Trust Estate: All right, title and interest of the Trust in and to the property and rights assigned to the Trust pursuant to Article II of the Trust Sale and Servicing Agreement, all funds on deposit from time to time in the Designated Accounts and the Certificate Distribution Account, the Specified Support Arrangements and all other property of the Trust from time to time, including any rights of the Owner Trustee and the Trust pursuant to the Trust Sale and Servicing Agreement and the Administration Agreement. Owner Trustee:____________________, a [ ] or any successor trustee under the Trust Agreement. Paying Agent: With respect to the Indenture, the Indenture Trustee or any other Person that meets the eligibility standards for the Indenture Trustee specified in Section 6.11 of the Indenture and is authorized by the Issuer to make the payments to and distributions from the Collection Account, the Term Note Distribution Account and the Revolver Distribution Account, including payment of principal of or interest on the Notes on behalf of the Issuer. With respect to the Trust Agreement, any paying agent or co-paying agent appointed pursuant to Section 3.9 of the Trust Agreement that meets the eligibility standards for the Owner Trustee specified in Section 6.13 of the Trust Agreement, and initially [ ]. Payment Date: With respect to a series of Notes, each date specified for payment of interest or principal on the Notes pursuant to the Indenture. With respect to a series of Notes providing for monthly payment of interest or principal, Payment Date means a Monthly Distribution Date. Payment Period: With respect to a series of Term Notes or Revolving Notes, the period, if any, described in the related Officer's Issuance Certificate during which amounts are required to be set aside and/or paid as principal on such Term Notes or Revolving Notes prior to the Wind Down Period or an Early Amortization Period. Person: Any legal person, including any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or Governmental Authority. Physical Property: Means bankers' acceptances, commercial paper, negotiable certificates of deposit and other obligations that constitute "instruments" within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of physical delivery. Pool of Accounts: At any time, all Accounts identified on the Schedule of Accounts as amended and supplemented from time to time pursuant to the Pooling and Servicing Agreement and the Trust Sale and Servicing Agreement. From and after the related Removal Date, an Account shall no longer be deemed included in the Pool of Accounts. Pooling and Servicing Agreement: The Pooling and Servicing Agreement, dated as of the Initial Closing Date, between the Original Seller and the Purchaser, as amended and supplemented from time to time. Predecessor Note: With respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 2.5 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. Principal Allocation Percentage: for a series of Notes that has reached its Fully Funded Date, zero, and for any other series of Notes (the "Referent Series") which requires Available Trust Principal to be retained or set aside during any period to fund swap payments, if any, or principal payments with respect to the Referent Series on any date, is the percentage equivalent to the following: (1) if such date does not relate to a Wind Down Period or an Early Amortization Period for the Trust: (Principal Allocation (Aggregate Principal Balance of Referent Series) Percentage for a Referent = ----------------------------------------------- Series) (Sum of Aggregate Principal Balance for all Referent Series) where, for purposes of this equation only: "Aggregate Principal Balance of Referent Series" is (ii with respect to any Referent Series of Term Notes, the aggregate initial principal balance with respect to such Referent Series or (ii with respect to any Referent Series of Revolving Notes, the outstanding principal balance of such Referent Series as of the close of business on the day preceding the first day of the Payment Period with respect to such series "Sum of Aggregate Principal Balance for all Referent Series" is the sum of the "Aggregate Principal Balance of Referent Series" for each series of Notes which is on that date a Referent Series (2) if such date relates to a Wind Down Period or an Early Amortization Period for the Trust: Principal Allocation (Aggregate Principal Balance of Referent Series) Percentage for a Referent = ------------------------------------------------- Series (Sum of Aggregate Principal Balance for each Series of Notes) where, for purposes of this equation only: "Aggregate Principal Balance of Referent Series" is the aggregate outstanding principal balance of the Referent Series then outstanding on the last day of the Revolving Period "Sum of Aggregate Principal Balance for each Series of Notes" is the sum of the "Aggregate Principal Balance of Referent Series" for all series then outstanding on the last day of the Revolving Period, except for any series the principal balance of which has been fully paid or provided for (calculated for this purpose as though each outstanding series is a Referent Series on that date) Principal Collections: For any day or any period, collections received on such date or during such period, as applicable, on the Receivables existing under the Accounts in the Pool of Accounts that the Servicer attributes to principal pursuant to the Floor Plan Financing Guidelines, including the principal portion of Warranty Payments and Administrative Purchase Payments. Priority Payment Amount: Any make-whole payment, payment to an interest rate swap counterparty, or other payment or deposit obligation specified in an Officers' Issuance Certificate for a series of Notes or a Certificate Issuance Order as constituting a "Priority Payment Amount," which designates such amount as having priority of payment over the principal balance of the Certificates; provided, that no amount shall constitute a Priority Payment Amount unless either (x) each holder of a Certificate has consented to the designation of such amount as a Priority Payment Amount or (y) the Rating Agency Condition has been satisfied with respect to such designation. Proceeding: Any suit in equity, action at law or other judicial or administrative proceeding. Program: The program described in Section 4.2 of the Trust Sale and Servicing Agreement. Purchaser: ACE Securities Corp., a Delaware corporation, or its successor in interest pursuant to the Pooling and Servicing Agreement. Quarterly Distribution Date: Each Monthly Distribution Date occurring in the months of _______, _______, _______ and _______, commencing ______________. Quarterly Interest Accrual Date: The 15th day of each ________, _______, ______ and _________, or if such day is not a Business Day, the next following day which is a Business Day, commencing _____________. Rapid Amortization Events: With respect to a series of Term Notes, the events designated as such in the Officer's Issuance Certificate for such series of Term Notes. Rapid Amortization Payment Date: With respect to a series of Term Notes, the meaning given to such term in the Officer's Issuance Certificate applicable to such series of Term Notes. Rapid Amortization Period: With respect to a series of Term Notes, the meaning given to such term in the Officer's Issuance Certificate for such series of Term Notes. Rating Agencies: As of any date, with respect to any series or class of Securities, the nationally recognized statistical rating organizations that are requested by the Seller to provide ratings on such Securities and that are rating such Securities on such date. Rating Agency Condition: With respect to any action, with respect to any series or class of Securities that are then rated, the condition that each of the Rating Agencies with respect to such Securities shall have notified the Seller, the Servicer and the Issuer in writing that such action shall not result in a downgrade, suspension or withdrawal of the then current rating of such Securities. Reassignment Amount: For any Monthly Distribution Date, after giving effect to any allocations, withdrawals and deposits otherwise to be made on such Monthly Distribution Date, the sum of the Daily Trust Invested Amount (which, for such purpose, shall be calculated without reduction for the Cash Collateral Amount) and accrued but unpaid interest on all outstanding Securities to the extent not previously distributed to Securityholders. Receivable: At any time, the right to receive payment on a loan made under an Account included in the Pool of Accounts. Receivables Purchase Date: Each Business Day during the Revolving Period on which Eligible Receivables are created in any Account then included in the Pool of Accounts, subject to Section 6.02 of the Pooling and Servicing Agreement. Record Date: (a) With respect to any series of Term Notes that are Book-Entry Notes and with respect to any Payment Date, the close of business on the day immediately preceding such Payment Date, or if Definitive Term Notes are issued therefor, the last day of the preceding Collection Period, (b) with respect to any series of Notes other than those described in clause (a) and with respect to any Payment Date, the last day of the preceding Collection Period and (c) with respect to the Certificates and with respect to any Certificate Payment Date, the close of business on the last day of the preceding Collection Period. Recoveries: For any Monthly Distribution Date, all amounts received, including insurance proceeds, by the Servicer during the related Collection Period with respect to Eligible Receivables that have previously become Defaulted Receivables. Redemption Date: For a series of Term Notes, the date, if any, specified as such in the Officer's Issuance Certificate applicable to such series. Redemption Price: For a series of Term Notes, the price, if any, specified as such in the Officer's Issuance Certificate applicable to such series. Registered Holder: The Person in whose name a Note is registered on the Note Register on the applicable Record Date. Remaining Interest Amounts: The amounts designated as Remaining Interest Amounts in Section 4.5(c) of the Trust Sale and Servicing Agreement. Removal Balance: The balance described in Section 2.8 of the Trust Sale and Servicing Agreement. Removal Commencement Date: The date described as such in Section 2.8 of the Trust Sale and Servicing Agreement. Removal Date: The date described as such in Section 2.8 of the Trust Sale and Servicing Agreement. Removal Notice: The notice described in Section 2.8 of the Trust Sale and Servicing Agreement. Removed Account: An Account that has been removed from the Pool of Accounts pursuant to Sections 2.04 or 2.05 of the Pooling and Servicing Agreement and/or Sections 2.8 or 2.9 of the Trust Sale and Servicing Agreement. Required Deposit Rating: A rating on short-term unsecured debt obligations of P-1 by Moody's and A-1+ by Standard & Poor's. Any requirement that short-term unsecured debt obligations have the "Required Deposit Rating" shall mean that such short-term unsecured debt obligations have the foregoing required ratings from each of such rating agencies. Required Payment: With respect to any series of Term Notes, the amount provided by the Officer's Issuance Certificate with respect to such Term Notes. Required Payment Period Length: With respect to a series of Notes, the period length specified as such in the Officer's Issuance Certificate applicable to such series of Notes. Required Revolver Payment: With respect to any Monthly Distribution Date, the aggregate amount required to be paid (or set aside for payment) as principal on all Revolving Notes on such Monthly Distribution Date pursuant to the Indenture and the Trust Sale and Servicing Agreement. Requirement of Law: With respect to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of an arbitrator or Governmental Authority, in each case applicable to or binding upon such Person or to which such Person is subject, whether Federal, State or local (including usury laws and the Federal Truth in Lending Act). Reserve Fund: The account designated as such, established and maintained pursuant to Section 6.1(a)(v) of the Trust Sale and Servicing Agreement. Reserve Fund Deposit Amount: With respect to any Monthly Distribution Date, the excess, if any, of the Reserve Fund Required Amount over the amount on deposit in the Reserve Fund (after taking into account any withdrawals from the Reserve Fund on such Monthly Distribution Date). Reserve Fund Funding Condition: Will be satisfied on the date of recommencement of the Revolving Period if: (a) the amount on deposit in the Reserve Fund equals or exceeds the Reserve Fund Required Amount as of such date of recommencement; (b) the amount on deposit in each Cash Accumulation Reserve Fund equals or exceeds the Cash Accumulation Reserve Fund Required Amount thereof as of such date of recommencement; and (c) the amount on deposit in the Certificate Reserve Fund equals or exceeds the amount required to be on deposit in the Certificate Reserve Fund, if any. Reserve Fund Initial Deposit: $_______________. Reserve Fund Property: The property described in Section 4.6(c) of the Trust Sale and Servicing Agreement. Reserve Fund Required Amount: With respect to any Monthly Distribution Date, (a) for any Monthly Distribution Date related to the Revolving Period or Wind Down Period, ___% of the Maximum Pool Balance minus the amounts on deposit in all Cash Accumulation Accounts as of such Monthly Distribution Date (or if, as of such Monthly Distribution Date, the long-term debt obligations of ______________________ are rated less than "BBB-" by Standard & Poor's, then ___%), and (b) for any Monthly Distribution Date during any Early Amortization Period, ___% of the result of the Maximum Pool Balance minus the amounts on deposit in all Cash Accumulation Accounts as of the last day of the Revolving Period (or if, as of the last day of the Revolving Period the long-term debt obligations of ______________________ are rated less than "BBB-" by Standard & Poor's, then ___%). Reserve Fund Trigger Amount: $_____________ Responsible Officer: With respect to the Indenture Trustee or the Owner Trustee, any officer within the Corporate Trust Office of such trustee, and, with respect to the Servicer, the President, any Vice President, Assistant Vice President, Secretary, Assistant Secretary or any other officer or assistant officer of such Person customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. Retained Property: The interest of the Original Seller described in Section 2.01(d) of the Pooling and Servicing Agreement. Revised Article 8: Revised Article 8 (1994 Version) (and corresponding amendments to Article 9) as promulgated in 1994 by the National Conference of Commissioners on Uniform State Laws, in the form in which it has been adopted in the State of New York. Revolver Distribution Account: The account designated as such, established and maintained pursuant to Section 6.1(a)(iii) of the Trust Sale and Servicing Agreement. Revolver Interest: With respect to any Monthly Distribution Date, for any series of Revolving Notes, except as otherwise provided in the related Officer's Issuance Certificate, the product of (a) the average daily Series Net Revolver Balance for such series during the related Collection Period and (b) the Revolver Interest Rate for such series for such Monthly Distribution Date. Revolver Interest Carryover Shortfall: For any Monthly Distribution Date, the excess of (a) the Aggregate Revolver Interest for such Monthly Distribution Date over (b) the amount that was actually deposited in the Revolver Distribution Account on such Monthly Distribution Date in respect of Aggregate Revolver Interest. Revolver Interest Rate: For any series of Revolving Notes, the interest rate specified as such in the applicable Officer's Issuance Certificate. Revolver Monthly Payment Date: Means the 15th day of each month, or if such day is not a U.S. Business Day, the next U.S. Business Day. Revolver Payment Date: Means a Revolver Monthly Payment Date or a Revolver Quarterly Payment Date. Revolver Quarterly Payment Date: Means the 15th day of each ______, _____, ______ and _____, or if such day is not a U.S. Business Day, the next U.S. Business Day. Revolving Note: Any asset-backed revolving note executed by the Issuer by any of its Authorized Officers and authenticated by the Indenture Trustee in the form attached to the Officer's Issuance Certificate applicable to such series of revolving notes. Revolving Noteholder: Any Holder of a Revolving Note. Revolving Period: The period commencing on the Initial Cut-Off Date and continuing until the earlier of (a) the commencement of an Early Amortization Period and (b) the occurrence of the Scheduled Revolving Period Termination Date; provided that, at the option of the Seller, the Revolving Period shall recommence (subject to termination upon the earlier to occur of an event described in the preceding clauses (a) or (b)) as described in Sections 9.1(j) and 9.5 of the Trust Sale and Servicing Agreement. Schedule of Accounts: The list of Accounts that is required to be kept at the locations specified in the Pooling and Servicing Agreement and the Trust Sale and Servicing Agreement, as such list may be amended and supplemented from time to time. Scheduled Revolving Period Termination Date: _________; provided that the Scheduled Revolving Period Termination Date shall be automatically extended to the last day of each succeeding month (but not beyond _____________) unless the Seller, prior to the then Scheduled Revolving Period Termination Date, elects to cause such extension not to occur by providing written notice to such effect to the Servicer, the Owner Trustee (who shall provide notice to the Certificateholders), the Indenture Trustee and the Rating Agencies. Unless such notice is given, each such extension shall become effective as of the Business Day prior to the then Scheduled Revolving Period Termination Date. In addition, the Seller may, at any time prior to the then Scheduled Revolving Period Termination Date, elect to extend the Scheduled Revolving Period Termination Date to the last day of any specified month (but not beyond ____________), subject thereafter to further automatic extensions beyond the last day of such specified month as described in the preceding two sentences. Secretary of State: The Secretary of State of the State of Delaware. Securities: The Term Notes, the Revolving Notes and the Certificates. Securities Act: The Securities Act of 1933, as amended. Securities Distribution Accounts: The Term Note Distribution Accounts, the Revolver Distribution Account and the Certificate Distribution Account. Securities Intermediary: Has the meaning given to such term in Section 6.1(b)(i) of the Trust Sale and Servicing Agreement. Security Certificate: Has the meaning given such term in Revised Article 8. Security Entitlement: Has the meaning given such term in Revised Article 8. Securityholders: The Noteholders and the Certificateholders. Selected Account: An Account designated as such as described in Section 2.8 or 2.9 of the Trust Sale and Servicing Agreement. Seller: The Person executing the Trust Sale and Servicing Agreement as the Seller, or its successor in interest pursuant to Section 3.3 of the Trust Sale and Servicing Agreement. Series Net Revolver Balance: With respect to any series of Revolving Notes, for any date, the aggregate outstanding principal balance under such series of Revolving Notes minus any amounts on deposit in the Revolver Distribution Account on such date for the payment of principal on such series of Revolving Notes. Series Shortfall: With respect to a series of Notes, the amounts designated as such in the Officer's Issuance Certificate applicable to such series of Notes. Series Specified Maximum Revolver Balance: For any series of Revolving Notes, the maximum balance specified as such in the Officer's Issuance Certificate applicable to such series of Revolving Notes. Servicer: The Person executing the Trust Sale and Servicing Agreement as the Servicer, or its successor in interest pursuant to Section 7.2 of the Trust Sale and Servicing Agreement. Servicer Advance: For any Monthly Distribution Date, the amount, if any, advanced by the Servicer as described in Section 4.5(c) of the Trust Sale and Servicing Agreement. Servicer Liquidity Advance: For any series of Term Notes, if the Officer's Issuance Certificate for such series provides for a Servicer Liquidity Advance, an advance by the Servicer, stated in dollars, to the Trust made to the extent a required principal payment for any series of Notes for any Monthly Distribution Date cannot otherwise be made, after giving effect to all issuances of Securities and additional borrowings under the Revolving Notes on such Monthly Distribution Date, as they are available. However, the Servicer can only make Servicer Liquidity Advances to the extent that the Servicer, in its sole discretion, expects to recover such advances from subsequent Trust Principal Collections. Servicer Liquidity Advances with respect to a series of Term Notes will be reimbursed (a) if Available Trust Principal is being set aside for that series of Term Notes, out of that series' share of Available Trust Principal and (b) if Available Trust Principal is not being set aside for Term Notes, out of a portion of Trust Principal Collections not to exceed a fraction, the numerator of which is the outstanding principal balance of that series of Term Notes and the denominator of which is the outstanding balance of all series of Notes as of that date. Servicer's Accounting: A certificate, completed by and executed on behalf of the, in accordance with Section 3.05 of the Pooling and Servicing Agreement. Servicing Default: An event described as such in Section 8.1 of the Trust Sale Servicing Agreement. Servicing Fee Rate: ___. Shared Investment Proceeds: Investment Proceeds other than: (A) Cash Accumulation Account Earnings, (B) Term Note Distribution Subaccount Earnings for the ______________________ Term Notes, (C) Investment Proceeds from the Cash Accumulation Reserve Fund, (D) Investment Proceeds from any other account established for other series of Term Notes in which funds are accumulated to pay principal on such Notes at designated times, and (E) any other Investment Proceeds which are designated in an Officer's Issuance Certificate as not constituting Shared Investment Proceeds. Specified Certificate Percentage: ___. Specified Maximum Revolver Balance: The maximum aggregate amount of borrowings that may be made under the Revolving Notes during the Revolving Period, which shall initially be $__________________. Specified Support Arrangement: Any letter of credit, security bond, cash collateral account, spread account, guaranteed rate agreement, maturity or liquidity facility, tax protection agreement, interest rate swap agreement, interest rate cap agreement, other derivative product or other arrangement to provide liquidity or credit support for the benefit of holder of one or more series or classes of Securities (other than the Reserve Fund), whether or not such arrangement is an asset of the Trust, designated as such. As of the Initial Closing Date, the Specified Support Arrangements will consist of the Basis Swaps and the Cash Accumulation Reserve Fund. Specified Trust Termination Date: _______________. Standard & Poor's: Standard & Poor's Ratings Services. State: Any one of the fifty states of the United States of America or the District of Columbia. Stated Final Payment Date: (i) In respect of a series of Notes, the date, specified as such in the related Officer's Issuance Certificate, on which final payment of principal on such series of Notes shall be due and payable and (ii) in respect of a class of Certificates, the date, specified as such in the Trust Agreement or the related Certificate Issuance Order, on which final payment of Certificate Balance on such class of Certificates shall be due and payable. Supplemental Principal Allocation: With respect to any Monthly Distribution Date related to the Wind Down Period or an Early Amortization Period or the Payment Period for the ______________________ Notes, an amount (not less than zero) equal to the lesser of (a) the excess, if any, of (i) the product of (A) the percentage equivalent of a fraction (which shall never exceed 100%), the numerator of which is the Daily Trust Balance and the denominator of which is the principal balance of all Receivables (including Receivables included in the Retained Property) in the Accounts included in the Pool of Accounts, in each case, as of the termination of the Ordinary Revolving Period, and (B) the aggregate amount of Principal Collections on all Receivables (including Receivables included in the Retained Property) in the Accounts included in the Pool of Accounts for each day during the related Collection Period over (ii) the aggregate amount of Trust Principal Collections for each day during the related Collection Period (provided, that no amount shall be included pursuant to clause (i)(B) or (ii) for any day in such Collection Period that occurred during the Ordinary Revolving Period) and (b) an amount equal to: (i) the Daily Trust Balance as of the termination of the Ordinary Revolving Period, plus (ii) the Cash Collateral Amount on the last day of the Ordinary Revolving Period, minus (iii) the Available Trust Principal for each Monthly Distribution Date from and after the final Monthly Distribution Date for the Revolving Period through but excluding such current Monthly Distribution Date, minus (iv) the amount added to unreimbursed Trust Charge-Offs on each Monthly Distribution Date from and after the final Monthly Distribution Date for the Revolving Period through and including such current Monthly Distribution Date, minus (v) Available Trust Principal for such current Monthly Distribution Date (assuming the Supplemental Principal Allocation for such Monthly Distribution Date was zero). For purposes of this definition, "Ordinary Revolving Period" means the period ending on the Business Day preceding the commencement of the Wind Down Period or the Early Amortization Period for the Trust or the Payment Period for the ______________________ term notes. ______________________ Reserve Funds: The Reserve Fund, the Cash Accumulation Reserve Funds, and any other fund designated as a ______________________ Reserve Fund in an Officer's Issuance Certificate or a Certificate Issuance Order. Targeted Final Payment Date: With respect to any series of Notes, the date, if any, specified as such in the related Officer's Issuance Certificate, on which all principal is scheduled to be paid as principal on such series of Notes, to the extent not previously paid. Temporary Notes: The Notes specified in Section 2.3 of the Indenture. Term Note: Any asset-backed term note executed by the Issuer by any of its Authorized Officers and authenticated by the Indenture Trustee in the form attached to the Officer's Issuance Certificate applicable to such series of term notes. Term Note Distribution Account: The account designated as such, established maintained pursuant to Section 6.1(a)(ii) of the Trust Sale and Servicing Agreement. Term Note Distribution Subaccount: With respect to any series of Notes, a subaccount of the Term Note Distribution Account which is used as specified in the Officer's Issuance Certificate for such series of Notes. Term Note Distribution Subaccount Earnings: With respect to any series of Notes, any Investment Proceeds in respect of funds in the Term Note Distribution Subaccount for such series. Term Noteholder: Any Holder of a Term Note. Treasury Regulations: The regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. Trust: ______________________, a Delaware business created pursuant to the Trust Agreement. Trust Agreement: The Trust Agreement, dated as of the Initial Closing Date, between the Seller and the Owner Trustee, as amended and supplemented from time to time, including all Certificate Issuance Orders. Trust Charge-Offs: With respect to any Monthly Distribution Date, the amount of the Trust Defaulted Amount for such Monthly Distribution Date that is not covered through the application of Trust Interest Collections and funds in the Reserve Fund or otherwise. As of any date, unreimbursed Trust Charge-Offs shall equal the aggregate Trust Charge-Offs for all prior Monthly Distribution Dates unless and to the extent such amounts are treated as Additional Trust Principal pursuant to Section 4.5(c) of the Trust Sale and Servicing Agreement; provided, however, that any Trust Charge-Offs allocated to any Notes as described in Section 4.5(g) of the Trust Sale and Servicing Agreement at the time of the final principal payment on such Notes shall reduce unreimbursed Trust Charge-Offs. Trust Defaulted Amount: With respect to any Monthly Distribution Date, an amount (not less than zero) equal to the principal amount of all Defaulted Receivables. Trust Equilibrium: Is achieved when the Daily Trust Balance equals the Daily Invested Amount. Trust Estate: All money, instruments, rights and other property that are subject or intended to be subject to the lien and security interest of the Indenture for the benefit of the Noteholders and (only to the extent expressly provided in the Indenture) the Certificateholders (including, without limitation, the Collateral described in the Granting Clause of the Indenture), including the proceeds thereof, the Reserve Fund and the Reserve Fund Property pledged to the Indenture Trustee pursuant to the Trust Sale and Servicing Agreement and any other property and interests that are pledged to the Indenture Trustee for the benefit of Securityholders pursuant to a supplement to the Trust Sale and Servicing Agreement or otherwise. Trust Indenture Act or TIA: The Trust Indenture Act of 1939, as amended. Trust Interest Allocation: For any series of Notes, for any Monthly Distribution Date, an amount equal to the product of (1) Available Trust Interest less the amounts paid to the Servicer pursuant to clause (1) of Section 4.5(c)(i) of the Trust Sale and Servicing Agreement and (2) the Trust Interest Allocation Percentage for such series. Trust Interest Allocation Percentage: With respect to any series of Notes, for any Distribution Date, a fraction calculated as set forth in the following equation: Trust Interest Allocation (UPB of Note Series) Percentage = ----------------------------------------- (UPB of All Term Notes) + (UPB of All Revolving Notes) where, for purposes of this equation only: "UPB of Note Series" is (1) for a series of Term Notes, the Unaccumulated Principal Balance for such series of Term Notes and (3) for a series of Revolving Notes, the daily average outstanding principal balance for such series of Revolving Notes during the related Collection Period "UPB of All Term Notes" is the Unaccumulated Principal Balances of all series of Term Notes then outstanding; and "UPB of All Revolving Notes" is the daily average of the outstanding principal balance of all Revolving Notes during the related Collection Period. Trust Interest Collections: With respect to any Monthly Distribution Date (subject to adjustment as described in Section 4.5(c)(v) of the Trust Sale and Servicing Agreement), an amount equal to the sum of (a) the product of (i) the Trust Percentage and (ii) Interest Collections for the related Collection Period and (b) Recoveries. Trust Percentage: With respect to any Monthly Distribution Date, the percentage equivalent of a fraction (which shall never exceed 100%), (a) the numerator of which is the average Daily Trust Balance during the related Collection Period and (b) the denominator of which is the average daily aggregate principal balance of all Receivables (including Receivables included in the Retained Property) in the Accounts in the Pool of Accounts during the related Collection Period. Trust Principal Collections: With respect to any date, the sum of (a) the amount of Principal Collections on Receivables held by the Trust and (b) the principal portion of all Warranty Payments and Administrative Purchase Payments, if any, on such date. Trust Receivables Purchases: On any Business Day, the purchase by the Trust from the Seller of additional Receivables pursuant to Section 2.1(b) of the Trust Sale and Servicing Agreement. Trust Sale and Servicing Agreement: The Trust Sale and Servicing Agreement, dated as of the Initial Closing Date, between the Seller, the Servicer and the Issuer, as amended and supplemented from time to time. Trust Termination Date: The date specified in Section 7.1 of the Trust Agreement. UCC: The Uniform Commercial Code as in effect in the States of Delaware, or New York, and as may be amended from time to time. Unaccumulated Principal Balance: With respect to any series of Term Notes as a Monthly Distribution Date, (1) the daily average of the outstanding principal balance of such Term Notes during the related Collection Period minus (2) with respect to the ______________________ Term Notes, the daily average during the related Collection Period of the sum of (x) the amount of funds on deposit in the relevant Cash Accumulation Account, and (y) the amount of funds on deposit in the relevant Term Note Distribution Account in respect of the outstanding principal balance of Term Notes. Uncertificated Security: As of any date, has the meaning given to such term under the applicable UCC as in effect on such date. Undertaking Letter: Any letter referred to in Sections 3.4 and 9.12 of the Trust Agreement or Section 2.15 of the Indenture. Unregistered Note: Any Note that has not been registered under the Securities and is subject to the provisions of Section 2.15 of the Indenture. Unsatisfied Deficiency Amount: The amounts determined to be Unsatisfied Amounts in Section 4.5(c)(ii) of the Trust Sale and Servicing Agreement. Used Vehicles: Under the Original Seller's current practices and policies, Auction Vehicles and Vehicles which have been previously titled; provided, however, that vehicles that are titled solely for purposes of state laws requiring demonstration vehicles to be titled shall not be considered Used Vehicles. USD One-Month LIBOR: With respect to each Monthly Distribution Date, the rate for deposits in U.S. Dollars for a period of one month which appears on the Bridge Information Systems Telerate Service Page 3750 as of 11:00 a.m., London time, for the ______________________ Term Notes and the ______________________ Certificates, on the day that is two LIBOR Business Days prior to the Monthly Distribution Date (or, in the case of the Initial Monthly Distribution Date, two LIBOR Business Days prior to the Initial Closing Date) immediately preceding such Monthly Distribution Date. If such rate does not appear on such page (or such other page as may replace that page on that service, or if such service is no longer offered, such other service for displaying LIBOR or comparable rates as may be selected by the Indenture Trustee after consultation with the Seller), the rate will be the One Month Reference Bank Rate. The "One Month Reference Bank Rate" will be determined on the basis of the rates at which deposits in U.S. dollars are offered by the reference banks (which will four major banks that are engaged in transactions in the London interbank market, selected by the Indenture Trustee after consultation with the seller) as of 11:00 a.m., London time, on the day that is two LIBOR Business Days prior to the immediately preceding Monthly Distribution Date to prime banks in the London interbank market for a period of one month commencing on such preceding Monthly Distribution Date in amounts approximately equal to the principal balance of the ______________________ Term Notes or the Certificate Balance of the ______________________ Certificates then outstanding, as applicable. The Indenture Trustee will request the principal London office of each of the reference banks to provide a quotation of its rate. If at least two such quotations are provided, the rate will be the arithmetic mean of the quotations, rounded upwards to the nearest one-sixteenth of one percent. If on any such date fewer than two quotations are provided as requested, the rate will be the arithmetic mean, rounded upwards to the nearest one-sixteenth of one percent, of the rates quoted by one or more major banks in New York, selected by the Indenture Trustee after consultation with the Seller, as of 11:00 a.m., New York time, on such date to leading European banks for U.S. dollar deposits for a period of one month commencing on such applicable date in amounts approximately equal to the then outstanding principal balance of the ______________________ Term Notes or the Certificate Balance of the ______________________ Certificates then outstanding, as applicable. If no such quotation can be obtained, the rate will be One-Month LIBOR for the prior Monthly Distribution Date. USD Three-Month LIBOR: With respect to each Monthly Distribution Date, the rate for deposits in U.S. Dollars for a period of three months which appears on the Bridge Information Systems Telerate Service Page 3750 as of 11:00 a.m., London time, for the ______________________ Term Notes and the ______________________ Certificates, on the day that is two LIBOR Business Days prior to the Quarterly Distribution Date (or, in the case of the Initial Quarterly Distribution Date, two LIBOR Business Days prior to the Initial Closing Date) immediately preceding such Quarterly Distribution Date. If such rate does not appear on such page (or such other page as may replace that page on that service, or if such service is no longer offered, such other service for displaying LIBOR or comparable rates as may be selected by the Indenture Trustee after consultation with the Seller), the rate will be the Three Month Reference Bank Rate. The "Three Month Reference Bank Rate" will be determined on the basis of the rates at which deposits in U.S. dollars are offered by the reference banks (which will be four major banks that are engaged in transactions in the London interbank market, selected by the Indenture Trustee after consultation with the seller) as of 11:00 a.m., London time, on the day that is two LIBOR Business Days prior to the immediately preceding Quarterly Distribution Date to prime banks in the London interbank market for a period of three months commencing on such preceding Quarterly Distribution Date in amounts approximately equal to the principal balance of the ______________________ Term Notes or the Certificate Balance of the ______________________ Certificates then outstanding, as applicable. The Indenture Trustee will request the principal London office of each of the reference banks to provide a quotation of its rate. If at least two such quotations are provided, the rate will be the arithmetic mean of the quotations, rounded upwards to the nearest one-sixteenth of one percent. If on any such date fewer than two quotations are provided as requested, the rate will be the arithmetic mean, rounded upwards to the nearest one-sixteenth of one percent, of the rates quoted by one or more major banks in New York, selected by the Indenture Trustee after consultation with the seller, as of 11:00 a.m., New York time, on such date to leading European banks for U.S. dollar deposits for a period of three months commencing on such applicable date in amounts approximately equal to the then outstanding principal balance of the ______________________ Term Notes or the Certificate Balance of the ______________________ Certificates then outstanding, as applicable. If no such quotation can be obtained, the rate will be Three-Month LIBOR for the prior Quarterly Distribution Date. Vehicle: An automobile or light truck. Vehicle Collateral Security: With respect to an Account and the Receivables arising under such Account, the security interest in the Vehicles of the related Dealer granted to secure the obligations of such Dealer in connection therewith and any proceeds therefrom. Voting Interests: As of any date, the aggregate outstanding Certificate Balance of all Certificates; provided, however, that if the Original Seller and its affiliates own less than 100% of the Certificates, Certificates owned by the Original Seller, the Trust or any Affiliate of the Original Seller or the Trust (other than the Seller) shall be disregarded and deemed not to be outstanding, except that, in determining whether the Owner Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Certificates that the Owner Trustee knows to be so owned shall be so disregarded. Certificates so owned that have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Owner Trustee the pledgor's right so to act with respect to such Certificates and that the pledgee is not the Original Seller or the Trust or any Affiliate of the Original Seller or the Trust (other than the Seller). Warranty Payment: The payment described in Section 2.5(a) of the Trust Sale Servicing Agreement. Warranty Receivable: A Receivable subject to repurchase as and to the extent described in Section 2.5(a) of the Trust Sale and Servicing Agreement. Wind Down Period: The period commencing on the day immediately after the Scheduled Revolving Period Termination Date and continuing until the earlier of (a) the commencement of an Early Amortization Period and (b) the date on which all of the Securities have been paid in full. The first Monthly Distribution Date for the Wind Down Period shall be the earlier of the Monthly Distribution Date in ____________ and the Monthly Distribution Date related to the first Collection Period included in the Wind Down Period. PART II - RULES OF CONSTRUCTION (A) Accounting Terms. As used in this Appendix or the Basic Documents, accounting terms which are not defined, and accounting terms partly defined, herein or therein shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Appendix or the Basic Documents are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Appendix or the Basic Documents will control. (B) "Hereof," etc. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Appendix or any Basic Document will refer to this Appendix or such Basic Document as a whole and not to any particular provision of this Appendix or such Basic Document; and Section, Schedule and Exhibit references contained in this Appendix or any Basic Document are references to Sections, Schedules and Exhibits in or to this Appendix or such Basic Document unless otherwise specified. The word "or" is not exclusive. (C) Including. Whenever the term "including" (whether or not that term is followed by the phrase "but not limited to" or "without limitation" or words of similar effect) is used in this Appendix or the Basic Documents in connection with a listing of items within a particular classification, that listing will be interpreted to be illustrative only and will not be interpreted as a limitation on, or exclusive listing of, the items within that classification. (D) Number and Gender. Each defined term used in this Appendix or the Basic Documents has a comparable meaning when used in its plural or singular form. Each gender-specific term used in this Appendix or the Basic Documents has a comparable meaning whether used in a masculine, feminine or gender-neutral form. (E) Reference to Monthly Distribution Dates. With respect to any Monthly Distribution Date, the "related Collection Period," and the "related Record Date," will mean the Collection Period and Record Date, respectively, immediately preceding such Monthly Distribution Date, and the relationships among Collection Periods and Record Dates will be correlative to the foregoing relationships. APPENDIX B NOTICE ADDRESSES AND PROCEDURES All requests, demands, directions, consents, waivers, notices, authorizations and communications provided or permitted under any Basic Document to be made upon, given or furnished to or filed with the Seller, the Servicer, the Administrator, the Indenture Trustee, the Issuer, the Owner Trustee, the Custodian or the Rating Agencies shall be in writing, personally delivered, sent by facsimile with a copy to follow via first class mail or mailed by certified mail-return receipt requested, and shall be deemed to have been duly given upon receipt: (A) in the case of the Seller, at the following address: ACE Securities Corp. 6525 Morrison Boulevard Suite 318 Charlotte, North Carolina 28211 with a copy to: ______________________ ______________________ ______________________ ______________________ (B) in the case of the Servicer, the Administrator or the Custodian, at the following address: ______________________ ______________________ ______________________ ______________________ (C) in the case of the Indenture Trustee, at its Corporate Trust Office, (D) in the case of the Issuer or the Owner Trustee, to the Owner Trustee at its Corporate Trust Office, with a copy to: ______________________ ______________________ ______________________ ______________________ The Issuer shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee and the Indenture Trustee shall likewise promptly transmit any notice received by it from the Noteholders to the Issuer. (E) in the case of Moody's Investors Service, Inc., to: Moody's Investors Service, Inc. ABS Monitoring Department 99 Church Street New York, New York 10007 (F) in the case of Standard & Poor's Ratings Services, to: Standard & Poor's Ratings Services 55 Water Street 29th Floor New York, New York 10041-0003 (G) in the case of Fitch, Inc., to: Fitch, Inc. One State Street Plaza New York, New York 10004 Attention: Asset Backed Surveillance or at such other address as shall be designated by such Person in a written notice to the other parties to this Agreement. Where any Basic Document provides for notice to Noteholders or Certificateholders of any condition or event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if it is in writing and mailed, first-class, postage prepaid to each Noteholder or Certificateholder affected by such condition or event, at such Person's address as it appears on the Note Register or Certificate Register, as applicable, not later than the latest date, and not earlier than the earliest date, prescribed in such Basic Document for the giving of such notice. If notice to Noteholders or Certificateholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholders or Certificateholders shall affect the sufficiency of such notice with respect to other Noteholders or Certificateholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given regardless of whether such notice is in fact actually received. EX-4.2.2 7 0007.txt EXHIBIT 4.2.2 ============================================================================== POOLING AND SERVICING AGREEMENT among [ ] EQUIPMENT TRUST SECURITIES [ ] as Issuer, ACE SECURITIES CORP. as Depositor, [ ] in its individual capacity and in its individual capacity and as Servicer Dated as of [ , ] ============================================================================== TABLE OF CONTENTS ARTICLE I DEFINITIONS Section 1.01. Definitions................................................1 Section 1.02. Usage of Terms............................................40 Section 1.03. Section References........................................40 Section 1.04. Accounting Terms..........................................41 ARTICLE II FUNDINGS OF TRUST; TRANSFERS OF CONTRACTS Section 2.01. Creation and Funding of Trust; Transfer of Transferred Assets to Trust...............................42 Section 2.02. Conditions to Transfers...................................43 Section 2.03. Acceptance by Trust.......................................45 Section 2.04. Conveyance of Substitute Contracts........................45 Section 2.05. Release of Excluded Amounts...............................47 ARTICLE III REPRESENTATIONS AND WARRANTIES Section 3.01. Representations and Warranties Regarding the Depositor.................................................48 Section 3.02. Representations and Warranties of the Servicer............50 ARTICLE IV PERFECTION OF TRANSFERS AND PROTECTION OF SECURITY INTERESTS Section 4.01. Custody of Contracts......................................53 Section 4.02. Filings...................................................54 Section 4.03. Name Change or Relocation.................................54 ARTICLE V SERVICING OF CONTRACTS Section 5.01. Initial Servicer's Appointment and Acceptance; Responsibility for Contract Administration................55 Section 5.02. General Duties............................................55 Section 5.03. Assignment or Replacement.................................56 Section 5.04. Disposition Upon Termination of Contract..................56 Section 5.05. Subservicers..............................................56 Section 5.06. Further Assurance.........................................56 Section 5.07. Notice to Obligors........................................57 Section 5.08. Collection Efforts; Modification of Contracts.............57 Section 5.09. Prepayments of Certain Contracts..........................58 Section 5.10. Certain Extensions; Acceleration..........................58 Section 5.11. Taxes and Other Amounts...................................59 Section 5.12. Suits by Servicer.........................................59 Section 5.13. Remittances...............................................59 Section 5.14. Servicer Advances.........................................59 Section 5.15. Realization Upon Defaulted Contract.......................59 Section 5.16. Maintenance of Insurance Policies.........................60 Section 5.17. Certain Other Duties With Respect ti Trust................60 Section 5.18. Servicing Compensation....................................60 Section 5.19 Payment of Certain Expenses by Servicer...................60 Section 5.20. Records...................................................61 Section 5.21. Inspection................................................61 Section 5.22. Trust To Cooperate in Releases............................61 Section 5.23. [RESERVED]................................................61 Section 5.24. Separate Entity Existence.................................62 ARTICLE VI COVENANTS OF THE DEPOSITOR Section 6.01. LLC Existence.............................................62 Section 6.02. Contracts Not to be Evidenced by Promissory Notes.........62 Section 6.03. Security Interests........................................62 Section 6.04. Delivery of Collections...................................62 Section 6.05. Regulatory Filings........................................62 Section 6.06. Compliance With Law.......................................63 Section 6.07. Activities................................................63 Section 6.08. Indebtedness..............................................63 Section 6.09. Guarantees................................................63 Section 6.10. Investments...............................................63 Section 6.11. Merger; Transfers.........................................63 Section 6.12. Payments..................................................64 Section 6.13. Other Agreements..........................................64 Section 6.14. Separate Entity Existence.................................64 Section 6.15. Location; Records.........................................65 Section 6.16. Liability of Depositor; Indemnities.......................65 Section 6.17. Bankruptcy Limitations....................................67 Section 6.18. Limitation on Liability of Depositor and Others...........67 Section 6.19. Chief Executive Office....................................67 ARTICLE VII ESTABLISHMENT OF ACCOUNTS; PAYMENTS Section 7.01. Trust Accounts; Collections...............................68 Section 7.02. Cash Collateral Account...................................68 Section 7.03. Trust Account Procedures..................................69 Section 7.04. Securityholder Payments...................................69 Section 7.05. Allocations and Payments..................................70 Section 7.06. Repurchases of, or Substitution for, Contracts for Breach of Representations and Warranties..................77 Section 7.07. Reassignment of Repurchased or Substituted Contracts.................................................78 Section 7.08. [ ] and Depositor's Repurchase Option.........................................78 ARTICLE VIII SERVICER DEFAULTS; SERVICING TRANSFER Section 8.01. Servicer Default..........................................79 Section 8.02. Servicing Transfer........................................80 Section 8.03. Appointment of Successor Servicer; Reconveyance; Successor Servicer to Act.................................80 Section 8.04. Notifications to Noteholders and the Equity Certificateholders........................................82 Section 8.05. Effect of Transfer........................................82 Section 8.06. Database File.............................................82 Section 8.07. Successor Servicer Indemnification........................82 Section 8.08. Responsibilities of the Successor Servicer................83 ARTICLE IX SERVICER REPORTING Section 9.01. Monthly Reports...........................................84 Section 9.02. Officer's Certificate.....................................84 Section 9.03. Other Data................................................84 Section 9.04. Annual Reporting; Evidence as to Compliance...............84 Section 9.05. Annual Statement of Compliance from Servicer..............85 ARTICLE X TERMINATION Section 10.01. Sale of Trust Assets......................................85 ARTICLE XI MISCELLANEOUS Section 11.01. Amendments................................................86 Section 11.02. [Reserved]................................................87 Section 11.03. Governing Law.............................................87 Section 11.04. Notices...................................................88 Section 11.05. Severability of Provisions................................89 Section 11.06. Third Party Beneficiaries.................................89 Section 11.07. Counterparts..............................................90 Section 11.08. Headings..................................................90 Section 11.09. No Bankruptcy Petition; Disclaimer and Subordination......90 Section 11.10. Jurisdiction..............................................91 Section 11.11. Tax Characterization......................................91 Section 11.12. Servicer Indemnity........................................91 Section 11.13. Limitation of Liability of Owner Trustee..................91 Section 11.14. Waiver of Jury Trial......................................92 Section 11.15. Third Party Beneficiary...................................92 EXHIBITS Exhibit A - Form of Transfer Agreement...............................A-1 Exhibit B - [Reserved]...............................................B-1 Exhibit C - Initial Schedule of Contracts............................C-1 Exhibit D - Form of Servicer's Monthly Report........................D-1 Exhibit E - Form of Substitution Transfer Agreement..................E-1 Exhibit F - Hedging Requirements.....................................F-1 Exhibit G - Schedule of Representations and Warranties...............G-1 Exhibit H - Certain Concentration Criteria...........................H-1 Exhibit I - [Reserved]...............................................I-1 Exhibit J - Minimum Value Filing Exceptions..........................J-1 This POOLING AND SERVICING AGREEMENT, dated as of [ ], is among [ ] Equipment Trust Securities [ ], a Delaware business trust (together with its successors and assigns, the "Issuer" or the "Trust"), ACE Securities Corp., a Delaware corporation (together with its successors and assigns, the "Depositor"), [ ], a Delaware corporation (together with its successors and assigns, "[ ]" and, in its capacity as the Servicer, the "Servicer") and [ together with its successors and assigns, "[ ]"). WHEREAS the Depositor desires to fund the Trust by selling, conveying and assigning from time to time, pursuant hereto or Substitution Transfer Agreements hereunder, designated Contracts or pools of Contracts together with certain related security therefor and other related rights and property as further described herein, which Contracts were originated by one or more Financing Originators, or acquired by purchase and assignment by a Financing Originator from the prior owner thereof, and subsequently conveyed (i) by certain Financing Originators to [ ] pursuant to the Conveyancing Agreement (as defined herein), and (ii) by [ ] to the Depositor, with respect to Contracts and related assets both originated or acquired directly by [ ] as a Financing Originator, and acquired by [ ] from the other Financing Originators as described in clause (i) above, pursuant to the Purchase and Sale Agreement (as defined herein); and WHEREAS the Trust is willing to purchase and accept assignment of such Contracts and related assets, including, without limitation such Contracts and other assets as the Depositor has previously conveyed to the [ ] - [ ] and which the [ ] - [ ] has assigned back to the Depositor from the Depositor pursuant to the terms hereof; and WHEREAS the Servicer is willing to service such Contracts and related assets for the benefit and account of the Trust and the Holders pursuant to the terms hereof; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: "Accounting Date" means, with respect to a Payment Date, the last day of the preceding calendar month. "Accrual Period" means, with respect to any Payment Date, the period from and including the immediately preceding Payment Date to but excluding such Payment Date, provided, that the initial Accrual Period following the Closing Date shall be the period from and including the Closing Date to but excluding the first Payment Date following the Closing Date. "Addition Notice" means, with respect to any transfer of Subsequent Contracts to the Trust pursuant to Section 2.04 (and the Depositor's corresponding prior purchase of such Contracts from [ ]), a notice, which shall be given at least five days prior to the related Subsequent Transfer Date, identifying the Subsequent Contracts to be transferred, the Contract Principal Balance of such Subsequent Contracts and the related Substitution Event (with respect to an identified Contract or Contracts then in the Contracts Pool) to which such Subsequent Contract relates, with such notice to be signed both by the Depositor and the [ ]. "Additional Principal" means, with respect to any Payment Date, an amount equal to (a) the Total Principal Payment Amount, less (b) the sum of the Class A-1 Principal Payment Amount, the Class A-2 Principal Payment Amount, the Class A-3 Principal Payment Amount, the Class A-4 Principal Payment Amount, the Class A-5 Principal Payment Amount, the Class B Principal Payment Amount, the Class C Principal Payment Amount and the Class D Principal Payment Amount. "Administration Agreement" means the Administration Agreement dated as of [ ] by and among the Trust, [ ], the Depositor and the Indenture Trustee. "Affiliate" of any specified Person means any other Person controlling or controlled by, or under common control with, such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" or "controlled" have meanings correlative to the foregoing. "Agreement" means this Pooling and Servicing Agreement, as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof. "Aggregate Principal Amount" means, with respect to any group of Notes, at any date of determination, the sum of the Principal Amounts of such Notes on such date of determination. "Allocation Criteria" means, with respect to the allocation of Insurance Proceeds or Liquidation Proceeds between the Trust (for inclusion as Pledged Revenues) and the Depositor, as contemplated in the definition of Available Pledged Revenues, that Insurance Proceeds or Liquidation Proceeds with respect to the Contracts consisting of Leases are allocable pro rata between inclusion as Available Pledged Revenues in respect of the Contract Pool, on the one hand, and directly to the Depositor, on the other, based upon (i) for allocation to Available Pledged Revenues, the Required Payoff Amount for such Lease (determined as of the beginning of the Collection Period during which such Lease became a Defaulted Contract), and (ii) for allocation to the Depositor, the Book Value of the related Equipment; provided, that in the event the Insurance Proceeds or Liquidation Proceeds in respect of a particular Lease exceed the sum of such Required Payoff Amount for such Lease plus the Book Value of the related Equipment, any such excess shall be allocated solely to the Depositor. "Applicable Security" means, with respect to a Vendor Loan, any (i) Secondary Contract securing such Vendor Loan and (ii) Equipment securing such Vendor Loan or a related Secondary Contract. "Assignment Agreement" means each Assignment Agreement, substantially in the form of Exhibit A-1 attached hereto, in the case of the [ ] Assignment, and in the form of Exhibit A to the Purchase and Sale Agreement, in the case of the Assignment Agreement executed by [ ], relating to an assignment, transfer and conveyance of Contracts and related assets by the [ ] Trust or [ ] to the Depositor, as the case may be. "Amount Available" means, with respect to any Payment Date, the sum of (i) the Available Pledged Revenues for such Payment Date, and (ii) that portion of the balance in the Cash Collateral Account available for withdrawal by the Trustee in accordance with Section 7.05(c). "Available Cash Collateral" means, with respect to a Payment Date, the amount of funds equal to the lesser of (i) the amount on deposit in the Cash Collateral Account (determined (a) exclusive of any net investment earnings, thereon and (b) before giving effect to any deposit to be made or withdrawals from the Cash Collateral Account with respect to such Payment Date), and (ii) the Requisite Cash Collateral Amount. "Available Pledged Revenues" means, as to any Payment Date, the sum of (i) the Related Collection Period Pledged Revenues for such Payment Date, (ii) all Purchase Amounts (other than any portion thereof attributable to the Book Value of the Leased Equipment) on deposit in the Collection Account as of the immediately preceding Deposit Date, (iii) the amount paid by the Depositor to purchase the Contracts pursuant to Section [ ] of the Pooling and Servicing Agreement on deposit in the Collection Account as of the immediately preceding Deposit Date, (iv) all net income from investments of funds in the Collection Account and the Note Distribution Account during the related Collection Period, and (v) to the extent necessary to pay the Note Interest Distributable Amount for such Payment Date, the Current Collection Period Pledged Revenues for such Payment Date. "Book Value" means, with respect to any Equipment subject to a Lease, the value of such Equipment as shown on the accounting books and records of the applicable Financing Originator (or the Depositor, in the case of Equipment relating to Contracts being transferred pursuant to the [ ] Assignment), as of the Cutoff Date for the related Lease (it being understood that, Book Value constitutes a measure of the lessor's residual interest in the Equipment as shown on its books and records as of such date, net of the financial asset shown on such books and records represented by the discounted Scheduled Payments owing on the Lease). "Business Day" means any day which is neither a Saturday or a Sunday, nor another day on which banking institutions in the cities of [ ] or New York, New York are authorized or obligated by law, executive order, or governmental decree to be closed. "Business Trust Statute" has the meaning specified in the Trust Agreement. "Cash Collateral Account" means the Cash Collateral Account established and maintained pursuant to Section 7.01 hereof "Cash Collateral Account Agreement" means the Loan Agreement dated as of [ ], among the Depositor, the Trust, the Indenture Trustee, the Cash Collateral Account Lenders and the Cash Collateral Account Lenders' Agent, as the same may be amended, supplemented or otherwise modified in accordance with the terms thereof. "Cash Collateral Account Lenders" means the parties identified as lenders in the Cash Collateral Account Agreement. "Cash Collateral Account Lenders' Agent" means the party identified as agent for the Cash Collateral Account Lenders in the Cash Collateral Account Agreement. "Cash Collateral Initial Balance" means [ ], which is equal to [ ]% of the Initial Contract Pool Principal Balance. "Casualty Loss" means, with respect to any item of Equipment, the loss, theft, damage beyond repair or governmental condemnation or seizure of such item of Equipment. "Certificate Register" has the meaning specified in the Trust Agreement. "Certificateholder" has the meaning specified in the Trust Agreement. "Class" means any of the group of Notes or the Equity Certificate identified herein as, as applicable, the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class B Notes, the Class C Notes, the Class D Notes, or the Equity Certificate. "Class A Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes. "Class A Percentage" means [ ]% "Class A Principal Payment Amount" means: (A) (i) with respect to any Payment Date on or prior to the Payment Date on which the Class A-1 Principal Balance is reduced to zero, the Total Principal Payment Amount; provided that if, the distribution of the Total Principal Payment Amount in accordance with Section [ ] would result in the Class A-1 Principal Balance equaling zero, the Class A Principal Payment Amount with respect to such Payment Date will be an amount equal to (x) the Class A-1 Principal Balance plus (y) the greater of (1) [ ]% of the Total Principal Payment Amount or (2) the remainder of (I) the sum of the Class A-2 Principal Balance, the Class A-3 Principal Balance, the Class A-4 Principal Balance and the Class A-5 Principal Balance minus (II) the Class A Target Principal Amount; and (ii) with respect to any Payment Date thereafter, the remainder of (a) the sum of the Class A-2 Principal Balance, the Class A-3 Principal Balance, the Class A-4 Principal Balance and the Class A-5 Principal Balance minus (b) the Class A Target Principal Amount; plus (B) with respect to any Payment Date, any Class A Principal Shortfall Amount; provided, however, that in no event will the Class A Principal Payment Amount exceed the Class A Principal Balance. "Class A Principal Shortfall Amount" means, with respect to any Payment Date that is the Stated Maturity Date for a Class of Class A Notes, and any Payment Date thereafter, the amount, if any, by which (i) the sum of (a) the Principal Balance of such Class, plus (b) until the Class A-4 Principal Balance has been reduced to zero, [ ]% of the Total Principal Payment Amount, exceeds (ii) the Total Principal Payment Amount. "Class A Target Principal Amount" means, with respect to any Payment Date, the product of (i) the Class A Percentage and (ii) the Contract Pool Principal Balance as of the related Accounting Date. "Class A-1 Interest Carryover Shortfall" means, with respect to any Payment Date, the excess, if any, of the Class A-1 Interest Distributable Amount for the preceding Payment Date over the amount that was actually distributed in respect of interest on the Class A-1 Notes on such preceding Payment Date, plus, to the extent permitted by law, an amount equal to the product of (i) the Class A-1 Interest Rate, (ii) such excess, and (iii) a fraction equal to the number of days in the related Interest Period divided by 360. "Class A-1 Interest Distributable Amount" means, with respect to any Payment Date, the sum of the Class A-1 Monthly Interest Distributable Amount and the Class A-1 Interest Carryover Shortfall for such Payment Date. "Class A-1 Interest Rate" means [ ]% per annum. "Class A-1 Interest Distributable Amount" means, with respect to any Account Period and the related Payment Date, an amount equal to the product of (i) the Class A-1 Interest Rate, (ii) the Principal Balance of the Class A-1 Notes on the immediately preceding Payment Date, after giving effect to all payments of principal to Class A-1 Noteholders on or prior to such immediately preceding Payment Date (or, in the case of the first Payment Date, the Initial Principal Amount of the Class A-1 Notes), and (iii) a fraction equal to the number of days in such Interest Period divided by 360. "Class A-1 Notes" means the $[ ] aggregate principal amount of [ ]% Receivable-Backed Notes, Class A-1, issued pursuant to the Indenture. "Class A-1 Maturity Date" means [ ] (or, if such day is not a Business Day, the next preceding Business Day). "Class A-2 Interest Carryover Shortfall" means, with respect to any Payment Date, the excess, if any, of the Class A-2 Interest Distributable Amount for the preceding Payment Date over the amount that was actually distributed in respect of interest on the Class A-2 Notes on such preceding Payment Date, plus, to the extent permitted by law, an amount equal to the product of (i) the Class A-2 Interest Rate, (ii) such excess, and (iii) a fraction equal to one-twelfth. "Class A-2 Interest Distributable Amount" means, with respect to any Payment Date, the sum of the Class A-2 Monthly Interest Distributable Amount and the Class A-2 Interest Carryover Shortfall for such Payment Date. "Class A-2 Interest Rate" means [ ]% per annum. "Class A-2 Interest Distributable Amount" means (a) with respect to the first Interest Period and the related Payment Date, an amount equal to the product of (i) the Class A-2 Interest Rate, (ii) the Initial Principal Amount of the Class A-2 Notes, and (iii) a fraction equal to 28 divided by 360, and (b) with respect to each subsequent Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class A-2 Interest Rate, (ii) the Principal Balance of the Class A-2 Notes on the immediately preceding Payment Date, after giving effect to all payments of principal to Class A-2 Noteholders on or prior to such immediately preceding Payment Date, and (iii) a fraction equal to one-twelfth. "Class A-2 Notes" means the $[ ] aggregate principal amount of [ ]% Receivable-Backed Notes, Class A-2, issued pursuant to the Indenture. "Class A-2 Maturity Date" means [ ] (or, if such day is not a Business Day, the next succeeding Business Day thereafter). "Class A-3 Interest Carryover Shortfall" means, with respect to any Payment Date, the excess, if any, of the Class A-3 Interest Distributable Amount for the preceding Payment Date over the amount that was actually distributed in respect of interest on the Class A-3 Notes on such preceding Payment Date, plus, to the extent permitted by law, an amount equal to the product of (i) the Class A-3 Interest Rate, (ii) such excess, and (iii) a fraction equal to one-twelfth. "Class A-3 Interest Distributable Amount" means, with respect to any Payment Date, the sum of the Class A-3 Monthly Interest Distributable Amount and the Class A-3 Interest Carryover Shortfall for such Payment Date. "Class A-3 Interest Rate" means [ ]% per annum. "Class A-3 Monthly Interest Distributable Amount" means (a) with respect to the first Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class A-3 Interest Rate, (ii) the Initial Principal Amount of the Class A-3 Notes, and (iii) a fraction equal to 28 divided by 360, and (b) with respect to each subsequent Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class A-3 Interest Rate, (ii) the Principal Balance of the Class A-3 Notes on the immediately preceding Payment Date, after giving effect to all payments of principal to Class A-3 Noteholders on or prior to such immediately preceding Payment Date, and (iii) a fraction equal to one-twelfth. "Class A-3 Notes" means the $[ ] aggregate principal amount of [ ]% Receivable-Backed Notes, Class A-3, issued pursuant to the Indenture. "Class A-3 Maturity Date" means [ ] (or, if such day is not a Business Day, the next succeeding Business Day thereafter). "Class A-4 Interest Carryover Shortfall" means, with respect to any Payment Date, the excess, if any, of the Class A-4 Interest Distributable Amount for the preceding Payment Date over the amount that was actually distributed in respect of interest on the Class A-4 Notes on such preceding Payment Date, plus, to the extent permitted by law, an amount equal to the product of (i) the Class A-4 Interest Rate, (ii) such excess, and (iii) a fraction equal to one-twelfth. "Class A-4 Interest Distributable Amount" means, with respect to any Payment Date, the sum of the Class A-4 Monthly Interest Distributable Amount and the Class A-4 Interest Carryover Shortfall for such Payment Date. "Class A-4 Interest Rate" means [ ]% per annum. "Class A-4 Monthly Interest Distributable Amount" means (a) with respect to the first Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class A-4 Interest Rate, (ii) the Initial Principal Amount of the Class A-4 Notes, and (iii) a fraction equal to 28 divided by 360, and (b) with respect to each subsequent Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class A-4 Interest Rate, (ii) the Principal Balance of the Class A-4 Notes on the immediately preceding Payment Date, after giving effect to all payments of principal to Class A-4 Noteholders on or prior to such immediately preceding Payment Date, and (iii) a fraction equal to one-twelfth. "Class A-4 Notes" means the $[ ] aggregate principal amount of [ ]% Receivable-Backed Notes, Class A-4, issued pursuant to the Indenture. "Class A-4 Maturity Date" means [ ] (or, if such day is not a Business Day, the next succeeding Business Day thereafter). "Class A-5 Interest Carryover Shortfall" means, with respect to any Payment Date, the excess, if any, of the Class A-5 Interest Distributable Amount for the preceding Payment Date over the amount that was actually distributed in respect of interest on the Class A-5 Notes on such preceding Payment Date, plus, to the extent permitted by law, an amount equal to the product of (i) the Class A-5 Interest Rate, (ii) such excess, and (iii) a fraction equal to one-twelfth. "Class A-5 Interest Distributable Amount" means, with respect to any Payment Date, the sum of the Class A-5 Monthly Interest Distributable Amount and the Class A-5 Interest Carryover Shortfall for such Payment Date. "Class A-5 Interest Rate" means [ ]%. "Class A-5 Monthly Interest Distributable Amount" means (a) with respect to the first Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class A-5 Interest Rate, (ii) the Initial Principal Amount of the Class A-5 Notes, and (iii) a fraction equal to 28 divided by 360, and (b) with respect to each subsequent Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class A-5 Interest Rate, (ii) the Principal Balance of the Class A-5 Notes on the immediately preceding Payment Date, after giving effect to all payments of principal to Class A-5 Noteholders on or prior to such immediately preceding Payment Date, and (iii) a fraction equal to one-twelfth. "Class A-5 Notes" means the $[ ] aggregate principal amount of [ ]% Receivable-Backed Notes, Class A-5, issued pursuant to the Indenture. "Class A-5 Maturity Date" means [ ] (or, if such day is not a Business Day, the next succeeding Business Day thereafter). "Class B Floor" means, with respect to any Payment Date, (i) [ ]% of the Contract Pool Principal Balance as of the Initial Cutoff Date, plus (ii) the Principal Differential, if any, for such Payment Date, minus (iii) the sum of the Class C Principal Balance and the Class D Principal Balance (prior to giving effect to any payments of principal on the Class C or Class D Notes on such Payment Date) and the amount on deposit in the Cash Collateral Account (after giving effect to withdrawals to be made on such Payment Date); provided, however, that in no event will the Class B Floor be greater than the Class B Principal Balance immediately prior to such Payment Date nor less than zero. "Class B Interest Carryover Shortfall" means, with respect to any Payment Date, the excess, if any, of the Class B Interest Distributable Amount for the preceding Payment Date over the amount that was actually distributed in respect of interest on the Class B Notes on such preceding Payment Date, plus, to the extent permitted by law, an amount equal to the product of (i) the Class B Interest Rate, (ii) such excess, and (iii) a fraction equal to one-twelfth. "Class B Interest Distributable Amount" means, with respect to any Payment Date, the sum of the Class B Monthly Interest Distributable Amount and the Class B Interest Carryover Shortfall for such Payment Date. "Class B Interest Rate" means [ ]% per annum. "Class B Monthly Interest Distributable Amount" means (a) with respect to the first Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class B Interest Rate, (ii) the Initial Principal Balance of the Class B Notes, and (iii) a fraction equal to 28 divided by 360, and (b) with respect to each subsequent Accrual Period and the related Payment Date Payment Date, an amount equal to the product of (i) the Class B Interest Rate, (ii) the Principal Balance of the Class B Notes on the immediately preceding Payment Date, after giving effect to all payments of principal to Class B Noteholders on or prior to such immediately preceding Payment Date, and (iii) a fraction equal to one-twelfth. "Class B Notes" means the $[ ] aggregate principal amount of [ ]% Receivable-Backed Notes, Class B, issued pursuant to the Indenture. "Class B Percentage" means [ ]%. "Class B Principal Payment Amount" means (i) zero with respect to any Payment Date prior to the Payment Date on which the Class A-1 Principal Balance is reduced to zero, and (ii) with respect to any Payment Date thereafter, the excess, if any, of (a) the Class B Principal Balance over (b) the greater of (1) the Class B Target Principal Amount and (2) the Class B Floor, if any; provided, however, that in no event will the Class B Principal Payment Amount exceed the Class B Principal Balance. "Class B Maturity Date" means [ ] (or, if such day is not a Business Day, the next succeeding Business Day thereafter). "Class B Target Principal Amount " means, with respect to any Payment Date, the product of (i) the Class B Percentage and (ii) the Contract Pool Principal Balance as of the related Accounting Date. "Class C Floor" means, with respect to any Payment Date, (i) [ ]% of the Contract Pool Principal Balance as of the Initial Cutoff Date, plus (ii) the Principal Differential, if any, for such Payment Date, minus (iii) the sum of the Class D Principal Balance (prior to giving effect to any payments of principal on the Class D Notes on such Payment Date) and the amount on deposit in the Cash Collateral Account (after giving effect to withdrawals to be made on such Payment Date); provided, however, that in no event will the Class C Floor be greater than the Class C Principal Balance immediately prior to such Payment Date nor less than zero. Furthermore, if the Class B Principal Balance immediately prior to any Payment Date is less than or equal to the Class B Floor for such Payment Date, the Class C Floor with respect to such Payment Date will equal the Class C Principal Balance immediately prior to such Payment Date. "Class C Interest Carryover Shortfall" means, with respect to any Payment Date, the excess, if any, of the Class C Interest Distributable Amount for the preceding Payment Date over the amount that was actually distributed in respect of interest on the Class C Notes on such preceding Payment Date, plus, to the extent permitted by law, an amount equal to the product of (i) the Class C Interest Rate, (ii) such excess, and (iii) a fraction equal to one-twelfth. "Class C Interest Distributable Amount" means, with respect to any Payment Date, the sum of the Class C Monthly Interest Distributable Amount and the Class C Interest Carryover Shortfall for such Payment Date. "Class C Interest Rate" means [ ]% per annum. "Class C Monthly Interest Distributable Amount" means (a) with respect to the first Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class C Interest Rate, (ii) the Initial Principal Amount of the Class C Notes, and (iii) a fraction equal to 28 divided by 360, and (b) with respect to each subsequent Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class C Interest Rate, (ii) the Principal Balance of the Class C Notes on the immediately preceding Payment Date, after giving effect to all payments of principal to Class C Noteholders on or prior to such immediately preceding Payment Date, and (iii) a fraction equal to one-twelfth. "Class C Notes" means the $[ ] aggregate principal amount of [ ]% Receivable-Backed Notes, Class C, issued pursuant to the Indenture. "Class C Percentage" means [ ]%. "Class C Principal Payment Amount" means (i) zero with respect to any Payment Date prior to the Payment Date on which the Class A-1 Principal Balance is reduced to zero, and (ii) with respect to any Payment Date thereafter, the excess, if any, of (a) the Class C Principal Balance over (b) the greater of (1) the Class C Target Principal Amount and (2) the Class C Floor, if any; provided, however, that in no event will the Class C Principal Payment Amount exceed the Class C Principal Balance. "Class C Maturity Date" means [ ] (or, if such day is not a Business Day, the next succeeding Business Day thereafter). "Class C Target Principal Amount" means, with respect to any Payment Date, the product of (i) the Class C Percentage and (ii) the Contract Pool Principal Balance as of the related Accounting Date. "Class D Floor" means, with respect to any Payment Date, (i) [ ]% of the Contract Pool Principal Balance as of the Initial Cutoff Date, plus (ii) the Principal Differential, if any, for such Payment Date, minus (iii) the amount on deposit in the Cash Collateral Account (after giving effect to withdrawals to be made on such Payment Date); provided, however, that in no event will the Class D Floor be greater than the Class D Principal Balance immediately prior to such Payment Date nor less than zero. Furthermore, if the Class C Principal Balance immediately prior to any Payment Date is less than or equal to the Class C Floor for such Payment Date, the Class D Floor with respect to such Payment Date will equal the Class D Principal Balance immediately prior to such Payment Date. "Class D Interest Carryover Shortfall" means, with respect to any Payment Date, the excess, if any, of the Class D Interest Distributable Amount for the preceding Payment Date over the amount that was actually distributed in respect of interest on the Class D Notes on such preceding Payment Date, plus, to the extent permitted by law, an amount equal to the product of (i) the Class D Interest Rate, (ii) such excess, and (iii) a fraction equal to one-twelfth. "Class D Interest Distributable Amount" means, with respect to any Payment Date, the sum of the Class D Monthly Interest Distributable Amount and the Class D Interest Carryover Shortfall for such Payment Date. "Class D Interest Rate" means [ ]% per annum. "Class D Monthly Interest Distributable Amount" means (a) with respect to the first Accrual Period and the related Payment Date, an amount equal to the product of (i) the Class D Interest Rate, (ii) the Initial Principal Amount of the Class D Notes, and (iii) a fraction equal to 28 divided by 360, and (b) with respect to each subsequent Accrual Period and the related Payment Date Payment Date, an amount equal to the product of (i) the Class D Interest Rate, (ii) the Principal Balance of the Class D Notes on the immediately preceding Payment Date, after giving effect to all payments of principal to Class D Noteholders on or prior to such immediately preceding Payment Date, and (iii) a fraction equal to one-twelfth. "Class D Notes" means the $[ ] aggregate principal amount of [ ]% Receivable-Backed Notes, Class D, issued pursuant to the Indenture. "Class D Percentage" means [ ] %. "Class D Principal Payment Amount" means (i) zero with respect to any Payment Date prior to the Payment Date on which the Class A-1 Principal Balance is reduced to zero, and (ii) with respect to any Payment Date thereafter, the excess, if any, of (a) the Class D Principal Balance over (b) the greater of (1) the Class D Target Principal Amount and (2) the Class D Floor, if any; provided, however, that in no event will the Class D Principal Payment Amount exceed the Class D Principal Balance. "Class D Maturity Date" means [ ] (or, if such day is not a Business Day, the next succeeding Business Day thereafter). "Class D Target Principal Amount" means, with respect to any Payment Date, the product of (i) the Class D Percentage and (ii) the Contract Pool Principal Balance as of the related Accounting Date. "Certificate of Formation" means the limited liability company Certificate of Formation of the Depositor. "Certificate of Trust" has the meaning given such term in the Trust Agreement. "Certificate Register" has the meaning specified in the Trust Agreement. "Closing Date" means [ ]. "Code" means the Internal Revenue Code of 1986, as amended. "Collection Account" means the account so designated established pursuant to Section 7.01. "Collection Account Property" means the Collection Account, all amounts and investments held from time to time in the Collection Account (whether in the form of deposit accounts, physical property, book-entry securities, uncertificated securities or otherwise), and all proceeds of the foregoing. "Collection Period" means a period beginning on the first day of a calendar month and ending on, but not including, the first day of the next calendar month, provided that the first Collection Period shall be the period beginning on the Initial Cutoff Date and ending on, but not including, the first day of the calendar month immediately following the calendar month in which the Closing Date occurs. "Commission" means the United States Securities and Exchange Commission. "Computer Disk" means the computer disk generated by the Servicer (or applicable Financing Originator acting as subservicer as described in Section 5.05), which provides information relating to Contracts in the Contract Pool and which was used by such party in selecting the related Contracts for conveyance and inclusion in such Contract Pool, and includes the master file and the history file as well as servicing information with respect to such Contracts. "Contract" means each End-User Contract and each Vendor Loan listed on any Schedule of Contracts but, unless otherwise specified herein, shall not refer to any Secondary Contract. "Contract Assets" means, with respect to any Contracts (including Substitute Contracts) and related assets conveyed or being conveyed to the Depositor pursuant to the Purchase and Sale Agreement, a Substitution Assignment Agreement executed thereunder or the [ ] Assignment, and concurrently conveyed or being conveyed by the Depositor to the Trust pursuant to this Pooling Agreement or a Substitution Transfer Agreement, all right, title and interest of [ ] or the [ ] Trust, as the case may be, in, to and under: (i) such Contracts, and all monies due or to become due in payment of such Contracts on and after the relevant Cutoff Date, and including Scheduled Payments due but not yet received prior to the relevant Cutoff Date and all other Scheduled Payments (including in respect of any Guaranteed Residual Investment) due or becoming due on or after the relevant Cutoff Date, any Prepayments, any payments in respect of a casualty or early termination, any Liquidation Proceeds received with respect thereto, but excluding any Scheduled Payments both due and actually received prior to the related Cutoff Date and any Excluded Amounts; (ii) the Financed Items related to such Contracts and, in the case of any Vendor Loan, related Applicable Security, including all proceeds from any sale or other disposition of such Financed Items (but subject to the exclusion and release herein of Excluded Amounts) and any Guaranteed Residual Investment; (iii) related Contract Files; (iv) all payments made or to be made in the future with respect to such Contracts or the Obligor thereunder under any Vendor Agreements with the relevant Financing Originator and under any guarantee or similar credit enhancement with respect to such Contracts; (v) all Insurance Proceeds with respect to each such Contract; (vi) the Conveyancing Agreement (but solely with respect to [ ] Contract Assets conveyed to [ ] thereunder constituting Contract Assets), including (A) all rights of [ ] to receive moneys due and to become due under or in respect of such Contract Assets pursuant to the Conveyancing Agreement, (B) all rights of [ ] to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to [ ] Contract Assets conveyed to [ ] thereunder constituting Contract Assets, (C) all claims of [ ] for damages arising out of or for breach of or default under the Conveyancing Agreement to the extent relating to [ ] Contract Assets conveyed to [ ] thereunder constituting Contract Assets, and (iv) the right of [ ] to amend, waive or terminate the Conveyancing Agreement, to compel performance and otherwise exercise remedies and rights thereunder, in each case with respect to or as applicable to [ ] Contract Assets conveyed thereunder constituting Contract Assets; and (vii) all income from and proceeds of the foregoing. "Contract File" means, with respect to each Contract, the fully executed original counterpart (for UCC purposes) of the Contract, the original certificate of title or other title document with respect to the related Equipment (if applicable), and otherwise such documents or electronic entries, if any, that the Servicer (or applicable Financing Originator) keeps on file in accordance with Customary Policies and Procedures evidencing ownership of such Equipment (if applicable), and all other documents originally delivered to the Financing Originator or held by the Servicer (or subservicer under Section 5.05) with respect to any Contract. "Contract Pool" means, as of any date of determination, the aggregate of the Contracts which have been conveyed to the Trust and which constitute as of such date Trust Assets under the terms and provisions hereof. "Contract Pool Principal Balance" means with respect to any Payment Date, the sum of the Contract Principal Balances (computed as of the related Accounting Date) for all Contracts. "Contract Principal Balance" means as of any Accounting Date, with respect to any Contract the present value of the unpaid Scheduled Payments due on such Contract after such Accounting Date (excluding all Scheduled Payments due on or prior to, but not received as of, such Accounting Date, as well as any Scheduled Payments due after, but received as of, such Accounting Date), after giving effect to any Prepayments received on or prior to such Accounting Date, discounted monthly at the Discount Rate (assuming, for purposes of such calculation, that each Scheduled Payment is due on the last day of the applicable Collection Period); provided that, for purposes of computing the Total Principal Payment Amount or the Required Cash Collateral Amount for a given Payment Date (as well as all Payment Dates thereafter), the Contract Principal Balance of any Contract which became a Defaulted Contract during the related Collection Period or was required to be purchased by [ ] as of the last day of the related Collection Period in accordance with Section 5.01 of the Purchase and Sale Agreement, will be deemed to be zero on and after the last day of such Collection Period. "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Servicer or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Conveyancing Agreement" means the Conveyancing Agreement dated as of [ ] among the [ ] Financing Originators and [ ], as the same may be amended, supplemented, restated or otherwise modified from time to time. "Corporate Trust Office" means the office of the Owner Trustee at which its corporate trust business shall be administered, which initially shall be [ ], or such other office at such other address in the State of [ ] as the Owner Trustee may designate from time to time by notice to the Certificateholder, the Servicer, the Administrative Agent and the Depositor. "CPR" means a conditional prepayment rate which assumes that a fraction of the outstanding Contract Pool is prepaid on each Payment Date and also assumes that all Contracts have the same initial principal balance and amortize at the same rate. "CSA" means each conditional sales agreement, including, as applicable, schedules, subschedules, supplements and amendments to a master conditional sales agreement, pursuant to which specified assets were conditionally sold to an Obligor at specified monthly, quarterly, semi-annual or annual payments. "Current Collection Period Pledged Revenues" means, with respect to any Payment Date, the amount of Pledged Revenues in the Collection Account as of the immediately preceding Deposit Date which were received by the Servicer after the end of the related Collection Period, including all Liquidation Proceeds so received but excluding any Purchase Amount. "Customary Policies and Procedures" means, with respect to any Contract Assets, the customary standards, policies and procedures of the relevant Financing Originator with respect to such Contract Assets in effect at the time of the Cutoff Date with respect thereto, as the same may be changed from time to time (provided that any such change does not materially impair (i) the collectibility of the related Contract, or (ii) the Servicer's ability to perform its obligations under this Agreement with respect thereto). "Cutoff Date" means either or both (as the context may require) the Initial Cutoff Date and any Subsequent Cutoff Date, as applicable to the Contract or Contracts in question. "Date of Processing" means, with respect to any transaction or Pledged Revenue, the date on which such transaction or Pledged Revenue is first recorded (and, in the case of a transaction or Pledged Revenue related to a particular Contract, identified as to such particular Contract) on the related Financing Originator's or the Servicer's computer master file of Contracts (without regard to the effective date of such recordation). "Defaulted Contract" means a Contract in the Contract Pool with respect to which there has occurred one or more of the following: (i) all or some portion of any Scheduled Payment under the Contract (constituting at least ten percent (10%) of such Scheduled Payment due) is more than 180 days delinquent from its original due date (or, with respect to a Contract for which there exists available payment recourse to a Vendor to satisfy the amount in default, and which recourse was not yet available (pursuant to the contractual terms thereof) or had not yet been paid by the Vendor prior to the end of such 180 day period, then at such time thereafter as the Vendor shall have failed to pay such defaulted amount in accordance with the provisions of the Program Agreement, Vendor Assignment or other agreement with the Vendor providing such recourse), (ii) the Servicer has determined in its sole discretion, in accordance with Customary Policies and Procedures (and taking into account any available Vendor recourse), that such Contract is not collectible; or (iii) the End-User under such Contract (or applicable Vendor, if such Contract is a Vendor Loan) becomes the subject of an Insolvency Event. "Delinquent Contract" means any Contract as to which all or a portion of a Scheduled Payment (constituting at least ten percent (10%) of such Scheduled Payment due) is more than 60 days delinquent from its original due date. "Deposit Date" means the Business Day immediately preceding each Payment Date. "Depositor" means the "Depositor" as defined in the preamble hereto, or any successor entity thereto. "Determination Date" means, with respect to any Payment Date, the second Business Day prior to such Payment Date. "Discount Rate" means [ ]%. "Dollar" and "$" means lawful currency of the United States of America. "Eligible Contract" means each Contract owned (prior to its conveyance by a [ ] Financing Originator to [ ] under the Conveyancing Agreement if a [ ] Contract, prior to its conveyance by [ ] to the Depositor under the Purchase and Sale Agreement if an [ ] Contract, and prior to its conveyance by the [ ] Trust to the Depositor pursuant to the [ ] Assignment, if a [ ] Contract) by an Eligible Originator or the [ ] Trust, and with respect to which each of the following is true (to the extent applicable to such type of Contract) at the time of its conveyance to the Trust on the Closing Date (or Substitution Transfer Date, as applicable): (a) the information with respect to the Contract, any Secondary Contract securing the obligations under such Contract, and the Financed Items related to the Contract, delivered to the Administrative Agent by or at the direction of [ ] under the Purchase and Sale Agreement or by or at the direction of the [ ] Trust pursuant to the [ ] Assignment is true and correct in all material respects; (b) immediately prior to the transfer of such Contract and any related Equipment (or security interest therein) or Applicable Security to the Depositor (and the Depositor's concurrent transfer thereof to the Trust) such Contract was owned by [ ] or the [ ] Trust (and by the Depositor following the transfer by [ ] or the [ ] Trust) free and clear of any adverse claim, other than Permitted Liens; and immediately prior to the transfer of such Contract (if a [ ] Contract) and any related Equipment (or security interest therein) or Applicable Security by the applicable [ ] Financing Originator to [ ], such Contract was owned by the applicable [ ] Financing Originator free and clear of any adverse claim, other than with respect to Permitted Liens; (c) the Contract is neither a Defaulted Contract nor a Delinquent Contract; (d) no provision of the Contract has been waived, altered or modified in any material respect, except as indicated in the Contract File; (e) the Contract is a valid and binding payment obligation of the Obligor and is enforceable in accordance with its terms (except as may be limited by applicable Insolvency Laws and the availability of equitable remedies); (f) the Contract is not subject to litigation, or to rights of rescission, setoff, counterclaim or defense and, to [ ] or the Servicer's knowledge, no such rights have been asserted or threatened with respect to the Contract; (g) the Contract, at the time it was made, had been originated in compliance (in all material respects) with applicable law, and did not violate the laws of the United States or any state in any material respect; (h) (i) the Contract and any related Financed Item or interest therein (other than Excluded Residual Investments) have not been sold, transferred, assigned or pledged by the relevant Financing Originator, [ ] (in respect of [ ] Contracts) or the [ ] Trust to any other Person (other than (a) the sale of Contracts and any related financed or interest therein to [ ] or to the Depositor and then the [ ] Trust and (b) the financed sale of Equipment to an End-User effected through an End-User Contract), and (ii) if such Contract finances Equipment, either (A) such Contract is secured by a fully perfected lien or ownership interest in favor of the relevant Financing Originator or, in the case of Equipment relating to the [ ] Contracts, the Depositor, on or in respect of the related Equipment (other than as contemplated by the Minimum Value Filing Exception), or, if the Contract is a Vendor Loan, the Vendor Loan is secured by a fully perfected lien or ownership interest in favor of the relevant Financing Originator or the [ ] Trust in the related Applicable Security, or (B) in the case of such a Contract secured by a Vehicle, within 90 calendar days of the origination or acquisition of such Contract by the relevant Financing Originator all applicable state registration or recording procedures were initiated, and the Financing Originator's interest in such Vehicle will be so noted or recorded within 180 days of such acquisition or origination, or a certificate of title or similar evidence of recordation on which the Financing Originator's interest has been noted has been obtained; (i) if the Contract constitutes an "instrument" or "chattel paper" for purposes of the UCC, there is not more than one "secured party's original" counterpart of the Contract and such original counterpart is in the Contract File; (j) all filings (including filings of UCC financing statements) necessary (i) in respect of Contracts consisting of [ ] Contracts, to evidence or perfect the conveyance or transfer of the relevant [ ] Financing Originator's ownership interest in the [ ] Contract, and the [ ] Financing Originator's corresponding interest in the related Equipment or Applicable Security, as applicable, to [ ], and (ii) in respect of all Contracts (i.e., Contracts consisting of either [ ] Contracts, [ ] Contracts or [ ] Contracts), to evidence or perfect the conveyance or transfer of [ ] or [ ] Trust's ownership interest in the Contract, and [ ] corresponding interest in the related Equipment or Applicable Security, as applicable, to the Depositor (as well as the concurrent conveyance of such property hereunder, other than ownership interests in Equipment, from the Depositor to the Trust), have been made in all appropriate jurisdictions; provided, that UCC financing statement filings with respect to Equipment or Applicable Security which name the Financing Originator as secured party have not been amended to indicate either [ ] (with respect to [ ] Contracts), the Depositor or the Trust as an assignee (although separate UCC filings were made against the relevant Financing Originator's interest in Applicable Security in each jurisdiction where a related Vendor is located); and provided further, that only filings in the States of New Jersey and [ ] have been made in favor of the Trust as secured party against the Depositor as debtor describing as collateral (among other things) the Depositor's ownership interest in Equipment, in respect of the security interest in Equipment owned by the Depositor which has been granted to the Trust pursuant to Section 2.01 hereof. (k) the Obligor is not, to [ ] knowledge, subject to bankruptcy or other insolvency proceedings; (l) the Obligor's billing address is in the United States or Puerto Rico, and the Contract is a U.S. dollar-denominated obligation; (m) the Contract does not require the prior written notification to or consent of an Obligor or contain any other restriction on the transfer or assignment of the Contract, other than (i) certain Contracts the Contract Pool Principal Balance of which, in proportion to the Contract Pool Principal Balance of all Contracts in the Contract Pool at the time of conveyance, is not material, that require notifications of the assignment to the Obligor, which notification will be given by the Servicer not more than 10 days following the Closing Date (or Substitution Transfer Date in the case of a Substitution Contract) (it being understood that if such notifications are not so timely obtained, the affected Contract shall be deemed and treated for all purposes of this Pooling Agreement and the other Transaction Documents as not having complied with this criteria for an Eligible Contract as of the Closing Date or Substitution Transfer Date, as the case may be), and (ii) certain Contracts that require the consent of the related Obligor, which consent shall have been obtained by the Servicer not later than 10 days following the Closing Date or Substitution Transfer Date, as the case may be; (n) either (x) the obligations of the related Obligor under such Contract are irrevocable and unconditional and non-cancelable (it being understood that Contracts which are prepayable in accordance with their terms shall not, by virtue of that fact alone, be deemed revocable, conditional or cancelable) or, if not irrevocable and unconditional, have the benefit of a Vendor Guarantee or (y) with respect to certain Leases with Lessees that are governmental entities or municipalities, if such Lease is canceled in accordance with its terms, either (1) the Vendor that assigned such Lease to the applicable Financing Originator is unconditionally obligated to repurchase such lease from the Financing Originator for a purchase price not less than the Contract Principal Balance of such Lease (as of the date of cancellation), or (2) pursuant to the Purchase and Sale Agreement, [ ] has indemnified the Depositor against such cancellation in an amount at least equal to the Contract Principal Balance of such Lease (as of the date of cancellation), less any amounts paid by the Vendor pursuant to clause (1); (o) no selection procedure adverse to the interests of the Trust or the Equity Certificateholder was used in selecting the Contract for the Contract Pool; (p) the Obligor under the Contract is required to maintain casualty insurance or to self-insure with respect to the related Equipment in accordance with Customary Policies and Procedures; (q) the Contract constitutes chattel paper, an account, an instrument or a general intangible, in each case as defined under the UCC; (r) the Contract is not a "consumer lease" as defined in Section 2A-103(1)(e) of the UCC; (s) if such Contract is a Lease, to the best knowledge of the relevant Financing Originator, the Lessee thereunder has accepted and has had reasonable opportunity to inspect the related Equipment; (t) except as provided in clause (n) above, the Contract is not subject to any guarantee by the Financing Originator, nor has the Financing Originator established any specific credit reserve with respect to the related Obligor; (u) if such Contract is a Lease, such Lease is a "triple net lease" under which the Obligor is responsible for the maintenance, taxes and insurance with respect to the related Equipment in accordance with general industry standards applicable to such item of Equipment; (v) if such Contract is a Vendor Loan, such Vendor Loan is secured by an Eligible Secondary Contract having an aggregate Discounted Contract Balance for such Eligible Secondary Contract (determined as of the relevant Cutoff Date for such Vendor Loan) not less than the outstanding principal amount of such Vendor Loan (assuming the interest rate specified in such Vendor Loan is the "Sale Discount Rate" for purposes of calculating such Discounted Contract Balance); (w) such Contract is not an obligation of the United States of America or an agency, department, or instrumentality of the United States of America; (x) such Contract contains provisions customary to similar financing agreements for Financed Items, which provisions are sufficient and enforceable (except as may be limited by applicable Insolvency Laws and the availability of equitable remedies) to enable the relevant Financing Originator (or its assignees, including the [ ] Trust, the Depositor and the Trust) to realize against the Financed Items related thereto (to the extent such Financed Items secure or support the payment of the Contract); (y) if the Obligor in respect of such Contract is a state or local governmental entity or municipality, the conveyance of such a Contract under and pursuant to the Transaction Documents does not violate applicable state or municipal laws or regulations (if any) restricting or prohibiting the assignment of claims against or obligations of such Obligor. "Eligible Investments" means negotiable instruments or securities or other investments (a) which, except in the case of demand or time deposits, investments in money market funds and Eligible Repurchase Obligations, are represented by instruments in bearer or registered form or the ownership of which is represented by book entries by a Clearing Agency or by a Federal Reserve Bank in favor of depository institutions eligible to have an account with such Federal Reserve Bank who hold such investments on behalf of their customers, (b) which, as of any date of determination, mature by their terms on or prior to the Payment Date immediately following such date of determination (or mature on such other Business Day as the Rating Agencies may approve), and (c) which evidence: (i) direct obligations of, and obligations fully guaranteed as to full and timely payment by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America); (ii) demand deposits, time deposits or certificates of deposit of depository institutions or trust companies incorporated under the laws of the United States of America or any state thereof and subject to supervision and examination by federal or state banking or depository institution authorities; provided, however, that at the time of the Trust's investment or contractual commitment to invest therein, the commercial paper, if any, and short-term unsecured debt obligations (other than such obligation whose rating is based on the credit of a Person other than such institution or trust company) of such depository institution or trust company shall have a credit rating from each of Standard & Poor's and Moody's in the Highest Required Investment Category granted by such Rating Agency; (iii) commercial paper, or other short term obligations, having, at the time of the Trust's investment or contractual commitment to invest therein, a rating in the Highest Required Investment Category granted by each of Standard & Poor's and Moody's; (iv) demand deposits, time deposits or certificates of deposit that are fully insured by the FDIC; (v) notes that are payable on demand or bankers' acceptances issued by any depository institution or trust company referred to in (ii) above; (vi) investments in money market funds having, at the time of the Trust's investment or contractual commitment to invest therein, a rating of the Highest Required Investment Category from each of Standard & Poor's and Moody's or having otherwise been approved in writing by each Rating Agency; (vii) time deposits with an entity the commercial paper of which has, at the time of the Trust's investment or contractual commitment to invest therein, a rating of the Highest Required Investment Category granted by each of Standard & Poor's and Moody's; (viii) Eligible Repurchase Obligations; and (ix) any other negotiable instruments or securities or other investments in which the investment by the Trust therein has been approved in writing by each Rating Agency. "Eligible Repurchase Obligations" means repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a depository institution or trust company (acting as principal) described in clause (c)(ii) of the definition of Eligible Investments. "Eligible Secondary Contract" shall mean each Secondary Contract (i) that satisfies all the criteria set forth in the definition of "Eligible Contract" except clauses (b), (h) (with respect to ownership by the Financing Originator of the Contract) and (w) thereof, and except that the term "Obligor" shall mean "End-User" in all such criteria; (ii) with respect to which Secondary Contract and the proceeds thereof the relevant Financing Originator (or, in the case of [ ] Contracts, the [ ] Trust, as assignee) has a duly perfected first priority lien; and (iii) with respect to which (A) if such Secondary Contract secures a Vendor Loan constituting a [ ] Contract, the transfer of the [ ] Financing Originator's security interest in such Secondary Contract and the proceeds thereof to [ ], the transfer of [ ] interest so acquired to the Depositor, and, if applicable, the Depositor's transfer of its interest therein to the [ ] Trust and the [ ] Trust's transfer of such interest back to the Depositor, is effective to create in favor of the Depositor a lien therein and such lien has been duly perfected, or (B) if the Secondary Contract instead secures a Vendor Loan constituting an [ ] Contract, then the transfer of [ ] security interest in such Secondary Contract and the proceeds thereof to the Depositor, and if applicable, the Depositor's transfer of its interest therein to the [ ] Trust and the [ ] Trust's transfer of such interest back to the Depositor, is effective to create in favor of the Depositor a lien therein and such lien has been duly perfected. "End-User" shall mean any party that uses the Financed Items pursuant to an End-User Contract. "End-User Contract" shall mean any CSA, Secured Note, Lease, IPA, or other Financing Agreement covering Financed Items originated by an Originator. "Equipment" means with respect to any Contract, the tangible assets constituting "goods" within the meaning of the UCC, in each case financed or leased by an Obligor pursuant to a Contract, or which otherwise provide security for the payment of amounts payable thereunder. "Equity Certificate" has the meaning specified in the Trust Agreement. "Equity Certificateholder" means the Person in whose name the Equity Certificate is registered in the Certificate Register. "Event of Default" has the meaning specified in the Indenture. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Exchange Act" means the Securities Exchange Act of 1934, as amended or supplemented from time to time. "Excluded Amounts" means (i) any collections on deposit in the Collection Account or otherwise received by the Servicer on or with respect to the Contract Pool or related Equipment, which collections are attributable to any taxes, fees or other charges imposed by any Governmental Authority, (ii) any collections representing reimbursements of insurance premiums or payments for services that were not financed by the applicable Originator, (iii) collections relating to security deposits, and (iv) collections representing Late Charges, documentation fees, administrative charges or extension fees on any Contract, or maintenance premiums in respect of related Equipment. "Excluded Residual Investments" means Residual Investments, other than Guaranteed Residual Investments. "FDIC" shall mean the Federal Deposit Insurance Corporation, or any successor thereto. "Financed Items" means Equipment, Software, Services and other property and services that are permitted to be financed under Contracts in accordance with Customary Policies and Procedures of the applicable Financing Originator. "Financing Agreement" means each financing agreement covering Financed Items, other than a CSA, a Secured Note, a Lease or an IPA. "Financing Originator" means any of the following as of the Closing Date: [ ]. "Governmental Authority" means the United States of America, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, government. "Guaranteed Residual Investment" means each Residual Investment with respect to which the Financing Originator may look to either the Vendor or to the related Obligor on an End-User Contract constituting a Lease, and not just the value of the related Equipment itself, to recover its full Residual Investment. "Highest Required Investment Category" means (i) with respect to ratings assigned by S&P, A-1+ for short-term instruments and AAA for long-term instruments and (ii) with respect to ratings assigned by Moody's, A2 or P-1 for one month instruments, A1 or P-1 for three month instruments, Aa3 or P-1 for six month instruments and Aaa or P-1 for instruments with a term in excess of six months. "Holder" has the meaning specified in the Indenture. "Indebtedness" means, with respect to any Person at any date, without duplication, (a) all indebtedness of such person for borrowed money or for the deferred purchase price of property or services (other than current liabilities incurred in the ordinary course of business and payable in accordance with customary trade practices) or which is evidenced by a note, bond, debenture or similar instrument, (b) all obligations of such Person under capital leases, (c) all obligations of such Person in respect of acceptances or letters of credit issued or created for the account of such Person, (d) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, and (e) obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (d) above. "Indenture" means the Indenture, dated as of the date hereof, between the Issuer and the Indenture Trustee, as amended, supplemented or otherwise modified from time to time. "Indenture Trustee" means the Person acting as Indenture Trustee under the Indenture, its successors in interest and any successor trustee under the Indenture. "Independent", when used with respect to any specified Person, means such a Person who (i) is in fact independent of the Issuer, the Depositor or the Servicer, (ii) is not a director, officer or employee of any Affiliate of the Issuer, the Depositor or the Servicer, (iii) is not a person related to any officer or director of the Issuer, the Depositor or the Servicer or any of their respective Affiliates, (iv) is not a holder (directly or indirectly) of more than 10% of any voting securities of the Issuer, the Depositor or the Servicer or any of their respective Affiliates, and (v) is not connected with the Issuer, the Depositor or the Servicer as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. "Ineligible Contract" has the meaning specified in Section 7.06. "Initial Class A-1 Principal Amount" means $[ ]. "Initial Class A-2 Principal Amount" means $[ ]. "Initial Class A-3 Principal Amount" means $[ ]. "Initial Class A-4 Principal Amount" means $[ ]. "Initial Class A-5 Principal Amount" means $[ ]. "Initial Class B Principal Amount" means $[ ]. "Initial Class C Principal Amount" means $[ ]. "Initial Class D Principal Amount" means $[ ]. "Initial Contract Assets" has the meaning assigned in Section 2.01 of the Purchase and Sale Agreement. "Initial Contract Pool Principal Balance" is $[ ]. "Initial Contracts" means those Contracts conveyed to the Trust on the Closing Date. "Initial Cutoff Date" means [ ]. "Initial Principal Amount" means, when used in the context of a reference to an individual Class of Notes, the initial principal amount applicable to such Class as defined above. "Insolvency Event" means, with respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable Insolvency Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person's affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable Insolvency Law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under such law, taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property; or (c) or the making by such Person of any general assignment for the benefit of creditors; or (d) the failure by such Person generally to pay its debts as such debts become due; or (e) the admission by such Person in writing of its inability generally to pay its debts when the same become due; or (f) the taking of action by such Person in furtherance of any of the foregoing. "Insolvency Laws" means the Bankruptcy Code of the United States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar debtor relief laws from time to time in effect affecting the rights of creditors generally. "Insurance Policy" means, with respect to any Contract, an insurance policy covering physical damage to or loss of the related Equipment. "Insurance Proceeds" means, depending on the context, any amounts payable or any payments made, to the Servicer (or applicable Financing Originator) under any Insurance Policy. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time. "Investment Earnings" means, the investment earnings (net of losses and investment expenses) on amounts on deposit in the Collection Account, Note Distribution Account and the Cash Collateral Account. "IPA" means each installment payment agreement, including as applicable, schedules, subschedules, supplements and amendments, pursuant to which the relevant Originator financed the purchase or acquisition of specified assets by an Obligor for specified monthly, quarterly, semiannual or annual payments. "Issuer" is defined in the preamble hereto. "Late Charges" means any late payment fees paid by Obligors on Contracts. "Lease" means each agreement constituting a "lease" within the meaning of Section 2A-103 of the UCC, and including, as applicable, schedules, subschedules, supplements and amendments to a master lease, pursuant to which the Originator, as lessor, leased specified assets to a Lessee at a specified monthly, quarterly, semiannual or annual rental. "Lessee" means, with respect to any Lease, the Obligor with respect to such Lease. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), equity interest, participation interest, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including, without limitation, any conditional transfer or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing. "Liquidation Expenses" means, with respect to any Defaulted Contract, the aggregate amount of all out-of-pocket expenses reasonably incurred by the Servicer (including amounts paid to or expenses incurred by any subservicer, other than subservicing fees, if any) in accordance with Customary Policies and Procedures in connection with the repossession, refurbishing and disposition of any related Equipment, and other out-of-pocket costs related to the liquidation of any such Equipment, including reasonable attorneys fees incurred in the attempted collection of any amount owing pursuant to such Defaulted Contract, and including amounts determined by the Servicer in its reasonable discretion as payable in respect of any sales, use, personal property or other taxes assessed or to be assessed on repossessed or liquidated Equipment. "Liquidation Proceeds" means, with respect to a Defaulted Contract, proceeds from the transfer, lease or re-lease of the related Financed Items, Insurance Proceeds, and any other recoveries with respect to such Defaulted Contract and the related Financed Items (including, without limitation, amounts received pursuant to a Program Agreement), but net of Liquidation Expenses, Late Charges, amounts payable to a Vendor in respect of (and in amounts not exceeding) amounts previously paid by such Vendor in respect of such Contract under Vendor recourse provisions, and amounts, if any, so received that are required to be refunded to the Obligor on such Contract. "Material Adverse Effect" means, with respect to any event or circumstance, a material adverse effect on: (i) the ability of [ ], [ ] any Financing Originator, the [ ] Trust, the Depositor, the Trust or the Servicer to perform in all material respects its obligations under this Agreement or any other Transaction Document; (ii) the validity or enforceability of this Agreement, any other Transaction Document, or the Contracts, or the collectibility of the Contracts; or (iii) the status, existence, perfection, priority or enforceability of the Trust's interest in the Contracts and the other Trust Assets. "Material Modification" means a termination or release (including pursuant to prepayment), or an amendment, modification or waiver, or equivalent similar undertaking or agreement, by the Servicer with respect to a Contract which would not otherwise be permitted under the standards and criteria set forth in Sections 5.08, 5.09 and/or 5.10 hereof. "Maturity Date" means, as applicable, the Class A-1 Maturity Date, Class A-2 Maturity Date, Class A-3 Maturity Date, Class A-4 Maturity Date, Class A-5 Maturity Date, Class B Maturity Date, Class C Maturity Date, or Class D Maturity Date. "Minimum Value Filing Exception" means the variation from the relevant Financing Originator's normal policies and practices with respect to filing UCC financing statements against an Obligor describing Equipment which is the subject of a Contract, in each case as set forth in Exhibit J hereto. "Monthly Report" has the meaning specified in Section 9.01. "Moody's" means Moody's Investors Service, Inc., or any successor thereto. "Note" means any one of the notes of the Trust of any Class executed and authenticated in accordance with the Indenture. "Note Distribution Account" means the account established and maintained as such pursuant to Section 7.01. "Note Register" has the meaning given such term in Section 2.04 of the Indenture. "Noteholder" means any registered holder of a Note. "[ ] Contract" means a Contract originated or acquired by [ ] (including without limitation any Contract originated or acquired by [ ] and transferred to the Depositor and by the Depositor to the [ ] Trust prior to the Closing Date) but which is not a [ ] Contract. "[ ] Contract Assets" means Contract Assets relating to [ ] Contracts. "[ ] Representations and Warranties" means the representations and warranties set forth in Sections 3.02, of the Purchase and Sale Agreement. "Obligor" means, with respect to any Contract, the Person or Persons obligated to make payments with respect to such Contract, including any guarantor thereof (and including, with respect to a Contract consisting of a Vendor Loan, the Vendor obligated in respect of such Vendor Loan). "Officer's Certificate" means, with respect to any Person, a certificate signed by an authorized officer of such Person and delivered to the party entitled to receipt thereof under any applicable Transaction Document. "Opinion of Counsel" means a written opinion of counsel, who may be counsel (including internal counsel) for the Depositor or the Servicer and who shall be reasonably acceptable to the Owner Trustee. "Originator" means, with respect to each Contract, the party that is the original lessor or financing party thereunder. "Owner Trustee" means [ ], not in its individual capacity, but solely as Owner Trustee under the Trust Agreement, its successors in interest and any successor owner trustee under the Trust Agreement. "Payment Date" shall mean the [ ] day of each calendar month or, if such [ ] day is not a Business Day, the next succeeding Business Day, with the first such Payment Date hereunder being [ ] "Paying Agent" means any Person described as such in Section 7.04(b). "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Permitted Liens" means (a) with respect to Contracts in the Contract Pool: (i) Liens for state, municipal or other local taxes if such taxes shall not at the time be due and payable or if the Depositor shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto; (ii) Liens in favor of [ ] created by a [ ] Financing Originator pursuant to the Conveyancing Agreement, or Liens in favor of the Depositor created pursuant to the Purchase and Sale Agreement or Liens in favor of the [ ] Trust created pursuant to the [ ] Pooling Agreement, in each case transferred to the Trust pursuant hereto; (iii) Liens in favor of the Trust created pursuant to this Agreement; and (iv) Liens in favor of the Indenture Trustee created pursuant to the Indenture and/or this Agreement; and (b) with respect to the related Equipment: (i) materialmen's, warehousemen's, mechanics' and other liens arising by operation of law in the ordinary course of business for sums not due; (ii) Liens for state, municipal or other local taxes if such taxes shall not at the time be due and payable or if the Depositor shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto; (iii) Liens in favor of [ ] created by a [ ] Financing Originator pursuant to the Conveyancing Agreement, or Liens in favor of the Depositor created pursuant to the Purchase and Sale Agreement, in each case transferred to the Trust pursuant hereto or Liens in favor of the Depositor created pursuant to the [ ] Purchase and Sale Agreement; (iv) Liens in favor of the Trust created pursuant to this Agreement; (v) Liens in favor of an Originator which have been transferred to the applicable Financing Originator and pursuant to the Purchase and Sale Agreement by such Financing Originator to the Depositor (through [ ] and the Conveyancing Agreement in the case of [ ] Financing Originators, and through [ ], the Depositor and the [ ] Trust and the [ ] Assignment in the case of the [ ] Contracts) and in each case transferred to the Trust pursuant hereto; (vi) Liens in favor of the Indenture Trustee crated pursuant to the Indenture and/or this Agreement; (vii) (A) interests in favor of [ ] (" ") which are subject to the prior payment of all Obligor obligations in respect of Scheduled Payments on the related Contract and which have been transferred by [ ] along with the related Contract to its limited purpose affiliate, [ ], and (B) interests in favor of a Vendor which are subject to the prior payment of all Obligor obligations in respect of Scheduled Payments on the related Contract; and (viii) Liens granted by the End-Users which are subordinated to the interest of the Trust in such Equipment. "Person" means any individual, corporation, estate, partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Servicer or any member of the Controlled Group may have any liability. "Pledged Revenues" means (i) all Scheduled Payments on the Contracts received on or after the Cut-Off Date (excluding the Excluded Amounts); (ii) any Prepayments received on the Contracts on or after the Cut-Off Date (other than (a) in the case of a Lease, any portion thereof allocated to the Depositor, or (b) in the case of a Prepaid Contract for which a substitution has been made in accordance with Section [ ] of the Pooling and Servicing Agreement, that portion thereof to which the Depositor is entitled pursuant to Section [ ]); (iii) the Purchase Amount of any Contracts purchased by [ ] in accordance with Section [ ] of the Pooling and Servicing Agreement (other than any portion thereof attributable in the case of a Lease to the Excluded Residual Investment of the related Equipment); (iv) the amount paid by the Depositor to purchase the Contracts pursuant to Section [ ] of the Pooling and Servicing Agreement; (v) that portion of the Liquidation Proceeds received in respect of any Contracts and the disposition of the related Equipment on or after the Cut-Off Date and allocated to the Trust; and (vi) any earnings on the investment of amounts credited to the Trust Accounts. Pledged Revenues shall not include any amounts received with respect to any Excluded Residual Investment. "Pooling Agreement" means this Pooling and Servicing Agreement, as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof. "Prepaid Contract" means any Contract that has terminated or been prepaid in full prior to its scheduled expiration date (including because of a Casualty Loss), other than a Defaulted Contract. "Prepayment" means with respect to any Collection Period for any Contract, a partial or full prepayment of amounts due and owing under such Contract. "Principal Amount" means, with respect to a Class of Notes, the aggregate Initial Principal Amount thereof reduced by (i) the aggregate amount of any payments applied in reduction of such principal amount and (ii) the aggregate amount of any payments then on deposit in the Note Distribution Account, if any, for such Class of Notes established in accordance with the Indenture and to be applied in reduction of such principal amount in accordance with such Indenture. "Principal Differential" means, with respect to any Payment Date, the excess, if any, of (i) the remainder, if any, of (a) the Aggregate Principal Amount of the Notes (prior to giving effect to the payment of principal on the Notes on such Payment Date) minus (b) the lesser of (1) the Contract Pool Principal Balance as of the related Accounting Date for the preceding Payment Date, minus the Contract Pool Principal Balance as of the related Accounting Date for such Payment Date, or (2) the Related Collection Period Pledged Revenue remaining after the payment of amounts owing to the Servicer and the payment of all interest due on the Notes on such Payment Date, over (ii) the aggregate of the Required Payoff Amounts for all Contracts as of the related Accounting Date. "Principal Deficiency Amount" means, with respect to any Payment Date, the lesser of (a) the Current Realized Losses for the related Collection Period or (b) the excess, if any, of (i) the Principal Amount of the Notes (after giving effect to all distributions of principal from the Available Pledged Revenues (determined without regard to the last sentence of the definition thereof) on such Payment Date), over (ii) the aggregate of the Required Payoff Amounts for all Contracts as of the last day of the related Collection Period. "Program Agreement" means each vendor finance program agreement pursuant to which End-User Contracts originated by a Vendor are assigned to the applicable Financing Originator. "Prospectus" has the meaning given such term in the Underwriting Agreement. "Purchase Amount" means, with respect to Ineligible Contracts, on any date of determination, the aggregate Required Payoff Amount for such Ineligible Contracts as of the related Accounting Date. "Purchase and Sale Agreement" means the Purchase and Sale Agreement dated as of [ ] among [ ], [ ] and the Depositor, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Purchase Price" means, with respect to any Contract conveyed on the Closing Date (or any Subsequent Transfer Date, as applicable), an amount equal to the Contract Principal Balance of such Contract as of the applicable Cutoff Date. "Qualified Eligible Investments" means Eligible Investments acquired by the Indenture Trustee in its name and in its capacity as Indenture Trustee, which are held by the Indenture Trustee in the Trust Accounts and with respect to which (a) the Indenture Trustee has noted its interest therein on its books and records, and (b) the Indenture Trustee has purchased such investments for value without notice of any adverse claim thereto (and, if such investments are securities or other financial assets or interests therein, within the meaning of Section 8-102 of the UCC as enacted in the State of New York, without acting in collusion with a securities intermediary in violating such securities intermediary's obligations to entitlement holders in such assets, under Section 8-504 of such UCC, to maintain a sufficient quantity of such assets in favor of such entitlement holders), and (c) either (i) such investments are in the possession of the Indenture Trustee, or (ii) such investments, (A) if certificated securities and in bearer form, have been delivered to the Indenture Trustee, or in registered form, have been delivered to the Indenture Trustee and either registered by the issuer in the name of the Indenture Trustee or endorsed by effective endorsement to the Indenture Trustee or in blank; (B) if uncertificated securities, the ownership of which has been registered to the Indenture Trustee on the books of the issuer thereof (or another person, other than a securities intermediary, either becomes the registered owner of the uncertified security on behalf of the Indenture Trustee or, having previously become the registered owner, acknowledges that it holds for the Indenture Trustee); or (C) if securities entitlements (within the meaning of Section 8-102 of the UCC as enacted in the State of New York) representing interests in securities or other financial assets (or interests therein) held by a securities intermediary (within the meaning of said Section 8-102), a securities intermediary indicates by book entry that a security or other financial asset has been credited to the Indenture Trustee's securities account with such securities intermediary. Any such Qualified Eligible Investment may be purchased by or through the Indenture Trustee or any of its Affiliates. "Qualified Institution" means (a) the corporate trust department of the Indenture Trustee or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank), (i) (A) which has (or the parent corporation of which has) either (1) a long-term unsecured debt rating acceptable to the Rating Agencies or (2) a short-term unsecured debt rating or certificate of deposit rating acceptable to the Rating Agencies or (B) which is otherwise acceptable to the Rating Agencies and (ii) whose deposits are insured by the FDIC. "Rating Agency" means each of S&P and Moody's, so long as such Persons maintain a rating on the Notes; and if none of S&P or Moody's, no longer maintains a rating on the Notes; such other nationally recognized statistical rating organization selected by the Depositor. "Rating Agency Condition" means, with respect to any action or series of related actions or proposed transaction or series of related proposed transactions, that each Rating Agency shall have notified the Depositor and the Owner Trustee and the Indenture Trustee in writing that such action or series of related actions or the consummation of such proposed transaction or series of related transactions will not result in a Ratings Effect. "Ratings Effect" means, with respect to any action or series of related actions or proposed transaction or series of related proposed transactions, a reduction or withdrawal of the rating of any outstanding Class with respect to which a Rating Agency has previously issued a rating as a result of such action or series of related actions or the consummation of such proposed transaction or series of related transactions. "Record Date" means, with respect to any Payment Date, the calendar day immediately preceding such Payment Date. "Related Collection Period Pledged Revenues" means, with respect to any Payment Date, the amount of Pledged Revenues in the Collection Account as of the Deposit Date which were received by the Servicer during the related Collection Period, including all Liquidation Proceeds (other than in respect of Excluded Residual Investment) so received by excluding any Purchase Amounts. "Replaced Assets" has the meaning assigned such term in Section 2.04. "Replaced Contracts" has the meaning assigned such term in Section 2.04. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Required Holders" means (i) prior to the payment in full of the Class A Notes Outstanding, Class A-1 Noteholders, Class A-2 Noteholders, Class A-3 Noteholders, Class A-4 Noteholders and/or Class A-5 Noteholders holding Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and/or Class A-5 Notes evidencing more than 66 2/3% of the Aggregate Principal Amount of all Class A Notes Outstanding, (ii) from and after the payment in full of the Class A Notes Outstanding, Holders of Class B Notes holding Class B Notes evidencing more than 66 2/3% of the Aggregate Principal Amount of all Class B Notes Outstanding, (iii) from and after the payment in full of the Class B Notes Outstanding, Holders of Class C Notes holding Class C Notes evidencing more than 66 2/3% of the Aggregate Principal Amount of all Class C Notes Outstanding, and (iv) from and after the payment in full of the Class C Notes Outstanding, Holders of Class D Notes holding Class D Notes evidencing more than 66 2/3% of the Aggregate Principal Amount of all Class D Notes Outstanding. "Required Payoff Amount" means, with respect to any Collection Period for a Contract, the sum of (i) the Scheduled Payment due in such Collection Period, together with any Scheduled Payments due in prior Collection Periods but not yet received, plus (ii) the Contract Principal Balance of such Contract (after taking into account the Scheduled Payment due in such Collection Period whether or not received). "Requirements of Law" for any Person means the certificate of incorporation or articles of association and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or order or determination of an arbitrator or Governmental Authority, in each case applicable to or binding upon such Person or to which such Person is subject, whether Federal, state or local (including, without limitation, usury laws, the Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of Governors of the Federal Reserve System). "Required Cash Collateral Amount" means, (i) with respect to any Payment Date on or prior to the Payment Date occurring in [ ], an amount equal to $[ ], and (ii) with respect to any Payment Date thereafter, an amount equal to the greater of (a) the sum of (1) [ ]% of the Contract Pool Principal Balance for such Payment Date, plus (2) the excess, if any of (A) the Aggregate Principal Amount of the Notes (after giving effect to all distributions of principal on such Payment Date) over (B) the Contract Pool Principal Balance for such Payment and (b) $[ ]; provided, that in no event will the Required Cash Collateral Amount exceed the Aggregate Principal Amount of the Notes. "Residual Investment" means, with respect to certain Leases, any funds that the Financing Originator shall have advanced against all or any portion of the anticipated residual value of the leased Equipment upon the expiration of such Lease in accordance with its terms, and in excess of the discounted present value of the rental payments due under such Lease. "Responsible Officer" means, with respect to the Owner Trustee, any officer in its Corporate Trust Administration Department (or any similar group of a successor Owner Trustee) customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively, or to whom a corporate trust matter is referred because of knowledge of, familiarity with, and authority to act with respect to a particular matter. "Scheduled Payment" means, with respect to any Contract, the monthly or quarterly or semi-annual or annual rent or financing (whether principal or principal and interest) payment or other payment scheduled to be made by the related Obligor under the terms of such Contract (or, if applicable, from a Vendor or Obligor with respect to any Guaranteed Residual Investment); it being understood that Scheduled Payments do not include any Excluded Amount or Excluded Residual Investment but does not include Guaranteed Residual Investment. "Schedule of Contracts" means the schedule of Contracts which are conveyed to the Trust pursuant to the related Assignment Agreement, executed and delivered on of the Closing Date, which schedule shall identify by any reasonable means or designation the applicable Financing Originator with respect to each Contract identified in such Schedule, and which shall otherwise be substantially in the form attached hereto as Exhibit C. Such Schedule shall be supplemented from time to time (a) by each subsequent Substitution Schedule of Contracts with respect to each Substitution Transfer Agreement and related Substitution Transfer, which Schedules of Contracts shall be deemed incorporated and made a part of the original Schedule of Contracts on Exhibit C hereto; and (b) by the Servicer from time to time to reflect the release by and removal from the Trust Assets of (i) Contracts released in connection with (A) in respect of a Contract becoming a Prepaid Contract in accordance herewith or having its final Scheduled Payment paid in full in accordance with the Contract, or (B) in respect of a repurchase from the Trust through payment of a Purchase Amount, and (ii) Replaced Contracts. The comprehensive Schedule of Contracts is to be maintained by the Servicer (with copies thereof, as the same shall be supplemented or amended as described above, to be provided promptly to the Owner Trustee). With respect to the Closing Date Transfer Agreement (or Substitution Transfer Agreement, as applicable), "Schedule of Contracts" shall mean the schedule attached thereto identifying the Contracts being conveyed thereby. "Schedule of Representations" means the Schedule of Representations and Warranties set forth on Exhibit G hereto. "Secondary Contract" shall mean, with respect to a Vendor Loan, each End-User Contract securing such Vendor Loan. "Secured Note" means each promissory note with a related security interest evidenced by written agreement, pursuant to which the purchase of specified assets by an Obligor or End-User is financed for specified monthly, quarterly, semiannual or annual payments. "Securities" means the Notes and the Certificate, or any of them. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Securityholders" means the Holders of the Notes or the Certificate. "Servicer" means initially [ ], until any Successor Servicer is appointed pursuant to Article VIII hereof, and thereafter, means the Successor Servicer so appointed. "Servicer Advance" means, with respect to any Payment Date, the amounts, if any, deposited by the Servicer in the Collection Account for such Payment Date in respect of Scheduled Payments pursuant to Section 5.14 hereof. "Servicer Default" has the meaning given such term in Section 8.01. "Services" means, in connection with the financing of Software by an Originator, the support and consulting services related to such Software, the procurement of which was also financed by such Originator pursuant to a Contract. "Servicing Fee" has the meaning specified in Section 5.18 hereof. "Servicing Fee Percentage" means [ ]%. "Servicing Officer" means any officer of the Servicer involved in, or responsible for, the administration and servicing of Contracts. "Servicing Standard" means, with respect to the servicing and collection activities of the Servicer concerning the Contract Assets, the conduct of such activities with reasonable care, using that degree of skill and attention that the relevant Financing Originator for such Contract Assets exercises with respect to all comparable contracts and related assets that it services for itself or others, and in accordance with Customary Policies and Procedures and applicable law. "Servicing Transfer" is defined in Section 8.02(b). "Software" means the computer software programs financed or leased by an Obligor pursuant to a Contract. "Solvent" means, as to any Person at any time, that (a) the fair value of the Property of such Person is greater than the amount of such Person's liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(31) of the Bankruptcy Code; (b) the present fair saleable value of the Property of such Person in an orderly liquidation of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its Property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in a business or a transaction, for which such Person's property would constitute unreasonably small capital. "S&P" means Standard & Poor's Ratings Service, a division of The McGraw Hill Companies, or any successor thereto. "Subsidiary" means with respect to a Person, any corporation or other entity of which securities or other ownership interests (whether directly or indirectly in connection with contract rights) having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Substitute Contract" means any Contract conveyed, assigned and transferred by the Depositor or [ ] to the Trust pursuant to Section 2.04. "Substitute Contract Assets" means Contract Assets relating to Substitute Contracts. "Substitute Contract Qualification Conditions" means, with respect to any Substitute Contract being transferred to the Trust pursuant to Section 2.04, each of the following: (1) the accuracy of each of the following statements as of the related Cutoff Date for such Contract: (a) the Contract Principal Balance of such Substitute Contract is not less than that of the related Replaced Contract[s]; (b) no adverse selection procedure shall have been employed in the selection of such Substitute Contract from the Financing Originator's portfolio; (c) each such Substitute Contract satisfied the criteria set forth in the definition of Eligible Contract herein; and (d) if the Replaced Contract for which such Substitute Contract is being substituted was a [ ] Contract, then such Substitute Contract is itself a [ ] Contract, and if such Replaced Contract is an [ ] Contract, then such Substitute Contract is itself an [ ] Contract; and (2) with respect to any such Substitute Contract which is replacing a Replaced Contract of the type described in clause (a) of the definition of Substitution Event (a "Type"), the condition that after giving effect to such transfer, the Contract Pool Principal Balance of all Substitute Contracts transferred to the Trust since the Closing Date in respect of Replaced Contracts of the same Type shall not exceed 10% of the Contract Pool Principal Balance as of the Initial Cutoff Date. "Substitute Transferred Assets" has the meaning assigned such term in Section 2.04. "Substitution Assignment Agreement" means, with respect to any Substitute Contracts, the agreement between [ ] and the Depositor pursuant to which [ ] transfers the identified Substitute Contracts to the Depositor, the form of which is attached to the Purchase and Sale Agreement as Exhibit B. "Substitution Cutoff Date" means the date specified as such for the relevant Substitute Contracts, in the related Substitution Transfer Agreement. "Substitution Event" means, with respect to any transfer of a related Substitute Contract to the Trust under Section 2.04, the occurrence of any of the following: (a) one or more Contracts identified in the related Substitution Notice as being an intended Replaced Contract with respect to such Substitute Contract, has become a Defaulted Contract, (b) one or more Contracts identified in the related Substitution Notice as being an intended Replaced Contract with respect to such Substitute Contract, has been subjected to a Material Modification, (c) one or more Contracts identified in the related Substitution Notice as being an intended Replaced Contract with respect to such Substitute Contract, has become an Ineligible Contract, or (d) one or more Contracts identified in the related Substitution Notice as being an intended Replaced Contract with respect to such Substitute Contract, has become a Prepaid Contract and the Trust has not yet received the related Prepayment. "Substitution Notice" means, with respect to any transfer of Substitute Contracts to the Trust pursuant to Section 2.04 (and the applicable Financing Originator's corresponding conveyance and assignment of such Substitute Contracts), a notice, which shall be given at least five days prior to the related Substitution Transfer Date, identifying the Substitute Contracts to be transferred, the Contract Principal Balance of such Substitute Contracts and the related Substitution Event (with respect to an identified Contract or Contracts then in the Contracts Pool, which will upon such substitution become a Replaced Contract) to which such Substitute Contract relates, with such notice to be signed both by the Depositor and the applicable Financing Originator[s]. "Substitution Schedule of Contracts" means a schedule or list, substantially in the form of the initial Schedule of Contracts delivered on the Closing Date, but listing each Substitute Contract being transferred to the Trust pursuant to a related Substitution Transfer Agreement, as well as the related Replaced Contracts being removed from the existing Contract Pool by virtue of such substitution. "Substitution Transfer Agreement" means the agreement identified as such in Section 2.04 hereof. "Substitution Transfer Date" means any date on which Substitute Contracts are transferred to the Trust. "Successor Servicer" has the meaning given such term in Section 8.02(b). "Tax Opinion" means, with respect to any action, an Opinion of Counsel to the effect that, for federal income tax purposes, (i) following such action the Trust will not be deemed to be an association (or publicly traded partnership) taxable as a corporation, (ii) following such action the Trust will be disregarded as a separate entity from the Depositor, and (iii) such action will not affect the tax characterization as debt of Notes of any outstanding Class issued by the Trust for which an Opinion of Counsel has been provided that such Notes are debt. "Total Principal Payment Amount" means, with respect to any Payment Date, the difference between (a) the aggregate outstanding principal of all Classes of Notes and (b) the Contract Pool Principal Balance as of the last day of the Collection Period immediately preceding such Payment Date; provided, that the amount referred to in clause (b) shall be deemed to be zero on any Payment Date on which the Contract Pool Principal Balance is less than $1,000,000. "[ ]" has the meaning assigned in the preamble hereto. "[ ] Assignment" has the meaning given such term in the Conveyancing Agreement. "[ ] Assignment Date" has the meaning given such term in the Conveyancing Agreement. "[ ] Contract" has the meaning given such term in the Conveyancing Agreement. "[ ] Contract Assets" has the meaning given such term in the Conveyancing Agreement. "[ ] Contract File" has the meaning given such term in the Conveyancing Agreement. "[ ] Financing Originator" means the Financing Originators (other than [ ]) in each case in the capacity of a [ ] Financing Originator party to the Conveyancing Agreement with [ ]. "Transaction Documents" means this Agreement, the Transfer Agreement, any Substitution Transfer Agreement, the Conveyancing Agreement, any [ ] Assignment, the Purchase and Sale Agreement, any Assignment Agreement, the Trust Agreement, the Administration Agreement, the Indenture, the Cash Collateral Account Agreement and the Underwriting. "Transfer Agreement" means, the Transfer Agreement dated the Closing Date between the Depositor and the Trust pursuant to which the Depositor conveys and assigns the Contract and other related Transferred Assets to the Trust, in the form attached hereto as Exhibit A. "Transferred Assets" means with respect to any Contracts (including Substitute Contracts) conveyed or being conveyed to the Trust pursuant to this Agreement, all right and interest of the Depositor in, to and under the following: (i) such Contracts and other related Contract Assets (subject to the proviso below); (ii) related rights of the Depositor under the Purchase and Sale Agreement and related Assignment Agreement (or Substitution Assignment Agreement, as applicable) and the [ ] Assignment, including, without limitation, in respect of the obligation of [ ] to repurchase or substitute for such Contracts under certain circumstances as specified therein; and (iii) rights under the Transfer Agreement and each Substitution Transfer Agreement; and (iv) all income from and proceeds of the foregoing; provided, that Transferred Assets shall not include any title to or ownership interest in the Equipment related to such Contracts (although security interests in such Equipment established pursuant to the related Contract, and proceeds thereof, shall constitute Transferred Assets), and provided further, that the security interest granted by the Depositor pursuant to Section 2.01 hereof in related Equipment owned by it, shall constitute part of Transferred Assets. "Trust" means the trust created by the Trust Agreement, the assets and property of which consists of the Trust Assets. "Trust Accounts" means, collectively, the Collection Account, the Cash Collateral Account and the Note Distribution Account, or any of them. "Trust Account Property" means the Trust Accounts, all amounts and investments held from time to time in any Trust Account (whether in the form of deposit accounts, physical property, book-entry securities, uncertificated securities or otherwise), and all proceeds of the foregoing. "Trust Agreement" means the Trust Agreement, dated as of [ ], between the Depositor and the Owner Trustee, as amended, restated, supplemented or otherwise modified from time to time. "Trust Assets" has the meaning given to such term in the Trust Agreement. "Trust Estate" shall have the meaning specified in the Trust Agreement. "Trustees" means the Owner Trustee and the Indenture Trustee, or any of them individually as the context may require. "UCC" means the Uniform Commercial Code as enacted in New York; provided, however, in the event that, by reason of mandatory provisions of law, any and all of the attachment, perfection or priority of the Lien of the Trust in and to the Trust Assets or the Lien of the Indenture Trustee in and to the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term UCC shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions. "UCC Filing Locations" means the States of New Jersey and [ ] and each other State in which the Servicer maintains the Contract Files related to Contracts in the Contracts Pool (as of the Closing Date, the State of [ ], and each State in which a Vendor which is an Obligor on a Vendor Loan is located (as defined in the UCC in such State)). "Uncollectible Advance" means with respect to any Determination Date and any Contract, the amount, if any, advanced by the Servicer pursuant to Section 5.14 which the Servicer has as of such Determination Date determined in good faith will not be ultimately recoverable by the Servicer. "Underwriting Agreement" means the Underwriting Agreement, dated [ ] among [ ] (as an underwriter thereunder and as representative of the underwriters) and the Depositor. "Unreimbursed Servicer Advances" means, at any time, the amount of all previous Servicer Advances (or portions thereof) as to which the Servicer has not been reimbursed as of such time pursuant to Section 7.05 and which the Servicer has determined in its sole discretion are Uncollectible Advances, and with respect to which the Servicer has given a written certification to such effect to the Owner Trustee (which certification may take the form of an entry on a Monthly Report identifying Unreimbursed Servicer Advances). "United States" means the United States of America. "Vehicle" means any motor vehicle, the transfer of interests in which is governed by a state certificate of title or registry system. "Vendor" means, with respect to a Contract, the equipment manufacturer, dealer or distributor, or software licensor or distributor, or other Person that provided financing under such Contract in connection with the acquisition or use by an End-User of such party's Equipment, Software, Services or other products. "Vendor Agreements" means the collective reference to Vendor Assignments and Program Agreements. "Vendor Assignment" means each assignment agreement pursuant to which an individual End-User Contract originated by a Vendor is assigned by such Vendor to the Financing Originator. "Vendor Guarantee" means the irrevocable obligation of a Vendor to pay to the Financing Originator the aggregate outstanding principal amount of a Contract which has been canceled by the related Obligor pursuant to the terms of such Contract. "Vendor Loan" means a limited recourse loan agreement payable by a Vendor and secured by the Vendor's interest in Secondary Contracts and by the Equipment, if any, related thereto. "[ ] Assignment" means the Release and Assignment instrument dated [ ], in the form attached hereto as Exhibit A-1, executed by the [ ] Trust conveying, assigning and releasing the [ ] Contract Assets to the Depositor. "[ ] Contract Assets" means the Contract Assets pertaining to the [ ] Contracts. "[ ] Contracts" means Contracts conveyed by the [ ] Trust to the Depositor pursuant to the [ ] Assignment, as listed in the Schedule of Contracts attached to the [ ] Assignment. "[ ] Trust" means the [ ] Equipment Trust -- [ ] Series created and existing pursuant to the Trust Agreement dated as of [ ] by and between the Depositor and [ ] as Owner Trustee. "[ ] Pooling Agreement" means the Pooling and Contribution Agreement dated as of [ ] by and among the [ ] Trust, the Depositor, and [ ]. "Vice President" of any Person means any vice president of such Person, whether or not designated by a number or words before or after the title "Vice President," who is a duly elected officer of such Person. "Voting Power" means, with respect to any outstanding membership interest of the Depositor, the power (expressed as a percentage) represented by such membership interest of the aggregate voting power of all outstanding membership interests of the Depositor having ordinary voting power, including the power to vote for election of members of the Board of Directors (and, if any class thereof has power to designate members of the Board of Directors or any special committee thereof, the power so to designate). Section 1.02. Usage of Terms. With respect to all terms in this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other genders; references to "writing" include printing, typing, lithography and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all amendments, modifications and supplements thereto or any changes therein entered into in accordance with their respective terms and not prohibited by this Agreement; references to Persons include their permitted successors and assigns; and the term "including" means "including without limitation." Section 1.03. Section References. All section references, unless otherwise indicated, shall be to Sections in this Agreement. Section 1.04. Accounting Terms. All accounting terms used but not specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States. [remainder of this page intentionally left blank] ARTICLE II FUNDINGS OF TRUST; TRANSFERS OF CONTRACTS Section 2.01. Creation and Funding of Trust; Transfer of Transferred Assets to Trust. (a) The Trust shall be created pursuant to the terms and conditions of the Trust Agreement, upon the execution and delivery of the Trust Agreement and the filing by the Owner Trustee of an appropriately completed Certificate of Trust under the Business Trust Statute. The Depositor, as settlor of the Trust, shall fund and convey assets to the Trust pursuant to the terms and provisions hereof. The Trust shall be administered pursuant to the provisions of this Agreement, the Administration Agreement and the Trust Agreement for the benefit of the Noteholder and the Equity Certificateholder. Each of the Owner Trustee and the Administrator (as defined in the Administration Agreement) is hereby specifically recognized by the parties hereto as empowered to conduct business dealings on behalf of the Trust in accordance with the terms hereof and of the Trust Agreement and Administration Agreement. (b) Subject to the terms and conditions set forth herein, on the Closing Date, the Depositor shall, transfer, assign, set over and otherwise convey to the Trust by execution of the Transfer Agreement, without recourse (other than as expressly provided herein), (i) all the right and interest of the Depositor in and to the Contracts and related Transferred Assets identified in such Transfer Agreement, (ii) the remittances, deposits and payments made into the Collection Account from time to time and amounts in the Collection Account from time to time (and any investments of such amounts), and (iii) all proceeds and products of the foregoing. (c) The parties hereto hereby agree and acknowledge that title to or ownership of any related Equipment shall not be transferred to the Trust upon such conveyance and that the Depositor shall retain its ownership interest (to the extent the same has been so conveyed to the Depositor pursuant to the Purchase and Sale Agreement and Assignment Agreements) in such Equipment (provided, that the parties agree and intend that any mere security interest, as opposed to title or ownership interest, in the related Equipment which secures the Contract pursuant to the terms thereof, is being assigned and conveyed as part of the Transferred Assets in accordance with the definition thereof). The Depositor and the Trust further intend and agree that, except as described in the preceding sentence with respect to ownership interests in related Equipment, any such transfer is intended to be a conveyance and transfer of ownership of the related Transferred Assets (or Substitute Transferred Assets conveyed as described in Section 2.04 below) and that such Transferred Assets shall not be part of the Depositor's estate in the event of the filing of a bankruptcy petition by or against the Depositor under any bankruptcy law. In the event, however, that notwithstanding such intent and agreement, a transfer and assignment contemplated hereby and in the Transfer Agreement (or Substitution Transfer Agreement, as applicable) is determined not to be a conveyance of ownership, this Agreement and the Transfer Agreement (or Substitution Transfer Agreement, as applicable) shall be deemed to constitute the Depositor's grant to the Trust of a perfected first priority security interest in such Transferred Assets, and this Agreement and the Transfer Agreement (or Substitution Transfer Agreement, as applicable), collectively, shall constitute a security agreement under applicable law, securing the related obligations of the Trust to the Noteholder and the Equity Certificateholder, in the order and priorities, and subject to the other terms and conditions of, this Agreement and the other Transaction Documents, together with such other obligations or interests as may arise hereunder and thereunder with respect to such Transferred Assets in favor of the parties thereto. (d) In furtherance of and not in limitation of any of the foregoing, the Depositor with respect to each item of Equipment owned by it as described above, by execution and delivery of this Agreement and the Transfer Agreement (or Substitution Transfer Agreement, as applicable), hereby and thereby on and as of the Closing Date (or Substitution Transfer Date, as applicable) grants to the Trust a security interest in such item of owned Equipment, securing in each case an amount payable by the Trust in respect of the Notes corresponding to the Contract Principal Balance from time to time of the related Contract; it being understood, however, that (i) recourse to such Equipment in realization of the benefits of such security interest shall only occur if the related Contract has become a Defaulted Contract, and (ii) the application of Liquidation Proceeds realized therefrom shall be governed in accordance with the provisions hereof generally applicable to such Pledged Revenue and allocation in accordance with the Allocation Criteria. Section 2.02. Conditions to Transfers. The Depositor shall transfer to the Trust the Contracts and other Transferred Assets described in Section 2.01 above only upon the satisfaction of each of the following conditions on or prior to the Closing Date and shall be deemed to have represented in respect of the Closing Date that all such conditions are satisfied upon the Depositor's delivery of the Transfer Agreement: (a) the Depositor shall have delivered to the Owner Trustee on behalf of the Trust the duly executed Transfer Agreement, which shall include a Schedule of Contracts listing the Contracts being transferred on the Closing Date; (b) [ ] shall have delivered and the [ ] Trust shall have delivered to the Depositor and the Owner Trustee on behalf of the Trust a duly executed Assignment Agreement (in the case of [ ]) and the [ ] Assignment (in the case of the [ ] Trust) with respect to the Contracts being conveyed by them, respectively, on the Closing Date; (c) A letter from Ernst & Young LLP, or another nationally recognized accounting firm, addressed to the Depositor and stating that such firm has reviewed a sample of the Initial Contracts and performed specific procedures for such sample with respect to certain contract terms and which identifies those Initial Contracts which do not conform; (d) Copies of resolutions of the Board of Directors of [ ], the Servicer and the Depositor or of the Executive Committee of the Board of Directors of [ ], the Servicer and the Depositor approving the execution, delivery and performance of this Agreement and the other Transaction Documents to which any of them is a party, as applicable, and the transactions contemplated hereunder and thereunder, certified in each case by the Secretary or an Assistant Secretary of [ ], the Servicer and the Depositor; (e) Officially certified, recent evidence of due incorporation or formation, as the case may be and good standing of each of [ ] and the Depositor under the laws of Delaware; (f) Evidence of proper filing with appropriate officers in the UCC Filing Locations of UCC financing statements executed by [ ], as debtor, naming the Depositor as secured party (and the Owner Trustee as assignee) and identifying the Contract Assets as collateral; evidence of proper filing with appropriate officer in the UCC Filing Locations of a UCC partial release identifying the [ ] Contracts as collateral being released, executed by the [ ] Trust; and evidence of proper filing with appropriate officer in the UCC Filing Locations of UCC financing statements executed by the Depositor, as debtor, naming the Owner Trustee as secured party (and the Indenture Trustee as assignee) and identifying the Trust Assets as collateral; and evidence of proper filing with appropriate officers in the UCC Filing Locations of UCC financing statements executed by the Trust and naming the Indenture Trustee as secured party and identifying the Trust Assets, as collateral; (g) Evidence of deposit in the Collection Account of all Pledged Revenues received with respect to the Initial Contracts after the Initial Cutoff Date through and including the date which is two days preceding the Closing Date, together with an Officer's Certificate from the Servicer to the effect that such amount is materially correct; (h) Evidence of deposit in the Cash Collateral Account of the initial Required Cash Collateral Amount; (i) A fully executed Purchase and Sale Agreement, together with the Assignment Agreement executed by [ ] pursuant thereto; (j) A fully executed [ ] Assignment; (k) A fully executed Trust Agreement; (l) A fully executed Administration Agreement; (m) A fully executed Indenture; (n) an opinion of [ ] to the effect that for federal income tax purposes, the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class A-5 Notes, Class B Notes, Class C Notes and Class D Notes will be characterized as debt and the Trust will not be characterized as an association (or publicly traded partnership) taxable as a corporation;, (o) each of the representations and warranties made by [ ] pursuant to Article III of the Purchase and Sale Agreement shall be true and correct as of the Closing Date (including the representation made thereunder as to compliance with the UCC filing criteria as set forth in clause (j) of the definition of Eligible Contract), and [ ] shall have performed in all material respects all obligations to be performed by it under the Purchase and Sale on or prior to the Closing Date; (p) each of the representations and warranties made by the Trust, the Depositor and the Servicer pursuant to Article III hereof shall be true and correct as of the Closing Date; (q) the Depositor shall, at its own expense, on or prior to the Closing Date indicate in its computer files that the Transferred Assets identified in the Transfer Agreement have been conveyed to the Trust pursuant to this Agreement and the Transfer Agreement; (r) no event has occurred and is continuing, or would result from the conveyance on the Closing Date that constitutes a Servicer Default; and (s) the Depositor or the Servicer shall have provided the Owner Trustee on behalf of the Trust a statement or computer disk listing the Contract Pool Principal Balance on the Closing Date of the contracts being transferred on the Closing Date. The failure to satisfy any of the foregoing conditions to transfer or to obtain a waiver thereof shall not be deemed to adversely affect the validity of any such transfer. Section 2.03. Acceptance by Trust. On the Closing Date, if all the conditions specified in Section 2.02 above have been satisfied, the Owner Trustee shall issue on behalf of the Trust to, or upon the order of the Depositor the Equity Certificate representing ownership of a beneficial interest in 100% of the Trust and the Owner Trustee shall issue, and the Indenture Trustee shall authenticate, to, or upon the order of, the Depositor the Notes secured by the Collateral. The Owner Trustee hereby acknowledges its acceptance, on behalf of the Trust, of the Trust Assets, and declares that it shall maintain such right and interest in the Trust Assets in accordance with the terms of this Agreement and the Trust Agreement on the trust herein and therein set forth. Section 2.04. Conveyance of Substitute Contracts. (a) Subject to the limitations set forth in (and the other terms and conditions of) this Section 2.04, the Depositor may substitute other Contracts and related assets for Contracts and related Transferred Assets previously conveyed to the Trust and in the Contract Pool, by conveying such other Contracts and related assets to the Trust pursuant to the procedures and documentation specified below. Upon the effectiveness of such substitution, such other Contracts and related Transferred Assets (such Contracts, "Substitute Contracts", and collectively, "Substitute Transferred Assets") shall, for all purposes of this Agreement and the Trust Agreement, constitute and be considered as part of the Trust Assets, and the Contracts already in the Contract Pool and related Transferred Assets for which the Substitute Assets have been substituted (such Contracts, "Replaced Contracts", and collectively, "Replaced Assets") shall no longer constitute Trust Assets. Upon consummation of such substitution, the Trust shall be deemed to have assigned to the Depositor all of the Trust's right, title and interest in and to the Replaced Assets, without recourse, representation or warranty. In addition, the parties hereto intend and agree that any conveyance described in this Section 2.04 is made with the intent and effect described in subsection (c) of Section 2.01 above. (b) Subject to the conditions set forth in this subsection (b) below, and pursuant to one or more related Substitution Transfer Agreements, the Depositor shall transfer, assign, set over and otherwise convey to the Trust, without recourse (other than as expressly provided herein), (i) all the right and interest of the Depositor in and to the Substitute Contracts listed on the related Substitution Schedule of Contracts, and (ii) all other rights and property interests consisting of Transferred Assets related to such Substitute Contracts. The Depositor shall effect such transfers only upon the satisfaction of each of the following conditions on or prior to the related Substitution Transfer Date (and the delivery of a related Substitution Notice by the Depositor shall be deemed a representation and warranty by the Depositor that such conditions have been or will be, as of the related Substitution Transfer Date, satisfied): (i) At least five days prior to the related Substitution Transfer Date, the Depositor shall have provided the Owner Trustee on behalf of the Trust and the Indenture Trustee with a Substitution Notice complying with the definition thereof contained herein; (ii) there shall have occurred, with respect to each such Substitute Contract, a corresponding Substitution Event with respect to one or more intended Replaced Contracts then constituting Contracts in the Contract Pool; (iii) the Substitute Contract(s) being conveyed to the Trust, satisfy the Substitute Contract Qualification Conditions; (iv) the Depositor shall have delivered to the Owner Trustee on behalf of the Trust a duly executed written assignment agreement in substantially the form of Exhibit E hereto (a "Substitution Transfer Agreement"), which shall include a Substitution Schedule of Contracts identifying the Substitute Contracts and the related Replaced Contracts; (v) [ ] shall have delivered to the Depositor and the Owner Trustee on behalf of the Trust a duly executed Substitution Assignment Agreement with respect to such conveyance; (vi) the Depositor shall have deposited or caused to be deposited in the Collection Account all Pledged Revenue received with respect to the Substitute Contracts after the applicable Substitution Cutoff Date and through and including the date which is two Business Days preceding the related Substitution Transfer Date; (vii) no selection procedures adverse to the interests of either the Trust or the Noteholders or Certificateholder shall have been utilized in selecting the Substitute Contracts; (viii) each of the representations and warranties made by [ ] pursuant to Article III of the Purchase and Sale Agreement shall be true and correct as of the related Substitution Transfer Date (including the representation made as to compliance with the UCC filing criteria set forth in clause (j) of the definition of Eligible Contract), and [ ] shall have performed in all material respects all obligations to be performed by it under the Purchase and Sale Agreement on or prior to such Substitution Transfer Date; and (ix) the Servicer and [ ] shall, at their own expense, on or prior to the Substitution Transfer Date, have indicated in their respective computer files that the Substitute Contracts identified on the Substitution Schedule of Contracts attached to the related Substitution Transfer Agreement have been assigned and conveyed to the Trust through the Depositor pursuant to this Pooling Agreement and the Purchase and Sale Agreement. The failure to satisfy any of the foregoing conditions to transfer or to obtain a waiver thereof shall not be deemed to adversely affect the validity of any such transfer. Section 2.05. Release of Excluded Amounts. The Trust hereby agrees to release to the Servicer, an amount equal to the Excluded Amounts immediately upon identification thereof, which release shall be automatic and shall require no further act by the Trust, provided that the Trust shall execute and deliver such instruments of release and assignment, or otherwise confirm the foregoing release, as may reasonably be requested in writing by the Servicer. Upon such release, such Excluded Amounts shall not constitute and shall not be included in the Trust Assets. ARTICLE III REPRESENTATIONS AND WARRANTIES [ ] under the Purchase and Sale Agreement has made, and upon execution of each Substitution Assignment Agreement is deemed to remake with respect to the relevant Contract Assets conveyed thereby, each of the representations and warranties set forth in the Schedule of Representations, and has consented to the assignment by the Depositor to the Trust of the Depositor's rights with respect thereto. Such representations speak as of the Closing Date in the case of the Initial Contracts, and as of the applicable Substitution Transfer Date in the case of the Substitute Contracts, but shall survive the transfer and assignment of the related Contracts to the Trust. Pursuant to Section 2.01 of this Agreement, the Depositor has sold, assigned, transferred and conveyed to the Trust as part of the Transferred Assets its rights under the Purchase and Sale Agreement, including without limitation, the representations and warranties of [ ] therein as set forth in the Schedule of Representations, together with all rights of the Depositor with respect to any breach thereof including any right to require [ ] to repurchase or substitute for any Contract in accordance with the Purchase and Sale Agreement. It is understood and agreed that the representations and warranties set forth or referred to in this Section shall survive delivery of the Contract Files to the Owner Trustee or any custodian. The Depositor hereby confirms to the Trust that it has entered into the Purchase and Sale Agreement with [ ], that [ ] has made the representations and warranties in the Schedule of Representations, that such representations and warranties run to and are for the benefit of the Depositor, and that pursuant to Section 2.01 of this Agreement the Depositor has transferred and assigned to the Trust all rights of the Depositor to cause [ ] under the Purchase and Sale Agreement to repurchase or substitute for Contracts conveyed thereunder in the event of a breach of such representations and warranties applicable to such Contract. Section 3.01. Representations and Warranties Regarding the Depositor. By its execution of this Agreement, and each Substitution Transfer Agreement, the Depositor represents and warrants to the Trust, the Owner Trustee, the Indenture Trustee, the Noteholders and the Equity Certificateholder that, as of the date of the Closing Date and Substitution Transfer Date (and, with respect to the representation set forth in subsection (l) of this Section 3.01 below, as of the date the certificate, written report or written statement referred to in such subsection is furnished): (a) Organization and Good Standing. The Depositor is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware and has the requisite power to own its assets and to transact the business in which it is currently engaged. The Depositor is duly qualified to do business and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets, or condition (financial or other) of the Depositor or the Trust. (b) Authorization; Valid Transfer; Binding Obligations. The Depositor has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which it is a party, and to create the Trust and cause it to make, execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which it is a party and has taken all necessary corporate action to authorize the due execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party and to cause the Trust to be created. This Agreement and the Transfer Agreement and any Substitution Transfer Agreement shall effect a valid transfer and assignment of the relevant Transferred Assets, enforceable against the Depositor and creditors of and purchasers from the Depositor. This Agreement and the other Transaction Documents to which the Depositor is a party have been duly executed and delivered by the Depositor and constitute the legal, valid and binding obligation of the Depositor enforceable in accordance with their terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. (c) No Consent Required. The Depositor is not required to obtain the consent of any other Person or any consent, license, approval or authorization from, or registration or declaration with, any Governmental Authority in connection with the execution, delivery, performance, validity or enforceability of this Agreement or the other Transaction Documents to which it is a party. (d) No Violations. The execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party by the Depositor, and the consummation of the transactions contemplated hereby and thereby, will not violate any Requirements of Law applicable to the Depositor, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Depositor is a party or by which the Depositor or any of the Depositor's properties may be bound, or result in the creation or imposition of any security interest, lien, charge, pledge, preference, equity or encumbrance of any kind upon any of its properties pursuant to the terms of any such mortgage, indenture, contract or other agreement, other than as contemplated by the Transaction Documents. (e) Litigation. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Depositor threatened, against the Depositor or any of its properties or with respect to this Agreement or the other Transaction Documents to which it is a party (1) which, if adversely determined, would in the reasonable judgment of the Depositor have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Depositor or the Trust or the transactions contemplated by this Agreement or the other Transaction Documents to which the Depositor is a party or (2) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Notes. (f) Taxes. The Depositor has filed or caused to be filed all material tax returns which, to its knowledge, are required to be filed and has paid all taxes shown to be due and payable on such returns or on any material assessments made against it or any of its property and all other material taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any amount of tax due, the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with generally accepted accounting principles have been provided on the books of the Depositor); no tax lien has been filed and, to the Depositor's knowledge, no claim is being asserted, with respect to any such tax, fee or other charge. (g) Schedule of Representations. The representations and warranties set forth on the Schedule of Representations are true and correct as of the Closing Date (or Substitution Transfer Date, as applicable) with respect to the Transferred Assets being conveyed to the Trust on such date. (h) Solvency. The Depositor, at the time of and after giving effect to each conveyance made hereunder, is Solvent on and as of the date thereof. (i) Place of Business; Name Changes. The location of the Depositor's sole place of business or chief executive office (within the meaning of Article 9 of the UCC) is as set forth in Section 11.04 below, and such location has not been changed within the four months preceding any Transfer Date (or if so changed, all necessary actions in connection with such change have been or are being timely taken in accordance with Section 4.03 hereof). The Depositor has not changed its name, whether by amendment of its certificate of formation, by reorganization or otherwise, within the four months preceding any Transfer Date (or if so changed, all necessary actions in connection with such change have been or are being timely taken in accordance with Section 4.03 hereof). (j) Not an Investment Company. The Depositor is not an "investment company" (and does not control, and is not under the control of, an investment company) within the meaning of the Investment Company Act of 1940, as amended (or the Depositor is exempt from all provisions of such Act). Such representations (except to the extent expressly stated by their terms to speak as of a different date or time) speak as of the Closing Date and each Transfer Date and Substitution Transfer Date, if any, but shall survive the transfer and assignment of the Contracts to the Trust. Section 3.02. Representations and Warranties of the Servicer. The Servicer represents and warrants to the Trust, the Owner Trustee, the Indenture Trustee, the Noteholders and the Equity Certificateholder that, as of the date of the execution and delivery of this Agreement and as of the Closing Date and each Substitution Transfer Date (and, with respect to the representations set forth in subsection (h) of this Section 3.02 below, as of the date the certificate, written report or written statement or financial statement referred to in such subsection is furnished): (a) Organization and Good Standing. The Servicer is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has the corporate power to own its assets and to transact the business in which it is currently engaged. The Servicer is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of the Servicer or the Trust. The Servicer (or any permitted subservicer hereunder with respect to affected Contracts, if the Servicer is not so licensed) is properly licensed in each jurisdiction to the extent required by the laws of such jurisdiction to service the Contracts in accordance with the terms hereof. (b) Authorization; Binding Obligations. The Servicer has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which the Servicer is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which the Servicer is a party, and has taken all necessary corporate action to authorize the due execution, delivery and performance of this Agreement and the other Transaction Documents to which the Servicer is a party. This Agreement and the other Transaction Documents to which the Servicer is a party have been duly executed and delivered by the Servicer and constitute the legal, valid and binding obligation of the Servicer enforceable in accordance with their terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. (c) No Consent Required. The Servicer is not required to obtain the consent of any other Person or any consent, license, approval or authorization from, or registration or declaration with, any Governmental Authority in connection with the execution, delivery, performance, validity or enforceability of this Agreement and the other Transaction Documents to which the Servicer is a party. (d) No Violations. The execution, delivery and performance of this Agreement and the other Transaction Documents to which the Servicer is a party by the Servicer will not violate any Requirements of Law applicable to the Servicer, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Servicer is a party or by which the Servicer or any of the Servicer's properties may be bound, or result in the creation of or imposition of any security interest, lien, pledge, preference, equity or encumbrance of any kind upon any of its properties pursuant to the terms of any such mortgage, indenture, contract or other agreement, other than as contemplated by the Transaction Documents. (e) Litigation. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Servicer threatened, against the Servicer or any of its properties or with respect to this Agreement, or any other Transaction Document to which the Servicer is a party which, if adversely determined, would in the reasonable judgment of the Servicer have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Servicer or the Trust or the transactions contemplated by this Agreement or any other Transaction Document to which the Servicer is a party. (f) No Servicer Default. No event has occurred and is continuing and no condition exists which constitutes a Servicer Default. [remainder of this page intentionally left blank] ARTICLE IV PERFECTION OF TRANSFERS AND PROTECTION OF SECURITY INTERESTS Section 4.01. Custody of Contracts. (a) Subject to the terms and conditions of this Section 4.01, the contents of each Contract File shall be held in the custody of the Servicer (including through any subservicer contemplated under Section 5.05), for the benefit of, and as agent for, the Noteholders, the Equity Certificateholder, the Indenture Trustee and the Issuer, as well as the Trust as the owner thereof. (b) The Servicer agrees to maintain the Contract Files at its offices where they are currently maintained, or at such other offices of the Servicer (or a subservicer contemplated under Section 5.05) as shall from time to time be established by the Servicer or such subservicer (or in certain instances at offsite storage facilities in the same general geographic area as an office of the Servicer or subservicer, pursuant to contractual agreement between the Servicer or subservicer and the Person owning or maintaining such offsite facility). The Servicer may temporarily move individual Contract Files or any portion thereof without notice or other such compliance, as necessary to conduct collection and other servicing activities in accordance with the Servicing Standard; provided, however, that the Servicer will take all action necessary to maintain the perfection of the Trust's interest in the Trust Assets and the proceeds thereof. It is intended that by the Servicer's agreement pursuant to Section 4.01(a) above and this Section 4.01(b), the Trust and the Owner Trustee for the benefit of the Trust shall be deemed to have possession of the Contract Files for purposes of Section 9-305 of the Uniform Commercial Code of the State in which the Contract Files are located. (c) As custodian, the Servicer shall have and perform the following powers and duties: (i) hold the Contract Files on behalf of the Noteholder and the Equity Certificateholder and the Trust; maintain accurate records pertaining to each Contract to enable it to comply with the terms and conditions of this Agreement; and maintain a current inventory thereof; (ii) maintain and comply with Customary Policies and Procedures with respect to Persons authorized to have access to the Contract Files; (iii) attend to all details in connection with maintaining custody of the Contract Files on behalf of the Noteholder and the Equity Certificateholder and the Trust; and (iv) indicate in the appropriate computer records that the Contracts as of the Closing Date (or Substitution Transfer Date, as the case may be) have been conveyed to the Trust. (d) In performing its duties under this Section 4.01, the Servicer agrees to act in accordance with the applicable Servicing Standard. In acting as custodian of the Contract Files, the Servicer further agrees not to assert any legal or beneficial ownership interest in the Contracts or the Contract Files, except as provided in Section 5.06. (e) The Servicer agrees to indemnify the Noteholder and the Equity Certificateholder, the Owner Trustee, the Indenture Trustee and the Trust for any and all liabilities, obligations, losses, damages, payments, costs, or expenses of any kind whatsoever which may be imposed on, incurred by or asserted against any of such parties as the result of any act or omission by the Servicer relating to the maintenance and custody of the Contract Files or any other breach or noncompliance of the Servicer in the performance of its duties and obligations as Servicer hereunder; provided, however, that the Servicer will not be liable to any such party for any portion of any such amount resulting from the gross negligence or willful misconduct of such party. Section 4.02. Filings. On or prior to the Closing Date, the Servicer shall cause UCC financing statement(s) to be filed, and from time to time the Servicer shall take and cause to be taken such other actions and execute such other documents as are necessary to perfect or further perfect and protect the Trust's first priority interest in the Trust Assets against all other Persons. Such additional actions may include without limitation, the filing of financing statements, amendments thereto and continuation statements, the execution of transfer instruments and the making of notations on or taking possession of records or documents of title. Section 4.03. Name Change or Relocation. (a) During the term of this Agreement, neither the Servicer nor the Depositor shall change, nor shall the Servicer permit any Financing Originator to change, its name, identity or structure or relocate its chief executive office without first giving at least 30 days' prior written notice to the Servicer, the Owner Trustee, and and the Indenture Trustee. (b) If any change in either the Servicer's, a Financing Originator's or the Depositor's name, identity or structure or other action would make any financing or continuation statement or notice of lien seriously misleading within the meaning of applicable provisions of the UCC or any title statute, the Servicer, no later than thirty days after the effective date of such change, shall file such amendments as may be required to preserve and protect the Trust's interests in the Trust Assets and the proceeds thereof. In addition, neither any Financing Originator, the Servicer nor the Depositor shall change its place of business (within the meaning of Article 9 of the UCC), from the locations specified in Section 11.04 hereof unless it has first taken such action as is necessary to preserve and protect the Trust's interest in the Trust Assets. Promptly after taking any of the foregoing actions, the Servicer shall deliver to the Owner Trustee and the Indenture Trustee an Opinion of Counsel reasonably acceptable to the Owner Trustee and the Indenture Trustee stating that, in the opinion of such counsel, all financing statements or amendments necessary to preserve and protect the interests of the Trust and Indenture Trustee in the Trust Assets have been filed, and reciting the details of such filing. [remainder of this page intentionally left blank] ARTICLE V SERVICING OF CONTRACTS Section 5.01. Initial Servicer's Appointment and Acceptance; Responsibility for Contract Administration. [ ] shall be and is hereby appointed as the Servicer and custodian (as contemplated in Article IV hereof) pursuant to this Agreement with respect to the Contract Assets in the Contract Pool. [ ] accepts the appointment and agrees to act as the Servicer and custodian pursuant to this Agreement. Except to the extent otherwise specified herein or as contemplated in Section 5.05, the Servicer will have the sole obligation to manage, administer, service and make collections on the Contracts and perform or cause to be performed all contractual and customary undertakings of the Originator of the Contracts to the Obligor. The Trust, at the written request of a Servicing Officer, shall furnish the Servicer with any powers of attorney or other documents necessary or appropriate in the opinion of the Servicer to enable the Servicer to carry out its servicing and administrative duties hereunder. The Servicer is hereby appointed the Servicer hereunder until such time as any Servicing Transfer may be effected pursuant to Article VIII hereof. Section 5.02. General Duties. The Servicer will service, administer and enforce the Contracts in the Contract Pool on behalf of the Trust and will have full power and authority to do any and all things in connection with such servicing and administration which it deems necessary or desirable and as shall not contravene the provisions of this Agreement or any other Transaction Document. The Servicer will manage, service, administer, and make collections on the Contracts in the Contract Pool in accordance with the Servicing Standard. The Servicer's duties will include collection and posting of all payments, responding to inquiries of Obligors regarding the Contracts in the Contract Pool, investigating delinquencies, accounting for collections, furnishing reports with respect to collections and payments as contemplated in Article IX hereof, making Servicer Advances in its discretion, and using its best efforts to maintain the perfected first priority interest of the Trust in the Trust Assets. The Servicer will have full power and authority, acting alone, to do any and all things in connection with such managing, servicing, administration, and collection that it deems necessary or desirable. If the Servicer commences a legal proceeding to enforce a Defaulted Contract pursuant to Section 5.15 or commences or participates in a legal proceeding (including a bankruptcy proceeding) relating to or involving a Contract in the Contract Pool, the Trust will be deemed to have automatically assigned such Contract to the Servicer solely for purposes of, and to the extent necessary for, commencing or participating in any such proceeding as a party or claimant (but in all cases subject to the continuing interest of the Trust and its assignees in the proceeds and recoveries from such proceedings, as and to the extent provided in the Transaction Documents), and the Servicer is authorized and empowered by the Trust, pursuant to this Section 5.02, to execute and deliver, on behalf of itself and the Trust, any and all instruments of satisfaction or cancellation, or partial or full release or discharge, and all other notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceedings. If in any enforcement suit or legal proceeding it is held that the Servicer may not enforce a Contract on the ground that it is not a real party in interest or a holder entitled to enforce the Contract, then the Owner Trustee will, at the Servicer's expense and written direction, take steps on behalf of the Trust to enforce the Contract, including bringing suit in the Trust's name. Section 5.03. Assignment or Replacement. At the request of an Obligor, the Servicer may in its sole discretion consent to the assignment by such Obligor of its rights under a Contract in the Contract Pool or the sublease of a unit of the Equipment relating to such a Contract, so long as such Obligor remains liable for all of its obligations under such Contract; provided, that the Servicer may release such Obligor from its obligations if the Obligor's assignee is determined by the Servicer to be of at least equivalent credit risk, all in accordance with Customary Policies and Procedures. Upon the request of any Obligor, the Servicer may, in its sole discretion, provide for the substitution or replacement of any unit of Equipment for a substantially similar unit of Equipment, so long as such Obligor remains liable for all of its obligations under such Contract. Section 5.04. Disposition Upon Termination of Contract. Upon the termination of a Contract included in the Contract Pool as a result of a default by the Obligor thereunder, and upon any such Contract becoming a Defaulted Contract, the Servicer will use commercially reasonable efforts to dispose of any related Equipment. Without limiting the generality of the foregoing, if the Servicer disposes of any such Equipment by purchasing such Equipment or by selling such Equipment to any of its Affiliates, such disposition shall be for a purchase price equal to the fair market value thereof (as determined by the Servicer in its reasonable discretion). The Servicer will deposit any Prepayments and any Liquidation Proceeds derived from any such disposition in accordance with Article VII hereof. Section 5.05. Subservicers. The Servicer may enter into servicing agreements with one or more subservicers (including the Financing Originators or any other Affiliate of the Servicer) to perform all or a portion of the servicing functions on behalf of the Servicer; provided that the Servicer shall remain obligated and be liable to the Trust for servicing and administering the Contracts in the Contract Pool in accordance with the provisions of this Agreement without diminution of such obligation and liability by virtue of the appointment of such subservicer, to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering such Contracts. The fees and expenses of the subservicer (if any) will be as agreed between the Servicer and its subservicer and neither the Owner Trustee, the Trust, the Indenture Trustee nor any Noteholder or Equity Certificateholder will have any responsibility therefor. All actions of a subservicer taken pursuant to such a subservicing agreement will be taken as an agent of the Servicer with the same force and effect as though performed by the Servicer. Section 5.06. Further Assurance. The Trust will execute and deliver to the Servicer, and the Servicer will prepare and furnish any subservicer with, any powers of attorney and other documents necessary or appropriate to enable the Servicer or a subservicer, as applicable, to carry out its servicing and administrative duties under this Agreement and the other Transaction Documents. Section 5.07. Notice to Obligors. Except as contemplated in clause (m) of the definition of Eligible Contract, the Servicer will not be required to notify any Obligor that such Obligor's Contract or related Equipment, or any security interest in such Contract or such Equipment, has been transferred, assigned, and conveyed pursuant to the Conveyancing Agreement, the Purchase and Sale Agreement or pursuant to this Agreement; provided that, in the event that the Servicer resigns or is replaced, then if the place for payment pursuant to any Contract is changed, the Successor Servicer must give each related Obligor prompt written notice of the appointment of the Successor Servicer and the place to which such Obligor should make payments pursuant to each such Contract. Section 5.08. Collection Efforts; Modification of Contracts. (a) The Servicer will make reasonable efforts to collect all payments called for under the terms and provisions of the Contracts in the Contract Pool as and when the same become due, in accordance with the Servicing Standard. The Servicer is authorized in its discretion to waive any Late Charges, or other administrative fees, expenses and charges collectible in respect of a Contract in the Contract Pool, including late payment interest, documentation fees, insurance administration charges, and extension fees. (b) The Servicer also may, subject to Sections 5.09 and 5.10, at the request of an Obligor and at the Servicer's option, waive, amend, modify or otherwise vary any other provision of a Contract in accordance with Customary Policies and Procedures (it being understood that any modification or amendment of a Contract resulting from an Insolvency Event with respect to the related Obligor will not be deemed to have been granted by the Servicer hereunder),including without limitation: (i) in order to (A) change the Obligor's regular due date to a date within the Collection Period in which such due date occurs, or (B) re-amortize (over the remainder of the original Contract term) the Scheduled Payments on a Contract following a partial Prepayment (provided, that the sum of such partial Prepayment and the Contract Principal Balance of the affected Contract after re-amortization is at least equal to the Contract Principal Balance for such Contract prior to giving effect to the partial Prepayment), or (ii) for any other purpose; provided, that no such modification or amendment shall: (A) change the amount or the due date of any Scheduled Payment (except as provided in clauses (i)(A) and (B) above, Section 5.09 and Section 5.10 below); (B) release the related Equipment from the Contract, unless (1) the release complies with Section 5.03 above, or (2) the release is pursuant to a partial Prepayment (which, in the case of a partial Prepayment on a Lease, meets the requirements of Section 5.09 below) and the ratio of the fair market value (determined by the Servicer in its reasonable discretion) of the related Equipment to the Contract Principal Balance of the affected Contract after giving effect to such Prepayment and release, is at least equal to such ratio existing prior to such event; (C) except as provided in clause (ii)(A) above, result in the Contract Principal Balance of the Contract being less than it would have been absent such modification or amendment; or (D) if such modification or amendment had been in effect on the relevant Transfer Date with respect to the Contract, cause or have caused the Contract not to constitute an Eligible Contract. Section 5.09. Prepayments of Certain Contracts. The Servicer may, at its option and in accordance with Customary Policies and Procedures, agree to permit a Contract in the Contract Pool that is not otherwise contractually prepayable by its terms and is not a Defaulted Contract, to become a Prepaid Contract through a voluntary Prepayment by the Obligor (which shall not be deemed to include prepayment due to a Casualty Loss); provided, that the Servicer will not permit the voluntary full or partial Prepayment of such a Contract unless the amount of such Prepayment (or, in the case of a partial Prepayment, the sum of such Prepayment and the remaining Contract Principal Balance of the Contract after application of such Prepayment), together with such additional amounts as are (i) otherwise available to or supplied by the Servicer for the purpose of prepaying such Contract, and (ii) deposited in the Collection Account contemporaneously with the deposit therein of such Prepayment, is at least equal to the Required Payoff Amount for such Contract determined as of the beginning of the current Collection Period. Section 5.10. Certain Extensions; Acceleration. (a) The Servicer may (subject to subsection (b) below) grant payment extensions on a Contract in the Contract Pool, consistent with Customary Policies and Procedures (it being understood that any extensions on a Contract resulting from an Insolvency Event with respect to the related Obligor will not be deemed to have been granted by the Servicer hereunder) if the Servicer believes in good faith that such extension is necessary to avoid a termination and liquidation of such Contract and will maximize the amount to be received by the Trust with respect to such Contract; provided, however, that the aggregate period of all extensions granted on a Contract shall not exceed six months. Nothing in this Section 5.10 shall be deemed to prevent the Servicer from extending or renewing, or otherwise accepting the continued performance by the Obligor under, a Contract after expiration of its stated term. (b) The Servicer also, consistent with Customary Policies and Procedures, may accelerate (or elect not to accelerate) the maturity of all or any Scheduled Payments under any Contract in the Contract Pool under which a default under the terms thereof has occurred and is continuing (after the lapse of any applicable grace period); provided that the Servicer is required to accelerate the Scheduled Payments due under any Contract in the Contract Pool (and take other action in accordance with applicable Customary Policies and Procedures, including repossessing or otherwise converting the related Equipment, to realize upon the value of such Contract and the related Equipment) to the fullest extent permitted by the terms of such Contract, promptly after such Contract becomes a Defaulted Contract. Section 5.11. Taxes and Other Amounts. To the extent provided for in any Contract in the Contract Pool, the Servicer will make reasonable efforts consistent with the applicable Servicing Standard to collect (or cause to be collected) all payments with respect to amounts due for taxes, assessments and insurance premiums relating to such Contract or the related Equipment and remit such amounts to the appropriate Governmental Authority or insurer on or prior to the date such payments are due. Section 5.12. Suits by Servicer. Notwithstanding anything herein to the contrary, the Servicer does not have any obligation pursuant to this Agreement to appear in, prosecute or defend any legal action which is not incidental to its servicing duties under this Agreement. Section 5.13. Remittances. The Servicer will service all Collections in accordance with Article VII hereof. Section 5.14. Servicer Advances. For any Collection Period, if the Servicer determines that any Scheduled Payment (or portion thereof) which was due and payable pursuant to a Contract in the Contract Pool during such Collection Period was not received prior to the end of such Collection Period, the Servicer may make a Servicer Advance in an amount up to the amount of such delinquent Scheduled Payment (or portion thereof), to the extent that in its sole discretion it determines that it can recover such amount from subsequent Collections under the related Contract. The Servicer will deposit any Servicer Advances into the Collection Account on or prior to 11:00 a.m. (New York time) on the Deposit Date, in immediately available funds. The Servicer will be entitled to be reimbursed for Servicer Advances pursuant to Article VII hereof. Section 5.15. Realization Upon Defaulted Contract. The Servicer will use its best efforts consistent with the applicable Servicing Standard to repossess or otherwise comparably convert the ownership of any Equipment relating to a Defaulted Contract and will act as transfer and processing agent for Equipment or Applicable Security which it repossesses. The Servicer will follow such other practices and procedures, consistent with the Servicing Standard, in order to realize upon such Equipment or Applicable Security, which practices and procedures may include reasonable efforts to enforce all obligations of Obligors and repossessing and selling such Equipment or Applicable Security at public or private sale in circumstances other than those described in the preceding sentence. Without limiting the generality of the foregoing, the Servicer may sell any such Equipment or Applicable Security to the Servicer or its Affiliates for a purchase price equal to the then fair market value thereof (determined by the Servicer in its reasonable discretion). In any case in which any such Equipment or Applicable Security has suffered damage, the Servicer will not expend funds in connection with any repair or toward the repossession of such Equipment or Applicable Security unless it determines in its discretion that such repair and/or repossession will increase the Liquidation Proceeds by an amount greater than the amount of such expenses. The Servicer will remit to the Collection Account the Liquidation Proceeds received in connection with the transfer or disposition of Equipment or Applicable Security relating to a Defaulted Contract in accordance with Article VII hereof. Section 5.16. Maintenance of Insurance Policies. The Servicer will use reasonable efforts, consistent with the Servicing Standard, to ensure that each Obligor complies with applicable insurance requirements set forth in the related Contract; provided that the Servicer, in accordance with Customary Policies and Procedures, may allow Obligors to self-insure. If an Obligor fails to maintain property damage insurance to the extent required under its Contract, the Servicer may, consistent with Customary Policies and Procedures, purchase and maintain such insurance on behalf of, and at the expense of (if the applicable Contract so provides), the Obligor. In connection with its activities as Servicer of Contracts in the Contract Pool, the Servicer agrees to present, on behalf of itself, the Trust and the Noteholders or Equity Certificateholders, claims to the insurer under each Insurance Policy and any such liability policy, and to settle, adjust and compromise such claims, in each case, consistent with the terms of each Contract. Section 5.17. Certain Other Duties With Respect to Trust. The Servicer shall, and hereby agrees that it will, monitor the Trust's compliance with all applicable provisions of state and federal securities laws, notify the Trust and the Administrator of any actions to be taken by the Trust necessary for compliance with such laws and prepare on behalf of the Trust and the Administrator all notices, filings or other documents or instruments required to be filed under such laws. Section 5.18. Servicing Compensation. As compensation for its servicing activities with respect to the Contract Pool, and also in consideration of its expenses as set forth in Section 5.19, the Servicer shall be entitled to receive a servicing fee in respect of any Collection Period (or portion thereof) (with respect to each Collection Period, the "Servicing Fee"), equal to the sum of (i) one-twelfth of the product of (A) the Servicing Fee Percentage and (B) the Contract Pool Principal Balance as of the first day of such Collection Period and (ii) any amount described in the clause (iv) of the definition of "Excluded Accounts." Section 5.19. Payment of Certain Expenses by Servicer. The Servicer will be required to pay all expenses incurred by it in connection with its activities under this Agreement, including fees and disbursements of independent accountants, the Owner Trustee, the Indenture Trustee taxes imposed on the Servicer, expenses incurred in connection with payments and reports pursuant to this Agreement, and all other fees and expenses not expressly stated under this Agreement to be for the account of the Trust or the Depositor, but excluding Liquidation Expenses incurred as a result of activities contemplated by Section 5.15 (which may be netted from Liquidation Proceeds). The Servicer will be required to pay all reasonable fees and expenses owing to the Owner Trustee or the Indenture Trustee in connection with the maintenance of the Collection Account. The Servicer shall be required to pay such expenses for its own account and shall not be entitled to any payment or reimbursement therefor other than the Servicing Fee, payable from Collections as provided herein. Section 5.20. Records. The Servicer shall, during the period it is Servicer hereunder, maintain such books of account and other records as will enable the Trust or the Administrative Agent to determine the status of each Contract in the Contract Pool. Section 5.21. Inspection. (a) The Servicer shall afford the Owner Trustee and the Indenture Trustee and their respective authorize agents not more frequently than once during each calendar year at the Servicer's expense, not to exceed $1,000 in expenses and upon reasonable prior written request, reasonable access during normal business hours to the Servicer's records relating to the Contracts in the Contract Pool, and will cause its personnel to assist in any examination of such records by any such Person, and allow copies of the same to be made. The examination referred to in this Section will be conducted in a manner which does not unreasonably interfere with the Servicer's normal operations or customer or employee relations. Without otherwise limiting the scope of the examination, such examining party may, using generally accepted audit procedures, verify the status of each such Contract and review the Computer Disk and records relating thereto for conformity to reports prepared by the Servicer pursuant to Article IX hereof, and compliance with the standards represented to exist as to each such Contract in this Agreement and the other Transaction Documents. (b) At all times during the term hereof, the Servicer shall keep available a copy of the Schedule of Contracts at its principal executive office for inspection by any such party referred to in subsection (a) of this Section 5.21. Section 5.22. Trust To Cooperate in Releases. At the same time as (i) any Lease in the Contract Pool terminates and the Equipment related to such Lease is sold, (ii) any Contract in the Contract Pool becomes a Prepaid Contract and in connection therewith the Equipment related to such Prepaid Contract is sold, (iii) the final Scheduled Payment is made in full on a Contract in the Contract Pool, (iv) a Contract previously in the Contract Pool becomes a Replaced Contract in accordance with Section 2.04, or is repurchased by deposit of a Purchase Amount as provided herein, or (v) the Servicer substitutes or replaces any unit of Equipment as contemplated in Section 5.03, the Trust shall to the extent requested by the Servicer release the Trust's interest in the Equipment relating to such affected Contract or such substituted or replaced Equipment, as the case may be; provided that such release will not constitute a release of the Trust's interest in the proceeds of Equipment the subject of a Contract still in the Contract Pool (other than with respect to Equipment that is replaced pursuant to Section 5.03). In connection with any transfer of such Equipment, the Trust and the Indenture Trustee shall execute and deliver to the Servicer any assignments, bills of sale, termination statements and any other releases and instruments as the Servicer may request in order to effect such release and transfer; provided that neither the Trust nor the Indenture Trustee shall be deemed to make any representation or warranty, express or implied, with respect to any such Equipment in connection with such transfer and assignment. Nothing in this Section 5.22 shall diminish the Servicer's obligations pursuant to Article VII with respect to the proceeds of any such transfer. Section 5.23. [RESERVED] Section 5.24. Separate Entity Existence. The Servicer agrees to take or refrain from taking or engaging in with respect to the Depositor, as applicable, each of the actions or activities specified in the "nonsubstantive consolidation" opinion of [ ] (or in any related Certificate of [ ]) delivered on the Closing Date, upon which the conclusions expressed therein are based. ARTICLE VI COVENANTS OF THE DEPOSITOR Section 6.01. LLC Existence. During the term of this Agreement, the Depositor will keep in full force and effect its existence, rights and franchises as a limited liability company under the laws of the jurisdiction of its formation and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the other Transaction Documents and each other instrument or agreement necessary or appropriate to the proper administration of this Agreement and the transactions contemplated hereby. In addition, all transactions and dealings between the Depositor and its Affiliates will be conducted on an arm's-length basis. Section 6.02. Contracts Not to be Evidenced by Promissory Notes. The Depositor will take no action to cause any Contract not originally consisting of or evidenced by an instrument (except to the extent part of chattel paper) (as such terms are defined in the UCC), to be evidenced by an instrument, except in connection with the enforcement or collection of such Contract. Section 6.03. Security Interests. The Depositor will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any Contract in the Contract Pool or on any other Trust Asset or on any related Equipment, whether now existing or hereafter transferred to the Trust, or any interest therein (except for Permitted Liens). The Depositor will immediately notify the Trust and the Indenture Trustee of the existence of any Lien (other than Permitted Liens) on any Contract in the Contract Pool or on any other Trust Assets or on any related Equipment; and the Depositor shall defend the right and interest of the Trust in, to and under the Contracts in the Contract Pool and the related Equipment, against all claims of third parties; provided, however, that nothing in this Section 6.03 shall prevent or be deemed to prohibit (i) the Depositor from suffering to exist Permitted Liens upon any of the Contracts in the Contract Pool or any related Equipment, or (ii) repurchases or substitutions by [ ] pursuant to the Purchase and Sale Agreement. Section 6.04. Delivery of Collections. The Depositor agrees to pay to the Servicer promptly any misdirected Collections received by the Depositor in respect of the Contracts in the Contract Pool, for application in accordance with Article VII. Section 6.05. Regulatory Filings. The Depositor shall make any filings, reports, notices, applications and registrations with, and seek any consents or authorizations from, the United States Securities and Exchange Commission and any state securities authority on behalf of the Trust as may be necessary or that the Depositor deems advisable to comply with any federal or state securities or reporting requirements or laws. Section 6.06. Compliance With Law. Depositor hereby agrees to comply in all material respects with all Requirements of Law applicable to Depositor. Section 6.07. Activities. The Depositor shall not engage in any business or activity of any kind, or enter into any transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking, which is not directly related to the transactions contemplated and authorized by this Agreement or the other Transaction Documents; provided, however, that the Depositor may purchase and sell (or grant Liens in respect of) contracts and/or other related assets similar to the Contracts to other Persons in securitization or other non-recourse financing transactions involving [ ] or any of their Affiliates on terms and conditions (with respect to the liabilities imposed upon the Depositor by virtue of such transactions, as well as in respect of agreements or restrictions concerning activities of the Depositor and its relations or interactions with [ ] or a Financing Originator or other applicable Affiliate relevant to "bankruptcy remoteness" or "substantive consolidation" analysis), in each case substantially similar to such terms and conditions applicable to the Depositor hereunder and under the other Transaction Documents. Section 6.08. Indebtedness. The Depositor shall not create, incur, assume or suffer to exist any Indebtedness or other liability whatsoever, except (i) obligations incurred under this Agreement or other Transaction Documents, or incidental thereto, or (ii) liabilities incident to the maintenance of its corporate existence in good standing, or (iii) obligations in connection with transactions described in the proviso to Section 6.07, as limited thereby. Section 6.09. Guarantees. The Depositor shall not become or remain liable, directly or contingently, in connection with any Indebtedness or other liability of any other Person, whether by guarantee, endorsement (other than endorsements of negotiable instruments for deposit or collection in the ordinary course of business), agreement to purchase or repurchase, agreement to supply or advance funds, or otherwise, except as contemplated hereby and in connection with transactions described in Section 6.07, as limited thereby. Section 6.10. Investments. The Depositor shall not make or suffer to exist any loans or advances to, or extend any credit to, or make any investments (by way of transfer of property, contributions to capital, purchase of stock or securities or evidences of indebtedness, acquisition of the business or assets, or otherwise) in, any Person except (i) for purchases or other acquisitions of Contracts and related Contract Assets pursuant to the Purchase and Sale Agreement or purchases or other acquisitions of similar contracts and related assets permitted by Section 6.07, or (ii) the holding of ownership interests in Equipment contemplated herein or in transactions permitted by Section 6.07, or (iii) for investments in Eligible Investments in accordance with the terms of this Agreement. Section 6.11. Merger; Transfers. The Depositor shall not enter into any transaction of merger or consolidation, or liquidate or dissolve itself (or suffer any liquidation or dissolution) or acquire or be acquired by any Person, or convey, sell, lease or otherwise dispose of all or substantially all of its property or business, except as provided for in this Agreement. Section 6.12. Payments. The Depositor shall not declare or pay, directly or indirectly, any dividend or make any other payment (whether in cash or other property) with respect to the profits, assets or capital of the Depositor or any Person's interest therein, or purchase, redeem or otherwise acquire for value any of its equity ownership interests now or hereafter outstanding, except that the Depositor may effect payments of its earnings in respect of Trust Assets to its members in each case so long as it would continue to be Solvent after giving effect thereto, and otherwise in accordance with the Transaction Documents. Section 6.13. Other Agreements. The Depositor shall not become a party to, or permit any of its properties to be bound by, any indenture, mortgage, instrument, contract, agreement, lease or other undertaking, except this Agreement and the other Transaction Documents to which it is a party and any agreement relating to another securitization transaction permitted by Section 6.07; nor shall it amend or modify the provisions of its Certificate of Formation or Limited Liability Company Agreement except in accordance with the Transaction Documents and with the consent of the Required Holders, or issue any power of attorney except to the Owner Trustee, the Indenture Trustee or the Servicer pursuant to the Transaction Documents (or other similar powers of attorney in connection with transactions permitted by the proviso to Section 6.07). Section 6.14. Separate Entity Existence. The Depositor shall: (i) Maintain its own deposit account or accounts, separate from those of any Affiliate, with commercial banking institutions. The funds of the Depositor will not be diverted to any other Person or for other than authorized uses of the Depositor. (ii) Ensure that, to the extent that it shares the same officers or other employees as any of its members or Affiliates, the salaries of and the expenses related to providing benefits to such officers and other employees shall be fairly allocated among such entities, and each such entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees. (iii) Ensure that, to the extent that it jointly contracts with any of its members or Affiliates to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such entities, and each such entity shall bear its fair share of such costs. To the extent that the Depositor contracts or does business with vendors or service providers when the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among such entities for whose benefit the goods and services are provided, and each such entity shall bear its fair share of such costs. All material transactions between Depositor and any of its Affiliates shall be only on an arm's length basis. (iv) To the extent that the Depositor and any of its members or Affiliates have offices in the same location, there shall be a fair and appropriate allocation of overhead costs among them, and each such entity shall bear its fair share of such expenses. (v) Conduct its affairs strictly in accordance with its Limited Liability Company Agreement and its Certificate of Formation, and observe all necessary, appropriate and customary limited liability company formalities, including, but not limited to, holding all regular and special members' and manager/directors' meetings appropriate to authorize all entity action, keeping separate and accurate records of such meetings and its actions, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts. (vi) Take or refrain from taking or engaging in, as applicable, each of the actions or activities specified in the "true sale" and "nonsubstantive consolidation" opinions of [ ] delivered on the Closing Date (or in any related certificate delivered in connection therewith), upon which the conclusions expressed therein are based. Section 6.15. Location; Records. The Depositor shall not move outside the State of __________, the location of its chief executive office, without thirty (30) days' prior written notice to the Trust, the Indenture Trustee and the Servicer, and will promptly take all actions required (including, but not limited to, all filings and other acts necessary or advisable under the UCC of each relevant jurisdiction) in order to continue the first priority perfected security interest of the Indenture Trustee in Trust Assets. The Depositor will give the Indenture Trustee, Trust and the Servicer prompt notice of a change within the State of __________ of the location of its chief executive office. Section 6.16. Liability of Depositor; Indemnities. The Depositor shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Depositor under this Agreement. The Depositor shall indemnify, defend and hold harmless the Trust, the Owner Trustee, the Indenture Trustee and the Servicer (and any of their respective officers, directors, employees or agents) from and against any taxes that may at any time be asserted against any such Person with respect to the transactions contemplated herein and in the other Transaction Documents, including any sales, gross receipts, general corporation, tangible personal property, personal property replacement privilege or license taxes (but, in the case of the Trust, not including any taxes asserted with respect to, and as of the date of, the transfer of Contracts to the Trust or the issuance and original sale of Senior Certificates, or asserted with respect to ownership of Contract Assets, or federal or other income taxes arising out of payments from Collections on the Trust Assets) and costs and expenses in defending against the same. The Depositor shall indemnify, defend and hold harmless the Trust, the Owner Trustee, the Indenture Trustee and the Servicer (and any of their respective officers, directors, employees or agents) and the Securityholders from and against any loss, liability or expense incurred by reason of the Depositor's willful misfeasance, bad faith or negligence (other than errors in judgment) in the performance of its duties under this Agreement, or by reason of reckless disregard of its obligations and duties under this Agreement. The Depositor shall indemnify, defend and hold harmless the Trust, the Owner Trustee, the Indenture Trustee and the Servicer (and any of their respective officers, directors, employees or agents) and any Senior Certificateholder from and against all costs, expenses, losses, claims, damages and liabilities arising out of or incurred in connection with the acceptance or performance (or failure of performance) of the trusts and duties herein and, in the case of the Owner Trustee, in the Trust Agreement and, in the case of the Indenture Trustee, in the Indenture, except to the extent that such cost, expense, loss, claim, damage or liability in the case of (i) the Owner Trustee; shall be due to the willful misfeasance, bad faith or negligence of the Owner Trustee, or shall arise from the breach by the Owner Trustee of any of its representations or warranties set forth in Section 7.03 of the Trust Agreement, or (ii) the Indenture Trustee, shall be due to the willful misfeasance, bad faith or negligence of the Indenture Trustee. The Depositor shall be liable directly to and will indemnify any injured party or any other creditor of the Trust for all losses, claims, damages, liabilities and expenses of the Trust to the extent that the Depositor would be liable if the Trust were a partnership under the Delaware Revised Uniform Limited Partnership Act in which the Depositor were a general partner; provided, however, that the Depositor shall not be liable for any losses incurred by the Equity Certificateholder in the capacity of an investor in the Equity Certificate or a Noteholder in the capacity of an investor in the Notes. In addition, any third party creditors of the Trust (other than in connection with the obligations described in the immediately preceding sentence for which the Depositor shall not be liable) shall be deemed third party beneficiaries of this paragraph. The obligation of the Depositor under this paragraph shall be evidenced by the Equity Certificate. The Depositor shall indemnify, defend and hold harmless the Owner Trustee and the Indenture Trustee from and against any loss, liability or expense incurred by reason of the Depositor's or Trust's violation of federal or state securities laws in connection with the offering and sale of the Notes and the Certificate. Indemnification under this Section shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation; provided, however, that the indemnification under this Section, notwithstanding anything to the contrary, is limited to the assets of the Depositor (including its rights under Article VI of the Purchase and Sale Agreement); provided, further, any indemnity payments to be made pursuant to this Section shall not be made from the Trust Assets (except to the extent any of the same have been distributed to the Depositor free and clear of any interest of the Trust therein and except to the extent [ ] as co-obligor is obligated to make such payment pursuant to Article VI of the Purchase and Sale Agreement), and such indemnity payments, if unpaid, shall not constitute a claim against the Trust or the Trust Assets (except in respect of rights against [ ] in respect of such Article VI). If the Depositor (or [ ] pursuant to such Article VI) shall have made any indemnity payments pursuant to this Section and the Person to or on behalf of whom such payments are made thereafter shall collect any of such amounts from others, such Person shall promptly repay such amounts to the Depositor (or [ ], as applicable), without interest. Indemnification under this Section shall survive the resignation or removal of the Owner Trustee or the Indenture Trustee, as the case may be, and the termination of this Agreement. Section 6.17. Bankruptcy Limitations. The Depositor shall not, without the affirmative vote of each of the manager/directors of the Depositor (which must include the affirmative vote of at least one duly appointed Independent Director as defined in the Certificate of Formation and the Limited Liability Company Agreement of the Depositor) (A) dissolve or liquidate, in whole or in part, or institute proceedings to be adjudicated bankrupt or insolvent, (B) consent to the institution of bankruptcy or insolvency proceedings against it, (C) file a petition seeking or consent to reorganization or relief under any applicable federal or state law relating to bankruptcy, (D) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Depositor or a substantial part of its property, (E) make a general assignment for the benefit of creditors, (F) admit in writing its inability to pay its debts generally as they become due, or (G) take any entity action in furtherance of the actions set forth in clauses (A) through (F) above; provided, however, that no manager/director may be required by any member of the Depositor to consent to the institution of bankruptcy or insolvency proceedings against the Depositor so long as it is Solvent. Section 6.18. Limitation on Liability of Depositor and Others. The Depositor and any director or officer or employee or agent of the Depositor may rely in good faith on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Depositor shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability. Section 6.19. Chief Executive Office. During the term of this Agreement, the Depositor will maintain its chief executive office in one of the States of the United States, except [ ], [ ], [ ], [. ], [ ], [ ], [ ] or [ ]. [remainder of this page intentionally left blank] ARTICLE VII ESTABLISHMENT OF ACCOUNTS; PAYMENTS Section 7.01. Trust Accounts; Collections. (a) On or before the Closing Date, the Trust Deposits or (or the Servicer on its behalf) shall establish the Collection Account, Note Distribution Account and Cash Collateral Account, each in the name of the Indenture Trustee for the benefit of the Noteholders and the Certificateholder. The Servicer and Indenture Trustee are hereby required to ensure that each of the Trust Accounts is established and maintained as a segregated corporate trust account with a Qualified Institution. If any institution with which any of the accounts established pursuant to this Section 7.01(a) ceases to be a Qualified Institution, the Servicer shall within 30 days after notice of such event establish a replacement account at a Qualified Institution, and effect (or cause to be effected) a concurrent transfer of all amounts in the current non-qualifying account to the replacement account. (b) The Servicer shall deposit or cause to be deposited, without deposit into any intervening account, into the Collection Account as promptly as practical after the Date of Processing (but in any case not later than the second Business Day following the Date of Processing thereof), all Pledged Revenues on deposit with the Servicer in the form of available funds, and all Pledged Revenues otherwise received by the Servicer (and all Investment Earnings from investments of the Collection Account). (c) Notwithstanding Section 7.01(b), the Servicer shall deposit or cause to be deposited, on the Closing Date and on each Substitution Transfer Date, in immediately available funds into the Collection Account, all Pledged Revenues received after the applicable Cutoff Date and through and including the date which is two Business Days preceding the Closing Date or Substitution Transfer Date, as the case may be, in respect of Contracts being transferred to the Trust on such date. (d) Notwithstanding Sections 7.01(b) and (c), if (i) the Servicer makes a deposit into the Collection Account in respect of Pledged Revenues of a Contract in the Contract Pool and such Pledged Revenues were received by the Servicer in the form of a check which is not honored for any reason, or (ii) the Servicer makes a mistake with respect to the amount of any Pledged Revenues and deposits an amount that is less than or more than the actual amount of such Collection, the Servicer shall appropriately adjust the amount subsequently deposited into the Pledged Revenues Account to reflect such dishonored check or mistake. Any Scheduled Payment in respect of which a dishonored check is received shall be deemed not to have been paid. Section 7.02. Cash Collateral Account. (a) On the Closing Date, the Depositor shall deposit the sum of $[ ] into the Cash Collateral Account from the net proceeds of the sale of the Notes and the Indenture Trustee shall deposit into the Cash Collateral Account proceeds of loans made by the Cash Collateral Account Lenders equal to $[ ]. (b) If on any Payment Date, the amounts on deposit in the Cash Collateral Account (after giving effect to all deposits thereto or withdrawals therefrom on such Payment Date) is greater than the Required Cash Collateral Amount, the Indenture Trustee shall distribute the excess of the amount on deposit in the Cash Collateral Account over the Required Cash Collateral Amount as provided in the Cash Collateral Account Agreement. Amounts properly distributed pursuant to the prior sentence shall be deemed released from the Trust Estate and the security interest herein granted to the Trustee, and the Trust shall in no event be required to refund such distributed amounts. Section 7.03. Trust Account Procedures. If the Servicer so directs, in writing (with a copy to the Owner Trustee), the Qualified Institution maintaining any Trust Account may invest the amounts therein in Eligible Investments of the type specified in such written direction that mature not later than one Business Day prior to the next succeeding Payment Date (or that mature on such other Business Day as the Rating Agencies shall aprove). Once such funds are invested, the Servicer shall not change or permit a change in the investment of such funds. Subject to the other provisions hereof, the Indenture Trustee shall have sole control over each such investment and the income thereon, and any certificate or other instrument evidencing any such investment, if any, shall be delivered directly to the Indenture Trustee or its agent, together with each document of transfer, if any, necessary to transfer title to such investment to the Indenture Trustee in a manner which complies with this Section 7.03. All Investment Earnings on investments of funds in the Collection Account and Note Distribution Account shall be deposited in or maintained within the Collection Account pursuant to Section 7.01 and distributed on the next Payment Date pursuant to Section 7.05. All Investment Earnings in the Cash Collateral Account shall be distributed in accordance with the Cash Collateral Account Agreement. The Servicer, the Depositor and the Trust agree and acknowledge that the Indenture Trustee is to have "control" (within the meaning of Section 8-102 of the UCC as enacted in New York) of collateral consisting of "Investment Property" (within the meaning of Section 9-115 of the UCC as enacted in New York) for all purposes of this Agreement. In the absence of timely written direction from the Servicer, the Indenture Trustee shall invest or cause to be invested amounts in the Trust Accounts in Eligible Investments of the type specified in clause (vi) of the definition of Eligible Investments herein. Section 7.04. Securityholder Payments. (a) On each Payment Date, each Noteholder and the Equity Certificateholder as of the related Record Date shall be paid amounts payable on such date pursuant to Section 7.05 below by check mailed to such Noteholder or the Equity Certificateholder at the address for such Noteholder or the Equity Certificateholder appearing on the Note Register or the Certificate Register, or by wire transfer if such Noteholder or the Equity Certificateholder has provided written instructions for such payment method to the Indenture Trustee and Owner Trustee, respectively, at least ten days prior to such Payment Date. (b) The Indenture Trustee shall serve as the Paying Agent hereunder and shall make the payments to the Noteholders and the Equity Certificateholder required hereunder. The Indenture Trustee hereby agrees that all amounts held by it for payment hereunder will be held in trust for the benefit of the Noteholders and Certificateholder. Section 7.05. Allocations and Payments. (a) Distributions. On each Payment Date, the Trustee shall (based solely on the information contained in the Servicer's Certificate delivered on the related Determination Date, upon which the Trustee may conclusively rely) distribute the following amounts and in the order of priority specified below. Within each order of priority, amounts shall be deemed withdrawn first from Available Pledged Revenues, and second (but only as to amounts described in clauses (ii) and (iii) below) from amounts deposited in the Collection Account pursuant to Section 7.02. (i) first, from the Available Pledged Revenues then on deposit in the Collection Account, to the Servicer, the Sevicing Fee and Servicer Advances for the related Collection Period (less that portion thereof to be applied by the Trustee in accordance with the Cash Collateral Account Agreement) and any amounts specified in Section 2.05 hereof, to the extent the Servicer has not reimbursed itself in respect of such amounts; (ii) second, from the Amount Available then remaining on deposit in the Collection Account, to the Note Distribution Account an amount equal to the Note Interest Distributable Amount for such Payment Date; (iii) third, from the Amount Available then remaining on deposit in the Collection Account, to the Note Distribution Account, an amount equal to the Note Principal Distributable Amount for such Payment Date; (iv) fourth, from the Amount Available then remaining on deposit in the Collection Account, to the Cash Collateral Account, the amount, if any, necessary to increase the balance therein to the Requisite Cash Collateral Amount; (v) fifth, from the Amount Available then remaining on deposit in the Collection Account, to the parties entitled thereto in accordance with the Cash Collateral Account Agreement, any amounts due and unpaid thereunder; and (vi) sixth, any remaining Amount Available to the Owner Trustee for distribution to the Equity Certificateholder. In the event the Servicer's Certificate shows that, as of any Determination Date, there are amounts on deposit in the Collection Account which do not constitute Pledged Revenues due to the clause (ii)(b) of the definition thereof and to which the Depositor is entitled pursuant to Section 2.04 hereof, the Trustee shall forthwith pay such amount to or upon the order of the Depositor. (b) Allocations and Payments Prior to an Event of Default. On each Payment Date and Redemption Date prior to an Event of Default, the Servicer, pursuant to written monthly payment instructions and notification, shall instruct the Indenture Trustee to withdraw and transfer, and on the succeeding Payment Date the Indenture Trustee acting in accordance with such written instructions shall withdraw and transfer, the amounts required to be withdrawn from the Note Distribution Account in order to make the following payments or allocations from the Amount Available for the related Payment Date (in each case, such payment or transfer to be made only to the extent funds remain available therefor after all prior payments and transfers for such Payment Date have been made), in the following order of priority: (i) pay to the Indenture Trustee on behalf of the Class A-1 Noteholders an amount equal to the Class A-1 Interest Distributable Amount; provided that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so allocated, such remaining Amount Available shall be allocated to the Holders of Class A-1 Notes pro rata based upon their respective entitlement pursuant to this clause; (ii) pay to the Indenture Trustee on behalf of the Class A-2 Noteholders an amount equal to the Class A-2 Interest Distributable Amount; provided that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so allocated, such remaining Amount Available shall be allocated to the Holders of Class A-2 Notes pro rata based upon their respective entitlement pursuant to this clause; (iii) pay to the Indenture Trustee on behalf of the Class A-3 Noteholders an amount equal to the Class A-3 Interest Distributable Amounts provided that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so allocated, such remaining Amount Available shall be allocated to the Holders of Class A-3 Notes pro rata based upon their respective entitlement pursuant to this clause; (iv) pay to the Indenture Trustee on behalf of the Class A-4 Noteholders an amount equal to the Class A-4 Interest Distributable Amount; provided that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so allocated, such remaining Amount Available shall be allocated to the Holders of Class A-4 Notes pro rata based upon their respective entitlement pursuant to this clause; (v) pay to the Indenture Trustee on behalf of the Class A-5 Noteholders an amount equal to the Class A-5 Interest Distributable Amount; provided that if the Amount Available remaining to be allocated pursuant to this clause are less than its full amount required to be so allocated, such remaining Amount Available shall be allocated to its Holders of Class A-5 Notes pro rata based upon their respective entitlement pursuant to this clause; (vi) pay to the Indenture Trustee on behalf of the Class B Noteholders an amount equal to the Class B Interest Distributable Amount; provided, that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be paid to the Holders of Class B Notes pro rata based on their respective entitlement pursuant to this clause; (vii) pay to the Indenture Trustee on behalf of the Class C Noteholders, an amount equal to the Class C Interest Distributable Amount; provided, that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be paid to the Holders of Class C Notes pro rata based on their respective entitlement pursuant to this clause; (viii) pay to the Indenture Trustee on behalf of the Class D Noteholders an amount equal to the Class D Interest Distributable Amount; provided, that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be paid to the Holders of Class D Notes pro rata based on their respective entitlement pursuant to this clause; (ix) prior to the Payment Date on which the Class A-1 Principal Balance has been reduced to zero, pay to the Indenture Trustee, on behalf of the Class A-1 and Class A-5 Noteholders, the Class A Principal Payment Amount, [ ]% of which shall be distributed to the Class A-1 Noteholders and [ ]% of which shall be distributed to the Class A-5 Noteholders; provided that if the amount available to make such payments is not sufficient to pay the full Class A Principal Payment Amount, such amount available shall be allocated (1) if such Payment Date is the Class A-1 Stated Maturity Date (or any Payment Date thereafter until the Class A-1 Principal Balance has been reduced to zero), first, to the Class A-1 Noteholders to the extent necessary to reduce the Class A-1 Principal Balance to zero, and, thereafter, to the Class A-5 Noteholders, and (2) for any other Payment Date, between the Class A-1 Noteholders and the Class A-5 Noteholders in the respective percentages specified above in this clause; (x) on the Payment Date on which the Class A-1 Principal Balance shall be reduced to zero, pay to the Indenture Trustee, on behalf of the Class A Noteholders, the Class A Principal Payment Amount, allocated as follows: (1) to the Class A-1 Noteholders, the remaining Class A-1 Principal Balance; (2) to the Class A-5 Noteholders, an amount equal to [ ]% of the Total Principal Payment Amount; and (3) the remaining Class A Principal Payment Amount, if any, to the Class A-2 Noteholders until the Class A-2 Principal Balance has been reduced to zero, then to the Class A-3 Noteholders until the Class A-3 Principal Balance has been reduced to zero, then to the Class A-4 Noteholders until the Class A-4 Principal Balance has been reduced to zero and then to the Class A-5 Noteholders until the Class A-5 Principal Balance has been reduced to zero; provided that if the amount available to make such payments is not sufficient to pay the full Class A Principal Payment Amount, such amount available shall be allocated, first, to the Class A-1 Notes and the Class A-5 Notes as provided in clauses (1) and (2) above (and, if such amount available is not sufficient to pay the full amounts so provided for, such amount available shall be allocated (I) if such Payment Date is the Class A-1 Stated Maturity Date (or any Payment Date thereafter until the Class A-1 Principal Balance has been reduced to zero), first, to the Class A-1 Noteholders to the extent necessary to reduce the Class A-1 Principal Balance to zero, and, thereafter, to the Class A-5 Noteholders, and (II) for any other Payment Date, between the Class A-1 Notes and the Class A-5 Notes pro rata based upon the amounts otherwise payable pursuant to such clauses (1) and (2)), and, thereafter, to the Class A-2, Class A-3, Class A-4 and Class A-5 Notes as provided in clause (3) above; (xi) after the Payment Date on which the Class A-1 Principal Balance has been reduced to zero, pay to the Indenture Trustee, on behalf of the Class A Noteholders, the Class A Principal Payment Amount, allocated as follows: (1) on and prior to the Payment Date on which the Class A-4 Principal Balance has been reduced to zero: (I) to the Class A-5 Noteholders, an amount equal to [ ]% of the Total Principal Payment Amount; and (II) the remaining Class A Principal Payment Amount to the Class A-2 Noteholders until the Class A-2 Principal Balance has been reduced to zero, then to the Class A-3 Noteholders until the Class A-3 Principal Balance has been reduced to zero, then to the Class A-4 Noteholders until the Class A-4 Principal Balance has been reduced to zero and then to the Class A-5 Noteholders until the Class A-5 Principal Balance has been reduced to zero; provided that if the amount available to make such payments is not sufficient to pay the full Class A Principal Payment Amount, such amount available shall be allocated (x) if such Payment Date is the Stated Maturity Date of the Class A-2, A-3 or A-4 Notes (or any Payment Date thereafter until the Principal Balance of such Class has been reduced to zero), first, to the Noteholders of such Class to the extent necessary to reduce the Principal Balance of such Class to zero, and, thereafter, to the Class A-5 Noteholders, and (y) for any other Payment Date, between the Class A-5 Notes, on the one hand, and the Class A-2, Class A-3 and Class A-4 Notes, on the other, pro rata based upon the amounts otherwise payable pursuant to clauses (I) and (II) above; and (2) after the Payment Date on which the Class A-4 Principal Balance has been reduced to zero, to the Class A-5 Notes until the Class A-5 Principal Balance has been reduced to zero; (xii) pay to the Indenture Trustee on behalf of the Class B Noteholders, the Class B Principal Payment Amount; (xiii) pay to the Indenture Trustee on behalf of the Class C Noteholders, the Class C Principal Payment Amount; (xiv) pay to the Indenture Trustee on behalf of the Class D Noteholders, the Class D Principal Payment Amount; and (xv) the Additional Principal, if any, to the Indenture Trustee for the benefit, sequentially, of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class B, Class C, and Class D Noteholders. (c) Allocations and Payments after an Event of Default. On each Determination Date after the occurrence of an Event of Default, the Servicer, pursuant to monthly payment instructions and notification, shall instruct the Indenture Trustee to withdraw and transfer, and on the succeeding Payment Date the Indenture Trustee acting in accordance with such instructions shall withdraw and transfer, the amounts required to be withdrawn from the Note Payment Account in order to make the following payments or allocations from the Amount Available for the related Payment Date (in each case, such payment or transfer to be made only to the extent funds remain available therefor after all prior payments and transfers for such Payment Date have been made), in the following order of priority: (i) pay to the Indenture Trustee on behalf of the Class A-1 Noteholders, Class A-2 Noteholders; Class A-3 Noteholders, the Class A-4 Noteholders and the Class A-5 Noteholders, an amount equal to interest accrued in respect of the related Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, class A-4 Notes and Class A-5 Notes at the respective Class A-1 Interest rate, Class A-2 Interest Rate, class A-3 Interest Rate, Class A-4 Interest Rate and Class A-5 Interest Rate for the Accrual Period immediately preceding such Payment Date, together with any such amounts that accrued in respect of prior Accrual Periods for which no allocation was previously made; provided that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so allocated, such remaining Amount Available shall be allocable to the Holders of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class A-5 Notes pro rata based upon the then-outstanding Principal Amount thereof; (ii) pay to the Indenture Trustee on behalf of the Class B Noteholders an amount equal to the interest accrued thereon at the Class B Interest Rate for the Accrual Period immediately preceding such Payment Date, together with any amounts that accrued in respect of prior Accrual Periods for which no allocation was previously made; provided, that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be paid to the Holder of each Class B Note pro rata based on the outstanding Principal Amount thereof; (iii) pay to the Indenture Trustee on behalf of the Class C Noteholders, an amount equal to the interest accrued thereon at the Class C Interest Rate for the Accrual Period immediately preceding such Payment Date, together with any such amounts that accrued in respect of prior Accrual Periods for which no allocation was previously made; provided, that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be paid to the Holder of each Class C Note pro rata based on the outstanding Principal Amount thereof; (iv) pay to the Indenture Trustee on behalf of the Class D Noteholders, an amount equal to the interest accrued thereon at the Class D Interest Rate for the Accrual Period immediately preceding such Payment Date, together with any such amounts that accrued in respect of prior Accrual Periods for which no allocation was previously made; provided, that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be paid to the Holder of each Class D Note pro rata based on the outstanding principal amount thereof; (v) pay to the Indenture Trustee, on behalf of the Class A-1 Noteholders, the Class A-1 Principal Payment Amount for such Payment Date; provided (i) that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be allocated to each Class A-1 Note pro rata based on the outstanding principal amount thereof and (ii) if the amount to be allocated pursuant to this clause exceeds the amount needed to repay outstanding Class A-1 Note principal in full, then such excess shall be applied in repayment of principal on Class A-2 Notes; (vi) pay to the Indenture Trustee, on behalf of the Class A-2 Noteholders, the Class A-2 Principal Payment Amount for such Payment Date; provided (i) that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be allocated to each Class A-2 Note pro rata based on the outstanding principal amount thereof, and (ii) if the amount to be allocated pursuant to this clause exceeds the amount needed to repay outstanding Class A-2 Note principal in full, then such excess shall be applied in repayment of principal on the Class A-3 Notes; (vii) pay to the Indenture Trustee, on behalf of the Class A-3 Noteholders, the Class A-3 Principal Payment Amount for such Payment Date; provided (i) that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be allocated to each Class A-3 Note pro rata based on the outstanding principal amount thereof, and (ii) if the amount to be allocated pursuant to this clause exceeds the amount needed to repay outstanding Class A-3 Note principal in full, then such excess shall be applied in repayment of principal on the Class A-4 Notes; (viii) pay to the Indenture Trustee, on behalf of the Class A-4 Noteholders, the Class A-4 Principal Payment Amount for such Payment Date; provided (i) that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be allocated to each Class A-4 Note pro rata based on the outstanding principal amount thereof, and (ii) if the amount to be allocated pursuant to this clause exceeds the amount needed to repay outstanding Class A-4 Note principal in full, then such excess shall be applied in repayment of principal on the Class A-5 Notes; (ix) pay to the Indenture Trustee, on behalf of the Class A-5 Noteholder, the Class A-5 Principal Payment Amount for such Payment Date, provided, that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be paid such remaining Amount Available shall be allocated to each Class A-5 Note pro rata based on the outstanding principal amount thereof, and (ii) if the amount to be allocated pursuant to this clause exceeds the amount needed to repay outstanding class A-5 Notes principal in full, then such excess shall be applied in repayment of principal on the Class B Notes; (x) pay to the Indenture Trustee, on behalf of the Class B Noteholders, the Class B Principal Payment Amount for such Payment Date; provided (i) that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be allocated to each Class B Note pro rata based on the outstanding principal amount thereof, and (ii) if the amount to be allocated pursuant to this clause exceeds the amount needed to repay outstanding Class B Note principal in full, then such excess shall be applied in repayment of principal on the Class C Notes; (xi) pay to the Indenture Trustee, on behalf of the Class C Noteholders, the Class C Principal Payment Amount for such Payment Date; provided (i) that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be allocated to each Class C Note pro rata based on the outstanding principal amount thereof, and (ii) if the amount to be allocated pursuant to this clause exceeds the amount needed to repay outstanding Class C Note principal in full, then such excess shall be applied in repayment of principal on the Class D Notes; (xii) pay to the Indenture Trustee, on behalf of the Class D Noteholders, the Class D Principal Payment Amount for such Payment Date; provided that if the Amount Available remaining to be allocated pursuant to this clause are less than the full amount required to be so paid, such remaining Amount Available shall be allocated to each Class D Note pro rata based on the outstanding principal amount thereof; (d) On the last Business Day preceding each Payment Date, the Indenture Trustee shall, in accordance with directions from the Servicer, withdraw from amounts on deposit in the Cash Collateral Account, and deposit into the Collection Account, an amount equal to the lesser of the Available Cash Collateral Amount for such Payment Date and the sum of the following amounts, if any: (i) the amount, if any, by which the Available Pledged Revenues with respect to such Payment Date, is less than the amount specified in clauses (b)(i)-(viii) of this Section 7.05 (or in the case of a payment after an Event of Default in clauses (c) (i) - (iv) of this Section 7.05; plus (ii) the Principal Deficiency Amount, if any, for such Payment Date, plus (iii) with respect to the Stated Maturity Date for any Class of Notes or on the first Payment Date on which the Contract Pool Principal Balance is less than $1,000,000, the amount, if any, by which the Available Pledged Revenues, after payment of all amounts specified in clauses (b)(i) through (b)(viii) (or in the event of a payment after an Event of Default clauses (c) (i) - (b) (iv) of Section 7.05, is less than (A) in the case of the Stated Maturity Date for a Class of Notes, the remaining Principal Balance of such Class of Notes, and (B) in the case of the first Payment Date on which the Contract Pool Analysis Principal is less than $1,000,000 the Principal Amount of all outstanding Notes. In the event that the Available Pledged Revenues for any Payment Date are less than the total amount, if any, specified above for such Payment Date, the amount actually withdrawn by the Trustee shall be applied in the order of priority specified above, and, within each clause specified above, in the order of priority specified in Section 7.05(b). The Servicer shall give the Trustee and the Cash Collateral Account Lenders' Agent notice, at least three Business Days prior to each Payment Date, of the amounts, if any, specified in clauses (i) through (iii) above for such Payment Date. Section 7.06. Repurchases of, or Substitution for, Contracts for Breach of Representations and Warranties. Upon a discovery by the Servicer of an inaccuracy or breach of a representation or warranty set forth in the Schedule of Representations which has been made or deemed made with respect to a Contract in the Contract Pool, which inaccuracy or breach materially adversely affects the Trust's or any Noteholder's or the Equity Certificateholder's interest in such Contract (without regard to the benefits of Cash Collateral Account, any reserve fund, over collateralization or other similar enhancement) or the collectibility thereof (an "Ineligible Contract"), the Servicer shall promptly notify [ ] thereof. As provided in the Purchase and Sale Agreement and in accordance with this Section 7.06, [ ] is obligated to repurchase each such Ineligible Contract, at a repurchase price equal to the Purchase Amount (determined as of the date such repurchase is to be funded), not later than the second Deposit Date following the date the Servicer becomes aware of any such breach or inaccuracy and which breach or inaccuracy has not otherwise been cured; provided, however, that if [ ] is able to effect a substitution for any such Ineligible Contract in compliance with Section 2.04, [ ] may, in lieu of repurchasing such Ineligible Contract, effect a substitution for such Ineligible Contract with a Substitute Contract not later than the date a repurchase of such Ineligible Contract would be required hereunder; and provided further, that with respect to a breach or inaccuracy of any such representations or warranties relating to the Contract Pool (or all Contracts conveyed on the Closing Date or Substitution Transfer Date, as the case may be) in the aggregate and not to any particular Contract, [ ] (or the Servicer acting on its behalf) may select Contracts (without adverse selection) to repurchase (or substitute for) such that had such Contracts not been included as part of the related Transferred Assets (and, in the case of a substitution, had such Substitute Contract been included as part of the related Transferred Assets instead of the selected Ineligible Contract) there would have been no breach or inaccuracy of such representation or warranty. Notwithstanding any other provision of this Agreement, the obligation of [ ] under the Purchase and Sale Agreement and described in this Section 7.06 shall not terminate or be deemed released by any party hereto upon a Servicing Transfer pursuant to Article VIII. The right to enforce the repurchase or substitution obligation described in this Section shall constitute the sole remedy of the Trust, the Indenture Trustee, the Depositor and the Holders with respect to the inaccuracy or breach related to such Ineligible Contract. The Purchase Amount shall be allocated in accordance with the Allocation Criteria. Section 7.07. Reassignment of Repurchased or Substituted Contracts. Upon deposit into the Collection Account of the Purchase Amount with respect to an Ineligible Contract as described in Section 7.06 (or upon the Substitution Transfer Date related to a Substitute Contract described in Section 7.06), or of the repurchase price set forth in Section 7.08, the Indenture Trustee shall release and reassign to [ ] all of the Trust's right and interest in the repurchased or substituted Contract and related Transferred Assets without recourse, representation or warranty, and such reassigned Contract shall no longer thereafter be included in any calculations of Contract Principal Balances required to be made hereunder or otherwise be deemed a part of the Trust Assets. Section 7.08. [ ] and Depositor's Repurchase Option. As provided in the Purchase and Sale Agreement, on written notice to the Indenture Trustee at least twenty (20) days prior to a Payment Date, and provided that the aggregate Principal Amount of Notes outstanding is then less than 10% of the Initial Contract Pool Principal Balance, [ ], through the Depositor, may (but is not required to) repurchase from the Trust on that Payment Date all outstanding Contracts in the Contract Pool at a price equal to the sum of (a) the aggregate outstanding Principal Amount of the Notes (other than the Equity Certificate) plus accrued unpaid interest thereon as of the current Payment Date, and (b) the amount of unreimbursed Servicer Advances (if any) as well as accrued and unpaid monthly Servicing Fees to the date of such repurchase plus (c) any other amounts that would otherwise be payable from Pledged Revenues on such Payment Date (assuming sufficient Pledged Revenues were available to effect such payments) pursuant to Article VII, minus (d) Pledged Revenues and other Available Pledged Revenues on deposit in the Collection Account and available to make such payments on such Payment Date. Such price is to be deposited in the Collection Account not later than the Deposit Date preceding such Payment Date, against the Indenture Trustee's and Depositor's release of the Contract Assets and the related Contract Files to [ ]. ARTICLE VIII SERVICER DEFAULTS; SERVICING TRANSFER Section 8.01. Servicer Default. "Servicer Default" means the occurrence of any of the following: (a) any failure by the Servicer to make any payment, transfer or deposit or to give instructions or notice to the Owner Trustee or the Indenture Trustee to make any payment, transfer or deposit, or to deliver the Monthly Report pursuant to this Agreement, which failure continues unremedied for a period of five (5) Business Days after the first to occur of (i) written notice from the Owner Trustee or the Indenture Trustee of such failure shall have been given to the Servicer, or (ii) the date the Servicer becomes aware thereof; or (b) failure on the part of the Servicer duly to observe or perform any other covenants or agreements of the Servicer set forth in this Agreement which has a material adverse effect on the Noteholders or the Equity Certificateholder, which continues unremedied for a period of thirty (30) days after the first to occur of (i) the date on which written notice of such failure requiring the same to be remedied shall have been given to the Servicer by and the Indenture Trustee or to the Servicer and the Indenture Trustee by the Noteholders or the Equity Certificateholder or the Indenture Trustee on behalf of such Noteholders of Notes aggregating not less than 25% of the Principal Amount of any Class adversely affected thereby, and (ii) the date on which the Servicer becomes aware thereof, and such failure continues to materially adversely affect the Noteholders or the Equity Certificateholders for such period; or (c) any representation, warranty or certification made by the Servicer in this Agreement or in any certificate delivered pursuant hereto shall prove to have been incorrect when made, which has a material adverse effect on the Noteholders or Equity Certificateholder and which continues to be incorrect in any material respect for a period of thirty (30) days after the first to occur of (i) the date on which written notice of such incorrectness requiring the same to be remedied shall have been given to the Servicer and the Owner Trustee by the Indenture Trustee, or to the Servicer, the Owner Trustee and the Indenture Trustee by Noteholders or the Equity Certificateholders or by the Indenture Trustee on behalf of Noteholders of Notes aggregating not less than 25% of the Principal Amount of any Class adversely affected thereby, and (ii) the date on which the Servicer becomes aware thereof, and such incorrectness continues to materially adversely affect the Noteholders or Equity Certificateholders for such period; or (d) an Insolvency Event shall occur with respect to the Servicer. Notwithstanding the foregoing, a delay in or failure of performance referred to under clause (a) above for a period of five (5) Business Days or referred to under clause (b) or (c) for a period of sixty (60) days (in addition to any period provided in (a), (b) or (c)) shall not constitute a Servicer Default until the expiration of such additional five (5) Business Days or sixty (60) days, respectively, if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or other similar occurrences. Upon the occurrence of any such event the Servicer shall not be relieved from using its best efforts to perform its obligations in a timely manner in accordance with the terms of this Pooling Agreement and the Servicer shall provide the Owner Trustee, the Indenture Trustee and the Depositor prompt notice of such failure or delay by it, together with a description of its efforts to so perform its obligations. The Servicer shall promptly notify the Indenture Trustee in writing of any Servicer Default. Section 8.02. Servicing Transfer. (a) If a Servicer Default has occurred and is continuing, the Required Holders, or (y) the Indenture Trustee may, by written notice (a "Termination Notice") delivered to the parties hereto, terminate all (but not less than all) of the Servicer's rights and obligations under this Pooling Agreement with respect to the Trust Assets. (b) Upon delivery of the Termination Notice (or, if later, on a date designated therein), and on the date that a successor Servicer shall have been appointed pursuant to Section 8.03 (such appointment being herein called a "Servicing Transfer"), all rights, benefits, fees, indemnities, authority and power of the Servicer under this Pooling Agreement, whether with respect to the Contracts in the Contract Pool, the Contract Files or otherwise, shall pass to and be vested in such successor (the "Successor Servicer") pursuant to and under this Section 8.02; and, without limitation, the Successor Servicer is authorized and empowered to execute and deliver on behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do any and all acts or things necessary or appropriate to effect the purposes of such notice of termination. The Servicer agrees to cooperate with the Successor Servicer in effecting the termination of the responsibilities and rights of the Servicer under this Pooling Agreement, including, without limitation, the transfer to the Successor Servicer for administration by it of all cash amounts which shall at the time be held by the Servicer for deposit, or have been deposited by the Servicer, in the Collection Account, or for its own account in connection with its services hereafter or thereafter received with respect to the Contracts in the Contract Pool. The Servicer shall transfer to the Successor Servicer (i) all records held by the Servicer relating to such Contracts in such electronic form as the Successor Servicer may reasonably request and (ii) any related Contract Files in the Servicer's possession. In addition, the Servicer shall permit access to its premises (including all computer records and programs) to the Successor Servicer or its designee, and shall pay the reasonable transition expenses of the Successor Servicer. Upon a Servicing Transfer, the Successor Servicer shall also be entitled to receive the Servicing Fee for performing the obligations of the Servicer. Section 8.03. Appointment of Successor Servicer; Reconveyance; Successor Servicer to Act. Upon delivery of the Termination Notice (or, if later, on a date designated therein), the Servicer shall continue to perform all servicing functions under this Pooling Agreement until the date specified in the Termination Notice or, if no such date is specified, until a date mutually agreed by the Servicer and the Indenture Trustee. The Indenture Trustee shall as promptly as possible after the giving of or receipt of a Termination Notice, appoint a Successor Servicer, and such Successor Servicer shall accept its appointment by a written assumption and by delivery of an opinion of counsel to the Successor Servicer relating to corporate matters and enforceability, in each case in a form acceptable to the Indenture Trustee and the Owner Trustee. In effecting such appointment, the Indenture Trustee shall seek bids from potential servicers which are established financial institutions each having a net worth of at least $50,000,000 and whose regular business includes the servicing of contracts similar to the Contracts in the Contract Pool. In the event that a Successor Servicer has not been appointed and has not accepted its appointment within 60 days of the delivery of a Termination Notice, then the Indenture Trustee shall offer the Depositor, and the Depositor shall offer the [ ], the right to accept retransfer of all the Trust Assets, and such party may accept retransfer of such Trust Assets in consideration of the Depositor's delivery to the Collection Account on or prior to the next upcoming Payment Date of a sum equal to the Aggregate Principal Amount of all Notes then outstanding, together with accrued and unpaid interest thereon through such date of deposit; provided, that the Indenture Trustee, if so directed by, the Required Holders, need not accept and effect such reconveyance in the absence of evidence (which may include valuations of an investment bank or similar entity) reasonably acceptable to such Indenture Trustee or Required Holders that such retransfer would not constitute a fraudulent conveyance of the Depositor or [ ]; provided, further, [ ] may not accept such retransfer unless it shall have delivered to each Rating Agency an Opinion of Counsel that such retransfer would not constitute a fraudulent conveyance of the Depositor or the Seller or that such retransfer would not constitute a preferential payment by the Depositor or [ ]. In the event that a Successor Servicer has not been appointed and has not accepted its appointment at the time when the then Servicer has ceased to act as Servicer, the Indenture Trustee without further action shall automatically be appointed the Successor Servicer. Notwithstanding the foregoing, if the Indenture Trustee is legally unable or prohibited from so acting, it shall petition a court of competent jurisdiction to appoint any established financial institution having a net worth of at least $50,000,000 and whose regular business includes the servicing of contracts similar to the Contracts in the Contract Pool as the Successor Servicer hereunder. On or after a Servicing Transfer, the Successor Servicer shall be the successor in all respects to the Servicer in its capacity as servicer under this Pooling Agreement, and the transactions set forth or provided for in this Pooling Agreement, and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and the terminated Servicer shall be relieved of such responsibilities, duties and liabilities arising after such Servicing Transfer; provided, however, that the Successor Servicer shall not be liable for any acts or omissions of the departing Servicer occurring prior to such Servicer Servicing Transfer or for any breach by the departing Servicer of any of its representations and warranties contained in this Pooling Agreement or in any related or Transaction Document or other agreement. As compensation therefor, the Successor Servicer shall be entitled to receive the Servicing Fee. The Trust, the Noteholders and the Equity Certificateholders, the Indenture Trustee and such successor shall take such action, consistent with this Pooling Agreement, as shall be necessary to effectuate any such succession. To the extent the terminated Servicer has made Servicer Advances, it shall be entitled to reimbursement of the same notwithstanding its termination hereunder, to the same extent as if it had continued to service the Trust Assets hereunder. In addition, it is understood and agreed that if an Event of Default has occurred and a Servicer Transfer is being effected by action of the Indenture Trustee hereunder, any documented expenses reasonably incurred by the Indenture Trustee in connection with effecting such Servicer Transfer shall be deemed expenses reimbursable from Available Pledged Revenues after an Event of Default pursuant to Section 7.05(b)(i) hereof and Section 5.06(a)(i) of the Indenture. Section 8.04. Notifications to Noteholders and the Equity Certificateholders. (a) Promptly following the occurrence of any Servicer Default, the Servicer shall give written notice thereof to the Trustees, the Depositor and each Rating Agency at the addresses described in Section 11.04 and to the Noteholders and Equity Certificateholder at their respective addresses appearing on the Note Register and the Certificate Register, respectively. (b) Within ten (10) days following any termination or appointment of a Successor Servicer pursuant to this Article VIII, the Indenture Trustee shall give written notice thereof to each Rating Agency and the Depositor at the addresses described in Section 11.04, and to the Noteholders and the Equity Certificateholder at their respective addresses appearing on the Note Register and the Certificate Register, respectively. Section 8.05. Effect of Transfer. (a) After a Servicing Transfer, the terminated Servicer shall have no further rights or obligations under this Pooling Agreement, including, without limitation, with respect to the management, administration, servicing, custody or collection of the Trust Assets, and the Successor Servicer appointed pursuant to Section 8.03 shall have all of such obligations, except that the terminated Servicer will transmit or cause to be transmitted directly to the Successor Servicer for its own account, promptly on receipt and in the same form in which received, any amounts or items (properly endorsed where required for the Successor Servicer to collect them) received as payments upon or otherwise in connection with the Contracts in the Contract Pool. (b) A Servicing Transfer shall not affect the rights and duties of the parties to this Pooling Agreement (including but not limited to the indemnities of the departing Servicer) other than those relating to the management, administration, servicing, custody or collection of the Contracts in the Contract Pool and related Transferred Assets. Section 8.06. Database File. The Servicer will provide the Successor Servicer with a magnetic tape containing the database file for each Contract in the Contract Pool on and as of the Business Day before the actual commencement of servicing functions by the Successor Servicer following the occurrence of a Servicer Default. Section 8.07. Successor Servicer Indemnification. The departing Servicer shall defend, indemnify and hold the Successor Servicer and any officers, directors, employees or agents of the Successor Servicer harmless against any and all claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments and any other costs, fees, and expenses that the Successor Servicer may sustain in connection with the claims asserted at any time by third parties against the Successor Servicer which result from (i) any willful or grossly negligent act taken or omission by the departing Servicer or (ii) a breach of any representations of the departing Servicer in Section 3.02. The indemnification provided by this Section 8.07 shall survive (a) a Servicing Transfer and/or (b) the termination of this Agreement. Section 8.08. Responsibilities of the Successor Servicer. The Successor Servicer will not be responsible for delays attributable to the departing Servicer's failure to deliver information, defects in the information supplied by the departing Servicer or other circumstances beyond the control of the Successor Servicer. The Successor Servicer will make arrangements with the departing Servicer for the prompt and safe transfer of, and the departing Servicer shall provide to the Successor Servicer, all necessary servicing files and records, including (as deemed necessary by the Successor Servicer at such time): (i) microfiche loan documentation, (ii) servicing system tapes, (iii) Contract payment history, (iv) collections history and (v) the trial balances, as of the close of business on the day immediately preceding conversion to the Successor Servicer, reflecting all applicable Contract Pool information. The departing Servicer shall be obligated to pay the costs associated with the transfer of the servicing files and records to the Successor Servicer. The Successor Servicer shall have no responsibility and shall not be in default hereunder nor incur any liability for any failure, error, malfunction or any delay in carrying out any of its duties under this Pooling Agreement if any such failure or delay results from the Successor Servicer acting in accordance with information prepared or supplied by a Person other than the Successor Servicer or the failure of any such Person to prepare or provide such information. The Successor Servicer shall have no responsibility, shall not be in default and shall incur no liability (i) for any act or failure to act by any third party, including the departing Servicer, the Depositor or the Trustees or for any inaccuracy or omission in a notice or communication received by the Successor Servicer from any third party or (ii) which is due to or results from the invalidity or unenforceability of any Contract under applicable law or the breach or the inaccuracy of any representation or warranty made with respect to any Contract. Any Successor Servicer which assumes the role of Successor Servicer hereunder shall be entitled to the benefits of (and subject to the provisions of) Section 5.05 concerning delegation of duties to subservicers. [remainder of this page intentionally left blank] ARTICLE IX SERVICER REPORTING Section 9.01. Monthly Reports. With respect to each Payment Date and the related Collection Period, the Servicer will provide to each Trustee, and each Rating Agency, on the related Determination Date, a monthly statement (a "Monthly Report") substantially in the form of Exhibit D hereto. On each Payment Date, the Indenture Trustee will forward to each Noteholder a copy of the Monthly Report for the related Collection Period. The parties hereto acknowledge that the Indenture Trustee has no obligation to verify the accuracy of the Monthly Report. Section 9.02. Officer's Certificate. Each Monthly Report delivered pursuant to Section 9.01 shall be accompanied by a certificate of a Servicing Officer certifying the accuracy of the Monthly Report. Section 9.03. Other Data. In addition, the Servicer shall, upon the request of any Trustees, or any Rating agency, furnish such Trustee or Rating agency, as the case may be, such Managing Agent such underlying data used to generate a Monthly Report as may be reasonably requested. Section 9.04. Annual Reporting; Evidence as to Compliance. The Servicer shall cause a firm of nationally recognized independent accountants (the "Independent Accountants"), who may also render other services to the Servicer or its Affiliates, to deliver to the Trustees and each Rating agency, on or before March 31 (or ninety (90) days after the end of the Servicer's fiscal year, if other than December 31) of each year, beginning on March 31, [ ], with respect to the twelve months ended the immediately preceding December 31 or other applicable date), a report addressed to the Board of Directors of the Servicer and to the Trustees (the "Accountant's Report") to the effect that such Independent Accountants have, at the request of the Servicers, (i) audited the financial statements of the Servicer (or, if the Servicer is a wholly-owned subsidiary of another entity, the financial statements of such parent entity) and issued an opinion thereon and that such audit was made in accordance with generally accepted auditing standards as in effect in the jurisdiction of the entity being audited, which require that such Independent Accountants plan and perform the audit to obtain reasonable assurance as to whether the financial statements of the Servicer (or its parent, as applicable) are free of material misstatement, and (ii) with respect to the immediately prior year's public securitization transactions involving similar contracts and assets, examined management's assertion that the Servicer maintained effective control over the servicing of such assets, in accordance with established or stated criteria, and providing a report thereon, as well as confirming that such examination was performed in accordance with standards established by the American Institute of Certified Public Accountants. A copy of the Accountant's Report may be obtained by any Securityholder by a request in writing to the Indenture Trustee, in the case of a Noteholder, or in the case of a Certificateholder, addressed to its respective Corporate Trust Office. Section 9.05. Annual Statement of Compliance from Servicer. The Servicer will deliver to the Trustees, and each of the Rating Agencies, on or before March 31 of each year commencing March 31, [ ], an Officer's Certificate stating that (a) a review of the activities of the Servicer during the prior calendar year and of its performance under the Pooling Agreement was made under the supervision of the officer signing such certificate and (b) to such officer's knowledge, based on such review, the Servicer has fully performed or cause to be performed in all material respects all its obligations under the Pooling Agreement and no Servicer Default has occurred or is continuing, or, if there has been a Servicer Default, specifying each such default known to such officer and the nature and status thereof and the steps being taken or necessary to be taken to remedy such event. A copy of such certificate may be obtained by any Noteholder or the Equity Certificateholder by a request in writing to the Indenture Trustee, with respect to any Noteholder, or the Owner Trustee, with respect to the Equity Certificateholder. ARTICLE X TERMINATION Section 10.01. Sale of Trust Assets. (a) Upon any transfer of Trust Assets pursuant to Section 10.02 of the Trust Agreement, the Servicer shall instruct the Indenture Trustee to deposit the proceeds from such transfer after all payments and reserves therefrom have been made (the "Insolvency Proceeds") into the Collection Account. On the Payment Date on which the Insolvency Proceeds are deposited in such Collection Account (or, if such proceeds are not so deposited on a Payment Date, on the Payment Date immediately following such deposit), the Servicer shall instruct the Indenture Trustee to allocate and apply the Insolvency Proceeds as if (and in the same order of priority as) the Insolvency Proceeds were Pledged Revenues being allocated and distributed on such date pursuant to this Pooling Agreement. (b) Notice of any termination of the Trust shall be given by the Servicer to the Owner Trustee and the Indenture Trustee as soon as practicable after the Servicer has received notice thereof. (c) Following the satisfaction and discharge of the Indenture and the payment in full of the principal of and interest on the Notes, the Equity Certificateholder will succeed to the rights of the Noteholders hereunder. [remainder of this page intentionally left blank] ARTICLE XI MISCELLANEOUS Section 11.01. Amendments. (a) This Pooling Agreement may be amended by the parties signatory hereto, with the consent of the Required Holders, to cure any ambiguity, to correct or supplement any provisions in this Agreement which are inconsistent with other provisions herein, or to add any other provisions with respect to matters or questions arising under this Agreement that shall not be inconsistent with the provisions thereof. (b) This Pooling Agreement may also be amended from time to time by the parties signatory hereto, with the consent of the Required Holders, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the Noteholders or the Equity Certificateholder; provided, however, that no such amendment shall (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of Pledged Revenues of payments on the Trust Assets or payments that shall be required to be made on any Note or the Equity Certificate (including by way of amendment of related definitions), or (B) the manner in which the Cash Collateral Account is applied; or (ii) change in any manner (including through amendment of related definitions), the Noteholders and the Equity Certificateholders which are required to consent to any such amendment; or (iii) make any Note or the Equity Certificate payable in money other than Dollars, without the consent of the Noteholders and the Equity Certificateholders of all Notes of the relevant affected Class then outstanding and the Equity Certificateholder, if affected; or (iv) change in any manner the duties of the Indenture Trustee under this Agreement without its written consent, (in any such case). (c) Prior to the execution of any such amendment or consent, the Indenture Trustee shall furnish written notification of the substance of such amendment or consent, together with a copy thereof, to each Rating Agency. (d) Promptly after the execution of any such amendment or consent, the Indenture Trustee, shall furnish written notification of the substance of such amendment or consent to each Noteholder and the Equity Certificateholder, respectively. It shall not be necessary for the consent of Noteholders and the Equity Certificateholder pursuant to Section 11.01(b) to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization by Noteholders and the Equity Certificateholder of the execution thereof shall be subject to such reasonable requirements as the Indenture Trustee may prescribe. (e) Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment on behalf of the Trust is authorized or permitted by this Pooling Agreement, and that all conditions precedent to such execution as set forth herein have been satisfied. The Trustees may, but shall not be obligated to, enter into any such amendment which affects the Trustees' own rights, duties or immunities under this Pooling Agreement or otherwise. (f) Notwithstanding anything to the contrary in the foregoing provisions of this Section 11.01, (a) the Depositor or the Servicer, acting on behalf of the Depositor, may request each rating agency to approve a formula for determining the Required Cash Collateral amount that is different from the formula or result determined from the current definition thereof contained herein so as to result in a decrease in the amount of the Required Cash Collateral amount or the manner by which such Cash Collateral Account is funded. If each Rating Agency delivers to the Indenture Trustee and Owner Trustee a written notice or letter satisfying the Rating Agency condition in connection with such change, then the Required Cash Collateral amount will be theretofore determined in accordance with such changed formula or manner of funding, and an amendment to this Agreement effecting such change may be executed without the consent of any Noteholder and the Equity Certificateholder. Section 11.02. [Reserved]. Section 11.03. Governing Law. This Pooling Agreement shall be construed in accordance with the laws of the State of New York and the obligations, rights, and remedies of the parties under this Pooling Agreement shall be determined in accordance with such laws, except that the duties of the Owner Trustee shall be governed by the laws of the State of Delaware. [remainder of page intentionally blank] Section 11.04. Notices. All notices, demands, certificates, requests and communications hereunder ("notices") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one (1) Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an authorized officer of the party to which sent, or (d) on the date transmitted by legible telefax transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to the Servicer: [ ] [ ] [ ] Fax No.: [ ] Telephone No.: [ ] with a copy to: [ ] [ ] [ ] Fax No.: [ ] Telephone No.: [ ] (ii) If to the Depositor: ACE Securities Corp. [ ] [ ] Attention: [ ] Fax No.: [ ] Telephone No.: [ ] (iii) If to the Indenture Trustee: [ ] [ ] [ ] Attention: [ ] Fax No.: [ ] Telephone No.: [ ] (iv) If to a Financing Originator: At the address, telephone and fax information set forth for such Financing Originator in the Conveyancing Agreement (for [ ] Financing Originators) or the Purchase and Sale Agreement (for [ ]) (v) If to [ ]: [ ] [ ] [ ] Attention: [ ] Fax No.: [ ] Telephone No.: [ ] (vi) If to the Owner Trustee: [ ] Attention: Corporate Trust Administration Fax No.: Telephone No.: with a copy to: [ ] Attention: [ ] Fax No.: [ ] Telephone No.: [ ] Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. Section 11.05. Severability of Provisions. If one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Notes or the Equity Certificateholders or the rights of the holders thereof. Section 11.06. Third Party Beneficiaries. Except as otherwise specifically provided herein, the parties hereto hereby manifest their intent that no third party shall be deemed a third party beneficiary of this Agreement, and specifically that Obligors are not third party beneficiaries of this Agreement; provided, that the Owner Trustee shall be a third party beneficiary of this Agreement for purposes of the fee and indemnification provisions hereof. Section 11.07. Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall together constitute but one and the same instrument. Section 11.08. Headings. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 11.09. No Bankruptcy Petition; Disclaimer and Subordination. (a) Each of the Servicer, the Owner Trustee and each Noteholder and the Equity Certificateholder (by acceptance of the applicable Notes or the Equity Certificate) covenants and agrees that it will not institute against the Depositor, or the Trust, or solicit or join in or cooperate with or encourage any other Person in instituting against the Depositor or the Trust, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceedings under the laws of the United States or any state of the United States. (b) Consistent with the provisions in Section 1.07 of the Trust Agreement and Section 6.16 hereof, the Trust, as well as each Noteholder and the Equity Certificateholder by accepting a Note or the Equity Certificate, acknowledges and agrees that such Note or the Equity Certificate represents a beneficial interest in the Trust and Trust Assets only and does not represent an interest in any assets (other than the Trust Assets) of the Depositor (including by virtue of any deficiency claim in respect of obligations not paid or otherwise satisfied from the Trust Assets and proceeds thereof). In furtherance of and not in derogation of the foregoing, to the extent the Depositor enters into other securitization transactions as contemplated in Section 6.07, the Trust as well as each Noteholder and the Equity Certificateholder by accepting a Note or Certificate acknowledges and agrees that it shall have no right, title or interest in or to any assets (or interests therein) (other than Trust Assets) conveyed or purported to be conveyed by the Depositor to another securitization trust (i.e., other than the Issuer) or other Person or Persons in connection therewith (whether by way of a sale, capital contribution or by virtue of the granting of a Lien) ("Other Assets"). To the extent that, notwithstanding the agreements and provisions contained in the preceding sentences of this subsection, the Trust, or any Noteholder and the Equity Certificateholder, either (i) asserts an interest in or claim to, or benefit from, Other Assets, whether asserted against or through the Depositor or any other Person owned by the Depositor, or (ii) is deemed to have any such interest, claim or benefit in or from Other Assets, whether by operation of law, legal process, pursuant to applicable provisions of Insolvency Laws or otherwise (including without limitation by virtue of Section 1111(b) of the federal Bankruptcy Code or any successor provision having similar effect under the Bankruptcy Code), and whether deemed asserted against or through the Depositor or any other Person owned by the Depositor, then the Trust and each Noteholder and the Equity Certificateholder by accepting a Note or the Equity Certificate further acknowledges and agrees that any such interest, claim or benefit in or from Other Assets is and shall be expressly subordinated to the indefeasible payment in full of all obligations and liabilities of the Depositor which, under the terms of the relevant documents relating to the securitization of such Other Assets, are entitled to be paid from, entitled to the benefits of, or otherwise secured by such Other Assets (whether or not any such entitlement or security interest is legally perfected or otherwise entitled to a priority of payment or application under applicable law, including Insolvency Laws, and whether asserted against the Depositor or any other Person owned by the Depositor), including, without limitation, the payment of post-petition interest on such other obligations and liabilities. This subordination agreement shall be deemed a subordination agreement within the meaning of Section 510(a) of the Bankruptcy Code. Each Noteholder and the Equity Certificateholder further acknowledges and agrees that no adequate remedy at law exists for a breach of this Section 11.09 and that the terms and provisions of this Section 11.09 may be enforced by an action for specific performance. (c) The provisions of this Section 11.09 shall be for the third party benefit of those entitled to rely thereon and shall survive the termination of this Agreement. Section 11.10. Jurisdiction. Any legal action or proceeding with respect to this Agreement may be brought in the courts of the United States for the Southern District of New York, and by execution and delivery of this Agreement, each party hereto consents, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each such party irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement or any document related hereto. Section 11.11. Tax Characterization. Notwithstanding the provisions of Section 2.01 and Section 2.04 hereof, the Depositor and Owner Trustee agree that pursuant to Treasury Regulations Section 301.7701-3(b)(1)(ii), the Trust is to be disregarded as a separate entity from the Depositor for federal income tax purposes. Section 11.12. Servicer Indemnity. The Servicer will indemnify the Depositor, the Trust, the Securityholders and the Indenture Trustees, and any of their officers, directors, employees or agents (each an "Indemnified Party") from and against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments and any other costs, fees and expenses that any Indemnified Party may sustain in connection with claims asserted by third parties against such Indemnified Party which result from any act or omission on the part of the Servicer with respect to the Trust Assets or its duties and obligations under this Pooling Agreement, except where such claims arise out of any willful misconduct, gross negligence or bad faith on the part of such Indemnified Party. Indemnification under this Section shall survive the resignation or removal of the Owner Trustee or Indenture Trustee, as the case may be, and the termination of the Trust Agreement or this Pooling Agreement. Section 11.13. Limitation of Liability of Owner Trustee. Notwithstanding anything contained herein to the contrary, the Agreement has been executed by [ ], not in its individual capacity but solely in its capacity as Owner Trustee of the Issuer and in no event shall [ ] in its individual capacity or any beneficial owner of the Issuer have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder, as to all of which recourse shall be had solely to the assets of the Issuer. For all purposes of this Agreement, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust Agreement. Section 11.14. WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE PARTIES HERETO EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OF THIS AGREEMENT OR A TRANSACTION DOCUMENT OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, AMENDMENTS AND RESTATEMENTS, OR MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. Section 11.15. Third Party Beneficiary. The Owner Trustee shall be a third party beneficiary of this Agreement. [remainder of page intentionally blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. [ ] By: [ ], not in its individual capacity but solely as Owner Trustee on behalf of the Trust By: [ ] Printed Name: [ ] Title: [ ] ACE Securities Corp., as Depositor By: [ ] Printed Name: [ ] Title: [ ] [ ] By: [ ] Printed Name: [ ] Title: [ ] [ ] in its individual capacity and as Servicer By: [ ] Printed Name: [ ] Title: [ ] EXHIBIT A Form of Transfer Agreement TRANSFER AGREEMENT This TRANSFER AGREEMENT, dated [ ], is by and between ACE Securities Corp., as Depositor and transferor, and [ ] Equipment Trust Securities [ ], as transferee with respect to the conveyance evidenced hereby. WHEREAS, the parties named above are each parties to the Pooling and Servicing Agreement dated as of [ ] (as from time to time amended, supplemented or otherwise modified, the "PSA"); and WHEREAS, pursuant to the PSA, the Depositor wishes to effect conveyances of Transferred Assets (including the Contracts identified on the Schedule of Contracts attached hereto), in each case in the manner and to the effect described in Article II of the PSA; NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein and in the PSA, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Definitions. All terms defined in the PSA (whether directly or by reference to other documents) shall have such defined meanings when used herein, unless such terms are otherwise defined herein. 2. Specification of Cutoff Date and Transfer Date. (a) The "Cutoff Date" applicable to the Contracts conveyed hereby is [ ]. (b) The "Transfer Date" with respect to the conveyances effected hereby is [ ]. 3. Conveyances. Subject to the terms and conditions provided for in the PSA, the Depositor hereby make the assignments and conveyances specified in Article II of the PSA as being effected by execution and delivery of this Transfer Agreement, in each case (i) with respect to the Transferred Assets related to and consisting in part of the Contracts and related Contract Assets identified on the Schedule of Contracts attached hereto, and (ii) in the manner and to the effect described in Article II of the PSA. 4. Incorporation of PSA. This Transfer Agreement is made pursuant to and upon the representations, warranties and agreements on the part of the parties hereto contained in the PSA and shall be governed in all respects by the PSA. 5. Ratification of PSA. As supplemented by this Transfer Agreement, the PSA is in all respects ratified and confirmed by the parties hereto. 6. Counterparts. This Transfer Agreement may be executed in two or more counterparts including by telefax transmission thereof (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. 7. Governing Law. This Transfer Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of New York. 8. Reaffirmation. As provided in Section 2.02 of the PSA, by delivery of this Transfer Agreement the Depositor confirms that the conditions to transfer set forth in Section 2.02 have been satisfied or otherwise waived as described therein. [signatures follow] IN WITNESS WHEREOF, the parties hereto have caused this Transfer Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. ACE Securities Corp., [ ] Equipment Trust Securities [ ] as Depositor By: [ ], not in its individual capacity but solely as Owner Trustee on behalf of the Trust By: [ ] By: [ ] Printed Name: [ ] Printed Name: [ ] Title: [ ] Title: [ ] EXHIBIT B [Reserved] EXHIBIT C Initial Schedule of Contracts EXHIBIT D Form of Servicer's Monthly Report EXHIBIT E Form of Substitution Transfer Agreement SUBSTITUTION TRANSFER AGREEMENT This SUBSTITUTION TRANSFER AGREEMENT, dated [ ], is by and between ACE Securities Corp., as Depositor and transferor, and [ ] Equipment Trust Securities [ ], as transferee with respect to the conveyances evidenced hereby. WHEREAS, the parties named above are each parties to the Pooling and Servicing Agreement dated as of [ ] (as from time to time amended, supplemented or otherwise modified, the "PSA"); and WHEREAS, pursuant to the PSA, the Depositor wishes to effect conveyances of the Substitute Contracts (together with related Substitute Transferred Assets), identified on the Substitution Schedule of Contracts attached hereto, in each case in the manner and to the effect described in Article II of the PSA; and WHEREAS, the Servicer has delivered or caused to be delivered a Substitution Notice with respect to such conveyance as required in the Pooling Agreement referred to in Section 2 below; NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein and in the PSA, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Definitions. All terms defined in the PSA (whether directly or by reference to other documents) shall have such defined meanings when used herein, unless such terms are otherwise defined herein. 2. Specification of Cutoff Date and Transfer Date. (a) The "Substitution Cutoff Date" applicable to the Substitute Contracts conveyed hereby is [ ]. (b) The "Substitution Transfer Date" with respect to the conveyances effected hereby is [ ] 3. Conveyances. Subject to the terms and conditions provided for in the PSA, the Depositor hereby makes the assignments and conveyances specified in Article II of the PSA as being effected by execution and delivery of this Substitution Transfer Agreement, in each case (i) with respect to the Substitute Contracts (together with related Substitute Transferred Assets) identified on the Substitution Schedule of Contracts attached hereto, and (ii) in the manner and to the effect described in Article II of the PSA. 4. Incorporation of PSA. This Substitution Transfer Agreement is made pursuant to and upon the representations, warranties and agreements on the part of the parties hereto contained in the PSA and shall be governed in all respects by the PSA. 5. Ratification of PSA. As supplemented by this Substitution Transfer Agreement, the PSA is in all respects ratified and confirmed by the parties hereto. 6. Counterparts. This Substitution Transfer Agreement may be executed in two or more counterparts including by telefax transmission thereof (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. 7. Governing Law. This Substitution Transfer Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of New York. 8. Reaffirmation. As provided in Section 2.04(b) of the SCA, by delivery of this Assignment Agreement the Depositor confirms that the conditions to transfer set forth in Section 2.02 have been satisfied or otherwise waived as described therein. [signatures follow] IN WITNESS WHEREOF, the parties hereto have caused this Substitution Transfer Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. ACE Securities Corp., [ ] Equipment Trust Securities [ ] as Depositor By: [ ], not in its individual capacity but solely as Owner Trustee on behalf of the Trust By: [ ] By: [ ] By: [ ] By: [ ] Printed Name: [ ] Printed Name: [ ] Title: [ ] Title: [ ] EXHIBIT F [Reserved] EXHIBIT G Schedule of Representations and Warranties (a) List of Contracts. The information set forth in the Schedule of Contracts (as the same may be amended or deemed amended in respect of a conveyance of Substitute Contracts on a Substitution Transfer Date) is true, complete and correct as of the Closing Date (or Substitution Transfer Date, as applicable). (b) Eligible Contract. As of its applicable Cutoff Date, each Contract satisfied the criteria for the definition of Eligible Contract set forth in the Pooling Agreement, and each Secondary Contract securing a Vendor Loan constituting a Contract satisfied, as of its applicable Cutoff Date, the definition of Eligible Secondary Contract set forth in the Pooling Agreement. (c) Contracts Secured by Vehicles. None of the Contracts relating to Equipment constituting Vehicles are "true leases." (d) Contract Files. As of the Closing Date (or as of the Substitution Transfer Date, with respect to Substitute Contracts), (i) immediately prior to such date, [ ] (or the applicable Financing Originator as custodian for [ ], with respect to [ ] Contracts) had possession of each original Contract and the related complete Contract File, and there were no other custodial agreements relating to the same in effect (other than offsite storage arrangements described in Section 4.01(b)); (ii) each of such documents which is required to be signed by the Obligor has been signed by the Obligor in the appropriate spaces; and (iii) the complete Contract File for each Contract is in the possession of the Servicer. (e) No Material Obligation. No Financing Originator has a material performance obligation in respect of any Contract in favor of an Obligor or End-User (it being understood that covenants of quiet enjoyment, purchase options, obligations to accept return of the property at end of lease term, and like obligations of a lessor typical of a "triple net" lease, shall not be deemed "material performance obligations" for purposes of this representation). EXHIBIT H [Reserved] EXHIBIT I [Reserved] EXHIBIT J Minimum Value Filing Exceptions With respect to the [ ] Financing Originators, no financing statements are filed against an Obligor located in a particular State describing Equipment which is the subject of a particular Contract of such [ ] Financing Originator, unless the fair market value of the Equipment (determined in accordance with Customary Policies and Procedures) related to such particular Contract is at least $[ ] (or, in the alternative, at least $[ ] if such Contract is a Lease with a "fair market value" purchase option). With respect to the [ ] Financing Originator, no financing statements are filed against an Obligor located in a particular State describing Equipment which is the subject of a particular Contract of such Financing Originator, unless the fair market value of the Equipment (determined in accordance with Customary Policies and Procedures) related to such particular Contract is at least $[ ]. EX-4.2.3 8 0008.txt EXHIBIT 4.2.3 POOLING AND SERVICING AGREEMENT BETWEEN ------------------------- SELLER AND SERVICER AND ACE SECURITIES CORP. PURCHASER DATED AS OF _____________ __________________ TRUST __ TABLE OF CONTENTS ARTICLE I DEFINITIONS SECTION 1.01. Definitions................................................5 ARTICLE II PURCHASE AND SALE OF ELIGIBLE RECEIVABLES SECTION 2.01. Purchase and Sale of Eligible Receivables..................6 SECTION 2.02. Purchase Price.............................................7 SECTION 2.03. Addition of Accounts.......................................7 SECTION 2.04. Optional Removal of Accounts...............................8 SECTION 2.05. Removal of Ineligible Accounts.............................9 SECTION 2.06. Custody of Documentation...................................9 ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES SECTION 3.01. Appointment of Servicer and Acceptance of Appointment......9 SECTION 3.02. Rights and Duties of the Servicer..........................9 SECTION 3.03. Servicing Compensation; Payment of Certain Expenses by the Servicer............................................11 SECTION 3.04. Representations, Warranties and Covenants of the Servicer..12 SECTION 3.05. Servicer's Accounting and Reports..........................15 SECTION 3.06. Pre-Closing Collections....................................15 SECTION 3.07. Collections Received by the Original Seller................16 ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 4.01. Representations and Warranties of the Original Seller Relating to the Accounts and the Receivables...............16 SECTION 4.02. Representations and Warranties of the Original Seller Relating to the Original Seller and the Agreement..........17 SECTION 4.03. Representations and Warranties of the Purchaser............19 SECTION 4.04. Covenants of the Original Seller...........................21 ARTICLE V CERTAIN MATTERS RELATING TO ORIGINAL SELLER SECTION 5.01. Merger or Consolidation of, or Assumption of the Obligations of, the Original Seller........................22 SECTION 5.02. the Original Seller Indemnification of the Purchaser.......22 SECTION 5.03. the Original Seller Acknowledgment of Transfers to the Issuer.................................................22 ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. Additional Obligations of the Original Seller and the Purchaser..........................................22 SECTION 6.02. Effect of Involuntary Case Involving the Original Seller............................................23 SECTION 6.03. Intercreditor Agreements...................................24 ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.01. Amendment..................................................25 SECTION 7.02. Protection of Right, Title and Interest in and to Receivables................................................25 SECTION 7.03. Costs and Expenses.........................................26 SECTION 7.04. GOVERNING LAW..............................................26 SECTION 7.05. Notices....................................................26 SECTION 7.06. Severability of Provisions.................................26 SECTION 7.07. Assignment.................................................27 SECTION 7.08. Further Assurances.........................................27 SECTION 7.09. No Waiver; Cumulative Remedies.............................27 SECTION 7.10. Counterparts...............................................27 SECTION 7.11. Third-Party Beneficiaries..................................27 SECTION 7.12. Merger and Integration.....................................27 SECTION 7.13. Confidential Information...................................27 SECTION 7.14. Headings...................................................28 SECTION 7.15. Termination................................................28 SECTION 7.16. No Petition Covenants......................................28 SECTION 7.17. Jurisdiction...............................................28 EXHIBIT A List of Locations of the Schedule of Accounts EXHIBIT B Form of Assignment for the Initial Closing Date EXHIBIT C Form of Assignment for Each Addition Date EXHIBIT D Form of Opinion of Counsel With Respect to Addition of Accounts APPENDIX A Definitions and Rules of Construction THIS POOLING AND SERVICING AGREEMENT is made as of _____________, between _____________________________________, a ____________ corporation (referred to herein as the "Original Seller" in its capacity as seller of the Receivables specified herein and as the "Servicer" in its capacity as servicer of the Receivables), and ACE Securities Corp., a Delaware corporation (the "Purchaser"). WHEREAS, the Original Seller, in the ordinary course of its business, generates certain payment obligations by financing the floor plan inventory of motor vehicle dealers; WHEREAS, the Original Seller desires to sell and assign to the Purchaser, and the Purchaser desires to purchase from the Original Seller, certain of such existing and future payment obligations arising or acquired from time to time; WHEREAS, the Purchaser desires to transfer and assign its interest in such payment obligations to __________________ Trust __ (the "Issuer") pursuant to the Trust Sale and Servicing Agreement; WHEREAS, the Issuer desires to issue the Initial Securities to fund its acquisition of such payment obligations; WHEREAS, the Purchaser, the Issuer and the Original Seller (as the holder of such payment obligations not sold to the Purchaser hereunder) desire that the Servicer shall service such payment obligations; and WHEREAS, the Servicer is willing to service such payment obligations and related payment obligations in accordance with the terms hereof and of the Trust Sale and Servicing Agreement for the benefit of the Purchaser, the Original Seller, the Issuer and each other party identified or described herein or in the Trust Sale and Servicing Agreement as having an interest therein as owner, trustee, secured party or holder of the Securities (all such parties being collectively referred to herein as "Interested Parties"). NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Certain capitalized terms used in the above recitals and in this Agreement are defined in and shall have the respective meanings assigned them in Part I of Appendix A to this Agreement. All references herein to "the Agreement" or "this Agreement" are to this Pooling and Servicing Agreement as it may be amended, supplemented or modified from time to time, and all references herein to Articles, Sections and subsections are to Articles, Sections or subsections of this Agreement unless otherwise specified. The rules of construction set forth in Part II of such Appendix A shall be applicable to this Agreement. ARTICLE II PURCHASE AND SALE OF ELIGIBLE RECEIVABLES SECTION 2.01. Purchase and Sale of Eligible Receivables. (a) By execution of this Agreement, on the Initial Closing Date, the Original Seller does hereby sell, transfer, assign and otherwise convey to the Purchaser, without recourse, all of its right, title and interest in, to and under all of the Eligible Receivables existing in the Accounts listed on the Schedule of Accounts (which is kept at locations listed in Exhibit A) as of the close of business on the Initial Cut-Off Date and all monies due or to become due thereon after the Initial Cut-Off Date, all Collateral Security with respect thereto and all amounts received with respect thereto (including all Interest Collections received in the calendar month in which the Initial Cut-Off Date occurs, whether or not received prior to the Initial Cut-Off Date) and all proceeds thereof (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries). (b) Subject to Section 6.02, as of each Receivables Purchase Date, the Original Seller does hereby sell, transfer, assign and otherwise convey to the Purchaser, without recourse, all of its right, title and interest in, to and under all Eligible Receivables created or deemed created in the Accounts in the Pool of Accounts on such date and all monies due or to become due thereon after such date, all Collateral Security with respect thereto and all amounts received with respect thereto and all proceeds thereof (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries). (c) It is the intention of the Original Seller and the Purchaser that the transfers and assignments contemplated by this Agreement shall constitute sales of the property described in Sections 2.01(a) and (b) from the Original Seller to the Purchaser and that the beneficial interest in and title to such property shall not be part of the Original Seller's estate in the event of the filing of a bankruptcy petition by or against the Original Seller under any Insolvency Law. The foregoing sales, transfers, assignments and conveyances and any subsequent sales, transfers, assignments and conveyances contemplated hereby do not constitute, and are not intended to result in, the creation or an assumption by the Purchaser of any obligation of the Servicer, the Original Seller (if the Original Seller is not the Servicer), _______________ or any other Person in connection with the Receivables described above or under any agreement or instrument relating thereto, including any obligation to any Dealers. (d) Subject to Section 2.06 and Article III hereof, the Original Seller shall retain all right, title and interest in, to and under the Receivables in the Accounts in the Pool of Accounts that the Original Seller has not transferred to the Purchaser hereunder. Such Receivables, together with any Receivables repurchased by the Original Seller or (so long as the Original Seller is the Servicer) the Servicer from the Purchaser or the Trust pursuant to this Agreement or the Trust Sale and Servicing Agreement, all monies due or to become due on such Receivables, all amounts received with respect thereto and all proceeds thereof (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries) are collectively referred to herein as the "Retained Property". SECTION 2.02. Purchase Price. On the Initial Closing Date, in consideration for the sale of the property described in Section 2.01(a) to the Purchaser, the Purchaser shall pay to the Original Seller $_____________ (representing the aggregate principal balance of the Eligible Receivables as of the close of business on the Initial Cut-Off Date so sold on the Initial Closing Date) in immediately available funds, and the Original Seller shall deliver to the Purchaser an executed assignment substantially in the form of Exhibit B hereto. The Purchaser shall pay, subject to Section 6.02, for property described in Section 2.03 sold by the Original Seller to the Purchaser on each Addition Date and property described in Section 2.01(b) sold by the Original Seller to the Purchaser on each Receivables Purchase Date, a price equal to the principal balance of the Eligible Receivables to be purchased on each such date. Such purchase price shall be payable by the Purchaser on each such date in immediately available funds. SECTION 2.03. Addition of Accounts. (a) Offers to Designate Additional Accounts. From time to time, the Original Seller may, at its option, offer to designate and the Purchaser may, at its option, request the designation of, one or more Accounts (each, an "Additional Account") to be included as Accounts in the Pool of Accounts, subject to the conditions specified in Section 2.03(b) below. If the Purchaser, at its option, elects to accept any such offer by the Original Seller or if the Original Seller, at its option, agrees to any such request of the Purchaser, the Original Seller shall sell and assign to the Purchaser, and the Purchaser shall purchase from the Original Seller, all of the Original Seller's right, title and interest in, to and under all of the Eligible Receivables in each such Additional Account as of the related Additional Cut-Off Date and all monies due or to become due thereon after such date, all Collateral Security with respect thereto, all amounts received with respect thereto and all proceeds thereof (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries), effective as of the Addition Date specified in a written notice provided by the Servicer, on behalf of the Original Seller, to the Purchaser (the "the Original Seller Addition Notice"). Effective as of each such Addition Date, such Additional Account shall be included in the Pool of Accounts and Eligible Receivables arising therein from and after the Additional Cut-Off Date shall be subject to purchase under Section 2.01(b) above. Each the Original Seller Addition Notice shall specify the related Additional Cut-Off Date and shall be given (with a copy to the Rating Agencies) on or before the fifth Business Day but not more than 30 days prior to the related Addition Date. (b) Conditions. the Original Seller shall be permitted to designate, and the Purchaser shall be permitted to accept the designation of, Additional Accounts, in accordance with Section 2.03(a) only upon satisfaction of each of the following conditions on or prior to the related Addition Date: (i) the Original Seller shall represent that as of the related Additional Cut-Off Date each such Additional Account is an Eligible Account and that each Receivable arising thereunder identified as an Eligible Receivable and conveyed to the Purchaser on such Addition Date is an Eligible Receivable; (ii) the Original Seller shall have delivered to the Purchaser a duly executed written assignment in substantially the form of Exhibit C and the list required to be delivered pursuant to Section 7.02(d); (iii) the Original Seller shall have agreed to deliver to the Purchaser, for deposit in the Collection Account, to the extent required by the Trust Sale and Servicing Agreement, all Collections with respect to the Eligible Receivables arising in such Additional Accounts since the Additional Cut-Off Date within two Business Days after such Addition Date; (iv) as of the Addition Date, neither the Original Seller nor the Purchaser is insolvent nor shall any of them have been made insolvent by such transfer nor is either of them aware of any pending insolvency; (v) the Schedule of Accounts shall have been amended to reflect such Additional Accounts and the Schedule of Accounts as so amended shall be true and correct as of the Addition Date; (vi) the Original Seller shall have delivered to the Purchaser a certificate of an Authorized Officer of the Original Seller confirming the items set forth in clauses (i) through (v) above; (vii) the conditions set forth in Section 2.7(b) of the Trust Sale and Servicing Agreement shall have been satisfied; and (viii) the Original Seller shall have delivered to the Purchaser an Opinion of Counsel of the Original Seller substantially in the form of Exhibit D. SECTION 2.04. Optional Removal of Accounts. From time to time, the Original Seller may, at its option, request from the Purchaser, and the Purchaser may, at its option, offer to the Original Seller, the right to designate an Account for removal from the Pool of Accounts. Subject to the satisfaction by the Purchaser of the conditions set forth in Section 2.8 of the Trust Sale and Servicing Agreement, the Original Seller, at its option, may accept offers to designate an Account for removal or request from the Purchaser the right to designate an Account for removal by furnishing a written notice (the "the Original Seller Removal Notice") to the Purchaser not less than five Business Days but not more than 30 days prior to the Removal Commencement Date. On and after the Removal Commencement Date with respect to a Selected Account, the Original Seller shall not transfer Receivables with respect to such Selected Account to the Purchaser. The Schedule of Accounts shall be amended to reflect such designation as of the Removal Commencement Date and to reflect such Account becoming a Removed Account as of the Removal Date. At any time after the Removal Date, at the written request of the Original Seller, the Purchaser shall assign to the Original Seller, without recourse, representation or warranty, effective as of the Removal Date, all of the Purchaser's right, title and interest in, to and under the Receivables arising in such Account and related Collateral Security. SECTION 2.05. Removal of Ineligible Accounts. If at any time an Account shall be deemed a Selected Account as described in Section 2.9 of the Trust Sale and Servicing Agreement, the Purchaser shall give notice thereof to the Original Seller at the time it gives notice to the parties identified in such Section 2.9. From and after the Removal Commencement Date with respect to a Selected Account pursuant to such Section 2.9, the Original Seller shall not transfer Receivables with respect to such Selected Account to the Purchaser. The Schedule of Accounts shall be amended to reflect such designation as of the Removal Commencement Date and to reflect such Account becoming a Removed Account as of the Removal Date. At any time after such removal, at the written request of the Original Seller, the Purchaser shall assign to the Original Seller, without recourse, representation or warranty, effective as of the Removal Date, all of the Purchaser's right, title and interest in, to and under the Receivables in such Account and related Collateral Security. SECTION 2.06. Custody of Documentation. In connection with the sale, transfer, assignment and conveyance of the Receivables and related Collateral Security in the Accounts in the Pool of Accounts to the Purchaser hereunder, the Purchaser is executing simultaneously herewith the Custodian Agreement with the Custodian, pursuant to which the Purchaser shall revocably appoint the Custodian to act as agent of the Purchaser to maintain custody of the documents and instruments (as more fully described in the Custodian Agreement) associated with such Receivables, which shall be constructively delivered to the Purchaser. the Original Seller, as the holder of the Retained Property, hereby consents to the appointment of the Custodian to act as agent of the Original Seller to maintain custody of the documents and contracts (as more fully described in the Custodian Agreement) associated with the Receivables included therein and is simultaneously herewith executing the Custodian Agreement. The Custodian has accepted such appointment by the Purchaser and the Original Seller under the Custodian Agreement. ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES SECTION 3.01. Appointment of Servicer and Acceptance of Appointment. The Purchaser and the Original Seller hereby appoint the Servicer to act as Servicer with respect to the Eligible Receivables and the Receivables included in the Retained Property, existing in or arising under the Accounts included in the Pool of Accounts from time to time and authorize the Servicer to perform the duties of Servicer under this Agreement and under the Trust Sale and Servicing Agreement. The Servicer by execution of this Agreement and by execution of the Trust Sale and Servicing Agreement hereby accepts such appointment and the terms hereof and thereof. SECTION 3.02. Rights and Duties of the Servicer. (a) The Servicer shall manage, service and administer the Receivables described in Section 3.01, including, without limitation, collecting payments due under the Receivables and providing for charge-offs of uncollectible Receivables, with reasonable care and all in accordance with the Servicer's customary and usual servicing procedures for servicing wholesale receivables comparable to the Receivables which the Servicer services for its own account, including the Floor Plan Financing Guidelines, except insofar as any failure to do so would not have a material adverse effect on the interests of Securityholders. The Servicer shall have full power and authority, acting alone or through any party properly designated by it hereunder or under the Trust Sale and Servicing Agreement, to do any and all things in connection with such servicing and administration which it may deem necessary or desirable, including monitoring the insurance maintained by Dealers. The Servicer is hereby authorized to commence, in its own name or in the name of any Interested Party, a Proceeding to enforce any Receivable subject hereto, to enforce all obligations of the Original Seller and the Purchaser under this Agreement and under the Trust Sale and Servicing Agreement or to commence or participate in a Proceeding (including without limitation a bankruptcy proceeding) relating to or involving any such Receivable. If in any Proceeding it is held that the Servicer may not enforce a Receivable arising under an Account in the Pool of Accounts on the ground that it is not a real party in interest or a holder entitled to enforce such Receivable, the Purchaser, the Original Seller and each other Interested Party shall, at the Servicer's expense, take such steps as the Servicer reasonably deems necessary or appropriate to enforce the Receivable, including bringing suit in the name of such Person. If the Servicer commences or participates in such a Proceeding in its own name, each Interested Party shall thereupon be deemed to have automatically assigned such Receivable to the Servicer for purposes of commencing or participating in any such Proceeding as a party or claimant, and the Servicer is hereby authorized and empowered to execute and deliver in the Servicer's name any notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such Proceeding. Each Interested Party shall furnish the Servicer with any powers of attorney and other documents and take any other steps which the Servicer may reasonably deem necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement and the Trust Sale and Servicing Agreement. Except to the extent required by the preceding two sentences, the authority and rights granted to the Servicer in this Section 3.02 shall be nonexclusive and shall not be construed to be in derogation of the retention by any Interested Party (to the extent of its rights in a Receivable) of equivalent authority and rights. Without limiting the generality of the foregoing and subject to any Servicing Default, the Servicer is hereby authorized and empowered, unless such power and authority is revoked by any Interested Party on account of the occurrence of such a Servicing Default, to: (i) instruct the Issuer to make allocations, withdrawals and payments to or from the Collection Account, the Distribution Accounts, the Reserve Fund, the Cash Accumulation Reserve Funds and any other related bank accounts or funds as set forth in the Trust Sale and Servicing Agreement; (ii) instruct the Issuer or any Interested Party to take any action required or permitted under any Specified Support Arrangement; (iii) execute and deliver, on behalf of the Issuer for the benefit of any related Securityholders, 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 Receivables and, after the delinquency of any Receivable and to the extent permitted under and in compliance with applicable requirements of law, to commence enforcement proceedings with respect to any such Receivable; and (iv) make any filings, reports, notices, applications, registrations with, and seek any consents or authorizations from, the U.S. Securities and Exchange Commission and any State securities authority on behalf of the Issuer as may be necessary or advisable to comply with any U.S. Federal or State securities law or reporting requirement. (b) The Servicer shall not be obligated to use separate servicing procedures, offices, employees or accounts for servicing the Receivables in the Accounts in the Pool of Accounts from the procedures, offices, employees and accounts used by the Servicer in connection with servicing other receivables. The Servicer shall, at its own expense, on or prior to the Initial Closing Date, in the case of the Initial Accounts, and on or prior to the applicable Addition Date, in the case of Additional Accounts, indicate in its computer files that the Eligible Receivables in the Accounts in the Pool of Accounts have been sold and transferred by the Original Seller to the Purchaser hereunder and by the Purchaser to the Trust under the Trust Sale and Servicing Agreement. (c) Except as otherwise required to comply with all Requirements of Law, the Servicer may change the terms and provisions of the Floor Plan Financing Agreements or the Floor Plan Financing Guidelines in any respect (including the calculation of the amount or the timing of charge-offs and the rate of the finance charge assessed thereon), only if: (i) in the reasonable belief of the Servicer, no Early Amortization Event shall occur as a result of such change; (ii) such change is made applicable to the comparable segment of any similar portfolio of accounts serviced by the Servicer and not only to the Accounts in the Pool of Accounts; and (iii) in the case of a reduction in the rate of such finance charges, the Servicer (and, if the Original Seller is not then the Servicer, the Original Seller) does not reasonably expect any such reduction, after considering amounts due and amounts payable under any Specified Support Agreements and Investment Proceeds for the related period, to result in the Net Receivables Rate for any Collection Period being less than the sum of (A) the weighted average of the rates of interest payable to all holders of Securities and (B) the Monthly Servicing Fee for the related period; provided, however, that nothing herein shall prevent the Servicer from modifying the terms of the Floor Plan Financing Agreement with any dealer on a case-by-case basis in a manner consistent with the Floor Plan Financing Guidelines. SECTION 3.03. Servicing Compensation; Payment of Certain Expenses by the Servicer. The Servicer is entitled to receive the Monthly Servicing Fee as described in the Trust Sale and Servicing Agreement. The Monthly Servicing Fee shall be payable to the Servicer solely to the extent amounts are available for payment in accordance with the terms of the Trust Sale and Servicing Agreement. Subject to any limitations on the Servicer's liability under the Trust Sale and Servicing Agreement, the Servicer shall be required to pay all expenses incurred by it in connection with its activities under this Agreement and the Trust Sale and Servicing Agreement (including disbursements of the Issuer, fees and disbursements of any trustees, accountants and outside auditors, taxes imposed on the Servicer, expenses incurred in connection with distributions and reports to Securityholders and all other fees and expenses not expressly stated under this Agreement or the Trust Sale and Servicing Agreement to be for the account of the Securityholders, but in no event including federal, state and local income and franchise taxes, if any, of the Issuer or any holder of the Securities). SECTION 3.04. Representations, Warranties and Covenants of the Servicer. (a) The Servicer hereby makes, and any successor Servicer by its appointment under this Agreement and under the Trust Sale and Servicing Agreement shall make, on each Closing Date (and on the date of any such appointment) the following representations, warranties and covenants on which the Purchaser relies in accepting and holding the Receivables and the related Collateral Security hereunder and the Issuer shall rely in acquiring and holding such Receivables and the related Collateral Security under the Trust Sale and Servicing Agreement and in issuing the Securities: (i) Organization and Good Standing. The Servicer has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware (or, in the case of a Servicer other than the Original Seller, other applicable law of its jurisdiction of incorporation), with power and authority to own its properties and to conduct its businesses as such properties are presently owned and such businesses are presently conducted. (ii) Due Qualification. The Servicer is duly qualified to do business and, where necessary, is in good standing as a foreign corporation (or is exempt from such requirement) and has obtained all necessary licenses and approvals in each jurisdiction in which the conduct of its businesses requires such qualification, except where the failure to so qualify or obtain licenses or approvals would not have material adverse effect on its ability to perform its obligations under this Agreement. (iii) Power and Authority. The Servicer has the power and authority to execute and deliver this Agreement and the Trust Sale and Servicing Agreement, to carry out the terms of each such agreement and to service the Accounts in the Pool of Accounts and the Receivables arising therein as provided herein and in the Trust Sale and Servicing Agreement, and the execution, delivery and performance of this Agreement and the Trust Sale and Servicing Agreement have been duly authorized by the Servicer by all necessary corporate action on the part of the Servicer. (iv) Binding Obligation. This Agreement constitutes, and the Trust Sale and Servicing Agreement, when duly executed and delivered by the Servicer, shall constitute, the legal, valid and binding obligation of the Servicer enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereinafter in effect, affecting the enforcement of creditors' rights in general and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (v) No Violation. The execution of this Agreement and the consummation of the transactions contemplated by this Agreement and the Trust Sale and Servicing Agreement by the Servicer and the fulfillment of the terms of this Agreement and the Trust Sale and Servicing Agreement by the Servicer, shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or by-laws of the Servicer, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument (other than pursuant to the Basic Documents), or violate any law or, to the best of the Servicer's knowledge, any order, rule or regulation applicable to the Servicer of any Governmental Authority having jurisdiction over the Servicer or any of its properties, except where any such conflict or violation would not have a material adverse effect on its ability to perform its obligations under this Agreement or the Trust Sale and Servicing Agreement. (vi) No Proceedings. To the Servicer's knowledge, there are no Proceedings or investigations pending, or threatened, against the Servicer before any Governmental Authority having jurisdiction over the Servicer or its properties (A) asserting the invalidity of this Agreement or the Trust Sale and Servicing Agreement or any Securities issued thereunder, (B) seeking to prevent the issuance of the such Securities, the execution of this Agreement or the consummation of any of the transactions contemplated by this Agreement or the Trust Sale and Servicing Agreement or (C) seeking any determination or ruling that might materially and adversely affect the performance by the Servicer of its obligations under, or the validity and enforceability of, this Agreement or the Trust Sale and Servicing Agreement. (vii) Compliance with Requirements of Law. The Servicer shall duly satisfy all obligations on its part to be fulfilled under or in connection with the Receivables and the Accounts to be serviced under this Agreement and the Trust Sale and Servicing Agreement, shall maintain in effect all qualifications required under Requirements of Law in order to service properly such Receivables and such Accounts and shall comply in all material respects with all Requirements of Law in connection with servicing such Receivables and such Accounts, except, in each case, where a failure to do so would not have a material adverse effect on the interests of the Securityholders. (viii) No Rescission or Cancellation. Except pursuant to the Floor Plan Financing Guidelines, the Servicer shall not permit any rescission or cancellation of any Receivable sold and assigned to the Purchaser hereunder that the Servicer services under this Agreement and the Trust Sale and Servicing Agreement, except as ordered by a court of competent jurisdiction or other Governmental Authority. (ix) Protection of Interested Party Rights. The Servicer shall take no action, nor omit to take any action, which would impair the rights or interests of Interested Parties in the Receivables sold and assigned to the Purchaser hereunder that the Servicer services under this Agreement and the Trust Sale and Servicing Agreement or in the related Vehicle Collateral Security nor shall it reschedule, revise or defer payments due on any such Receivable except, in each case, in a manner consistent with the Floor Plan Financing Guidelines or as otherwise contemplated herein or in the Trust Sale and Servicing Agreement. The Servicer shall not permit any such Receivable to become subject to any right of set-off or any offsetting balance. (x) Negative Pledge. Except for the conveyances hereunder to the Issuer pursuant to the Trust Sale and Servicing Agreement and the pledge of the Trust Estate to the Indenture Trustee pursuant to the Indenture, and as provided in Section 6.03, the Servicer shall not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist, any Lien on any Receivable sold and assigned to the Purchaser hereunder (and any related Collateral Security), whether now existing or hereafter created, or any interest therein, and the Servicer shall defend the right, title and interest of the Purchaser, the Issuer and any Interested Party in, to and under such property, whether now existing or hereafter created, against all claims of third parties claiming through or under the Purchaser or the Servicer. The Servicer shall notify the Purchaser promptly after becoming aware of any Lien on such property other than the conveyances hereunder or under the Trust Sale and Servicing Agreement or the Indenture. (b) Notice of Breach. Upon discovery by the Purchaser or the Servicer of a breach of any of the representations, warranties and covenants set forth in this Section 3.04, the party discovering such breach shall give prompt written notice to the other party. (c) Purchase of Receivables. If any covenants of the Servicer under Section 3.04(a)(viii), (ix) or (x) has not been complied with in all material respects with respect to any Eligible Receivable or Account in the Pool of Accounts and such noncompliance has a material adverse effect on the interests of Securityholders or any other Interested Parties in such Receivable or such Account, the Servicer shall purchase such Receivable (or, in the case of a breach affecting less than the entire principal amount of a Receivable, to the extent of the breach) or all Eligible Receivables under such Account (each, an "Administrative Receivable") from the Issuer, on the terms and conditions set forth in this Section 3.04. (d) Payment of Purchase Price. The Servicer shall purchase each Administrative Receivable no later than two Business Days (or such other period as may be agreed by the Applicable Trustee) following discovery by the Servicer (including through the receipt of notice thereof) of the event giving rise to such Administrative Receivable by depositing in the Collection Account, on the date on which such purchase is deemed to occur, an amount (in immediately available funds) equal to the principal amount of such Receivable plus accrued and unpaid interest thereon through the date of purchase. The amount so deposited with respect to a Receivable (an "Administrative Purchase Payment") shall be included in Trust Principal Collections (to the extent of the principal amount of such Receivable) and Interest Collections (as to the remainder of such amount) on such date and shall be applied in accordance with the terms of this Agreement and the Trust Sale and Servicing Agreement. (e) Sole Remedy. The obligation of the Servicer to purchase Receivables as described in this Section 3.04, and to make the deposits required to be made to the Collection Account as provided in the preceding paragraph, shall constitute the sole remedy respecting the event giving rise to such obligation available to any Securityholders, the Purchaser, the Owner Trustee, the Indenture Trustee or the Issuer. SECTION 3.05. Servicer's Accounting and Reports. (a) On or before each Determination Date, the Servicer shall deliver to the Purchaser, the Owner Trustee, the Indenture Trustee and the Rating Agencies a Servicer's Accounting with respect to the immediately preceding Collection Period executed by an Authorized Officer of the Servicer containing all information necessary for making the allocations, deposits and distributions required by the Trust Sale and Servicing Agreement, the Trust Agreement and the Indenture on the related Distribution Date, and all information necessary to each such party for sending any statements required to be sent to Securityholders with respect to such Distribution Date under the Trust Sale and Servicing Agreement. (b) On each Business Day, the Servicer shall deliver to the Indenture Trustee a Servicer's Accounting executed by an Authorized Officer of the Servicer (i) containing the Daily Trust Balance, the Daily Trust Invested Amount and all related amounts to the extent necessary to determine the Cash Collateral Amount for such date as described in Section 4.5(d) of the Trust Sale and Servicing Agreement and (ii) if any series or class of Securities is then in a Payment Period, Cash Accumulation Period or Rapid Amortization Period, or if the Trust is then in an Early Amortization Period or a Wind-Down period, containing such instructions and computations as are necessary to effect the allocation and application of Principal Collections and other Available Trust Principal on such day. (c) At any time that the Original Seller does not have a long-term rating of at least BBB- from Standard & Poor's and at least Baa3 from Moody's, the Servicer shall identify on a daily basis all Eligible Receivables and, on or before each Determination Date, the Servicer shall deliver to the Owner Trustee a list identifying all Eligible Receivables as of the last day of the related Collection Period. SECTION 3.06. Pre-Closing Collections. Within two Business Days after the Initial Closing Date, the Original Seller shall deliver to the Purchaser all collections on the Receivables in the Accounts in the Pool of Accounts held by the Original Seller on the Initial Closing Date to the extent such collections would be required to be on deposit on such date if this Agreement and the Trust Sale and Servicing Agreement had been in effect from and after the Initial Cut-Off Date and the Revolving Period had commenced on such date. The Purchaser hereby directs the Original Seller to deposit such amount on its behalf into the Collection Account. SECTION 3.07. Collections Received by the Original Seller. the Original Seller hereby agrees to deliver all Collections on the Receivables in the Accounts in the Pool of Accounts received by the Original Seller from or on behalf of Dealers to the Servicer and consents to the application, allocation and distribution thereof in accordance with the terms and provisions of this Agreement and the Trust Sale and Servicing Agreement. ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 4.01. Representations and Warranties of the Original Seller Relating to the Accounts and the Receivables. (a) Representations and Warranties. As of the dates set forth below, the Original Seller makes the following representations and warranties to the Purchaser as to the Accounts in the Pool of Accounts and the Receivables sold to the Purchaser hereunder, on which the Purchaser relies in accepting such Receivables: (i) as of the Initial Cut-Off Date, each Account included in the Pool of Accounts is an Eligible Account; (ii) as of the Initial Cut-Off Date, each Receivable that is identified as an Eligible Receivable and conveyed to the Purchaser on the Initial Closing Date is an Eligible Receivable; (iii) as of each Additional Cut-Off Date, each related Additional Account is an Eligible Account and each Receivable arising thereunder that is identified as an Eligible Receivable and conveyed to the Purchaser on the related Addition Date is an Eligible Receivable; and (iv) as of each date that Receivables are sold and transferred hereunder pursuant to Section 2.01(b), each Receivable that is identified as an Eligible Receivable and so conveyed to the Purchaser on such date is an Eligible Receivable. (b) Survival; Notice of Breach. The representations and warranties set forth in this Section 4.01 shall survive the transfer and assignment of the Eligible Receivables in the Accounts in the Pool of Accounts and related items to the Purchaser from time to time and the subsequent assignment and transfer of its interests therein to the Issuer pursuant to the Trust Sale and Servicing Agreement. Upon discovery by the Original Seller or the Purchaser of a breach of any of the representations and warranties set forth in this Section 4.01, the party discovering such breach shall give prompt written notice to the other party. (c) Repurchase. the Original Seller acknowledges that the Purchaser shall assign its rights and remedies hereunder with respect to the Eligible Receivables arising in the Accounts in the Pool of Accounts to the Issuer under the Trust Sale and Servicing Agreement. the Original Seller hereby covenants and agrees with the Purchaser that (i) in the event of a breach of any of the Original Seller's representations and warranties contained in Section 4.01(a) with respect to any Receivable or with respect to any Account that materially and adversely affects the interests of the Purchaser or the Trust in any Receivable or (ii) in the event that the payment of all or a portion of the principal amount of any Receivable held by the Purchaser or the Trust is deferred pursuant to [DPP] or any other installment sales program or similar arrangement, unless and to the extent such breach or deferral shall have been cured in all material respects, the Original Seller shall repurchase the interest of the Issuer in such Receivable (to the extent of such breach or deferral) on the date and for the amount specified in Section 2.5 of the Trust Sale and Servicing Agreement, without further notice from the Purchaser hereunder and without any representation, warranty or recourse from the Purchaser or the Issuer. Without limiting the generality of the foregoing, a Receivable shall not be an Eligible Receivable, and thus shall be subject to repurchase, if and to the extent that, (A) the Servicer adjusts downward the principal amount of such Receivable because of a rebate, refund, credit adjustment or billing error to the related Dealer or (B) such Receivable was created in respect of a Vehicle which was refused or returned by the related Dealer. (d) Sole Remedy. The obligation of the Original Seller to repurchase any Receivable shall constitute the sole remedy respecting the event giving rise to such obligation available to the Purchaser and to any Interested Party. SECTION 4.02. Representations and Warranties of the Original Seller Relating to the Original Seller and the Agreement. (a) Representations and Warranties. the Original Seller, in its capacity as seller, hereby makes as of each Closing Date the following representations and warranties on which the Purchaser relies. The following representations and warranties shall survive the sale, transfer and assignment of the Receivables hereunder: (i) Organization and Good Standing. the Original Seller has been duly organized and is validly existing as a [ ] in good standing under the laws of the State of [ ], with power and authority to own its properties and to conduct its businesses as such properties are presently owned and such businesses are presently conducted; (ii) Due Qualification. the Original Seller is duly qualified to do business and, where necessary, is in good standing as a foreign corporation (or is exempt from such requirement) and has obtained all necessary licenses and approvals in each jurisdiction in which the conduct of its businesses requires such qualification, except where the failure to so qualify or obtain licenses or approvals would not have a material adverse effect on its ability to perform its obligations under this Agreement; (iii) Power and Authority. the Original Seller has the power and authority to execute and deliver this Agreement, to carry out its terms, and to consummate the transactions contemplated herein, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by the Original Seller by all necessary corporate action on the part of the Original Seller; (iv) No Violation. The execution of this Agreement and the consummation of the transactions contemplated by this Agreement and the fulfillment of the terms of this Agreement by the Original Seller shall not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or by-laws of the Original Seller, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Original Seller is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument (other than pursuant to the Basic Documents) or violate any law or, to the best of the Original Seller knowledge, any order, rule or regulation applicable to the Original Seller of any Governmental Authority having jurisdiction over the Original Seller or any of its properties, except where any such conflict or violation would not have a material adverse effect on its ability to perform its obligations with respect to the Purchaser or any Interested Party under this Agreement or the Trust Sale and Servicing Agreement; (v) No Proceedings. To the Original Seller knowledge, there are no Proceedings or investigations pending, or threatened, against the Original Seller before any Governmental Authority having jurisdiction over the Original Seller or its properties (A) asserting the invalidity of this Agreement, the Trust Sale and Servicing Agreement, the Custodian Agreement or the Administration Agreement, (B) seeking to prevent the execution of this Agreement or the consummation of any of the transactions contemplated by this Agreement, the Trust Sale and Servicing Agreement, the Custodian Agreement or the Administration Agreement or (C) seeking any determination or ruling that might materially and adversely affect the performance by the Original Seller of its obligations under, or the validity or enforceability of, this Agreement, the Trust Sale and Servicing Agreement, the Custodian Agreement or the Administration Agreement; (vi) Binding Obligation. This Agreement constitutes a legal, valid and binding obligation of the Original Seller, enforceable against the Original Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law; (vii) Record of Accounts. The Schedule of Accounts is an accurate and complete listing in all material respects of all of the Accounts in the Pool of Accounts as of the Initial Cut-Off Date or the applicable Additional Cut-Off Date, as the case may be, and the information contained therein with respect to the identity of such Accounts is true and correct in all material respects; and (viii) Valid Sale. With respect to the Initial Accounts, this Agreement and the related assignment to be delivered on the Initial Closing Date or, in the case of Additional Accounts, the related assignment as described in Section 2.03(b), when duly executed and delivered, shall constitute a valid sale, transfer and assignment to the Purchaser of all right, title and interest of the Original Seller in, to and under the Eligible Receivables thereunder and the related Vehicle Collateral Security, whether then existing or thereafter created, and the proceeds thereof, enforceable against creditors of and purchasers from the Original Seller. To the extent such filings are required therefor, upon the filing of the financing statements described in Section 7.02(a) (and, in the case of Eligible Receivables hereafter created in the Accounts in the Pool of Accounts and the proceeds thereof, upon the creation thereof) the Purchaser shall have a first priority perfected ownership interest in such property, except for Liens permitted under Section 4.04(a). Except as otherwise provided in the Trust Sale and Servicing Agreement or this Agreement, neither the Original Seller nor any Person claiming through or under the Original Seller has any claim to or interest in the Trust Estate. (b) Survival; Notice of Breach. The representations and warranties set forth in this Section 4.02 shall survive the transfer and assignment of the Receivables and related items to the Purchaser hereunder and the subsequent assignment and transfer of its interests therein to the Issuer pursuant to the Trust Sale and Servicing Agreement. Upon discovery by the Original Seller or the Purchaser of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the other party. (c) Repurchase. If (i) the Purchaser is required to purchase Receivables and related Collateral Security pursuant to Section 3.1(c) of the Trust Sale and Servicing Agreement and (ii) the condition giving rise to such purchase obligation shall also constitute a breach of a representation or warranty pursuant to Section 4.02(a), the Original Seller shall repurchase such Receivables and such Collateral Security and shall pay to the Purchaser, prior to the time the Purchaser is required to pay such amount pursuant to the Trust Sale and Servicing Agreement, an amount equal to the Reassignment Amount. (d) Sole Remedy. The obligation of the Original Seller to purchase such Receivables and such Collateral Security pursuant to this Section 4.02 shall constitute the sole remedy available to the Purchaser and to any Interested Party against the Original Seller respecting the event giving rise to such obligation. SECTION 4.03. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Original Seller as of each Closing Date that: (a) Organization and Good Standing. The Purchaser has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently conducted, and had at all relevant times, and now has, power, authority and legal right to acquire and own the Eligible Receivables arising in the Accounts in the Pool of Accounts and the Collateral Security related thereto; (b) Due Qualification. The Purchaser is duly qualified to do business and, where necessary, is in good standing as a foreign corporation (or is exempt from such requirement) and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualification, except where the failure to so qualify or obtain licenses or approvals would not have a material adverse effect on its ability to perform its obligations under this Agreement; (c) Power and Authority. The Purchaser has the power and authority to execute and deliver this Agreement, to carry out its terms and to consummate the transactions contemplated herein, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by the Purchaser by all necessary corporate action on the part of the Purchaser; (d) No Violation. The execution of this Agreement and the consummation of the transactions contemplated by this Agreement by the Purchaser and the fulfillment of the terms of this Agreement by the Purchaser shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice or lapse of time) a default under, the certificate of incorporation or by-laws of the Purchaser, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Purchaser is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument (other than pursuant to the Basic Documents), or violate any law or, to the best of the Purchaser's knowledge, any order, rule or regulation applicable to the Purchaser of any Governmental Authority having jurisdiction over the Purchaser or any of its properties, except where any such conflict or violation would not have a material adverse effect on its ability to perform its obligations with respect to the Original Seller or any Interested Party under this Agreement or the Trust Sale and Servicing Agreement; (e) No Proceedings. To the Purchaser's knowledge, there are no Proceedings or investigations pending, or threatened, against the Purchaser before any Governmental Authority having jurisdiction over the Purchaser or its properties (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the execution of this Agreement or the consummation of any of the transactions contemplated by this Agreement or (iii) seeking any determination or ruling that might materially and adversely affect the performance by the Purchaser of its obligations under, or the validity or enforceability of, this Agreement; and (f) Binding Obligation. This Agreement constitutes a legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and by general principles or equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. SECTION 4.04. Covenants of the Original Seller. The Original Seller hereby covenants that: (a) Negative Pledge. Except for the conveyances hereunder and under the Trust Sale and Servicing Agreement and the pledge of the Trust Estate to the Indenture Trustee under the Indenture and as provided in Section 6.03, the Original Seller shall not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist, any Lien on any Eligible Receivable in any Account in the Pool of Accounts (and any related Vehicle Collateral Security), whether now existing or hereafter created, or any interest therein, and the Original Seller shall defend the right, title and interest of the Purchaser and any Interested Party in, to and under such property, whether now existing or hereafter created, against all claims of third parties claiming through or under the Original Seller . The Original Seller shall notify the Purchaser and the Issuer promptly after becoming aware of any Lien on any such property other than the conveyances hereunder or under the Trust Sale and Servicing Agreement or the Indenture. Nothing herein shall prohibit the Original Seller from granting, creating, incurring or suffering to exist any Lien on all or any portion of the Retained Property. (b) Delivery of Collections. All payments received by the Original Seller from or on behalf of a Dealer in respect of Receivables in any Accounts in the Pool of Accounts or any Collateral Security (except as contemplated in Section 6.03 with respect to any property constituting Common Collateral that is not Vehicle Collateral Security in connection with any Other Indebtedness) shall be received by the Original Seller in its capacity as Servicer, unless the Original Seller is no longer the Servicer, in which case the Original Seller shall deliver all such payments to the Servicer as soon as practicable after receipt thereof, but in no event later than two Business Days after receipt thereof. (c) Compliance with Requirements of Law. The Original Seller shall comply in all material respects with all Requirements of Law applicable to the Original Seller, except where any such failure to comply would not have a material adverse effect on its ability to perform its obligations under this Agreement. (d) No Petition. Neither the Servicer nor the Original Seller shall at any time institute against the Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy or similar law. ARTICLE V CERTAIN MATTERS RELATING TO ORIGINAL SELLER SECTION 5.01. Merger or Consolidation of, or Assumption of the Obligations of, the Original Seller. (a) Notwithstanding anything to the contrary in this Agreement, any Person (i) into which the Original Seller may be merged or consolidated, (ii) resulting from any merger, conversion or consolidation to which the Original Seller shall be a party, (iii) succeeding to the business of the Original Seller or (iv) more than 50% of the voting interests of which is owned, directly or indirectly, by _________________ and which is otherwise originating receivables, which Person in any of the foregoing cases (other than the Original Seller as the surviving entity of such merger or consolidation) executes an agreement of assumption to perform every obligation of the Original Seller, as seller, under this Agreement and the Trust Sale and Servicing Agreement, shall be the successor to the Original Seller under this Agreement, as seller, without the execution or filing of any document or any further act on the part of any of the parties to this Agreement or the Trust Sale and Servicing Agreement, anything in this Agreement to the contrary notwithstanding. (b) The Original Seller shall provide notice of any merger, consolidation or succession pursuant to this Section 5.01 to the Rating Agencies. SECTION 5.02. The Original Seller Indemnification of the Purchaser. The Original Seller shall indemnify the Purchaser for any liability as a result of the failure of an Eligible Receivable sold hereunder to be originated in compliance with all Requirements of Law. This indemnity obligation shall be in addition to any obligation that the Original Seller may otherwise have. SECTION 5.03. The Original Seller Acknowledgment of Transfers to the Issuer. By its execution of the Trust Sale and Servicing Agreement, the Original Seller acknowledges that the Purchaser shall, pursuant to the Trust Sale and Servicing Agreement, transfer the Receivables purchased hereunder and related Collateral Security to the Issuer and assign its rights associated therewith under this Agreement to the Issuer, subject to the terms and conditions of the Trust Sale and Servicing Agreement, and that the Issuer shall in turn further pledge, assign or transfer its rights in such property and this Agreement to the Indenture Trustee under the Indenture. The Original Seller further acknowledges that the Purchaser shall assign its rights under the Custodian Agreement to the Issuer. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. Additional Obligations of the Original Seller and the Purchaser. (a) Supplemental Principal Allocations. On or before the Business Day prior to each Monthly Distribution Date for the Wind Down Period or an Early Amortization Period or the Payment Period for the ______ Term Notes, the Original Seller shall deposit into the Collection Account, on behalf of the Purchaser, an amount equal to the Supplemental Principal Allocation for such Monthly Distribution Date. Such amount shall be recorded as an advance under the Intercompany Advance Agreement and shall bear interest and be payable as provided therein. (b) Removed Accounts. With respect to each Removed Account, if and to the extent that any related Receivable held by the Trust on the related Removal Commencement Date (determined without giving effect to the special allocation of Principal Collections pursuant to Section 2.8(c) or Section 2.9(b), as applicable, of the Trust Sale and Servicing Agreement) is charged-off as uncollectible at any time following the related Removal Date, the Purchaser shall pay the amount so charged-off to the Original Seller. SECTION 6.02. Effect of Involuntary Case Involving the Original Seller. (a) Suspension of Purchases. The Purchaser shall suspend the purchase (and the Original Seller shall suspend the sale) of Receivables hereunder if either party shall receive notice at its principal corporate office that the Original Seller has become an involuntary party to (or has been made the subject of) any proceeding provided for by any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the Original Seller or relating to all or substantially all of its property (an "Involuntary Case"). (b) Resumption of Purchases. Notwithstanding any cessation or suspension of purchases pursuant to Section 6.02(a), if the Original Seller or the Purchaser has obtained an order from the court having jurisdiction over an Involuntary Case approving the continuation of the sale of Receivables by the Original Seller to the Purchaser and/or approving the sale of Receivables originating in the Accounts in the Pool of Accounts since the date of the suspension of such sales on the same terms (including Section 6.03 hereof) as, or on terms that do not have a material adverse effect on Securityholders as compared to, the terms in effect prior to the commencement of such Involuntary Case, and further providing that the Purchaser and any of its transferees (including the Issuer) may rely on such order for the validity and nonavoidance of such transfer (the "Order"), the Purchaser may resume the purchase (and the Original Seller may resume the sale) of Receivables pursuant to the terms hereof; provided, however, that so long as such Involuntary Case shall continue, notwithstanding anything in this Agreement to the contrary, the purchase price of such Receivables (which shall not be less than reasonably equivalent value therefor or greater than the principal balance thereof) shall be paid by the Purchaser to the Original Seller in cash not later than the same Business Day of any such sale, and such Receivables shall be considered transferred to the Purchaser only to the extent that the purchase price therefor has been paid in cash on the same Business Day. (c) Cessation of Purchases. If an Order is obtained but subsequently is reversed or rescinded or expires, the Purchaser shall immediately cease to purchase (and the Original Seller shall immediately cease to sell) Receivables hereunder. Notwithstanding anything contained in Section 6.02(b), if an Involuntary Case has not been dismissed by the first Business Day following the 60 day period beginning on the day on which notice of an Involuntary Case was received by either party, whether or not an Order was obtained, the Purchaser shall not thereafter purchase Receivables from the Original Seller hereunder and the Original Seller shall not thereafter designate Additional Accounts for transfer to the Purchaser or sell Receivables hereunder. SECTION 6.03. Intercreditor Agreements. (a) Common Collateral. In connection with loans or advances made or to be made by the Original Seller to a Dealer from time to time other than pursuant to an Account (collectively, "Other Indebtedness"), the Original Seller may have a security interest in property constituting Collateral Security (the "Common Collateral"). (b) Agreements of the Original Seller with respect to Common Collateral. The Original Seller agrees that with respect to the Receivables of each Dealer: (i) the Original Seller security interest in any Common Collateral that is Vehicle Collateral Security (and the proceeds thereof) in connection with any Other Indebtedness is subordinate to the security interest therein in connection with such Receivables and assigned to the Purchaser hereunder; (ii) the Original Seller shall not apply the proceeds of any such Common Collateral that is Vehicle Collateral Security in connection with any Other Indebtedness in any manner that is materially adverse to the Purchaser or the Issuer and the Securityholders until all required payments in respect of such Receivable have been made; and (iii) in realizing upon any such Common Collateral that is Vehicle Collateral Security in connection with any such Receivables, neither the Purchaser nor the Issuer (nor the Servicer on behalf of either) shall be obligated to protect or preserve the rights of the Original Seller in such Common Collateral. (c) Agreements of the Purchaser with respect to Common Collateral. The Purchaser agrees that with respect to the Receivables of each Dealer: (i) the Purchaser's security interest in any Common Collateral that is not Vehicle Collateral Security (and the proceeds thereof) in connection with such Receivables assigned to the Purchaser hereunder is subordinate to the security interest therein in connection with any Other Indebtedness; (ii) the Purchaser (or the Servicer on its behalf) shall not apply the proceeds of any such Common Collateral that is not Vehicle Collateral Security in connection with any such Receivables in any manner that is materially adverse to the Original Seller until all required payments in respect of such Other Indebtedness have been made; and (iii) in realizing upon any such Common Collateral that is not Vehicle Collateral Security in connection with such Other Indebtedness, the Original Seller shall not be obligated to protect or preserve the rights of the Purchaser or the Issuer in such Collateral Security. (d) Obligations of Issuer. The Trust Sale and Servicing Agreement shall provide that the Issuer is subject to this Section 6.03. (e) Obligations of Assignees and Transferees. If, other than pursuant hereto, the Original Seller in any manner assigns or transfers any right or obligation with respect to any Other Indebtedness or any property constituting Common Collateral, the Original Seller shall make such assignment or transfer subject to the provisions of this Section 6.03 and shall require such assignee or transferee to acknowledge that it takes such assignment or transfer subject to the provisions of this Section 6.03 and to agree that it shall require the same acknowledgment from any subsequent assignee or transferee. ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.01. Amendment. This Agreement may be amended from time to time (subject to Section 10.1(g) of the Trust Sale and Servicing Agreement) by a written amendment duly executed and delivered by the Original Seller and the Purchaser. SECTION 7.02. Protection of Right, Title and Interest in and to Receivables. (a) the Original Seller or the Purchaser or both shall execute and file such financing statements and cause to be executed and filed such continuation statements or other statements, all in such manner and in such places as may be required by law fully to evidence, preserve, maintain and protect the interest of the Purchaser hereunder in the Eligible Receivables arising in the Accounts in the Pool of Accounts and the related Collateral Security and in the proceeds thereof (including, without limitation, UCC-1 financing statements on or prior to the Initial Closing Date). The Original Seller shall deliver (or cause to be delivered) to the Purchaser file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. (b) Within 60 days after the Original Seller makes any change in its name, identity or corporate structure that would make any financing statement or continuation statement filed in accordance with Section 7.02(a) seriously misleading within the meaning of Section 9-402(7) of the UCC, the Original Seller shall give the Purchaser notice of any such change. (c) The Original Seller shall give the Purchaser at least 60 days prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement. The Original Seller shall at all times maintain its principal executive office within the United States of America. (d) In connection with the sale and transfer hereunder of the Receivables in the Accounts in the Pool of Accounts and the related Collateral Security from the Original Seller to the Purchaser, the Original Seller shall, at its own expense, on or prior to the Initial Closing Date, in the case of the Initial Accounts, and on or prior to the applicable Addition Date, in the case of Additional Accounts, (i) indicate in its computer files that the Eligible Receivables in the Accounts in the Pool of Accounts have been sold and transferred, and the Collateral Security assigned, to the Purchaser pursuant to this Agreement and that such property has been sold and transferred to the Issuer pursuant to the Trust Sale and Servicing Agreement and (ii) deliver to the Purchaser a true and complete list of all such Accounts specifying for each such Account, as of the Initial Cut-Off Date, in the case of the Initial Accounts, and as of the applicable Additional Cut-Off Date, in the case of Additional Accounts, its account number and the outstanding principal balance of Eligible Receivables in such Account. Such list, as supplemented from time to time to reflect Additional Accounts, Selected Accounts and Removed Accounts (including Accounts removed as described in Section 2.05), shall be the Schedule of Accounts and is hereby incorporated into and made a part of this Agreement. (e) The Servicer shall furnish to the Purchaser at any time upon request a list of all Accounts then included in the Pool of Accounts, together with a reconciliation of such list to the Schedule of Accounts as initially furnished pursuant to the Trust Sale and Servicing Agreement and to each notice furnished before such request indicating removal from or addition to the Accounts in the Pool of Accounts. SECTION 7.03. Costs and Expenses. The Original Seller agrees to pay all reasonable out-of-pocket costs and expenses of the Purchaser, including fees and expenses of counsel, in connection with the perfection as against third parties of the Purchaser's right, title and interest in, to and under the Receivables sold hereunder and the enforcement of any obligation of the Original Seller hereunder. SECTION 7.04. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF OR OF ANY OTHER JURISDICTION, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 7.05. Notices. All demands, notices and communications upon or to the Original Seller, the Purchaser, or any other Person identified in Section 10.3 of the Trust Sale and Servicing Agreement under this Agreement shall be delivered as specified in Appendix B to the Trust Sale and Servicing Agreement. SECTION 7.06. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed enforceable to the fullest extent permitted, and if not so permitted, 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 any Securities or rights of any Interested Parties. SECTION 7.07. Assignment. Notwithstanding anything to the contrary contained herein, this Agreement may not be assigned by the Original Seller without the prior written consent of the Purchaser and the Issuer. The Purchaser may assign all or a portion of its rights, remedies, powers and privileges under this Agreement to the Issuer pursuant to the Trust Sale and Servicing Agreement. SECTION7.08. Further Assurances. The Original Seller and the Purchaser agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other party to more fully effect the purposes of this Agreement, including the execution of any financing statements or continuation statements relating to the Receivables for filing under the provisions of the Uniform Commercial Code of any applicable jurisdiction and to evidence the repurchase of any interest in any Receivable by the Original Seller or the Servicer. SECTION 7.09. No Waiver; Cumulative Remedies. No failure or delay on the part of the Purchaser in exercising any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. SECTION 7.10. Counterparts. This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 7.11. Third-Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the parties hereto, the Interested Parties and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement, no other Person shall have any right or obligation hereunder. SECTION 7.12. Merger and Integration. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived, or supplemented except as provided herein. SECTION 7.13. Confidential Information. The Purchaser agrees that it shall neither use nor disclose to any Person the names and addresses of Dealers, except in connection with the enforcement of the Purchaser's rights hereunder, under the Trust Sale and Servicing Agreement, under the Receivables or as required by law. SECTION 7.14. Headings. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. SECTION 7.15. Termination. This Agreement (except for Section 5.02) shall terminate immediately after the termination of the Trust Sale and Servicing Agreement; provided, that if at the time of the termination of the Trust Sale and Servicing Agreement, the Purchaser has not made all payments to the Original Seller required to be made under Section 6.01, this Agreement (except for Section 5.02) shall not terminate until immediately after all such payments have been made. SECTION 7.16. No Petition Covenants. Notwithstanding any prior termination of this Agreement, the Original Seller shall not, prior to the date which is one year and one day after the final distribution with respect to the Securities to the Note Distribution Account, the Revolver Distribution Account or the Certificate Distribution Account, as applicable, acquiesce, petition or otherwise invoke or cause the Purchaser to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Purchaser under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Purchaser or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Purchaser. SECTION 7.17. Jurisdiction. Any action or proceeding arising out of or relating to this Agreement shall be submitted to the exclusive jurisdiction of any United States Federal or New York State Court sitting in the Borough of Manhattan, New York, New York. * * * * IN WITNESS WHEREOF, the parties hereby have caused this Pooling and Servicing Agreement to be executed by their respective officers thereunto duly authorized as of the date and year first above written. -------------------------------------, Seller and Servicer By: ----------------------------------- Name: Title: ACE SECURITIES CORP., Purchaser By: ------------------------------------- Name: Title: EXHIBIT A LIST OF LOCATIONS OF THE SCHEDULE OF ACCOUNTS The Schedule of Accounts is on file at the offices of: 1. The Indenture Trustee 2. The Owner Trustee 3. The Original Seller 4. ______________________________________ EXHIBIT B FORM OF ASSIGNMENT FOR INITIAL CLOSING DATE For value received, in accordance with the Pooling and Servicing Agreement, dated as of _____________ (the "Pooling and Servicing Agreement"), between ______________________, a _____________ corporation ("the Original Seller"), and ACE Securities Corp., a Delaware corporation (the "Purchaser"), the Original Seller does hereby sell, assign, transfer and otherwise convey unto the Purchaser, without recourse, all of its right, title and interest in, to and under all of the Eligible Receivables existing in the Accounts listed in the Schedule of Accounts as of the close of business on the Initial Cut-Off Date and, so long as each such Account is included in the Pool of Accounts, all Eligible Receivables created or deemed created thereunder on each Receivables Purchase Date and all monies due or to become due thereon after the Initial Cut-Off Date or such Receivables Purchase Date, as appropriate, all Collateral Security with respect thereto and all amounts received with respect thereto and all proceeds thereof (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries). The foregoing sale, transfer, assignment and conveyance and any sales, transfers, assignments and conveyances subsequent to the date hereof do not constitute, and are not intended to result in, the creation or an assumption by the Purchaser of any obligation of the Servicer, the Original Seller (if the Original Seller is not the Servicer), ______________ or any other Person in connection with the Accounts, the Receivables or under any agreement or instrument relating thereto, including any obligation to any Dealers. It is the intention of the Original Seller and the Purchaser that the transfers and assignments contemplated by this Assignment, including transfers and assignments subsequent to the date hereof, shall constitute a sale of the property described herein and in the Pooling and Servicing Agreement from the Original Seller to the Purchaser and the beneficial interest in and title to such property shall not be part of the Original Seller's estate in the event of the filing of a bankruptcy petition by or against the Original Seller under any bankruptcy law. This Assignment is made pursuant to and upon the representations, warranties and agreements on the part of the undersigned contained in the Pooling and Servicing Agreement and is to be governed by the Pooling and Servicing Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Pooling and Servicing Agreement. * * * * * IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly executed as of _____________. ------------------------------------- By: ---------------------------------- Name: Title: EXHIBIT C FORM OF ASSIGNMENT FOR EACH ADDITION DATE For value received, in accordance with the Pooling and Servicing Agreement, dated as of _____________ (the "Pooling and Servicing Agreement"), between ______________________, a ____________________ ("the Original Seller"), and ACE Securities Corp., a Delaware corporation (the "Purchaser"), the Original Seller does hereby sell, assign, transfer and otherwise convey unto the Purchaser, without recourse, with respect to the Additional Accounts to which this Assignment relates, all of its right, title and interest in, to and under all of the Eligible Receivables as of the close of business on the related Additional Cut-Off Date in such Additional Accounts and, so long as each such Account is included in the Pool of Accounts, all Eligible Receivables created or deemed created thereunder on each Receivables Purchase Date and all monies due or to become due thereon after such Additional Cut-Off Date or such Receivables Purchase Date, as appropriate, all Collateral Security with respect thereto and all amounts received with respect thereto and all proceeds thereof (including "proceeds" as defined in Section 9-306 of the UCC and Recoveries). The foregoing sale, transfer, assignment and conveyance and any sales, transfers, assignments and conveyances subsequent to the date hereof do not constitute, and are not intended to result in, the creation or an assumption by the Purchaser of any obligation of the Servicer, the Original Seller (if the Original Seller is not the Servicer), ______________ or any other Person in connection with the Accounts, the Receivables or under any agreement or instrument relating thereto, including any obligation to any Dealers. It is the intention of the Original Seller and the Purchaser that the transfers and assignments contemplated by this Assignment, including transfers and assignments subsequent to the date hereof, shall constitute a sale of the property described herein and in the Pooling and Servicing Agreement from the Original Seller to the Purchaser and the beneficial interest in and title to such property shall not be part of the Original Seller's estate in the event of the filing of a bankruptcy petition by or against the Original Seller under any bankruptcy law. This Assignment is made pursuant to and upon the representations, warranties and agreements on the part of the undersigned contained in the Pooling and Servicing Agreement and is to be governed by the Pooling and Servicing Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Pooling and Servicing Agreement. * * * * * IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly executed as of _____________ ____,_______. ------------------------------------- By: --------------------------------- Name: Title: EXHIBIT D FORM OF OPINION OF COUNSEL WITH RESPECT TO ADDITION OF ACCOUNTS Provision to be Included in Opinion of Counsel Delivered Pursuant to Section 2.03(b)(viii) of the Pooling and Servicing Agreement The opinion set forth below may be subject to standard qualifications, assumptions, limitations and exceptions. The Assignment delivered on the Addition Date has been duly authorized, executed and delivered by ____, and constitutes the valid and legally binding obligation of ____, enforceable against ____ in accordance with its terms. APPENDIX A PART I For ease of reference, capitalized terms defined herein have been consolidated with and are contained in Appendix A to the Trust Sale and Servicing Agreement of even date herewith among the Original Seller, ACE Securities Corp. and ________________________. PART II For ease of reference, the rules of construction have been consolidated with and are contained in Part II of Appendix A to the Trust Sale and Servicing Agreement of even date herewith among the Original Seller, ACE Securities Corp. and ____________________________________. PART III For ease of reference, the notice address and procedures have been consolidated with and are contained in Part II of Appendix B to the Trust Sale and Servicing Agreement of even date herewith among the Original Seller, ACE Securities Corp. and _______________________________________________. EX-4.2.4 9 0009.txt FORM OF MASTER POOLING AND SERVICING AGREEMENT EXHIBIT 4.2.4 - ------------------------------------------------------------------------------ ACE SECURITIES CORP. Depositor, [SERVICER NAME], Servicer and [TRUSTEE NAME], Trustee [ ] CARD ACCOUNT MASTER TRUST FORM OF POOLING AND SERVICING AGREEMENT dated as of [ ] - ------------------------------------------------------------------------------ TABLE OF CONTENTS PAGE ARTICLE I Definitions Section 1.01. Definitions.............................................1 Section 1.02. Other Definitional Provisions and Rules of Construction.....................................19 ARTICLE II Transfer of Receivables Section 2.01. Transfer of Receivables................................20 Section 2.02. Acceptance by Trustee..................................21 Section 2.03. Representations and Warranties of the Depositor Relating to the Depositor............................22 Section 2.04. Representations and Warranties of the Depositor Relating to the Agreement and Any Supplement and the Receivables.................................24 Section 2.05. Reassignment of Ineligible Receivables.................26 Section 2.06. Reassignment of Receivables in Trust Portfolio.........27 Section 2.07. Covenants of the Depositor.............................28 Section 2.08. Covenants of Depositor with Respect to Receivables Purchase Agreement...................................29 Section 2.09. Addition of Accounts...................................30 Section 2.10. Removal of Accounts...................................35 Section 2.11. Account Allocations....................................37 Section 2.12. Discount Option........................................38 ARTICLE III Administration and Servicing of Receivables Section 3.01. Acceptance of Appointment and Other Matters Relating to the Servicer............................39 Section 3.02. Servicing Compensation.................................40 Section 3.03. Representations, Warranties and Covenants of the Servicer.....................................40 Section 3.04. Reports and Records for the Trustee....................43 Section 3.05. Annual Certificate of Servicer.........................44 Section 3.06. Annual Servicing Report of Independent Public Accountants; Copies of Reports Available............44 Section 3.07. Tax Treatment..........................................45 Section 3.08. Notices to the [Servicer Name].........................45 Section 3.09. Adjustments............................................45 Section 3.10. Reports to the Commission..............................46 ARTICLE IV Rights of Certificateholders and Allocation and Application of Collections Section 4.01. Rights of Certificateholders...........................46 Section 4.02. Establishment of Collection Account and Excess Funding Account..............................47 Section 4.03. Collections and Allocations............................49 Section 4.04. Shared Principal Collections...........................51 Section 4.05. Excess Finance Charges.................................51 ARTICLE V Distributions and Reports to Certificateholders ARTICLE VI The Certificates Section 6.01. The Certificates.......................................52 Section 6.02. Authentication of Certificates.........................53 Section 6.03. New Issuances..........................................53 Section 6.04. Registration of Transfer and Exchange of Certificates........................................55 Section 6.05. Mutilated, Destroyed, Lost or Stolen Certificates......57 Section 6.06. Persons Deemed Owners..................................58 Section 6.07. Appointment of Paying Agent............................58 Section 6.08. Access to List of Registered Certificateholders Names and Addresses.................................59 Section 6.09. Authenticating Agent...................................60 Section 6.10. Book-Entry Certificates................................60 Section 6.11. Notices to Clearing Agency.............................61 Section 6.12. Definitive Certificates................................61 Section 6.13. Global Certificate; Exchange Date......................62 Section 6.14. Meetings of Certificateholders.........................63 ARTICLE VII Other Matters Relating to the Depositor Section 7.01. Liability of the Depositor.............................65 Section 7.02. Merger or Consolidation of, or Assumption of the Obligations of, the Depositor...................65 Section 7.03. Limitations on Liability of the Depositor..............66 Section 7.04. Liabilities............................................67 ARTICLE VIII Other Matters Relating to the Servicer Section 8.01. Servicer...............................................67 Section 8.02. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer.........................67 Section 8.03. Limitation on Liability of the Servicer and Others..........................................68 Section 8.04. Servicer Indemnification of the Trust and the Trustee.........................................68 Section 8.05. The Servicer Not To Resign.............................69 Section 8.06. Access to Certain Documentation and Information Regarding the Receivables............................69 Section 8.07. Delegation of Duties...................................70 Section 8.08. Examination of Records.................................70 ARTICLE IX Pay Out Events Section 9.01. Pay Out Events.........................................70 Section 9.02. Additional Rights upon the Occurrence of Certain Events...................................71 ARTICLE X Servicer Defaults Section 10.01. Servicer Defaults......................................72 Section 10.02. Trustee To Act; Appointment of Successor...............74 Section 10.03. Notification to Certificateholders.....................75 ARTICLE XI The Trustee Section 11.01. Duties of Trustee......................................76 Section 11.02. Certain Matters Affecting the Trustee..................77 Section 11.03. Trustee Not Liable for Recitals in Certificates........................................79 Section 11.04. Trustee May Own Certificates...........................79 Section 11.05. The Servicer To Pay Trustee's Fees and Expenses............................................79 Section 11.06. Eligibility Requirements for Trustee...................79 Section 11.07. Resignation or Removal of Trustee......................80 Section 11.08. Successor Trustee......................................80 Section 11.09. Merger or Consolidation of Trustee.....................81 Section 11.10. Appointment of Co-Trustee or Separate Trustee.............................................81 Section 11.11. Tax Returns............................................82 Section 11.12. Trustee May Enforce Claims without Possession of Certificates..........................82 Section 11.13. Suits for Enforcement..................................83 Section 11.14. Rights of Certificateholders to Direct Trustee......................................84 Section 11.15. Representations and Warranties of Trustee..............84 Section 11.16. Maintenance of Office or Agency........................84 Section 11.17. Confidentiality........................................85 ARTICLE XII Termination Section 12.01. Termination of Trust...................................85 Section 12.02. Final Distribution.....................................85 Section 12.03. Depositor's Termination Rights.........................87 ARTICLE XIII Miscellaneous Provisions Section 13.01. Amendment; Waiver of Past Defaults.....................87 Section 13.02. Protection of Right, Title and Interest to Trust............................................88 Section 13.03. Limitation on Rights of Certificateholders.............89 Section 13.04. Governing Law..........................................90 Section 13.05. Notices; Payments......................................90 Section 13.06. Rule 144A Information..................................92 Section 13.07. Severability of Provisions.............................92 Section 13.08. Assignment.............................................92 Section 13.09. Certificates Nonassessable and Fully Paid..............92 Section 13.10. Further Assurances.....................................92 Section 13.11. Nonpetition Covenant...................................92 Section 13.12. No Waiver; Cumulative Remedies.........................93 Section 13.13. Counterparts...........................................93 Section 13.14. Third-Party Beneficiaries..............................93 Section 13.15. Actions by Certificateholders..........................93 Section 13.16. Merger and Integration.................................93 Section 13.17. Headings...............................................94 Section 13.18. Agreement to Constitute Security Agreement.............94 POOLING AND SERVICING AGREEMENT dated as of [ ] between Ace Securities Corp., a Delaware corporation, as Depositor, [Servicer Name], as Servicer, and [Trustee Name], a [ ] banking corporation, as Trustee. In consideration of the mutual agreements herein contained, each party agrees as follows for the benefit of the other parties, the Certificateholders and any Series Enhancer to the extent provided herein and in any Supplement: ARTICLE I DEFINITIONS Section 1.01. DEFINITIONS. Whenever used in this Agreement, the following words and phrases shall have the following meanings. "ACCOUNT" shall mean each Initial Account and each Additional Account, but shall exclude any Account all the Receivables in which are either reassigned or assigned to the Depositor or its designee or the Servicer in accordance with the terms of this Agreement. The definition of Account shall include any MasterCard(R) or Visa(R)1 account or accounts (each, a "Related Account") having the following characteristics: (a) such Related Account was established in compliance with the Lending Guidelines pursuant to a Credit Card Agreement; (b) the Obligor or Obligors with respect to such Related Account are the same Person or Persons as the Obligor or Obligors of the Account; (c) such Related Account is originated (i) as a result of the credit card with respect to the Account being lost or stolen; (ii) as a result of the Obligor requesting a change in his billing cycle; (iii) as a result of the Obligor requesting the discontinuance of responsibility with respect to an Account; (iv) as a result of the Obligor requesting a product change; or (v) for any other reasons permitted by the Lending Guidelines; and (d) such Related Account can be traced or identified by reference to or by way of the computer or other records of the Depositor. From and after the date on which an Account replaced by a Related Account is removed from the computer records of the Depositor, such Account shall no longer be an Account hereunder. The term "Account" shall be deemed to refer to an Additional Account only from and after the Addition Date with respect thereto, and the term "Account" shall be deemed to refer to any Removed Account only prior to the Removal Date with respect thereto. "ACCUMULATION PERIOD" shall mean, with respect to any Series, the period, if any, specified as such in the related Supplement. "ACE" shall mean Ace Securities Corp. "ADDITION DATE" shall mean (a) with respect to Additional Accounts, the date on which the Receivables in such Additional accounts are conveyed to the Trust pursuant to Section 2.08(a), (b) or (c), and (b) with respect to Participation Interests, the date from and after which such Participation Interests are to be included as Trust Assets pursuant to Section 2.08(a) or (b). "ADDITION DISCOUNT RECEIVABLES" shall mean, as of any applicable Additional Cut-Off Date, the amount of Principal Receivables in Additional Accounts designated by the Depositor to be treated as Finance Charge Receivables; PROVIDED, HOWEVER, that the Depositor may not make such designation unless (i) shall have received written notice from each Rating Agency that such designation will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee, and (ii) the Depositor shall have delivered to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate of the Depositor, to the effect that the Depositor reasonably believes that such designation will not, based on the facts known to such officer at the time of such certification, then cause a Pay-Out Event or any event that, after the giving of notice or the lapse of time, would constitute a Pay-Out Event to occur with respect to any Series. "ADDITIONAL ACCOUNT" shall mean each consumer revolving credit card account or other consumer revolving credit account established pursuant to a Credit Card Agreement, which account is designated pursuant to Section 2.08(a), (b) or (c) to be included as an Account and is identified in a computer file or microfiche list delivered to the Trustee by the Depositor pursuant to Sections 2.01 and 2.08 (g). "ADDITIONAL CUT-OFF DATE" shall mean the date as of which any Additional Accounts or Participation Interests are to be included in the Trust, as specified in the related Assignment. "ADDITIONAL DEPOSITORS" shall have the meaning specified in Section 2.08(f). "ADDITIONAL PAYMENT" shall have the meaning specified in Section 3.09(a). "AFFILIATE" shall mean, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person, shall mean the power to direct the management and policies of a Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. The Trust shall not be deemed an affiliate of the Depositor. "AGGREGATE ADDITION LIMIT" shall mean the number of accounts designated as Automatic Additional Accounts, without prior Rating Agency consent, and designated as Additional Accounts pursuant to Section 2.08(a), without the prior Rating Agency notice described under Section 2.08(d)(v), which would either (x) with respect to any three consecutive Monthly Periods, equal 15% of the number of Accounts at the end of the ninth Monthly Period preceding the commencement of such three Monthly Periods (or, the Trust Cut-Off Date, whichever is later) and (y) with respect to any twelve Monthly Periods, equal 20% of the number of Accounts as of the first day of such twelve Monthly Periods (or, the Trust Cut-Off Date, whichever is later). "AGREEMENT" shall mean this Pooling and Servicing Agreement and all amendments hereof and supplement hereto, including, with respect to any Series or Class, the related Supplement. "ANNUAL MEMBERSHIP FEES" shall mean annual membership fees or any similar term specified in the Credit Card Agreement applicable to each Account. "APPLICANTS" shall have the meaning specified in Section 6.08. "APPOINTMENT DATE" shall have the meaning specified in Section 9.02(a). "ASSIGNMENT" shall have the meaning specified in Section 2.08(g). "AUTHORIZED NEWSPAPER" shall mean any newspaper or newspapers of general circulation (including The Wall Street Journal) in the Borough of Manhattan, The City of New York, printed in the English language (and with respect to any Series or Class, if and so long as the Investor Certificate of such Series or Class are listed on a European stock exchange (including the Luxembourg Stock Exchange) and such exchange shall so require, then in the city of such exchange, printed in any language satisfying the requirements of such exchange) and customarily published on each business day at such place, whether or not published on Saturday, Sundays or holidays. "AUTOMATIC ADDITIONAL ACCOUNT" shall mean each consumer revolving credit card account or other consumer revolving credit account established pursuant to a Credit Card Agreement, which account is designated pursuant to Section 2.08(c) to be included as an Account and is identified in a computer file or microfiche list delivered to the Trustee by the Depositor pursuant to Sections 2.01 and "DEPOSITOR'S AMOUNT" shall mean on any date of determination an amount equal to the difference between (I) the sum of (A) the aggregate balance of Principal Receivables at the end of the day immediately prior to such date of determination and (B) Special Funding Amount at the end of the day immediately prior to such date of determination MINUS (II) the Aggregate Invested Amount at the end of such day. "DEPOSITOR'S CERTIFICATE" shall mean the certificate executed by the Depositor and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A, as the same may be modified in accordance with Section 2.08(f). "DEPOSITOR'S INTEREST" shall have the meaning specified in Section 4.01. "BEARER CERTIFICATES" shall have the meaning specified in Section 6.01. "BENEFIT PLAN" shall have the meaning specified in Section 6.04(c). "BOOK-ENTRY CERTIFICATES" shall mean beneficial interests in the Investor Certificate, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 6.10. "BUSINESS DAY" shall mean any day other than (a) a Saturday or Sunday or (b) any other day on which national banking associations or state banking institutions in New York, New York are authorized or obligated by law, executive order or governmental decree to be closed. "CASH ADVANCE FEES" shall mean cash advance fees or any similar term as specified in the Credit Card Agreement applicable to each Account. "CEDEL" shall mean Cedel S.A. "CERTIFICATE" shall mean any one of the Investor Certificates or the Depositor's Certificate. "CERTIFICATE OWNER" shall mean, with respect to a Book-Entry Certificate, the Person who is the owner of such Book-Entry Certificate, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly or as an indirect participant, in accordance with the rules of such Clearing Agency). "CERTIFICATE RATE" shall mean, with respect to any Series or Class, the certificate rate specified therefor in the related Supplement. "CERTIFICATE REGISTER" shall mean the register maintained pursuant to Section 6.04, providing for the Registration of the Registered Certificates and the Depositor's Certificate and transfers and exchanges thereof. "CERTIFICATEHOLDER" or "HOLDER" shall mean an Investor Certificateholder or a Person in whose name the Depositor's Certificate is registered in the Certificate Register. "CERTIFICATEHOLDERS' INTEREST" shall have the meaning specified in Section 4.01. "CLASS" shall mean, with respect to any Series, any one of the classes of Investor Certificate of that Series. "CLEARING AGENCY PARTICIPANT" shall mean a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency pursuant to the rules and regulations of such Clearing Agency. "CLOSING DATE" shall mean, with respect to any Series., the closing date specified in the related Supplement. "CODE" shall mean the Internal Revenue Code of 1986. "COLLECTION ACCOUNT" shall have the meaning specified in Section 4.02. "COLLECTIONS" shall mean (a) all payments by or on behalf of Obligors (excluding Insurance Proceeds) received in respect to the Receivables, in the form of cash, checks, wire transfers, electronic transfers, ATM transfers or any other form of payment in accordance with the related Credit Card Agreement in effect from time to time and (b) with respect to any Monthly Period, (i) a portion, determined pursuant to Section 2.07(i), of the Interchange paid to the Depositor through VISA and MasterCard with respect to such Monthly Period and (ii) all Recoveries received during such Monthly Period and (iii) all payments of Annual Membership Fees with respect to the accounts during such Monthly Period. "COMMISSION" shall have the meaning specified in Section 3.01(b). "CONTROLLED AMORTIZATION PERIOD" shall mean, with respect to any Series, the period, if any, specified as such in the related Supplement. "CORPORATE TRUST OFFICE" shall have the meaning specified in Section 11.16. "COUPONS" shall have the meaning specified in Section 6.01. "CREDIT CARD AGREEMENT" shall mean, with respect to an Account governed by a Receivables Purchase Agreement, the agreements between the an Account Owner and the related Obligor, governing the terms and conditions of such Account, as such agreements may be amended, modified or otherwise changed from time to time in accordance with Section 2.07(g), and as distributed (including any amendments and revisions thereto) to holders of such Accounts. "DATE OF PROCESSING" shall mean, with respect to any transaction, the date on which such transaction if first recorded under the Servicer's (or, in the case of the Depositor, the Depositor's) computer file of consumer revolving accounts (without regard to the effective date of such recordation). "DEFAULTED AMOUNT" shall mean, with respect to any Monthly Period, an amount (which shall not be less than zero) equal to (a) the amount of Principal Receivables which became Defaulted Receivables in such Monthly Period, minus (b) the sum of (i) the amount of any Defaulted Receivables included in any Account the Receivable in which the Depositor or the Servicer became obligated to accept reassignment or assignment in accordance wit the terms of this Agreement during such Monthly Period, (ii) the amount of Recoveries received in such Monthly Period with respect to Finance Charge Receivables and Principal Receivables previously charged off as uncollectible and (iii) the excess, if any, for the immediately preceding Monthly Period of the sum computed pursuant to this clause (b) for such Monthly Period over the amount of Principal Receivable which became Defaulted Receivables in such Monthly Period; PROVIDED, HOWEVER, that, if an Insolvency Event occurs with respect to the Depositor, the amount of such Defaulted Receivables which are subject to reassignment to the Depositor in accordance with the terms of the Agreement shall not be added to the sums so subtracted and, if any of the events described in Section 10.01(d) occur with respect to the Service, the amount of such Defaulted Receivables which are subject to reassignment or assignment to the Service in accordance with the terms of this Agreement shall not be added to the sum so subtracted. "DEFAULTED RECEIVABLES" shall mean, with respect to any Monthly Period, all Principal Receivables in any Account which are charged off as uncollectible, other than due to any Adjustment Payment, in such Monthly Period in accordance with the Lending Guidelines and the Servicer's customary and usual servicing procedures for servicing consumer revolving credit card and other consumer revolving credit account receivables comparable to the Receivable, but in any event not later that 180 days after such Receivable became due for payment by the Obligor. For purposes of this definition, a Principal Receivable in any Account shall become a Defaulted Receivable on the day on which such Principal Receivable is recorded as charged off on the Servicer's computer master file or consumer revolving credit accounts. "Definitive Certificates" shall have the meaning specified in Section 6.10. "DEFINITIVE EURO-CERTIFICATES" shall have the meaning specified in Section 6.13(a). "DEPOSIT DATE" shall mean each day on which the Service deposits Collections in the Collection Account. "DEPOSITARIES" shall mean the Person specified in the applicable Supplement, in its capacity as depositary for the respective accounts of any Clearing Agency or any Foreign Clearing Agencies. "DEPOSITARY AGREEMENT" shall mean, with respect to any Series or Class, the agreement among the Depositor, the Trustee and the initial Clearing Agency substantially in the form of Exhibit F. "DETERMINATION DATE" shall mean the fourth Business Day prior to each Distribution Date. "DISCOUNT OPTION RECEIVABLES" shall have the meaning specified in Section 2.11(a). "DISCOUNT OPTION RECEIVABLES COLLECTIONS" shall mean on any Date of Processing on and after the date on which the Depositor's exercise of its discount option pursuant to Section 2.11(a) takes effect, the product of (a) a fraction the numerator of which is the amount of the Discount Option Receivables and the denominator of which is the sum of the Principal Receivables other than Discount Option Receivables) and the Discount Option Receivables in each case (for both numerator and denominator) at the end of the prior Monthly Period and (b) collection of Principal Receivables that arise in the Accounts on such day on or after the date such option is exercised that would otherwise be Principal Receivables. "DISCOUNT PERCENTAGE" shall have the meaning specified in Section 2.11(a). "DISTRIBUTION DATE" shall mean the 15th day of each calendar month during the term hereof, or, if such 15th day is not a Business Day, the next succeeding Business Day. "DOCUMENT DELIVERY DATE" shall mean the first Closing Date in the case of Initial Accounts and the day that is on or prior to the tenth Business Day after the Addition Date in the case of Additional Accounts or Participation Interests added to the Trust. "EARLY AMORTIZATION PERIOD" shall mean, with respect to any Series, the Period beginning at the close of business on the Business Day immediately preceding the day on which a Pay-Out Event is deemed to have occurred with respect to such Series, and ending upon the earlier to occur of (i) the payment in full to the Investor Certificateholders of such Series of the Invested Amount with respect to such Series and the payment in full to any applicable Series Enhancer with respect to such Series of the Enhancement Invested Amount, if any, with respect to such Series and (ii) the Series Termination Date with respect to such Series. "ELIGIBLE ACCOUNT" shall mean a MasterCard or VISA consumer revolving credit card account or other consumer revolving credit account owned by the Depositor or any Affiliated of the Depositor which as of the Trust Cut-Off Date with respect to an Initial Account or as of the related Addition Date with respect to an Additional Account: (a) is in existence and maintained with the Depositor or any Affiliated of the Depositor on the Trust Cut-Off Date or the Addition Date, as the case may be; (b) is payable in United States dollars; (c) as not been identified as an account the credit cards or checks, if any, with respect to which have been reported to the Depositor or any Affiliate of the Depositor as having been lost or stolen; (d) the Obligor or which has provided, as his or her current billing address, an address located in the United States (or its territories or possessions or a military address); (e) has not been, and does not have any Receivables which have been, sold, pledged, assigned or otherwise conveyed to any Person (except pursuant to this Agreement); (f) except as provided below, does not have any Receivables which are Defaulted Receivables; (g) does not have any Receivables which have been identified by the Depositor or any Affiliate of the Depositor or the relevant Obligor as having been incurred as a result or fraudulent use of any related credit card or check; and (h) relates to an Obligor who is not identified by the Depositor or any Affiliate of the Depositor in its computer files as being the subject of a voluntary or involuntary bankruptcy proceeding. Eligible Accounts may include account, the Receivable or which have been written off; PROVIDED that (a) the balance of all Receivables included in such accounts is reflected on the books and records of the Depositor or any Affiliate of the Depositor (and is treated for purposes of this Agreement) as "zero", and (b) charging privileges with respect to all such accounts have been concealed in accordance with the Lending Guidelines of the Depositor and will not be reinstated by the Depositor or any Affiliate of the Depositor or the Servicer. "ELIGIBLE DEPOSIT ACCOUNT" shall mean either (a) segregated account with an Eligible Institution or (b) a segregate trust account with the corporate trust department of a depository institution organized under the laws of the United States or any one of the states thereof, including the District of Columbia (or any domestic branch of a foreign bank), or a trust company acceptable to each Rating Agency, and acting as a trustee for funds deposited in such account, so long as any of the securities of such depository institution or trust company shall have a credit rating from each Rating Agency in one of its generic credit rating categories which signifies investment grade. "ELIGIBLE INSTITUTION" shall mean (a) a depository institution (which may be the Trustee) organized under the laws of the United States or any one of the states thereof which at all times (i) has either (x) a long-term unsecured debt rating of A2 or better by Moody's or (y) a certificate of deposit rating of P-1 by Moody's, (ii) has either (x) a long-term unsecured debt rating of AAA by Standard & Poor's or (y) a certificate of deposit rating of A-1+ by Standard Poor's and (iii) is a member of the FDIC or (b) any other institution that is acceptable to each Rating Agency. "ELIGIBLE INVESTMENTS" shall mean book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form which evidence: (a) direct obligations of, and obligations fully guaranteed as to timely payment of principal and interest by, the United States of America; (b) demand deposits, time deposits or certificates of deposit (having original maturities of no more than 365 days) of depository institutions or trust companies incorporated under the laws of the United States of America or any state thereof, including the District of Columbia, (or domestic branches of foreign banks) and subject to supervision and examination by federal or state banking or depository institution authorities; PROVIDED that at the time of the Trust's investment or contractual commitment to invest therein, the short-term debt rating of such depository institution or trust company shall be in the highest investment category of each Rating Agency; (c) commercial paper or other short-term obligations having, at the time of the Trust's investment or contractual commitment to invest therein, a rating from each Rating Agency in its highest investment category; (d) demand deposits, time deposits and certificates of deposit which are fully insured by the FDIC, with a Person the commercial paper of which has a credit rating from each Rating Agency in its highest investment category; (e) notes or bankers' acceptances (having original maturities of no more than 365 days) issued by any depository institution or trust company referred to in (b) above; (f) investments in money market funds rated in the highest investment category by each Rating Agency or otherwise approved in writing by each Rating Agency; (g) time deposits (having maturities of not more than 30 days), other than as referred to in clause (d) above, with a Person the commercial paper of which has a credit rating from each Rating Agency in its highest investment category; or (h) any other investments approved in writing by each Rating Agency. "ELIGIBLE RECEIVABLE" shall mean each Receivable: (a) which has arisen under an Eligible Account; (b) which was created in compliance in all material aspects with the Lending Guidelines and all Requirements of Law applicable to the Depositor or any Affiliate of the Depositor, the failure to comply with which would have a material adverse effect on Investor Certificateholders, and pursuant to a Credit Card Agreement which complies with all Requirements of Law applicable to the Depositor or any Affiliate of the Depositor, the failure to comply with which would have a material adverse effect on Investor Certificateholders; (c) with respect to which all material consents, licenses, approvals or authorizations of, or registrations or declarations with, any Governmental Authority required to be obtained, effected or given by the Depositor or any Affiliate of the Depositor in connection with the creation of such Receivable or the execution, delivery and performance by the Depositor or any Affiliate of the Depositor of its obligations, if any, under the related Credit Card Agreement have been duly obtained, effected or given and are in full force and effect as of such date of creation of such Receivable; (d) as to which, at the time of its transfer to the Trust, the Depositor or any Affiliate of the Depositor or the Trust will have good and marketable title free and clear of all Liens (other than any Lien for municipal or other local taxes if such taxes are not then due and payable or if the Depositor or any Affiliate of the Depositor is then contesting the validity thereof in good faith by appropriate proceedings and has set aside on its books adequate reserves with respect thereto); (e) which has been the subject of either a valid transfer and assignment from the Depositor or any Affiliate of the Depositor to the Trust of all the right, title and interest therein of the Depositor or any Affiliate of the Depositor (including any proceeds thereof), or the grant of a first priority perfected security interest therein (and in the proceeds thereof), effective until the termination of the Trust; (f) which at and after the time of transfer to the Trust is the legal, valid and binding payment obligation of the Obligor thereon, legally enforceable against such Obligor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws, now or hereafter in effect, affecting the enforcement of creditors, rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity) or matter as to which the Servicer is required by Section 3.09 to make an adjustment; (g) which constitutes either an "account" or a "general intangible" under and as defined, in Article 9 of the UCC; (h) which, at the time of its transfer to the Trust, has not been waived or modified except as permitted in accordance with Section 3.03(h); (i) which, at the time of its transfer to the Trust, is not subject to any right of rescission, setoff, counterclaim or any other defense of the Obligor (including the defense of usury), other than defenses arising out of applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws affecting the enforcement of creditors, rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or equity) or matters as to which the Servicer is required by Section 3.09 to make an adjustment; (j) as to which, at the time of its transfer to the Trust, the Depositor or any Affiliate of the Depositor has satisfied all obligations on its part to be fulfilled at the time it is transferred to the Trust; and (k) as to which, at the time of its transfer to the Trust, the Depositor or any Affiliate of the Depositor has not taken any action which, or failed to take any action, the omission of which, would, at the time of its transfer to the Trust, impair in any material respect the rights of the Trust or the Certificateholders therein. "ELIGIBLE SERVICER" shall mean the Trustee, a wholly-owned subsidiary of the Trustee, or an entity which, at the time of its appointment as Servicer, (a) is servicing a portfolio of consumer revolving credit card accounts or other consumer revolving credit accounts, (b) is legally qualified and has the capacity to service the Accounts, (c) is qualified (or licensed) to use the software that the Servicer is then currently using to service the Accounts or obtains the right to use, or has its own, software which is adequate to perform its duties under this Agreement, (d) has, in the reasonable judgment of the Trustee, demonstrated the ability to Professionally and competently service a portfolio of similar accounts in accordance with customary standards of skill and care and (e) has a net worth of at least $50,000,000 as of the end of its most recent fiscal quarter. "ENHANCEMENT AGREEMENT" shall mean any agreement, instrument or document governing the terms of any Series Enhancement or pursuant to which any Series Enhancement is issued or outstanding. "ENHANCEMENT INVESTED AMOUNT", with respect to any Series, shall have the meaning specified in the related Supplement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974. "EUROCLEAR OPERATOR" shall mean Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System.] "EXCESS FINANCE CHARGES" shall have the meaning specified in Section 4.05. "EXCESS FUNDING ACCOUNT" shall have the meaning specified in Section 4.02. "EXCHANGE ACT", shall mean the Securities Exchange Act of 1934. "EXCHANGE DATE" shall mean, with respect to any Series, any date that is after the related Series Issuance Date, in the case of Definitive Euro-Certificates in registered form, or upon presentation of certification of non-United States beneficial ownership (as described in Section 6.13), in the case of Definitive Euro-Certificates in bearer form. "EXCLUDED SERIES" shall mean any Series designated as such in the relevant Supplement. "FDIC" shall mean the Federal Deposit Insurance Corporation or any successor thereto. "FINANCE CHARGE RECEIVABLES" shall mean, with respect to any Monthly Period, the sum of (a) all amounts billed to the Obligors on any Account in respect of (i) Periodic Rate Finance charges, (ii) Cash Advance Fees, (iii) Late Charge Fees, (iv) Overlimit Fees, (v) Returned other incidental and miscellaneous fees and charges billed on the Accounts from time to time, and (b) the amount of Discount Option Receivables, if any, for such Monthly Period. Collections of Finance Charge Receivables with respect to any Monthly Period shall include (i) a portion, determined pursuant to Section 2.07(i), of the Interchange paid to the Depositor through VISA and MasterCard with respect to such Monthly Period, and (ii) the Addition Discount Receivables to be deposited into the Collection Account with respect to such Monthly Period. "FINANCE CHARGE SHORTFALLS" shall have the meaning specified in Section 4.05. "FIRREA" shall mean the Financial Institutions Reform, Recovery and Enforcement Act of 1989. "FLOATING ALLOCATION PERCENTAGE" shall mean, with respect to any Series, the floating allocation percentage specified in the related Supplement. "FOREIGN CLEARING AGENCY" shall mean Cedel and the Euroclear Operator. "GLOBAL CERTIFICATE" shall have the meaning specified in Section 6.13(a). "GOVERNMENTAL AUTHORITY" shall mean the United States of America, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and having jurisdiction over the applicable Person. "GROUP" shall mean, with respect to any Series, the group of Series, if any, in which the related Supplement specifies such Series is to be included. "INELIGIBLE RECEIVABLES" shall have the meaning specified in Section 2.05(a). "INITIAL ACCOUNT" shall mean each MasterCard and VISA account, in each case established pursuant to a Credit Card Agreement, chosen from Eligible Accounts of the Depositor and identified in the computer file or microfiche list delivered to the Trustee by the Depositor an or prior to the first Closing Date pursuant to Section 2.01. "INSOLVENCY EVENT" shall have the meaning specified in Section 9.01(a). "INSOLVENCY PROCEEDS" shall have the meaning specified in Section 9.02(b). "INSURANCE PROCEEDS" shall mean any amounts received by the Servicer pursuant to any credit life, credit disability or unemployment insurance policies covering any Obligor with respect to Receivables under such Obligor's Account. "INTERCHANGE" shall mean interchange fees payable to an Account Owner, in its capacity as credit card-issuing bank, from VISA, MasterCard or any similar entity or organization with respect to any other type of revolving credit card accounts included as Accounts (except as otherwise provided in the initial Assignment with respect to any such Accounts), in connection with cardholder charges for goods and services. Any reference in this Agreement or any Supplement to Interchange shall refer to only the fractional undivided interest in the interchange fees that are transferred by an Account Owner to the Depositor pursuant to a Receivables Purchase Agreement, which fractional undivided interest may be less than a 100% interest therein. "INVESTED AMOUNT" shall mean, with respect to any Series and for any date, an amount equal to the invested amount specified in the related Supplement. "INVESTMENT COMPANY ACT" shall mean the Investment Company Act of 1940. "INVESTOR CERTIFICATEHOLDER" shall mean the Person in whose name a Registered Certificate is registered in the Certificate Register or the bearer of any Bearer Certificate (or the Global Certificate, as the case may be) or Coupon. "INVESTOR CERTIFICATES" shall mean any one of the certificates including the Bearer Certificates, the Registered Certificates or any Global Certificate) executed by the Bank and authenticated by or on behalf of the Trustee, substantially in the form attached to the related Supplement, other than the Depositor's Certificate. "LATE CHARGE FEES" shall have the meaning specified in the Credit Card Agreement applicable to each Account for late payment fees or similar terms with respect to such Account. "LENDING GUIDELINES" shall mean an Account Owner's established policies and procedures relating to the operation of its credit card business, which are applicable to its entire portfolio of VISA and MasterCard and other consumer-revolving accounts governed by a Receivables Purchase Agreement, and are consistent with reasonably prudent practice, including the established policies and procedures for determining the creditworthiness of credit card or other revolving credit account customers, and the extension of credit-to-credit card and other revolving credit account customers and relating to the maintenance of credit card and other revolving credit accounts and collection of receivables with respect thereto, as such policies and procedures may be amended, modified, or otherwise changed from time to be in accordance with Section 2.07(g). "LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, participation or equity interest, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement, or preferential arrangement of any kind or nature whatsoever, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing and the filing of any financing statement under the UCC (other than any such financing statement filed for informational purposes only) or comparable law of any jurisdiction to evidence any of the foregoing, excluding any lien or filing pursuant to this Agreement; PROVIDED, HOWEVER, that any assignment or transfer pursuant to Section 6.03(c) or Section 7.02 shall not be deemed to constitute a Lien. "MANAGER" shall mean the lead manager, manager or co-manager or person performing a similar function with respect to an offering of Definitive Euro-Certificates. "MASTERCARD" shall mean MasterCard International Incorporated or any successor thereto. "MISCELLANEOUS PAYMENTS" shall mean, with respect to any Monthly Period, the sum of Adjustment Payments and Transfer Deposit Amounts deposited in the Collection Account with respect to such Monthly Period. "MONTHLY PERIOD" shall mean, with respect to each Distribution Date, a period of approximately 30 days, that (a) contains a full set of processing cycles with respect to the Accounts, as defined by the Servicer, (b) commences on the day immediately succeeding the last day of the immediately preceding Monthly Period and (c) ends prior to the Determination Date for such Distribution Date; PROVIDED, HOWEVER, that the initial Monthly Period with respect to any Series will commence on the Cut-Off Date with respect to such Series. "MONTHLY SERVICING FEE" shall have the meaning specified in Section 3.02. "MOODY'S" shall mean Moody's Investors Service, Inc., or any successor thereto. "NON-CODE ENTITY" shall mean a savings and loan association, a national banking association, a bank or other entity that is not subject to Title 11 of the United States Code. "NOTICES" shall have the meaning specified in Section 13.05(a). "OBLIGOR" shall mean, with respect to any Account, the Person or Persons obligated to make payments with respect to such Account, including any guarantor thereof. "OFFICERS CERTIFICATE" shall mean, unless otherwise specified in this Agreement, a certificate delivered to the Trustee signed by any officer of the Depositor or the Servicer, as the case may be, or, in the case of a Successor Servicer, a certificate signed by a vice president or more senior officer or the financial controller (or an officer holding an office with equivalent or more senior responsibilities of such successor Servicer, and delivered to the Trustee at its Corporate Trust office. "OPINION OF COUNSEL" shall mean a written opinion of counsel, in a form reasonably acceptable to the Trustee, by counsel for, or an employee of, the Person providing the opinion and who shall be reasonably acceptable to the Trustee. "OVERLIMIT FEES" shall mean overlimit fees or any similar term specified in the Credit Card Agreement applicable to each Account. "PARTICIPATION INTERESTS" shall mean participation representing undivided interests in a pool of assets primarily consisting of revolving credit card accounts or other revolving credit accounts owned by the Depositor or any Affiliate thereof and collections thereon. "PAY OUT EVENT" shall mean, with respect to any Series, each event specified in Section 9.01 and each additional event, if any, specified in the relevant Supplement as a Pay-Out Event with respect to such Series. "PAYING AGENT" shall mean any paying agent and co-paying agent appointed pursuant to Section 6.07, which initially shall be the Trustee. "PERIODIC RATE" shall mean the periodic rate or rates determined in the manner described in the Credit Card Agreement applicable to each Account. "PERIODIC RATE FINANCE CHARGES" shall mean finance charges based on the Periodic Rate or any similar term specified in the Credit Card Agreement applicable to each Account. "PERSON" shall mean any legal person, including any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity of similar nature. "PRINCIPAL ALLOCATION PERCENTAGE" shall mean, with respect to any Series, the Principal allocation percentage specified in the related Supplement. "PRINCIPAL RECEIVABLES" shall mean all amounts, other than amounts which represent Finance Charge Receivables, billed to the Obligors on any Account in respect of (a) purchase of goods and services and (b) cash advances. Such amounts shall exclude Defaulted Receivables. In calculating the aggregate amount of Principal Receivables on any day, the amount of Principal Receivables shall be reduced by the aggregate amount of credit balances in the Accounts on such day. Any Principal Receivables which the Depositor is unable to transfer as provided in Section 2.10 shall not be included in calculating the aggregate amount of Principal Receivables, except to the extent so provided in Section 2.10. "PRINCIPAL SHARING SERIES" shall mean a Series that pursuant to the Supplement therefor, is entitled to receive Shared Principal Collections. "PRINCIPAL SHORTFALLS" shall have the meaning specified in Section 4.04. "PRINCIPAL TERMS" shall mean, with respect to any Series, (i) the name or designation; (ii) the initial principal amount (or method for calculating such amount) and the Invested Amount of such Series; (iii) the Certificate Rate (or method for the determination thereof) and the manner, if any, in which such rate may be adjusted from time to time; (iv) the interest payment date or dates and the manner, if any, in which the interest payment date or dates may be reset from time to time and the date or dates from which interest shall accrue; (v) the method for allocating collections to Certificateholders of such Series; (vi) the designation of any Series Accounts and the terms governing the operation of any such Series Accounts; (vii) the method of calculating the servicing fee with respect thereto; (viii) the provider and the terms of any form of Series Enhancement with respect thereto; (ix) the terms on which the Investor Certificates of such Series may be exchanged for Investor Certificates of another Series, repurchased by the Depositor or remarketed to other investors; (x) the Series Termination Date; (xi) the number of Classes of Investor Certificates of such Series and, if such Series consists of more than one Class, the rights and priorities of each such Class; (xii) the extent to which that Investor Certificates of such Series will be issuable in temporary or permanent global form (and, in such case, the depositary for such Global Certificate or Certificates, the terms and conditions, if any, upon which such Global Certificate may be exchanged, in whole or in part, for Definitive Certificates, and the manner in which any interest payable on a temporary or Global Certificate will be paid); (xiii) whether the Investor Certificates of such Series may be issued Bearer Certificates and any limitations imposed thereon; (xiv) the priority of such Series with respect to any other Series (xv) the Rating Agency or Agencies, if any, rating the Series; (xvi) the name of the Clearing Agency, if any; (xvii) the base rate applicable to any series; (xviii) the minimum amount of Principal Receivables required to be maintained through the designation of Additional Accounts; (xix) any deposit into any account maintained for the benefit of Certificateholders; (xx) the rights of the holder of the Depositor's Certificate that have been transferred to the holders of such Series; (xxi) the Group, if any, to which such Series belongs; (xxii) whether or not such Series is a Principal Sharing Series; and (xxiii) any other terms of such Series. "RATING AGENCY" shall mean, with respect to any outstanding Series or Class, each statistical rating agency selected by the Depositor to rate the Investor Certificates of such Series or Class. "RATINGS EFFECT" shall mean, with respect to any action and any Rating Agency, that such action will not result in such Rating Agency's reducing or withdrawal its rating of any outstanding Series or Class of Certificates with respect to which it is a Rating Agency. "REASSIGNMENT" shall have the meaning specified in Section 2.09(b). "RECEIVABLES" shall mean all amounts shown on the Servicer's records as Amounts payable by Obligors on any Account, from time to time, including amounts payable for Principal Receivables and amounts payable for Finance Charge Receivables; PROVIDED, HOWEVER, that such amounts shall not be included as or deemed Receivables on and after the day on which they become Defaulted Receivables; PROVIDED, FURTHER, HOWEVER, that for purposes of determining the amount of Principal Receivables in the Trust and the deduction of the principal amount of (x) Ineligible Receivables from such total amount of Principal Receivables as required by section 2.05(b) and (y) Defaulted Receivables from such total amount of Principal Receivables as required by subsection 3.03, the foregoing proviso shall not apply. Any reference in this Agreement or any Supplement to a Receivable (including any Principal Receivable, Finance Charge Receivable or Defaulted Receivable) and any Collections thereon or other amounts recoverable with respect thereto (including any Insurance Proceeds or Recoveries with respect thereto) shall refer to only the fractional undivided interest in the amounts paid or payable by Obligors on the Accounts that are transferred by an Account Owner to the Depositor pursuant to a Receivables Purchase Agreement, which undivided interest may be less than a 100% undivided interest therein. "RECEIVABLES PURCHASE AGREEMENTS" shall mean, as applicable, the receivables purchase agreements between [Seller Name] and ACE, dated as of [ ], in each case as amended from time to time, and includes any receivables purchase agreement, substantially in the form of such agreements dated [ ], entered into between ACE and an Account owner in the future. "RECORD DATE" shall mean, with respect to any Distribution Date, the last Business Day of the preceding Monthly Period, except as otherwise provided with respect to a Series in the related Supplement. "RECOVERIES" shall mean all amounts, excluding Insurance Proceeds, received by the Servicer with respect to Receivables which have previously become Defaulted Receivables, net of any out-of-pocket costs and expenses of collection (including attorneys fees and expenses) deducted therefrom. "REGISTERED CERTIFICATEHOLDER" shall mean the Holder of a Registered Certificate. "REGISTERED CERTIFICATES" shall have the meaning specified in Section 6.01. "RELATED ACCOUNT" shall have the meaning specified in the definition of "Account". "REMOVAL DATE" shall have the meaning specified in Section 2.09(a). "REMOVAL NOTICE DATE" shall have the meaning specified in subsection 2.09(a). "REMOVED ACCOUNTS" shall have the meaning specified in Section 2.09(a) "REQUIRED DESIGNATION DATE" shall have the meaning specified in Section 2.08(a). "REQUIRED PRINCIPAL BALANCE" shall mean, as of any date of determination, (a) the sum of the "Initial Invested Amount" (as defined in the relevant Supplement) of the Investor Certificates of each Series outstanding on such date (other than any Series or portion thereof which is designated in the relevant Supplement as then being an Excluded Series) minus (b) the principal amount on deposit in the Excess Funding Account on such date; PROVIDED, HOWEVER, if at any time the only Series outstanding are Excluded Series and a Pay-Out Event has occurred with respect to one or more of such Series, the Required Principal Balance shall mean (a) the sum of the Invested Amount (as defined in the relevant Supplement) of each such Excluded Series as of the earliest date on which any such Pay-Out Event is deemed to have occurred, minus (b) the principal amount on deposit in the Excess Funding Account. "REQUIRED DEPOSITOR'S INTEREST" shall mean, with respect to any date, an amount equal to the product of the Required Depositor's Percentage and the aggregate amount of Principal Receivables in the Trust. "REQUIRED DEPOSITOR'S PERCENTAGE" shall mean 7%; PROVIDED, HOWEVER, that the Depositor may reduce the Required Depositor's Percentage upon (w) 30days, prior notice to the Trustee, each Rating Agency and any Series Enhancer entitled to receive such notice pursuant to the relevant Supplement, (x) receipt of written notice by the Depositor from each Rating Agency that such reduction will not have a Ratings Effect, (y) delivery by the Depositor of copies of each such written notice to the Servicer and the Trustee and (z) delivery to the Trustee and each such Series Enhancer of an Officer's Certificate of the Depositor stating that the Depositor reasonably believes that such reduction will not, based on the facts known to such officer at the time of such certification, then cause a Pay-Out Event or any event that, after the giving of notice or the lapse of time, would constitute a Pay-Out Event to occur with respect to any Series; PROVIDED FURTHER, that the Required Depositor's Percentage shall not at any time be less than the Specified Percentage. "REQUIREMENTS OF LAW" with respect to any Person shall mean the certificate of incorporation or articles of association and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, determination of an arbitrator or Governmental Authority, in each case applicable to or binding upon such Person or to which such Person is subject, whether Federal, state or local (including usury laws, the Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of Governors of the Federal Reserve System). "RESPONSIBLE OFFICER" shall mean any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, the Treasure, any Assistant Treasurer, or any other officer of the Trustee, the Depositor or the Servicer customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "RETURNED CHECK CHARGES" shall mean the charges specified in the Credit Card Agreement payable for returned payment checks drawn on an Account. "REVOLVING PERIOD" shall mean, with respect to any Series, the period specified as such in the related Supplement. "RTC" shall mean the Resolution Trust any Series, the period Corporation or any successor thereto. "RULE 144A" shall mean Rule 144A under the Act. "SERIES" shall mean any series of Investor Certificates established pursuant to a Supplement. "SERIES ACCOUNT" shall mean any deposit, trust, escrow or similar account maintained for the benefit of the Investor Certificateholders of any Series or Class, as specified in any Supplement. "SERIES ENHANCEMENT" shall mean the rights and benefits provided to the Investor Certificateholders of any Series or Class pursuant to any letter of credit, surety bond, cash collateral guaranty, cash collateral account, insurance policy, spread account, reserve account, guaranteed rate agreement, maturity liquidity facility, tax protection agreement, interest rate swap agreement, interest rate cap agreement, interest rate floor agreement, currency exchange agreement, other derivative securities agreement or other similar arrangement. The subordination of any Class or Series to another Class or Series shall be deemed to be a Series Enhancement for such other Class or Series. "SERIES ENHANCER" shall mean the Person or Persons providing any Series Enhancement, other than the Investor Certificateholders of any Class or Series which is subordinated to another Class or Series. "SERIES ISSUANCE DATE" shall mean, with respect to any Series, the date on which the Investor Certificates of such Series are to be originally issued in accordance with Section 6.03 and the related Supplement. "SERIES TERMINATION DATE" shall mean, with respect to any Series, the termination date specified in the related Supplement. "SERVICE TRANSFER" shall have the meaning specified in Section 10.01. "SERVICER" shall mean the [Servicer Name], in its capacity as Servicer pursuant to this Agreement, and, after any Service Transfer, the Successor Servicer. "SERVICER DEFAULT" shall have the meaning specified in Section 10.01. "SERVICING FEE" shall have the meaning specified in Section 3.02. "SERVICING FEE RATE" shall mean, with respect to any series, the servicing fee rate specified in the related Supplement. "SERVICING OFFICER" shall mean any officer or duly appointed attorney-in-fact of the Servicer who in either case is involved in, or responsible for, the administration and servicing of the Receivables and whose name appears on a list of servicing officers furnished to the Trustee by the Servicer, as such list may from time to time be amended. "TRANSFER DATE" shall mean the Business Day immediately preceding each Distribution Date. "TRANSFER DEPOSIT AMOUNT" shall mean, with respect to any Distribution Date, the amount, if any, deposited into the Excess Funding Account and the Collection Account on such Distribution Date in connection with the reassignment of an Ineligible Receivable pursuant to Section 2.05 or 2.07(a) or the reassignment or assignment of a Receivable pursuant to Section 3.03. "TRANSFER RESTRICTION EVENT" shall have the meaning specified in Section 2.10. "TRUST" shall mean the [ ] Card Account Master Trust created by this Agreement. "TRUST ASSETS" shall have the meaning specified in section 2.01. "TRUST CUT-OFF DATE" shall mean [ ]. "TRUSTEE" shall mean [Trustee Name], not in its Individual capacity, but solely in its capacity as trustee on behalf of the Trust, or its successor in interest, or any successor trustee appointed as herein provided. "UCC" shall mean the Uniform Commercial Code, as amended from time to time, as in effect to the State of [ ] and in any other state where the filing of a financing statement is required to perfect the Trust's interest in the Receivables and the proceeds thereof or in any other specified jurisdiction. "UNALLOCATED PRINCIPAL COLLECTIONS", shall have the meaning specified in Section 4.03(c). "UNITED STATES" shall mean the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. "U.S. ALIEN" or "UNITED STATES ALIEN" shall mean any corporation, partnership, individual or fiduciary that, as to the United States, and for United States income tax purposes, is (i) a foreign corporation, (ii) a foreign partnership one or more of the members of which is, as to the United states, a foreign corporation, a nonresident alien individual or a nonresident alien fiduciary of a foreign estate or trust, (iii) a nonresident alien individual or (iv) a nonresident alien fiduciary of a foreign estate or trust. "U.S. PERSON" or "UNITED STATES PERSON" shall mean a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States, or an estate or trust the income of which is subject to United States Federal income taxation regardless of its source. "VISA" shall mean VISA U.S.A., Inc., or any successor thereto. Section 1.02. OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION. With respect to any Series, all terms used herein and not otherwise defined herein shall have meanings ascribed to them in the related Supplement. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles or regulatory accounting principles, as applicable, as in effect on the date of this Agreement or on the date of any such certificate or other document. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control. (c) The agreements representations and warranties of ACE in this Agreement as Depositor shall be deemed to be the agreements, representations and warranties of ACE solely in its capacity for so long as ACE acts in such capacity under this Agreement. (d) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; references to any Article, Section, Schedule or Exhibit are references to Articles, Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the term "including" means "including without limitation". (e) All references herein to laws, statutes, acts and regulations shall mean laws, statutes, acts and regulations as amended or recodified from time to time. (f) All references herein (including the terms defined in Section 1.01) to the singular shall include the plural and vice versa, unless the context requires otherwise. (g) All references herein to the masculine, feminine or neuter gender shall include all other genders. ARTICLE II TRANSFER OF RECEIVABLES Section 2.01. TRANSFER OF RECEIVABLES. By execution of this Agreement, the Depositor does hereby sell, transfer, assign, set over and otherwise convey to the Trustee, on behalf of the Trust, for the benefit of the Certificateholders, all its right, title and interest in, to and under the Receivables existing at the opening of business on the Trust Cut-Off Date, in the case of Receivables arising in the Initial Accounts, and on each Additional Cut-Off Date, in the case of Receivables arising in the Additional Accounts, and in each case thereafter created from time to time until the termination of the Trust, all moneys due or to become due and all amounts received with respect thereto and all proceeds (including "proceeds" as defined in the UCC, and Recoveries but excluding Insurance Proceeds) thereof, and all its rights, title and interest in, to and under the Interchange payable pursuant to Section 2.07(i). Such property, together with all moneys on deposit in the Collection Account, the Excess Funding Account, the Series Accounts and any Series Enhancement shall constitute the assets of the Trust (the "Trust Assets"). The foregoing does not constitute and is not intended to result in the creation or assumption by the Trust, the Trustee, any Investor Certificateholder or any Series Enhancer of any obligation of the Depositor, the Servicer or any other Person in connection with the Accounts or the Receivables or under any agreement or instrument relating thereto, including any obligation to Obligors, merchant banks, merchants clearance systems, VISA, MasterCard or insurers. The Depositor agrees to record and file, at its own expense, financing statements (and continuation statements when applicable) with respect to the Receivables now existing and hereafter created in the Accounts meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect, and maintain the perfection of, the sale and assignment of such Receivables to the Trust, and to deliver a file stamped copy of each such financing statement or other evidence of such filing (which may, for purposes of this Section 2.01, consist of telephone confirmation of such filing) to the Trustee on or prior to the first Closing Date, in the case of such Receivables arising in the Initial Accounts, and (if any additional filing is so necessary) the applicable Addition Date, in the case of such Receivables arising in Additional Accounts. The Trustee shall be under no obligation whatsoever to file such financing or continuation statements or to make any other filing under the UCC in connection with such sale and assignment. The Depositor further agrees, at its own expense, (a) on or prior to (x) the first Closing Date, in the case of the Initial Accounts, (y) the applicable Addition Date, in the case of Additional Accounts, and (z) the applicable Removal Date, in the case of Removed Accounts, to indicate clearly and unambiguously in its computer files that Receivables created in connection with the Accounts (other than Removed Accounts) have been conveyed to the Trust pursuant to this Agreement for the benefit of the Certificateholders and (b) on or prior to the applicable Document Delivery Date, to deliver to the Trustee a computer file on media and in a file format reasonably acceptable to the Trustee or microfiche list containing a true and complete list of all such Accounts specifying for each such Account, as of the Trust Cut-Off Date, in the case of the Account, as of the Trust Cut-Off Date, in the case of the Initial Accounts, the applicable Additional Cut-Off Date, in the case of Additional Accounts, and the applicable Removal Date, in the case of the Removed Accounts, its account number, the collection status, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables outstanding in such Account. Such file or list, as supplemented form time to time to reflect Additional Accounts and Removed Accounts, shall be marked as Schedule 1 to this Agreement and is hereby incorporated into and made a part of this Agreement. Section 2.02. ACCEPTANCE BY TRUSTEE. The Trustee hereby acknowledges its acceptance on behalf of the Trust of all right, title and interest to the property, now existing and hereafter created, conveyed to the Trust pursuant to Section 2.01 and declares that it shall maintain such right, title and interest, upon the trust herein set forth, for the benefit of all Certificateholders. The Trustee further acknowledges that, prior to or simultaneously with the execution and delivery of this Agreement, the Depositor delivered to the Trustee the computer file or microfiche list relating to the Initial Accounts described in the last paragraph of Section 2.01. (a) The Trustee hereby agrees not to disclose to any Person any of the account numbers or other information contained in the computer files or microfiche lists marked as Schedule 1 or otherwise delivered to the Trustee from time to time, except (i) to a Successor Servicer or as required by a Requirement of Law applicable to the Trustee, (ii) in connection with the performance of the Trustee's duties hereunder or (iii) in enforcing the rights of Certificateholders. The Trustee agrees to take such measures as shall be reasonably requested by the Depositor to protect and maintain the security and confidentiality of such information and, in connection therewith, will allow the Depositor to inspect the Trustee's security and confidentiality arrangements from time to time during normal business hours. The Trustee shall when possible provide the Depositor with written notice 30 days prior to any disclosure pursuant to this Section. (b) The Trustee shall have no power to create, assume or incur indebtedness or other liabilities in the name of the Trust other than as contemplated in this Agreement or any Supplement. (c) The Trustee hereby agrees not to use any information it obtains pursuant to this Agreement, including any of the account numbers or other information contained in the computer files or microfiche lists marked as Schedule 1 or otherwise delivered by the Depositor to the Trustee, directly or indirectly, to compete or assist any person in competing with the Depositor in its business. Section 2.03. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR RELATING TO THE DEPOSITOR. The Depositor hereby represents and warrants to the Trust and the Trustee as of each Closing Date that: (a) ORGANIZATION AND GOOD STANDING. The Depositor is a corporation, validly existing under the laws of the jurisdiction of its organization or incorporation, and has, in all material respects, full power and authority to own its properties and conduct its business as such properties are presently owned and such business is presently conducted, and to execute, deliver and perform its obligations under this Agreement and each Supplement and to execute and deliver to the Trustee the Certificates pursuant hereto. (b) DUE QUALIFICATION. The Depositor is duly qualified to do business and is in good standing as a foreign corporation (or is exempt from such requirements), and has obtained all necessary licenses and approvals, in each jurisdiction in which failure to so qualify or to obtain such licenses and approvals would render any Credit Card Agreement relating to an Account or any Receivable unenforceable by the Depositor, the Servicer or the Trustee or would have a material adverse effect on the interests of the Certificateholders hereunder or under any Supplement; PROVIDED, HOWEVER, that no representation or warranty is made with respect to any qualifications, licenses or approvals which the Trustee has or may be required at any time to obtain, if any, in connection with the transactions contemplated hereby. (c) DUE AUTHORIZATION. The execution and delivery of this Agreement and each Supplement, the execution and delivery to the Trustee of the Certificates and the consummation of the transactions provided for in this Agreement and each Supplement have been duly authorized by the Depositor by all necessary corporate action on the part of the Depositor. (d) NO CONFLICT. The execution and delivery of this Agreement, each Supplement and the Certificates, the performance of the transactions contemplated by this Agreement and each Supplement and the fulfillment of the terms hereof and thereof applicable to the Depositor will not conflict with or violate the articles of association or by-laws of the Depositor or conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any material indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Depositor is a party or by which it or any or its properties are bound. (e) NO VIOLATION. The execution and delivery of this Agreement, each Supplement and the Certificates, the performance of the transactions contemplated by this Agreement and each Supplement and the fulfillment of the terms hereof and thereof applicable to the Depositor will not conflict with or violate in any material respect any Requirements of Law applicable to the Depositor. (f) NO PROCEEDINGS. There are no proceedings or investigations pending or, to the best knowledge of the Depositor, threatened against the Depositor, before any Governmental Authority (i) asserting the invalidity of this Agreement, any Supplement or the Certificates, (ii) seeking to prevent the issuance of the Certificates or the consummation by the Depositor of any of the transactions contemplated by this Agreement, any Supplement or the Certificates, (iii) seeking any determination or ruling that, in the reasonable judgment of the Depositor, would materially and adversely affect the performance of its obligations under this Agreement or any Supplement, (iv) seeking any determination or ruling that would materially and adversely effect the valid or enforceability of this Agreement, any Supplement or the Certificates or (v) seeking to affect adversely the income tax attributes of the Trust under the Federal income or Ohio income or franchise tax systems. (g) ALL CONSENTS REQUIRED. All authorizations, consents, orders or other actions of any Person or of any Governmental Authority required to be obtained by the Depositor in connection with the execution and delivery by the Depositor of this Agreement, each Supplement and the Certificates, the performance by the Depositor of the transactions contemplated by this Agreement and each Supplement and the fulfillment by the Depositor of the terms hereof and thereof, have been obtained, except such as are required by state securities or "Blue Sky" laws in connection with the distribution of the Certificates. [(h) INSOLVENCY. No Insolvency Event with respect to the Depositor has occurred and the transfer of the Receivables by the Depositor to the Trust has not been made in contemplation of the occurrence thereof.] [The representations and warranties set forth in this Section 2.03 shall survive the transfer and assignment of the Receivables to the Trust. Upon discovery by a Responsible Officer of the Depositor, the Servicer or the trustee of a breach of any of the representations and warranties set forth in this Section 2.03, the party, discovering such breach shall give prompt written notice to the others and to each Series Enhancer entitled thereto pursuant to the relevant Supplement within three Business Days following such discovery. The Depositor agrees to cooperate with the Servicer and the Trustee in attempting to cure any such breach. For purposes of the representations and warranties set forth in this Section 2.03, each reference to a Supplement shall be deemed to refer only to those Supplements in effect as of the relevant Closing Date.] Section 2.04. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR RELATING TO THE AGREEMENT AND ANY SUPPLEMENT AND THE RECEIVABLES. (a) REPRESENTATIONS AND WARRANTIES. The Depositor hereby represents and warrants to the Trust and the Trustee as of the date of this Agreement and the date of each Supplement, as of each Closing Date and, with respect to Additional Accounts, as of the related Addition Date that: (i) this Agreement, each Supplement and, in the case of Additional Accounts, the related Assignment, each constitutes a legal, valid and binding obligation of the Depositor enforceable against the Depositor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general or by general principles of equity (whether considered in a suit at law or in equity); (ii) as of the first Closing Date, as of the related Addition Date, with respect to Additional Accounts, and as of the applicable Removal Date, with respect to the Removed Accounts, Schedule 1 to this Agreement and the related computer file or microfiche list delivered pursuant to this Agreement, as supplemented to such date, is an accurate and complete listing in all material respects of all the Accounts as the Trust Cut-Off Date, such Additional Cut-Off Date or such Removal Date, as the case may be, and the information contained therein with respect to the identify of such Accounts and the Receivables existing in such Accounts is true and correct in all material respects as of the trust Cut-Off Date, such Additional Cut-Off Date or such Removal Date, as the case may be; (iii) each Receivable conveyed to the Trust by the Depositor has been conveyed to the Trust free and clear of any Lien (other than Liens permitted under subsection 2.07(b)); (iv) with respect to each Receivable, all authorizations, consents, licenses, orders or approvals of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by the Depositor in connection with the transfer by the Depositor of Receivables to the Trust have been duly obtained, effected or given and are in full force and effect; (v) [subject, in each case pertaining to proceeds, to Section 9-306 of the UCC, and further subject to any Liens permitted under subsection 2.07(b), each of this Agreement and, in the case of Additional Accounts, the related Assignment constitutes a valid sale, transfer and assignment to the Trust of all right, title and interest of the Depositor in the Receivables now existing or hereafter created and the proceeds thereof; or, if this Agreement or, in the case of Additional Accounts, the related Assignment does not constitute a sale of such property, it constitutes a grant of a "security interest" (as defined in the UCC) in such property to the Trust, which, in the case of existing Receivables and the proceeds thereof, is enforceable upon execution and delivery of this Agreement, or, with respect to then existing Receivables in Additional Accounts, as of the applicable Addition Date, and which will be enforceable with respect to such Receivables hereafter and thereafter created and the proceeds thereof upon such creation. Upon the filing of the financing statements pursuant to Section 2.01 and, in the case of Receivables hereafter created and the proceeds thereof, upon the creation thereof, the Trust shall have a first priority perfected security or ownership interest in such property and proceeds except for Liens permitted under subsection 2.07(b); [(vi) except as otherwise expressly provided in this Agreement or any Supplement, neither the Depositor nor any Person claiming through or under the Depositor has any claim to or interest in the Collection Account, any Series Account or any Series Enhancement;] (vii) on the Trust Cut-Off Date, each Account was an Eligible Account and, in the case of Additional Accounts, on the Additional Cut-Off Date with respect thereto, each such Account will be an Eligible Account; (viii) on the Trust Cut-Off Date, each Receivable then existing was an Eligible Receivable and, in the case of Additional Accounts, on the Addition Date with respect thereto, each Receivable contained therein will be an Eligible Receivable; (ix) as of the date of the creation of any new Receivable in an Account specified in a Receivables Purchase Agreement, such Receivable is an Eligible Receivable; and (x) no selection procedure reasonably believed by the Depositor to be materially adverse to the interests of the Investor Certificateholders was used in selecting the Initial Accounts. (b) NOTICE OF BREACH. The representations and warranties of the Depositor set forth in Section 2.03, this Section 2.04 and Section 2.09(f) shall survive the transfer and assignment by the Depositor of Receivables to the Trust. Upon discovery by a Responsible Officer of the Depositor, the Servicer or the Trustee of a breach of any of the representations and warranties by the Depositor set forth in this in Section 2.03, this Section 2.04 and Section 2.09(f), the party discovering such breach shall give prompt written notice to the others and to each Series Enhancer entitled thereto pursuant to the relevant Supplement within three Business Days following such discovery. [The Depositor agrees to cooperate with the Servicer and the Trustee in attempting to cure any such breach. For purposes of the representations and warranties set forth in this Section 2.04, each reference to a Supplement shall be deemed to refer only to those Supplements in effect as of the date of the relevant representations or warranties.] Section 2.05. REASSIGNMENT OF INELIGIBLE RECEIVABLES. (a) Reassignment of Receivables. In the event that: (i) any representation or warranty contained in Section 2.04(a)(ii), (iii), (iv), [(vi)](vii), (viii), [(ix) or (x)] is not true and correct in any material respect as of the date specified therein (individually or together with any other breach or breaches then existing) and such breach has a material adverse effect on the Certificateholders' Interest of all Series in any Receivables transferred to the Trust (which determination shall be made without regard to the availability of funds under any Series Enhancement) and remains uncured for 60 days (or for such longer period, not in excess of 150 days, as may be reasonably necessary to remedy such breach; provided that such breach is capable of remedy within 150 days or less and the Depositor delivers an Officer's Certificate to the Trustee to the effect that the Depositor has commenced, or will promptly commence and diligently pursue, all reasonable efforts to remedy such breach) after the earlier to occur of the discovery thereof by the Depositor or receipt by the Depositor of written notice thereof given by the Trustee, or (ii) it is so provided in Section 2.07(a) with respect to any Receivables, then the Depositor shall accept reassignment of all Receivables in the related Account ("Ineligible Receivables") on the terms and conditions set forth in paragraph (b) below[; PROVIDED, HOWEVER, that such Receivables will not be deemed to be Ineligible Receivables and will not be reassigned to the Depositor if, on any day prior to the end of such 60-day or longer period, (x) either (A) in the case of an event described in clause (i) above the relevant representation and warranty shall be true and correct in all material respects as if made on such day or (B) in the case of an event described in clause (ii) above the circumstances causing such Receivable to become an Ineligible Receivable shall no longer exist and (y) the Depositor shall have delivered to the Trustee an Officer's Certificate of the Depositor describing the nature of such breach and the manner in which in the relevant representation and warranty became true and correct]. (b) PRICE OF REASSIGNMENT. The Servicer shall deduct the portion of such Ineligible Receivables reassigned to the Depositor which are Principal Receivables from the aggregate amount of Principal Receivables used to calculate the Depositor's Amount, the Depositor's Interest and the Floating Allocation Percentage and the Principal Allocation Percentage applicable to any Series. In the event that, following the exclusion of such Principal Receivables from the calculation of the Depositor's Amount, the Depositor's Amount would be a negative number, not later than 12:00 noon, New York City time on the first Distribution Date following the Monthly Period in which such reassignment obligation arises, the Depositor shall make a deposit in immediately available funds in an amount equal to the principal portion and the interest portion of the amount by which the Depositor's Amount would be below zero (up to the amount of such Principal Receivables) into the Excess Funding Account and the Collection Account, respectively. [Any amount deposited into the Excess Funding Account and the Collection Account, respectively, in connection with the reassignment of an Ineligible Receivable shall be considered a Transfer Deposit Amount and shall be applied in accordance with Article IV and the terms of each Supplement.] Upon the deposit, if any, required to be made to the Excess Funding Account and the Collection Account, respectively, as provided in this Section and the reassignment of Ineligible Receivables, the Trustee, on behalf of the Trust, shall automatically and without further action be deemed to transfer, assign, set-over and otherwise convey to the Depositor or its designee, without recourse, representation or warranty, all the right, title and interest of the Trust in and to such Ineligible Receivables, all monies due or to become due with respect thereto and all proceeds thereof. The Trustee shall execute such documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by the Depositor to effect the transfer of such Ineligible Receivables pursuant to this Section. The obligation of the Depositor to accept reassignment of any Ineligible Receivables, and to make the deposits, if any, required to be made to the Excess Funding Account and the Collection Account, respectively, as provided in this Section, shall constitute the sole remedy respecting the event giving rise to such obligation available to Investor Certificateholders (or the Trustee on behalf of the Investor Certificateholders) or any Series Enhancer. Section 2.06. REASSIGNMENT OF RECEIVABLES IN TRUST PORTFOLIO. In the event any representation or warranty of the Depositor set forth in [Section 2.03 or Section 2.04(a)(i), (v) or (vi)] is not true and correct in any material respect and such breach has a material adverse effect on the Certificateholders' Interest of all Series in the Receivables (which determination shall be made without regard to the availability of funds under any Series Enhancement), then either the Trustee or the Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of all outstanding Investor Certificates, by written notice then given to the Depositor and the Servicer (and to the Trustee if given by the Investor Certificateholders), may direct the Depositor to accept a reassignment of the Receivables if such breach and any material adverse effect caused by such breach is not cured within 60 days of such notice (or for such longer period, not in excess of 150 days, as may be reasonably necessary to remedy such breach; provided that such breach is capable of remedy within 150 days or less and the Depositor delivers an Officer's Certificate to the Trustee to the effect that the Depositor has commenced, or will promptly commence and diligently pursue, all reasonable efforts to remedy such breach), and upon those conditions the Depositor shall be obligated to accept such reassignment on the terms set forth below; PROVIDED, HOWEVER, that such Receivables will not be reassigned to the Depositor if, on any day prior to the end of such 60-day or longer period (i) the relevant representation and warranty shall be true and correct in all material respects as if made on such day and (ii) the Depositor shall have delivered to the Trustee an Officer's Certificate of the Depositor describing the nature of such breach and the manner in which the relevant representation and warranty became true and correct and the breach of such representation and warranty shall no longer materially adversely affect the interests of the Investor Certificateholders. The Depositor shall deposit in the Collection Account in immediately available funds not later than 12:00 noon, New York City time, on the Transfer Date immediately preceding the first Distribution Date following the Monthly Period in which such reassignment obligation arises, in payment for such reassignment, an amount equal to the sum of the amounts specified therefor with respect to each outstanding Series in the related Supplement. Notwithstanding anything to the contrary in this Agreement, such amounts shall be distributed on such Distribution Date in accordance with Article IV and the terms of each Supplement. Upon the deposit, if any, required to be made to the Collection Account as provided in this Section and the reassignment of the applicable Receivables, the Trustee, on behalf of the Trust, shall automatically and without further action be deemed to sell, transfer, assign, set over and otherwise convey to the Depositor or its designee, without recourse, representation or warranty, all the right, title and interest of the Trust in and to such Receivables, all moneys due or to become due and all amounts received with respect thereto and all proceeds thereof. The Trustee shall execute such documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by the Depositor to affect the conveyance of such Receivables pursuant to this Section. The obligation of the Depositor to accept reassignment of any Receivables and to make the deposits, if any, required to be made to the Collection Account as provided in this Section shall constitute the sole remedy respecting the event giving rise to such obligation available to the Certificateholders (or the Trustee on behalf of the Certificateholders) or any Series Enhancer. Section 2.07. COVENANTS OF THE DEPOSITOR. The Depositor hereby covenants as follows: (a) RECEIVABLES NOT TO BE EVIDENCED BY PROMISSORY NOTES. The depositor will take no action to cause or permit any Receivable to be evidenced by any instrument or chattel paper (as defined in the UCC) and, if any such Receivable is so evidenced it shall be deemed to be an Ineligible Receivable in accordance with Section 2.05(a) and shall be reassigned to the Depositor in accordance with Section 2.05(b)[; PROVIDED, HOWEVER, that Receivables evidenced by notes taken from Obligors in the ordinary course of business of the Servicer's collection efforts shall not be deemed Ineligible Receivables solely as a result thereof]. (b) SECURITY INTERESTS. Except for the conveyances hereunder, the Depositor will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any Receivable, whether now existing or hereafter created, or any interest therein; the Depositor will immediately notify the Trustee of the existence of any Lien on any Receivable; and the Depositor shall defend the right, title and interest of the Trust in, to and under the Receivables, whether now existing or hereafter created, against all claims of third parties claiming through or under the Depositor. (c) DEPOSITOR'S INTEREST. Except for the conveyances hereunder, in connection with any transaction permitted by Section 7.02 and as provided in Sections 2.08(f) and 6.03, the Depositor agrees not to transfer, assign, exchange or otherwise convey or pledge, hypothecate or otherwise grant a security interest in the Depositor's Interest represented by the Depositor's Certificate or any Supplemental Certificate and any such attempted transfer, assignment, exchange, conveyance, pledge, hypothecation or grant shall be void. (d) DELIVERY OF COLLECTIONS. In the event that the Depositor receives Collections, the Depositor agrees to pay the Servicer all such Collections as soon as practicable after receipt thereof but in no event later than two Business Days after the Date of Processing by the Depositor. (e) NOTICE OF LIENS. The Depositor shall notify the Trustee and each Series Enhancer entitled to such notice pursuant to the relevant Supplement promptly after becoming aware of any Lien on any Receivable other than the conveyances hereunder or Liens permitted under Section 2.07(b). (f) AMENDMENT OF THE CERTIFICATE OF INCORPORATION. The Depositor will not amend in any material respect its Certificate of Incorporation without providing the Rating Agency with notice no later than the fifth Business Day prior to such amendment (unless the right to such notice is waived by the Rating Agency) and satisfying the Rating Agency Condition. (g) OTHER INDEBTEDNESS. The Depositor shall not incur any additional debt, unless (i) such debt is incurred pursuant to the Revolving Credit Agreement or (ii) the Rating Agency is provided with notice no later than the fifth Business Day prior to the incurrence of such additional debt (unless the right to such notice is waived by the Rating Agency) and the Rating Agency Condition is satisfied with respect to the incurrence of such debt. (h) [other organizational assurances by Depositor] Section 2.08. COVENANTS OF DEPOSITOR WITH RESPECT TO RECEIVABLES PURCHASE AGREEMENT. Each Depositor in its capacity as purchaser of Receivables from [Seller Name] pursuant to a Receivables Purchase Agreement, hereby covenants that the Depositor will at all times enforce the covenants and agreements of [Seller Name] in such Receivables Purchase Agreement, including covenants to the effect set forth below only to the extent to which they are enforceable against [Seller Name] pursuant to such Receivables Purchase Agreement: (i) PERIODIC RATE FINANCE CHARGE. (i) Except (x) as otherwise required by any Requirements of Law or (y) as is deemed by [Seller Name] or any other Account Owner, as the case may be, to be necessary in order for it to maintain its credit card business or a program operated by such credit card business on a competitive basis based on a good faith assessment by it of the nature of the competition with respect to the credit card business or such program, it shall not at any time make any action which would have the effect of reducing the Portfolio Yield to a level that cold be reasonably expected to cause any Series to experience any Pay Out Event or Reinvestment Event based on the insufficiency of the Portfolio Yield or any Requirements of Law, it shall not take any action which would have the effect of reducing the Portfolio Yield to less than the highest [current/future] Average Rate for any Group. (ii) CREDIT CARD AGREEMENTS AND GUIDELINES. Subject to compliance with all Requirements of Law and paragraph (a) above, [Seller Name] or other Account Owner, as the case may be, may change the terms and provisions of the applicable Credit Card Agreements or the applicable Credit Card Guidelines in any respect (including the calculation of the amount or the timing of charge-offs and the Periodic Rate Finance Charges to be assessed thereon). Notwithstanding the above, unless required by Requirements of Law or as permitted by Section 2.08(a), [Seller Name] or other Account Owner, as the case may be, will take no action with respect to the applicable Credit Card Agreements or the applicable Credit Card Guidelines, which, at the time of such action, [Seller Name] or other Account Owner, as the case may be, reasonably believes will have a material adverse effect on the Investor Certificateholders. The Depositor further covenants that it will not enter into any amendments to a Receivables Purchase Agreement unless the Rating Agency Condition has been satisfied. Section 2.09. ADDITION OF ACCOUNTS. (a) REQUIRED ADDITIONS. (i) If, as of the close of business on the last Business Day of any Monthly Period, [either (i) the Depositor's Amount is less than the Required Depositor's Interest on such date, or (ii)] the aggregate amount of Principal Receivables is less than the Required Principal Balance on such date, the Depositor shall on or prior to the close of business on the 10th Business Day following the last Business Day of such Monthly Period (the "Required Designation Date")[, unless the Depositor's Amount exceeds the Required Depositor's Interest and the aggregate amount of Principal Receivables equals or exceeds the Required Principal Balance as of the close of business on any day after the last Business Day of such Monthly Period and prior to the Required Designation Date,] cause to be designated additional Eligible Accounts to be included as Accounts as of the Required Designation Date or any earlier date in a sufficient amount such that, after giving effect to such addition, [the Depositor's Amount as of the close of business on the Addition Date is at least equal to the Required Depositor's Interest on such date and] the aggregate amount of Principal Receivables as of the Addition Date is at least equal to the Required Principal Balance on such date. The failure of any condition set forth in paragraph (c) or (d) below, as the case may be, shall not relieve the Depositor of its obligation pursuant to this paragraph; PROVIDED, HOWEVER, that the failure of the Depositor to transfer Receivables to the Trust as provided in this paragraph solely as a result of the unavailability of a sufficient amount of Eligible Receivables shall not constitute a breach of this Agreement; PROVIDED FURTHER that any such failure which has not been timely cured will nevertheless result in the occurrence of a Pay Out Event with respect to each Series for which, pursuant to the Supplement therefor, a failure by the Depositor to convey Receivables in Additional Accounts or Participation Interests to the Trust by the day on which it is required to convey such Receivables or Participation Interests pursuant to Section 2.08(a) constitutes a "Pay Out Event" (as defined in such Supplement). (ii) In lieu of, or in addition to, designating Additional Accounts pursuant to clause (i) above, the Depositor may, subject to the conditions specified in paragraph (d) below, convey Participation Interests to the Trust. The addition of Participation Interests in the Trust pursuant to this paragraph (a) or paragraph (b) below shall be effected by an amendment hereto, dated the applicable Addition Date, pursuant to Section 13.01(a) (b) PERMITTED ADDITIONS. The Depositor may from time to time, at his sole discretion, subject to the conditions specified in paragraph (c) or (d) below, as the case may be, cause the designation of additional Eligible Accounts to be included as Accounts or Participation Interests to be included as Trust Assets, in either case as of the applicable Additional Cut-Off Date. (c) CONDITIONS TO ADDITION. On the Addition Date with respect to any Additional Accounts or Participation Interests, the Trust shall purchase the Receivables in such Additional Accounts (and such Additional Accounts shall be deemed to be Accounts for purposes of this Agreement) or shall purchase such Participation Interests, in each case as of the close of business on the applicable Additional Cut-Off Date, subject to the satisfaction of the following conditions: (i) on or before the [eight] Business Day immediately preceding the Addition Date, the Depositor shall have given the Trustee, the Servicer, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement written notice that the Additional Accounts or Participation Interests will be included and specifying the applicable Addition Date, the Additional Cut-Off Date, the approximate number of accounts or other assets expected to be added and the approximate aggregate balances expected to be outstanding in the accounts or other assets to be added; (ii) all Additional Accounts will be Eligible Accounts; (iii) in the case of Additional Accounts, the Depositor shall have delivered to the Trustee copies of UCC-1 financing statements covering such Additional Accounts, if necessary to perfect the Trust's interest in the Receivables arising therein; (iv) in the case of Additional Accounts, to the extent required by Section 4.03, the Depositor shall have deposited in the Collection Account all Collections with respect to such Additional Accounts since the Additional Cut-Off Date; (v) as of each of the Additional Cut-Off Date and the Addition Date, no Insolvency Event with respect to the Depositor shall have occurred nor shall the transfer of the Receivables arising in the Additional Accounts or of the Participation Interests to the Trust have been made in contemplation of the occurrence thereof; (vi) except in the case of an Addition pursuant to Section 2.08(a), the Depositor shall have received written notice from each Rating Agency that such Addition will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee; (vii) the Depositor shall have delivered to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Opinion of Counsel that for Federal income and [ ] income and franchise tax purposes, such Addition will not cause a taxable event to the holders of the Certificates; (viii) the Depositor shall have delivered to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Opinion of Counsel, dated the Addition Date, in accordance with Section 13.02(d); (ix) the Depositor shall have delivered to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate of the Depositor, dated the Addition Date, to the effect that the Depositor reasonably believes that such Addition will not, based on the facts known to such officer at the time of such certification, then cause a Pay Out Event or any event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event to occur with respect to any Series; and (x) within ten Business Days of the Addition Date, the Depositor shall have delivered to the Trustee a written assignment and a computer file or a microfiche list containing a true and complete list of the related Additional Accounts or Participation Interests specifying for each such Account its account number, the collection status, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables outstanding in such Account or comparable information in the case of Participation Interests. (d) [(f)] REPRESENTATIONS AND WARRANTIES. The Depositor hereby represents and warrants to the Trust and the Trustee as of the related Addition Date as to the matters relating to it set forth in paragraph (d)(iv) and (viii) above and that, in the case of Additional Accounts, the file or list delivered pursuant to paragraph (g) below is, as of the applicable Additional Cut-Off Date, true and complete in all material respects. (e) ADDITIONAL DEPOSITORS. The Depositor may designate Affiliates of the Depositor to be included as Depositors ("Additional Depositors") under this Agreement by an amendment hereto pursuant to Section 13.01(a) and, in connection with such designation, the Bank shall surrender the Depositor's Certificate to the Trustee in exchange for a newly issued Depositor's Certificate modified to reflect such Additional Depositor's interest in the Depositor's Interest; PROVIDED, HOWEVER, that prior to any such designation and exchange the conditions set forth in Section 6.03(c) shall have been satisfied with respect thereto.] (f) DELIVERY OF DOCUMENTS. In the case of the designation of Additional Accounts, the Depositor shall deliver to the Trustee (i) the computer file or microfiche list required to be delivered pursuant to Section 2.01 with respect to such Additional Accounts on the applicable Document Delivery Date and (ii) a duly executed, written Assignment (including an acceptance by the Trustee for the benefit of the Certificateholders), substantially in the form of Exhibit B (the "Assignment"), on the Document Delivery Date; and, in the case of an Addition of Participation Interests, the Depositor shall deliver comparable information and documents with respect to such Participation Interests, on the Document Delivery Date.] (g) [AUTOMATIC ADDITIONAL] [NEW] ACCOUNTS. The Depositor may from time to time, at its sole discretion, subject to and in compliance with the limitations specified in clause (ii) below and the applicable conditions specified in paragraph (d) below, voluntarily designate Eligible Accounts to be included as Accounts as of the applicable Additional Cut-Off Date. For purposes of this paragraph, Eligible Accounts shall be deemed to include only consumer revolving credit card accounts or other consumer revolving credit accounts which are of a type included as Initial Accounts or which have previously been included in any Addition which has been effected in accordance with all of the conditions specified in paragraph ( ) below. (i) The Depositor shall not be permitted to designate Automatic Additional Accounts pursuant to clause (i) above with respect to any of the three consecutive Monthly Periods commencing in January, April, July and October of each calendar year, unless on or before the first Business Day of such three consecutive Monthly Periods, the Depositor shall have requested Standard & Poor's to notify, and Standard & Poor's shall have notified in writing, the Depositor, the Servicer and the Trustee of the limitations (other than the limitations described in this Agreement), if any, to the right of the Depositor to designate Automatic Additional Accounts during such three consecutive Monthly Periods. Unless Standard & Poor's otherwise consents, the number of Automatic Additional Accounts plus the number of Accounts added pursuant to Section 2.08(a), without the prior notice of Standard & Poor's as described under Section 2.08(d)(v), shall not at any time exceed the Aggregate Addition Limit; PROVIDED, HOWEVER, if the Aggregate Addition Limit is exceeded for purposes of Section 2.08(a), the Depositor shall have delivered written notice to Moody's of any such addition. Unless Moody's otherwise consents, the number of Automatic Additional Accounts added pursuant to Section 2.08(c), without prior notice of Moody's as described under 2.08(d) (v), shall not at any time exceed the Aggregate Addition Limit. (ii) On or before June 30 and December 31 of each calendar year, commencing on December 31, [ ], the Depositor shall deliver to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Opinion of Counsel in accordance with Section 13.02(d), with respect to the Automatic Additional Accounts included as Accounts during the preceding six-month period confirming the validity and perfection of each transfer of such Automatic Additional Accounts; PROVIDED, HOWEVER, if the long-term unsecured debt rating or certificate of deposit rating of the Depositor is reduced below AA- but is maintained at a level of A- or higher, by Standard & Poor's, (and only for so long as such rating is below AA- but is maintained at a level of A-or higher by Standard & Poor's) the Depositor shall deliver to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Opinion of Counsel in accordance with Section 13.02(d) on or before March 31, June 30, September 30 and December 31 of each calendar year, commencing on the first such date to occur after such reduction occurs, with respect to the Automatic Additional Accounts included as Accounts during the preceding three-month period confirming the validity and perfection of each transfer of such Automatic Additional Accounts; PROVIDED FURTHER, if the long-term unsecured debt rating of the Depositor is withdrawn or reduced below A- by Standard & Poor's (and only for so long as such rating is below A- by Standard & Poor's), the Depositor shall deliver to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Opinion of Counsel in accordance with Section 13.02(d) on or before the last Business Day of each calendar month, commencing on the last Business Day of the calendar month immediately following the month in which such withdrawal or reduction occurs, with respect to the Automatic Additional Accounts included as Accounts during the preceding one-month period confirming the validity and perfection of each transfer of such Automatic Additional Accounts. If such Opinion of Counsel with respect to any Automatic Additional Accounts is not so received, the ability of the Depositor to designate Automatic Additional Accounts will be suspended until such time as each Rating Agency otherwise consents in writing or such Automatic Additional Accounts are removed from the Trust. If the Depositor is unable to deliver such Opinion of Counsel with respect to any Additional Account which has been the subject of an Automatic Addition, such inability shall be deemed to be breach of the representation in Section 2.04(a)(viii) with respect to the Receivables in such Additional Account for purposes of Section 2.05. (h) CONDITIONS TO ADDITION. On the Addition Date with respect to any Additional Accounts or Participation Interests, the Trust shall purchase the Receivables in such Additional Accounts (and such Additional Accounts shall be deemed to be Accounts for purposes of this Agreement) or shall purchase such Participation Interests, in each case as of the close of business on the applicable Additional Cut-Off Date, subject to the satisfaction of the following conditions (PROVIDED, HOWEVER, that the conditions set forth in clauses (i), (v), (vi) and (vii) shall not apply to the transfer to the Trust of Receivables in Automatic Additional Accounts which are governed by Section 2.08(c)): (i) on or before the fifth Business Day immediately preceding the Addition Date, the Depositor shall have given the Trustee, the Servicer, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement written notice that the Additional Accounts or Participation Interests will be included and specifying the applicable Addition Date, the Additional Cut-Off Date, the approximate number of accounts or other assets expected to be added and the approximate aggregate balances expected to be outstanding in the accounts or other assets to be added; (ii) in the case of Additional Accounts, the Depositor shall have delivered to the Trustee copies of UCC-1 financing statements covering such Additional Accounts, if necessary to perfect the Trust's interest in the Receivables arising therein; (iii) in the case of Additional Accounts, to the extent required by Section 4.03, the Depositor shall have deposited in the Collection Account all Collections with respect to such Additional Accounts since the Additional Cut-Off Date; (iv) as of each of the Additional Cut-Off Date and the Addition Date, no Insolvency Event with respect to the Depositor shall have occurred nor shall the transfer of the Receivables arising in the Additional Accounts or of the Participation Interests to the Trust have been made in contemplation of the occurrence thereof; (v) except in the case of an Addition pursuant to Section 2.08(a), the Depositor shall have received written notice from each Rating Agency that such Addition will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee and in the case of an Addition pursuant to Section 2.08(a) which would exceed the Aggregate Addition Limit, the Depositor shall have provided Standard & Poor's at least 15 days prior written notice of such Addition and at or prior to the end of such 15-day period, the Depositor shall not have received a notice in writing from Standard & Poor's that such Addition will have a Ratings Effect; (vi) the Depositor shall have delivered to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Opinion of Counsel that for Federal income and [ ] income and franchise tax purposes, such Addition will not cause a taxable event to the holders of the Certificates; (vii) the Depositor shall have delivered to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Opinion of Counsel, dated the Addition Date, in accordance with Section 13.02(d); (viii) the Depositor shall have delivered to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate of the Depositor, dated the Addition Date, to the effect that the Depositor reasonably believes that such Addition will not, based on the facts known to such officer at the time of such certification, then cause a Pay Out Event or any event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event to occur with respect to any Series; and (ix) within ten Business Days of the Addition Date, the Depositor shall have delivered to the Trustee a written assignment and a computer file or a microfiche list containing a true and complete list of the related Additional Accounts or Participation Interests specifying for each such Account its account number, the collection status, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables outstanding in such Account or comparable information in the case of Participation Interests. Section 2.10. REMOVAL OF ACCOUNTS. On any day of any Monthly Period the Depositor shall have the right to require the reassignment to it or its designee of all the Trust's right, title and interest in, to and under the Receivables then existing and thereafter created, all moneys due or to become due and all amounts received with respect thereto and all proceeds thereof in or with respect to the Accounts owned and designated by the Depositor (the "Removed Accounts"), upon satisfaction of the following conditions: (i) on or before the fifth Business Day immediately preceding the Removal Date (the "Removal Notice Date"), the Depositor shall have given the Trustee, the Servicer, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement written notice of such removal and specifying the date for removal of the Removed Accounts (the "Removal Date"); (ii) on or prior to the date that is 10 Business Days after the Removal Date, the Depositor shall have amended Schedule 1 by delivering to the Trustee a computer file or microfiche list containing a true and complete list of the Removed Accounts specifying for each such Account, as of the Removal Notice Date, its account number, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables outstanding in such Account; (iii) the Depositor shall have represented and warranted as of the Removal Date that the list of Removed Accounts delivered pursuant to paragraph (ii) above, as of the Removal Date, is true and complete in all material respects and further, that no selection procedure was utilized by the Depositor that would result in a selection of Removed Accounts that would be materially adverse to the Certificate holders of any Series as of the Removal Date; (iv) the Depositor shall have received written notice form each Rating Agency that such removal will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee; (v) as of the Removal Notice Date, either (A) the Receivables in the Accounts are not more than 15% delinquent by estimated principal amount and the weighted average delinquency of such Receivables is not more than 60 days or (B) the Receivables in the Accounts are not more than 7% delinquent by estimated principal amount and the weighted average delinquency of such Receivables does not exceed 90 days; (vi) the Depositor shall have delivered to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate of the Depositor, dated the Removal Date, to the effect that the Depositor reasonably believes that such removal will not, based on the facts known to such officer at the time of such certification, then cause a Pay Out Event or any event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event to occur with respect to any Series; and (vii) the aggregate amount of Principal Receivables to be removed shall not equal or exceed 5% of the aggregate amount of Principal Receivables in the Trust. (a) Notwithstanding Section 2.09(a) of this Agreement, on any day of any Monthly Period the Depositor shall have the right to require the reassignment to it or its designee of all the Trust's right, title and interest in, to and under the Receivables then existing and thereafter created, all moneys due or to become due and all amounts received with respect thereto and all proceeds thereof in or with respect to the Accounts owned and designated by the Depositor without the satisfaction of the conditions set forth in Section 2.09(a); PROVIDED, that, (i) on or before the Removal Notice Date, the Depositor shall have given each Rating Agency written notice specifying the Removal Date, (ii) the balance of all receivables included in such Accounts is reflected on the books and records of the Depositor as "zero" and (iii) for the twelve Monthly Periods preceding such designation, there have been no charges with respect to such Accounts. For purposes of this Agreement, accounts designated by the Depositor in accordance with this Section 2.09(b) shall constitute Removed Accounts. Upon satisfaction of the above conditions, the Trustee shall execute and deliver to the Depositor a written reassignment in substantially the form of Exhibit C (the "Reassignment") and shall, without further action, be deemed to sell, transfer, assign, set over and otherwise convey to the Depositor or its designee, effective as of the Removal Date, without recourse, representation or warranty, all the right, title and interest of the Trust in and to the Receivables arising in the Removed Accounts and all proceeds thereof. In addition, the Trustee shall execute such other documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by the Depositor to effect the conveyance of Receivables pursuant to this Section. Section 2.11. ACCOUNT ALLOCATIONS. In the event that the Depositor is unable for any reason to transfer Receivables to the Trust in accordance with the provisions of this Agreement, including by reason of the application of the provisions of Section 9.02 or any binding order of any Governmental Authority (a "Transfer Restriction Event"), then, in any such event, (a) the Depositor and the Servicer agree (except as prohibited by any such order) to allocate and pay to the Trust, after the date of such inability, all Collections, including Collections of Receivables transferred to the Trust prior to the occurrence of such event, and all amounts which would have constituted Collections but for the Depositor's inability to transfer Receivables (up to an aggregate amount equal to the amount of Receivables in the Trust on such date), (b) the Depositor and the Servicer agree that such amounts will be applied as Collections in accordance with Article IV and the terms of each Supplement and (c) for so long as the allocation and application of all Collections and all amounts that would have constituted Collections are made in accordance with clauses (a) and (b) above, Principal Receivables and all amounts which would have constituted Principal Receivables but for the Depositor's inability to transfer Receivables to the Trust and Principal Receivables and all amounts which would have constituted Principal Receivables as aforesaid that are written off as uncollectible in accordance with this Agreement shall continue to be allocated in accordance with Article IV and the terms of each Supplement. For the purpose of the immediately preceding sentence, the Depositor and the Servicer shall treat the first received Collections with respect to the Accounts as allocable to the Trust until the Trust shall have been allocated and paid Collections in an amount equal to the aggregate amount of Principal Receivables in such Account as of the date of the occurrence of such event. If the Depositor or the Servicer is unable pursuant to any Requirements of Law to allocate Collections as described above, the Depositor and the Servicer agree that, after the occurrence of such event, payments on each Account with respect to the principal balance of such Account shall be allocated first to the oldest principal balance of such Account and shall have such payments applied as Collections in accordance with Article IV and the terms of each Supplement. The parties hereto agree that Finance Charge Receivables, whenever created, accrued in respect of Principal Receivables which have been conveyed to the Trust shall continue to be a part of the Trust notwithstanding any cessation of the transfer of additional Principal Receivables to the Trust and Collections with respect thereto shall continue to be allocated and paid in accordance with Article IV and the terms of each Supplement. Section 2.12. DISCOUNT OPTION. (a) The Depositor shall have the option to designate at any time a percentage, which may be a fixed percentage or a variable percentage based on a formula (the "Discount Percentage"), of the amount of Receivables arising in the Accounts on or after the date such designation becomes effective that would otherwise constitute Principal Receivables to be treated as Finance Charge Receivables ("Discount Option Receivables"). The Depositor shall also have the option of reducing or withdrawing the Discount Percentage, at any time and from time to time, on and after the date such designation becomes effective. The Depositor shall provide to the Servicer, the Trustee, any Series Enhancer and each Rating Agency 30 days prior written notice of such designation (or reduction or withdrawal), and such designation (or reduction or withdrawal) shall become effective on the date designated therein only if (i) the Depositor shall have delivered to the Trustee and each Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate of the Depositor stating that the Depositor reasonably believes that such designation (or reduction or withdrawal) will not, based on the facts known to such officer at the time of such certification, then cause a Pay Out Event or any event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event to occur with respect to any Series, (ii) the Depositor shall have received written notice form each Rating Agency that such designation (or reduction or withdrawal) will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee and (iii) in the case of a reduction or withdrawal, the Depositor shall have delivered to the Trustee an Officer's Certificate to the effect that, in the reasonable belief of the Depositor, such reduction or withdrawal shall not have adverse regulatory implications for the Depositor. (b) On each Date of Processing after the date on which the Depositor's exercise of its discount option takes effect, the Depositor shall, to the extent required by Section 4.03, (i) deposit into the Collection Account in immediately available funds an amount equal to the product of (a) the aggregate Floating Allocation Percentages with respect to all Series and (b) the aggregate amount of the Discount Option Receivable Collections processed on such day and (ii) pay to the Holder of the Depositor's Certificate the balance of such Discount Option Receivables Collections. The deposit made by the Depositor into the Collection Account under the preceding sentence shall be considered a payment of such Discount Option Receivables and shall be applied as Finance Charge Receivables in accordance with Article IV and the terms of each Supplement. ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES Section 3.01. ACCEPTANCE OF APPOINTMENT AND OTHER MATTERS RELATING TO THE SERVICER. (a) [Servicer Name] agrees to act as the Servicer under this Agreement and the Certificateholders by their acceptance of Certificates consent to [Servicer Name] acting as Servicer. (b) The Servicer shall service and administer the Receivables, shall collect payments due under the Receivables and shall charge off as uncollectible Receivables, all in accordance with its customary and usual servicing procedures for servicing consumer credit card and other consumer revolving credit receivables comparable to the Receivables and in accordance with the Lending Guidelines. The Servicer shall have full power and authority, acting alone or through any Person properly designated by it hereunder, to do any and all things in connection with such servicing and administration which it may deem necessary or desirable. Without limiting the generality of the foregoing, subject to Section 10.01 and provided [Servicer Name] is the Servicer, the Servicer or its designee (other than the Trustee) is hereby authorized and empowered (i) to make withdrawals and payments or to instruct the Trustee to make withdrawals and payments from the Collection Account and any Series Account, as set forth in this Agreement or any Supplement under any Series Account, as set forth in this Agreement or any Supplement, and (ii) to take any action required or permitted under any Series Enhancement, as set forth in this Agreement or any Supplement. Without limiting the generality of the foregoing and subject to Section 10.01, the Servicer or its designee is hereby authorized and empowered to make any filings, reports, notices, applications and registrations with, and to seek any consents or authorizations from, the Securities and Exchange Commission (the "Commission") and any state securities authority on behalf of the Trust as may be necessary or advisable to comply with any Federal or state securities laws or reporting requirements. The Trustee shall furnish, within a reasonable period of time, the Servicer with any powers of attorney or other documents requested by the Servicer and reasonably necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder. (c) The Servicer shall not be obligated to use separate servicing procedures, offices, employees or accounts for servicing the Receivables from the procedures, offices, employees and accounts used by the Servicer in connection with servicing other credit card and consumer revolving credit receivables. (d) The Servicer shall comply with and perform its servicing obligations with respect to the Accounts and Receivables in accordance with the Credit Card Agreements, applicable rules and regulations of VISA, MasterCard and any other similar entity or organization relating to any other type of revolving credit card accounts included as Accounts, except insofar as any failure to so comply or perform would not materially and adversely affect the Trust or the Investor Certificateholders. (e) The Servicer shall pay out of its own funds, without reimbursement, all expenses incurred in connection with the Trust and the servicing activities hereunder including expenses related to enforcement of the Receivables, fees and disbursements of the Trustee, any Paying Agent and any Transfer Agent and Registrar (including the reasonable fees and expenses of its counsel) in accordance with Section 11.05, fees and disbursements of independent accountants and all other fees and expenses, including the costs of filing UCC continuation statements and the costs and expenses relating to obtaining and maintaining the listing of any Investor Certificates on any stock exchange, that are not expressly stated in this Agreement to be payable by the Trust or the Depositor (other than Federal, state, local and foreign income, franchise and other taxes, if any, or any interest or penalties with respect thereto, assessed on the Trust). (f) The Servicer agrees that upon a request by the Depositor it will use its reasonable efforts to obtain and maintain the listing of the Investor Certificates of any Series or Class on any specified securities exchange. If any such request is made, the Servicer shall give notice to the Depositor and the Trustee on the date on which such Investor Certificates are approved for such listing and within three Business Days following receipt of written notice by the Servicer of any actual, proposed or contemplated delisting of such Investor Certificates by any such securities exchange. The Trustee or the Servicer, each in its sole discretion, may terminate any listing on any such securities exchange at any time subject to the notice requirements set forth in the preceding sentence. Section 3.02. SERVICING COMPENSATION. As full compensation for its servicing activities hereunder and as reimbursement for any expense incurred by it in connection therewith, the Servicer shall be entitled to receive a servicing fee (the "Servicing Fee") with respect to each Monthly Period, payable monthly on the related Distribution Date, in an amount equal to one-twelfth of the product of (a) the weighted average of the Servicing Fee Rates with respect to each outstanding Series (based upon the Servicing Fee Rate for each Series and the outstanding Principal amount of each Series) and (b) the amount of Principal Receivables on the last day of the prior Monthly Period. The share of the Servicing Fee allocable to (i) the Certificateholders' Interest of a particular Series with respect to any Monthly Period (the "Monthly Servicing Fee") and (ii) the Enhancement Invested Amount, if any, of a particular Series with respect to any Monthly Period will each be determined in accordance with the relevant Supplement. The portion of the Servicing Fee with respect to any Monthly Period not so allocated to the Certificateholders' Interest or the Enhancement Invested Amount, if any, of a particular Series shall be paid by the Depositor or the related Distribution Date and in no event shall the Trust, the Trustee, the Investor Certificateholders of any Series or any Series Enhancer be liable for the share of the Servicing Fee with respect to any Monthly Period to be paid by the Depositor. Section 3.03. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SERVICER. [Servicer Name], as initial Servicer, hereby makes, and any Successor Servicer by its appointment hereunder shall make, on each Closing Date (and on the date of any such appointment), the following representations, warranties and covenants: (a) ORGANIZATION AND GOOD STANDING. The Servicer is a state banking corporation, a state banking association, a national banking association or a corporation validly existing under the laws of its jurisdiction of incorporation and has, in all material respects, full power and authority to execute, deliver and perform its obligations under this Agreement and each Supplement and to own its properties and conduct its consumer revolving lending business as such properties are presently owned and as such business is presently conducted. (b) DUE QUALIFICATION. The Servicer is duly qualified to do business and is in good standing as a foreign corporation (or is exempt form such requirements), and has obtained all necessary licenses and approvals in each jurisdiction in which the servicing of the Receivables as required by the Agreement requires such qualification except where failure to so qualify or to obtain such licenses and approvals should not have a material adverse effect on its ability to perform its obligation hereunder or under any Supplement. (c) DUE AUTHORIZATION. The execution, delivery, and performance of this Agreement, each Supplement and the other agreements and instruments executed or to be executed by the Servicer as contemplated hereby, have been duly authorized by the Servicer by all necessary corporate action on the part of the Servicer and this Agreement and each Supplement will remain, from the time of its execution, an official record of the Servicer. (d) BINDING OBLIGATION. This Agreement and each Supplement constitutes a legal, valid and binding obligation of the Servicer, enforceable against the Servicer in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereinafter in effect, affecting the enforcement of creditors' rights in general and, if applicable, the rights of creditors of state banking corporations, state banking associations or national banking associations, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (e) NO CONFLICT AND NO VIOLATION. The execution and delivery of this Agreement and each Supplement by the Servicer, and the performance of the transactions contemplated by this Agreement and each Supplement and the fulfillment of the terms hereof and thereof applicable to the Servicer, will not conflict with or violate or result in any breach of, or constitute (with or without notice or lapse of time or both) a material default under, any material indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which it or any of its properties are bound. The execution and delivery of this Agreement by the Servicer, the performance by the Servicer of the transactions contemplated by this Agreement and the fulfillment of the terms hereof applicable to the Servicer will not conflict with or violate any Requirements of Law applicable to the Servicer. (f) NO PROCEEDINGS. There are no proceedings or investigations pending or, to the best knowledge of the Servicer, threatened against the Servicer before any Governmental Authority seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement or any Supplement, or seeking any determination or ruling that, in the reasonable judgment of the Servicer would materially and adversely affect the performance by the Servicer of its obligations under this Agreement or any Supplement. (g) COMPLIANCE WITH REQUIREMENTS OF LAW. The Servicer shall duly satisfy all obligations on its part to be fulfilled under or in connection with the Receivables and the related Accounts, will maintain in effect all qualifications required under Requirements of Law in order to properly service the Receivables and the related Accounts and will comply in all material respects with all other Requirements of Law in connection with servicing the Receivables and the related Accounts, the failure to comply with which would have a material adverse effect on the interests of the Certificateholders. (h) NO RESCISSION OR CANCELLATION. The Servicer shall not permit any rescission or cancellation of a Receivable except as ordered by a court of competent jurisdiction or other Governmental Authority or in accordance with the Lending Guidelines. (i) PROTECTION OF CERTIFICATEHOLDERS' RIGHTS. The Servicer shall take no action which, nor omit to take any action the omission of which, would substantially impair the rights of Certificateholders in any Receivable or Account, nor shall it, except in the ordinary course of its business and in accordance with the Lending Guidelines, reschedule, revise or defer Collections due on the Receivables. (j) RECEIVABLES NOT TO BE EVIDENCED BY PROMISSORY NOTES. The Servicer will take no action to cause or permit any Receivable to be evidenced by any instrument or chattel paper (as defined in the UCC) and, if any Receivable is so evidenced it shall be deemed to be an Ineligible Receivable and shall be reassigned or assigned to the Servicer as provided in this Section; PROVIDED, HOWEVER, that Receivables evidenced by notes taken from Obligors in the ordinary course of the Servicer's collection efforts shall not be deemed Ineligible Receivables solely as a result thereof. (k) ALL CONSENTS. All approvals, authorizations, consents, orders or other actions of any Person or of any Governmental Authority required to be obtained by the Servicer in connection with the execution and delivery by the Servicer of this Agreement and each Supplement, the performance by the Servicer of the transactions contemplated by this Agreement and each Supplement and the fulfillment by the Servicer of the terms hereof and thereof, have been obtained. For purposes of the representation and warranties set forth in this Section 3.03, each reference to a Supplement shall be deemed to refer only to those Supplements in effect as of the relevant Closing Date or the date of appointment of a Successor Servicer, as applicable. In the event any of the representations, warranties or covenants of the Servicer contained in paragraph (g), (h), (i) or (j) with respect to any Receivable or the related Account is breached, and such breach has a material adverse effect on the Certificateholders' Interest of all Series in the Receivables (which determination shall be made without regard to the availability of funds under any Series Enhancement) and remains uncured for 60 days (or for such longer period, not in excess of 150 days, as may be reasonably necessary to remedy such breach; provided that such breach is capable of remedy within 150 days or less and the Servicer delivers an Officer's Certificate to the Trustee to the effect that the Servicer has commenced, or will promptly commence and diligently pursue, all reasonable efforts to remedy such breach) from the earlier to occur of the discovery of such event by the Servicer, or receipt by the Servicer of written notice of such event given by the Trustee, all Receivables in the Account or Accounts to which such event relates shall be reassigned or assigned to the Servicer on the terms and conditions set forth below; PROVIDED, HOWEVER, that such Receivables will not be reassigned or assigned to the Servicer if, on any day prior to the end of such 60-day or longer period, (i) the relevant representation and warranty shall be true and correct, or the relevant covenant shall have been complied with, in all material respects and (ii) the Servicer shall have delivered to the Trustee an Officer's Certificate describing the nature of such breach and the manner in which such breach was cured. If [Servicer Name] is the Servicer, such reassignment or assignment shall be accomplished in the manner set forth in Section 2.05(b) as if the reassigned or assigned Receivables were Ineligible Receivables (including the requirement, if applicable, to reduce the aggregate amount of Principal Receivables used to calculate the Depositor's Amount, the Depositor's Interest, the Floating Allocation Percentage and the Principal Allocation Percentage applicable to any Series and to make deposits into the Excess Funding Account and the Collection Account) and any amounts deposited into the Excess Funding Account and the Collection Account in connection with such reassignment or assignment pursuant to this Section shall be considered a Transfer Deposit Amount and shall be applied in accordance with Article IV and the terms of each Supplement. If [Servicer Name] is not the Servicer, the Servicer shall effect such assignment by making a deposit into the Excess Funding Account and the Collection Account in immediately available funds on the Transfer Date following the Monthly Period in which such assignment obligation arises in an amount equal to the amount of such Receivables, which deposit shall be considered a Transfer Deposit Amount and shall be applied in accordance with Article IV and the terms of each Supplement. Upon each such reassignment or assignment to the Servicer, the Trustee on behalf of the Trust, shall automatically and without further action be deemed to sell, transfer, assign, set over and otherwise convey to the Servicer, without recourse, representation or warranty, all right, title and interest of the Trust in and to such Receivables, all moneys due to become due and all amounts received with respect thereto and all proceeds thereof. The Trustee shall execute such documents and instruments of transfer or assignment and take such other actions as shall be reasonably requested by the Servicer to effect the transfer of any such Receivables pursuant to this Section. The obligation of the Servicer to accept reassignment or assignment and transfer of any such Receivables, and to make the deposits, if any, required to be made to the Collection Account as provided in the preceding paragraph, shall constitute the sole remedy respecting the event giving rise to such obligation available to Investor Certificateholders (or the Trustee on behalf of Certificateholders) or any Series Enhancer, except as provided in Section 8.04. Section 3.04. REPORTS AND RECORDS FOR THE TRUSTEE. (a) DAILY OR MONTHLY RECORDS. On each day on which the Servicer is required to make deposits in the Collection Account pursuant to Section 4.03, the Servicer shall make or cause to be made available at the office of the Servicer during normal business hours for inspection by the Trustee upon request a record setting forth (i) the Collections in respect of Principal Receivables and in respect of Finance Charge Receivables processed by the Servicer on the second preceding Business Day in respect of the Accounts and (ii) the amount of Receivables as of the close of business on the second preceding Business Day in each Account. The Servicer shall, at all times, maintain its computer files with respect to the Accounts in such a manner so that the Accounts may be specifically identified and shall make available to the Trustee at the office of the Servicer on any Business Day during normal business hours any computer programs necessary to make such identification. (b) MONTHLY SERVICER'S CERTIFICATE. Not later than the third Business Day preceding each Distribution Date, the Servicer shall, with respect to each outstanding Series, deliver to the Trustee, the Paying Agent, each Rating Agency and each Series Enhancer entitled thereto pursuant to the relevant Supplement a certificate of a Servicing Officer in substantially the form set forth in the related Supplement. (c) RELATED ACCOUNTS. The Servicer covenants and agrees hereby to deliver to the Trustee, within a reasonable time period after any Related Account is created, but in any event not later than 15 days after the end of the month within which the Related Account was created, a notice specifying the new account numbers of all Accounts and the account numbers of all Additional Accounts for the Related Period. (d) ADDITION DISCOUNT RECEIVABLES. On or prior to each Determination Date, the Servicer shall deliver to the Trustee a certificate of a Servicing Officer setting forth (or shall set forth in the Monthly Servicer's Certificate) (a) the amount of Addition Discount Receivables to be included as Collection of Finance charge Receivables with respect to the preceding Monthly Period, as calculated in accordance with the formula set forth in the applicable Assignment of Receivables in Additional Accounts or accretion designation letter delivered to the Trustee and (b) the portion of such Addition Discount Receivables which have not been treated as Collections of Finance Charge Receivables with respect to the preceding Monthly Period. Section 3.05. ANNUAL CERTIFICATE OF SERVICER. The Servicer shall deliver to the Trustee, each Rating Agency and each Series Enhancer entitled thereto pursuant to the relevant Supplement, on or before May 31 of each calendar year, an Officer's Certificate (with appropriate insertions) substantially in the form of Exhibit D. Section 3.06. ANNUAL SERVICING REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS; COPIES OF REPORTS AVAILABLE. (a) On or before May 31 of each calendar year, the Servicer shall cause a firm of nationally recognized independent public accountants (who may also render other services to the Servicer or the Depositor) to furnish a report (addressed to the Trustee) to the Trustee, the Servicer and each Rating Agency to the effect that they have examined certain documents and records relating to the servicing of Accounts under this Agreement and each Supplement and compared the information contained in the Servicer's certificates delivered pursuant to Section 3.04(b) during the period covered by such report with such documents and records and that, on the basis of such examination, nothing has come to the attention of such accountants that caused them to believe that the servicing has not been conducted in compliance with the terms and conditions set forth in Sections 3.02, 3.04, 3.09, 4.02, 4.03, 4.04, 4.05 and 8.08 of this Agreement and the applicable provisions of each Supplement, except for such exceptions as they believe to be immaterial and such other exceptions as shall be set forth in such statement. A copy of such report shall be delivered by the Servicer to each Series Enhancer entitled thereto pursuant to the relevant Supplement. (b) On or before May 31 of each calendar year, the Servicer shall cause a firm of nationally recognized independent public accounts (who may also render other services to the Servicer or the Depositor) to furnish a report to the Trustee, the Servicer and each Rating Agency to the effect that they have applied certain procedures agreed upon with the Servicer to compare the mathematical calculations of certain amounts set forth in the Servicer's certificates delivered pursuant to Section 3.04(b) during the period covered by such report with the Servicer's computer reports which were the source of such amounts and that on the basis of such agreed upon procedures and comparison, nothing has come to the attention of such accountants that caused them to believe that such amounts are not in agreement, except for such exceptions as they believe to be immaterial and such other exceptions as shall be set forth in such statement. A copy of such report shall be delivered by the Servicer to each Series Enhancer entitled thereto pursuant to the relevant Supplement. (c) A copy of each certificate and report provided pursuant to Section 3.04(b), 3.05 or 3.06 may be obtained by any Investor Certificateholder or Certificate Owner (at the reasonable expense of such Certificate Owner who can establish ownership interest in the Trust) by a request to the Trustee addressed to the Corporate Trust Office. Section 3.07. TAX TREATMENT. The Depositor has entered into this Agreement, and the Certificates will be issued, with the intention that, for Federal, state and local income and franchise tax purposes only, the Investor Certificates of each Series which are characterized as indebtedness at the time of their issuance will qualify as indebtedness of the Depositor secured by the Receivables. The Depositor, by entering into this Agreement, and each Certificateholder, by the acceptance of any such Certificate (and each Certificate Owner, by its acceptance of an interest in the applicable Certificate), agree to treat such Investor Certificates for Federal, state and local income and franchise tax purposes as indebtedness of the Depositor. Section 3.08. NOTICES TO THE [SERVICER NAME]. In the event that [Servicer Name] is no longer acting as Servicer, any Successor Servicer shall deliver to [Servicer Name] each certificate and report required to be provided thereafter pursuant to Section 3.04(b), 3.05 or 3.06. Section 3.09. ADJUSTMENTS. (a) If the Servicer adjusts downward the amount of any Principal Receivable (other than any Ineligible Receivable to be reassigned or assigned to the Depositor or the Servicer pursuant to this Agreement) because of a rebate, refund, unauthorized charge or billing error to an accountholder, or because such Principal Receivable was created in respect of merchandise which was refused or returned by an accountholder, or if the Servicer otherwise adjusts downward the amount of any Principal Receivable without receiving Collections therefor or charging off such amount as uncollectible, then, in any such case, the amount of Principal receivables used to calculate the Depositor's Amount, the Depositor's Interest and the Floating Allocation Percentage and the Principal Allocation Percentage applicable to any Series will be reduced by the amount of the adjustment. Similarly, the amount of Principal Receivables used to calculate the Depositor's Amount, the Depositor's Interest and the Floating Allocation Percentage and the Principal Allocation Percentage applicable to any Series will be reduced by the amount of any Principal Receivable which was discovered as having been created through a fraudulent or counterfeit charge. Any adjustment required pursuant to either of the two preceding sentences shall be made on or prior to the end of the Monthly Period in which such adjustment obligation arises. In the event that, following the exclusion of such Principal Receivables from the calculation of the Depositor's Amount, the Depositor's Amount would be a negative number, not later than 12:00 noon, New York City time, on the Transfer Date immediately preceding the Distribution date following the Monthly Period in which such adjustment obligation arises, the Depositor shall make a deposit into the Collection Account in immediately available funds in an amount equal to the amount by which the Depositor's Amount would be below zero (up to the amount of such Principal Receivables). Any amount deposited into the Collection Account pursuant to the preceding sentence shall be considered an "Adjustment Payment" and shall be applied in accordance with Article IV and the terms of each Supplement. (b) If (i) the Servicer makes a deposit into the collection Account in respect of a Collection of a Receivable and such Collection was received by the Servicer in the form of a check which is not honored for any reason or (ii) the Servicer makes a mistake with respect to the amount of any Collection and deposits an amount that is less than or more than the actual amount of such Collection, the Servicer shall appropriately adjust the amount subsequently deposited in to the Collection Account to reflect such dishonored check or mistake. Any Receivable in respect of which a dishonored check is received shall be deemed not to have been paid. Section 3.10. REPORTS TO THE COMMISSION. The Servicer shall, on behalf of the Trust, cause to be prepared and filed with the Commission any periodic reports required to be filed under the provisions of the Exchange Act and the rules and regulations of the Commission thereunder. The Depositor, if [Servicer Name] is not the Servicer, shall, at the expense of the Servicer, cooperate in any reasonable request of the Servicer in connection with such filings. ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS Section 4.01. RIGHTS OF CERTIFICATEHOLDERS. The Investor Certificates shall represent fractional undivided interests in the Trust, which, with respect to each Series, shall consist of the right to receive, to the extent necessary to make the required payments with respect to such Series at the times and in the amounts specified in the related Supplement, the portion of Collections allocable to such Series pursuant to this Agreement and such Supplement, funds on deposit in the Collection Account or the Excess Funding Account allocable to such Series pursuant to this Agreement and such Supplement, funds on deposit in any related Series Account and funds available pursuant to any related Series Enhancement (collectively, with respect to all Series, the "Certificateholders' Interest"), it being understood that the Investor Certificates of any Series or Class shall not represent any interest in any Series Account or Series Enhancement for the benefit of any other Series or Class. The Depositor's Certificate shall represent the ownership interest in the remainder of the Trust Assets not allocated pursuant to this Agreement or any Supplement to the Certificateholders' Interest including the right to receive Collections with respect to the Receivables and other amounts at the times and in the amounts specified in this Agreement or any Supplement to be paid to the Depositor on behalf of all holders of the Depositor's Certificate (the "Depositor's Interest"); PROVIDED, HOWEVER, that the Depositor's Certificate shall not represent any interest in the Collection Account, the Excess Funding Account, any Series Account or any Series Enhancement, except as specifically provided in this Agreement or any Supplement; PROVIDED FURTHER that the foregoing shall not be construed to limit the Trustee's obligations to make payments to the Depositor and the Servicer as and when required under this Agreement and any Supplement. Section 4.02. ESTABLISHMENT OF COLLECTION ACCOUNT AND EXCESS FUNDING ACCOUNT. The Servicer, for the benefit of the Certificateholders, shall establish and maintain in the name of the Trustee, on behalf of the Trust, an Eligible Deposit Account bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders (the "Collection Account"). The Collection Account shall initially be established with [Servicer Name]. The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Collection Account and in all proceeds thereof. The Collection Account shall be under the sole dominion and control of the Trustee for the benefit of the Certificateholders. Except as expressly provided in this Agreement, the Servicer agrees that it shall have no right of setoff or banker's lien against, and no right to otherwise deduct from, any funds held in the Collection Account for any amount owed to it by the Trustee, the Trust, any Certificateholder or any Series Enhancer. If, at any time, the Collection Account ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Collection Account meeting the conditions specified above, transfer any cash and/or investments to such new collection account and from the date such new Collection Account is established, it shall be the "Collection Account". Unless otherwise agreed by each Rating Agency, if at any time neither [Servicer Name] nor any other Affiliate of [Servicer Name] is the Servicer, the Collection Account will be moved from [Servicer Name] if then maintained there. Funds on deposit in the Collection Account (other than amounts deposited pursuant to Section 2.06, 9.02, 10.01 or 12.02) shall at the direction of the Servicer be invested by the Trustee in Eligible Investments selected by the Servicer. Notwithstanding any other provision herein to the contrary, for purposes of the investment of funds in the Collection Account (but only in an amount up to 20% of the outstanding principal balance of each Series outstanding as of the dates of investment), "highest investment category" as used in the definition of "Eligible Investments" shall mean, in the case of Standard & Poor's, A-1, A-1+, AAA, AAAm or AAAm-G. All such Eligible Investments shall be held by the Trustee for the benefit of the Certificateholders. The Trustee or its custodian shall maintain for the benefit of the Certificateholders possession of the negotiable instruments or securities, if any, evidencing such Eligible Investments. Investments of funds representing Collections collected during any Monthly Period shall be invested in Eligible Investments that will mature so that all funds will be available at the close of business on the Transfer Date following such Monthly Period. No Eligible Investment shall be disposed of prior to its maturity; PROVIDED, HOWEVER, that the Trustee may sell, liquidate or dispose of an Eligible Investment before its maturity, if so directed by the Servicer, the Servicer having reasonably determined that the interests of the Investor Certificateholders may be adversely affected if such Eligible Investment is held to its maturity. Unless directed by the Servicer, funds deposited in the Collection Account on a Transfer Date with respect to the next following Distribution Date are not required to be invested overnight. On each Distribution Date, all interest and other investment earnings (net of losses and investment expenses) on funds on deposit in the Collection Account shall be paid to or at the direction of the Depositor, except as otherwise specified in any Supplement. For purposes of determining the availability of funds or the balances in the Collection Account for any reason under this Agreement, all investment earnings' net of investment expenses and losses on such funds shall be deemed not to be available or on deposit. The Servicer, for the benefit of the Certificateholders, shall establish and maintain in the name of the Trustee, on behalf of the Trust, an Eligible Deposit Account bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders (the "Excess Funding Account"). The Excess Funding Account will initially be established with [Servicer Name]. The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Excess Funding Account and in all proceeds thereof. The Excess Funding Account shall be under the sole dominion and control of the Trustee for the benefit of the Certificateholders. Except as expressly provided in this Agreement, the Servicer agrees that it shall have no right of setoff or banker's lien against, and no right to otherwise deduct from, any funds held in the Excess Funding Account for any amount owed to it by the Trustee, the Trust, any Certificateholder or any Series Enhancer. If, at any time, the Excess Funding Account ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Excess Funding Account meeting the conditions specified above, transfer any cash and/or any investment to such new Excess Funding Account and from the date such new Excess Funding Account is established, it shall be the "Excess Funding Account". Unless otherwise agreed by each Rating Agency, if at any time neither [Servicer Name] nor any other Affiliate of [Servicer Name] is the Servicer, the Excess Funding Account will be moved from [Servicer Name] if then maintained there. Funds on deposit in the Excess Funding Account shall at the direction of the Servicer be invested by the Trustee in Eligible Investments selected by the Servicer. All such Eligible Investments shall be held by the Trustee for the benefit of the Certificateholders. The Trustee or its custodian shall maintain for the benefit of the Certificateholders possession of the negotiable instruments or securities, if any, evidencing such Eligible Investments. Funds on deposit in the Excess Funding Account on any Distribution Date will be invested in Eligible Investments that will mature so that all funds will be available at the close of business on the Transfer Date following such Monthly Period. No Eligible Investment shall be disposed of prior to its maturity; PROVIDED, HOWEVER, that the Trustee may sell, liquidate or dispose of an Eligible Investment before its maturity, if so directed by the Servicer, the Servicer having reasonably determined that the interests of the Investor Certificateholders may be adversely affected if such Eligible Investment is held to its maturity. Unless directed by the Servicer, funds deposited in the Excess Funding Account on a Transfer Date with respect to the next following Distribution Date are not required to be invested overnight. On each Distribution Date, all interest and other investment earnings (net of losses and investment expenses) on funds on deposit in the Excess Funding Account shall be treated as Collections of Finance Charge Receivables with respect to the last day of the related Monthly Period. Funds on deposit in the Excess Funding Account will be withdrawn and paid to the Depositor on any Distribution Date to the extent the (i) the Depositor's Amount exceeds the Required Depositor's Interest and (ii) the Required Principal Balance (as defined in any Series Supplement) is not less than the aggregate amount of Principal Receivables (determined after giving effect to any Principal Receivables transferred to the Trust on such date); PROVIDED, HOWEVER, that, if an Accumulation Period, Controlled Amortization Period or Early Amortization Period has commenced and is continuing with respect to one or more outstanding Series, any funds on deposit in the Excess Funding Account shall be treated as Shared Principal Collections and shall be allocated and distributed in accordance with Section 4.04 and the terms of the Supplements for the Principal Sharing Series. For purposes of determining the availability of funds or the balances in the Excess Funding Account for any reason under this Agreement, all investment earnings' net of investment expenses and losses on such funds shall be deemed not to be available or on deposit. Section 4.03. COLLECTIONS AND ALLOCATIONS. (a) The Servicer will apply or will instruct the Trustee to apply all funds on deposit in the Collection Account as described in this Article IV and in each Supplement. Except as otherwise provided below, the Servicer shall deposit Collections into the Collection Account no later than the second Business Day following the Date of Processing of such Collections or, in the case of any Collections consisting of Interchange, not later than 12:00 noon, New York City time, on each Distribution Date. Subject to the express terms of any Supplement, but notwithstanding anything else in this Agreement to the contrary, for so long as [Servicer Name] remains the Servicer and (x) maintains a certificate of deposit rating of A-1 or better by Standard & Poor's and P-1 by Moody's, or (y) [Servicer Name] has provided to the Trustee a letter of credit covering collection risk of the Servicer acceptable to each Rating Agency (as evidenced by a letter from each Rating Agency), the Servicer need not make the daily deposits of Collections into the Collection Account as provided in the preceding sentence, but may make a single deposit in the Collection Account in immediately available funds not later than 12:00 noon, New York City time, on the Transfer Date immediately preceding each Distribution Date or, in the case of any Collections consisting of Interchange, not later than 12:00 noon, New York City time, on each Distribution Date. Subject to the first provision Section 4.04, but notwithstanding anything else in this Agreement to the contrary, with respect to any Monthly Period, whether the Servicer is required to make deposits of Collections pursuant to the first or the second preceding sentence, (i) the Servicer will only be required to deposit Collections into the Collection Account up to the aggregate amount of Collections required to be deposited into any Series Account or, without duplication, distributed on or prior to the related Distribution Date to Investor Certificateholders or to any Series Enhancer pursuant to the terms of any Supplement or Enhancement Agreement and (ii) if at any time prior to such Distribution, Date the amount of Collections deposited in the Collection Account exceeds the amount required to be deposited pursuant to clause (i) above, the Servicer will be permitted to withdraw the excess from the Collection Account. (b) (i) Collections of Finance Charge Receivables will be allocated to the Certificateholders' Interest of a Series in an amount equal to the product of the amount of such Collections and the Floating Allocation Percentage of such Series, (ii) the Defaulted Amount will be allocated to the Certificateholders' Interest of a Series in an amount equal to the product of such Defaulted Amount and the Floating Allocation Percentage of such Series, (iii) Collections of Principal Receivables will be allocated to the Certificateholders' Interest of such Series in an amount equal to the product of the amount of such Collections and the Principal Allocation Percentage of such Series and (iv) Miscellaneous Payments will be allocated to the Certificateholders' Interest of such Series in an amount equal to the product of the amount of such Miscellaneous Payments and a fraction the numerator of which is the Invested Amount and Enhancement Invested Amount, if any, of such Series and the denominator of which is the sum of the Invested Amounts and the Enhancement Invested Amount, if any, for all outstanding Series, in each case or such Monthly Period. Subject to Sections 4.03(c) and 4.04, amounts not allocated to the Certificateholders' Interest of any Series will be allocated to the Depositor's Interest. (c) On the earlier of (A) the second Business Day after the Date of Processing and (B) the day on which the Servicer actually deposits any Collections into the Collection Account or, in the case of any Collections consisting of Interchange, not later than 12:00 noon, New York City time, on each Distribution Date, the Servicer will pay to the Depositor (i) the Depositor's allocable portion of Collections of Finance Charge Receivables and (ii) the Depositor's allocable portion of Collections of Principal Receivables; PROVIDED, however, that, in the case of Collections of Principal Receivables allocated to the Depositor's Interest and any Shared Principal Collections that would otherwise be paid to the Depositor pursuant to Section 4.04, such amounts shall be paid to the Depositor only if the Depositor's Amount (determined after giving effect to any Principal Receivables transferred to the Trust on such date) exceeds zero. The amount held in the Collection Account as a result of the proviso in the preceding sentence ("Unallocated Principal Collections") shall be paid to the Depositor at the time the Depositor's Amount exceeds zero; PROVIDED, HOWEVER, that any Unallocated Principal Collections on deposit in the Collection Account at any time during which any Principal Sharing Series is in its Accumulation Period, Amortization Period or Early Amortization Period shall be deemed to be Shared Principal Collections and shall be allocated and distributed in accordance with Section 4.04 and the terms of each Supplement. The payments to be made to the Depositor pursuant to this Section 4.03(c) do not apply to deposits to the Collection Account or other amounts that do not represent Collections, including Miscellaneous Payments, payment of the purchase price for Receivables pursuant to Section 2.06 or 10.01, proceeds from the sale, disposition or liquidation of Receivables pursuant to Section 9.02 or 12.02 or payment of the purchase price for the Certificateholders' Interest of a specific Series pursuant to the related Supplement. (d) If the Depositor so designates, the Principal Receivables in Additional Accounts added during any Monthly Period having an Additional Cut-Off Date as of any day during the preceding Monthly Period shall be treated as Principal Receivables outstanding on and after such Additional Cut-Off Date for purposes of calculating the Floating Allocation Percentage and Principal Allocation Percentage for the Monthly Period in which such Additional Accounts are added. Any such recalculation of the Floating Allocation Percentage and Principal Allocation Percentage for a Monthly Period shall be effective only on and after the Addition Date, but the Servicer shall determine the amounts of Collections and the Defaulted Amounts which would have been allocated to the Certificateholders' Interest of each Series for the portion of such Monthly Period preceding such Addition Date as if such recalculated Floating Allocation Percentage and Principal Allocation Percentage had been in effect and shall adjust the amounts to be allocated for the remainder of such Monthly Period so that the amounts allocated to the Certificateholders' Interest of each Series and the Depositor's Interest are equal to the amounts which would have been allocated to them if such recalculated percentages had been in effect for the entire Monthly Period. Section 4.04. SHARED PRINCIPAL COLLECTIONS. On each Distribution Date, (a) the Servicer shall allocate Shared Principal Collections to each Principal Sharing Series, pro rata, in proportion to the Principal Shortfalls, if any, with respect to each such Series and (b) the Servicer shall withdraw from the Collection Account or the Excess Funding Account and pay to the Depositor an amount equal to the excess, if any, of (x) the aggregate amount for all outstanding Series of Collections of Principal Receivables and Miscellaneous Payments which the related Supplements or this Agreement specify are to be treated as "Shared Principal Collections" for such Distribution Date over (y) the aggregate amount for all outstanding Principal Sharing Series which the related Supplements specify are "Principal Shortfalls" for such Distribution Date; PROVIDED, HOWEVER, that, if, on any Distribution Date, either (i) the Depositor's Amount (determined after giving effect to any Principal Receivables transferred to the Trust on such date) is less than or equal to the Required Depositor's Interest, or (ii) the aggregate amount of Principal Receivables in the Trust (determined after giving effect to any Principal Receivables transferred to the Trust on such date) is less than the Required Principal Balance, the Servicer will not distribute to the Depositor any Shared Principal Collections then on deposit in the Collection Account that otherwise would be distributed to the Depositor, but shall deposit such funds in the Excess Funding Account. Section 4.05. EXCESS FINANCE CHARGES. On each Distribution Date, (a) the Servicer shall allocate Excess Finance Charges with respect to the Series in a Group to each Series in such Group, pro rata, in proportion to the Finance Charge Shortfalls, if any, with respect to each such Series and (b) the Servicer shall withdraw (or shall instruct the Trustee to withdraw) from the Collection Account and pay to the Depositor an amount equal to the excess, if any, of (x) the aggregate amount for all outstanding Series in a Group of the amounts which the related Supplements specify are to be treated as "Excess Finance Charges" for such Distribution Date over (y) the aggregate amount for all outstanding Series in such Group which the related Supplements specify are "Finance Charge Shortfalls" for such Distribution Date; PROVIDED, HOWEVER, that, if, on any Distribution Date, either (i) the Depositor's Amount for such Distribution Date (determined after giving effect to any Principal Receivables transferred to the Trust on such date and Shared Principal Collections deposited in the Excess Funding Account on such date) is less than or equal to the Required Depositor's Interest, or (ii) the aggregate amount of Principal Receivables in the Trust (determined after giving effect to any Principal Receivables transferred to the Trust on such date and any Shared Principal Collections deposited in the Excess Funding Account on such Date) is less than the Required Principal Balance, the Servicer will not distribute to the Depositor any Excess Finance Charges then on deposit in the Collection Account that otherwise would be distributed to the Depositor, but shall deposit such funds in the Excess Funding Account; PROVIDED FURTHER, HOWEVER, that the sharing of Excess Finance Charges among Series in a Group will continue only until such time, if any, at which the Depositor shall deliver to the Trustee an Officer's Certificate to the effect that, in the reasonable belief of the Depositor, the continued sharing of Excess Finance Charges among Series in any Group would have adverse regulatory implications with respect to the Depositor. Following the delivery by the Depositor of such an Officer's Certificate to the Trustee there will not be any further sharing of Excess Finance Charges among Series in any Group. ARTICLE V DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS Distributions shall be made to, and reports shall be provided to, Certificateholders as set forth in the applicable Supplement. ARTICLE VI THE CERTIFICATES Section 6.01. THE CERTIFICATES. The Investor Certificates of any Series or Class may be issued in bearer form ("Bearer Certificates") with attached interest coupons and any other applicable coupon (collectively, the "Coupons") or in fully registered form ("Registered Certificates") and shall be substantially in the form of the exhibits with respect thereto attached to the applicable Supplement. The Depositor's Certificate will be issued in registered form, substantially in the form of Exhibit A and shall upon issue, be executed and delivered by the Depositor to the Trustee for authentication and redelivery as provided in Section 6.02. Except as otherwise provided in Section 6.03 or in any Supplement, Bearer Certificates shall be issued in minimum denominations of $1,000 and Registered Certificates shall be issued in minimum denominations of $1,000 and in integral multiples of $1,000 in excess thereof. If specified in any Supplement, the Investor Certificates of any Series or Class shall be issued upon initial issuance as a single certificate evidencing the aggregate original principal amount of such Series or Class as described in Section 6.13. The Depositor's Certificate shall be a single certificate and shall initially represent the entire Depositor's Interest. Each Certificate shall be executed by manual or facsimile signature of behalf of the Depositor by its respective President or any Vice President. Certificates bearing the manual or facsimile signature on an individual who was, at the time when such signature was affixed, authorized to sign on behalf of the Depositor shall not be rendered invalid, notwithstanding that such individual ceased to be so authorized prior to the authentication and delivery of such Certificates or does not hold such office at the date of such Certificates. No Certificates shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by or on behalf of the Trustee by the manual signature of a duly authorized signatory, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. Bearer Certificates shall be dated the Series Issuance Date. All Registered Certificates and the Depositor's Certificate shall be dated the date of their authentication. Section 6.02. AUTHENTICATION OF CERTIFICATES. The Trustee shall authenticate and deliver the Investor Certificates of each Series and Class that are issued upon original issuance to or upon the order of the Depositor against payment to the Depositor of the purchase price therefor. The Trustee shall authenticate and deliver the Depositor's Certificate to the Depositor simultaneously with its delivery of the Investor Certificates of the first Series to be issued hereunder. If specified in the related Supplement for any Series or Class, the Trustee shall authenticate and deliver outside the United States the Global Certificate that is issued upon original issuance thereof. Section 6.03. NEW ISSUANCES. (a) The Depositor may from time to time direct the Trustee, on behalf of the Trust, to authenticate one or more new Series of Investor Certificates. The Investor Certificates of all outstanding Series shall be equally and ratably entitled as provided herein to the benefits of this Agreement without preference, priority or distinction, all in accordance with the terms and provisions of this Agreement and the applicable Supplement except, with respect to any Series or Class, as provided in the related Supplement. (b) On or before the Series Issuance Date relating to any new Series, the parties hereto will execute and deliver a Supplement which will specify the Principal Terms of such new Series. The terms of such Supplement may modify or amend the terms of this Agreement solely as applied to such new Series. The obligation of the Trustee to authenticate the Investor Certificates of such new Series and to execute and deliver the related Supplement is subject to the satisfaction of the following conditions: (i) on or before the fifth Business Day immediately preceding the Series Issuance Date, the Depositor shall have given the Trustee, the Servicer, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement notice of such issuance and the Series Issuance Date; (ii) the Depositor shall have delivered to the Trustee the related Supplement, in form and substance satisfactory to the Trustee, executed by each party hereto other than the Trustee; (iii) the Depositor shall have delivered to the Trustee any related Enhancement Agreement executed by each of the parties thereto, other than the Trustee; (iv) the Depositor shall have received written notice from each Rating Agency that such issuance will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee; (v) the Depositor shall have delivered to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate of the Depositor, dated the Series Issuance Date, to the effect that the Depositor reasonably believes that such issuance will not, based on the facts known to such officer at the time of such certification, then cause a Pay Out Event or any event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event to occur with respect to any Series; (vi) the Depositor shall have delivered to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement a Tax Opinion, dated the Series Issuance Date, with respect to such issuance; and (vii) the Depositor shall have delivered to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate of the Depositor, dated the Series Issuance Date to the effect that the Depositor's Amount (excluding the interest represented by any Supplemental Certificate) shall not be less than the Specified Percentage of the total amount of Principal Receivables, in each case as of the Series Issuance Date, and after giving effect to such issuance. Upon satisfaction of the above conditions, the Trustee shall execute the Supplement and authenticate the Investor Certificates of such Series upon execution thereof by the Depositor. (c) The Depositor may surrender the Depositor's Certificate to the Trustee in exchange for a newly issued Depositor's Certificate and one or more additional certificates (each a "Supplemental Certificate"), the terms of which shall be defined in a Supplement (which Supplement shall be subject to Section 13.01(a) to the extent that it amends any of the terms of this Agreement), to be delivered to or upon the order of the Depositor (or the holder of a Supplemental Certificate, in the case of the transfer of exchange thereof, as provided below), upon satisfaction of the following conditions: (i) the Depositor shall have received written notice from each Rating Agency that such exchange (or transfer or exchange as provided below) will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee; and (ii) the Depositor shall have delivered to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement a Tax Opinion, dated the date of such exchange (or transfer or exchange as provided in the next sentence), with respect thereto. Any Supplemental Certificate may be transferred or exchanged only upon satisfaction of the conditions set forth in clauses (i) and (ii) above. Section 6.04. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a) The Trustee shall cause to be kept at the Corporate Trust Office to be maintained in accordance with the provisions of Section 11.16 a register (the "Certificate Register") in which, subject to such reasonable regulations as it may prescribe, a transfer agent and registrar (which may be the Trustee) (the "Transfer Agent and Registrar") shall provide for the registration of the Registered Certificates and of transfers and exchanges of the Registered Certificates as herein provided. The Transfer Agent and Registrar shall initially be the Trustee, and any co-transfer agent and co-registrar chosen by the Depositor and acceptable to the Trustee, including, if and so long as any Series or Class is listed on a European stock exchange (including the Luxembourg Stock Exchange) and such exchange shall so require, a co-transfer agent and co- registrar in the city of such exchange. So long as any Investor Certificates are outstanding, the Depositor shall maintain a co-transfer agent and co- registrar in New York City. Any reference in this Agreement to the Transfer Agent and Registrar shall include any co-transfer agent and co-registrar unless the context requires otherwise. The Trustee may revoke such appointment and remove any Transfer Agent and Registrar if the Trustee determines in its sole discretion that such Transfer Agent and Registrar failed to perform its obligations under this Agreement in any material respect. Any Transfer Agent and Registrar shall be permitted to resign as Transfer Agent and Registrar upon 30 days' written notice to the Depositor, the Trustee and the Servicer; provided, however, that such resignation shall not be effective and such Transfer Agent and Registrar shall continue to perform its duties as Transfer Agent and Registrar until the Depositor has appointed a successor Transfer Agent and Registrar reasonably acceptable to the Trustee. Subject to paragraph (c) below, upon surrender for registration of transfer of any Registered Certificate at any office or agency of the Transfer Agent and Registrar maintained for such purpose, one or more new Registered Certificates (of the same Series and Class) in authorized denominations of like aggregate fractional undivided interests in the Certificateholders' Interest shall be executed, authenticated and delivered, in the name of the designated transferee or transferees. At the option of a Registered Certificateholder, Registered Certificates (of the same Series and Class) may be exchanged for other Registered Certificates of authorized denominations of like aggregate fractional undivided interests in the Certificateholders' Interest, upon surrender of the Registered Certificates to be exchanged at any such office or agency; Registered Certificates, including Registered Certificates received in exchange for Bearer Certificates, may not be exchanged for Bearer Certificates. At the option of the Holder of a Bearer Certificate, subject to applicable laws and regulations, Bearer Certificates may be exchanged for other Bearer Certificates or Registered Certificates (of the same Series and Class) of authorized denominations of like aggregate fractional undivided interests in the Certificateholders' Interest upon surrender of the Bearer Certificates to be exchanged at an office or agency of the Transfer Agent and Registrar located outside the United States. Each Bearer Certificate surrendered pursuant to this Section shall have attached thereto all unmatured Coupons; PROVIDED that any Bearer Certificate, so surrendered after the close of business on the Record Date preceding the relevant payment date or distribution date after the expected final payment date need not have attached the Coupon relating to such payment date or distribution date (in each case, as specified in the applicable Supplement). Whenever any Investor Certificates are so surrendered for exchange, the Depositor shall execute, the Trustee shall authenticate and the Transfer Agent and Registrar shall deliver (in the case of Bearer Certificates, outside the United States) the Investor Certificates which the Investor Certificateholder making the exchange is entitled to receive. Every Investor Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in a form satisfactory to the Trustee or the Transfer Agent and Registrar duly executed by the Investor Certificateholder or the attorney-in-fact thereof duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Investor Certificates, but the Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any such transfer or exchange. All Investor Certificates (together with any Coupons) surrendered for registration of transfer and exchange or for payment shall be canceled and disposed of in a manner customary and satisfactory to the Trustee. The Trustee shall cancel and destroy any Global Certificate upon its exchange in full for Definitive Euro-Certificates and shall deliver a certificate of destruction to the Depositor. Such certificate shall also state that a certificate or certificates of a Foreign Clearing Agency to the effect referred to in Section 6.13 was received with respect to each portion of the Global Certificate exchanged for Definitive Euro-Certificates. The Depositor shall execute and deliver to the Trustee Bearer Certificates and Registered Certificates in such amounts and at such times as are necessary to enable the Trustee to fulfill its responsibilities under this Agreement, each Supplement and the Certificates. (b) The Transfer Agent and Registrar will maintain at the Transfer Agent and Registrar's expense (or at the co-transfer agent and co-registrar's expense) in each of the Borough of Manhattan, The City of New York, and if and so long as any Series or Class is listed on a European stock exchange (including the Luxembourg Stock Exchange), then in the city of such exchange, an office or agency where Investor Certificates may be surrendered for registration of transfer or exchange (except that Bearer Certificates may not be surrendered for exchange at any such office or agency in the United States). (c) (i) Registration of transfer of Investor Certificates containing a legend substantially to the effect set forth on Exhibit E-1 shall be effected only if such transfer (x) is made pursuant to an effective registration statement under the Act, or is exempt from the registration requirements under the Act, and (y) is made to a Person which is not an employee benefit plan, trust or account, including an individual retirement account, that is subject to ERISA or that is described in Section 4975(e)(1) of the Code or an entity whose underlying assets include plan assets by reason of a plan's investment in such entity (a "Benefit Plan"). In the event that registration of a transfer is to be made in reliance upon an exemption from the registration requirements under the Act, the transferor or the transferee shall deliver, at its expense, to the Depositor, the Servicer and the Transfer Agent and Registrar an investment letter from the transferee, substantially in the form of the investment and ERISA representation letter attached hereto as Exhibit E-2, and no registration of transfer shall be made until such letter is so delivered. Investor Certificates issued upon registration or transfer of, or Investor Certificates issued in exchange for, Investor Certificates bearing the legend referred to above shall also bear such legend unless the Depositor, the Servicer, the Trustee and the Transfer Agent and Registrar receive an Opinion of Counsel, satisfactory to each of them, to the effect that such legend may be removed. Whenever an Investor Certificate containing the legend referred to above is presented to the Transfer Agent and Registrar for registration of transfer, the Transfer Agent and Registrar shall promptly seek instructions from the Servicer regarding such transfer and shall be entitled to receive instructions signed by a Servicing Officer prior to registering any such transfer. The Depositor hereby agrees to indemnify the Transfer Agent and Registrar and the Trustee and to hold each of them harmless against any loss, liability or expense incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by them in relation to any such instructions furnished pursuant to this clause (i). (ii) Registration of transfer of Investor Certificates containing a legend to the effect set forth on Exhibit E-3 shall be effected only if such transfer is made to a Person which is not a Benefit Plan. By accepting and holding any such Investor Certificate, an Investor Certificateholder shall be deemed to have represented and warranted that it is not a Benefit Plan. By acquiring any interest in a Book-Entry Certificate which contains such legend, a Certificate Owner shall be deemed to have represented and warranted that it is not a Benefit Plan. (iii) If so requested by the Depositor, the Trustee will make available to any prospective purchaser of Investor Certificates who so requests, a copy of a letter provided to the Trustee by or on behalf of the Depositor relating to the transferability of any Series or Class to a Benefit Plan. Section 6.05. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any mutilated Certificate (together, in the case of Bearer Certificates, with all unmatured Coupons (if any) appertaining thereto) is surrendered to the Transfer Agent and Registrar, or the Transfer Agent and Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to the Transfer Agent and Registrar, the Depositor, the Servicer and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Trustee that such Certificate has been acquired by a bona fide purchaser, the Depositor shall execute, the Trustee shall authenticate and the Transfer Agent and Registrar shall deliver (in the case of Bearer Certificates, outside the United States), in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and aggregate fractional undivided interest. In connection with the issuance of any new Certificate under this Section, the Trustee or the Transfer Agent and Registrar may require the payment by the Certificate, older of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and Transfer Agent and Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section shall constitute complete and indefeasible evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time and any holder of the lost, stolen, or destroyed Certificate shall no longer be entitled to any of the rights or benefits hereunder. Section 6.06. PERSONS DEEMED OWNERS. The Trustee, the Paying Agent, the Depositor, the Servicer, the Transfer Agent and Registrar and any agent of any of them may (a) prior to due presentation of a Registered Certificate for registration of transfer, treat the Person in whose name any Registered Certificate is registered as the owner of such Registered Certificate for the purpose of receiving distributions pursuant to the terms of the applicable Supplement and for all other purposes whatsoever, and (b) treat the bearer of a Bearer Certificate or Coupon as the owner of such Bearer Certificate or Coupon for the purpose of receiving distributions pursuant to the terms of the applicable Supplement and for all other purposes whatsoever; and, in any such case, neither the Trustee, the Paying Agent, the Depositor, the Servicer, the Transfer Agent and Registrar nor any agent of any of them shall be affected by any notice to the contrary. Notwithstanding the foregoing, in determining whether the Holders of the requisite Investor Certificates have given any request, demand, authorization, direction, notice , consent or waiver hereunder, Certificates owned by the Depositor, the Servicer, any other holder of the Depositor's Certificate, the Trustee or any Affiliate thereof, shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Certificates which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Certificates so owned which have been pledged in good faith shall not be disregarded and may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Depositor, the Servicer, any other holder of the Depositor's Certificate or any Affiliate thereof. Section 6.07. APPOINTMENT OF PAYING AGENT. The Paying Agent shall make distributions to Investor Certificateholders from the Collection Account or any applicable Series Account pursuant to the provisions of the applicable Supplement and shall report he amounts of such distributions to the Trustee. Any Paying Agent shall have the revocable power to withdraw funds from the Collection Account or any applicable Series Account for the purpose of making the distributions referred to above. The Trustee may revoke such power and remove the Paying Agent if the Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement or any Supplement in any material respect. The Paying Agent shall initially be the Trustee and any co-paying agent chosen by the Depositor and acceptable to the Trustee, including, if and so long as any Series or Class is listed on a European stock exchange (including the Luxembourg Stock Exchange) and such exchange so requires, a co-paying agent in the city exchange or another western European city. Any Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Trustee and the Depositor. In the event that any Paying Agent shall resign, the Depositor shall appoint a successor to act as Paying Agent, reasonably acceptable to the Trustee. The initial and each successor or additional Paying Agent shall execute and deliver to the Trustee an instrument in which such successor or additional Paying Agent shall agree with the Trustee that (i) it will hold all sums, if any, held by it for payment to the Investor Certificateholders in trust for the benefit of the Investor: Certificateholders entitled thereto until such sums shall be paid to such Investor Certificateholders and (ii) during the continuance of any Pay-Out Event or Servicer Default, upon the written request of the Trustee, it will forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Investor Certificates. The Paying Agent shall return all unclaimed funds to the Trustee and upon removal shall also return all funds in its possession to the Trustee. If and for so long as the Trustee shall act as Paying Agent, the provisions of Sections 11.01, 11.02, 11.03 and 11.05 shall apply to the Trustee also in its role as Paying Agent. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. Section 6.08. ACCESS TO LIST OF REGISTERED CERTIFICATEHOLDERS NAMES AND ADDRESSES. The Trustee will furnish or cause to be furnished by the Transfer Agent and Registrar to the Servicer or the Paying Agent, within five Business Days after receipt by the Trustee of a request therefor, a list in such form as the Servicer or the Paying Agent may reasonably inquire, of the names and addresses of the Registered Certificateholders. If any Holder or group of Holders of Investor Certificates of any Series or all outstanding Series, as the case may be, evidencing not less than 33% of the aggregate unpaid principal amount of such Series or all outstanding Series, as applicable (the "Applicants"), apply to the Trustee, and such application states that the Applicants desire to communicate with other Investor Certificateholders with respect to their rights under this Agreement or any Supplement or under the Investor Certificates and is accompanied by a copy of the communication which such Applicants propose to transmit, then the Trustee after having been adequately indemnified by such Applicants for its costs and expenses, shall afford or shall cause the Transfer Agent and Registrar to afford such Applicants access during normal business hours to the most recent list of Registered Certificateholders of such Series or all outstanding Series, as applicable, held by the Trustee, within five Business Days after the receipt of such application. Such list shall be as of a date no more than 45 days prior to the date of receipt of such Applicants request. Every Registered Certificateholder, by receiving and holding a Registered Certificate, agrees with the Trustee that neither the Trustee, the Depositor, the Servicer, the Transfer Agent and Registrar, nor any of their respective agents, shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Registered Certificateholders hereunder, regardless of the sources from which such information was derived. Section 6.09. AUTHENTICATING AGENT. (a) The Trustee may appoint one or more authenticating agents with respect to the Certificates which shall be authorized to act on behalf of the Trustee in authenticating the Certificates in connection with the issuance, delivery, registration of transfer, exchange or repayment of the Certificates. Whenever reference is made in this Agreement to the authentication of Certificates by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an authenticating agent and certificate of authentication executed on behalf of the Trustee by an authenticating agent. Each authenticating agent must be reasonably acceptable to the Depositor and the Servicer. (b) Any institution succeeding to the corporate agency business of an authenticating agent shall continue to be an authenticating agent without the execution or filing of any power or any further act on the part of the Trustee or such authenticating agent. An authenticating agent may at any time resign by giving written notice of resignation to the Trustee and to the Depositor. The Trustee may at any time terminate the agency of an authenticating agent by giving written notice of termination to such authenticating agent and to the Depositor. Upon receiving such a notice of resignation or upon such a termination, or in case at any time an authenticating agent shall cease to be acceptable to the Trustee or the Depositor, the Trustee promptly may appoint a successor authenticating agent. Any successor authenticating agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an authenticating agent. No successor authenticating agent shall be appointed unless acceptable to the Trustee and the Depositor. The Depositor agrees to pay to each authenticating agent from time to time reasonable compensation for its services under this Section. The provisions of Sections 11.0l, 11.02 and 11.03 shall be applicable to any authenticating agent. (c) Pursuant to an appointment made under this Section, the Certificates may have endorsed thereon, in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication in substantially the following form: This is one of the Certificates described in the Pooling and Servicing Agreement. ---------------------------------- ---------------------------------- as Authenticating Agent for the Trustee, by _______________________________ Authorized Officer Section 6.10. BOOK-ENTRY CERTIFICATES. Unless otherwise specified in the related Supplement for any Series or Class, the Investor Certificates, upon original issuance, shall be issued in the form of one or more typewritten Investor Certificates representing the Book-Entry Certificates, to be delivered to the Clearing Agency, by, or on behalf of, the Depositor. The Investor Certificates shall initially be registered on the Certificate Register in the name of the Clearing Agency or its nominee, and no Certificate Owner will receive a definitive certificate representing such Certificate Owner's interest in the Investor Certificates, except as provided in Section 6.12. Unless and until definitive, fully registered Investor Certificates ("Definitive Certificates") have been issued to the applicable Certificate Owners pursuant to Section 6.12 or as otherwise specified in any such Supplement: (a) the provisions of this Section shall be in full force and effect; (b) the Depositor, the Servicer and the Trustee may deal with the Clearing Agency and the Clearing Agency Participants for all purposes (including the making of distributions) as the authorized representatives of the respective Certificate Owners; (c) to the extent that the provisions of this Section conflict with any other provisions of this Agreement, the provisions of this Section shall control; and (d) the rights of the respective Certificate Owners shall be exercised only through the Clearing Agency and the Clearing Agency Participants and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency and/or the Cleaning Agency Participants. Pursuant to the Depositary Agreement, unless and until Definitive Certificates are issued pursuant to Section 6.12, the Clearing Agency will make book-entry transfers, the Clearing Agency Participants and receive and transmit distributions of and interest on the related Investor Certificates to such Clearing Agency Participants. For purposes of any provision of this Agreement requiring or permitting actions with the consent of, or at the direction of, Investor Certificateholders evidencing a specified percentage of the aggregate unpaid principal amount of Investor Certificates, such direction or consent may be given by Certificate Owners (acting through the Clearing Agency and the Clearing Agency Participants) owning Investor Certificates evidencing the requisite percentage of principal amount of Investor Certificates. Section 6.11. NOTICES TO CLEARING AGENCY. Whenever any notice or other communication is required to be given to Investor Certificateholders of any Series or Class with respect to which Book-Entry Certificates have been issued, unless and until Definitive Certificates shall have been issued to the related Certificate Owners, the Trustee shall give all such notices and communications to the applicable Clearing Agency. Section 6.12. DEFINITIVE CERTIFICATES. If Book-Entry Certificates have been issued with respect to any Series or Class and (a) the Depositor advises the Trustee that the Clearing Agency is no longer willing or able to discharge properly its responsibilities under the Depositary Agreement with respect to such Series or Class and the Trustee or the Depositor is unable to locate a qualified successor, (b) the Depositor, at its option, advises the Trustee that it elects to terminate the book-entry system with respect to such Series or Class through the Clearing Agency or (c) after the occurrence of a Servicer Default, Certificate Owners of such Series or Class evidencing more than 50% of the aggregate unpaid principal amount of such Series or Class advise the Trustee and the Clearing Agency through the Clearing Agency Participants that the continuation of a book-entry system with respect to the Investor Certificates of such Series or Class through the Clearing Agency is no longer in the best interests of the Certificate Owners with respect to such Certificates, then the Trustee shall notify all Certificate Owners of such Certificates, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Certificates to Certificate Owners requesting the same. Upon surrender to the Trustee of any such Certificates by the Clearing Agency, accompanied by registration instructions from the Clearing Agency for registration, the Depositor shall execute and the Trustee shall authenticate and deliver such Definitive Certificates. Neither the Depositor nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of such Definitive Certificates all references herein to obligations imposed upon or to be performed by the Clearing Agency shall be deemed to be imposed upon and performed by the Trustee, to the extent applicable with respect to such Definitive Certificates and the Trustee shall recognize the Holders of such Definitive Certificates as Investor Certificateholders hereunder. Section 6.13. GLOBAL CERTIFICATE; EXCHANGE DATE. (a) If specified in the related Supplement for any Series or Class, the Investor Certificates for such Series or Class will initially be issued in the form of a single temporary global Certificate (the "Global Certificate") in bearer form, without interest coupons, in the denomination of the entire aggregate principal amount of such Series or Class substantially in the form set forth in the exhibit with respect thereto attached to the related Supplement. The Global Certificate will be executed by the Depositor and authenticated by the Trustee upon the same conditions, in substantially the same manner and with the same effect as the Definitive Certificates. The Global Certificate may be exchanged as described below for Bearer or Registered Certificates in definitive form (the "Definitive Euro-Certificates"). (b) The Manager shall, upon its determination of the date of completion of the distribution of the Investor Certificates of such Series or Class, so advise the Trustee, the Depositor, the Depositaries, and each Foreign Clearing Agency forthwith. Without unnecessary delay, but in any event not prior to the Exchange Date, the Depositor will execute and deliver to the Trustee at its London office or its designated agent outside the United States definitive Bearer Certificates in an aggregate principal amount equal to the entire aggregate principal amount of such Series or Class. All Bearer Certificates so issued and delivered will have Coupons attached. The Global Certificate may be exchanged for an equal aggregate principal amount of Definitive Euro-Certificates only on or after the Exchange Date. An institutional investor that is a U.S. Person may exchange the portion of the Global Certificate beneficially owned by it only for an equal aggregate principal amount of Registered Certificates bearing the applicable legend set forth in the form of Registered Certificate attached to the related Supplement and having a minimum denomination of $500,000, which may be in temporary form if the Depositor so elects. The Depositor may waive the $500,000 minimum denomination requirement if it so elects. Upon any demand for exchange for Definitive Euro-Certificates in accordance with this paragraph, the Depositor shall cause the Trustee to authenticate and deliver the Definitive Euro- Certificates to the Holder (x) outside the United States, in the case of Bearer Certificates, and (y) according to the instructions of the Holder, in the case of Registered Certificates, but in either case only upon presentation to the Trustee of a written statement. Substantially in the form of Exhibit G-1 with respect to the Global Certificate or portion thereof being exchanged signed by a Foreign Clearing Agency and dated on the Exchange Date or a subsequent date, to the effect that it has received in writing or by tested telex a certification substantially in the form of (i) in the case of beneficial ownership of the Global Certificate or a portion thereof being exchanged by a United States institutional investor pursuant to the second preceding sentence, the certificate in the form of Exhibit G-2 by the Manager which sold the relevant Certificates or (ii) in all other cases, the certificate in the form of Exhibit G-3, the certificate referred to in this clause (ii) being dated on the earlier of the first actual payment of interest in respect of such Certificates and the date of the delivery of such Certificate in definitive form. Upon receipt of such certification, the Trustee shall cause the Global Certificate to be endorsed in accordance with paragraph (d) below. Any exchange as provided in this Section shall be made free of charge to the holders and the beneficial owners of the Global Certificate and to the beneficial owners of the Definitive Euro-certificates issued in exchange, except that a person receiving Definitive Euro-certificates must bear the cost of insurance, postage, transportation and the like in the event that such person does not receive such Definitive Euro-Certificates in person at the offices of a Foreign Clearing Agency. (c) The delivery to the Trustee by a Foreign Clearing Agency of any written statement referred to above may be relied upon by the Depositor and the Trustee as conclusive evidence that a corresponding certification or certifications has or have been delivered to such Foreign Clearing Agency pursuant to the terms of this Agreement. (d) Upon any such exchange of all or a portion of the Global Certificate for a Definitive Euro-Certificate or Certificates, such Global Certificate shall be endorsed by or on behalf of the Trustee to reflect the reduction of its principal amount by an amount equal to the aggregate principal amount of such Definitive Euro-Certificate or Certificates. Until so exchanged in full, such Global Certificate shall in all respects be entitled to the same benefits under this Agreement as Definitive Euro-Certificates authenticated and delivered hereunder except that the beneficial owners of such Global Certificate shall not be entitled to receive payments of interest on the Certificates until they have exchanged their beneficial interests in such Global Certificate for Definitive Euro-Certificates. Section 6.14. MEETINGS OF CERTIFICATEHOLDERS. (a) If at the time any Bearer Certificates are issued and outstanding with respect to any Series or Class to which any meeting described below relates, the Servicer or the Trustee may at any time call a meeting of Investor Certificateholders of any Series or Class or of all Series, to be held at such time and at such place as the Servicer or the Trustee, as the case may be, shall determine, for the purpose of approving a modification of or amendment to, or obtaining a waiver of any covenant or condition set forth in, this Agreement, any Supplement or the Investor Certificates or of taking any other action permitted to be taken by Investor Certificateholders hereunder or under any Supplement. Notice of any meeting of Investor Certificateholders, setting forth the time and place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given in accordance with Section 13.05(b), the first mailing and publication to be not less than 20 nor more than 180 days prior to the date fixed for the meeting. To be entitled to vote at any meeting of Investor Certificateholders a person shall be (i) a Holder of one or more Investor Certificates of the applicable Series or Class or (ii) a person appointed by an instrument in writing as proxy by the Holder of one or more such Investor Certificates. The only persons who shall be entitled to be present or to speak at any meeting of Investor Certificateholders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Depositor, the Servicer and the Trustee and their respective counsel. (b) At a meeting of Investor Certificateholders, persons entitled to vote Investor Certificates evidencing a majority of the aggregate unpaid principal amount of the applicable Series or Class or all outstanding Series, as the case may be, shall constitute a quorum. No business shall be transacted in the absence of a quorum, unless a quorum is present when the meeting is called to order. In the absence of a quorum at any such meeting, the meeting may be adjourned for a period of not less than 10 days; in the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days; at the reconvening of any meeting further adjourned for lack of a quorum, the persons entitled to vote Investor Certificates evidencing at least 25% of the aggregate unpaid principal amount of the applicable Series or Class or all outstanding Series, as the case may be, shall constitute a quorum for the taking of any action set forth in the notice of the original meeting. Notice of the reconvening of any adjourned meeting shall be given as provided above except that such notice must be given not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage of the aggregate principal amount of the outstanding applicable Investor Certificates which shall constitute a quorum. (c) Any Investor Certificateholder who has executed an instrument in writing appointing a person as proxy shall be deemed to be present for the purposes of determining a quorum and be deemed to have voted; provided that such Investor Certificateholder shall be considered as present or voting only with respect to the matters covered by such instrument in writing. Subject to the provisions of Section 13.01, any resolution passed or decision taken at any meeting of Investor Certificateholders duly held in accordance with this Section shall be binding on all Investor Certificateholders whether or not present or represented at the meeting. (d) The holding of Bearer Certificates shall be proved by the production of such Bearer Certificates or by a certificate, satisfactory to the Servicer, executed by any bank, trust company or recognized securities dealer, wherever situated, satisfactory to the Servicer. Each such certificate shall be dated and shall state that on the date thereof a Bearer Certificate bearing a specified serial number was deposited with or exhibited to such bank, trust company or recognized securities dealer by the person named in such certificate. Any such certificate may be issued in respect of one or more Bearer Certificates specified therein. The holding by the person named in any such certificate of any Bearer Certificate specified therein shall be presumed to continue for a period of one year from the date of such certificate unless at the time of any determination of such holding (i) another certificate bearing a later date issued in respect of the same Bearer Certificate shall be produced, (ii) the Bearer Certificate specified in such certificate shall be produced by some other person or (iii) the Bearer Certificate specified in such certificate shall have ceased to be outstanding. The appointment of any proxy shall be proved by having the signature of the person executing the proxy guaranteed by any bank, trust company or recognized securities dealer satisfactory to the Trustee. (e) The Trustee shall appoint a temporary chairman of the meeting. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the holders of Investor Certificates evidencing a majority of the aggregate unpaid principal amount of Investor Certificates of the applicable Series or Class or all outstanding Series, as the case may be, represented at the meeting. No vote shall be cast or counted at any meeting in respect of any Investor Certificate challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote except as an Investor Certificateholder or proxy. Any meeting of Investor Certificateholders duly called at which a quorum is present may be adjourned from time to time, and the meeting may be held as so adjourned without further notice. (f) The vote upon any resolution submitted to any meeting of Investor Certificateholders shall be by written ballot on which shall be subscribed the signatures of Investor Certificateholders or proxies and on which shall be inscribed the serial number or numbers of the Investor Certificates held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Investor Certificateholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was published as provided above. The record shall be signed and verified by the permanent chairman and secretary of the meeting and one of the duplicates delivered to the Servicer and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. ARTICLE VII OTHER MATTERS RELATING TO THE DEPOSITOR Section 7.01. LIABILITY OF THE DEPOSITOR. The Depositor shall be liable in all respects for the obligations, covenants, representations and warranties of the Depositor arising under or related to this Agreement or any Supplement. The Depositor shall be liable only to the extent of the obligations specifically undertaken by it in its capacity as Depositor. Section 7.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE Depositor. (a) The Depositor shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person unless: (i) (x) the corporation formed by such consolidation or into which the Depositor is merged or the Person which acquires by conveyance or transfer the properties and assets of the Depositor substantially as an entirety shall be, if the Depositor is not the surviving entity, a corporation, banking corporation or banking association organized and existing under the laws of the United States and, if the Depositor is not the surviving entity, such corporation, banking corporation or banking association shall expressly assume, by an agreement supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the performance of every covenant and obligation of the Depositor hereunder, including its obligations under Section 7.04; and (y) the Depositor has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental agreement comply with this Section, that such supplemental agreement is a legal, valid and binding obligation of such surviving entity enforceable against such surviving entity in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general, and if applicable, the rights of creditors of state banking corporations or associations or national banking associations, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity), and an Officer's Certificate stating that all conditions precedent herein provided for relating to such transaction have been complied with; (ii) if the surviving entity is a Non-Code Entity, the Depositor shall have delivered written notice of such consolidation, merger conveyance or transfer to each Rating Agency or, if the surviving entity is not a Non-Code Entity, the Depositor shall have received written notice from each Rating Agency that such consolidation, merger, conveyance or transfer will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee; and (iii) the Depositor shall have delivered to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement a Tax Opinion, dated the date of such consolidation, merger, conveyance or transfer, with respect thereto. (b) The obligations of the Depositor hereunder shall not be assignable nor shall any Person succeed to the obligations of the Depositor hereunder except in each case in accordance with the provisions of the foregoing paragraph. Section 7.03. LIMITATIONS ON LIABILITY OF THE DEPOSITOR. Subject to Sections 7.01 and 7.04, neither the Depositor nor any of the directors, officers, employees or agents of the Depositor acting in their capacities as Depositor shall be under any liability to the Trust, the Trustee, the Certificateholders, any Series Enhancer or any other Person for any action taken or for refraining from the taking of any action in good faith in their capacities as Depositor pursuant to this Agreement; PROVIDED, HOWEVER, that this provision shall not protect the Depositor or any such Person against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. The Depositor and any director, officer, employee or agent of the Depositor may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person (other than the Depositor) respecting any matters arising hereunder. Section 7.04. LIABILITIES. Notwithstanding Section 7.03 (and notwithstanding Sections 8.03 and 8.04), by entering into this Agreement, the Depositor agrees to be liable, directly to the injured party, for the entire amount of any losses, claims, damages or liabilities (other than those incurred by an Investor Certificateholder in the capacity of an investor in the Investor Certificates or those which arise from any action by any Investor Certificateholder) arising out of or based on the arrangement created by this Agreement and the actions of the Servicer taken pursuant hereto as though this Agreement created a partnership under the New York Uniform Partnership Act in which the Depositor was a general partner. In the event of the appointment of a Successor Servicer, the Successor Servicer will (from its own assets and not from the assets of the Trust) indemnify and hold harmless the Depositor against and from any losses, claims, damages and liabilities of the Depositor as described in this Section arising from the actions or omissions of such Successor Servicer. ARTICLE VIII OTHER MATTERS RELATING TO THE SERVICER Section 8.01. SERVICER. The Servicer shall be liable under this Article only to the extent of the obligations specifically undertaken by the Servicer in its capacity as Servicer. Section 8.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE Servicer. The Servicer shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person, unless: (a) (i) the corporation formed by such consolidation or into which the Servicer is merged or the Person which acquires by conveyance or transfer the properties and assets of the Servicer substantially as an entirety shall be, if the Servicer is not the surviving entity, a corporation, banking corporation or banking association organized and existing under the laws of the United States and, if the Servicer is not the surviving entity, such corporation, banking corporation or banking association shall expressly assume, by an agreement supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the performance of every covenant and obligation of the Servicer hereunder; (ii) the Servicer had delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental agreement comply with this Section, that such supplemental agreement is a legal, valid and binding obligation of such surviving entity enforceable against such surviving entity in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and, if applicable, the rights of creditors of state banking corporations or associations or national banking associations, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity), and an Officer's Certificate stating that all conditions precedent herein provided for relating to such transaction have been complied with; (b) if the surviving entity is a Non-Code Entity, the Depositor shall have delivered written notice of such consolidation, merger conveyance or transfer to each Rating Agency or, if the surviving entity is not a Non-Code Entity, the Depositor shall have received written notice from each Rating Agency that such assignment and succession will not have a Ratings Effect and shall have delivered copies of each such notice to the Depositor and the Trustee; and (c) the corporation formed by such consolidation or into which the Servicer is merged or the Person which acquires by conveyance or transfer the properties and assets of the Servicer substantially as an entirety shall be an Eligible Servicer. Section 8.03. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS. Except as provided in Section 8.04, neither the Servicer nor any of the directors, officers, employees or agents of the Servicer in its capacity as Servicer shall be under any liability to the Trust, the Trustee, the Certificateholders, any Series Enhancer or any other person for any action taken or for refraining from the taking of any action in good faith in its capacity as Servicer pursuant to this Agreement; PROVIDED, HOWEVER, that this provision shall not protect the Servicer or any such Person against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person (other than the Servicer) respecting any matters arising hereunder. The Servicer shall not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties as Servicer in accordance with this Agreement and which in its reasonable judgment may require it to incur any expense or liability. The Servicer may, in its sole discretion, undertake any such legal action which it may deem necessary or desirable for the benefit of the Certificateholders with respect to this Agreement and the rights and duties of the parties hereto and the interests of the Certificateholders hereunder. Section 8.04. SERVICER INDEMNIFICATION OF THE TRUST AND THE TRUSTEE. The Servicer shall indemnify and hold harmless the Trustee and its directors, officers, employees, and agents against any loss, liability or expense incurred by it in connection with the administration of the Trust and the performance of its duties under this Agreement and any Supplement, including those arising from acts of omissions of the Servicer pursuant to this Agreement, and including but not limited to any judgment, award, settlement reasonable attorney's fees and other costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim; PROVIDED, HOWEVER, that the Servicer shall not indemnify the Trustee or its directors, officers, employees or agents if such acts, omission or alleged acts or omissions constitute fraud, negligence or willful misconduct by the Trustee. Indemnification pursuant to this Section shall not be payable from the Trust Assets. Section 8.05. THE SERVICER NOT TO RESIGN. The Servicer shall not resign from the obligations and duties hereby imposed on it except (a) upon determination that (i) the performance of its duties hereunder is no longer permissible under Requirements of the Law (other than the charter and by-laws of the Servicer) and (ii) there is no reasonable action which the Servicer could take to make the performance of its duties hereunder permissible under such Requirements of Law (other than the charter and bylaws of the Servicer)or (b) upon the assumption, by an agreement supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, of the obligations and duties of the Servicer hereunder by any of its Affiliates or by any other entity the appointment of which shall have satisfied the Rating Agency Condition and, in either case, qualifies as an Eligible Servicer. Any determination permitting the resignation of the Servicer shall be evidenced by an Officer's Certificate and an Opinion of Counsel to such effect delivered to the Trustee. No resignation shall become effective until the Trustee or a Successor Servicer shall have assumed the responsibilities and obligations of the Servicer in accordance with Section 10.02. If within 120 days of the date of the determination that the Servicer may no longer act as Servicer and the Trustee is unable to appoint a Successor Servicer, the Trustee shall serve as Successor Servicer. Notwithstanding the foregoing, the Trustee shall, if it is legally unable so to act, petition a court of competent jurisdiction to appoint any established institution having a net worth of not less than $50,000,000 and whose regular business includes the servicing of credit card accounts and who has the ability to service the Receivables as the Successor Servicer hereunder. The Trustee shall give prompt written notice of such appointment to each Rating Agency and each Series Enhancer entitled hereto under the terms of the applicable supplement upon the appointment of a Successor Servicer. Section 8.06. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE RECEIVABLES. The Servicer shall provide to the Trustee access to the documentation regarding the Accounts and the Receivables in such cases where the Trustee is required in connection with the enforcement of the rights of Certificateholders or by Requirements of Law to review such documentation, such access being afforded without charge but only (a) upon reasonable request, (b) during normal business hours, (c) subject to the Servicer's normal security and confidentiality procedures and (d) at the Servicer's principal office or at the Servicer's office in the continental United States where the documentation regarding the Accounts and the Receivables normally is kept. Nothing in this Section shall derogate from the obligation of the Depositor, the Trustee and the Servicer to observe any Requirements of Law prohibiting disclosure of information regarding the Obligors and the failure of the Servicer to provide access as provided in this Section as a result of such Requirements of Law shall not constitute a breach of this Section. Section 8.07. DELEGATION OF DUTIES. In the ordinary course of business, the Servicer may at any time delegate any duties hereunder to any Person who agrees to conduct such duties in accordance with the Lending Guidelines; PROVIDED, HOWEVER, that in the case of significant delegation to a Person other than any Affiliate of the Depositor, (i) at least 30 days prior written notice shall be given to the Trustee, each Rating Agency and each Series Enhancer entitled thereto pursuant to the relevant Supplement, of such delegation and (ii) at or prior to the end of such 30-day period the Servicer shall not have received a notice in writing from a Rating Agency that such delegation will have a Ratings Effect. Any such delegation shall not relieve the Servicer of its liability and responsibility with respect to such duties, and shall not constitute a resignation within the meaning of Section 8.05 hereof. Section 8.08. EXAMINATION OF RECORDS. The Depositor and the Servicer shall clearly and unambiguously indicate in their computer files or other records that the Receivables arising in the Accounts have been conveyed to the Trustee, on behalf of the Trust, pursuant to this Agreement for the benefit of the Certificateholders. The Depositor and the Servicer shall, prior to the sale or transfer to a third party of any receivable held in its custody, examine its computer and other records to determine that such receivable is not a Receivable. ARTICLE IX PAY OUT EVENTS Section 9.01. PAY OUT EVENTS. If any one of the following events shall occur with respect to any Series: (a) the Depositor shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Depositor or of or relating to all or substantially all of its property, or a decree order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Depositor; or the Depositor shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make any assignment for the benefit of its creditors or voluntarily suspend payment of its obligations (any such event, an "Insolvency Event"); (b) the Trust shall become an "investment company" within the meaning of the Investment Company Act; or (c) any event specified in the relevant Supplement as a Pay Out Event with respect to such Series; then, in the case of any such event, a Pay Out Event shall occur with respect to such Series without any notice or other action on the part of the Trustee or the Investor Certificateholders, immediately upon the occurrence of such event. Section 9.02. ADDITIONAL RIGHTS UPON THE OCCURRENCE OF CERTAIN EVENTS. (a) If an Insolvency Event occurs with respect to the Depositor or the Depositor violates Section 2.07(c) for any reason, the Depositor shall on the day any such Insolvency Event or violation occurs (the "Appointment Date"), immediately cease to transfer Principal Receivables to the Trust and shall promptly give notice to the Trustee thereof. Notwithstanding any cessation of the transfer to the Trust of additional Principal Receivables, Principal Receivables transferred to the Trust prior to the occurrence of such Insolvency Event and Collection in respect of such Principal Receivables and Finance Charge Receivables whenever created, accrued in respect of such Principal Receivables, shall continue to be a part of the Trust. Within 15 days after receipt of such notice by the Trustee of the occurrence of such Insolvency Event or violation of Section 2.07(c), the Trustee shall (i) publish a notice in an Authorized Newspaper that an Insolvency Event or violation has occurred and that the Trustee intends to sell, dispose of or otherwise liquidate the Receivables on commercially reasonable terms and in a commercially reasonable manner and (ii) give notice to Investor Certificateholders and each Series Enhancer entitled thereto pursuant to the relevant Supplement describing the provisions of this Section and requesting instructions from such Holders. Unless the Trustee shall have received instructions within 90 days from the date notice pursuant to clause (i) above is first published from (x) Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of each Series or, with respect to any Series with two or more Classes, of each Class, to the effect that such Investor Certificateholders disapprove of the liquidation of the Receivables and wish to continue having Principal Receivables Transferred to the Trust as before such Insolvency Event or violation, (y) to the extent provided in the relevant Supplement, the Series Enhancer with respect to such Series, to such effect, and (z) each holder (other than the Depositor with respect to which the Insolvency Event occurred) of the Depositor's Certificate to such effect, the Trustee shall promptly sell, dispose of or otherwise liquidate the Receivables in a commercially reasonable manner and on commercially reasonable terms, which shall include the solicitation of competitive bids. The Trustee may obtain and conclusively rely upon a prior determination from any such conservator, receiver or liquidator that the terms and manner of any proposed sale, disposition or liquidation are commercially reasonable. The provisions of Section 9.01 and 9.02 shall not be deemed to be mutually exclusive. References to the Depositor in this Section 9.02 include any Additional Depositor. (b) The proceeds from the sale, disposition or liquidation of the Receivables pursuant to paragraph (a) ("Insolvency Proceeds") shall be immediately deposited in the Collection Account. The Trustee shall determine conclusively the amount of the Insolvency Proceeds which are deemed to be Finance Charge Receivables and Principal Receivables. The Insolvency Proceeds shall be allocated and distributed to Investor Certificateholders in accordance with Article IV and the terms of each Supplement and the Trust shall terminate immediately thereafter. ARTICLE X SERVICER DEFAULTS Section 10.01. SERVICER DEFAULTS. If any one of the following events (a "Servicer Default") shall occur and be continuing: (a) any failure by the Servicer to make any payment, transfer or deposit or to give instructions or notice to the Trustee pursuant to the terms of this Agreement or any Supplement on or before the date, occurring ten Business Days after the date such payment, transfer or deposit or such instruction or notice is required to be made or given, as the case may be, under the terms of this Agreement or any Supplement; (b) failure on the part of the Servicer duly to observe or perform in any material respect any other covenants or agreements of the Servicer set forth in this Agreement or any Supplement which has a material adverse effect on the interests hereunder of the Investor Certificateholders of any Series or Class (which determination shall be made without regard to whether funds are then available pursuant to any Series Enhancement) and which continues unremedied for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, or to the Servicer and the Trustee by Holders of Investor Certificates evidencing not less than 33% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any such failure that does not relate to all Series, 33% of the aggregate unpaid principal amount of all Series to which such failure relates); or the Servicer shall delegate its duties under this Agreement except as permitted by Section 8.02 and 8.07, a Responsible officer, of the Trustee as actual knowledge of such delegation and such delegation continues unremedied for 15 days after the date on which written notice thereof, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, or to the Servicer and the Trustee by Holders of Investor Certificates evidencing not less than 10% of the aggregate unpaid principal amount of all Investor Certificates; (c) any representation, warranty or certification made by the Servicer in this Agreement or any Supplement or in any certificate delivered pursuant to this Agreement or any Supplement shall prove to have been incorrect in any material respect when made, which has a material adverse effect on the rights of the Investor Certificateholders of any Series or Class (which determination shall be made without regard to whether funds are then available pursuant to any Series Enhancement) and which continues to be incorrect in any material respect for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, or to the Servicer and the Trustee by the Holders of Investor Certificates, evidencing not less than 33% of the aggregate unpaid principal amount of all Investor Certificates (with respect to any such representation, warranty or certification that does not relate to all Series, 33% of the aggregate unpaid principal amount of all Series to which such representation, warranty or certification relates); or (d) the Servicer shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of its property, or a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding up or liquidation of its affairs, shall have been entered against the Servicer, and such decree or order shall have remained in force undischarged or unstayed for a period of 90 days; or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make any assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; then, in the event of any Servicer Default, so long as the Servicer Default shall not have been remedied, either the Trustee, or the Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of all outstanding Series, by written notice then given to the Servicer (and to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement if given by the Investor Certificateholders) (a "Termination Notice"), may terminate all but not less than all the rights and obligations of the Servicer as Servicer under this Agreement and in and to the Receivables and the proceeds thereof; PROVIDED, HOWEVER, that if within 60 days of receipt of a Termination Notice the Trustee does not receive any bids from Eligible Servicers in accordance with Section 10.02(c) to act as a Successor Servicer and receives an Officer's Certificate of the Servicer or the Depositor, to the effect that the Servicer cannot in good faith cure the Servicer Default which gave rise to the Termination Notice, the Trustee shall grant a right of first refusal to the Depositor which would permit the Depositor to purchase the Certificateholders Interest on the Distribution Date in the next calendar month. The Trustee shall first solicit bids from unaffiliated third parties and, if at least two bids are obtained, the Trustee will offer the right of first refusal to the Depositor at a purchase price equal to the higher of such bids so long as such purchase price is at least equal to the sum of the amounts specified therefor with respect to each outstanding Series in the related Supplement. If the Depositor does not exercise its right of first refusal, the Trustee may sell the Certificateholders' Interest to the highest bidder, so long as the purchase price is at least equal to the amount described in the preceding sentence. The Depositor shall notify the Trustee prior to the Record Date for the Distribution Date of the purchase if it is exercising such right. If it exercises such right, the Depositor shall deposit the purchase price into the Collection Account not later than 12:00 noon New York City time, on the Transfer Date immediately preceding such Distribution Date in immediately available funds. The purchase price shall be allocated and distributed to Investor Certificateholders in accordance with Article IV and the terms of each Supplement. After receipt by the Servicer of such Termination Notice, and on the date that a Successor Servicer shall have been appointed by the Trustee pursuant to Section 10.02, all authority and power of the Servicer under this Agreement shall pass to and be vested in a Successor Servicer (a "Service Transfer") and, without limitation, the Trustee is hereby authorized and empowered (upon the failure of the Servicer to cooperate) to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all documents and other instruments upon the failure of the Servicer to execute or deliver such documents or instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights. The Servicer agrees to cooperate with the Trustee and such Successor Servicer in effecting the termination of the responsibilities and rights of the Servicer to conduct servicing hereunder including the transfer to such Successor Servicer of all authority of the Servicer to service the Receivables provided for under this Agreement, including all authority over all Collections which shall on the date of transfer be held by the Servicer for deposit, or which have been deposited by the Servicer, in the Collection Account, or which shall thereafter be received with respect to the Receivables, and in assisting the Successor Servicer and in enforcing all rights to Insurance Proceeds. The Servicer shall promptly transfer its electronic records relating to the Receivables to the Successor Servicer in such electronic form as the Successor Servicer may reasonably request and shall promptly transfer to the Successor Servicer all other records, correspondence and documents necessary for the continued servicing of the Receivables in the manner and as such times as the Successor Servicer shall reasonably request. To the extent that compliance with this Section 10.01 shall require the Servicer to disclose to the Successor Servicer Information of any kind which the Servicer reasonably deems to be confidential, the Successor Servicer shall be required to enter into such customary licensing and confidentiality agreements as the Servicer shall been necessary to protect its interests. Notwithstanding the foregoing, any delay in or failure of performance under Section 10.01(a) for a period of five Business Days or under Section 10.01(b) or (c) or a period of 90 days (in addition to any period provided in Section 10.01(a), (b) or (c)) shall not constitute a Servicer Default until the expiration of such additional five Business Days or 90 days, respectively, if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or the public enemy, acts of declared or undeclared war, public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods or similar causes. The preceding sentence shall not relieve the Servicer from using its best efforts to perform its respective obligations in a timely manner in accordance with the terms of this Agreement and any Supplement and the Servicer shall provide the Trustee, each Rating Agency, any Series Enhancer entitled thereto pursuant to the relevant Supplement, each Holder of the Depositor's Certificate and the Investor Certificateholders with an Officer's Certificate giving prompt notice of such failure or delay by it, together with a description of its efforts, to so perform its obligations. Section 10.02. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a) On and after the receipt by the Servicer of a Termination Notice pursuant to Section 10.01, the Servicer shall continue to perform all servicing functions under this Agreement until the date specified in the Termination Notice or otherwise specified by the Trustee or until a date mutually agreed upon by the Servicer and Trustee. The Trustee shall as promptly as possible after the giving of a Termination Notice appoint an Eligible Servicer ad a successor service (the "Successor Servicer"), and such Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Trustee. In the event that a Successor Servicer has not been appointed or has not accepted its appointment at the time when the Servicer ceases to act as Servicer, the Trustee without further action shall automatically be appointed the Successor Servicer. The Trustee may delegate any of its servicing obligations to an Affiliate of the Trustee or agent in accordance with Sections 3.01(b) and 8.07. Notwithstanding the foregoing, the Trustee shall, if it is legally unable so to act, petition a court of competent jurisdiction to appoint any established institution having a net worth of not less than $50,000,000 and whose regular business includes the servicing of credit card receivables and who has the ability to service the Receivables as the Successor Servicer hereunder. The Trustee shall give prompt notice of such appointment to each Rating Agency and each Series Enhancer entitled thereto pursuant to the applicable Supplement upon the appointment of a Successor Servicer. (b) Upon its appointment, the Successor Servicer shall be the successor in all respects to the Servicer with respect to servicing functions under this Agreement and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to the Successor Servicer. (c) In connection with any Termination Notice, the Trustee will solicit bids from Eligible Servicers and shall be permitted to appoint any Eligible Servicer submitting such a bid as a Successor Servicer for servicing compensation not in excess of the aggregate Servicing Fees for all Series; PROVIDED, HOWEVER, that the Depositor shall be responsible for payment of that Depositor's portion of such aggregate Servicing Fees and that no such monthly compensation paid out of Collections shall be in excess of such aggregate Servicing Fees. Each holder of the Depositor's Certificate agrees that, if [Servicer Name] (or any Successor Servicer) is terminated as Servicer hereunder, the portion of the Collections in respect of Finance Charge Receivables that the Depositor is entitled to receive pursuant to this Agreement or any Supplement shall be reduced by an amount sufficient to pay the Depositor's share (determined by reference to the Supplements with respect to any outstanding Series) of the compensation of the Successor Servicer. (d) All authority and power granted to the Successor Servicer under this Agreement shall automatically cease and terminate upon termination of the Trust pursuant to Section 12.01 and shall pass to and be vested in the Depositor and, without limitation, the Depositor is hereby authorized and empowered to execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact or otherwise, all documents and other instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights. The Successor Servicer agrees to cooperate with the Depositor in effecting the termination of the responsibilities and rights of the Successor Servicer to conduct servicing on the Receivables. The Successor Servicer shall transfer its electronic records relating to the Receivables to the Depositor in such electronic form as the Depositor may reasonably request and shall transfer all other records, correspondence and documents to the Depositor in the manner and at such times as the Depositor shall reasonably request. To the extent that compliance with this Section 10.02 shall require the Successor Servicer to disclose to the Depositor information of any kind which the Successor Servicer reasonably deems to be confidential, the Depositor shall be required to enter into such customary licensing and confidentiality agreements as the Successor Servicer shall deem reasonably necessary to protect its interests. Section 10.03. NOTIFICATION TO CERTIFICATEHOLDERS. Within two Business Days after the Servicer becomes aware of any Servicer Default, the Servicer shall give notice thereof to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement and the Trustee shall give notice to the Investor Certificateholders. Upon any termination or appointment of a Successor Servicer pursuant to this Article, the Trustee shall give prompt notice thereof to the investor Certificateholders. ARTICLE XI THE TRUSTEE Section 11.01. DUTIES OF TRUSTEE. (a) The Trustee, prior to the occurrence of a Servicer Default and after the curing of all Servicer Defaults which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Agreement. If a Servicer Default has occurred (which has not been cured or waived) the Trustee shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of such man's own affairs. (b) The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee which are specifically required to be furnished pursuant to any provision of this Agreement, shall examine them to determine whether they conform to the requirements of this Agreement. The Trustee shall give prompt written notice to the Certificateholders of any material lack of conformity of any such instrument to the applicable requirements of this Agreement discovered by the Trustee which would entitle a specified percentage of the Certificateholders to take any action pursuant to this Agreement. (c) Subject to Section 11.01(a), no provision or this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct; PROVIDED, HOWEVER, that: (i) the Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (ii) the Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the written direction of the Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any such action that does not relate to all Series, more than 50% of the aggregate unpaid principal amount of the Investor Certificates of all Series to which such action relates) relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement; and (iii) the Trustee shall not be charged with knowledge of any failure by the Servicer referred to in clauses (a) and (b) of Section 10.01 unless a Responsible Officer of the Trustee obtains actual knowledge of such failure or the Trustee receives written notice of such failure from the Servicer, any Holders of Investor Certificates evidencing not less than 33% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any such failure that does not relate to all Series, not less than 33% of the aggregate unpaid principal amount of all Investor Certificates of all Series to which such failure relates, or the Series Enhancers for all Series to which such failure relates). (d) The Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers hereunder or thereunder, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Agreement shall in any event require the Trustee to perform, or be responsible for the manner of performance of, any of the obligations of the Servicer under this Agreement except during such time, if any, as the Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Servicer in accordance with the terms of this Agreement. (e) Except for actions expressly authorized by this Agreement, the Trustee shall take no action reasonably likely to (i) impair the interests of the Trust in any Receivable now existing or hereafter created or (ii) impair the value of any Receivable now existing or hereafter created. (f) The Trustee shall have no power to vary the corpus of the Trust, except as expressly provided in this Agreement. (g) Subject to Section 11.01(d), in the event that the Paying Agent or the Transfer Agent and Registrar shall fail to perform any obligation, duty or agreement in the manner or on the day required to be performed by the Paying Agent or the Transfer Agent and Registrar, as the case may be, under this Agreement, the Trustee shall be obligated as soon as possible upon knowledge of a Responsible officer, thereof and receipt of appropriate records, if any, to perform such obligation, duty or agreement in the manner so required. (h) If the Depositor has agreed to transfer any of its receivables (other than the Receivables) to another Person, upon the written request of the Depositor, the Trustee will enter into such intercreditor agreement with the transferee of such receivables as are customary and necessary to separately identify the rights of the Trust and such other Person in the Depositor's receivables; PROVIDED THAT the Trustee shall not be required to enter into any intercreditor agreement which could adversely affect the interests of the Certificateholders and, upon the request of the Trustee, the Depositor will deliver an Opinion of Counsel on any matters relating to such intercreditor agreement, reasonably requested by the Trustee. Section 11.02. CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as otherwise provided in Section 11.01: (a) the Trustee may conclusively rely on and shall be protected in acting on, or in refraining from acting in accord with, any resolution, Officer's Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have been signed or presented to it pursuant to this Agreement by the proper party or parties; (b) the Trustee may consult with counsel, and any advice of such counsel, or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion of Counsel; (c) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or any Enhancement Agreement, or to institute, conduct or defend any litigation hereunder or thereunder or in relation to this Agreement or any Enhancement Agreement, at the request, order or direction of any of the Certifiateholders, pursuant to the provisions of this Agreement or any Enhancement Agreement, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; nothing contained herein shall, however, relieve the Trustee of the obligations, upon the occurrence of any Servicer Default (which has not been cured) to exercise such of the rights and powers vested in it by this Agreement, and to use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (d) the Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement; (e) the Trustee shall not be bound to make any investigation into the facts of matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing so to do by Holders of Investor Certificates evidencing more than 33% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any such matters that do not relate to all Series, 33% of the aggregate unpaid principal amount of the Investor Certificates of all series to which such matters relate); (f) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder or any Supplement either directly or by or through agents or attorneys or a custodian, and the Trustee shall not be responsible for the supervision of, or any misconduct or negligence on the part of any such agent, attorney or custodian appointed with due care by it hereunder; (g) except as may be required by subsection 11.01(a) hereof, the Trustee shall not be required to make any initial or periodic examination of any documents or records related to the Receivables or the Accounts for the purpose of establishing the presence or absence of defects, the compliance by the Depositor with its representations and warranties or for any other purpose; and (h) in the event that the Trustee is also acting as Paying Agent or Transfer Agent and Registrar hereunder, the rights and protections afforded to the Trustee pursuant to this Article XI shall also be afforded to the Trustee when acting as Paying Agent or Transfer Agent and Registrar. Section 11.03. TRUSTEE NOT LIABLE FOR RECITALS IN CERTIFICATES. The Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates (other than the certificate of authentication on the Certificates). Except as set forth in Section 11.15, the Trustee makes no representations as to the validity or sufficiency of this Agreement or any Supplement or of the Certificates (other than the certificate of authentication on the Certificates) or of any Receivable or related document. The Trustee shall not be accountable for the use or application by the Depositor of any of the Certificates or of the proceeds of such Certificates, or for the use or application of any funds paid to the Depositor or the holders of the Depositor's Certificate in respect of the Receivables or deposited in or withdrawn from the Collection Account, any Series Accounts or any other accounts hereafter established to effectuate the transactions contemplated by this Agreement and in accordance with the terms of this Agreement. Section 11.04. TRUSTEE MAY OWN CERTIFICATES. Subject to Section 6.06, the Trustee in its individual or any other capacity may become the owner or pledgee of Investor Certificates with the same rights as it would have if it were not the Trustee. Section 11.05. THE SERVICER TO PAY TRUSTEE'S FEES AND EXPENSES. The Servicer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to receive, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trust hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and the Servicer will pay or reimburse the Trustee (without reimbursement from the Collection Account or otherwise) upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Agreement or any Enhancement Agreement (including the reasonable fees and expenses of its agents, any co-trustee and counsel) except any such expense, disbursement or advance as may arise from its own negligence or bad faith and except as provided in the following sentence. If the Trustee is appointed Successor Servicer pursuant to Section 10.02, the provisions of this Section 11.05 shall not apply to expenses, disbursements and advances made or incurred by the Trustee in its capacity as Successor Servicer. The obligations of the Servicer under Section 8.04 and this Section 11.05 shall survive the termination of the Trust and the resignation or removal of the Trustee. Section 11.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee hereunder shall at all times be a bank or a corporation organized and doing business under the laws of the United States of America or any state thereof authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or state authority and maintain any credit or deposit rating required by any Rating Agency (as of the date hereof Baa3 for Moody 's). If such bank or corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section 11.06, the combined capital and surplus of such bank or corporation shall be deemed to be its confined capital and surplus as set forth in interest recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 11.06, the Trustee shall resign immediately in the manner and with the effect specified in Section 11.07. Section 11.07. RESIGNATION OR REMOVAL OF TRUSTEE. (a) The Trustee may at any the resign and be discharged from the trust hereby created by giving written notice thereof to the Depositor and the Servicer. Upon receiving such notice of resignation, the Depositor shall promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. (b) If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section 11.06 and shall fail to resign after written request therefor by the Servicer or the Depositor, or if at any time the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, the Servicer shall remove the Trustee and promptly appoint a successor trustee by written instrument, in duplicate, one copy of which installment shall be delivered to the Trustee so removed and one copy to the successor trustee, PROVIDED HOWEVER, that the Trustee shall not be liable for any damages solely attributable to the acts or omissions of any Successor Trustee. (c) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 11.07 shall not become effective until acceptance of appointment by the successor trustee as provided in Section 11.08 and any liability of the Trustee arising hereunder shall survive such appointment of a successor trustee. Section 11.08. SUCCESSOR TRUSTEE. (a) Any successor trustee appointed as provided in Section 11.07 shall execute, acknowledge and deliver to the Depositor, to the Servicer and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with the like effect as if originally named as Trustee herein. The predecessor Trustee shall deliver to the successor trustee all documents and statements held by it hereunder, and the Depositor and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor trustee all such rights, powers, duties and obligations. (b) No successor trustee shall accept appointment as provided in this Section 11.08 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 11.06. (c) Upon acceptance of appointment by a successor trustee as provided in this Section, such successor trustee shall provide notice of such succession hereunder to all Investor Certificateholders and the Servicer shall provide such notice each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement. Section 11.09. MERGER OR CONSOLIDATION OF TRUSTEE. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be eligible under the provisions of Section 11.06, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 11.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a) Notwithstanding any other provisions of this Agreement, at any time any legal requirements of any jurisdiction in which any part of the Trust may at the time be located, the Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co- trustees, or separate trustee or separate trustees, of all or any part of the Trustee and to vest in such Person or Persons in such capacity and for the benefit of the certificateholders, such title to the Trust, or any part he other provisions of this thereof, and, subject to Section 11.10, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable; PROVIDED, HOWEVER, that the Trustee shall exercise due care in the appointment of any co-trustee. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 11.06 and no notice to Certificateholders of the appointment of any co-trustee or separate trustee shall be required under Section 11.08. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and be exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act) except to the extent that under any laws of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Servicer hereunder) the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trustee or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely the direction of the Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article XI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Depositor and the Servicer. (d) Any separate trustee or co-trustee may at any time constitute the Trustee its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect to this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. Section 11.11. TAX RETURNS. In the event the Trust shall be required to file tax returns, the servicer shall prepare or shall cause to be prepared any tax returns required to be filed by the Trust and shall remit such returns to the Trustee for signature at least five days before such returns are due to be filed; the Trustee shall promptly sign such returns and deliver such returns after signature to the Servicer and such returns shall be filed by the Servicer. The Servicer in accordance with the terms of each Supplement shall also prepare or shall cause to be prepared such tax information as is required by United States law to be distributed to Investor Certificateholders. The Trustee, upon request, will furnish the Servicer with all such information known to the Trustee as may be reasonably required in connection with the preparation of all tax returns of the Trust. In no event shall the Trustee or the Servicer (except as provided in Section 8.04) be liable for any liabilities, costs or expenses of the Trust or the Investor Certificateholders arising under any tax law, including Federal, state, local or foreign income or excise taxes or any other tax imposed on or measured by income (or any interest or penalty with respect thereto or arising from a failure to comply therewith). Section 11.12. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF CERTIFICATES. All rights of action and claims under this Agreement or the Certificates may be prosecuted and enforced by the Trustee without the possession of any of the Certificates or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Certificateholders in respect of which such judgment has been obtained. Section 11.13. SUITS FOR ENFORCEMENT. (a) If a Servicer Default shall occur and be continuing, the Trustee, in its discretion may, subject to the provisions of Sections 10.01 and 11.14, proceed to protect and enforce its rights and, the rights of the Certificateholders under this Agreement by a suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant agreement contained in this Agreement or in aid of the execution of any power granted in this Agreement or for the enforcement of any other legal, equitable or other remedy as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Trustee or the Certificateholders. (b) If the FDIC, the RTC or any equivalent government agency or instrumentality or any designee of any of them shall have been appointed as receiver, conservator, assignee, trustee in bankruptcy or reorganization, liquidator, sequestrator or custodian with respect to the Depositor (the "receiver"), the Trustee shall, irrespective of whether the principal of any Series or Class of Investor Certificates shall then be due and payable: (i) unless prohibited by applicable law or regulation or unless under FIRREA the receiver is required to participate in the process as a defendant or otherwise, promptly take or cause to be taken any and all necessary or advisable commercially reasonable action as a secured creditor on behalf of the Certificateholders to recover, repossess, collect or liquidate the Receivables or any other Trust Assets on a "self- help basis or otherwise and exercise any rights or remedies of a secured party under the applicable UCC and take any other appropriate action to protect and enforce the rights and remedies of the Trustee and the Certificateholders; (ii) promptly, and in any case within any applicable claims bar period specified under FIRREA or otherwise, file and prove a claim or claims under FIRRFA or otherwise, by filing proofs of claim, protective proofs of claim or otherwise, for the whole amount of unpaid principal and interest in respect of the Investor Certificates and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Certificateholders allowed in any judicial, administrative, corporate or other proceedings relating to the Depositor, its creditors or its property, including any actions relating to the preservation of deficiency claims or for the protection against loss of any claim in the event the Trustee's or the Certificateholders status as secured creditors are successfully challenged; and (iii) Collect and receive any moneys or other property payable or deliverable on any such claims and distribute all amounts with respect to the claims of the Certificateholders to the Certificateholders as their interests may appear. (c) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Certificateholder any plan of reorganization, arrangement, adjustment or composition affecting the Investor Certificates or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Certificateholder in any such proceeding; PROVIDED, HOWEVER, that the Trustee may, on behalf of the Investor Certificateholders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditor's or other similar committee. Section 11.14. RIGHTS OF CERTIFICATEHOLDERS TO DIRECT TRUSTEE. Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of all investor Certificates (or, with respect to any remedy, trust or power that does not relate to all Series, 50% of the aggregate unpaid principal amount of the Investor Certificates of all Series to which such remedy, trust or power relates) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee relating to such proceeding; PROVIDED, however, that, subject to Section 11.01, the Trustee shall have the right to decline to follow any such direction if the Trustee being advised by counsel determines that the action so directed may not lawfully be taken, or if the Trustee in good faith shall, by a Responsible Officer or Responsible Officers of the Trustee, determine that the proceedings so directed would be illegal or involve it in personal liability or be unduly prejudicial to the rights of Certificateholders not parties to such direction; and PROVIDED, FURTHER, that nothing in this Agreement shall impair the right of the Trustee to take any action deemed proper by the Trustee and which is not inconsistent with such direction. Section 11.15. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The Trustee represents and warrants as of each Closing Date that: (a) the Trustee is a banking corporation organized, existing and in good standing under the laws of the State of New York; (b) the Trustee has full power, authority and right to execute, deliver and perform this Agreement and such Supplement, and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement and each Supplement; and (c) this Agreement and each Supplement has been duly executed and delivered by the Trustee. Section 11.16. MAINTENANCE OF OFFICE OR AGENCY. The Trustee will maintain at its expense an office or agency (the "Corporate Trust Office") where notices and demands to or upon the Trustee in respect of the Certificates and this Agreement may be served (a) in the Borough of Manhattan, The City of New York, in the case of Registered Certificates and Holders thereof, and (b) in London or Luxembourg, in the case of Bearer Certificates and Holders thereof, if and for so long as any Bearer Certificates are outstanding. The Corporate Trust Office shall initially be located at [ ], Attention: [ ]. The Trustee will give prompt notice to the Depositor, the Servicer and to Investor certificateholders of any change in the location of the Certificate Register or any such office or agency. Section 11.17. CONFIDENTIALITY. Information provided by the Depositor to the Trustee related to the transaction effected hereunder, including all information related to the Obligors with respect to the Receivables and any computer software provided to the Trustee in connection with the transaction effected hereunder or under any Supplement, in each case whether in the form of documents, reports, lists, tapes, discs or any other form, shall be "Confidential Information." The Trustee and its agents, representatives or employees shall at all times maintain the confidentiality of all Confidential Information and shall not, without the prior written consent of the Depositor, disclose to third parties (including Certificateholders) or use such information, in any manner whatsoever, in whole or in part, except as expressly permitted under this Agreement or under any Supplement or as required to fulfill an obligation of the Trustee under this Agreement or under any Supplement, in which case such Confidential Information shall be revealed only to the extent expressly permitted or only to the Trustee's agents, representatives and employees who need to know such Confidential Information to the extent required for the purpose of fulfilling an obligation of the Trustee under this Agreement or under any Supplement. Notwithstanding the above, Confidential Information may be disclosed to the extent required by law, legal process or as provided under this Agreement, provided that the Trustee when possible gives prior written notice to the Depositor of the nature and scope of such disclosure and affords the Depositor an opportunity to contest such disclosure through any legal means available. ARTICLE XII TERMINATION Section 12.01. TERMINATION OF TRUST. The Trust and the respective obligations and responsibilities of the Depositor, the Servicer and the Trustee created hereby (other than the obligation of the Trustee to make payments to Investor Certificateholders as hereinafter set forth) shall terminate, except with respect to the duties described in Sections 7.04, 8.04 and 12.02(b), upon the earlier of (i) [ ], (ii) the day following the Distribution Date on which the Invested Amount and Enhancement Invested Amount for each Series is zero and (iii) the time provided in Section 9.02(b). Section 12.02. FINAL DISTRIBUTION. (a) The Servicer shall give the Trustee at least 30 days prior notice of the Distribution Date on which the Investor Certificateholders of any Series or Class may surrender their Investor Certificates for payment of the final distribution on and cancellation of such Investor Certificates (or, in the event of a final distribution resulting from the application of Section 2.06, 9.02 or 10.01, notice of such Distribution Date promptly after the Servicer has determined that a final distribution will occur, if such determination is made less than 30 days prior to such Distribution Date). Such notice shall be Accompanied by an Officer's Certificate setting forth the information specified in Section 3.05 covering the period during the then current calendar year through the date of such notice. Not later than the fifth day of the month in which the final distribution in respect of such Series or Class is payable to Investor Certificateholders the Trustee shall provide notice to Investor Certificateholders of such Series or class specifying (i) the date upon which final payment of such series or Class will be made upon presentation and surrender of Investor Certificates of such Series or Class at the office or offices therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such payment date is not applicable, payments being made upon presentation and surrender of such Investor certificates at the office or offices therein specified (which, in the case of Bearer Certificate, shall be outside the United States). The Trustee shall give such notice to the Transfer Agent and Registrar and the Paying Agent at the time such notice is given to Investor Certificateholders. (b) Notwithstanding a final distribution to the Investor Certificateholders of any Series or Class (or the termination of the Trust), except as otherwise provided in this paragraph, all funds then on deposit in the Collection Account and any Series Account allocated to such Investor Certificateholders shall continue to be held in trust for the benefit of such Investor Certificateholders and the Payment or the Trustee shall pay such funds to such Investor Certificateholders upon surrender of their Investor Certificates (and any excess shall be paid in accordance with the terms of any relevant Enhancement Agreement). In the event that all such Investor Certificateholders shall not surrender their Investor Certificates for cancellation within six months after the date specified in the notice from the Trustee described in paragraph (a), the Trustee shall give a second notice to the remaining such Investor Certificateholders to surrender their Investor Certificates for cancellation and receive the final distribution with respect thereto (which surrender and payment, in the case of Bearer Certificates, shall be outside the United States). If within one year after the second notice all such Investor Certificates shall not have been surrendered for cancellation, the Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining such investor Certificateholders concerning surrender of their Investor Certificates and the cost thereof shall be paid out of the funds in the Collection Account or any Series Account held for the benefit of such Investor Certificateholders. The Trustee and the Paying Agent shall pay to the Depositor any moneys held by them for the payment of principal or interest that remains unclaimed for two years. After such payment to the Depositor, Investor Certificateholders entitled to the money must look to the Depositor for payment as general creditors unless an applicable abandoned property law designates another Person. (c) In the event that the Invested Amount (or Enhancement Invested Amount) with respect to any Series is greater than zero on the related Series Termination Date or such earlier date as is specified in the related Supplement (after giving effect to deposits and distributions otherwise to be made on such date), the Trustee will sell or cause to be sold on such Series Termination Date, in accordance with the procedures and subject to the conditions described in such Supplement, Principal Receivables and the related Finance Charge Receivables (or interests therein) in an amount equal to the Invested Amount and the Enhancement Invested Amount, if any, with respect to such Series on such date (after giving effect to such deposits and distributions; provided, HOWEVER, that in no event shall such amount exceed such Series' allocable share of Receivables on such Series Termination Date). The proceeds from any such sale shall be allocated and distributed in accordance with the terms of the applicable Supplement. Section 12.03. DEPOSITOR'S TERMINATION RIGHTS. Upon the termination of the Trust pursuant to Section 12.01 and the surrender of the Depositor's Certificate, the Trustee shall sell, assign and convey to the Depositor or its designee, without recourse, representation or warranty, all right, title and interest of the Trust in the Receivables, whether then existing or thereafter created, all moneys due or to become due and all amounts received with respect thereto and all proceeds thereof, except for amounts held by the Trustee pursuant to Section 12.02(b). The Trustee shall execute and deliver such instruments of transfer and assignment, in each case without recourse, as shall be reasonably requested by the Depositor to vest in the Depositor or its designee all right, title and interest which the Trust had in the Receivables and such other related assets. ARTICLE XIII MISCELLANEOUS PROVISIONS Section 13.01. AMENDMENT; WAIVER OF PAST DEFAULTS. (a) This Agreement or any Supplement may be amended from time to time (including in connection with (w) the issuance of a Supplemental Certificate (x) the addition of Participation Interests to the Trust, (y) the designation of an Additional Depositor, or (z) the provision of additional Series Enhancement for the benefit of Certificateholders of any Series) by the Servicer, the Depositor and the Trustee without the consent of any of the Certificateholders, provided that (i) the Depositor shall have received written notice from each Rating Agency that such amendment will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee and (ii) if such amendment realities to the provision of additional Series Enhancement or any Series, the Depositor shall have delivered to the Trustee and each provider of Series Enhancement an Officer's Certificate of the Depositor stating that the Depositor reasonably believes that such amendment will not, based on the facts known to such officer at the time of such certification, have a material adverse effect on the interests of the Certificateholders. Notwithstanding the foregoing, this Agreement may be amended without the consent of Certificateholders, any Series Enhancer and without the approval of any Rating Agency, for the purpose of correcting typographical errors, clarifying ambiguities and other similar modifications. (b) This Agreement or any Supplement may also be amended from time to time by the Servicer, the Depositor and the Trustee, with the consent of the Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of the Investor Certificates of all adversely affected Series, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or any Supplement or of modifying in any manner the rights of the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall (i) reduce in any manner the amount of or delay the timing of any distributions to be made to Investor Certificateholders or deposits of amounts to be so distributed or the amount available under any Series Enhancement without the consent of each affected Certificateholder, (ii) change the definition of or the manner of calculating the interest of any Investor Certificateholder without the consent of each affected Investor Certificateholder, (iii) reduce the aforesaid percentage required to consent to any such amendment without 6. the consent of each Investor Certificateholder or (iv) adversely affect the rating of any Series or Class by any Rating Agency without the consent of the Holders of Investor Certificates of such Series or Class evidencing more than 50% of the aggregate unpaid principal amount of the Investor Certificates of such Series or Class. Any amendment to be effected pursuant to this paragraph shall be deemed to adversely affect all outstanding Series, other than any Series with respect to which such action shall not, as evidenced by an Opinion of Counsel for the Depositor, addressed and delivered to the Trustee, adversely affect in any material respect the interests of any Investor Certificateholder of such Series. The Trustee may, but shall not be obligated to, enter into any such amendment which affects the Trustee's rights, duties or immunities under this Agreement or otherwise. (c) Promptly after the execution of any such amendment or consent (other than an amendment pursuant to paragraph (a)), the Trustee shall furnish notification of the substance of such amendment to each Investor Certificateholder, and the Servicer shall furnish notification of the substance of such amendment to each Rating Agency and each Series Enhancer entitled thereto pursuant to the relevant Supplement. (d) It shall be necessary for the consent of Investor Certificateholders under this Section to approve the particular form of any propose, amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Investor Certificateholders shall be subject to such reasonable requirements as the Trustee may prescribe. (e) Any Supplement executed in accordance with the provisions of Section 6.03 shall not be considered an amendment to this Agreement for the purposes of this Section. (f) The Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of the Investor Certificates of each Series or, with respect to any Series with two or more Classes, of each Class (or, with respect to any default that does not relate to all Series, 50% of the aggregate unpaid principal amount of the Investor Certificates of each Series to which such default relates or, with respect to any such Series with two or more classes, of each Class) may, on behalf of all Certificateholders, waive any default by the Depositor or the Servicer in the performance of their obligations hereunder and its consequences, except the failure to make any distributions required to be made to Investor Certificateholders or to make any required deposits of any amounts to be so distributed. Upon any such waiver of a past default, such default shall cease to exist, and any default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. Section 13.02. PROTECTION OF RIGHT, TITLE AND INTEREST TO TRUST. (a) The Servicer shall cause this Agreement, all amendments and supplements hereto and/or all financing statements and continuation statements and any other necessary documents covering the Certificateholders, and the Trustee's right, title and interest in the Trust to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Certificateholders and the Trustee hereunder to all property compromising the Trust. The Servicer shall deliver to the Trustee file-stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recording, registration or filing. The Depositor shall cooperate fully with the Servicer in connection with the obligations set forth above and will execute any and all documents reasonably required to fulfill the intent of this paragraph. (b) Within 30 days after the Depositor makes any change in its name, identity, or corporate structure which would make any financing statement or continuation statement filed in accordance with paragraph (a) seriously misleading within the meaning of Section 9-402(7) (or any comparable provision) of the UCC, the Depositor shall give the Trustee notice of any such change and shall file such financing statements or amendments as may be necessary to continue the perfection of the Trust's security interest in the Receivables and the proceeds thereof. (c) The Depositor and the Servicer will give the Trustee prompt notice of any relocation of any office from which it services Receivables or keeps records concerning the Receivables or of its principal executive office and whether, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously file financing or continuation statement or of any new financing statement and shall file such financing statements or amendments as may be necessary to perfector to continue the perfection of the Trust's security interest in the Receivables and the proceeds thereof. The Depositor and the Servicer will at all times maintain each office from which it services Receivables and its principal executive offices within the United States. (d) The Servicer will deliver to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement: (i) upon the execution had delivery of each amendment of this Agreement or any Supplement, an Opinion of Counsel to the effect specified in Exhibit H-1; (ii) on each Addition Date on which any Additional Accounts (other than Automatic Additional Accounts) are to be designated as Accounts pursuant to Section 2.08(a) or (b) .and on each date specified in Section 2.08(c)(iii) with respect to the inclusion of Automatic Additional Accounts as Accounts, an Opinion of Counsel substantially in the form of Exhibit H-2, and on each Addition Date on which any Participation Interests are to be included in the Trust pursuant to Section 2.08(a) or (b), an Opinion of Counsel covering the same substantive legal issues addressed by Exhibit H-2 but conformed to the extent appropriate to relate to Participation Interests; and (iii) on or before April 30 of each year, an Opinion of Counsel substantially in the form of Exhibit H-2. Section 13.03. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (a) The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust, nor shall such death or incapacity entitle such Certificateholders' legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. (b) No Investor Certificateholder shall have any right to vote (except as expressly provided in this Agreement; or in any manner otherwise control the operation and management of the Trust, or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Certificates, be construed so as to constitute the Investor Certificateholders from time to time as partners or members of an association, nor shall any Investor Certificateholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof. (c) No Investor Certificateholder shall have any right by virtue of any provisions of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless such Investor Certificateholder previously shall have made, and unless the Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any such action, suit or proceeding that does not relate to all Series, 50% of the aggregate unpaid principal amount of the Investor Certificates of all Series to which such action, suit or proceeding relates) shall have made, a request to the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after such request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding it; being understood and intended, and being expressly covenanted by each Investor Certificateholder with every other Investor Certificateholder and the Trustee, that no one or more Investor Certificateholders shall have any right in any manner whatever by virtue or by availing itself or themselves of any provisions of this Agreement to affect, disturb or prejudice the rights of the holders of any other of the Investor Certificates, or to obtain or seek to obtain priority over or preference to any other such Investor Certificateholder, or to enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all Investor Certificateholders except as otherwise expressly provided in this Agreement. For the protection and enforcement of the provisions of this Section, each and every Investor Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Section 13.04. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 13.05. NOTICES; PAYMENTS. (a) All demands, notices, instructions, directions and communications (collectively, "Notices") under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered at, mailed by registered mail, return receipt requested, or sent by facsimile transmission: (i) in the case of the Depositor, to: ACE Securities Corp. 6525 Morrison Boulevard Suite 318 Charlotte, North Carolina 28211 (704) 365-0569 Attention: [Department] (ii) in the case of the Servicer, to: ------------------------------- ------------------------------- ------------------------------- ------------------------------- (iii) in the case of the Trustee, to: ------------------------------- ------------------------------- ------------------------------- ------------------------------- (iv) in the case of Moody's, to: 99 Church Street, New York, New York 10007, Attention: ABS Monitoring Department 4th Floor (facsimile no. 212-553-4600); (v) in the case of Standard & Poor's, to: 55 Water Street New York, New York 10041, Attention: Asset Backed Group (facsimile no. (212-412-0224); and (vi) to any other Person as specified in any Supplement; or, as to each party, at such other address or facsimile number as shall be designated by such party in a written notice to each other party. (b) Any Notice required or permitted to be given to a Holder of Registered Certificates shall be given by first-class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register. No Notice shall be required to be mailed to a Holder of Bearer Certificates or Coupons but shall be given as provided below. Any Notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Investor Certificateholder receives such Notice. In addition, (a) if and so long as any Series or Class is listed on a European stock exchange (including the Luxembourg Stock Exchange), and such exchange shall so require, any Notice to Investor Certificateholders shall be published in an Authorized Newspaper in the city of such exchange, within the time period prescribed in this Agreement and (b) in the case of any Series or Class with respect to which any Bearer Certificates are outstanding, any Notice required or permitted to be given to Investor Certificateholders of such Series or Class shall be published in an Authorized Newspaper within the time period prescribed in this Agreement. Section 13.06. RULE 144A INFORMATION. For so long as any of the Investor Certificates of any Series or Class are "restricted securities" within the meaning of Rule 144(a)(3) under the Act, the Depositor, the Trustee, the Servicer and any Series Enhancer agree to cooperate with each other to provide to any Investor Certificateholders of such Series or Class and to any prospective purchaser of Certificates designated by such an Investor Certificateholder, upon the request of such Investor Certificateholder or prospective purchaser, any information required to be provided to such holder or prospective purchaser to satisfy the condition set forth in Rule 144A(d)(4) under the Act. Section 13.07. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such provisions shall be deemed severable from the remaining provisions of this Agreement and shall in no way affect the validity or enforceability of the remaining provisions of this Agreement or of the Certificates or the rights of the Certificateholders. Section 13.08. ASSIGNMENT. Notwithstanding anything to the contrary contained herein, except as provided in Section 8.02, this Agreement may not be assigned by the Servicer without the prior consent of Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of all outstanding Investor Certificates. Section 13.09. CERTIFICATES NONASSESSABLE AND FULLY PAID. It is the intention of the parties to this Agreement that the Certificateholders shall not be personally liable for obligations of the Trust, that the interests in the Trust represented by the Certificates shall be nonassessable for any losses or expenses of the Trust or for any reason whatsoever and that Certificates upon authentication thereof by the Trustee pursuant to Section 6.02 are and shall be deemed fully paid. Section 13.10. FURTHER ASSURANCES. The Depositor and the Servicer agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the Trustee more fully to effect the purposes of this Agreement, including the execution of any financing statements or continuation statements relating to the Receivables for filing under the provisions of the UCC of any applicable jurisdiction. Section 13.11. NONPETITION COVENANT. Notwithstanding any prior termination of this Agreement, the Servicer, the Trustee, the Depositor, each Series Enhancer and each holder of a Supplemental Certificate shall not, prior to the date which is one year and one day after the termination of this Agreement with respect to the Trust, acquiesce, petition or otherwise invoke or cause the Trust to invoke the process of any Governmental Authority for the purpose of commencing or sustaining a case against the Trust under any Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignment, trustee, custodian, sequestrator or other similar official of the Trust or any substantial part of its property or ordering the winding-up or liquidation of the affairs of the Trust. Section 13.12. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Trustee or the Certificateholders, any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right remedy, power or privilege. The rights, remedies, powers and Privileges provided under this Agreement are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. Section 13.13. COUNTERPARTS. This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. Section 13.14. THIRD-PARTY BENEFICIARIES. This Agreement will inure to the benefit of and be binding upon the parties hereto, the Certificateholders, any Series Enhancer (to the extent provided in this Agreement and the related Supplement) and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement, no other Person will have any right or obligation hereunder. Section 13.15. ACTIONS BY CERTIFICATEHOLDERS. (a) Wherever in this Agreement a provision is made that an action may be taken or a Notice given by Certificateholders, such action or Notice may be taken or given by any Certificateholder, unless such provision requires a specific percentage of Certificateholders. (b) Any Notice, request, authorization, direction, consent, waiver or other act by the Holder of a Certificate shall bind such Holder and every subsequent Holder of such Certificate and of any Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or omitted to be done by the Trustee or the Servicer in reliance thereon, whether or not notation of such action is made upon such Certificate. Section 13.16. MERGER AND INTEGRATION. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived or supplemented except as provided herein. Section 13.17. HEADINGS. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. Section 13.18. AGREEMENT TO CONSTITUTE SECURITY AGREEMENT. The Depositor hereby grants to the Trustee a security interest for the benefit of (i) the Certificateholders and (ii) any Series Enhancer to the extent of the Enhancement Invested Amount, if any, provided for in the relevant Supplement (which interest, in the case of any Series Enhancer, will be subordinated to the interest of the Certificateholders of such Series in accordance with the relevant Supplement), in all of the Depositor's right, title and interest in, to and under the Receivables now existing and hereafter created, all moneys due or to become due and all amounts received with respect thereto and all "proceeds" thereof and any other Trust Assets, to secure all the Depositor's and Servicer's obligations hereunder, including the Depositor's obligation to sell or transfer Receivables hereafter created to the Trust. This Agreement shall constitute a security agreement under applicable law. IN WITNESS WHEREOF, the Depositor, the Servicer and the Trustee have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. ACE SECURITIES CORP. Depositor by: __________________________ Name: Title: [SERVICER NAME] Servicer by: __________________________ Name: Title: [TRUSTEE NAME] Trustee, by: __________________________ Name: Title: EXHIBIT A FORM OF BANK CERTIFICATE THIS BANK CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NEITHER THIS BANK CERTIFICATE NOR ANY PORTION HEREOF MAY BE OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS. THIS BANK CERTIFICATE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. No. R- One Unit [ ] CARD ACCOUNT MASTER TRUST BANK CERTIFICATE THIS CERTIFICATE REPRESENTS AN INTEREST IN CERTAIN ASSETS OF THE [ ] CARD ACCOUNT MASTER TRUST Evidencing an interest in a trust, the corpus of which consists primarily of receivables generated from time to time in the ordinary course of business in a portfolio of revolving credit card accounts and other revolving credit accounts transferred by ACE Securities Corp. (the "Depositor"). (Not an interest in or obligation of the Depositor or any affiliate thereof) This certifies that ACE Securities Corp. is the registered owner of a fractional interest in the assets of a trust (the "Trust") not allocated to the Certificateholders' Interest or the interest of any holder of a Supplemental Certificate pursuant to the Pooling and Servicing Agreement dated as of [ ] (as amended and supplemented, the "Agreement"), between ACE Securities Corp., a Delaware corporation, as Depositor, and [Trustee Name], a [ ] corporation, as trustee (the "Trustee"). The corpus of the Trust consists of (i) a portfolio of all receivables (the "Receivables") existing in the consumer revolving credit card accounts and other consumer revolving credit accounts identified under the Agreement from time to time (the "Accounts"), (ii) all Receivables generated under the Accounts from time to time thereafter, (iii) funds collected or to be collected from accountholders in respect of the Receivables, (iv) all funds which are from time to time on deposit in the Collection Account and in the Series Accounts, (v) the benefits of any Series Enhancements issued and to be issued by Series Enhancers with respect to one or more Series of Investor Certificates and (vi) all other assets and interests constituting the Trust. Although a summary of certain provisions of the Agreement is set forth below, this Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby and the rights, duties and obligations of the Trustee. A copy of the Agreement may be requested from the Trustee by writing to the Trustee at the Corporate Trust Office. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to them in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement, as amended and supplemented from time to time, the Depositor by virtue of the acceptance hereof assents and is bound. The Receivables consist of Principal Receivables which arise generally from the purchase of goods and services and amounts advanced to cardholders as cash advances and Finance Charge Receivables which arise generally from Periodic Finance Charges. This Certificate is the Depositor's Certificate, which represents the Depositor's Interest in certain assets of the Trust, including the right to receive a portion of the Collections and other amounts at the times and in the amounts specified in the Agreement. The aggregate interest represented in the Depositor's Certificate at any time in the Receivables in the Trust shall not exceed the Depositor's Interest at such time. In addition to the Depositor's Certificate, (i) Investor Certificates will be issued to investors pursuant to the Agreement, which will represent the Certificateholders' Interest, and (ii) Supplemental Certificates may be issued pursuant to the Agreement, which will represent that portion of the Depositor's Interest not allocated to the Depositor. This Depositor's Certificate shall not represent any interest in the Collection Account or the Series Accounts, except as expressly provided in the Agreement, or any Series Enhancements. The Depositor has entered into the Agreement, and this Certificate is issued, with the intention that, for Federal, state and local income and franchise tax purposes only, the Investor Certificates will qualify as indebtedness of the Depositor secured by the Receivables. The Depositor, by entering into the Agreement and by the acceptance of this Certificate, agrees to treat the Investor Certificates for Federal, state and local income and franchise tax purposes as indebtedness of the Depositor. Subject to certain conditions and exceptions specified in the Agreement, the obligations created by the Agreement and the Trust created thereby shall terminate upon the earlier of (i) [ ], (ii) the day following the Distribution Date on which the Invested Amount and Enhancement Invested Amount, if any, for each Series is zero and (iii) the time provided in Section 9.02(b) of the Agreement. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Depositor has caused Certificate to be duly executed. ACE SECURITIES CORP. by __________________________ Name: Title: Dated: [ ] TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is the Depositor's Certificate described in the within-mentioned Agreement and Series Supplement. as Trustee, By: _________________________ Authorized Officer or By: _________________________ as Authenticating Agent for the Trustee, By: _________________________ Authorized Officer EXHIBIT B FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS (As required by Section 2.08 of the Pooling and Servicing Agreement) ASSIGNMENT No. _____ OF RECEIVABLES IN ADDITIONAL ACCOUNTS dated as of /**///, by and between ACE SECURITIES CORP., as Depositor (the "Depositor"), and [Trustee Name], a [ ] corporation, as trustee (the "Trustee"), pursuant to the Pooling and Servicing Agreement referred to below. WITNESSETH WHEREAS the Depositor and the Trustee are parties to the Pooling and Servicing Agreement dated as of [ ] (as amended and supplemented, the "Agreement"); WHEREAS, pursuant to the Agreement, the Depositor wishes to designate Additional Accounts owned by the Depositor to be included as Accounts and to convey the Receivables of such Additional Accounts, whether now existing or hereafter created, to the Trust as part of the corpus of the Trust (as each such term is defined in the Agreement); and WHEREAS the Trustee is willing to accept such designation and conveyance subject to the terms and conditions hereof; NOW, THEREFORE, the Depositor and the Trustee hereby agree as follows: 1. DEFINED TERMS. All capitalized terms used herein shall have the meanings ascribed to them in the Agreement unless otherwise defined herein. "Addition Date" shall mean, with respect to the Additional Accounts designated hereby, [ ]. "Additional Cut-Off Date" shall mean, with respect to the Additional Accounts designated hereby, [ ]. - ----------- /**// To be dated as of the applicable Document Delivery Date. 2. DESIGNATION OF ADDITIONAL ACCOUNTS. On or before the Document Delivery Date, the Depositor will deliver to the Trustee a computer file or a microfiche list containing a true and complete list of the related Additional Accounts or Participation Interests specifying (i) for each Additional Account, as of the Additional Cut-Off Date, its account number, the collection status, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables outstanding in such Account, which computer file or microfiche list shall supplement Schedule I to the Agreement (in the case of Additional Accounts) and (ii) for each Participation Interest, as of the Additional Cut-Off Date, information comparable to the information referred to in clause (i) above. 3. CONVEYANCE OF RECEIVABLES. The Depositor does hereby sell, transfer, assign, set over and otherwise convey to the Trustee, on behalf of the Trust, for the benefit of the Certificateholders, all its right, title and interest in, to and under the Receivables of such Additional Accounts existing at the opening of business on the Additional Cut-Off Date and thereafter created from time to time until the termination of the Trust, all moneys due or to become due and all amounts received with respect thereto and all proceeds (including "proceeds" as defined in the UCC, and Recoveries but excluding Insurance Proceeds) thereof, and all of its right, title and interest in, to and under the Interchange payable pursuant to Section 2.07(i) of the Agreement. The foregoing does not constitute and is not intended to result in the creation or assumption by the Trust, the Trustee, any Investor Certificateholder or any Series Enhancer of any obligation of the Servicer, the Depositor or any other Person in connection with the Accounts or the Receivables or under any agreement or instrument relating thereto, including any obligation to Obligors, merchant banks, merchants clearance systems, VISA, MasterCard or insurers. a. The Depositor agrees to record and file, at its own expense, financing statements (and continuation statements when applicable) with respect to the Receivables now existing thereafter created in such Additional Accounts, meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect, and maintain the perfection of, the sale and assignment of such Receivables to the Trust, and to deliver a file stamped copy of each such financing statement or other evidence of such filing (which, for purposes of this Section 3(b), consists of telephone confirmation of such filing) to the Trustee on or prior to the Addition Date. The Trustee shall be under no obligation whatsoever to file such financing or continuation statements or to make any other filing under the UCC in connection with such sale and assignment. b. In connection with such sale, the Depositor further agrees, at its own expense, on or prior to the date of this Assignment, to indicate clearly and unambiguously in the appropriate computer files that Receivables created in connection with the Additional Accounts designated hereby (other than Removed Accounts) have been conveyed to the Trust pursuant to the Agreement and this Assignment for the benefit of the Certificateholders. c. The Depositor does hereby grant to the Trustee a security interest in all of its right, title and interest in, to and under the Receivables now existing and hereafter created in the Additional Accounts designated, all moneys due or to become due and all amounts received with respect thereto and all "proceeds" (including "proceeds" as defined in the UCC and Recoveries, but excluding Insurance Proceeds) thereof, and all of its right, title and interest in, to and under the Interchange payable pursuant to Section 2.07(i) of the Agreement. This Assignment constitutes a security agreement under the UCC. 4. ACCEPTANCE BY TRUSTEE. The Trustee hereby acknowledges its acceptance on behalf of the Trust of all right, title and interest to the property, now existing and hereafter created, conveyed to the Trust pursuant to Section 3(a) of this Assignment, and declares that it shall maintain such right, title and interest, upon the trust set forth in the Agreement for the benefit of all Certificateholders. The Trustee further acknowledges that, prior to or simultaneously with the execution and delivery of this Assignment, the Depositor delivered to the Trustee the computer file or microfiche list described in Section 2 of this Assignment. 5. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The Depositor hereby represents and warrants to the Trustee, on behalf of the Trust, as of the date of this Assignment and as of the Addition Date that: a. LEGAL VALID AND BINDING OBLIGATION. This Assignment constitutes a legal, valid and binding obligation of the Depositor enforceable against the Depositor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and, if applicable, the rights of creditors of a state banking corporation, state balking association or national banking association, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity); b. ELIGIBILITY OF ACCOUNTS. Each Additional Account designated hereby is an Eligible Account; c. INSOLVENCY. As of each of the Additional Cut-Off Date and the Addition Date, no Insolvency Event with respect to [any Account Owner, as applicable or the] Depositor has occurred and the transfer by the Depositor of Receivables arising in the Additional Accounts to the Trust has not been made in contemplation of the occurrence thereof; d. PAY OUT EVENT. The Depositor reasonably believes that the addition of the Receivables arising in the Additional Accounts will not, based on the facts known to the Depositor, then cause a Pay Out Event or any event that, after giving of notice or the lapse of time, would constitute a Pay Out Event to occur with respect to any Series; e. SECURITY INTEREST. Subject, in each case pertaining to proceeds, to Section 9-306 of the UCC, and further subject to any Liens permitted under Section 2. 07(b) of the Agreement, this Assignment constitutes a valid sale, transfer and assignment to the Trust of all right, title and interest of the Depositor in the Receivables now existing or hereafter created in the Additional Accounts designated by the Depositor, all moneys due or to become due and all amounts received with respect thereto and the "proceeds" (including "proceeds" as defined in the UCC, and Recoveries but excluding Insurance Proceeds) thereof, and all of its right, title and interest in, to and under the Interchange payable pursuant to Section 2.07(i) of the Agreement, relating thereto or, if this Assignment does not constitute a sale of such property, it constitutes a grant of a "security interest" (as defined in the UCC), in such property to the Trust, which, in the case of existing Receivables and the proceeds thereof, is enforceable upon execution and delivery of this Assignment, and which will be enforceable with respect to such Receivables hereafter created and the proceeds thereof upon such creation. Upon the filing of the financing statements described in Section 3 of this Assignment and, in the case of the Receivables hereafter created and the proceeds thereof, upon the creation thereof, the Trust shall have a first priority perfected security or ownership interest in such property and proceeds except for Liens permitted under subsection 2.07(b); f. NO CONFLICT. The execution and delivery by the Depositor of this Assignment, the performance of the transactions contemplated by this Assignment and the fulfillment of the terms hereof applicable to the Depositor, will not conflict with or violate the articles of association or by-laws of the Depositor or result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any material indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Depositor is a party or by which it or any of its properties are bound; g. NO PROCEEDINGS. There are no proceedings or investigations, pending or, to the best knowledge of the Depositor, threatened against the Depositor, before any Governmental Authority (i) asserting the invalidity of this Assignment, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Assignment, (iii) seeking any determination or ruling that, in the reasonable judgment of the Depositor, would materially and adversely affect the performance by the Depositor of its obligations under this Assignment or (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Assignment; and h. ALL CONSENTS. All authorizations, consents, orders or other actions of any Person or of any Governmental Authority required to be obtained by the Depositor in connection with the execution and delivery of this Assignment by the Depositor and the performance of the transactions contemplated by this Assignment by the Depositor have been obtained. 6. RATIFICATION OF AGREEMENT. As supplemented by this Assignment, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Assignment shall be read, taken and construed as one and the same instrument. 7. COUNTERPARTS. This Assignment may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which shall constitute one and the same instrument. 8. GOVERNING LAW. THIS ASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. IN WITNESS WHEREOF, the Depositor and the Trustee have caused this Assignment to be duly executed by their respective officers as of the day and year first above written. ACE SECURITIES CORP., Depositor, by __________________________ Name: Title: [TRUSTEE NAME] Trustee, by __________________________ Name: Title: - -------- 1 MasterCard and VISA are registered trademarks of MasterCard International Incorporated and of VISA USA, Inc., respectively. EX-4.3.1 10 0010.txt EXHIBIT 4.3.1 ===================================================================== ADMINISTRATION AGREEMENT AMONG --------------------------------------- ISSUER AND --------------------------------------- ADMINISTRATOR AND --------------------------------------- INDENTURE TRUSTEE DATED AS OF ____________________ ===================================================================== THIS ADMINISTRATION AGREEMENT is made as of _________, among ______________________, a __________ business trust (the "Issuer"), ______________________, a _____________ corporation, as administrator (the "Administrator"), and____________________, a _________ corporation, not in its individual capacity but solely as Indenture Trustee (the "Indenture Trustee"). WITNESSETH: WHEREAS, the Issuer is issuing the ____ Term Notes and the ______ Revolving Note on the date hereof and may in the future issue additional Notes, in each case pursuant to the Indenture between the Issuer and the Indenture Trustee; WHEREAS, the Issuer is issuing on the date hereof the ______ Certificates, and may in the future issue additional Certificates, in each case pursuant to the Trust Agreement; WHEREAS, the Issuer has entered into (or assumed) certain agreements in connection with the issuance of the Notes and the Certificates, including (i) the Trust Sale and Servicing Agreement, (ii) the Depository Agreement and (iii) the Indenture; WHEREAS, pursuant to the Basic Documents, the Issuer and_________________, as Owner Trustee, are required to perform certain duties in connection with (i) the Notes, (ii) the Collateral and (iii) the Certificates; WHEREAS, the Issuer and the Owner Trustee desire to have the Administrator perform certain of the duties of the Issuer and the Owner Trustee referred to in the preceding clause, and to provide such additional services consistent with the terms of this Agreement and the Basic Documents as the Issuer and the Owner Trustee may from time to time request; and WHEREAS, the Administrator has the capacity to provide the services required hereby and is willing to perform such services for the Issuer and the Owner Trustee on the terms set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties agree as follows: 1. CERTAIN DEFINITIONS. Certain capitalized terms used in this Agreement are defined in and shall have the respective meanings assigned to them in Part I of Appendix A to the Trust Sale and Servicing Agreement dated as of ______________ among the Issuer, the Seller and ___________________, as Servicer (the "Trust Sale and Servicing Agreement"). All references herein to "the Agreement" or "this Agreement" are to this Administration Agreement, as it may be amended, supplemented or modified from time to time, and all references herein to Sections are to Sections of this Agreement unless otherwise specified. The rules of construction set forth in Part II of such Appendix A shall be applicable to this Agreement. 2. DUTIES OF THE ADMINISTRATOR. (a) Duties with Respect to the Depository Agreement and the Indenture. (i) The Administrator agrees to perform all its duties as Administrator and the duties of the Issuer under the Indenture and the Depository Agreement. In addition, the Administrator shall consult with the Owner Trustee regarding the duties of the Issuer under the Indenture and the Depository Agreement. The Administrator shall monitor the performance of the Issuer and shall advise the Owner Trustee when action is necessary to comply with the Issuer's duties under the Indenture and the Depository Agreement. The Administrator shall prepare for execution by the Issuer or shall cause the preparation by other appropriate persons of all such documents, reports, filings, instruments, certificates, notices and opinions as it shall be the duty of the Issuer to prepare, file or deliver pursuant to the Indenture and the Depository Agreement. In furtherance of the foregoing, the Administrator shall take all appropriate action that it is the duty of the Issuer to take pursuant to the Indenture including, without limitation, such of the foregoing as are required with respect to the following matters under the Indenture (references are to sections of the Indenture): (A) the preparation of (or obtaining of) the documents and instruments required for issuance of the Notes (if not prepared or obtained by the Issuer), including the Officer's Issuance Certificate and Opinion of Counsel to be delivered in connection with the issuance of each series of Notes, the coordination with the holders of the Revolving Notes of all borrowings under the Revolving Notes and all matters relating to such borrowings, and the preparation of (or obtaining of) the documents and instruments required for authentication of the Notes and delivery of the same to the Indenture Trustee (Section 2.1); (B) the duty to cause the Note Register to be kept and to give the Indenture Trustee notice of any appointment of a new Note Registrar and the location, or change in location, of the Note Register (Section 2.4); (C) the notification of the Noteholders of each series of the final principal payment on their Notes (Section 2.7(c)); (D) the preparation, obtaining or filing of the instruments, opinions and certificates and other documents required for the release of Collateral (Section 2.9); (E) the preparation of Definitive Term Notes and arranging the delivery thereof (Section 2.12); (F) the maintenance of an office in _____________, for registration of transfer or exchange of Notes (Section 3.2); (G) the duty to cause newly appointed Paying Agents, if any, to deliver to the Indenture Trustee the instrument specified in the Indenture regarding funds held in trust (Section 3.3); (H) the direction to the Indenture Trustee to deposit monies with Paying Agents, if any, other than the Indenture Trustee (Section 3.3); (I) the obtaining and preservation of the Issuer's qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of the Indenture, the Notes, the Collateral and each other instrument and agreement included in the Trust Estate (Section 3.4); (J) the preparation of all supplements, amendments, financing statements, continuation statements, assignments, certificates, instruments of further assurance and other instruments, in accordance with Section 3.5 of the Indenture, necessary to protect the Trust Estate (Section 3.5); (K) the delivery of the Opinion of Counsel on the Initial Closing Date, in accordance with Section 3.6 of the Indenture, as to the Trust Estate, and the annual delivery of the Officers' Certificate, in accordance with Section 3.9 of the Indenture, as to compliance with the Indenture (Sections 3.6 and 3.9); (L) the identification to the Indenture Trustee in an Officers' Certificate of a Person with whom the Issuer has contracted to perform its duties under the Indenture (Section 3.7(b)); (M) the notification of the Indenture Trustee and the Rating Agencies of a Servicing Default under the Trust Sale and Servicing Agreement and, if such Servicing Default arises from the failure of the Servicer to perform any of its duties under the Trust Sale and Servicing Agreement or the Pooling and Servicing Agreement, the taking of all reasonable steps available to remedy such failure (Section 3.7(d)); (N) the preparation and obtaining of documents and instruments required for the release of the Issuer from its obligations under the Indenture (Section 3.11(b)); (O) the delivery of notice to the Indenture Trustee and the Rating Agencies of each Event of Default under the Indenture, each Servicing Default, any Insolvency Event with respect to the Seller, each default on the part of the Seller or the Servicer of their respective obligations under the Trust Sale and Servicing Agreement and each default on the part of the Original Seller or the Servicer of their respective obligations under the Pooling and Servicing Agreement (Section 3.19); (P) the monitoring of the Issuer's obligations as to the satisfaction and discharge of the Indenture, the preparation of an Officers' Certificate, the obtaining of the Opinion of Counsel and, if necessary, an Independent Certificate relating thereto (Section 4.1); (Q) the compliance with any written directive of the Indenture Trustee with respect to the sale of the Trust Estate in a commercially reasonable manner if an Event of Default shall have occurred and be continuing (Section 5.4(a)); (R) the preparation of any written instruments required to confirm more fully the authority of any co-trustee or separate trustee and any written instruments necessary in connection with the resignation or removal of any co-trustee or separate trustee (Sections 6.8 and 6.10); (S) the furnishing of the Indenture Trustee with the names and addresses of Noteholders during any period when the Indenture Trustee is not the Note Registrar (Section 7.1); (T) the preparation and, after execution by the Issuer, the filing with the Commission, any applicable state agencies and the Indenture Trustee of documents required to be filed on a periodic basis with, and summaries thereof as may be required by rules and regulations prescribed by, the Commission and any applicable state agencies and the transmission of such summaries, as necessary, to the Noteholders (Section 7.3); (U) the notification of the Indenture Trustee of the listing or delisting of the Notes of any series on any stock exchange, if and when such Notes are so listed or delisted (Section 7.4(a)); (V) the opening of one or more accounts in the Issuer's name, the preparation of Issuer Orders, Officer's Certificates and Opinions of Counsel and all other actions necessary with respect to investment and reinvestment of funds in the Designated Accounts (Sections 8.2 and 8.3); (W) the preparation of an Issuer Request and Officer's Certificate and the obtaining of an Opinion of Counsel and Independent Certificates, if necessary, for the release of the Trust Estate (Sections 8.4 and 8.5); (X) the preparation of Issuer Orders and the obtaining of Opinions of Counsel with respect to the execution of supplemental indentures and the mailing to the Noteholders of notices with respect to such supplemental indentures (Sections 9.1, 9.2 and 9.3); (Y) the preparation and execution of new Notes conforming to any supplemental indenture (Section 9.6); (Z) the notification of Noteholders and the Rating Agencies of the redemption of any Notes subject to redemption or the duty to cause the Indenture Trustee to provide such notification (Sections 10.1 and 10.2); (AA) the preparation of all Officer's Certificates, Opinions of Counsel and Independent Certificates, if necessary, with respect to any requests by the Issuer to the Indenture Trustee to take any action under the Indenture (Section 11.1(a)); (BB) the preparation and delivery of Officers' Certificates and the obtaining of Independent Certificates, if necessary, for the release of property from the lien of the Indenture (Section 11.1(b)); (CC) the notification of the Rating Agencies, upon the failure of the Indenture Trustee to give such notification, of the information required pursuant to Section 11.4 (Section 11.4); (DD) the preparation and delivery to Noteholders and the Indenture Trustee of any agreements with respect to alternate payment and notice provisions (Section 11.6); and (EE) the recording of the Indenture, if applicable, and the obtaining of an Opinion of Counsel as required pursuant to Section 11.15 (Section 11.15). (ii) The Administrator will perform those payment and indemnity obligations of the Servicer under Section 3.02 of the Pooling and Servicing Agreement and Section 7.1 of the Trust Sale and Servicing Agreement in the event that the Servicer fails to perform such obligations. (b) Additional Duties. (i) In addition to the duties of the Administrator set forth above, the Administrator shall perform such calculations and shall prepare for execution by the Issuer or the Owner Trustee or shall cause the preparation by other appropriate Persons of all such documents, reports, filings, instruments, certificates, notices and opinions as it shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to the Basic Documents, and at the request of the Owner Trustee shall take all appropriate action that it is the duty of the Issuer or the Owner Trustee to take pursuant to the Basic Documents. Subject to Section 7 of this Agreement, and in accordance with the directions of the Owner Trustee, the Administrator shall administer, perform or supervise the performance of such other activities in connection with the Collateral (including the Basic Documents) as are not covered by any of the foregoing provisions and as are expressly requested by the Owner Trustee and are reasonably within the capability of the Administrator. (ii) The Administrator shall perform the duties of the Administrator specified in Section 6.10 of the Trust Agreement required to be performed in connection with the resignation or removal of the Owner Trustee, and any other duties expressly required to be performed by the Administrator under the Trust Agreement. (iii) In carrying out the foregoing duties or any of its other obligations under this Agreement, the Administrator may enter into transactions with or otherwise deal with any of its Affiliates; provided, however, that the terms of any such transactions or dealings shall be in accordance with any directions received from the Issuer and shall be, in the Administrator's opinion, no less favorable to the Issuer than would be available from Persons that are not Affiliates of the Administrator. (c) Non-Ministerial Matters. (i) With respect to matters that in the reasonable judgment of the Administrator are non-ministerial, the Administrator shall not take any action unless, within a reasonable time before the taking of such action, the Administrator shall have notified the Owner Trustee of the proposed action and the Owner Trustee shall not have withheld consent or provided an alternative direction. For the purpose of the preceding sentence, "non-ministerial matters" shall include, without limitation: (A) the amendment of or any supplement to the Indenture (other than pursuant to or in connection with an Officer's Issuance Certificate); (B) the initiation of any claim or lawsuit by the Issuer and the compromise of any action, claim or lawsuit brought by or against the Issuer; (C) the amendment, change or modification of any of the Basic Documents; (D) the appointment of successor Note Registrars, successor Paying Agents and successor Indenture Trustees pursuant to the Indenture or the appointment of successor Administrators or successor Servicers, or the consent to the assignment by the Note Registrar, Paying Agent or Indenture Trustee of its obligations under the Indenture; and (E) the removal of the Indenture Trustee. (ii) Notwithstanding anything to the contrary in this Agreement, the Administrator shall not be obligated to, and shall not, (x) make any payments to the Noteholders under the Basic Documents, (y) except as provided in Section 2(a)(i)(Q) hereof, sell the Trust Estate pursuant to Section 5.4 of the Indenture or (z) take any other action that the Issuer directs the Administrator not to take on its behalf. 3. Successor Servicer and Administrator. The Issuer shall undertake, as promptly as possible after the giving of notice of termination to the Servicer of the Servicer's rights and powers pursuant to Section 8.2 of the Trust Sale and Servicing Agreement, to enforce the provisions of Sections 8.2, 8.3 and 8.4 of the Trust Sale and Servicing Agreement with respect to the appointment of a successor Servicer. Such successor Servicer shall, upon compliance with Sections 10(e)(ii) and (iii), become the successor Administrator hereunder. 4. Records. The Administrator shall maintain appropriate books of account and records relating to services performed hereunder, which books of account and records shall be accessible for inspection by the Issuer and the Seller at any time during normal business hours. 5. Compensation. As compensation for the performance of the Administrator's obligations under this Agreement and as reimbursement for its expenses related thereto, the Servicer shall pay the Administrator a monthly fee in the amount of $________. 6. Additional Information To Be Furnished to the Issuer. The Administrator shall furnish to the Issuer from time to time such additional information regarding the Collateral as the Issuer shall reasonably request. 7. Independence of the Administrator. For all purposes of this Agreement, the Administrator shall be an independent contractor and shall not be subject to the supervision of the Issuer or the Owner Trustee with respect to the manner in which it accomplishes the performance of its obligations hereunder. Unless expressly authorized by the Issuer, the Administrator shall have no authority to represent the Issuer or the Owner Trustee in any way and shall not otherwise be deemed an agent of the Issuer or the Owner Trustee. 8. No Joint Venture. Nothing contained in this Agreement (a) shall constitute the Administrator and either of the Issuer or the Owner Trustee as members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (b) shall be construed to impose any liability as such on any of them or (c) shall be deemed to confer on any of them any express, implied or apparent authority to incur any obligation or liability on behalf of the others. 9. Other Activities of Administrator. Nothing herein shall prevent the Administrator or its Affiliates from engaging in other businesses or, in its sole discretion, from acting in a similar capacity as an administrator for any other Person or entity even though such Person or entity may engage in business activities similar to those of the Issuer, the Owner Trustee or the Indenture Trustee. 10. Term of Agreement; Resignation and Removal of Administrator. (a) This Agreement shall continue in force until the dissolution of the Issuer, upon which event this Agreement shall automatically terminate. (b) Subject to Section 10(e), the Administrator may resign its duties hereunder by providing the Issuer with at least 60 days' prior written notice. (c) Subject to Section 10(e), the Issuer may remove the Administrator without cause by providing the Administrator with at least 60 days' prior written notice. (d) Subject to Section 10(e), at the sole option of the Issuer, the Administrator may be removed immediately upon written notice of termination from the Issuer to the Administrator if any of the following events shall occur: (i) the Administrator shall default in the performance of any of its duties under this Agreement and, after notice from the Issuer of such default, shall not cure such default within ten days (or, if such default cannot be cured in such time, shall not give within ten days such assurance of cure as shall be reasonably satisfactory to the Issuer); (ii) a court having jurisdiction in the premises shall enter a decree or order for relief, and such decree or order shall not have been vacated within 60 days, in respect of the Administrator in any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or (ii) the Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Administrator or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due. The Administrator agrees that if any of the events specified in clauses (ii) or (iii) of this Section 10(d) shall occur, it shall give written notice thereof to the Issuer and the Indenture Trustee within seven days after the happening of such event. (e) No resignation or removal of the Administrator pursuant to this Section 10 shall be effective until (i) a successor Administrator shall have been appointed by the Issuer, (ii) such successor Administrator shall have agreed in writing to be bound by the terms of this Agreement in the same manner as the Administrator is bound hereunder, and (iii) the Rating Agency Condition has been satisfied with respect to such proposed appointment. 11. Action upon Termination, Resignation or Removal. Promptly upon the effective date of termination of this Agreement pursuant to Section 10(a) or the resignation or removal of the Administrator pursuant to Section 10(b) or (c), respectively, the Administrator shall be entitled to be paid all fees and reimbursable expenses accruing to it to the effective date of such termination, resignation or removal. The Administrator shall forthwith upon such termination pursuant to Section 10(a) deliver to the Issuer all property and documents of or relating to the Collateral then in the custody of the Administrator. In the event of the resignation or removal of the Administrator pursuant to Section 10(b) or (c), respectively, the Administrator shall cooperate with the Issuer and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties of the Administrator. 12. Notices. All demands, notices and communications upon or to the Issuer, the Owner Trustee, the Administrator or the Indenture Trustee shall be delivered as specified in Appendix B of the Trust Sale and Servicing Agreement. 13. Amendments. (a) This Agreement may be amended from time to time with prior notice to the Rating Agencies by a written amendment duly executed and delivered by the Issuer, the Administrator and the Indenture Trustee, with the written consent of the Owner Trustee, without the consent of the Noteholders or the Certificateholders, for any of the following purposes: (i) to add provisions hereof for the benefit of the Noteholders and Certificateholders or to surrender any right or power herein conferred upon the Administrator; (ii) to cure any ambiguity or to correct or supplement any provision herein which may be inconsistent with any other provision herein; (iii) to evidence and provide for the appointment of a successor Administrator hereunder and to add to or change any of the provisions of this Agreement as shall be necessary to facilitate such succession; and (iv) to add any provisions to or change in any manner or eliminate any of the provisions of this Agreement or modify in any manner the rights of the Noteholders or Certificateholders; provided, however, that such amendment under this Section 13(a)(iv) shall not, as evidenced by an Opinion of Counsel, materially and adversely affect in any material respect the interest of any Noteholder or Certificateholder. (b) This Agreement may also be amended by the Issuer, the Administrator and the Indenture Trustee with prior notice to the Rating Agencies and with the written consent of the Owner Trustee, the Holders of Notes evidencing at least a majority in the Outstanding Amount of the Notes as of the close of the immediately preceding Distribution Date, the Holders of Certificates evidencing at least a majority of the Voting Interests as of the close of the preceding Distribution Date for the purpose of adding any provisions to, changing in any manner or eliminating any of the provisions of this Agreement or modifying in any manner the rights of Noteholders or the Certificateholders; provided, however, that no such amendment may (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, Collections on the Receivables held by the Trust or payments or distributions that are required to be made for the benefit of the Noteholders or Certificateholders (it being understood that the issuance of any Securities and the specification of the terms and provisions thereof pursuant to an Officer's Issuance Certificate (in the case of Notes) or a Certificate Issuance Order (in the case of Certificates) shall not be deemed to have such effect for purposes hereof), (ii) reduce the percentage of the Holders of Notes and Certificates which are required to consent to any amendment of this Agreement or (iii) modify or alter any provision of this Section 13, except to provide that certain additional provisions of this Agreement and the Basic Documents cannot be modified or waived without the consent of each Noteholder and Certificateholder affected thereby, without, in any such case, the consent of the Holders of all the outstanding Notes and Certificates. (c) Notwithstanding Sections 13(a) and (b), the Administrator may not amend this Agreement without the permission of the Seller, which permission shall not be unreasonably withheld. 14. Successors and Assigns. This Agreement may not be assigned by the Administrator unless such assignment is previously consented to in writing by the Issuer and the Owner Trustee and subject to the satisfaction of the Rating Agency Condition for each then outstanding series of Notes in respect thereof. An assignment with such consent and satisfaction, if accepted by the assignee, shall bind the assignee hereunder in the same manner as the Administrator is bound hereunder. Notwithstanding the foregoing, this Agreement may be assigned by the Administrator without the consent of the Issuer or the Owner Trustee to a corporation or other organization that is a successor (by merger, consolidation or purchase of assets) to the Administrator, provided that such successor organization executes and delivers to the Issuer, the Owner Trustee and the Indenture Trustee an agreement in which such corporation or other organization agrees to be bound hereunder by the terms of such assignment in the same manner as the Administrator is bound hereunder. Subject to the foregoing, this Agreement shall bind any successors or assigns of the parties hereto. 15. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 16. Headings. The section headings hereof have been inserted for convenience of reference only and shall not define or limit any of the terms or provisions hereof. 17. Separate Counterparts, This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 18. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such 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. 19. Not Applicable to ____________________ in Other Capacities. Nothing in this Agreement shall affect any obligation ____________________________ may have in any other capacity. 20. Limitation of Liability of Owner Trustee and Indenture Trustee. (a) Notwithstanding anything contained herein to the contrary, this instrument has been executed by _____________________, not in its individual capacity but solely as Owner Trustee and in no event shall ___________________ have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer. For all purposes of this Agreement, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Article VI of the Trust Agreement. (b) Notwithstanding anything contained herein to the contrary, this Agreement has been executed by ______________, not in its individual capacity but solely in its capacity as Indenture Trustee and in no event shall ________________ have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer. 21. Third-Party Beneficiary. The Owner Trustee is a third-party beneficiary to this Agreement and is entitled to the rights and benefits hereunder and may enforce the provisions hereof as if it were a party hereto. * * * * * IN WITNESS WHEREOF, the parties have caused this Administration Agreement to be duly executed by their respective officers as of the day and year first above written. _________________________________________ By: _______________________________, not in its individual capacity, but solely as Owner Trustee on behalf of the Issuer By: _____________________________________ Name: Title: _____________________, as Indenture Trustee By: _______________________, not in its individual capacity, but solely as Indenture Trustee By: ____________________________________ Name: Title: _________________________________________ as Administrator By: _____________________________________ Name: Title: EX-4.3.2 11 0011.txt FORM OF SERIES SUPPLEMENT TO POOLING AND SERVICING EXHIBIT 4.3.2 =============================================================================== FORM OF SERIES [ ] SUPPLEMENT Dated as of [ ] to POOLING AND SERVICING AGREEMENT Dated as of [ ] $[ ] [ ] CARD ACCOUNT MASTER TRUST SERIES [ ] among ACE SECURITIES CORP., Depositor [SERVICER NAME], Servicer and [TRUSTEE NAME], Trustee on behalf of the Series [ ] Certificateholders =============================================================================== TABLE OF CONTENTS ARTICLE I CREATION OF THE SERIES [ ] CERTIFICATES............................1 Section 1.01. Designation...............................................1 ARTICLE II DEFINITIONS................................................................2 Section 2.01. Definitions...............................................2 ARTICLE III SERVICER AND TRUSTEE......................................................21 Section 3.01. Servicing Compensation..................................21 ARTICLE IV RIGHTS OF SERIES [ ] CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS.................................22 Section 4.01. Collections and Allocations.............................22 Section 4.02. Determination of Monthly Interest [; Interest Funding Account]........................................23 Section 4.03. Determination of Monthly Principal [; Principal Funding Account; Class A Accumulation Period]...........26 Section 4.04. Required Amount.........................................29 Section 4.05. Application of Class A Available Funds, Class B Available Funds and Available Principal Collections.....29 Section 4.06. Defaulted Amounts; Investor Charge-Offs.................32 Section 4.07. Excess Spread; Excess Finance Charge Collections........33 Section 4.08. Reallocated Principal Collections.......................35 Section 4.09. Excess Finance Charge Collections.......................36 Section 4.09A. Reallocated Investor Finance Charge Collections.........36 Section 4.10. Shared Principal Collections............................38 Section 4.11. Reserve Account.........................................38 Section 4.12. Establishment of Credit Enhancement.....................40 Section 4.13. Cash Collateral Account.................................42 Section 4.14. [Determination of Index.................................46 Section 4.15. Pre-Funding Account.....................................46 Section 4.16. Changes in Invested Amount..............................48 ARTICLE V DISTRIBUTIONS AND REPORTS TO SERIES [ ] CERTIFICATEHOLDERS........48 Section 5.01. Distributions...........................................48 Section 5.02. Reports and Statements to Series [ ] Certificateholders......................................49 ARTICLE VI Section 6.01. [Reinvestment] [Pay Out] Events........................50 ARTICLE VII OPTIONAL PURCHASE; SERIES TERMINATION.....................................51 Section 7.01. Optional Repurchase.....................................51 Section 7.02. Series Termination......................................52 ARTICLE VIII FINAL DISTRIBUTIONS.......................................................52 Section 8.01. Sale of Receivables Certificateholders' Interest pursuant to Section 2.06 or 10.01 of the Agreement and Section 7.01 or 7.02 of this Supplement.............52 Section 8.02. Distribution of Proceeds of Sale, Distribution or Liquidation of the Receivables pursuant to Section 9.02 of the Agreement...........................53 ARTICLE IX MISCELLANEOUS PROVISIONS..................................................55 Section 9.01. Ratification of Agreement...............................55 Section 9.02. Counterparts............................................55 Section 9.03. Governing Law...........................................55 ARTICLE X INTERCHANGE...............................................................56 Section 10.01. Interchange............................................56 SERIES [ ] SUPPLEMENT, dated as of [ ] (the "Supplement"), between ACE SECURITIES CORP., a Delaware corporation, as Depositor, [SERVICER NAME], as Servicer, and [TRUSTEE NAME], a [jurisdiction] [form of organization], as Trustee. Pursuant to the Pooling and Servicing Agreement dated as of [ ] (as amended and supplemented, the "Agreement"), among the Depositor, the Servicer and the Trustee, the Depositor has created the [ ] Card Account Master Trust (the "Trust"). Section 6.03 of the Agreement provides that the Depositor may from time to time direct the Trustee to authenticate one or more new Series of Investor Certificates representing fractional undivided interests in the Trust. The Principal Terms of any new Series are to be set forth in a Supplement to the Agreement. Pursuant to this Supplement, the Depositor and the Trustee shall create a new Series of Investor Certificates and specify the Principal Terms thereof. ARTICLE I CREATION OF THE SERIES [ ] CERTIFICATES Section 1.01. DESIGNATION. (a) There is hereby created a Series of Investor Certificates to be issued pursuant to the Agreement and this Supplement to be known as "[ ] Card Account Master Trust, Series [ ]". The Series [ ] Certificates shall be issued in two Classes, the first of which shall be known as the "Class A Series [ ] [______%] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Certificates" and the second of which shall be known as the "Class B Series [ ] [______%] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Certificates." [In addition, there is hereby created a third Class of uncertificated interests in the Trust which, except as expressly provided herein, shall be deemed to be "Investor Certificates" for all purposes under the Agreement and this Supplement and which shall be known as the "Collateral Interest, Series [ ]". The Collateral Interest Holder shall deemed to be the Series Enhancer for all purposes under the Agreement and this Supplement.] (b) [ ] shall [be included in Group [______] and shall] [not] be a Principal Sharing Series. [Group [_____] [shall] [shall not] be a Reallocation Group.] Series [ ] shall [not] be subordinated to [ ] [any other Series]. Describe terms of subordination, if applicable.] Notwithstanding any provision in the Agreement or in this Supplement to the contrary, the first Distribution Date with respect to Series [ ] shall be the [________] Distribution Date [and the first Monthly Period shall be the period from the Closing Date until [ ]. [(c) Except as expressly provided herein, the provisions of Article VI and Article XII of the Agreement relating to the registration, authentication, delivery, presentation, cancellation and surrender of Registered Certificates shall not be applicable to the Collateral Interest.] ARTICLE II DEFINITIONS Section 2.01. DEFINITIONS. (a) Whenever used in this Supplement, the following words and phrases shall have the following meanings, and the definitions of such terms are applicable to the singular as well as the plural forms of such terms and the masculine as well as the feminine and neuter genders of such terms. ["ACCUMULATION PERIOD" shall mean the Class A Accumulation Period and the Class B Accumulation Period.] "ADDITIONAL INTEREST" means, with respect to any Distribution Date, the Class A Additional Interest and the Class B Additional Interest for such Distribution Date. ["ADJUSTED INVESTED AMOUNT" shall mean, with respect to any date of determination, an amount equal to the Invested Amount less the Principal Funding Account Balance on such date of determination.] ["AVAILABLE CASH COLLATERAL AMOUNT" shall mean, with respect to any Distribution Date, the lesser of (a) the amount on deposit in the Cash Collateral Account on such date (before giving effect to any deposit to, or withdrawal from, the Cash Collateral Account to be made with respect to such date) and (b) the [Initial] [Required] Cash Collateral Amount.] ["AVAILABLE COLLATERAL AMOUNT" shall mean, with respect to any date of determination, the lesser of (a) the sum of the amount on deposit in the Cash Collateral Account and the Collateral Invested Amount and (b) the Required Collateral Amount.] ["AVAILABLE CREDIT ENHANCEMENT AMOUNT" shall mean, with respect to any date of determination, [__________].] "AVAILABLE PRINCIPAL COLLECTIONS" shall mean, with respect to any Monthly Period, an amount equal to the sum of (a) (i) an amount equal to the Principal Allocation Percentage of all Collections in respect of Principal Receivables received during such Monthly Period MINUS (ii) the amount of Reallocated Principal Collections with respect to such Monthly Period which pursuant to Section 4.08(a) or (b) are required to fund any deficiency in the amount to be distributed pursuant to Sections 4.05(a)(i), (ii) and (iii) or (b)(i), (ii) or (iii) for the related Distribution Date, (b) [any Shared Principal Collections with respect to other Series that are allocated to Series [ ] in accordance with Section 4.04 of the Agreement and Section 4.10 hereof (c)] any other amounts which pursuant to Section 4.07 hereof are to be treated as Available Principal Collections with respect to the related Distribution Date [and (d) describe other amounts, if applicable]. ["AVAILABLE RESERVE ACCOUNT AMOUNT" shall mean, with respect to any Distribution Date, the lesser of (a) the amount on deposit in the Reserve Account on such date (before giving effect to any deposit to be made to the Reserve Account on such date) and (b) the Required Reserve Account Amount.] ["AVAILABLE SHARED COLLATERAL AMOUNT" shall mean, with respect to any date of determination, the lesser of (a) the [Initial] [Required] Shared Collateral Amount and (b) the excess, if any, of the Available Cash Collateral Amount on such date over the Initial Class B Collateral Amount.] "BASE RATE" shall mean, with respect to any Monthly Period, the annualized percentage equivalent of a fraction, the numerator of which is equal to the sum of the Class A Monthly Interest, the Class B Monthly Interest [Collateral Monthly Interest] and the Monthly Servicing Fee with respect to the related Distribution Date and the denominator of which is the Invested Amount as of the last day of the preceding Monthly Period. ["CASH COLLATERAL ACCOUNT" shall have the meaning specified in Section 4.12(a).] ["CASH COLLATERAL ACCOUNT INVESTMENTS" shall mean Eligible investments.] ["CASH COLLATERAL ACCOUNT SURPLUS" shall mean, as of any date of determination, the amount, if any, by which the amount on deposit in the Cash Collateral Account exceeds the [[lesser of the] Initial Cash Collateral Amount [and the Adjusted Investor Interest]] [the Required Cash Collateral Amount].] ["CASH COLLATERAL DEPOSITOR" shall mean the financial institution or institutions that are party to the Loan Agreement, such financial institution or institutions to be selected by the Depositor on or prior to the Closing Date to make a deposit in the Cash Collateral Account on the Closing Date, or any successors thereto appointed as provided in the Loan Agreement.] ["CLASS A ACCUMULATION PERIOD" shall mean, unless a Pay Out Event shall have occurred prior thereto, the period commencing at the close of business on [_____________] [or such later date as is determined in accordance with Section 4.03(e)] and ending on the first to occur of (a) the commencement of the Rapid Amortization Period or (b) the payment in full to Class A Certificateholders of the Class A Invested Amount.] ["CLASS A ACCUMULATION PERIOD LENGTH" shall have the meaning specified in Section 4.03(e). ["CLASS A ADDITIONAL INTEREST" shall have the meaning specified in Section 4.02(e). ["CLASS A ADJUSTED INVESTED AMOUNT" shall mean, with respect to any date of determination, an amount equal to the Class A Invested Amount less the Principal Funding Account Balance on such date.] "CLASS A AVAILABLE FUNDS" shall mean, with respect to any Monthly Period, an amount equal to the sum of [(a) if such Monthly Period Relates to a Distribution Date with respect to the Class A Accumulation Period [or an Early Accumulation Period], the amount of Principal Funding Investment Proceeds, if any, with respect to such Distribution Date, (b) the Class A Floating Percentage of the [Investor Finance Charge Collections] [Reallocated Investor Finance Charge Collections] [, (c) the amount of funds, if any, to be withdrawn from the Reserve Account which, pursuant to Section 4.11(d), are required to be included in Class A Available Funds with respect to such Distribution Date] [, (d) [the Class A Floating Percentage of] any investment earnings (net of investment losses and expenses) transferred from the Pre-Funding Account to the Collection Account on the related Distribution Date] [, (e) the amount of Interest Funding Investment Proceeds, if any, with respect to the related Distribution Date] [and (f) describe other amounts, if applicable]. "CLASS A CERTIFICATE RATE" shall mean, with respect to the Class A Certificates, [___% per annum, calculated on the basis of a 360-day year consisting of twelve 30-day months] [[___]% with respect to the initial Interest Period, and for each Interest Period thereafter, a per annum rate of [_____]% [above] [below] [times] [Index] determined on the related Rate Determination Date, [but in no event in excess of [_______]% per annum], each calculated on the basis of actual days elapsed and a 360-day year]. "CLASS A CERTIFICATEHOLDER" shall mean the Person in whose name a Class A Certificate in registered in the Certificate Register. "CLASS A CERTIFICATES" shall mean any one of the Certificates executed by the Depositor and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-1. "CLASS A CONTROLLED AMORTIZATION PERIOD" shall mean, unless a Pay-Out Event shall have occurred prior thereto, the period commencing on the close of business [____________] and ending on the first to occur of (a) the commencement of the Rapid Amortization Period, (b) the payment in full to Class A Certificateholders of the Class A Invested Amount or (c) the Termination Date.] ["CLASS A EXPECTED FINAL PAYMENT DATE" shall mean the [_____________] Distribution Date.] "CLASS A FLOATING PERCENTAGE" shall mean, with respect to any Monthly Period, the percentage equivalent (which percentage shall never exceed 100% of a fraction, the numerator of which is equal to the Class A [Adjusted] Invested Amount as of the close of business on the last day of the preceding Monthly Period and the denominator of which is equal to the [Adjusted] Invested Amount as of such day; PROVIDED, HOWEVER, that with respect to the first Monthly Period, the Class A Floating Percentage shall mean the percentage equivalent of a fraction, the numerator of which is the Class A Initial Invested Amount of the denominator of which is the Initial Invested Amount. "CLASS A INITIAL INVESTED AMOUNT" shall mean [the portion of the initial principal amount of the Class A Certificates that is invested in Principal Receivables on the Closing Date, which is] $______________. "CLASS A INTEREST SHORTFALL" shall have the meaning specified in Section 4.02(a). "CLASS A INVESTED AMOUNT" shall mean, on the date of determination, an amount equal to (a) the Class A Initial Invested Amount, [PLUS (b) the [amount] [Class A Floating Percentage] of any withdrawals from the Pre-Funding Account in connection with the purchase of an additional interest in Principal Receivables pursuant to Section 4.15,] MINUS (c) the aggregate amount of principal payment made to the Class A Certificateholders on or prior to such date [other than any payments of principal to the Class A Certificateholders from the Pre-Funding Account], MINUS (d) the excess, if any, of the aggregate amount of Class A Investor Charge-Offs for all prior Distribution Dates OVER Class A Investor Charge-Offs reimbursed pursuant to Section 4.06(a) prior to such date. "CLASS A INVESTOR CHARGE-OFFS" shall have the meaning specified in Section 4.06(a). "CLASS A INVESTOR DEFAULT AMOUNT" shall mean, with respect to each Distribution Date, an amount equal to the product of (i) the Investor Default Amount for the related Monthly Period and (ii) the Class A Floating Percentage for such Monthly Period. "CLASS A MONTHLY INTEREST" shall have the meaning specified in Section 4.02(a). "CLASS A MONTHLY PRINCIPAL" shall have the meaning specified in Section 4.03(a). ["CLASS A PRINCIPAL DRAW AMOUNT" shall have the meaning specified in Section 4.12(i).] "CLASS A PRINCIPAL PERCENTAGE" shall mean, with respect to any Monthly Period (i) during the Revolving Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction, the numerator of which is the Class A Invested Amount as of the last day of the immediately preceding Monthly Period and the denominator of which is the Invested Amount as of such day and (ii) during the [Accumulation Period] [Controlled Amortization Period] or the Rapid Amortization Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction, the numerator of which is the Class A Invested Amount as of the end of the Revolving Period, and the denominator of which is the Invested Amount as of the end of the Revolving Period; PROVIDED, HOWEVER, that with respect to the first Monthly Period, the Class A Principal Percentage shall mean the percentage equivalent of a fraction, the numerator of which is the Class A Initial Invested Amount and denominator of which is the Initial Invested Amount. ["CLASS A REQUIRED AMOUNT" shall have the meaning specified in Section 4.04.] "CLASS A SERVICING FEE" shall have the meaning specified in Section 3.01. ["CLASS B ACCUMULATION PERIOD" shall mean the period commencing on the Class B Principal Commencement Date and ending on the first to occur thereafter of (a) the commencement of the Rapid Amortization Period, (b) the payment in full to the Class B Certificateholders of the Class B Invested Amount or (c) the Termination Date.] "CLASS B ADDITIONAL INTEREST" shall have the meaning specified in Section 4.02(b). ["CLASS B ADJUSTED INVESTED AMOUNT" shall mean, with respect to any date of determination, an amount equal to the Class B Invested Amount less the Principal Funding Account Balance on such date.] "CLASS B AVAILABLE FUNDS" shall mean, with respect to any Monthly Period, an amount equal to the sum of (a) if such Monthly Period relates to a Distribution Date that occurs on or after the Class B Principal Commencement Date, the amount of Principal Funding Investment Proceeds [and Interest Funding Investment Proceeds], if any, with respect to such Distribution Date, (b)] the Class B Floating Percentage of the [Investor Finance Charge Collections] [Reallocated Investor Finance Charge Collections] [, (c) the amount of funds, if any, to be withdrawn from the Reserve Account which pursuant to Section 4.11(d) are required to be included in Class B Available Funds with respect to such Distribution Date] [, (d) [the Class B Floating Percentage of] any investment earnings (net of investment losses and expenses) transferred from the Pre-Funding Account to the Collection Account on the related Distribution Date] [and (e) describe other amounts, if applicable]. "CLASS B CERTIFICATE RATE" shall mean, with respect to the Class B Certificate, [[____]% per annum, calculated on the basis of a 360-day year consisting of twelve 30-day months] [[____]% with respect to the initial Interest Period, and for each Interest Period thereafter, a per annum rate of [____]% [above] [below] [times] [Index] determined on the related Rate Determination Date, [but in no event in excess of [______]% per annum,] each calculated on the basis of actual days elapsed and a 360-day year]. "CLASS B CERTIFICATEHOLDER" shall mean the Person in whose name a Class B Certificate is registered in the Certificate Register. "CLASS B CERTIFICATES" shall mean any one of the Certificates executed by the Depositor and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-2. ["CLASS B CONTROLLED AMORTIZATION PERIOD" shall mean the period commencing on the Class B Principal Commencement Date and ending on the first to occur thereafter of (a) the commencement of the Rapid Amortization Period, (b) the payment in full to the Class B Certificateholders of the Class B Invested Amount or (c) the Termination Date.] ["CLASS B EXPECTED FINAL PAYMENT DATE" shall mean the [___________,] Distribution Date.] "CLASS B FLOATING PERCENTAGE" shall mean, with respect to any Monthly Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction, the numerator of which is equal to the Class B [Adjusted] Invested Amount as of the close of business on the last day of the preceding Monthly Period and the denominator of which is equal to the [Adjusted] Invested Amount as of the close of business on such day; provided, HOWEVER, that with respect to the first Monthly Period, the Class B Floating Percentage shall mean the percentage equivalent of a fraction, the numerator of which is the Class B Initial Invested Amount and the denominator of which is the Initial Invested Amount. "CLASS B INITIAL INVESTED AMOUNT" shall mean [the portion of the initial principal amount of the Class B Certificates that is invested in Principal Receivables on the Closing Date, which is] $___________. "CLASS B INTEREST SHORTFALL" shall have the meaning specified in Section 4.02(b). "CLASS B INVESTED AMOUNT" shall mean, on any date of determination, an amount equal to (a) [the sum of] the Class B Initial Invested Amount [and the [amount] [Class B Floating Percentage] of any withdrawals from the Pre-Funding Account in connection with the purchase of an additional interest in Principal Receivables pursuant to Section 4.15], MINUS (b) the aggregate amount of principal payments made to the Class B Certificateholders prior to such date [(other than (any principal payments made to Class B Certificateholders from the proceeds of a Reimbursement Draw Amount pursuant to Section 4.12 [(c)] [(g)] (and) [any payments of principal to the Class B Certificateholders from the Pre-Funding Account])], MINUS (c) the aggregate amount of Class B Investor Charge-Offs for all prior Distribution Dates, MINUS (d) the amount of Reallocated Principal Collections allocated on all prior Distribution Dates pursuant to Section 4.06(a) [(excluding any Reallocated Principal Collections that have resulted in a reduction in [the Enhancement Invested Amount pursuant to Section 4-06(c))] (the Collateral Invested Amount pursuant to Section 4.08]], MINUS (e) an amount equal to the amount by which the Class B Invented Amount has been reduced on all prior Distribution Dates pursuant to Section 4.06(a) and PLUS (f) the amount of Excess Spread and Excess Finance Charge Collections] allocated and available on all prior Distribution Dates pursuant to Section 4.07(f) for the purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e). "CLASS B INVESTOR CHARGE-OFFS" shall have the meaning specified in Section 4.06(b). "CLASS B INVESTOR DEFAULT AMOUNT" shall mean, with respect to each Distribution Date, an amount equal to the product of (i) the Investor Default Amount for the related Monthly Period and (ii) the Class B Floating Percentage for such Monthly Period. "CLASS B MONTHLY INTEREST" shall have the meaning specified in Section 4.02(b). "CLASS B MONTHLY PRINCIPAL" shall have the meaning specified in Section 4.03(b). "CLASS B PRINCIPAL COMMENCEMENT DATE" shall mean the Distribution Date on which the Class A Invested Amount is paid in full or, if the Class A Invested Amount is paid in full [on the Class A Expected Final Payment Date] [during the Class A Controlled Amortization Period] and the Rapid Amortization Period has not commenced, the Distribution Date following the Class A Expected Final Payment Date. ["CLASS B PRINCIPAL DRAW AMOUNT" shall have the meaning specified in Section 4.12 (i).] "CLASS B PRINCIPAL PERCENTAGE" shall mean, with respect to any Monthly Period (i) during the Revolving Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction, the numerator of which is the Class B Invested Amount as of the last day of the immediately preceding Monthly Period and the denominator of which is the Invested Amount as of such day and (ii) during the [Class B Accumulation Period] [Class B Amortization Period] or the Rapid Amortization Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction, the numerator of which is the Class B invested Amount as of the end of the Revolving Period, and the denominator of which is the Class B Invested Amount as of the end of the Revolving Period; PROVIDED, HOWEVER, that with respect to the first Monthly Period the Class B Principal Percentage shall mean the percentage equivalent of a fraction, the numerator of which is the Class B Initial Invested Amount and the denominator of which is the Initial Invested Amount. ["CLASS B REQUIRED AMOUNT" shall have the meaning set forth in Section 4.04.] "CLASS B SERVICING FEE" shall have the meaning specified in Section 3.01. "CLOSING DATE" shall mean [_______________]. ["COLLATERAL ADDITIONAL INTEREST" shall have the meaning specified in subsection 4.02(e).] ["COLLATERAL AMOUNT" shall mean, for any date of determination, the sum of (a) the Collateral Invested Amount and (b) the aggregate amount of funds on deposit in the Cash Collateral Account, in each case on such date.] ["COLLATERAL AVAILABLE FUNDS" shall mean with respect to any Distribution Date, the Collateral Invested Percentage of [Reallocated] Investor Finance Charge Collections with respect to the preceding Monthly Period.] ["COLLATERAL CASH SURPLUS" shall mean, as of any date of determination, the lesser of (a) the Collateral Surplus and (b) the amount on deposit in the Cash Collateral Account.] ["COLLATERAL CHARGE-OFFS" shall have the meaning specified in Section 4.06(c).] ["COLLATERAL DEFAULT AMOUNT" shall mean, with respect to any Distribution Date, the product of the Investor Default Amount for the related Monthly Period and the Collateral Invested Percentage.] ["COLLATERAL INITIAL INVESTED AMOUNT shall mean $[_______________].] ["COLLATERAL INTEREST" shall mean a fractional undivided interest in the Trust which shall consist of the right to receive, to the extent necessary to make the required payments to the Collateral Interest Holder under this Supplement, the portion of Collections allocable thereto under the Agreement and this Supplement, funds on deposit in the Collection Account allocable thereto pursuant to the Agreement and this Supplement and, subject to the rights of the Investor Certificateholders with respect thereto, funds on deposit in the Cash Collateral Account.] ["COLLATERAL INTEREST HOLDER" shall mean the entity so designated in the Loan Agreement.] ["COLLATERAL INTEREST SHORTFALL" shall have the meaning specified in Section 4.02(e).] ["COLLATERAL INVESTED AMOUNT" shall mean, when used with respect to any date, an amount equal to (a) the Collateral Initial Invested Amount, MINUS (b) the aggregate amount of payments made to the Cash Collateral Depositor pursuant to Section 4. 11 (d) (iii) prior to such date, MINUS (c) the aggregate amount of Collateral Charge-Offs for all prior Distribution Dates pursuant to Section 4.06(c), MINUS (d) the aggregate amount of Reallocated Principal Collections allocated on all prior Distribution Dates pursuant to Section 4.08 allocable to the Collateral Invested Amount, MINUS (e) an amount equal to the amount by which the Collateral Invested Amount has been reduced on all prior Distribution Dates pursuant to Sections 4.06 (a) and (b), and PLUS the amount allocated and available on all prior Distribution Dates pursuant to Section 4.07(h-5), for the purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e) ; PROVIDED, HOWEVER, that the Collateral Invested Amount may not be reduced below zero.] ["COLLATERAL INVESTED PERCENTAGE" shall mean, with respect to any Distribution Date, the percentage equivalent of a fraction, the numerator of which is the Collateral Invested Amount as of the last day of the second preceding Monthly Period and the denominator of which is the Invested Amount as of such last day.] ["COLLATERAL MONTHLY INTEREST" shall mean the monthly interest distributable in respect of the Collateral Invested Amount as calculated in accordance with subsection 4.02(e).] ["COLLATERAL MONTHLY PRINCIPAL" shall mean the monthly principal distributable in respect of the Collateral Invested amount as calculated in accordance with subsection 4.03(b-1).] ["COLLATERAL RATE" shall mean, for any Interest Period, a per annum rate equal to LIBOR for such Interest Period PLUS [_______]%.] ["COLLATERAL SERVICING FEE" shall have the meaning set forth in Section 3.01.] ["COLLATERAL SURPLUS" shall mean, with respect to any Distribution Date, the excess, if any, of (a) the amount on deposit in the Cash Collateral Account PLUS the Collateral Invested Amount over (b) the greater of (x) the Required Collateral Amount or (y) at any time the Class B Invested Amount is greater than zero and as long As a Rapid Amortization (or Early Accumulation) Period is not in effect, at the option of the Seller (as evidenced by written instructions to the Servicer and the Trustee), such higher amount as the Seller shall specify, from time to time, in such instructions.] ["CONTROLLED ACCUMULATION AMOUNT" shall mean (a) for any Distribution Date with respect to the Class A Accumulation Period, $[______________][; PROVIDED, HOWEVER, that, if the Class Accumulation Period Length is determined to be less than [____] months, the Controlled Accumulation Amount for each Distribution Date with respect to the Class A Accumulation Period will be equal to (x) the Class A [Initial] [Series] Invested Amount divided by (y) the number of Distribution Dates from, and including, the first Distribution Date with respect to the Class A Accumulation Period to, and including, the Class A Expected Final Payment Date]; and (b) for any Distribution Date with respect to the Class B Accumulation Period, $[_________].] ["CONTROLLED AMORTIZATION AMOUNT" shall mean (a) for any Distribution Date with respect to the Class A Controlled Amortization Period, $[______]; and (b) for any Distribution Date with respect to the Class B Controlled Amortization Period $[_________].] ["CONTROLLED AMORTIZATION PERIOD" shall mean the Class A Controlled Amortization Period and the Class B Controlled Amortization Period.] ["CONTROLLED DEPOSIT AMOUNT" shall mean, for any Distribution Date with respect to the Accumulation Period, an amount equal to the sum of the Controlled Accumulation Amount for such Distribution Date and any Deficit Controlled Accumulation Amount for the immediately preceding Distribution Date.] ["CONTROLLED DISTRIBUTION AMOUNT" shall mean, for any Distribution Date with respect to the Controlled Amortization Period, an amount equal to the sum of the Controlled Amortization Amount for such Distribution Date and any Deficit Controlled Amortization for the immediately preceding Distribution Date.] ["COVERED AMOUNT" shall mean (a) for any Distribution Date with respect to the Class A Accumulation Period or the first Special Payment Date, if such Special Payment Date occurs prior to the Class B Principal Commencement Date, an amount equal to [one-twelfth of the product of (i) the Class A Certificate Rate and (ii) the Principal Funding Account Balance, if any, as of the preceding Distribution Date] [the product of (i) (A) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360, times (B) the Class A Certificate Rate in effect during such Interest Period, and (ii) the Principal Funding Account Balance, if any, as of the preceding Distribution Date, and (b) for any Distribution Date with respect to the Class B Accumulation Period or the first Special Payment Date, if such Special Payment Date occurs on or after the Class B Principal Commencement Date, an amount equal to [one-twelfth of the product of (i) the Class B Certificate Rate and (ii) the Principal Funding Account Balance, if any, as of the preceding Distribution Date] [the product of (i) (A) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360, times (B) the Class B Certificate Rate in effect during such Interest Period, and (ii) the Principal Funding Account Balance, if any, as of the preceding Distribution Date].] ["CREDIT ENHANCEMENT" shall mean [___________], up to the Available Credit Enhancement Amount.] ["CREDIT ENHANCEMENT AGREEMENT" shall mean the [_____________________] agreement among the Depositor, the Servicer and the Credit Enhancement Provider, dated as of [ ], as amended or modified from time to time.] ["CREDIT ENHANCEMENT PROVIDER" shall mean [_____________________].] ["DEFAULT DRAW AMOUNT" shall have the meaning specified in Section 4.12(f).] ["DEFICIT CONTROLLED ACCUMULATION AMOUNT" shall mean (a) on the first Distribution Date with respect to the Class A Accumulation Period or the Class B Accumulation Period, the excess, if any, of the Controlled Accumulation Amount for such Distribution Date over the amount distributed from the Collection Account as Class A Monthly Principal or Class B Monthly Principal, as the case may be, for such Distribution Date and (b) on each subsequent Distribution Date with respect to the Class A Accumulation Period or the Class B Accumulation Period, the excess, if any, of the Controlled Deposit Amount for such subsequent Distribution Date plus any Deficit Controlled Accumulation Amount for the prior Distribution Date over the Amount distributed from the Collection Account as Class A Monthly Principal or Class B Monthly Principal, as the case may be, for such subsequent Distribution Date.] ["EARLY ACCUMULATION PERIOD" shall mean [, unless a Pay Out Event shall have occurred prior thereto,] the period commencing at the closing of business on the Business Day" immediately preceding the day on which a Reinvestment Event with respect to Series [ ] is deemed to have occurred and ending on [the first to occur of (a) the commencement of the Rapid Amortization Period or (b) the payment in full to the Class A Certificateholders and the Class B Certificateholders of the Class A Invested Amount and the Class B Invested Amount, respectively.] ["ECONOMIC PAY-OUT EVENT" shall mean a Pay Out Event set forth in Section 6.011(f)] or [ ].] ["ECONOMIC SPECIAL PAYMENT DATE" shall mean the special Payment Date falling in the Monthly following the Monthly Period in which an Economic Pay-Out Event is deemed to have occurred.) ["ENHANCEMENT INITIAL INVESTMENT AMOUNT" shall mean the aggregate amount withdrawn from the Cash Collateral Account and applied to the payment of principal of the Series [ ] Certificates with respect to the Economic Special Payment Date, if any, pursuant to Section 4.12 (j) (E) and (F).] ["ENHANCEMENT INVESTED AMOUNT" shall mean, when used with respect to any date, an amount equal to (a) the Enhancement Initial Invented Amount, MINUS (b) the aggregate amount of principal payments made to the Cash Collateral Depositor pursuant to Section 4.05(d) (iii) prior to such date, MINUS (c) an amount equal to the amount by which the Enhancement Invested Amount has been reduced on all prior Distribution Dates pursuant to Section 4.06, and PLUS (d) the aggregate amount of [Excess Finance Charge Collections and] Excess Spread allocated and available on all prior Distribution Dates pursuant to Section 4.07(h) for the purpose of reimbursing amounts deducted pursuant to the foregoing clause (c); PROVIDED, HOWEVER, that (i) unless and until a withdrawal is made from the Cash Collateral Account and applied to the payment of principal of the Series [ ] -Certificates with respect to the Economic Special Payment Date, if any, pursuant to Section 4.12(j)(E) and (F), the Enhancement Invested Amount shall be zero, and (ii) the Enhancement Invested Amount may not be reduced below zero.] "EXCESS SPREAD" shall mean, with respect to any Distribution Date, the sum of the amounts, if any specified pursuant to Sections 4.05(a)(iv) and 4.05(b)(iv) with respect to such Distribution Date [plus Collateral Available Funds as of such Distribution Date]. ["FINANCE CHARGE SHORTFALL" shall have the meaning specified in Section 4.09.] "FLOATING ALLOCATION PERCENTAGE" shall mean, with respect to any Monthly Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction, the numerator of which is [the sum of] the [Adjusted] invested Amount [and the Enhancement Invested Amount, if any,] as of the last day of the preceding Monthly Period (or with respect to the first Monthly Period, the initial Invested Amount) and the denominator of which is the product of (x) the Series [ ] Allocation Percentage with respect to such Monthly Period and (y) [the sum of (i)] the total amount of Principal Receivables in the Trust as of such day (or with respect to the first Monthly Period, the total amount of Principal Receivables in the Trust on the Closing Date) [and (ii) the principal amount on deposit in the Special Funding Account as of such last day]; PROVIDED, HOWEVER, that with respect to any Monthly Period in which an Addition Date or a Removal Date occurs the denominator in (x) (i) above shall be the Series [ ] Allocation Percentage of (1) the aggregate amount of Principal Receivables in the Trust at the end of the day on the last day of the prior Monthly Period for the period from and including the first day of such Monthly Period to but excluding the related Addition Date or Removal Date and (2) the aggregate amount of Principal Receivables in the Trust at the end of the day on the related Addition Date or Removal Date for the period from and including the related Addition Date or Removal Date to and including the last day of such Monthly Period [; PROVIDED FURTHER, HOWEVER, that with respect to any Monthly Period in which the Invested Amount is increased pursuant to Section 4.15, the numerator above will be (1) the Invested Amount as of the last day of the prior Monthly Period for the period from and including the first day of such Monthly Period to but excluding the day the Invested Amount is increased and (2) the Invested Amount as of the end of the day on which the Invested Amount is increased for the period from and including such day to and including the last day of such Monthly Period. ["FULL INVESTED AMOUNT" shall mean $[__________].] ["FUNDING PERIOD" shall mean the period beginning on and including the Closing Date to but excluding the earliest to occur of (x) the day on which the Invested Amount equals the Full Invested Amount, (y) the commencement of the Rapid Amortization Period and (z) the [ ]. ["GROUP [ ]" shall mean Series [ ] and each other Series specified in the related Supplement to be included in Group [______].] "GROUP [__] INVESTOR ADDITIONAL AMOUNTS" shall mean, with respect to any Distribution Date, the sum of (a) Series [ ] Additional Amounts for such Distribution Date and (b) for all other Series included in Group [ ], the sum of (i) the aggregate net amount by which the Invested Amounts of such Series have been reduced as a result of investor charge-offs, subordination of principal collections and funding the investor default amounts in respect of any Class or Series Enhancement interests of such Series as of such Distribution Date and (ii) if the applicable Supplements so provide, the aggregate unpaid amount of interest at the applicable certificate rates that has accrued on the amounts described in the preceding clause (i) for such Distribution Date. "GROUP [__] INVESTOR DEFAULT AMOUNT" shall mean, with respect to any Distribution Date, the sum of (a) the Investor Default Amount for such Distribution Date and (b) the aggregate amount of the investor default amounts for all other Series included in Group [ ] for such Distribution Date. "GROUP [ ] INVESTOR FINANCE CHARGE AND ADMINISTRATIVE COLLECTIONS" shall mean, with respect to any Distribution Date, the sum of (a) Investor Finance Charge Collections for such Distribution Date and (b) the aggregate amount of the investor finance charge collections for all other Series included in Group [_______] for such Distribution Date. "GROUP [ ] INVESTOR MONTHLY FEES" shall mean with respect to any Distribution Date, the sum of (a) Series [ ] Monthly Fees for such Distribution Date and (b) the aggregate amount of the servicing fees, investor fees, fees payable to any Series Enhancer and any other similar fees, which are payable out of reallocated investor finance charge collections pursuant to the related Supplements, for all other Series included in Group [__] for such Distribution Date. "GROUP [ ] INVESTOR MONTHLY INTEREST" shall mean, with respect to any Distribution Date, the sum of (a) series [ ] Monthly Interest for such Distribution Date and (b) the aggregate amount of monthly interest, including overdue monthly interest and interest on such overdue monthly interest, if applicable, for all other Series included in Group [_____] for such Distribution Date. ["INDEX" shall mean [__________].] ["INITIAL CASH COLLATERAL AMOUNT" shall mean $[________].] ["INITIAL CLASS B COLLATERAL AMOUNT" shall mean $[___________].] ["INITIAL SHARED COLLATERAL AMOUNT" shall mean $1[__________].] "INITIAL INVESTED AMOUNT" shall mean [the portion of the initial principal amount of the Series [ ] Certificates that is invested in Principal Receivables on the Closing Date, which is] [the sum of the Class A Initial Invested amount, the Class B Initial Invested Amount and the Collateral Initial Invested Amount] $____________. ["INITIAL PRE-FUNDING AMOUNT" shall mean $_____.] ["INTEREST DRAW AMOUNT" shall have the meaning specified in Section 4.12 [(b)][(d)]. ["INTEREST FUNDING ACCOUNT" shall have the meaning set forth in Section 4.02(c)(i).] ["INTEREST FUNDING INVESTMENT PROCEEDS" shall have the meaning specified in Section 4.02(c)(ii).] "INTEREST PAYMENT DATE" shall mean [the [____]th day of each month] [each [___________], [___________], [___________] and [___________]] [each [___________] and [___________] [other] (or, if any such day is not a Business Day, the next succeeding Business Day), [and the Class A Expected Final Payment Date and the Class B Expected Final Payment Date] commencing [_________]. ["INTEREST PERIOD" shall mean, with respect to any Interest Payment Date, the period from and including the Interest Payment Date immediately preceding such Interest Payment Date (or, in the case of the first Interest Payment Date, from and including the Closing Date) to but excluding such interest Payment Date.] "INVESTED AMOUNT" shall mean, as of any date of determination, an amount equal to the sum of (a) the Class A Invested Amount as of such date and (b) the Class B Invested Amount as of such date [and (c) the Collateral Invested Amount as of such date]. "INVESTOR CHARGE-OFFS" shall mean Class A Investor Charge-offs and Class B Investor Charge-Offs [and Collateral Charge-Offs]. "INVESTOR DEFAULT AMOUNTS" shall mean, with respect to any Distribution Date, an amount equal to the product of (a) the Defaulted Amount for the related Monthly Period and (b) the Floating Allocation Percentage for such Monthly Period. "INVESTOR FINANCE CHARGE COLLECTIONS" shall mean with respect to any Distribution Date, an amount equal to the product of (a) the Floating Allocation Percentage for the related Monthly Period and (b) Series [ ] Allocable Finance Charge Collections deposited in the Collection Account for the related Monthly Period. ["LOAN AGREEMENT" shall mean the agreement among the Depositor, the Trustee and the [Cash Collateral Depositor] [Collateral Interest Holder], dated as of the date hereof.] ["MONTHLY CASH COLLATERAL FEE" shall have the meaning specified in Section 4.07(g).) "MONTHLY CREDIT ENHANCEMENT FEE" shall have the meaning specified in Section 4.07(g)] "MONTHLY INTEREST" means, with respect to any Distribution Date, the Class A Monthly Interest and the Class B Monthly Interest and the Collateral Monthly Interest) for such Distribution Date. "MONTHLY SERVICING FEE" shall have the meaning specified in Section 3.01. ["Net Servicing Fee Rate" shall mean [_____]%.] "PAYMENT DATE" shall mean any Interest Payment Date and any Special Payment Date. ["PAY OUT EVENT" shall mean any Pay Out Event specified in Section 6.01.] ["PORTFOLIO ADJUSTED YIELD" shall mean, with respect to any Distribution Date, the average of the percentages obtained for each of the three preceding Monthly Periods by subtracting the Bass Rate from the Portfolio Yield for such Monthly Period and deducting [__]% from the result for each monthly Period.] "PORTFOLIO YIELD" shall mean, with respect to any Monthly Period, the annualized percentage equivalent of a fraction, the numerator of which is equal to (a) the Floating Allocation Percentage with respect to such Monthly Period of [Investor] [Reallocated Investor] Finance Charge Collections with respect to such Monthly Period [plus (b) the amount of any Principal Funding Investment Proceeds for the related Distribution Date] [plus (c) the amount of any interest Funding investment Proceeds for the related Distribution Date,] (plus (d) any Excess Finance Charge Collections that are allocated to Series [ ] with respect to such Monthly Period) (plus (e) the amount of funds, if any, withdrawn from the Reserve Account which pursuant to Section 4.11(d) are required to be included as Class A Available Funds or Class B Available Funds for the Distribution Date with respect to such Monthly Period) MINUS (f) the Investor Default Amount for the Distribution Date with respect to such Monthly Period, and the denominator of which is the Invested Amount as of the last day of the preceding Monthly Period. ["PRE-FUNDING ACCOUNT" shall have the meaning specified in Section 4.14(a).) ["PRE-FUNDING AMOUNT" shall mean the amount on deposit in the Pre-Funding Account.] "PRINCIPAL ALLOCATION PERCENTAGE" shall mean, with respect to any day during a Monthly Period, the percentage equivalent (which percentage shall never exceed 100) of a fraction, the numerator of which is [the sum, of] (a) during the Revolving Period, the Series Adjusted Invested Amount as of the last day of the immediately preceding Monthly Period (or, in the case of the first Monthly Period, the Initial Invested Amount) and (b) during the [Accumulation Period] [Early Accumulation Period] [Controlled Amortization Period] or the Rapid Amortization Period, the Series Adjusted Invested Amount as of the last day of the Revolving Period [and the Enhancement Investment Amount, if any,] and the denominator of which is the product of (x) (i) the total amount of Principal Receivables in the Trust as of the last day of the immediately preceding Monthly Period (or with respect to the first Monthly Period, the total amount of Principal Receivables in the Trust as of the Closing Date) [and the principal amount on deposit in the Special Funding Account as of such last day] and (y) the Series [ ] Allocation Percentage with respect to the Monthly Period in respect of which the Principal Allocation Percentage is being determined; PROVIDED, HOWEVER, that with respect to any Monthly Period in which an Addition Date or a Removal Date occurs, the denominator in (x)(i) above shall be the Series [ ] Allocation Percentage of (1) the aggregate amount of principal Receivables in the Trust at the end of the day on the last day of the prior Monthly Period f or the period from and including the first day of such Monthly Period to but excluding the related Addition Date or Removal Date and (2) the aggregate amount of Principal Receivables in the Trust at the end of the day on the related Addition Date or Removal Date for the period from and including the related Addition Date or Removal Date to and including the last day of such Monthly Period [; PROVIDED, FURTHER, HOWEVER, that with respect to any Monthly Period in which the Invested Amount is increased pursuant to Section 4.15, the numerator in (a) above will be (1) the Invested Amount as of the last day of the prior Monthly Period for the period from and including the first day of such Monthly Period to but excluding the day the Invested Amount is increased and (2) the Invested Amount as of the end of the day on which the Invested Amount is increased for the period from and including such day to and including the last day of such Monthly Period] [; PROVIDED FURTHER, HOWEVER, that if after the commencement of the [Accumulation Period] [Early Accumulation Period] [Controlled Amortization Period] or the Rapid Amortization Period, a Pay Out Event occurs with respect to another Series that was designated in the Supplement therefor as a Series that is a "Paired Series" with respect to Series [ ], the Depositor may, by written notice delivered to the Trustee and the Servicer, designate a different numerator for the foregoing fraction, provided that (x) such numerator is not less than the [Adjusted] Invested Amount for such Paired Series as of the last day of the Monthly Period preceding such Pay-Out Event and (y) the Depositor shall have received written notice from each Rating Agency that such designation will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee.] ["PRINCIPAL FUNDING ACCOUNT" shall have the meaning specified in Section 4.03(c)(i).] ["PRINCIPAL FUNDING ACCOUNT BALANCE" shall mean, with respect to any date of determination during the Accumulation Period, the principal amount, if any, on deposit in the Principal Funding Account on such date of determination.] ["PRINCIPAL BINDING INVESTMENT PROCEEDS" shall have the meaning specified in Section 4.03(c)(ii).] ["PRINCIPAL FUNDING INVESTMENT SHORTFALL" shall mean, with respect to each [Interest] [Monthly] Period during the Accumulation Period, the amount, if any, by which the Principal Funding Investment Proceeds are less than the Covered Amount.] ["PRINCIPAL SHORTFALL" shall have the meaning specified in Section 4.10.] "RAPID AMORTIZATION PERIOD" shall mean the period commencing at the close of business on the Business Day immediately preceding the day on which a Pay-Out Event with respect to Series [ ] is deemed to have occurred, and ending on the first to occur of (i) the payment in full to the Class A Certificateholders and the Class B Certificateholders of the Class A Invested Amount and the Class B Invested Amount, respectively [, and the payment in full to the Cash Collateral Depositor of the Enhancement Invested Amount, if any,] or (ii) the Termination Date. ["RATE DETERMINATION DATE" shall mean [__________] for the period from [__________] through [__________], and thereafter, [__________].] "REALLOCATED INVESTOR FINANCE CHARGE COLLECTIONS" shall mean that portion of Group [__] Investor Finance charge Collections allocated to Series [ ] [pursuant to Section 4.09A plus any Collections of Finance Charge Receivables allocated to any Series expressly subordinated to Series [ ] which are available for application pursuant to Sections 4.05 and 4.07.] ["REALLOCATED PRINCIPAL COLLECTIONS" shall mean, with respect to any Monthly Period, the product of (a) the Principal Allocation Percentage of the aggregate amount of Collections in respect of Principal Receivables deposited in the Collection Account for such Monthly Period and (b) the [sum of the] Class B Principal Percentage [and the Collateral Principal Percentage], with respect to the [Accumulation Period] [Controlled Amortization Period] [early Accumulation Period] or the Rapid Amortization Period. "REASSIGNMENT AMOUNT" shall mean, with respect to any Distribution Date, after giving effect to any deposits and distributions otherwise to be made on such Distribution Date, the sum of (i) the [Adjusted] Invested Amount on such Distribution Date, [plus (ii) the Enhancement Invested Amount, if any, on such Distribution Date,] plus (iii) monthly Interest for such Distribution Date and any Monthly Interest previously due but not distributed to the Series [ ] Certificateholders (or deposited to the Interest Funding Account on a prior Distribution Date, plus (iv) the amount of Additional Interest, if any, or such Distribution Date and any Additional Interest previously due but not distributed to the Series [ ] Certificateholders [or deposited to the Interest Funding Account] on a prior Distribution Date. "REIMBURSEMENT DRAW AMOUNT" shall have the meaning specified in Section 4.12[(c)] [(g)].) ["REINVESTMENT EVENT" shall mean any Reinvestment Event specified in Section 6.01.] "REQUIRED AMOUNT" shall have the meaning specified in Section 4.04. ["REQUIRED CASH COLLATERAL AMOUNT" shall mean (i) and (ii) on any Distribution Date thereafter, ___% the Invested Amount as of the last day of the Monthly Period preceding such Distribution Date, but not less than $_________; PROVIDED, HOWEVER, that if either (a) there is a withdrawal from the Cash Collateral Account pursuant to Section 4.12(c), (d), (e), (f) or (g) [or any reduction in the Collateral Invested Amount pursuant to clauses (c), (d) or (e) of the definition thereof] during the Controlled [Amortization] [Accumulation] Period or (b) a Pay-Out Event [or a Reinvestment Event] with respect to the Series Certificates [ ] Certificates has occurred, the Required [Cash] Collateral Amount for any Distribution Date thereafter shall equal the Required [Cash] Collateral Amount for the Distribution Date immediately preceding such withdrawal or Pay-Out Event [or Reinvestment Event].] "REQUIRED DRAW AMOUNT" shall have the meaning specified in Section 4.12(c)-l ["REQUIRED RESERVE ACCOUNT AMOUNT" shall mean, with respect to any Distribution Date on or after the Reserve Account Funding Date, an amount equal to (1) [______]% of the Invested Amount as of the preceding Distribution Date (after giving effect to all changes therein on such date) or (2) any other amount designated by the Depositor, provided that the Depositor shall have received written notice from each Rating Agency that such designation will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee.] ["RESERVE ACCOUNT" shall have the meaning specified in Section 4.11(a).] ["RESERVE ACCOUNT FUNDING DATE" shall mean (1) the Distribution Date with respect to the Monthly Period which commences [_____] months prior to the commencement of the Class A Accumulation Period; PROVIDED, that the Depositor may delay the Reserve Account Funding Date to the Distribution Date which occurs not later than the earliest of (a) the Distribution Date with respect to the Monthly Period which commences [__] months prior to the commencement of the Class A Accumulation Period, (b) the first Distribution Date for which the Portfolio Adjusted Yield is less than [ ] but in such event the Reserve Account Funding Date shall not be required to occur earlier than the Distribution Date with respect to the Monthly Period which commences [_____] months prior to the commencement of the Class A Accumulation Period, (c) the first Distribution Date for which the Portfolio Adjusted Yield is less than [__]%, but in such event the Reserve Account Funding Date shall not be required to occur earlier than the Distribution Date which commences [_____] months prior to the commencement of the Class A Accumulation Period, or (d) the first Distribution Date for which the Portfolio Adjusted Yield is less than [_____]%, but in such event the Reserve Account Funding Date shall not be required to occur earlier than the Distribution Date which commences [____] months prior to the commencement of the Class A Accumulation Period or (2) any other date designated by the Depositor; PROVIDED, that the Depositor shall have received written notice from each Rating Agency that such designation will not have a Ratings Effect and shall have delivered copies of each such written notice to the Servicer and the Trustee.] ["RESERVE ACCOUNT SURPLUS" shall mean, as of any date of determination, the amount, if any, by which the amount on deposit in the Reserve Account exceeds the Required Reserve Account Amount.] ["RESERVE DRAW AMOUNT" shall have the meaning specified in Section 4.11(c).] "REVOLVING PERIOD" shall mean the period beginning at the close of business on the Series Cut-Off Date and ending on the earlier of (a) the close of business on the day immediately preceding the day the [Class A Accumulation Period] [Class A Controlled Amortization Period] commences and (b) the close of business on the day immediately preceding the day the Early Amortization [Accumulation] Period commences. "SERIES CUT-OFF DATE" shall mean the close of business on [__________________ __]. "SERIES [ ] " shall mean the Series of Certificates the terms of which are specified in this Supplement. "SERIES [ ] ADDITIONAL AMOUNTS" shall mean, with respect to any Distribution Date, the sum of the amounts determined pursuant to Sections 4.07(b), (f) and (h-5) for such Distribution Date. "SERIES [ ] ALLOCABLE FINANCE CHARGE COLLECTIONS" shall mean the Series Allocable Finance Charge Collections with respect to Series [ ]. "SERIES [ ] ALLOCATION PERCENTAGE" shall mean the Series Allocation Percentage with respect to Series [ ]. "SERIES [ ] CERTIFICATE" shall mean a Class A Certificate or a Class B Certificate [or the Collateral Interest]. "SERIES [ ] CERTIFICATEHOLDER" shall mean a Class A Certificateholder or a Class B Certificateholder [or the Collateral Interest Holder]. "SERIES [ ] CERTIFICATEHOLDERS' INTEREST" shall mean the Class Certificateholders' Interest and the Class B Certificateholders' Interest [and the Collateral Interest]. "SERIES [ ] MONTHLY FEES" shall mean, with respect to any Distribution Date, the amount determined pursuant to Section 4.05(a)(ii) and (b)(ii) and Section 4.07(h-2)]. "SERIES [ ] MONTHLY INTEREST" shall mean the amounts determined pursuant to Sections 4.02(a), (b) and (e); PROVIDED, HOWEVER, that for purposes of Section 4.09A the amount Determined pursuant to subsection 4.02(e) shall be determined based on the lesser of the Collateral Rate and [____]% per annum. "SERIES [ ] PRINCIPAL SHORTFALL" shall have the meaning specified in Section 4.10. "SERIES INVESTED AMOUNT" shall mean [the Initial Invested Amount] [the Initial Invested Amount plus the amount of any withdrawals from the Pre-Funding Account in connection with the purchase of an additional interest in Principal Receivables pursuant to Section 4.15] [other formula]. "SERIES REQUIRED SELLER AMOUNT" shall mean an amount equal to [__]% of the Initial Invested Amount. ["SERIES INTERCHANGE" shall mean, for any Monthly Period, the product of (a) the Floating Allocation Percentage for such Monthly Period and (b) the portion of Series [ ] Allocable Finance Charge Collections with respect to such Monthly Period that is attributable to Interchange; PROVIDED, HOWEVER, that Servicer Interchange for a Monthly Period shall not exceed one-twelfth of the product of (i) the sum of the Invested Amount [and the Enhancement Invested Amount, if any,] as of the last day of such Monthly Period and (ii) [___]%.] ["SERVICING BASE AMOUNT" shall have the meaning specified in Section 3.01.] ["SERVICING DRAW AMOUNT" shall have the meaning specified in Section 4.12(e).] "SERVICING FEE RATE" shall mean [____]%. ["SERVICING DRAW AMOUNT" shall have the meaning specified in Section 4.12[(d)][(h)].] "SPECIAL PAYMENT DATE" shall mean each Distribution Date with respect to the Rapid Amortization Period. "SUBORDINATED SERIES" shall mean any Series which, pursuant to the terms of the related Supplement, is subordinated in any manner to the Series [ ] Certificates. "SUBORDINATED SERIES REALLOCATED PRINCIPAL COLLECTIONS" shall mean, with respect to any Distribution Date, that portion of Collections of Principal Receivables allocable to a Subordinated Series which, pursuant to the terms of the related Supplement, are to be reallocated to Series [ ] and treated as a portion of Available Principal Collections for such Distribution Date. ["TOTAL DRAW AMOUNT" shall have the meaning specified in Section 4.12[(e)] [(j)].] "TERMINATION DATE" mean the [_________] Distribution Date. "DEPOSITOR PERCENTAGE" shall mean 100% MINUS (a) the Floating Allocation Percentage, when used at any time with respect to Finance Charge Receivables and Defaulted Receivables, (b) the Floating Allocation Percentage, when used with respect to Principal Receivables during the Revolving Period and (c) the Principal Allocation Percentage, when used with respect to Principal Receivables during the Controlled [Amortization] [Accumulation] Period and the Rapid Amortization Period [and any Early Accumulation Period]. (b) Notwithstanding anything to the contrary in this Supplement or the Agreement, the term "Rating Agency" shall mean, whenever used in this Supplement or the Agreement with respect to Series [ ] [Moody's] [Standard & Poor's] [other Rating Agency]. As used in this Supplement and in the Agreement with respect to Series [ ], "highest investment category" shall mean (i) in the case of Standard & Poor's, [_____] or [_____], as applicable, and (ii) in the case of Moody's, [_____] or [_____] as applicable[; PROVIDED, HOWEVER, that notwithstanding any other provision of the Agreement or this Supplement to the contrary, for purposes of the investment of funds in the Cash Collateral Account (but only to the extent such funds exceed the Available Shared Collateral Amount on any date) and, on and after the Class B Principal Commencement Date, the Principal Funding Account and the Reserve Account, "highest investment category" as used in the definition of "Eligible Investments" shall mean (i) in the case of Standard & Poor's, [_____] or [_____], as applicable, and (ii) in the case of Moody's, [_____] or [_____], as applicable.] (c) Each capitalized term defined herein shall relate to the Series [ ] Certificates and no other Series of Certificates issued by the Trust. All capitalized terms used herein and not otherwise defined herein have the meanings ascribed to them in the Agreement. In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Agreement, the terms and provisions of this Supplement shall govern. (d) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Supplement shall refer to this Supplement as a whole and not to any particular provision of this Supplement; references to any Article, Section or Exhibit are references to Articles, Sections and Exhibits in or to this Supplement unless otherwise specified; and the term "including" means "including without limitation." ARTICLE III SERVICER AND TRUSTEE Section 3.01. SERVICING COMPENSATION. The share of the Servicing Fee allocable to the Series [ ] Certificateholders with respect to any Distribution Date (the "Monthly Servicing Fee") shall be equal to one-twelfth of the product of (a) the Servicing Fee Rate and (b)(i) the sum of the [Adjusted] Invested Amount [and the Enhancement Invested Amount, if any,] as of the last day of the Monthly Period preceding such Distribution Date, minus (ii) the product of the amount, if any, on deposit in the Special Funding Account as of the last day of the Monthly Period preceding such Distribution Date and the Floating Allocation Percentage with respect to such Monthly Period (the amount calculated pursuant to this clause (b) is referred to as the "Servicing Base Amount"); PROVIDED, HOWEVER, that with respect to the first Distribution Date, the Monthly Servicing Fee shall be equal to $[__________]. [On each Distribution Date, Servicer Interchange with respect to the related Monthly Period that is on deposit in the Collection Account shall be withdrawn from the Collection Account and paid to the Servicer in payment of a portion of the Monthly Servicing Fee with respect to such Monthly Period. In the case of any insufficiency of Servicer Interchange on deposit in the Collection Account, a portion of the Monthly Servicing Fee with respect to such Monthly Period will not be paid to the extent of such insufficiency of Servicer Interchange.] The share of the Monthly Servicing Fee allocable to the Class A Certificateholders [(after giving effect to the distribution of Servicer Interchange, if any, to the Servicer)] with respect to any Distribution Date (the "Class A Servicing Fee") shall be equal to one-twelfth of the product of (a) the Class A Floating Percentage, (b) the [Net] Servicing Fee Rate and (c) the Servicing Base Amount; PROVIDED, HOWEVER, that with respect to the first Distribution Date, the Class A Servicing Fee shall be equal to $[__________]. The share of the Monthly Servicing Fee allocable to the Class B Certificateholders [(after giving effect to the distribution of Servicer Interchange, if any, to the Servicer)] with respect to any Distribution Date (the "Class B Servicing Fee") shall be equal to one-twelfth of the product of (a) the Class 13 Floating Percentage, (b) the [Net] Servicing Fee Rate and (c) the Servicing Base Amount; PROVIDED, HOWEVER, that with respect to the first Distribution Date, the Class B Servicing Fee shall be equal to $[__________]. [The share of the Monthly Servicing Fee allocable to the Collateral Interest [(after giving effect to the distribution of Servicer Interchange, if any, to the Servicer)] with respect to any Distribution Date (the "Collateral Servicing Fee") shall be equal to one-twelfth of the product of the (a) Collateral Invested Percentage (b) the [Net] Servicing Fee Rate and (c) the Servicing Base Amount; PROVIDED, HOWEVER, that with respect to the first Distribution Date, the Collateral Servicing Fee shall be equal to [__________].] The remainder of the Servicing Fee shall be paid by the Holder of the Depositor Certificate or the Certificateholders of other Series (as provided in the related Supplements) and in no event shall the Trust, the Trustee, the Series [ ] Certificateholders or the [Cash Collateral Depositor] [Credit Enhancement Provider] be liable for the share of the Servicing Fee to be paid by the Holder of the Depositor Certificate or the Certificateholders of any other Series. The (i) Class A Servicing Fee shall be payable to the Servicer solely to the extent amounts are available for distribution in respect thereof pursuant to Section 4.05(a)(ii), 4.07(a), 4.08(a) or 4.12(c)]; and the Class B Servicing Fee shall be payable solely to the extent amounts are available for distribution in respect thereof pursuant to Section 4.05(b) (ii), 4.07(d) for 4.12(e) [and (iii) the Collateral Servicing Fee shall be payable solely to the extent amounts are available for distribution with respect thereto pursuant to Section 4.05[(b-1)(i)], 4.05(b)(ii) [or 4.07(h-2)]. ARTICLE IV RIGHTS OF SERIES [ ]_-_ CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS Section 4.01. COLLECTIONS AND ALLOCATIONS. (a) ALLOCATIONS. Collections of Finance Charge Receivables and Principal Receivables and Defaulted Receivables allocated to Series [ ] pursuant to Article IV of the Agreement (and, as described herein, Collections of Finance Charge Receivables reallocates from other Series in Group [__]) shall be allocated and distributed or reallocated as set forth in this Article. (b) PAYMENTS TO THE DEPOSITOR. The Servicer shall on Deposit Dates withdraw from the Collection Account and pay to the Depositor, the following amounts: (i) an amount equal to the Depositor's Percentage for the related Due Period of Series [ ] Allocable Finance Charge Collections to the extent such amount is deposited in the Collection Account; and (ii) an amount equal to the Transferor's Percentage for the related Due Period of Series Allocable Principal Collections deposited in the Collection Account, if the Depositor Amount (determined after giving effect to any Principal Receivables transferred to the Trust on such Deposit Date) exceeds zero. The withdrawals to be made from the Collection Account pursuant to this Section 4.01(b) do not apply to deposits into the Collection Account that do not represent Collections, including payment of the purchase price for the Certificateholders, Interest pursuant to Section 2.06 or 10.01 of the Agreement, payment of the purchase price for the Series [ ] Certificateholders' Interest pursuant to Section 2.06 or 10.01 of this Supplement and proceeds from the sale, disposition or liquidation of Receivables pursuant to Section 9.01 or 12.02 of the Agreement. Section 4.02. DETERMINATION OF MONTHLY INTEREST [; INTEREST FUNDING ACCOUNT] (a) The amount of monthly interest ("Class A Monthly Interest") distributable from the Collection Account with respect to the Class A Certificates on any Distribution Date shall be an amount equal to [one-twelfth of] the product of (i) [(A) a fraction, the numerator of which in the actual number of days in the related Interest Period and the denominator of which is 360, times (B)] the Class A Certificate Rate and (ii) [the sum of (A)] the Class A Invested Amount [and (B) [the product of the Class A Floating Percentage and] the Pre-Funding Amount, each] as of close of business on the last day of the preceding Monthly Period; PROVIDED, HOWEVER, with respect to the first Distribution Date, Class A Monthly Interest shall be equal to $[__________]. [Class A Monthly Interest shall be calculated on the basis of a 360-day year of twelve 30-day months.] On the Determination Date preceding each Distribution Date, the Servicer shall determine the excess, if any (the "Class A Interest Shortfall"), of (x) the Class A Monthly Interest for such Distribution Date over (y) the aggregate amount of funds allocated and available to pay such Class A Monthly Interest on such Distribution Date (after giving effect to any withdrawal from the [Cash Collateral Account][Credit Enhancement] with respect to such Distribution Date). If the Class A Interest Shortfall with respect to any Distribution Date is greater than zero, an additional amount ("Class A Additional Interest") equal to [one-twelfth) of the product of (i) [(A) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360, times (B)] the Class A Certificate Rate and (ii) such Class A Interest Shortfall (or the portion thereof which has not been paid to the Class A Certificateholders [or deposited to the Interest Funding Account]) shall be payable as provided herein with respect to the Class A Certificates on each Distribution Date following such Distribution Date to and including the Distribution Date on which a Class A Interest Shortfall is paid to the Class A Certificateholders. Notwithstanding anything to the contrary herein, Class A Additional Interest shall be payable or distributed to the Class A Certificateholders only to the extent permitted by applicable law. (b) The amount of monthly interest ("Class B Monthly Interest") distributable from the Collection Account with respect to the Class B Certificates on any Distribution Date shall be an amount equal to [one-twelfth of] the product of (i) [(A) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360, times (B)] the Class B Certificate Rate and (ii) [the sum of (A)] the Class B Invested Amount [and (B) [the product of the Class B Floating Percentage and] the Pre-Funding Amount, each] as of the close of business on the last day of the preceding Monthly Period; PROVIDED, HOWEVER, with respect to the first Distribution Date, Class B Monthly Interest shall be equal to $[__________]. [Class B Monthly Interest shall be calculated on the basis of a 360-day year of twelve 30-day months.] On the Determination Date preceding each Distribution Date, the Servicer shall determine the excess, if any (the "Class B Interest Shortfall"), of (x) the Class B Monthly Interest for such Distribution Date over (y) the aggregate amount of funds allocated and available to pay such Class B Monthly Interest on such Distribution Date (after giving effect to any withdrawal from the [Cash Collateral Account] [Credit Enhancement] with respect to such Distribution Date) . If the Class B Interest Shortfall with respect to any Distribution Date is greater than zero, an additional amount ("Class B Additional Interest") equal to [one-twelfth of] the product of (i) [(A) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360, times (B)] the Class B Certificate Rate and (ii) such Class B Interest Shortfall (or the portion thereof which has not been paid to the Class B Certificateholders [or deposited to the Interest Funding Account]) shall be payable as provided herein with respect to the Class B Certificates on each Distribution Date following such Distribution Date to and including the Distribution Date on which such Class B Interest Shortfall is paid to the Class B Certificateholders. Notwithstanding anything to the contrary herein, Class B Additional Interest shall be payable or distributed to the Class B Certificateholders only to the extent permitted by applicable law. (c) INTEREST FUNDING ACCOUNT. (i) The Servicer, for the benefit of the Series [ ] Certificateholders, shall establish and maintain in the name of the Trustee, on behalf of the Trust, an Eligible Deposit Account (the "Interest Funding Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Series [ ] Certificateholders. The Interest Funding Account shall initially be established with [the Trustee]. (ii) At the direction of the Servicer, funds on deposit in the Interest Funding Account shall be invested by the Trustee in Eligible Investments selected by the Servicer. All such Eligible Investments shall be held by the Trustee for the benefit of the Series [ ] Certificateholders; PROVIDED, that on each Distribution Date any interest and other investment income (net of losses and investment expenses) (Interest Funding Investment Proceeds") on funds on deposit therein shall be applied as set forth in paragraph (iii) below. Funds on deposit in the Interest Funding Account shall be invested in Eligible Investments that will mature so that such funds will be available at the close of business on the Transfer Date preceding the following Distribution Date. Unless the Servicer directs otherwise, funds deposited in the Interest Funding Account on a Transfer Date (which immediately precedes a Payment Date) upon the maturity of any Eligible Investments are not required to be invested overnight. (iii) On each Distribution Date, the Servicer shall direct the Trustee to withdraw from the Interest Funding Account and [deposit into the Collection Account] [pay to the Depositor] all Interest Funding Investment Proceeds then on deposit in the Interest Funding Account [and such Interest Funding Investment Proceeds shall be treated as a portion of (x) prior to the Class B Principal Commencement Date, Class A Available Funds and (y) thereafter, Class B Available Funds, in each case for such Distribution Date]. (iv) Reinvested interest and other investment income on funds deposited in the Interest Funding Account shall not be considered to be principal amounts on deposit therein for purposes of this Supplement. (d) CONTROL OF INTEREST FUNDING ACCOUNT. (i) The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Interest Funding Account and in all proceeds thereof. The Interest Funding Account shall be under the sole dominion and control of the Trustee for the benefit of the Series [ ] Certificateholders. If, at any time, the Interest Funding Account ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Interest Funding Account meeting the conditions specified in paragraph (c)(i). above as an Eligible Deposit Account and shall transfer any cash or any investments to such new Interest Funding Account. (ii) Pursuant to the authority granted to the Servicer in Section 3.01(b) of the Agreement, the Servicer shall have the power, revocable by the Trustee, to make withdrawals and payments or to instruct the Trustee to make withdrawals and payments from the Interest Funding Account for the purposes of carrying out the Servicer's or Trustee's duties hereunder. Pursuant to the authority granted to the Paying Agent in Section 5.01 of this Supplement and Section 6.07 of the Agreement, the Paying Agent shall have the power, revocable by the Trustee, to withdraw funds from the Interest Funding Account for the purpose of making distributions to the Series [ ] Certificateholders. (e) [The amount of monthly interest ("Collateral Monthly Interest") distributable from the Collection Account with respect to the Collateral Invested Amount on any Distribution Date shall be an amount equal to the product of (i) the Collateral Rate in effect with respect to the applicable Interest Period, (ii) the Collateral Invested Amount as of the close of business on the preceding Distribution Date (after giving effect to any increase or decrease in the Collateral Invested Amount on such preceding Distribution Date); PROVIDED that in the case of the first Distribution Date Collateral Monthly Interest shall be equal to $[_______________]. On the Determination Date preceding each Distribution Date, the Servicer shall determine an amount (the "Collateral Interest Shortfall") equal to (x) the aggregate Collateral Monthly Interest for the Interest Period applicable to such Distribution Date MINUS (y) the amount which will be on deposit in the Collection Account and allocable to the Collateral Invested Amount on such Distribution Date. If the Collateral Interest Shortfall with respect to any Distribution Date is greater than zero, on each subsequent Distribution Date until such Collateral Interest Shortfall is fully paid, an additional amount ("Collateral Additional Interest") shall be payable as provided herein with respect to the Collateral Invested Amount on each Distribution Date following such Distribution Date, to and including the Distribution Date on which such Collateral Interest Shortfall is paid to the Collateral Interest Holder, equal to the product of (i) the Collateral Rate in effect with respect to the applicable Interest Period, (ii) such Collateral Interest Shortfall (or the portion thereof which has not been paid to the Collateral Interest Holder) and (iii) a fraction the numerator of which is the actual number of days in the Interest Period ending immediately prior to such Distribution Date and the denominator of which is 360. Notwithstanding anything to the contrary herein, Collateral Additional Interest shall be payable or distributed to the Collateral Interest Holder only to the extent permitted by applicable law.) Section 4.03. DETERMINATION OF MONTHLY PRINCIPAL [; PRINCIPAL FUNDING ACCOUNT; CLASS A ACCUMULATION PERIOD.] (a) The amount of monthly principal ("Class A Monthly Principal") distributable from the Collection Account with respect to the Class A Certificates on each Distribution Date, beginning with the first to occur of (i) the first Special Payment Date, if any, and (ii) the first Distribution Date with respect to the [Class A Accumulation Period] [Class A Controlled Amortization Period] [Early Accumulation Period], shall be equal to the least of (x) the Available Principal Collections on deposit in the Collection Account with respect to such Distribution Date, (y) for each Distribution Date with respect to the [Class A Accumulation Period] [Class A Controlled Amortization Period], the [Controlled Deposit Amount] [Controlled Distribution Amount] for such Distribution Date and (z) the Class A [Adjusted] Invested Amount on such Distribution Date. (b) The amount of monthly principal ("Class B Monthly Principal") distributable from the Collection Account with respect to the Class B Certificates on each Distribution Date, beginning with the Class B Principal Commencement Date [or during an Early Accumulation Period], shall be equal to the least of (x) the Available Principal Collections on deposit in the Collection Account with respect to such Distribution Date (minus the portion of such Available Principal Collections applied to Class A Monthly Principal on such Distribution Date), (y) for each Distribution Date with respect to the [Class B Accumulation Period] [Class B Controlled Amortization Period] the [Controlled Deposit Amount] [Controlled Distribution Amount] for such Distribution Date and (z) the Class B [Adjusted] Invested Amount on such Distribution Date. [(b-1) The amount of monthly principal ("Collateral Monthly Principal") distributable from the Collection Account to the Collateral Interest Holder with respect to the Collateral Interest on each Distribution Date shall be an amount equal to the lesser of (A) the excess, if any, of the Collateral Invested Amount (after taking into account adjustments to be made on such Distribution Date pursuant to Sections 4.06.and 4.08) over the Required Collateral Amount on such Distribution Date or (B) the Available Principal Collections on such Distribution Date.] (c) PRINCIPAL FUNDING ACCOUNT. (i) The Servicer, for the benefit of the Series [ ] Certificateholders, shall establish and maintain in the name of the Trustee, on behalf of the Trust, an Eligible Deposit Account (the "Principal Funding Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Series [ ] Certificateholders. The Principal Funding Account shall initially be established with [the Trustee]. (ii) At the direction of the Servicer, funds on deposit in the Principal Funding Account shall be invested by the Trustee in Eligible Investments selected by the Servicer. All such Eligible Investments shall be held by the Trustee for the benefit of the Series [ ] Certificateholders; provided, that on each Distribution Date all interest and other investment income (net of losses and investment expenses) ("Principal Funding Investment Proceeds") on funds on deposit therein shall be applied as set forth in paragraph (iii) below. Funds on deposit in the Principal Funding Account shall be invested in Eligible Investments that will mature so that such funds will be available at the close of business on the Transfer Date preceding the following Distribution Date. Unless the Servicer directs otherwise, funds deposited in the Principal Funding Account on a Transfer Date (which immediately precedes a Payment Date) upon the maturity of any Eligible Investments are not required to be invested overnight. (iii) On each Distribution Date with respect to [the Accumulation Period] [an Early Accumulation Period], the Servicer shall direct the Trustee to withdraw from the Principal Funding Account and deposit into the Collection Account all Principal Funding Proceeds then on deposit in the Principal Funding Account and such Principal Funding Investment Proceeds shall be treated as a portion of (x) prior to the Class B Principal Commencement Date, Class A Available Funds and (y) thereafter, Class B Available Funds, in each case for such Distribution Date. (iv) Reinvested interest and other investment income on funds deposited in the Principal Funding Account shall not be considered to be principal amounts on deposit therein for purposes of this Supplement. (d) CONTROL OF PRINCIPAL FUNDING ACCOUNT. (i) The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Principal Funding Account and in all proceeds thereof. The Principal Funding Account shall be under the sole dominion and control of the Trustee for the benefit of the Series [ ] Certificateholders. If, at any time, the Principal Funding Account ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Principal Funding Account meeting the conditions specified in paragraph (c)(i) above as an Eligible Deposit Account and shall transfer any cash or any investments to such new Principal Funding Account. (ii) Pursuant to the authority granted to the Servicer in Section 3.01(b) of the Agreement, the Servicer shall have the power, revocable by the Trustee, to make withdrawals and payments or to instruct the Trustee to make withdrawals and payments from the Principal Funding Account for the purposes of carrying out the Servicer's or Trustee's duties hereunder. Pursuant to the authority granted to the Paying Agent in Section 5.01 of this Supplement and Section 6.07 of the Agreement, the Paying Agent shall have the power, revocable by the Trustee, to withdraw funds from the Principal Funding Account for the purpose of making distributions to the Series [ ] Certificateholders.] [(d) The Class A Accumulation Period is scheduled to commence at the close of business on the last Business Day of [_____]; PROVIDED, HOWEVER, that if the Class A Accumulation Period Length (determined as described below) is less than [____] months, the date on which the Class A Accumulation Period actually commences will be delayed to the last Business Day of the month that is the number of months prior to [_____], equal to the Class A Accumulation Period Length and, as a result, the number of Monthly Periods in the Class A Accumulation Period will equal the Class A Accumulation Period Length. On the Determination Date immediately preceding the [_____] Distribution Date, the Servicer will determine the "Class A Accumulation Period Length" which will be equal to the product, rounded upwards to the nearest whole number, of (a) [_____] months and (b) a fraction, the numerator of which is equal to the sum of (i) the Series Invested Amount, (ii) the series invested amounts of all then outstanding Series which are not scheduled to be in their revolving periods for the entire period from [_____] to the last Business Day of [_____], (iii) the series invested amounts of any other Series which are not Principal Sharing Series and (iv) the series invested amounts of any other Series designated by the Depositor in a written notice delivered to the Servicer on or prior to such Determination Date, and the denominator of which is equal to the series invested amounts of all then outstanding Series (including Series [ ]). Notwithstanding the foregoing, unless a Pay Out Event occurs with respect to Series [ ], the Class A Accumulation Period will commence on the last Business Day of [_____] if, prior to such date, a Pay out Event shall have occurred with respect to any other Series (other than a Series designated pursuant to clause (iii) or (iv) above). In addition, if the Class A Accumulation Period Length shall have been determined to be less than [ ] months and, after the date on which such determination is made, a Pay Out Event shall occur with respect to any outstanding Series other than Series [ ], the Class A Accumulation Period will commence on the earlier of (i) the first day of the Monthly Period immediately succeeding the date that such Pay Out Event shall have occurred with respect to such Series and (ii) the date on which the Class A Accumulation Period is then scheduled to commence.] Section 4.04. REQUIRED AMOUNT. With respect to each Distribution Date, on the related Determination Date, the Servicer shall determine the amount (the "Class A Required Amount"), if any, by which (a) the sum of (i) Class A Monthly Interest for such Distribution Date, (ii) any Class A Monthly Interest previously due but not paid to the Class A Certificateholders [or deposited to the Interest Funding Account] on a prior Distribution Date, (iii) any Class A Additional interest previously due but not paid to the Class A Certificateholders [or deposited to the Interest Funding Account] on a prior Distribution Date, (iv) the Class A Servicing Fee for such Distribution Date, (v) any Class A Servicing Fee previously due but not paid to the Servicer, and (vi) the Class A Investor Default Amount, if any, for such Distribution Date exceeds (b) the Class A Available Funds. In the event that the [Class A] Required Amount for such Distribution Date is greater than zero, the Servicer shall give written notice to the Trustee of such positive Required Amount on the date of computation. [(b) With respect to each Distribution Date, on the related Determination Date, the Servicer shall determine the amount (the "Class B Required Amount"), if any, by which (a) the sum of (i) Class B Monthly Interest for such Distribution Date, (ii) any Class B Monthly Interest previously due but not paid to the Class B Certificateholders, (iii) Class B Additional Interest, if any, for such Distribution Date and (iv) the Class B Investor Default Amount, if any, (v) the Class B Servicing Fee for such Distribution Date and (vi) any Class A Servicing Fee previously due but not paid to the Servicer exceeds (b) the amounts available therefor pursuant to subsections 4.05(b)(i), (ii) and (iii) and 4.07(c), (d) or (e) PLUS any other funds available to the Trust to cover the amounts referred to in clauses (i) through (vi) above. In the event that the Class B Required Amount for such Distribution Date is greeter than zero, the Servicer shall give written notice to the Trustee of such positive Class B Required Amount on the date of computation.] Section 4.05. APPLICATION OF CLASS A AVAILABLE FUNDS, CLASS B AVAILABLE FUNDS AND AVAILABLE PRINCIPAL COLLECTIONS. The Servicer shall apply, or shall cause the Trustee to apply, on each Distribution Date, Class A Available Funds, Class B Available Funds and Available Principal Collections on deposit in the Collection Account with respect to such Distribution Date to make the following distributions: (a) On each Distribution Date, an amount equal to the Class A Available Funds with respect to such Distribution Date will be distributed in the following priority: [(i) an amount equal to Class A Monthly Interest for such Distribution Date, PLUS the amount of any Class A Monthly Interest previously due but not distributed to Class A Certificateholders [or deposited to the Interest Funding Account] on a prior Distribution Date, PLUS the amount of any Class A Additional Interest for such Distribution Date and any Class A Additional Interest previously due but not distributed to Class A Certificateholders [or deposited to the Interest Funding Account] on a prior Distribution Date, shall be [distributed to the Paying Agent for payment to the Class A Certificateholders] [deposited in the Interest Funding Account for distribution to the Paying Agent for payment to Class A Certificateholders on the applicable Payment Date]; (ii) an amount equal to the Class A Servicing Fee for such Distribution Date, plus the amount of any Class A Servicing Fee previously due but not distributed to the Servicer on a prior Distribution Date, shall be distributed to the Servicer (unless such amount has been netted against deposits to the Collection Account in accordance with Section 4.03 of the Agreement); (iii) an amount equal to the Class A Investor Default Amount for such Distribution Date shall be treated as a portion of Available Principal Collections for such Distribution Date; and (iv) the balance, if any, shall constitute Excess Spread and shall be allocated and distributed as set forth in Section 4.07. (b) On each Distribution Date, an amount equal to the Class B Available Funds with respect to such Distribution Date will be distributed in the following priority: (i) an amount equal to Class B Monthly Interest for such Distribution Date, plus the amount of any Class B Monthly Interest previously due but not distributed to Class B Certificateholders [or deposited to the Interest Funding Account] on a prior Distribution Date, plus the amount of any Class B Additional Interest for such Distribution Date and any Class B Additional Interest previously due but not distributed to Class B Certificateholders [or deposited to the Interest Funding Account] on a prior Distribution Date, shall be [distributed to the Paying Agent for payment to the Class B Certificateholders] [deposited in the Interest Funding Account for distribution to the Paying Agent for payment to Class B Certificateholders on the applicable Payment Date]; (ii) an amount equal to the Class B Servicing Fee for such Distribution Date, plus the amount of any Class B Servicing Fee previously due but not distributed to the Servicer on a prior Distribution Date, shall be distributed to the Servicer (unless such amount has been netted against deposits to the Collection Account in accordance with Section 4.03 of the Agreement); (iii) an amount equal to the Class B Investor Default Amount for such Distribution Date shall be treated as a portion of Available Principal Collections for such Distribution Date; and (iv) the balance, if any, shall constitute Excess Spread and shall be allocated and distributed as set forth in Section 4.07. (c) On each Distribution Date with respect to the Revolving Period, an amount equal to the Available Principal Collections deposited in the Collection Account for the related Monthly Period shall be [treated as Shared Principal Collections and applied in accordance with Section 4.04 of the Agreement] [paid to the Holder of the Depositor Certificate only if the Depositor Amount on such date is greater than the Required Depositor Amount [after giving effect to the inclusion in the Trust of all Principal Receivables created on such date and thereafter shall be deposited in the Special Funding Account] [paid to the Collateral Interest Holder for application in accordance with the Loan Agreement to the extent of Collateral Monthly Principal for such Distribution Date]. (d) On each Distribution Date with respect to the [Accumulation Period] [Controlled Amortization Period] [Early Accumulation Period] or the Rapid Amortization Period, an amount equal to the Available Principal Collections deposited in the Collection Account for the related Monthly Period will be distributed in the following priority: (i) an amount equal to Class A Monthly Principal for such Distribution Date, up to the Class A [Adjusted] Invested Amount, on such Distribution Date, shall be [distributed to the Paying Agent for payment to the Class A Certificateholders] [deposited in the Principal Funding Account]; (ii) for each Distribution Date [beginning on the Class B Principal Commencement Date] [during an Early Accumulation Period], an amount equal to Class B Monthly Principal for such Distribution Date, up to the Class B Adjusted] Invested Amount on such Distribution Date, shall be [distributed to the Paying Agent for payment to the Class B Certificateholders] [deposited in the Principal Funding Account]; (iii) for each Distribution Date with respect to the Rapid Amortization Period, beginning with the Distribution Date on which the Invested Amount is paid in full, after giving effect to the distributions referred to above, an amount equal to the balance, if any, of such Available Principal Collections then on deposit in the Collection Account, to the extent of the Enhancement Invested Amount, if any, shall be distributed to the Cash Collateral Depositor for application in accordance with the Loan Agreement;] and (iv) for each Distribution Date, after giving effect to paragraphs (i), (ii) [and (iii)] above, an amount equal to the balance, if any, of such Available Principal Collections then on deposit in the Collection Account [up to an amount equal to Collateral Monthly Principal for such Distribution Date shall be distributed to the Collateral Interest Holder for application in accordance with the Loan Agreement and the remainder of such Collections] shall be [treated as Shared Principal Collections and applied in accordance with Section 4.04 of the Agreement] [paid to the Holder of the Depositor Certificate only if the Depositor Amount on such date is greater than the Required Depositor Amount (after giving effect to the inclusion in the Trust of all Principal Receivables created on such date) and thereafter shall be deposited in the Special Funding Account]. [(e) On the Distribution Date immediately following the end of the Funding Period, an amount equal to the amount specified in Section 4.14(b) shall be withdrawn from the Pre-Funding Account and distributed to the Paying Agent for payment to the [Class A Certificateholders] [and] [the Class B Certificateholders] [and the Collateral Interest Holder] [PRO RATA based on the ratio of the Class A Invested Amount and the Class B Invested Amount [and the Collateral Interest], respectively, to the Invested Amount as of the last day of the related Monthly Period]. Section 4.06. DEFAULTED AMOUNTS; INVESTOR CHARGE-OFFS. (a) On each Determination Date, the Servicer shall calculate the Class A Investor Default Amount, if any, for the related Distribution Date. If, on any Distribution Date, the [Class A] Required Amount for the related Monthly Period exceeds the sum of (x) the amount of Reallocated Principal Collections with respect to such Monthly Period, (y) the amount of Excess Spread [and the Excess Finance Charge Collections allocable to Series [ ] with respect to such Monthly Period [and (z) the [Available Shared Collateral Amount] [Available Credit Enhancement Amount] with respect to such Distribution Date, then [the [Enhancement] [Collateral] Invested Amount, if any, will be reduced by the amount of such excess, but not by more than the Class A Investor Default Amount for such Distribution Date. In the event that such reduction would cause the [Enhancement] [Collateral] Investment Amount to be a negative number, then the [Enhancement] [Collateral] Invested Amount will be reduced to zero and] the Class B Invested Amount shall be reduced by the amount [of such excess] [by which the [Enhancement] [Collateral] Invested Amount would have been reduced below zero,] but not by more than [the excess, if any, of] the Class A Investor Default Amount for such Distribution Date [over the amount of such reduction, if any, of the [Enhancement] [Collateral] Invested Amount with respect to such Distribution Date]. In the event that such reduction would cause the Class B Invested Amount to be a negative number, then the Class B Invested Amount shall be reduced to zero, and the Class A Invested Amount shall be reduced by the amount by which the Class B Invested Amount would have been reduced below zero, but not by more than the excess, if any, of the Class A Investor Default Amount for such Distribution Date over the [aggregate] amount of the reductions, if any, of [the [Enhancement] [Collateral] Invested Amount and] the Class B Invested Amount for such Distribution Date (a "Class A Investor Charge-Off). Class A Investor Charge-Offs shall thereafter be reimbursed and the Class A Invested Amount increased (but not by an amount in excess of the aggregate unreimbursed Class A Investor Charge-Offs) on any Distribution Date by the amount of Excess Spread [and Excess Finance Charge Collections] allocated and available for that purpose pursuant to Section 4.07(b). (b) On each Determination Date, the Servicer shall calculate the Class B Investor Default Amount, if any, for the related Distribution Date. If, on any Distribution Date, the Class B Required Amount for such Distribution Date exceeds the sum of (x) the amount of Class B Available Funds, Excess Spread [and Excess Finance Charge Collections] with respect to the related Monthly Period which are allocated and available to pay such amount pursuant to Section 4.05(b) (iii) or 4.07(e) and (y) the portion, if any, of the [Available Shared Collateral Amount] [Available Credit Enhancement Amount] with respect to such Distribution Date [(after giving effect to any withdrawal from the Cash Collateral Account to fund the Required Draw Amount with respect to such Distribution Date)], then [the [Enhancement) [Collateral] Invested Amount shall be reduced by the amount of such excess. In the event that such reduction would cause the [Enhancement] [Collateral] Invested Amount to be a negative number, then the [Enhancement] [Collateral] Invested Amount shall reduced to zero, and] the Class B Invested Amount shall be reduced by the amount [of such excess] [by which the [Enhancement] [Collateral] Invested Amount would have been reduced below zero,] but not by more than the Class B Investor Default Amount for such Distribution Date (a "Class B Investor Charge-Off"). Class B Investor Charge- Offs shall thereafter be reimbursed and the Class B Invested Amount increased (but not by an amount in excess of the aggregate unreimbursed Class B Investor Charge-Offs) on any Distribution Date by the amount of Excess Spread [and Excess Finance Charge Collections] allocated and available for that purpose pursuant to Section 4.07(f). (c) If on any Distribution Date Reallocated Principal Collections for such Distribution Date are applied pursuant to Section 4.08(a), then [the [Enhancement] [Collateral] Invested Amount shall be reduced by the amount of such Reallocated Principal Collections. In the event that such reduction would cause the [Enhancement] [Collateral] Invested Amount to be a negative number, then the [Enhancement] [Collateral] Invested Amount shall be reduced to zero, and] the Class B Invested Amount shall be reduced by the amount [of such Reallocated Principal Collections] [by which the [Enhancement] [Collateral] Invested Amount would have been reduced below zero]. [On each Determination Date, the Servicer shall calculate the Collateral Default Amount. If on any Distribution Date the Collateral Default Amount for the previous Monthly Period exceeds the amount of Collateral Available Funds, Excess Spread [and Excess Finance Charge Collections] with respect to the related Monthly Period which are allocated and available to pay such amount pursuant to Section 4.07(h-3), then the Collateral Interest will be reduced by the amount of such excess but not by more than the lesser of the Collateral Default Amount and the Collateral Interest for such Distribution Date (a "Collateral Charge-Off"). The Collateral Interest will after any reduction pursuant to this Section 4.06 be reimbursed on any Distribution Date by the amount of Excess Spread [and Excess Finance Charge Collections] allocated and available on such Distribution date for that purpose as described under Section 4.07(h-4).] Section 4.07. EXCESS SPREAD; EXCESS FINANCE CHARGE COLLECTIONS. The Servicer shall apply, or shall cause the Trustee to apply, on each Distribution Date, Excess Spread [and Excess Finance Charge Collections allocated to Series [ ] with respect to the related monthly Period, to make the following distributions in the following order of priority: (a) an amount equal to the [Class A] Required Amount, if any, with respect to such Distribution Date shall be distributed by the Trustee to fund any deficiency pursuant to Sections 4.05(a)(i), (ii) and (iii); PROVIDED, that in the event the Required Amount for such Distribution Date exceeds the amount of Excess Spread [and Excess Finance Charge Collections allocated to Series [ ], then such Excess Spread [and Excess Finance Charge Collections] shall be applied first to pay amounts due with respect to such Distribution Date pursuant to Section 4.05(a)(i), second to pay the Class A Servicing Fee pursuant to Section 4.05(a)(ii) and third to pay the Class A Investor Default Amount for such Distribution Date pursuant to Section 4.05(a)(iii); (b) an amount equal to the aggregate amount of Class A Investor Charge-Offs which have not been previously reimbursed as provided in Section 4.06(a) (after giving effect to the allocation on such Distribution Date of any amount for that purpose pursuant to Section 4.06(a)) shall be treated as a portion of Available Principal Collections for such Distribution Date; (c) an amount equal to the sum of (i) any Class B Monthly Interest due but not distributed to the Class B Certificateholders [or deposited to the Interest Funding Account] either on such Distribution Date or a prior Distribution Date and (ii) the amount of any Class B Additional Interest previously due but not distributed to the Class B Certificateholders [or deposited to the Interest Funding Account] either on such Distribution Date or a prior Distribution Date, after giving effect to the allocation in section 4.05(b)(i), shall be [distributed to the Paying Agent for payment to the Class B Certificateholders] [deposited in the Interest Funding Account for distribution to the Paying Agent for payment to Class B Certificateholders on the applicable Payment Date]; (d) an amount equal to any Class B Servicing Fees due but not paid to the Servicer either on such Distribution Date or a prior Distribution Date, after giving effect to the allocation in Section 4.05(b)(iii), shall be paid to the Servicer; (e) an amount equal to the remaining Class B Investor Default Amount for such Distribution Date, after giving effect to the allocation in Section 4.05(b)(iii), shall be treated as a portion of Available Principal Collections for such Distribution Date; (f) an amount equal to the aggregate amount by which the Class B Invested Amount has been reduced pursuant to clauses (c), (d) and (e) of the definition of "Class B Invested Amount" in Section 2.01 of this Supplement (but not in excess of the aggregate amount of such reductions which have not been previously reimbursed) shall be treated as a portion of Available Principal Collections for such Distribution Date; (g) [an amount equal to the "Monthly Cash Collateral Fee" (as defined in the Loan Agreement) for such Distribution Date shall be distributed to the Cash Collateral Depositor for application in accordance with the Loan Agreement] [an amount equal to the "Monthly Credit Enhancement Fee" (as defined in the Credit Enhancement Agreement) shall be distributed to the Credit Enhancement Provider]; [(h-1) an amount equal to Collateral Monthly Interest for the related Distribution Date, PLUS the amount of any Collateral Monthly Interest previously due but not distributed to the Collateral Interest Holder on a prior Distribution Date, PLUS the amount of any Collateral Additional Interest for such Distribution Date and any Collateral Additional Interest previously due but not distributed to the Collateral Interest Holder on a prior Distribution Date, shall be distributed to the Collateral Interest Holder for application in accordance with the Loan Agreement;] [(h-2) an amount equal to the Collateral Servicing Fee for such Distribution Date and any Collateral Servicing Fee due but not paid to the Servicer on a prior Distribution Date shall be paid to the Servicer;] [(h-3) an amount equal to the Collateral Default Amount, if any, for the prior Monthly Period shall be treated as a portion of Available Principal Collections for such Distribution Date;] [(h-4) an amount equal to the aggregate amount by which the [Enhancement] [Collateral] Invested Amount has been reduced pursuant to clause (c) of the definition of "[Enhancement] [Collateral] Invested Amount" (but not in excess of the aggregate amount of such reductions which have not been previously reimbursed) shall be treated as a portion of Available Principal Collections with respect to such Distribution Date;] [(i) [prior to the occurrence of an Economic Early Amortization Event,] an amount up to the excess, if any, of the [Initial] [Required] Cash Collateral Amount over the Available Cash Collateral Amount shall be deposited into the Cash Collateral Account in accordance with the Loan Agreement;] [(j) on each Distribution Date from and after the Reserve Account Funding Date, but prior to the date on which the Reserve Account terminates as described in Section 4.11(f), an amount up to the excess, if any, of the Required Reserve Account Amount over the Available Reserve Account Amount shall he deposited into the Reserve Account;] [(k) an amount equal to the aggregate of any other amounts then due to the [Cash Collateral Depositor] [Credit Enhancement Provider] pursuant to the [Loan Agreement] [Credit Enhancement Agreement] (to the extent such amounts are payable pursuant to the [Loan Agreement] [Credit Enhancement Agreement] out of Excess Finance Charge Collections and Excess Spread) shall be distributed to the [Cash Collateral Depositor] [Credit Enhancement Provider] for application in accordance with the [Loan Agreement] [Credit Enhancement Agreement];] and [(l) the balance, if any, will constitute a portion of Excess Finance Charge Collections for such Distribution Date and will be available for allocation to other Series in Group [ ] or to the Depositor as described in Section 4.05 of the Agreement.] Section 4.08. REALLOCATED PRINCIPAL COLLECTIONS. The Servicer shall apply, or shall cause the Trustee to apply, on each Distribution Date Reallocated Principal Collections with respect to such Distribution Date, to make the following distributions in the following order of priority: (a) an amount equal to the excess, if any, of (i) the [Class A] Required Amount, if any, with respect to such Distribution Date over (ii) [the sum of (x)] the amount of Excess Spread [and Excess Finance Charge Collections allocated to Series [ ] with respect to the related Monthly Period [and (y) the [Available Shared Collateral Amount] [Available Credit Enhancement Amount] with respect to such Distribution Date,] shall be distributed by the Trustee to fund any deficiency pursuant to Sections 4.05(a)(i), (ii) and (iii); and [(b) an amount equal to the excess, if any, of (i) the Class B Required Amount, if any, with respect to such Distribution Date over (ii) the amount of Excess Spread [and Excess Finance Charge Collections] allocated and available to the Class B Certificates pursuant to subsection 4.07(c), (d) and (e) on such Distribution Date shall be applied pursuant to subsections 4.05(b)(i), (ii) and (iii)]. (c) the balance, if any, shall be treated as a portion of Available Principal Collections for such Distribution Date. On each Distribution Date, the Collateral Interest shall be reduced by the amount of Reallocated Principal Collections for such Distribution Date. In the event that such reduction would cause the Collateral Interest (after giving to any Collateral Charge-Offs for such Distribution Date) to be a negative number, then the Collateral Interest (after giving effect to any Collateral Charge-Offs for such Distribution Date) shall be reduced to zero and the Class B Investor Interest shall be reduced by the amount by which the Collateral Interest would have been reduced below zero. In the event that the reallocation of Reallocated Principal Collections would cause the Class B Investor Interest (after giving effect to any Class B Investor Charge-Offs for such Distribution Date) to be a negative number on any Distribution Date, then Reallocated Principal Collections shall be reallocated on such Distribution Date in an aggregate amount not to exceed the amount which would cause the Class B Investor Interest (after giving to any Class B Investor Charge-Offs for such Distribution Date) to be reduced to zero. References to "negative numbers" above shall be determined without regard to the requirement that the Invested Amount of a Class not be reduced below zero.) [Section 4.09. EXCESS FINANCE CHARGE COLLECTIONS. Series [ ] shall be included in Group [ ]. Subject to Section 4.05 of the Agreement, Excess Finance Charge Collections with respect to the Series in Group [ ] for any Distribution Date will be allocated to Series [ ] in an amount equal to the product of (x) the aggregate amount of Excess Finance Charge Collections with respect to all the Series in Group [ ] for such Distribution Date and (y) a fraction, the numerator of which is the Finance Charge Shortfall for Series [ ] for such Distribution Date and the denominator of which is the aggregate amount of Finance Charge Shortfalls for all the Series in Group [ ] for such Distribution Date. The "Finance Charge Shortfall" for Series [ ] for any Distribution Date will be equal to the excess, if any, of (a) the full amount required to be paid, without duplication, pursuant to Sections 4.05(a), 4.05(b) and 4.07 on such Distribution Date over (b) the sum of (i) the Floating Allocation Percentage of Collections of Finance Charge Receivables with respect to the related Monthly Period (including any investment earnings that are to be treated as Collections of Finance Charge Receivables in accordance with the Agreement), [(ii) if such Monthly Period relates to a Distribution Date with respect to the Accumulation Period [or an Early Accumulation Period], the amount of Principal Funding Investment Proceeds and Interest Funding Investment Proceeds, if any, with respect to such Distribution Date, [(iii) the amount of funds, if any, to be withdrawn from the Reserve Account which, pursuant to Section 4.11(d), are required to be included in Class A Available Funds or Class B Available Funds with respect to such Distribution Date,] [(d) any investment earnings (net of investment losses and expenses) transferred from the Pre- Funding Account to the Collection Account on the related Distribution Date] [and (e) describe other amounts]. [Section 4.09A. REALLOCATED INVESTOR FINANCE CHARGE COLLECTIONS. (a) That portion of Group [____] Investor Finance Charge Collections for any Distribution Date equal to the amount of Reallocated Investor Finance Charge Collections for such Distribution Date will be allocated to Series [ ] and will be distributed as set forth in this Supplement.] (b) Reallocated Investor Finance Charge and Administrative Collections, with respect to any Distribution Date shall equal the sum of (i) the aggregate amount of Series [ ] Monthly Interest, Investor Default Amount, Series [ ] Monthly Fees and Series [ ] Additional Amounts for such Distribution Date and (ii) that portion of excess Group [____] Investor Finance Charge Collections to be included in Reallocated Investor Finance Charge Collections pursuant to subsection (c) hereof; PROVIDED, HOWEVER, that if the amount of Group [____] Investor Finance Charge Collections for such Distribution Date is less than the sum of (w) Group [____] Investor Monthly Interest, (x) Group [____] Investor Default Amount, (y) Group [____] Investor Monthly Fees and (z) Group [____] Investor Additional Amounts, then Reallocated Investor Finance Charge Collections shall equal the sum of the following amounts for such Distribution Date: (A) The product of (I) Group [____] Investor Finance Charge Collections (up to the amount of Group [____] Investor Monthly Interest) and (II) a fraction, the numerator of which is Series [ ] Monthly Interest and the denominator of which is Group [____] Investor Monthly Interest; (B) the product of (I) Group [____] Investor Finance Charge Collections less the amount of Group [____] Investor Monthly Interest (up to the Group [____] Investor Default Amount) and (II) a fraction, the numerator of which is the Investor Default Amount and the denominator of which is the Group [____] Investor Default Amount; (C) the product of (I) Group [____] Investor Finance Charge Collections less the amount of Group [____] Investor Monthly Interest and the Group [____] Investor Default Amount (up to Group [____] Investor Monthly Fees) and (II) a fraction, the numerator of which is Series [ ] Monthly Fees and the denominator of which is Group [____] Investor Monthly Fees; and (D) the product of (I) Group [____] Investor Finance Charge Collections less the sum of (i) Group [____] Investor Monthly Interest, (ii) the Group [____] Investor Default Amount and (iii) Group [____] Investor Monthly Fees and (II) a fraction, the numerator of which is Series [ ] Additional Amounts and the denominator of which is Group [____] Investor Additional Amounts. (c) If the amount of Group [____] Investor Finance Charge Collections for such Distribution Date exceeds the sum of (i) Group [____] Investor Monthly Interest, (ii) Group [____] Investor Default Amount, (iii) Group [____] Investor Monthly Fees and (iv) Group [____] Investor Additional Amounts, then Reallocated Investor Finance Charge Collections for such Distribution Date shall include an amount equal to the product of (x) the amount of such excess and (y) a fraction, the numerator of which is the Invested Amount as of the last day of the second preceding Due Period and the denominator of which is the sum of such Invested Amount and the aggregate invested amounts for all other Series included in Group [____] as of such last day. [Section 4.10. SHARED PRINCIPAL COLLECTIONS. Subject to Section 4.04 of the Agreement, Shared Principal Collections for any Distribution Date will be allocated to Series [ ] in an amount equal to the product of (x) the aggregate amount of Shared Principal Collections with respect to all Principal Sharing Series for such Distribution Date and (y) a fraction, the numerator of which is the Principal Shortfall for Series [ ] for such Distribution Date and the denominator of which is the aggregate amount of Principal Shortfalls for all the Series which are Principal Sharing Series for such Distribution Date. The Principal Shortfall for Series [ ] will be equal to (a) for any Distribution Date with respect to the Revolving Period, zero, (b) for any Distribution Date with respect to the [Accumulation Period] [Controlled Amortization Period], the excess, if any, of the [Controlled Deposit Amount] [Controlled Distribution Amount] with respect to such Distribution Date over the amount of Available Principal Collections for such Distribution Date (excluding any portion thereof attributable to Shared Principal Collections) and (c) for any Distribution Date with respect to the [Rapid Amortization] [Early Accumulation] Period, the excess, if any, of [the sum of] the Invested Amount [and the Enhancement Invested Amount, if any,] over the amount of Available Principal Collections for such Distribution Date (excluding any portion thereof attributable to Shared Principal Collections).] Section 4.11. RESERVE ACCOUNT. (a) The Servicer shall establish and maintain, in the name of the Trustee, on behalf of the Trust, for the benefit of the Series [ ] Certificateholders, an Eligible Deposit Account (the "Reserve Account") bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Series [ ] Certificateholders. The Reserve Account shall initially be established with [the Trustee]. The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Reserve Account and in all proceeds thereof. The Reserve Account shall be under the sole dominion and control of the Trustee for the benefit of the Series [ ] Certificateholders. If at any time the Reserve Account ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency shall consent) establish a new Reserve Account meeting the conditions specified above as an Eligible Deposit Account, and shall transfer any cash or any investments to such new Reserve Account. The Trustee, at the direction of the Servicer, shall (i) make withdrawals from the Reserve Account from time to time in an amount up to the Available Reserve Account Amount at such time, for the purposes set forth in this Supplement, and (ii) on each Distribution Date (from and after the Reserve Account Funding Date) prior to the termination of the Reserve Account make a deposit into the Reserve Account in the amount specified in, and otherwise in accordance with, Section 4.07(j). (b) Funds on deposit in the Reserve Account shall be invested at the direction of the Servicer by the Trustee in Eligible Investments. Funds on deposit in the Reserve Account on any Transfer Date, after giving effect to any withdrawals from the Reserve Account on such Transfer Date, shall be invested in such investments that will mature so that such funds will be available for withdrawal on or prior to the following Transfer Date. The Trustee shall maintain for the benefit of the Series [ ] Certificateholders possession of the negotiable instruments or securities, if any, evidencing such Eligible Investments. No Eligible Investment shall be disposed of prior to its maturity; PROVIDED, HOWEVER, that the Trustee may sell, liquidate or dispose of an Eligible Investment before its maturity, if so directed by the Servicer, the Servicer having reasonably determined that the interests of the Series [ ] Certificateholders may be adversely affected if such Eligible Investment is held to its maturity. On each Distribution Date, all interest and earnings (net of losses and investment expenses) accrued since the preceding Distribution Date on funds on deposit in the Reserve Account shall be retained in the Reserve Account (to the extent that the Available Reserve Account Amount is less than the Required Reserve Account Amount) and the balance, if any, shall be distributed to [the Cash Collateral Depositor for application in accordance with the Loan Agreement] [the Depositor]. For purposes of determining the availability of funds or the balance in the Reserve Account for any reason under this Supplement, except as otherwise provided in the preceding sentence, investment earnings on such funds shall be deemed not to be available or on deposit. (c) On the Determination Date preceding each Distribution Date with respect to the Accumulation Period and the first Special Payment Date, the Servicer shall calculate the "Reserve Draw Amount" which shall be equal to the excess, if any, of the Covered Amount with respect to such Distribution Date or Special Payment Date over the Principal Funding Investment Proceeds with respect to such Distribution Date or Special Payment Date; PROVIDED, that such amount will be reduced to the extent that funds otherwise would be available for deposit in the Reserve Account under Section 4.07(j) with respect to such Distribution Date or Special Payment Date. (d) In the event that for any Distribution Date the Reserve Draw Amount is greater than zero, the Reserve Draw Amount, up to the Available Reserve Account Amount, shall be withdrawn from the Reserve Account on the related Transfer Date by the Trustee (acting in accordance with the instructions of the Servicer), deposited into the Collection Account and included in (i) prior to the Class B Principal Commencement Date, Class A Available Funds and (ii) thereafter, the Class B Available Funds, in each case for such Distribution Date. (e) In the event that the Reserve Account Surplus on any Distribution Date, after giving effect to all deposits to and withdrawals from the Reserve Account with respect to such Distribution Date, is greater than zero, the Trustee, acting in accordance with the instructions of the Servicer, shall withdraw from the Reserve Account, and pay to [the Cash Collateral Depositor for application in accordance with the Loan Agreement] [the Depositor], an amount equal to such Reserve Account Surplus. (f) Upon the earliest to occur of (i) the day on which the Invested Amount is paid in full to the Series [ ] Certificateholders, (ii) if the Accumulation Period has not commenced, the occurrence of a Pay Out Event with respect to Series [ ] and (iii) if the Accumulation Period has commenced, the earlier of the first Special Payment Date and the Class B Expected Final Payment Date, the Trustee, acting in accordance with the instructions of the Servicer, after the prior payment of all amounts owing to the Series [ ] Certificateholders which are payable from the Reserve Account as provided herein, shall withdraw from the Reserve Account and pay to [the Depositor] [the Cash Collateral Depositor for application in accordance with the Loan Agreement,] all amounts, if any, on deposit in the Reserve Account and the Reserve Account shall be deemed to have terminated for purposes of this Supplement.] Section 4.12. ESTABLISHMENT OF CREDIT ENHANCEMENT. (a) The Servicer shall: (i) [obtain] [establish] the Credit Enhancement [for the account] [in the name of] of the Trustee and solely for the benefit of the Class B Certificateholders, (ii) enter into the Credit Enhancement Agreement which provides for [ ], and (iii) ensure that the Credit Enhancement will permit the Trustee (or the Servicer on its behalf) to make withdrawals from time to time in an amount up to the Available Credit Enhancement Amount at such times and for the purposes set forth in this Supplement. Such withdrawals shall be made in the priority set forth below and the Available Credit Enhancement Amount will be reduced by the amount of each such withdrawal as provided in the definition thereof set forth in Section 2.01 of this Supplement. The Credit Enhancement Provider shall not be entitled to reimbursement for any withdrawals, interest or fees with respect to the Credit Enhancement from the corpus of the Trust except as specifically provided herein. (b) On each Determination Date, the Servicer shall calculate the amount (the "Required Draw Amount") (determined after giving effect to any distribution to be made pursuant to Section 4.05(a) on the related Distribution Date) equal to the excess, if any, of (i) the Required Amount, if any, with respect to such Distribution Date over (ii) the amount of Excess Spread [and Excess Finance Charge Collections allocated to Series [ ] to be allocated and available pursuant to Section 4.07(a) to fund such Required Amount on such Distribution Date. (c) On each Determination Date, the Servicer shall calculate the amount (the "Interest Draw Amount") (determined after giving effect to any distribution to be made pursuant to Section 4.05(b)(i) and Section 4.07(c) on the related Distribution Date) of (i) any Class B Monthly Interest due but not distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] on such Distribution Date pursuant to Section 4.05(b)(i) or Section 4.07(c), (ii) any Class B Monthly Interest previously due but not distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] on a prior Distribution Date pursuant to Section 4.05(b)(i) or Section 4.07(c) or this paragraph (d) and (iii) any Class B Additional Interest due but not to be distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] on such Distribution Date and any Class B Additional Interest previously due but not distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] on a prior Distribution Date pursuant to Section 4.05(b)(i) or Section 4.07(c) or this paragraph (d). (d) On each Determination Date, the Servicer shall calculate the amount (the "Servicing Draw Amount") equal to the excess, if any, of (i) the Class B Servicing Fee for the related Distribution Date over (ii) the amount of Available Class B Funds, Excess Spread [and Excess Finance Charge Collections allocated to Series [ ] to be allocated and available pursuant to Section 4.05(b)(ii) and Section 4.07(d) to fund such Class B Servicing Fee on such Distribution Date. (e) On each Determination Date, the Servicer shall calculate the amount (the "Default Draw Amount") equal to the excess, if any, of (i) the Class B Investor Default Amount for the related Distribution Date over (ii) the amount of Class B Available Funds, Excess Spread [and Excess Finance Charge Collections allocated to Series [ ] to be allocated and available pursuant to Section 4.05(b)(iii) and Section 4.07(e) to fund such Class B Investor Default Amount on such Distribution Date. (f) On each Determination Date (commencing with the Determination Date preceding the Class B Principal Commencement Date), the Servicer shall calculate the amount (the "Reimbursement Draw Amount") equal to the excess, if any, of (i) the Class B Initial Invested Amount minus the sum of the aggregate amount of principal payments previously distributed to Class B Certificateholders [or deposited to the Principal Funding Account in respect to the Class B Certificates] over (ii) the Class B Invested Amount on the last day of the related Monthly Period (determined after giving effect to any change to be made in the Class B Invested Amount pursuant to clause (c), (d), (e) or (f) of the definition of "Class B Invested Amount" on the following Distribution Date). (g) Notwithstanding Section 4.12(f), if either (i) the Certificateholders' Interest in the Receivables is reassigned to the Depositor pursuant to Section 2.06 of the Agreement, (ii) Receivables are sold, disposed of or otherwise liquidated pursuant to Section 9.02 or Section 12.02(c) of the Agreement or (iii) the Certificateholders' Interest in the Receivables is purchased by the Depositor pursuant to Section 10.01 of the Agreement or the Series [ ] Certificateholders' Interest is purchased by the Depositor pursuant to Section 7.01 of this Supplement, the Servicer shall not calculate the Reimbursement Draw Amount with respect to the relevant Distribution Date, but shall calculate the amount (the "Special Draw Amount") equal to the aggregate amount of all reductions of the Class B Invested Amount occurring under clauses (c), (d) or (e) of the definition of "Class E Invested Amount" which have not been reimbursed prior to such Distribution Date under clause (f) thereof. (h) In the event that for any Distribution Date the sum of any Required Draw Amount, Interest Draw Amount, Servicing Draw Amount, Default Draw Amount, Reimbursement Draw Amount, Special Draw Amount (such sum being referred to as the "Total Draw Amount"), is greater than zero, the Servicer shall give written notice to the Trustee and the Credit Enhancement Provider, in substantially the form of Exhibit B, of such positive Total Draw Amount on the related Determination Date. On the related Transfer Date, the Trustee (or the Servicer on its behalf) shall make a proper demand as required under the Credit Enhancement Agreement for the Total Draw Amount (but not in excess of the Available Credit Enhancement Amount) and upon receipt thereof, the Trustee shall allocate such amount as follows: (A) the portion of the Total Draw Amount allocable to the Required Draw Amount, if any, up to the Available Credit Enhancement Amount, shall be demanded from the Credit Enhancement Provider on the related Transfer Date and distributed first to fund any deficiency pursuant to Section 4.05(a)(i), second to fund any deficiency in the Class A Monthly Servicing Fee pursuant to Section 4.05(a)(ii) and third to pay the Class A Investor Default Amount, if any, for such Distribution Date pursuant to Section 4.05(a)(iii); (B) the portion of the Total Draw Amount allocable to the Interest Draw Amount, if any, up to the Available Credit Enhancement Amount (determined after giving effect to any withdrawal pursuant to clause (A)), shall be demanded from the Credit Enhancement Provider on the related Transfer Date and distributed to fund any deficiency pursuant to Section 4.07(c); (C) the portion of the Total Draw Amount allocable to the Servicing Draw Amount, if any, up to the Available Credit Enhancement Amount (determined after giving effect to any withdrawal pursuant to clauses (A) and (B)), shall be demanded from the Credit Enhancement Provider and used to pay the Class B Servicing Fee for such Distribution Date pursuant to Section 4.07(d); (D) the portion of the Total Draw Amount allocable to the Default Draw Amount, if any, up to the Available Credit Enhancement Amount (determined after giving effect to any withdrawal pursuant to clauses (A), (B) and (C)), shall be demanded from the Credit Enhancement Provider on the related Transfer Date and used to pay the Class B Investor Default Amount for such Distribution Date pursuant to Section 4.07(e); (E) the remainder of the Total Draw Amount, if any, up to the Available Credit Enhancement Amount (determined after giving effect to any withdrawal pursuant to clauses (A) through (D), shall be demanded from the Credit Enhancement Provider on the related Transfer Date and immediately deposited by the Trustee into [the Collection Account for distribution to the Class B Certificateholders on such Distribution Date] [the Principal Funding Account in respect of the Class B Certificates].] Section 4.13. CASH COLLATERAL ACCOUNT. (a) The Servicer shall establish and maintain, in the name of the Trustee, on behalf of the Trust, for the benefit of the Series [ ] Certificateholders and the Cash Collateral Depositor, as their interests appear herein, a "Cash Collateral Account" which shall be an Eligible Deposit Account, bearing designations clearly indicating that the funds deposited therein are held for the benefit of the Series [ ] Certificateholders and the Cash Collateral Depositor. The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Cash Collateral Account and in all proceeds thereof. The Cash Collateral Account shall be under the sole dominion and control of the Trustee for the benefit of the Series [ ] Certificateholders and the Cash Collateral Depositor as their interests appear herein. The interest of the Cash Collateral Depositor in the Cash Collateral Account shall be subordinated to the interests of the Series [ ] Certificate holders as provided herein and in the Loan Agreement. If at any time the Cash Collateral Account ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency shall consent) establish a new Cash Collateral Account meeting the conditions specified above as an Eligible Deposit Account, and shall transfer any cash or any investments to such new Cash Collateral Account. The Trustee, at the direction of the Servicer, shall (i) on the Closing Date, deposit in the Cash Collateral Account the proceeds of the advance to be made on such date by the Cash Collateral Depositor under the Loan Agreement, (ii) make withdrawals from the Cash Collateral Account from time to time in an amount up to the Available Cash Collateral Amount at such time, for the purposes set forth in paragraphs (c) through (i) below, and (iii) on each Distribution Date prior to the termination of the Cash Collateral Account make a deposit into the Cash Collateral Account in the amount specified in, and otherwise in accordance with, Section 4.07(i). All withdrawals from the Cash Collateral Account shall be made in the priority set forth below. The Cash Collateral Depositor shall not be entitled to reimbursement from the Trust Assets for any withdrawals from the Cash Collateral Account except as specifically provided in this Supplement. (b) Funds on deposit in the Cash Collateral Account shall be invested at the direction of the Servicer (or the Cash Collateral Depositor, as provided in the Loan Agreement) by the Trustee in Cash Collateral Account Investments. Funds on deposit in the Cash Collateral Account on any Transfer Date, after giving effect to any withdrawals from the Cash Collateral Account on such Transfer Date, shall be invested in such investments that will mature so that such funds will be available for withdrawal on or prior to the following Transfer Date. The proceeds of any such investments shall be invested in such investments that will mature so that such funds will be available for withdrawal on or prior to the Transfer Date immediately following the date of such investment. The Trustee shall maintain for the benefit of the Series [ ] Certificateholders and the Cash Collateral Depositor possession of the negotiable instruments or securities, if any, evidencing the Cash Collateral Account Investments. On each Transfer Date, all interest and earnings (net of losses and investment expenses) accrued since the preceding Transfer Date on funds on deposit in the Cash Collateral Account shall be applied in accordance with the Loan Agreement. For purposes of determining the availability of funds or the balances in the Cash Collateral Account for any reason under this Supplement, all investment earnings on such funds shall be deemed not to be available or on deposit. (c) On each Determination Date, the Servicer shall calculate the amount (the "Required Draw Amount") (determined after giving effect to any distribution to be made pursuant to Section 4.05(a) on the related Distribution Date) equal to the excess, if any, of (i) the Required Amount, if any, with respect to such Distribution Date over (ii) the amount of Excess Spread [and Excess Finance Charge Collections allocated to Series [ ] to be allocated and available pursuant to Section 4.07(a) to fund such Required Amount on such Distribution Date. (d) On each Determination Date, the Servicer shall calculate the amount (the "Interest Draw Amount") (determined after giving effect to any distribution to be made pursuant to Section 4.05(b)(i) and Section 4.07(c) on the related Distribution Date) of (i) any Class B Monthly Interest due but not distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] on such Distribution Date pursuant to Section 4.05(b)(i) or Section 4.07(c), (ii) any Class B Monthly Interest previously due but not distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] on a prior Distribution Date pursuant to Section 4.05(b)(i) or Section 4.07(c) or this paragraph (d) and (iii) any Class B Additional Interest due but not to be distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] on such Distribution Date and any Class B Additional Interest previously due but not distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] on a prior Distribution Date pursuant to Section 4.05(b)(i) or Section 4.05(c) or this paragraph (d). (e) On each Determination Date, the Servicer shall calculate the amount (the "Servicing Date Amount") equal to the excess, if any, of (i) the Class B Servicing Fee for the related Distribution Date over (ii) the amount of Available Class B Funds, Excess Spread [and Excess Finance Charge Collections allocated to Series [ ] to be allocated and available pursuant to Section 4.05(b)(ii) and Section 4.07(d) to fund such Class B Servicing Fee on such Distribution Date. (f) On each Determination Date, the Servicer shall calculate the amount (the "Default Draw Amount") equal to the excess, if any, of (i) the Class B Investor Default Amount for the related Distribution Date over (ii) the amount of Class B Available Funds, Excess Spread [and Excess Finance Charge Collections allocated to Series [ ] to be allocated and available pursuant to Section 4.05(b)(iii) and Section 4.07(e) to fund such Class B Investor Default Amount on such Distribution Date. (g) On each Determination Date (commencing with the Determination Date preceding the Class B Principal Commencement Date), the Servicer shall calculate the amount (the "Reimbursement Draw Amount") equal to the excess, if any, of (i) the Class B Initial Invested Amount minus the sum of the aggregate amount of principal payments previously distributed to Class 3 Certificateholders [or deposited to the Principal Funding Account in respect of the Class B Certificates) over (ii) the Class B Invested Amount on the last day of the related Monthly Period (determined after giving effect to any change to be made in the Class B Invested Amount pursuant to clause (c), (d), (e) or (f) of the definition of "Class B Invested Amount" on the following Distribution Date). (h) Notwithstanding Section 4.12(g), if either (i) the Certificateholders' Interest in the Receivables is reassigned to the Depositor pursuant to Section 2.06 of the Agreement, (ii) the Receivables are sold, disposed of or otherwise liquidated pursuant to Section 9.02 or Section 12.02(c) of the Agreement or (iii) the Certificateholders' Interest in the Receivables is purchased by the Depositor pursuant to Section 10.01 of the Agreement or the Series [ ] Certificateholders' Interest is purchased by the Depositor pursuant to Section 7.01 of this Supplement, the Servicer shall not calculate the Reimbursement Draw Amount with respect to the relevant Distribution Date, but calculate the amount (the "Special Draw Amount") equal to the aggregate amount of all reductions of the Class B Invested Amount occurring under clauses (c), (d) or (e) of the definition of "Class B Invested Amount" which have not been reimbursed prior to such Distribution Date under clause (f) thereof. [(i) Notwithstanding Sections 4.12(g) and (h), on the Determination Date preceding the Economic Special Payment Date, the Servicer shall not calculate the Reimbursement Draw Amount or the Special Draw Amount with respect to such Special Payment Date, but shall calculate (i) the amount (the "Class A Principal Draw Amount") (determined after giving effect to any deposit or distribution to be made pursuant to Sections 4.05(d)(i) and 5.01(b) on such Special Payment Date) equal to the outstanding principal amount of the Class A Certificates [(less the Principal Funding Account Balance, if any)] and (ii) the amount (the "Class B Principal Draw Amount") (determined after giving effect to any deposit or distribution to be made pursuant to Sections 4.05(d)(ii) and 5.01(d) on such Special Payment Date) equal to the outstanding principal amount of the Class B Certificates [(less the Principal Funding Account Balance, if any)];] (j) In the event that for any Distribution Date the sum of any Required Draw Amount, Interest Draw Amount, Servicing Draw Amount, Default Draw Amount, Reimbursement Draw Amount, Special Draw Amount, [Class A Principal Draw Amount and Class B Principal Draw Amount] (such sum being referred to as the "Total Draw Amount"), is greater than zero, the Servicer shall give written notice to the Trustee and the Cash Collateral Depositor, in substantially the form of Exhibit B, of such positive Total Draw Amount on the related Determination Date. On the related Transfer Date, withdrawals will be made from the Cash Collateral Account as follows: (A) the portion of the Total Draw Amount allocable to the Required Draw Amount, if any, up to the Available Shared Collateral Amount, shall be withdrawn from the Cash Collateral Account on the related Transfer Date and distributed first to fund any deficiency pursuant to Section 4.05(a)(i), second to fund any deficiency in the Class A Monthly Servicing Fee pursuant to Section 4.05(a)(ii) and third to pay the Class A Investor Default Amount, if any, for such Distribution Date pursuant to Section 4.05(a)(iii); (B) the portion of the Total Draw Amount allocable to the Interest Draw Amount, if any, up to the Available Shared Collateral Amount (determined after giving effect to any withdrawal pursuant to clause (A)), shall be withdrawn from the Cash Collateral Account on the related Transfer Date and distributed to fund any deficiency pursuant to Section 4.07(c); (C) the portion of the Total Draw Amount allocable to the Servicing Draw Amount, if any, up to the Available Shared Collateral Amount (determined after giving effect to any withdrawal pursuant to clauses (A) and (B)), shall be withdrawn from the Cash Collateral Account and used to pay the portion of the Class B Servicing Fee for such Distribution Date not paid pursuant to Section 4.07(d); (D) the portion of the Total Draw Amount allocable to the Default Draw Amount, if any, up to the Available Shared Collateral Amount (determined after giving effect to any withdrawal pursuant to clauses (A) , (B) and (C)), shall be withdrawn from the Cash Collateral Account on the related Transfer Date and used to pay the portion of the Class B Investor Default Amount for such Distribution Date not paid pursuant to Section 4.07(e); [(E) the portion of the Total Draw Amount allocable to the Class A Principal Draw Amount, if any, up to the Available Shared Collateral Amount (determined after giving effect to any withdrawal pursuant to clauses (A), (B), (C) and (D)), shall be withdrawn from the Cash Collateral Account on the related Transfer Date and immediately deposited by the Trustee into the Principal Funding Account; and (F) the remainder of the Total Draw Amount, if any, up to the Available Cash Collateral Amount (determined after giving effect to any withdrawal pursuant to classes (A) through (E), shall be withdrawn from the Cash Collateral Account on the related Transfer Date and immediately deposited by the Trustee into [the Collection Account for distribution to the Class B Certificateholders on such Distribution Date] [the Principal Funding Account in respect of the Class B Certificates].] (k) In the event that the Cash Collateral Account Surplus on any Distribution Date, after giving effect to all deposits to and withdrawals from the Cash Collateral Account with respect to such Distribution Date, is greater than zero, the Trustee, acting in accordance with the instructions of the Servicer, shall withdraw from the Cash Collateral Account, and apply in accordance with the Loan Agreement, an amount equal to such Cash Collateral Account Surplus. (l) Upon the earliest to occur of (i) the Termination Date, (ii) the day on which the Class A Invested Amount and the Class B Invested Amount are paid in full to the Class A Certificateholders and the Class B Certificateholders [and (iii) the day on which all withdrawals from the Cash Collateral Account pursuant to Section 4.12(j) with respect to the Economic Special Payment Date have been made], the Trustee, acting in accordance with the instructions of the Servicer, after the prior payment of all amounts owing to the Class A Certificateholders and the Class B Certificateholders which are payable from the Cash Collateral Account as provided herein, shall withdraw from the Cash Collateral Account for application in accordance with the Loan Agreement all amounts, if any, on deposit in the Cash Collateral Account and the Cash Collateral Account shall be deemed to have terminated for purposes of this Supplement.] Section 4.14. [DETERMINATION OF INDEX. (a) On each Rate Determination Date the Trustee shall determine the [Index] on the basis of [______________]. (b) The [Class A] [Class B] Certificate Rate applicable to the then current and the immediately preceding Interest Period may be obtained by any Series [ ] Certificateholder by telephoning the Trustee at its Corporate Trust Office at [_____]. (c) On each Rate Determination Date, the Trustee shall send to the Servicer, by facsimile, notification of the [Index] for the following Interest Period.] Section 4.15. PRE-FUNDING ACCOUNT. (a) ESTABLISHMENT OF THE PRE-FUNDING ACCOUNT. The Trustee, for the benefit of the [Series [ ]] [Class A] [Class B] Certificateholders, shall establish and maintain in the name of the Trustee, a segregated trust account (the "Pre-Funding Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the [Series [ ]] [Class A] [Class B] Certificateholders. The Depositor does hereby transfer, assign, set over and otherwise convey to the Trustee for the benefit of the [Series [ ]] [Class A] [Class B] Certificateholders, without recourse, all of its right, title and interest in, to and under the Pre- Funding Account, all amounts on deposit therein, all Eligible Investments credited to the Pre-Funding Account, and any proceeds of the foregoing. The Pre-Funding Account shall be under the sole dominion and control of the Trustee for the benefit of the [ ] [Class A] [Class B] Certificateholders. On the Closing Date, the Depositor shall cause to be deposited in the Pre-Funding Account an amount equal to the Initial Pre-Funding Amount. Pursuant to the authority granted to the Servicer in the Agreement, the Servicer shall have the power, revocable by the Trustee, to instruct the Trustee to make withdrawals and payments from the Pre-Funding Account for the purposes of carrying out the Servicer's or Trustee's duties hereunder. (b) Administration Pre-Funding Account. On each Determination Date, the Servicer shall instruct the Trustee to withdraw on the related Distribution Date from the Pre-Funding Account and deposit in the Collection Account all interest and other investment income and earnings (net of losses and investment expenses) on all funds in the Pre-Funding Account, for application as Collections of Finance Charge Receivables allocable to the [Series [ ]] [Class A] [Class B] Certificates. Except as provided in the immediately preceding sentence, interest (including reinvested interest) and other investment income and earnings on funds on deposit in the Pre-Funding Account shall be deemed not to be on deposit therein for purposes of this Supplement. Funds on deposit in the Pre-Funding Account shall be withdrawn by the Trustee and paid to the Depositor to the extent of any increases in the Invested Amount pursuant to Section 4.15. On the Determination Date immediately preceding the last day of the Funding Period, the Servicer shall instruct the Trustee to distribute to the Paying Agent the remaining Pre-Funding Amount, if any, on deposit in the Pre-Funding Account for distribution as payment of principal to the [Series [ ]] [Class A] [Class B] Certificateholders on the related Distribution Date pursuant to Section 4.05(e); PROVIDED, HOWEVER, that if during the period beginning on such Transfer Date and ending on or before such Distribution Date, the Depositor increases the Invested Amount in accordance with the provisions of Section 4.15, then that portion of the Pre-Funding Amount equal to the amount by which the Invested Amount was increased during such period shall not be paid to the [Series [ ]] [Class A] [Class B] Certificateholders, but rather shall be paid to the Depositor. The Servicer shall furnish or cause to be furnished to the Trustee a monthly statement reporting all activity with respect to the Pre-Funding Account. (c) INVESTMENT OF FUNDS IN PRE-FUNDING ACCOUNT. Funds on deposit in the Pre-Funding Account shall be invested in [Eligible Investments] [a guaranteed investment agreement] by the Servicer (or, at the direction of the Servicer, by the Trustee on behalf of the Servicer). [Funds on deposit in the Pre-Funding Account on any Distribution Date and any proceeds of any investments thereof, after giving effect to any withdrawals from the Pre-Funding Account, shall be invested in [Eligible Investments that will mature [overnight] [as specified by the Servicer] so that such funds will be available for withdrawal on or prior to the following Transfer Date] [a guaranteed investment agreement]. Section 4.16. Changes in Invested Amount. The Depositor may on any Business Day during the Funding Period determine to increase the [Class A] [Class B] Invested Amount to an amount not to exceed [, when added to the [Class A] [Class B] Invested Amount,] the Full Invested Amount to the extent there are sufficient Principal Receivables in the Trust (including Principal Receivables in Additional Accounts designated pursuant to Section 2.06 of the Agreement) to permit any such increase in the [Class A] [Class B] Invested Amount without causing a Pay Out Event to occur with respect to any outstanding Series. Upon determining to increase the [Class A] [Class B] Invested Amount pursuant to this Section 4.15, the Depositor shall deliver to the Servicer, the Trustee, the [Credit Enhancement Provider] [Cash Collateral Depositor] and each Rating Agency an officer's Certificate specifying the amount of the increase in the [Class A] [Class B] Invested Amount the Depositor has determined to make and certifying that the Depositor reasonably believes that such increase in the [Class A] [Class B] Invested Amount will not, based on the facts known to such officer at the time of such certification, cause a Pay Out Event, or an event that, after giving of notice or the lapse of time, would constitute a Pay Out Event, to occur with respect to any Series. Upon receipt of such Officer's Certificate by the Trustee, the [Class A] [Class B] Invested Amount shall be increased by the amount specified in such Officer's Certificate, whereupon the Servicer shall instruct the Trustee to withdraw from the Pre-Funding Account and pay to the Depositor an amount equal to the amount of such increase in the [Class A] [Class B] Invested Amount. [Any such increase in the Invested Amount will increase the Class A Invested Amount and the Class B Investment Amount PRO RATA based on the Class A Floating Percentage and the Class B Floating Percentage, respectively].] ARTICLE V DISTRIBUTIONS AND REPORTS TO SERIES [ ] CERTIFICATEHOLDERS Section 5.01. DISTRIBUTIONS. (a) On each Payment Date, the Paying Agent shall distribute to each Class A Certificateholder of record on the related Record Date (other than as provided in Section 12.02 of the Agreement) such Class A Certificateholder's pro rata share of the amounts [on deposit in the Interest Funding Account or otherwise held by the Paying Agent] that are allocated and available on such Payment Date to pay interest on the Class A Certificates pursuant to this Supplement. (b) On each Special Payment Date [, each Interest Payment Date with Interest pursuant to Section 10.01 of the Agreement, in which respect to the Class A Controlled Amortization Period] and on the Class A Expected Final Payment Date, the Paying Agent shall distribute to each Class A Certificateholder of record on the related Record Date (other than as provided in Section 12.02 of the Agreement) such Class A Certificateholder's pro rata share of the amounts [on deposit in the Principal Funding Account or otherwise held by the Paying Agent] that are allocated and available on such date to pay principal of the Class A Certificates pursuant to this Supplement up to a maximum amount on any such date equal to the Class A Invested Amount on such date (unless there has been an optional repurchase of the Series [ ] Certificateholders' event the foregoing limitation will not apply). (c) On each Payment Date, the Paying Agent shall distribute to each Class B Certificateholder of record on the related Record Date (other than as provided in Section 12.02 of the Agreement) such Class B Certificateholder's pro rata share of the amounts [on deposit in the Interest Funding Account or otherwise held by the Paying Agent] that are allocated and available on such Payment Date to pay interest on the Class B Certificates pursuant to this Supplement. (d) On each Special Payment Date, [, each Interest Payment Date with respect to the Class B Controlled Amortization Period] and on the Class B Expected Final Payment Date, the Paying Agent shall distribute to each Class B Certificateholder of record on the related Record Date (other than as provided in Section 12.02 of the Agreement) such Class B Certificateholder's pro rata share of the amounts [on deposit in the Principal Funding Account or otherwise held by the Paying Agent] that are allocated and available on such date to pay principal of the Class B Certificates pursuant to this supplement up to a maximum amount on any such date equal to the Class B Invested Amount on such date (unless there has been an optional repurchase of the Series [ ] Certificateholders' Interest pursuant to Section 10.01 of the Agreement, in which event the foregoing limitation will not apply). (e) The distributions to be made pursuant to this Section 5.01 are subject to the provisions of Sections 2.06, 9.02, 10.01 and 12.02 of the Agreement and Sections 8.01 and 8.02 of this Supplement. (f) Except as provided in Section 12.02 of the Agreement with respect to a final distribution, distributions to Series [ ] Certificateholders hereunder shall be made by check mailed to each Series [ ] Certificateholder at such Series [ ] Certificateholder's address appearing in the Register without presentation or surrender of any Series [ ] Certificate or the making of any notation thereon; PROVIDED, HOWEVER, that with respect to Series [ ] Certificates registered in the name of a Clearing Agency, such distributions shall be made to such Clearing Agency in immediately available funds. Section 5.02. REPORTS AND STATEMENTS TO SERIES [ ] CERTIFICATEHOLDERS. (a) On each Distribution Date, the Paying Agent, on behalf of the Trustee, shall forward to each Class A Certificateholder a statement substantially in the form of Exhibit C-1 prepared by the Servicer. (b) On each Distribution Date, the Paying Agent, on behalf of the Trustee, shall forward to each Class B Certificateholder a statement substantially in the form of Exhibit C-2 prepared by the Servicer. (c) Not later than each Determination Date, the Servicer shall deliver to the Trustee, the Paying Agent, each Rating Agency and the Cash Collateral Depositor (i) statements substantially in the form of Exhibits C-1 and C-2 prepared by the Servicer and (ii) a certificate of a Servicing officer substantially in the form of Exhibit D. [(d) A copy of each statement or certificate provided pursuant to paragraph (a), (b) or (c) may be obtained by any Series [ ] Certificateholder or any Certificate Owner thereof by a request in writing to the Servicer.] (e) On or before January 31 of each calendar year, beginning with calendar year [ ], the Paying Agent, on behalf of the Trustee, shall furnish or cause to be furnished to each Person who at any time during the preceding calendar year was a Series [ ] Certificateholder, a statement prepared by the Servicer containing the information which is required to be contained in the statement to Series [ ] Certificateholders, as set forth in paragraph (a) or (b) above, as applicable, aggregated for such calendar year or the applicable portion thereof during which such Person was a Series [ ] Certificateholder, together with other information as is required Certificateholder, together with other information to be provided by an issuer of indebtedness under the internal Revenue Code. Such obligation of the Servicer shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Paying Agent pursuant to any requirements of the Internal Revenue Code as from time to time in effect. ARTICLE VI Section 6.01. [REINVESTMENT] [PAY OUT] EVENTS. If any one of the following events shall occur with respect to the Series [ ] Certificates: (a) failure on the part of the Depositor (i) to make any Payment or deposit required by the terms of the Agreement or this Supplement on or before the date occurring [ ] Business Days after the date such payment or deposit is required to be made therein or herein or (ii) duly to observe or perform any other covenants or agreements of the Depositor set forth in the Agreement or this Supplement, which failure has a material adverse effect on the Series [ ] Certificateholders and which continues unremedied for a period of [ ] days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Depositor by the Trustee, or to the Depositor and the Trustee by [any Holder of the Series [ ] Certificates]; (b) any representation or warranty made by the Depositor in the Agreement or this Supplement, or any information contained in a computer file or microfiche list required to be delivered by the Depositor pursuant to Section 2.01 or 2.08(f) of the Agreement shall prove to have been incorrect in any material respect when made or when delivered, which continues to be incorrect in any material respect for a period of [ ] days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Depositor by the Trustee, or to the Depositor and the Trustee by [any Holder of the Series [ ] Certificates] and as a result of which the interests of the Series [ ] Certificateholders are materially and adversely affected and continue to be materially and adversely affected for such period; PROVIDED, HOWEVER, that a Pay Out Event pursuant to this Section 6.01(b) shall not be deemed to have occurred hereunder if IMSA has accepted reassignment of the related Receivable, or all of such Receivables, if applicable, during such period in accordance with the provisions of the Agreement; (c) a failure by the Depositor to convey Receivables in Additional Accounts or Participations to the Trust within [ ] Business Days after the day on which it is required to convey such Receivables or Participations pursuant to Section 2.08(a) of the Agreement; (d) any Servicer Default shall occur; (e) the Class B Invested Amount is reduced to less than $_________;] [(f) the [average] Portfolio Yield for any [three] consecutive Monthly Periods is reduced to a rate which is less than the [average] Base Rate (for such period];] [(g) the Class A Invested Amount shall not be paid in full on the Class A Expected Final Payment Date or the Class B Invested Amount shall not be paid in full on the Class B Expected Final Payment Date;] then, in the case of any event described in subparagraph (a), (b) or (d), after the applicable grace period, if any, set forth in such subparagraphs, either the Trustee or the Holders of Series [ ] Certificates evidencing more than 50% of the aggregate unpaid principal amount of Series [ ] Certificates by notice then given in writing to the Depositor and the Servicer (and to the Trustee if given by the Series [ ] Certificateholders) may declare that a [Pay Out] [Reinvestment] Event has occurred with respect to Series [ ] as of the date of such notice, and, in the case of any event described in subparagraph (c), (e), (f) or (g), a [Pay Out] [Reinvestment] Event shall occur with respect to Series [ ] without any notice or other action on the part of the Trustee or the Series [ ] Certificateholders immediately upon the occurrence of such event.] ARTICLE VII OPTIONAL PURCHASE; SERIES TERMINATION [Section 7.01. OPTIONAL REPURCHASE. (a) On any day occurring on or after the date on which [the sum of] the Invested Amount [and the Enhancement Invested Amount, if any,] is reduced to [ ]% or less of the Series Invested Amount, the Depositor shall have the option to purchase the Series [ ] Certificateholders' Interest, at a purchase price equal to (i) if such day is a Distribution Date, the Reassignment Amount for such Distribution Date or (ii) if such day is not a Distribution Date, the Reassignment Amount for the Distribution Date following such day. (b) The Depositor shall give the Servicer and the Trustee at least 30 days prior written notice of the date on which the Depositor intends to exercise such purchase option. Not later than 12:00 noon, New York City time, on such day the Depositor shall deposit the Reassignment Amount into the Collection Account in immediately available funds. Such purchase option is subject to payment in full of the Reassignment Amount. Following the deposit of the Reassignment Amount into the Collection Amount in accordance with the foregoing, the Invested Amount for Series [ ] [and the Enhancement Invested Amount] shall [each] be reduced to zero and the Series [ ] Certificateholders [and the Cash Collateral Depositor] shall have no further interest in the Receivables. The Reassignment Amount shall be distributed as set forth in Section 8.01(b).] [Section 7.02. SERIES TERMINATION. (a) If, on the [__________] Distribution Date, the Invested Amount (after giving effect to all changes therein on such date) would be greater than zero, the Servicer, on behalf of the Trustee, shall, within the 40-day period which begins on such Distribution Date, solicit bids for the sale of Principal Receivables and the related Finance Charge Receivables (or interests therein) in an amount equal to [the sum of] the Invested Amount [and the Enhancement Invested Amount, if any,] at the close of business on the last day of the Monthly Period preceding the Termination Date (after giving effect to all distributions required to be made on the Termination Date, except pursuant to this Section 7.02). Such bids shall require that such sale shall (subject to Section 7.02(b)) occur on the Termination Date. The Depositor and the [Cash Collateral Depositor] [Credit Enhancer] shall be entitled to participate in, and to receive from the Trustee a copy of each other bid submitted in connection with, such bidding process. (b) The Servicer, on behalf of the Trustee, shall sell such Receivables (or interests therein) on the Termination Date to the bidder who made the highest cash purchase offer. The proceeds of any such sale shall be treated as Collections on the Receivables allocated to the Series [ ] Certificateholders pursuant to the Agreement and this Supplement; PROVIDED, HOWEVER, that the Servicer shall determine conclusively the amount of such proceeds which are allocable to Finance Charge Receivables and the amount of such proceeds which are allocable to Principal Receivables. During the period from the [ ] Distribution Date to the Termination Date, the Servicer shall continue to collect payments on the Receivables and allocate Collections in accordance with the provisions of the Agreement and the Supplements.] ARTICLE VIII FINAL DISTRIBUTIONS Section 8.01. SALE OF RECEIVABLES CERTIFICATEHOLDERS' INTEREST PURSUANT TO SECTION 2.06 OR 10.01 OF THE AGREEMENT AND SECTION 7.01 OR 7.02 OF THIS SUPPLEMENT. (a) The amount to be paid by the Depositor with respect to Series [ ] in connection with a reassignment of Receivables to the Depositor pursuant to Section 2.06 of the Agreement shall equal the Reassignment Amount for the first Distribution Date following the Monthly Period in which the reassignment obligation arises under the Agreement. (b) With respect to the Reassignment Amount deposited into the Collection Account pursuant to Section 7.01 or any amounts allocable to the Series [ ] Certificateholders' Interest deposited into the Collection Account pursuant to Section 7.02, the Trustee shall, not later than 12:00 noon, New York City time, on the related Distribution Date, make deposits or distributions of the following amounts (in the priority set forth below and, in each case effect to any deposits and distributions otherwise be made on such date) in immediately available funds: (i)(x) the Class A Invested Amount on such Distribution Date will be distributed to the Paying Agent for payment to the Class A Certificateholders and (y) an amount equal to the sum of (A) Class A Monthly Interest for such Distribution Date, (B) any Class A Monthly Interest previously due but not distributed to the Class A Certificateholders [or deposited in the Interest Funding Account] on a prior Distribution Date and (C) the amount of Class A Additional Interest, if any, for such Distribution Date and any Class A Additional Interest previously due but not distributed to the Class A Certificate holders [or deposited in the Interest Funding Account] on any prior Distribution Date, will be distributed to the Paying Agent for payment to the Class A Certificateholders, (ii) (x) the Class B Invested Amount on such Distribution Date will be distributed to the Paying Agent for payment to the Class B Certificateholders and (y) an amount equal to the sum of (A) Class B Monthly Interest for such Distribution Date, (B) any Class B Monthly Interest previously due but not distributed to the Class B Certificateholders [or deposited in the interest Funding Account] on a prior Distribution Date and (C) the amount of Class B Additional Interest, if any, for such Distribution Date and any Class B Additional Interest previously due but not distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] on any prior Distribution Date, will be distributed to the Paying Agent for payment to the Class B Certificateholders and (iii) the balance, if any, will be distributed to the [[Cash Collateral Depositor] [Collateral Interest Holder] for application in accordance with the Loan Agreement] [Credit Enhancement Provider for application in accordance with the Credit Enhancement Agreement]. Notwithstanding anything to the contrary contained in this Supplement or the Agreement, the amount of any excess determined pursuant to paragraph (a)(ii)(y) shall be distributed to the Series [ ] Certificateholders. (c) Notwithstanding anything to the contrary in this Supplement or the Agreement, all amounts distributed to the Paying Agent pursuant to Section 8.01(b) for payment to the Series [ ] Certificateholders shall be deemed distributed in full to the Series [ ] Certificateholders on the date on which such funds are distribution to the Paying Agent pursuant to this section and shall be deemed to be a final distribution pursuant to Section 12.02 of the Agreement. Section 8.02. DISTRIBUTION OF PROCEEDS OF SALE, DISTRIBUTION OR LIQUIDATION OF THE RECEIVABLES PURSUANT TO SECTION 9.02 OF THE AGREEMENT. (a) Not later than 12:00 noon, New York City time, on the Distribution Date following the date on which the Insolvency Proceeds are deposited into the Collection Account pursuant to Section 9.02(b) of the Agreement, the Trustee shall (in the following priority and, in each case, after giving effect to any deposits and distributions otherwise to be made on such Distribution Date) (i) deduct an amount equal to the Class A Invested Amount on such Distribution Date from the portion of the Insolvency Proceeds allocated to Collections of Principal Receivables and distribute such amount to the Paying Agent for payment to the Class A Certificateholders, provided that the amount of such distribution shall not exceed the product of (x) the portion of the Insolvency Proceeds allocated to Collections of Principal Receivables and (y) the Principal Allocation Percentage with respect to the related Monthly Period, (ii) deduct an amount equal to the Class B Invested Amount on such Distribution Date from the portion of the Insolvency Proceeds allocated to Collections of Principal Receivables and distribute such amount to the Paying Agent for payment to the Class B Certificateholders, provided that the amount of such distribution shall not exceed (x) the product of (A) the portion of such Insolvency Proceeds allocated to Collections of Principal Receivables and (B) the Principal Allocation Percentage with respect to the related Monthly Period minus (y) the amount distributed to the Paying Agent pursuant to clause (i) of this sentence [and (iii) deduct an amount equal to the [Enhancement] [Collateral] Invested Amount, if any, on such Distribution Date from the portion of the Insolvency Proceeds allocated to Collections of Principal Receivables and distribute such amount to the [Cash Collateral Depositor] [Collateral Interest Holder] for application in accordance with the Loan Agreement, provided that the amount of such distribution shall not exceed (x) the product of (1) the portion of the Insolvency Proceeds allocated to Collections of Principal Receivables and (2) the Principal Allocation Percentage with respect to such Monthly Period minus (y) the amounts distributed to the Paying Agent pursuant to clauses (i) and (ii) of this sentence]. To the extent that the product of (A) the portion of the Insolvency Proceeds allocated to Collections of Principal Receivables and (B) the Principal Allocation Percentage with respect to the related Monthly Period exceeds the aggregate amounts distributed to the Paying Agent [and the Cash Collateral Depositor] pursuant to the preceding sentence, the excess shall be allocated to the Depositor's Interest and shall be released to the Depositor on such Distribution Date. (b) Not later than 12:00 noon, New York City time, on such Distribution Date, the Trustee shall (in the following priority and, in each case, after giving effect to any deposits and distributions otherwise to be made on such Distribution Date) (i) deduct an amount equal to the sum of (w) Class A Monthly Interest for such Distribution Date, (x) any class A Monthly Interest previously due but not distributed to the Class A Certificateholders [or deposited in the Interest Funding Account] on a prior Distribution Date and (y) the amount of Class A Additional Interest, if any, for such Distribution Date and any Class A Additional Interest previously due but not distributed to the Class A Certificateholders [or deposited in the interest Funding Account] on a prior Distribution Date from the portion of the Insolvency Proceeds allocated to Collections of Finance Charge Receivables and distribute such amount to the Paying Agent for payment to the Class A Certificateholders, provided that the amount of such distribution shall not exceed the product of, (x) the portion of the Insolvency Proceeds allocated to Collections of Finance Charge Receivables, (y) the Floating Allocation Percentage with respect to the related Monthly Period and (z) the Class A Floating Percentage with respect to such Monthly Period (ii) deduct an amount equal to the sum of (w) Class B Monthly Interest for such Distribution Date, (x) Class B Monthly Interest previously due but not distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] and (y) the amount of Class B Additional Interest, if any, for such Distribution Date and any Class B Additional interest previously due but not distributed to the Class B Certificateholders [or deposited in the Interest Funding Account] on a prior Distribution Date from the portion of the Insolvency Proceeds allocated to Collections of Finance Charge Receivables and distribute such amount to the Paying Agent for payment to the Class B Certificateholders, provided that the amount of such distribution shall not exceed the product of (x) the portion of the Insolvency Proceeds allocated to Collections of Finance Charge Receivables, (y) the Floating Allocation Percentage with respect to the related Monthly Period and (z) the Class B Floating Percentage with respect to such Monthly Period. To the extent that the product of (A) the portion of the Insolvency Proceeds allocated to Collections of Finance Charge Receivables and (B) the Floating Allocation Percentage with respect to the related Monthly Period exceeds the aggregate amount distributed to the Paying Agent pursuant to the preceding sentence, the excess shall be released to the [[Cash Collateral Depositor] [Collateral Interest Holder] for application by the [Cash Collateral Depositor] [Collateral Holder] in accordance with the Loan Agreement] [Credit Enhancement Provider for application by the Credit Enhancement Provider in accordance with the Credit Enhancement Agreement]. (c) Notwithstanding anything to the contrary in this Supplement or the Agreement, all amounts Distributed to the Paying Agent pursuant to this Section for payment to the Series [ ] Certificateholders shall be distributed in full to the Series [ ] Certificateholders on the date on which funds are distributed to the Paying Agent pursuant to this Section and shall be deemed to be a final distribution pursuant to Section 12.02 of the Agreement. ARTICLE IX MISCELLANEOUS PROVISIONS Section 9.01. RATIFICATION OF AGREEMENT. As supplemented by this Supplement, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Supplement shall be read, taken and construed as one and the same instrument. Section 9.02. COUNTERPARTS. This Supplement may be executed in two or more counterparts, and by different parties on separate counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. Section 9.03. GOVERNING LAW. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. ARTICLE X INTERCHANGE Section 10.01. INTERCHANGE. If Interchange is to be included in Series [ ], provisions will be made to calculate the amount to be allocated to Series [ ] and the manner in which it will be distributed. IN WITNESS WHEREOF, the undersigned have caused this Supplement to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. ACE SECURITIES CORP., Depositor By:__________________________ Name: Title: [SERVICER NAME], Servicer By:__________________________ Name: Title: [TRUSTEE NAME] Trustee, By:__________________________ Name: Title: FORM OF CLASS A CERTIFICATE EXHIBIT A-1 REGISTERED $___________ /1/ No. R-___________ CUSIP No. [___________] [Unless this Class A Certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to ACE Securities Corp. or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an Authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] [ ] CARD ACCOUNT MASTER TRUST Series [ ] CLASS A [_____%] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE] ASSET BACKED CERTIFICATE Class A Expected Final Payment Date: The [_______] [________] Distribution Date Each $1,000 minimum denomination represents a 1/[________] undivided interest in Class A of the CARD ACCOUNT MASTER TRUST, SERIES [ ] Evidencing an undivided interest in a trust, the corpus of which consists primarily of receivables generated from time to time in the ordinary course of business in a portfolio of consumer revolving credit card accounts serviced by [SERVICER NAME] and other assets and interests constituting the Trust under the Pooling and Servicing Agreement referred to below. - ------------------ /1/ Denominations of $1,000 and integral multiples of $1,000 in excess thereof. (Not an interest in or obligation of ACE Securities Corp. or any affiliate thereof) This certifies that [CEDE CO.] (the "CLASS A CERTIFICATEHOLDER") is the registered owner of a fractional undivided interest in certain assets of a trust (the "TRUST") created pursuant to the Pooling and Servicing Agreement, dated as of [__________] (as amended and supplemented, the "AGREEMENT"), as supplemented by the Series [____] Supplement dated as of [________], [____] (as amended and supplemented, the "SUPPLEMENT"), among ACE Securities Corp., as Depositor, [Servicer Name], as Servicer, and [Trustee Name] a [jurisdiction] banking corporation, as trustee (the "TRUSTEE"). The corpus of the Trust consists of (i) a portfolio of all receivables (the "RECEIVABLES") existing in the consumer revolving credit card accounts identified under the Agreement from time to time (the "ACCOUNTS"), (ii) all Receivables generated under the Accounts from time to time thereafter, (iii) funds collected or to be collected from accountholders in respect of the Receivables, (iv) all funds which are from time to time [on deposit in the Collection Account, the Pre- Funding Account, the Special Funding Account and any other Series Accounts] [available pursuant to Credit Enhancement], (v) the benefits of the [Cash Collateral Account] [Credit Enhancement] and (vi) all other assets and interests constituting the Trust. The Holder of this Certificate is entitled to the benefits of [funds on deposit in a Cash Collateral Account] [Credit Enhancement] to the extent provided in the Supplement. Although a summary of certain provisions of the Agreement and the Supplement is set forth below and in the Summary of Terms and Conditions attached hereto, and made a part hereof, this Class A Certificate does not purport to summarize the Agreement and the Supplement and reference is made to the Agreement and the Supplement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby and the rights, duties and obligations of the Trustee. A copy of the Agreement and the Supplement (without schedules) may be requested from the Trustee by writing to the Trustee at the Corporate Trust Office. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to them in the Agreement or the Supplement, as applicable. This Class A Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement and the Supplement, to which Agreement and Supplement, each as amended and supplemented from time to time, the Class A Certificateholder by virtue of the acceptance hereof assents and is bound. It is the intent of the Depositor and the Class A Certificateholders that, for federal, state and local income and franchise tax purposes only, the Class A Certificates will qualify as indebtedness of the Holders of the Depositor Certificate secured by the Receivables. The Class A Certificateholder, by the acceptance of this Class A Certificate, agrees to treat this Class A Certificate for federal, state and local income and franchise tax purposes as debt. [Provisions regarding payment of interest to be provided as applicable.] In general, payments of principal with respect to the Class A Certificates are limited to the Class A Invested Amount, which may be less than the unpaid principal balance of the Class A Certificates. The Class A Expected Final Payment Date is the [______________] Distribution Date, but principal with respect to the Class A Certificates may be paid earlier or later under certain circumstances described in the Agreement and the Supplement. If for one or more months during the [Class A Accumulation Period] [Class A Controlled Amortization Period] there are not sufficient funds to pay the [Controlled Deposit Amount] [Controlled Distribution Amount], then to the extent that excess funds are not available on subsequent Distribution Dates with respect to the [Class A Accumulation Period] [Class A Controlled Amortization Period] to make up for such shortfalls, the final payment of principal of the Class A Certificates will occur later than the Class A Expected Final Payment Date. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Class A Certificate shall not be entitled to any benefit under the Agreement or the Supplement or be valid for any purpose. IN WITNESS WHEREOF, the Depositor has caused this class A Certificate to be duly executed. ACE SECURITIES CORP. By:__________________________ Name: Title: Dated: [__________], [____] TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Class A Certificates described in the within-mentioned Agreement and Supplement. [TRUSTEE NAME] as Trustee, By:__________________________ Authorized Officer or By:__________________________ as Authenticating Agent for the Trustee, By:__________________________ Authorized Officer [ ] CARD ACCOUNT MASTER TRUST Series [ ] CLASS A [_____%] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE] ASSET BACKED CERTIFICATE Summary of Terms and Conditions The Receivables consist of Principal Receivables which arise generally from the purchase of goods and services and amounts advanced to accountholders as cash advances and Finance Charge Receivables. This Class A Certificate is one of a Series of Certificates entitled [ ] Card Account Master Trust, Series [ ] (the "SERIES [ ] CERTIFICATES"), and one of a class thereof entitled Class A [___%] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Certificates, Series [ ] (the "CLASS A CERTIFICATES"), each of which represents a fractional, undivided interest in certain assets of the Trust. The assets of the Trust are allocated in part to the certificateholders of all outstanding Series (the "CERTIFICATEHOLDERS' Interest") with the remainder allocated to the Holders of the Depositor Certificate. The aggregate interest represented by the Class A Certificates at any time in the Trust shall not exceed an amount equal to the Invested Amount at such time. The Class A Initial Invested Amount is $[__________]. The Class A Invested Amount on any date will be an amount equal to (a) the Class A initial Invested Amount, MINUS (b) the aggregate amount of principal payments made to the Class A Certificateholders on or prior to such date [other than any payments of principal to the Class A Certificateholders from the [Pre-Funding Account] [Special Funding Account] [other Series Account] [Cash Collateral Account] [other Credit Enhancement]], MINUS (c) the excess, if any, of the aggregate amount of Class A Investor Charge-Offs for all prior Distribution Dates over Class A Investor Charge-Offs reimbursed pursuant to Section 4.06(a) of the Supplement prior to such date. Subject to the terms and conditions of the Agreement, the Depositor may, from time to time, direct the Trustee, on behalf of the Trust, to issue one or more new Series of Investor Certificates, which will represent fractional, undivided interests in certain of the Trust Assets. On each Distribution Date, the Paying Agent shall distribute to each Class A Certificateholder of record on the last day of the preceding calendar month (each a "RECORD DATE") such Class A Certificateholder's PRO RATA share of such amounts (including amounts) on deposit in the Collection Account [the Principal Funding Account] [the Special Funding Account] as are payable to the Class A Certificateholders pursuant to the Agreement and the Supplement. Distributions with respect to this Class A Certificate will be made by the Paying Agent by check mailed to the address of the Class A Certificateholder of record appearing in the Certificate Register without the presentation or surrender of this Class A Certificate or the making of any notation thereon (except for the final distribution in respect of this Class A Certificate) except that with respect to Class A Certificates Registered in the name of Cede & Co., the nominee for The Depository Trust Company, distributions will be made in the form of immediately available funds. Final payment of this Class A Certificate will be made only upon presentation and surrender of this Class A Certificate at the office or agency specified in the notice of final distribution delivered by the Trustee to the Series [ ] Certificateholders in accordance with the Agreement and the Supplement. [On any day occurring on or after the day on which the Invested Amount [and the Enhancement Invested Amount, if any,] is reduced to [_____]% or less of the Series Invested Amount, the Depositor has the option to repurchase the Series [ ] Certificateholders' Interest in the Trust. The repurchase price will be equal to (a) if such day is a Distribution Date, the Reassignment Amount for such Distribution Date or (b) if such day it not a Distribution Date, the Reassignment Amount for the Distribution Date following such day. Following the deposit of the Reassignment Amount in the Collection Account, Series [ ] Certificateholders [and the Cash Collateral Depositor] [and the provider of Credit Enhancement] will not have any interest in the Receivables and the Series [ ] Certificates will represent only the right to receive such Reassignment Amount.] THIS CLASS A CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR AND SERVICER OR ANY AFFILIATE THEREOF AND IN NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY. THIS CLASS A CERTIFICATE IS LIMITED IN RIGHT OF PAYMENT TO CERTAIN COLLECTIONS WITH RESPECT TO THE RECEIVABLES (AND CERTAIN OTHER AMOUNTS), ALL AS MORE SPECIFICALLY SET FORTH HEREINABOVE AND IN THE AGREEMENT AND THE SUPPLEMENT. The Class A Certificates are issuable only in minimum denominations of $1,000 and integral multiples of $1,000. The transfer of this Class A Certificate shall be registered in the Certificate Register upon surrender of this Class A Certificate for registration of transfer at any office or agency maintained by the Transfer Agent and Registrar accompanied by a written instrument of transfer, in a form satisfactory to the Trustee or the Transfer Agent and Registrar, duly executed by the Class A Certificateholder or such Class A Certificateholder's attorney, and duly authorized in writing with such signature guaranteed, and thereupon one or more new Class A Certificates of authorized denominations and for the same aggregate fractional undivided interest will be issued to the designated transferee or transferees. As provided in the Agreement and subject to certain limitations therein set forth, Class A Certificates are exchangeable for new Class A Certificates evidencing like aggregate fractional, undivided interests as requested by the Class A Certificateholder surrendering such Class A Certificates. No service charge may be imposed for any such exchange but the Servicer or Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. The Servicer, the Trustee, the Paying Agent and the Transfer Agent and Registrar and any agent of any of them, may treat the person in whose name this Class A Certificate is registered as the owner hereof for all purposes, and neither the Servicer nor the Trustee, the Paying Agent, the Transfer Agent and Registrar, nor any agent of any of them, shall be affected by notice to the contrary except in certain circumstances described in the Agreement. THIS CLASS A CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. ASSIGNMENT Social Security or other identifying number of assignee ________________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto __________________________________________ (name and address of assignee) the within certificate and all rights thereunder, and hereby irrevocably constitutes and appoints _______________, attorney, to transfer said certificate on the books kept for registration thereof, with full power of substitution in the premises. Dated:__________________ _________________________./2/ Signature Guaranteed: ----------------------- - ------------------ /2/NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Certificate in every particular, without alteration, enlargement or any change whatsoever. [FORM OF CLASS B CERTIFICATE] EXHIBIT A-2 REGISTERED........ $_____________/1/ No. R-_____________ CUSIP No. [____________] [Unless this Class B Certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to ACE Securities Corp. or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] [ ]CARD ACCOUNT MASTER TRUST SERIES [ ] CLASS B [_____%] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE] ASSET BACKED CERTIFICATE Class B Expected Final Payment Date: The [________] [________] Distribution Date Each $1,000 minimum denomination represents a 1/ [__________] undivided interest in Class B of the [ ] Card Account Master TRUST, SERIES [ ] Evidencing an undivided interest in a trust, the corpus of which consists primarily of receivables generated from time to time in the ordinary course of business in a portfolio of consumer revolving credit card accounts serviced by [SERVICER NAME] and other assets and interests constituting the Trust under the Pooling and Servicing Agreement referred to below. - --------------------- /1/ Denominations of $1,000 and integral multiples of $1,000 in excess thereof. (Not an interest in or obligation of ACE Securities Corp., or any affiliate thereof) This certifies that [CEDE & CO.] (the "CLASS B CERTIFICATEHOLDER") is the registered owner of a fractional, undivided interest in certain assets of a trust (the "TRUST") created pursuant to the Pooling and Servicing Agreement, dated as of [________] (as amended and supplemented, the "AGREEMENT"), as supplemented by the Series [_______] Supplement dated as of [________], [_______] (as amended and supplemented, the "SUPPLEMENT"), among ACE Securities Corporation, as Depositor, [Servicer Name], as Servicer, and [Trustee Name], a [jurisdiction] banking corporation, as trustee (the "TRUSTEE"). The corpus of the Trust consists of (i) a portfolio of all receivables (the "RECEIVABLES") existing in the consumer revolving credit card accounts identified under the Agreement from time to time (the "ACCOUNTS"), (ii) all Receivables generated under the Accounts from time to time thereafter, (iii) funds collected or to be collected from accountholders in respect of the Receivables, (iv) all funds which are from time to time [on deposit in the Collection Account, the Pre-Funding Account, the Special Funding Account, and the other Series Accounts] [available pursuant to Credit Enhancement], (v) the benefits, if any, of the [Cash Collateral Account] [Credit Enhancement] and (vi) all other assets and interests constituting the Trust. The Holder of this Certificate is entitled to the benefits of [funds on deposit in a Cash Collateral Account] [Credit Enhancement] to the extent provided in the Supplement. Although a summary of certain provisions of the Agreement and the Supplement is set forth below and in the Summary of Terms and Conditions attached hereto and made a part hereof, this Class B Certificate does not purport to summarize the Agreement and the Supplement and reference is made to the Agreement and the Supplement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby and the rights, duties and obligations of the Trustee. A copy of the Agreement and the Supplement (without schedules) may be requested from the Trustee by writing to the Trustee at the Corporate Trust Office. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to then in the Agreement or the Supplement, as applicable. This Class B Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement and the Supplement, to which Agreement and Supplement, each as amended and supplemented from time to time, the Class B Certificateholder by virtue of the acceptance hereof assents and is bound. THIS CLASS B CERTIFICATE IS SUBORDINATED TO THE EXTENT NECESSARY TO PAYMENTS ON THE CLASS A CERTIFICATES TO THE EXTENT SPECIFIED IN THE SUPPLEMENT. .........It is the intent of the Depositor and the Class B Certificateholders that, for federal, state and local income and franchise tax purposes only, the Class B Certificates will qualify as indebtedness of the Holders of the Depositor Certificate secured by the Receivables. The Class B Certificateholder, by the acceptance of this Class B Certificate, agrees to treat this Class B Certificate for federal, state and local income and franchise tax purposes as indebtedness of the Holders Depositor Certificate. [Provisions regarding the payment of interest to be provided as applicable] In general, payments of principal with respect to the Class B Certificates are limited to the Class B Invested Amount, which may be less then the unpaid principal balance of the Class B Certificates. The Class B Expected Final Payment Date is the [_____] [_____] Distribution Date, but principal with respect to the Class B Certificates may be paid earlier or later under certain circumstances described in the Agreement and the Supplement. If for one or more months during the [Class B Accumulation Period] [Class B Amortization Period] there are not sufficient funds to pay the [Controlled Deposit Amount] [Controlled Distribution Amount], then to the extent that excess funds are not available on subsequent Distribution Dates with respect to the [Class B Accumulation Period] [Class B Amortization Period] to make up for such shortfalls, the final payment of principal of the Class B Certificates will occur later than the Class B Expected Final Payment Date. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Class B Certificate shall not be entitled to any benefit under the Agreement or the Supplement or be valid for any purpose. IN WITNESS WHEREOF, the Depositor has caused this Class B Certificate to be duly executed. ACE SECURITIES CORP. By:__________________________ Name: Title: Dated: [__________], [____] TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Class B Certificates described in the within mentioned Agreement and Supplement. [TRUSTEE NAME] as Trustee By:__________________________ Authorized Signatory [ ] CARD ACCOUNT MASTER TRUST SERIES [ ] CLASS B [____%] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE] ASSET BACKED CERTIFICATE Summary of Terms and Conditions The Receivables consist of Principal Receivables which arise generally from the purchase of goods and services and amounts advanced to accountholders as cash advances and Finance Charge Receivables. This Class B Certificate is one of a Series of Certificates entitled [ ] Card Account Master Trust, Series [ ] (the "SERIES [ ] CERTIFICATES" and one of a class thereof entitled Class B [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Certificates, Series [ ] (the "CLASS B CERTIFICATES"), each of which represents a fractional, undivided interest in certain assets of the Trust. The assets of the Trust are allocated in part to the certificateholders of all outstanding Series (the "CERTIFICATEHOLDERS' INTEREST") with the remainder allocated to the Holders of the Depositor Certificate. The aggregate interest represented by the Class B Certificates at any time in the Principal Receivables in the Trust shall not exceed an amount equal to the Class B Invested Amount at such time. The Class B Invested Amount on any date will be an amount equal to (a) the Class B initial Invested Amount, MINUS (b) the aggregate amount of principal payments made to the Class B Certificateholders on or prior to such date [other than principal payments made from amounts on deposit in the [Pre-Funding Account] [Special Funding Account] [the Cash Collateral Account] [Other Series Account] [other Credit Enhancement] for the purpose of reimbursing previous reductions in the Class B Invested Amount [, MINUS (c) the aggregate amount of Class B Investor Charge-offs for all prior Distribution Dates [, MINUS (d) the amount of Reallocated Principal Collections for all prior Distribution Dates which have been used to fund the Required Amount with respect to such Distribution Dates, MINUS (e) an amount equal to the amount by which the Class B Invested Amount has been reduced to cover the Class A Investor Default Amount on all prior Distribution Dates, and PLUS (f) the amount of Excess Spread and Excess Finance Charge Collections allocated to Series [ ] and applied on all prior Distribution Dates for the purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e)]. Subject to the terms and conditions of the Agreement, the Depositor may, from time to time, direct the Trustee, on behalf of the Trust, to issue one or more new Series of Investor Certificates, which will represent fractional, undivided interests in certain of the Trust Assets. On each Distribution Date, the Paying Agent shall distribute to each Class B Certificateholder of record on the last day of the preceding calendar month (each a "RECORD DATE") such Class B Certificateholder's PRO RATA share of such amounts (including amounts on deposit in the Collection Account) as are payable to the Class B Certificateholders pursuant to the Agreement and the Supplement. Distributions with respect to this Class B Certificate will be made by the Paying Agent by check mailed to the address of the Class B Certificateholder of record appearing in the Certificate Register without the presentation or surrender of this Class B Certificate or the making of any notation thereon (except for the final distribution in respect of this Class B Certificate) except that with respect to Class B Certificates registered in the name of Cede & Co., the nominee for The Depository Trust Company, distributions will be made in the form of immediately available funds. Final payment of this Class B Certificate will be made only upon presentation and surrender of this Class B Certificate at the office or agency specified in the notice of final distribution delivered by the Trustee to the Series [ ] Certificateholders in accordance with the Agreement and the Supplement. [On any day occurring on or after the day on which [the sum of] the Invested Amount [and the Enhancement Invested Amount] is reduced to [___]% or less of the Series Invested Amount, the Depositor has the option to repurchase the Certificateholders' Interest in the Trust represented by the Series [ ] Certificates. The repurchase price will be equal to (a) if such day is a Distribution Date, the Reassignment Amount for such Distribution Date or (b) if such day is not a Distribution Date, the Reassignment Amount for the Distribution Date next following such day. Following the deposit of the Reassignment Amount in the Collection Account, Series [ ] Certificateholders [and the Cash Collateral Depositor] [and the provider of Credit Enhancement] will not have any interest in the Receivables and the Series [ ] Certificates will represent only the right to receive such Reassignment Amount.] THIS CLASS B CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN INTEREST IN, THE DEPOSITOR AND SERVICER OR ANY AFFILIATE THEREOF AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY. THIS CLASS B CERTIFICATE IS LIMITED IN RIGHT OF PAYMENT TO CERTAIN COLLECTIONS WITH RESPECT TO THE RECEIVABLES (AND CERTAIN OTHER AMOUNTS), ALL AS MORE SPECIFICALLY SET FORTH HEREIN AND IN THE AGREEMENT AND THE SUPPLEMENT. The Class B Certificates are issuable only in minimum denominations of $1,000 and integral multiples of $1,000. The transfer of this Class B Certificate shall be registered in the Certificate Register upon surrender of this Class B Certificate for registration of transfer at any office or agency maintained by the Transfer Agent and Registrar accompanied by a written instrument of transfer, in a form satisfactory to the Trustee or the Transfer Agent and Registrar, duly executed by the Class B Certificateholder or such Class B Certificateholder's attorney, and duly authorized in writing with such signature guaranteed, and thereupon one or more new Class B Certificates of authorized denominations and for the same aggregate fractional undivided interest will be issued to the designated transferee or transferees. As provided in the Agreement and subject to certain limitations therein set forth, Class B Certificates are exchangeable for new Class B Certificates evidencing like aggregate fractional undivided interests as requested by the Class B Certificateholder surrendering such Class B Certificates. No service charge may be imposed for any such exchange but the Servicer or Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. The Servicer, the Trustee, the Paying Agent and the Transfer Agent and Registrar and any agent of any of them, may treat the person in whose name is Class B Certificate is registered as the owner hereof for all purposes, and neither the Servicer nor the Trustee, the Paying Agent, the Transfer Agent and Registrar, nor any agent of any of them, shall be affected by notice to the contrary except in certain circumstances described in the Agreement. THIS CLASS B CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. ASSIGNMENT Social Security or other identifying number of assignee _______________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ___________________________________________ (name and address of assignee) the within certificate and all rights thereunder, and hereby irrevocably constitutes and appoints _______________, attorney, to transfer said certificate on the books kept for registration thereof, with full power of substitution in the premises. Dated: _________________________/2/ Signature Guaranteed: ___________________ _________________________ /2/ NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Certificate in every particular, without alteration, enlargement or any change whatsoever. EX-4.4.1 12 0012.txt EXHIBIT 4.4.1 - ------------------------------------------------------------------------------ [ ] TRUST AGREEMENT between ACE SECURITIES CORP. and [ ] Dated as of [ ] - ------------------------------------------------------------------------------
TABLE OF CONTENTS PAGE ARTICLE I - Definitions SECTION 1.1. Capitalized Terms........................................................................1 SECTION 1.2 Other Definitional Provisions............................................................3 ARTICLE II - ORGANIZATION SECTION 2.1. Name.....................................................................................4 SECTION 2.2. Office...................................................................................4 SECTION 2.3. Purposes and Powers......................................................................4 SECTION 2.4. Appointment of Owner Trustee.............................................................5 SECTION 2.5. Initial Capital Contribution of Trust Estate.............................................5 SECTION 2.6. Declaration of Trust.....................................................................5 SECTION 2.7. Liability of the Depositor...............................................................6 SECTION 2.8. Title to Trust Property..................................................................6 SECTION 2.9. Situs of Trust...........................................................................6 SECTION 2.10. Representations and Warranties of the Depositor..........................................6 SECTION 2.11. [Reserved]...............................................................................7 SECTION 2.12. Federal Income Tax Allocations...........................................................7 ARTICLE III - Trust Certificates and Transfer of Interests SECTION 3.1. Initial Ownership........................................................................8 SECTION 3.2. The Trust Certificates...................................................................8 SECTION 3.3. Authentication of Trust Certificates.....................................................8 SECTION 3.4. Registration of Transfer and Exchange of Trust Certificates..............................8 SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Trust Certificates..................................8 SECTION 3.6. Persons Deemed Certificateholders.......................................................10 SECTION 3.7. Access to List of Certificateholders' Names and Addresses...............................10 SECTION 3.8. Maintenance of Office or Agency.........................................................10 SECTION 3.9. Appointment of Paying Agent.............................................................10 SECTION 3.10. [Reserved]..............................................................................11 SECTION 3.11. [Reserved]..............................................................................11 SECTION 3.12. [Reserved]..............................................................................11 SECTION 3.13. [Reserved]..............................................................................11 SECTION 3.14. [Reserved]..............................................................................11 SECTION 3.15. [Reserved]..............................................................................11 SECTION 3.16. [Reserved]..............................................................................11 SECTION 3.17. Trust Certificate Transfer Restrictions.................................................11 ARTICLE IV - Actions by Owner Trustee SECTION 4.1. Prior Notice to Owners with Respect to Certain Matters..................................13 SECTION 4.2. Action by Certificateholders with Respect to Certain Matters............................14 SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.................................14 SECTION 4.4. Restrictions on Certificateholders' Power...............................................14 SECTION 4.5. Majority Control........................................................................14 SECTION 4.6. Execution of Documents..................................................................14 ARTICLE V - Application of Trust Funds: Certain Duties SECTION 5.1. [Reserved]..............................................................................15 SECTION 5.2. Distributions to Certificateholders.....................................................15 SECTION 5.3. [Reserved]..............................................................................15 SECTION 5.4. Method of Payment.......................................................................15 SECTION 5.5. No Segregation of Monies; No Interest...................................................16 SECTION 5.6. Accounting and Reports to the Noteholders, Certificateholders, the Internal Revenue Service and Others..............................................................16 SECTION 5.7. Signature on Returns; Tax Matters Partner...............................................16 ARTICLE VI - Authority and Duties of Owner Trustee SECTION 6.1. General Authority.......................................................................17 SECTION 6.2. Action upon Instruction.................................................................17 SECTION 6.3. No Duties Except as Specified in this Agreement or in Instructions......................18 SECTION 6.4. No Action Except under Specified Documents or Instructions..............................19 SECTION 6.5. Restrictions............................................................................19 SECTION 6.6. Notice of Default Under Indenture.......................................................19 ARTICLE VII - Concerning the Owner Trustee SECTION 7.1. Acceptance of Trusts and Duties.........................................................19 SECTION 7.2. Furnishing of Documents.................................................................21 SECTION 7.3. Representations and Warranties..........................................................21 SECTION 7.4. Reliance; Advice of Counsel.............................................................21 SECTION 7.5. Not Acting in Individual Capacity.......................................................22 SECTION 7.6. Owner Trustee Not Liable for Trust Certificates or Receivables..........................22 SECTION 7.7. Owner Trustee May Own Trust Certificates and Notes......................................22 ARTICLE VIII - Compensation of Owner Trustee SECTION 8.1. Owner Trustee's Fees and Expenses.......................................................23 SECTION 8.2. Indemnification.........................................................................23 SECTION 8.3. Payments to the Owner Trustee...........................................................23 ARTICLE IX - Dissolution and Termination of Trust SECTION 9.1. Termination of Trust Agreement..........................................................23 SECTION 9.2. [Reserved]..............................................................................25 ARTICLE X - Successor Owner Trustees and Additional Owner Trustees SECTION 10.1. Eligibility Requirements for Owner Trustee..............................................25 SECTION 10.2. Resignation or Removal of Owner Trustee.................................................25 SECTION 10.3. Successor Owner Trustee.................................................................26 SECTION 10.4. Merger or Consolidation of Owner Trustee................................................26 SECTION 10.5. Appointment of Co-Trustee or Separate Trustee...........................................27 ARTICLE XI - Miscellaneous SECTION 11.1 Supplements and Amendments..............................................................28 SECTION 11.2. No Legal Title to Owner Trust Estate in Certificateholders..............................29 SECTION 11.3. Limitations on Rights of Others.........................................................29 SECTION 11.4. Notices.................................................................................30 SECTION 11.5. Severability............................................................................30 SECTION 11.6. Separate Counterparts...................................................................30 SECTION 11.7. Successors and Assigns..................................................................30 SECTION 11.8. [Reserved]..............................................................................30 SECTION 11.9. No Petition.............................................................................30 SECTION 11.10. No Recourse.............................................................................31 SECTION 11.11. Headings................................................................................31 SECTION 11.12. GOVERNING LAW...........................................................................31 SECTION 11.13. [Reserved]..............................................................................31 SECTION 11.14. Servicer................................................................................31
TRUST AGREEMENT dated as of [ ] between ACE SECURITIES CORP., a [ ] corporation, as depositor, and [ ], a [ ] banking corporation, as Owner Trustee. ARTICLE I. DEFINITIONS SECTION 1.1 CAPITALIZED TERMS. For all purposes of this Agreement, the following terms shall have the meanings set forth below: "Agreement" shall mean this Trust Agreement, as the same may be amended and supplemented from time to time. "Basic Documents" shall mean the Sale and Servicing Agreement, the Indenture, the Certificate Depository Agreement, the Note Depository Agreement and the other documents and certificates delivered in connection therewith. "Benefit Plan" shall have the meaning assigned to such term in Section 3.17. "Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware Code, 12 DEL. CODE ss. 3801 ET SEQ., as the same may be amended from time to time. "Certificate" means a certificate evidencing the beneficial interest of a Certificateholder in the Trust, substantially in the form of Exhibit A attached hereto. "Certificate of Trust" shall mean the Certificate of Trust in the form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the Business Trust Statute. "Certificate Register" and "Certificate Registrar" shall mean the register mentioned and the registrar appointed pursuant to Section 3.4. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder. "Corporate Trust Office" shall mean, with respect to the Owner Trustee, the principal corporate trust office of the Owner Trustee located at [ ], Attention: [ ]; or at such other address as the Owner Trustee may designate by notice to the Certificateholders and the Depositor, or the principal corporate trust office of any successor Owner Trustee (the address of which the successor owner trustee will notify the Certificateholders and the Depositor). "Delaware Trustee" shall have the meaning assigned to such term in Section 10.1. "Depositor" shall mean Ace Securities Corp., as the depositor of the Receivables, and each successor to Ace Securities Corp., (in the same capacity) to the extent permitted hereunder. "ERISA" shall have the meaning assigned to such term in Section 3.17. "Expenses" shall have the meaning assigned to such term in Section 8.2. "Holder" or "Certificateholder" shall mean the Person in whose name a Trust Certificate is registered on the Certificate Register. "Indemnified Parties" shall have the meaning assigned to such term in Section 8.2. "Note Depository Agreement" shall mean the agreement among the Trust, the Trustee, the Servicer and The Depository Trust Company, as the initial Clearing Agency, dated as of one Business Day prior to the Closing Date, relating to the Notes, as the same may be amended or supplemented from time to time. "Owner Trust Estate" shall mean all right, title and interest of the Trust in and to the property and rights assigned to the Trust pursuant to Article II of the Sale and Servicing Agreement, all funds on deposit from time to time in the Trust Accounts and all other property of the Trust from time to time, including any rights of the Owner Trustee and the Trust pursuant to the Sale and Servicing Agreement. "Owner Trustee" shall mean [ ], a [ ] banking corporation, not in its individual capacity but solely as owner trustee under this Agreement, and any successor Owner Trustee hereunder. "Paying Agent" shall mean any paying agent or co-paying agent appointed pursuant to Section 3.9. "Percentage Interest" shall mean with respect to any Trust Certificate, the percentage interest of ownership in the Trust represented thereby as set forth on the face thereof. "Record Date" shall mean, with respect to any Distribution Date, the close of business on the last day of the calendar month preceding such Distribution Date. "Responsible Officer" shall mean, when used with respect to the Owner Trustee, any officer assigned to the Corporate Trust Office of the Owner Trustee, including any Vice President, any Assistant Vice President, any trust officer or any other officer of the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers or any agent acting under a power of attorney from the Owner Trustee, having responsibility for the administration of this Trust Agreement, as the case may be, and also, with respect to a particular matter relating to the Trust, any other officer of the Owner Trustee to whom such matter is referred because of such officer's knowledge of and familiarity with such matter. Any notice given to the address and in the manner specified in Section 11.4 hereof shall be deemed to be given to a Responsible Officer. "Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement among the Trust, Ace Securities Corp., as seller and [ ], as servicer and. as sponsor, dated as of [ ], as the same may be amended and supplemented from time to time. "Secretary of State" shall mean the Secretary of State of the State of Delaware. "Treasury Regulations" shall mean regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. "Trust" shall mean the trust established by this Agreement. "Trust Certificate" shall mean a Certificate. SECTION 1.2. Other Definitional Provisions. (a) Capitalized terms used herein and not otherwise defined have the meanings assigned to them in the Sale and Servicing Agreement or, if not defined therein, in the Indenture. (b) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (c) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles as in effect on the date of this Agreement or any such certificate or other document, as applicable. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control. (d) The words "hereof," "herein," "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section and Exhibit references contained in this Agreement are references to Sections and Exhibits in or to this Agreement unless otherwise specified; and the term "including" shall mean "including without limitation." (e) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. ARTICLE II. ORGANIZATION SECTION 2.1. NAME. The Trust created hereby shall be known as "[ ] ", in which name the Owner Trustee may engage in the transactions contemplated hereby, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. SECTION 2.2. OFFICE. The office of the Trust shall be in care of the Owner Trustee at the Corporate Trust Office, or at the office of the Delaware Trustee, if one exists, or at such other address as the Owner Trustee may designate by written notice to the Certificateholders and the Depositor. SECTION 2.3. PURPOSES AND POWERS. (a) The purpose of the Trust is, and the Trust shall have the power and authority, to engage in the following activities: (i) to issue the Notes pursuant to the Indenture and the Trust Certificates pursuant to this Agreement, to sell the Notes, and to transfer the Trust Certificates to the Depositor pursuant to the Sale and Servicing Agreement; (ii) with the proceeds of the sale of the Notes, to pay the organizational, start-up and transactional expenses of the Trust and to pay the balance to the Depositor pursuant to the Sale and Servicing Agreement; (iii) to acquire, receive and accept from time to time the Owner Trust Estate, and to assign, grant, transfer, pledge, mortgage and convey the Trust Estate pursuant to the Indenture and to hold, manage and distribute to the Certificateholders pursuant to the terms of the Sale and Servicing Agreement any portion of the Trust Estate released from the Lien of, and remitted to the Trust pursuant to, the Indenture; (iv) to enter into and perform its obligations under the Basic Documents to which it is a party; (v) to engage in those activities, including entering into agreements, that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith; and (vi) subject to compliance with the Basic Documents to which the Trust is a party, to engage in such other activities as may be required in connection with conservation of the Owner Trust Estate and the making of distributions to the Certificateholders and the Noteholders. The Trust is hereby authorized to engage in the foregoing activities. The Trust shall not engage in any activity other than in connection with the foregoing or other than as required or authorized by the terms of this Agreement or the Basic Documents. SECTION 2.4. APPOINTMENT OF OWNER TRUSTEE. The Depositor hereby appoints the Owner Trustee as trustee of the Trust effective as of the date hereof, to have all the rights, powers and duties set forth herein. SECTION 2.5. INITIAL CAPITAL CONTRIBUTION OF TRUST ESTATE. The Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges receipt in trust from the Depositor, as of the date hereof, of the foregoing contribution, which shall constitute the initial Owner Trust Estate and shall be deposited in the Certificate Distribution Account. SECTION 2.5. DECLARATION OF TRUST. The Owner Trustee hereby declares that it will hold the Owner Trust Estate in trust upon and subject to the conditions set forth herein for the use and benefit of the Certificateholders, subject to the obligations of the Trust under the Basic Documents to which the Trust is a party. It is the intention of the parties hereto that the Trust constitute a business trust under the Business Trust Statute and that this Agreement constitute the governing instrument of such business trust. It is the intention of the parties hereto that, solely for federal income tax purposes, the Trust shall be disregarded as an entity apart from its owner, the Depositor, in the event that the Depositor is the sole Certificateholder for federal income tax purposes, or treated as a partnership if there is more than one Certificateholder for federal income tax purposes. The parties agree that, unless otherwise required by appropriate tax authorities, the Trust will file or cause to be filed annual or other necessary returns, reports and other forms consistent with the characterization of the Trust as a division of the Depositor, or as a partnership, as the case may be, for such tax purposes. Effective as of the date hereof, the Owner Trustee shall have all rights, powers and duties set forth herein and to the extent not inconsistent herewith, in the Business Trust Statute with respect to accomplishing the purposes of the Trust. The Owner Trustee shall file the Certificate of Trust with the Secretary of State. SECTION 2.6. LIABILITY OF THE DEPOSITOR . (a) The Depositor shall pay organizational expenses of the Trust as they may arise or shall, upon the request of the Owner Trustee, promptly reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. The Depositor shall also be liable directly to and will indemnify any injured party for all losses, claims, damages, liabilities and expenses of the Trust (including Expenses, to the extent not paid out of the Owner Trust Estate) [to the extent that the Depositor would be liable if the Trust were a partnership under the Delaware Revised Uniform Limited Partnership Act in which the Depositor were a general partner]; PROVIDED, HOWEVER, that the Depositor shall not be liable for any losses incurred by a Certificateholder in the capacity of an investor in the Trust Certificates or a Noteholder in the capacity of an investor in the Notes. In addition, any third party creditors of the Trust (other than in connection with the obligations described in the preceding sentence for which the Depositor shall not be liable) shall be deemed third party beneficiaries of this paragraph. (b) No Holder, other than to the extent set forth in clause (a), shall have any personal liability for any liability or obligation of the Trust. SECTION 2.8. TITLE TO TRUST PROPERTY. Legal title to all the Owner Trust Estate shall be vested at all times in the Trust as a separate legal entity except where applicable law in any jurisdiction requires title to any part of the Owner Trust Estate to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case may be. SECTION 2.9. SITUS OF TRUST. The Trust will be located in the State of Delaware. All bank accounts maintained by the Owner Trustee on behalf of the Trust shall be located in the State of Delaware or the State of New York. Payments will be received by the Trust only in Delaware or New York, and payments will be made by the Trust only from Delaware or New York. The only office of the Trust will be in Delaware. SECTION 2.10. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The Depositor hereby represents and warrants to the Owner Trustee that: (a) The Depositor is duly organized and validly existing as a [ ] corporation with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted. (b) The Depositor has the corporate power and authority to execute and deliver this Agreement and to carry out its terms; the Depositor has full power and authority to sell and assign the property to be sold and assigned to and deposited with the Trust and the Depositor has duly authorized such sale and assignment and deposit to the Trust by all necessary corporate action; and the execution, delivery and performance of this Agreement has been duly authorized by the Depositor by all necessary corporate action. (c) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or by-laws of the Depositor, or any material indenture, agreement or other instrument to which the Depositor is a party or by which it is bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Basic Documents); nor violate any law or, to the best of the Depositor's knowledge, any order, rule or regulation applicable to the Depositor of any court or of any Federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties. (d) It is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications. SECTION 2.11. [RESERVED] SECTION 2.12. FEDERAL INCOME TAX ALLOCATIONS. Net income of the Trust for any month as determined for Federal income tax purposes (and each item of income, gain, loss, credit and deduction entering into the computation thereof) shall be allocated: (a) for so long as (i) all of the Trust Certificates are owned by the Depositor, the Trust shall be disregarded as an entity separate from the Depositor such that net income of the Trust for any month as determined solely for federal income tax purposes (and each item of income, gain, loss, credit and deduction entering into the computation thereof) shall be allocated to the Depositor and treated in the same manner as if the Trust were a division or branch of the Depositor; (b) in the event that the Depositor transfers (as such term is defined for federal income tax purposes) any Trust Certificates and there is more than one owner of Trust Certificates for federal income tax purposes, net income of the Trust for any month as determined solely for federal income tax purposes (and each item of income, gain, loss, credit and deduction entering into the computation thereof) shall be allocated pro rata to the Certificateholders based on their Percentage Interest. ARTICLE III. TRUST CERTIFICATES AND TRANSFER OF INTERESTS SECTION 3.1. INITIAL OWNERSHIP. Upon the formation of the Trust by the contribution by the Depositor pursuant to Section 2.5 and until the issuance of the Trust Certificates, the Depositor shall be the sole beneficiary of the Trust. SECTION 3.2. THE TRUST CERTIFICATES. The Trust Certificates shall be issued in minimum denominations of 5% Percentage Interest. The Trust Certificates shall be initially issued to the Depositor in a Percentage Interest of 100%. The Trust Certificates shall be executed on behalf of the Trust by manual or facsimile signature of an authorized officer of the Owner Trustee. Trust Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefit of this Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the authentication and delivery of such Trust Certificates or did not hold such offices at the date of authentication and delivery of such Trust Certificates. A transferee of a Trust Certificate shall become a Certificateholder, and shall be entitled to the rights and subject to the obligations of a Certificateholder hereunder, upon due registration of such Trust Certificate in such transferee's name pursuant to Section 3.4. SECTION 3.3. AUTHENTICATION OF TRUST CERTIFICATES. Concurrently with the initial sale of the Receivables to the Trust pursuant to the Sale and Servicing Agreement, the Owner Trustee shall cause the Trust Certificates in an aggregate Percentage Interest equal to 100% to be executed on behalf of the Trust, authenticated and delivered to or upon the written order of the Depositor, signed by its chairman of the board, its president or any vice president, without further corporate action by the Depositor, in authorized denominations. No Trust Certificate shall entitle its holder to any benefit under this Agreement, or shall be valid for any purpose, unless there shall appear on such Trust Certificate a certificate of authentication substantially in the form set forth in Exhibit A, executed by the Owner Trustee by manual signature; such authentication shall constitute conclusive evidence that such Trust Certificate shall have been duly authenticated and delivered hereunder. All Trust Certificates shall be dated the date of their authentication. SECTION 3.4. REGISTRATION OF TRANSFER AND EXCHANGE OF TRUST CERTIFICATES. The Certificate Registrar shall keep or cause to be kept, at the office or agency maintained pursuant to Section 3.8, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Owner Trustee shall provide for the registration of Trust Certificates and of transfers and exchanges of Trust Certificates as herein provided. The [ ] shall be the initial Certificate Registrar. Upon surrender for registration of transfer of any Trust Certificate at the office or agency maintained pursuant to Section 3.8, and, upon satisfaction of the conditions set forth below, the Owner Trustee shall execute, authenticate and deliver, in the name of the designated transferee or transferees, one or more new Trust Certificates in authorized denominations of a like class and aggregate face amount dated the date of authentication by the Owner Trustee or any authenticating agent. At the option of a Holder, Trust Certificates may be exchanged for other Trust Certificates of the same class in authorized denominations of a like aggregate amount upon surrender of the Trust Certificates to be exchanged at the office or agency maintained pursuant to Section 3.8. Every Trust Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the Certificateholder or his attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Certificate Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Certificate Registrar in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act. Each Trust Certificate surrendered for registration of transfer or exchange shall be canceled and subsequently disposed of by the Owner Trustee in accordance with its customary practice. No service charge shall be made for any registration of transfer or exchange of Trust Certificates, but the Owner Trustee or the Certificate Registrar may, but shall not be obligated to, require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Trust Certificates. Notwithstanding the foregoing, the Owner Trustee shall not make and the Certificate Registrar shall not register, transfers or exchanges of, Trust Certificates for a period of 15 days preceding the due date for any payment with respect to any Trust Certificates. SECTION 3.5. MUTILATED, DESTROYED, LOST OR STOLEN TRUST CERTIFICATES. If (a) any mutilated Trust Certificate shall be surrendered to the Certificate Registrar, or if the Certificate Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Certificate and (b) there shall be delivered to the Certificate Registrar and the Owner Trustee such security or indemnity as may be required by them to save each of them harmless, then in the absence of actual knowledge by a Responsible Officer of the Owner Trustee that such Trust Certificate shall have been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Certificate, a new Trust Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Certificate under this Section, the Owner Trustee or the Certificate Registrar may, but shall not be obligated to, require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Certificate shall be found at any time. SECTION 3.6. PERSONS DEEMED CERTIFICATEHOLDERS. Every person by virtue of becoming a Certificateholder in accordance with this Agreement shall be deemed to be bound by the terms of this Agreement. Prior to due presentation of a Trust Certificate for registration of transfer, the Owner Trustee or the Certificate Registrar may treat the Person in whose name any Trust Certificate shall be registered in the Certificate Register as the Owner of such Trust Certificate for the purpose of receiving distributions pursuant to Section 5.2 and for all other purposes whatsoever, and neither the Owner Trustee, nor the Certificate Registrar, nor the Paying Agent shall be bound by any notice to the contrary. SECTION 3.7. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES. The Owner Trustee shall furnish or cause to be furnished to the Servicer or the Depositor, within 15 days after receipt by the Owner Trustee of a request therefor from the Servicer or the Depositor in writing, a list, in such form as the Servicer or the Depositor may reasonably require, of the names and addresses of the Certificateholders as of the most recent Record Date. If three or more Holders of Trust Certificates or one or more Holders of Trust Certificates evidencing not less than 25% of the Certificate Balance apply in writing to the Owner Trustee, and such application states that the applicants desire to communicate with other Certificateholders with respect to their rights under this Agreement or under the Trust Certificates and such application is accompanied by a copy of the communication that such applicants propose to transmit, then the Owner Trustee shall, within five Business Days after the receipt of such application, afford such applicants access during normal business hours to the current list of Certificateholders. Each Holder, by receiving and holding a Trust Certificate, shall be deemed to have agreed not to hold either the Depositor or the Owner Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. SECTION 3.8. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall maintain in the Borough of Manhattan, City of New York, an office or offices or agency or agencies where Trust Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Owner Trustee in respect of the Trust Certificates and the Basic Documents may be served. The Owner Trustee shall give prompt written notice to the Depositor and to the Certificateholders of any change in the location of the Certificate Register or any such office or agency. SECTION 3.9. APPOINTMENT OF PAYING AGENT. The Paying Agent shall make distributions to Certificateholders pursuant to Section 5.2 and shall report the amounts of such distributions to the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw funds from the Reserve Account for the purpose of making the distributions referred to above. The Owner Trustee may revoke such power and remove the Paying Agent if the Owner Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect. The Paying Agent shall initially be [ ] and any co-paying agent chosen by [ ] and acceptable to the Servicer. The Paying Agent shall be permitted to resign upon 30 days' written notice to the Owner Trustee and the Servicer. In the event that [ ] shall no longer be the Paying Agent, the Owner Trustee shall appoint a successor to act as Paying Agent (which shall be a bank or trust company). The Owner Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Owner Trustee that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Certificateholders in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to such Certificateholders. The Paying Agent shall return all unclaimed funds to the Owner Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Owner Trustee. The provisions of Articles VII and VIII shall apply to [ ] or the Owner Trustee also in its role as Paying Agent, for so long as [ ] or the Owner Trustee shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. SECTION 3.10. [Reserved] SECTION 3.11. [Reserved] SECTION 3.12. [Reserved] SECTION 3.13. [Reserved] SECTION 3.14. [Reserved] SECTION 3.15. [Reserved] SECTION 3.16. [Reserved] SECTION 3.17. TRUST CERTIFICATE TRANSFER RESTRICTIONS. (a) The Trust Certificates may not be acquired by or for the account of (i) an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of Title 1 of ERISA, (ii) a plan described in Section 4975(e) (1) of the Code, or (iii) any entity whose underlying assets include plan assets by reason of such plan's investment in the entity (each, a "Benefit Plan"). By accepting and holding a Trust Certificate, the Holder thereof shall be deemed to have represented and warranted that it is not a Benefit Plan. The Owner Trustee shall have no duty to determine whether Trust Certificates are owned by a Benefit Plan. (b) The Trust Certificates may not be offered or sold except to Qualified Institutional Buyers in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A thereunder. Each purchaser of the Trust Certificates will be deemed to have represented and agreed as follows: (i) It is a Qualified Institutional Buyer as defined in Rule 144A promulgated under the Securities Act and is acquiring the Trust Certificates for its own institutional account or for the account of a Qualified Institutional Buyer. (ii) It understands that the Trust Certificates will be offered in a transaction not involving any public offering within the meaning of the Securities Act, and that, if in the future it decides to resell, pledge or otherwise transfer any Trust Certificates, such Trust Certificates may be resold, pledged or transferred only (a) to the Servicer (upon redemption), (b) to a person who the seller reasonably believes is a Qualified Institutional Buyer that purchases for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A or (c) pursuant to an effective registration statement under the Securities Act. (iii) It understands that the Trust Certificates will bear a legend substantially to the following effect: THE TRUST CERTIFICATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS. THE HOLDER HEREOF, BY PURCHASING ANY TRUST CERTIFICATE, AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH TRUST CERTIFICATE IS BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY BE RESOLD, PLEDGED OR TRANSFERRED ONLY (1) TO THE ISSUER (UPON REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (3) IN A TRANSACTION COMPLYING WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. NO INTEREST IN THIS TRUST CERTIFICATE MAY BE ACQUIRED BY OR FOR THE ACCOUNT OF (i) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (ii) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (INCLUDING, WITHOUT LIMITATION, INDIVIDUAL RETIREMENT ACCOUNTS AND KEOGH PLANS), OR (iii) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY. BY ACCEPTING AND HOLDING THIS CERTIFICATE, THE HOLDER HEREOF AND THE CERTIFICATE OWNER SHALL EACH BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT PLAN. ARTICLE IV. ACTIONS BY OWNER TRUSTEE SECTION 4.1. PRIOR NOTICE TO OWNERS WITH RESPECT TO CERTAIN MATTERS. With respect to the following matters, the Owner Trustee shall not take action unless at least 30 days before the taking of such action, the Owner Trustee shall have notified the Certificateholders in writing of the proposed action and the Certificateholders shall not have notified the Owner Trustee in writing prior to the 30th day after such notice is given that such Certificateholders have withheld consent or provided alternative direction: (a) the initiation of any material claim or lawsuit by the Trust except claims or lawsuits brought in connection with the collection of the Receivables and the compromise of any material action, claim or lawsuit brought by or against the Trust (except with respect to the aforementioned claims or lawsuits for collection of the Receivables); (b) the election by the Trust to file an amendment to the Certificate of Trust (unless such amendment is required to be filed under the Business Trust Statute); (c) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is required; (d) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is not required and such amendment materially adversely affects the interest of the Certificateholders; (e) the amendment, change or modification of the Sale and Servicing Agreement, except to cure any ambiguity or defect or to amend or supplement any provision in a manner that would not materially adversely affect the interests of the Certificateholders; or (f) the appointment pursuant to the Indenture of a successor Trustee or the consent to the assignment by the Note Registrar, Paying Agent or Trustee or Certificate Registrar of its obligations under the Indenture or this Agreement, as applicable. The Owner Trustee shall notify the Certificateholders in writing of any appointment of a successor Note Registrar, Paying Agent or Certificate Registrar within five Business Days thereof. SECTION 4.2. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN MATTERS. The Owner Trustee shall not have the power, except upon the direction of the Certificateholders, to (a) remove the Servicer under the Sale and Servicing Agreement pursuant to Section 8.1 thereof or (b) sell the Receivables after the termination of the Indenture. The Owner Trustee shall take the actions referred to in the preceding sentence only upon written instructions signed by the Certificateholders. SECTION 4.3. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO BANKRUPTCY. The Owner Trustee shall not have the power to commence a voluntary proceeding in bankruptcy relating to the Trust without the unanimous prior approval of all Certificateholders and the delivery to the Owner Trustee by each such Certificateholder of a certificate certifying that such Certificateholder reasonably believes that the Trust is insolvent. SECTION 4.4. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. The Certificateholders shall not direct the Owner Trustee to take or refrain from taking any action if such action or inaction would be contrary to any obligation of the Trust or the Owner Trustee under this Agreement or any of the Basic Documents or would be contrary to Section 2.3 nor shall the Owner Trustee be obligated to determine if a Certificateholder's direction violates this Section 4.4 or to follow any such direction, if given. SECTION 4.5. MAJORITY CONTROL. Except as otherwise specifically provided herein, any action that may be taken by the Certificateholders under this Agreement may be taken by the Holders of Trust Certificates evidencing not less than a majority of the Percentage Interest. Except as otherwise specifically provided herein, any written notice of the Certificateholders delivered pursuant to this Agreement shall be effective if signed by Holders of Certificates evidencing not less than a majority of the Percentage Interest at the time of the delivery of such notice. SECTION 4.6. EXECUTION OF DOCUMENTS. Notwithstanding anything herein to the contrary, the Owner Trustee is authorized, empowered and directed, on behalf of the Trust, to execute, deliver, issue and authenticate the Certificates, to execute, deliver and issue the Notes, and to execute and deliver each Basic Document to which the Trust or the Owner Trustee is or is to be a party and any other document, instrument, certificate or other writing that may be necessary, convenient or incidental thereto. Any such execution, delivery, issuance and authentication is hereby ratified and confirmed in all respects and does not and will be deemed not to conflict with, constitute or result in a breach or violation of, or a default under, any provision of or any duty under this Trust Agreement. ARTICLE V. APPLICATION OF TRUST FUNDS: CERTAIN DUTIES SECTION 5.1. [Reserved] SECTION 5.2. DISTRIBUTIONS TO CERTIFICATEHOLDERS. (a) On each Distribution Date, the Owner Trustee will, based on the information contained in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 4.9 of the Sale and Servicing Agreement, distribute to Certificateholders, on a pro rata basis based on Percentage Interest, an amount equal to the Certificateholders' Distributable Amount. (a) On each Distribution Date, the Owner Trustee shall send to each Certificateholder the statement provided to the Owner Trustee by the Servicer pursuant to Section 5.8 of the Sale and Servicing Agreement on such Distribution Date. (b) In the event that any withholding tax is imposed on the Trust's payment (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to the Certificateholder in accordance with this Section. The Owner Trustee is hereby authorized and directed to retain from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax that is legally owed by the Trust (but such authorization shall not prevent the Owner Trustee from contesting any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to such Certificateholder at the time it is withheld by the Trust and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution (such as a distribution to a non-US Certificateholder), the Owner Trustee may in it sole discretion withhold such amounts in accordance with this clause (c). In the event that an Owner wishes to apply for a refund of any such withholding tax, the Owner Trustee shall reasonably cooperate with such Certificateholder in making such claim so long as such Certificateholder agrees to reimburse the Owner Trustee for any out-of-pocket expenses incurred. The Servicer shall facilitate compliance with this Section 5.2(c) by performance of its duties under Section 10.1(b) of the Sale and Servicing Agreement. SECTION 5.3. [Reserved] SECTION 5.4. METHOD OF PAYMENT. Subject to Section 9.1(c), distributions required to be made to Certificateholders on any Distribution Date shall be made to each Certificateholder of record on the preceding Record Date either by wire transfer, in immediately available funds, to the account of such Holder at a bank or other entity having appropriate facilities therefor, if (i) such Certificateholder shall have provided to the Certificate Registrar appropriate written instructions at least five Business Days prior to such Distribution Date or (ii) such Certificateholder is the Depositor, or an Affiliate thereof, or, if not, by check mailed to such Certificateholder at the address of such holder appearing in the Certificate Register. Notwithstanding the foregoing, the final distribution in respect of any Trust Certificate (whether on the Final Scheduled Distribution Date or otherwise) will be payable only upon presentation and surrender of such Trust Certificate at the office or agency maintained for that purpose by the Owner Trustee pursuant to Section 3.8. SECTION 5.5. NO SEGREGATION OF MONIES; NO INTEREST. Subject to Sections 5.1 and 5.2, monies received by the Owner Trustee hereunder need not be segregated in any manner except to the extent required by law and may be deposited under such general conditions as may be prescribed by law. The Owner Trustee shall not be liable for any interest thereon. SECTION 5.6. ACCOUNTING AND REPORTS TO THE NOTEHOLDERS, CERTIFICATEHOLDERS, THE INTERNAL REVENUE SERVICE AND OTHERS. Subject to Sections 10.1(b)(iii) and 10.1(c) of the Sale and Servicing Agreement, the Depositor shall (a) maintain (or cause to be maintained) the books of the Trust on a calendar year basis on the accrual method of accounting, (b) deliver (or cause to be delivered) to each Certificateholder, as may be required by the Code and applicable Treasury Regulations, such information as may be required (including, if applicable, Schedule K-1) to enable each Certificateholder to prepare its Federal and state income tax returns, (c) prepare or cause to be prepared, and file or cause to be filed, all tax returns, if any, relating to the Trust (including, if applicable, a partnership information return, Form 1065), and direct the Owner Trustee to make such elections as may from time to time be required or appropriate under any applicable state or Federal statute or rule or regulation thereunder so as to maintain the Trust's characterization as a division or branch of its 100% owner, or as a partnership, as the case may be, for Federal income tax purposes and (d) collect or cause to be collected any withholding tax as described in and in accordance with Section 5.2(c) with respect to income or distributions to Certificateholders. The Owner Trustee shall make all elections pursuant to this Section as directed by the Depositor. The Owner Trustee shall sign all tax information returns furnished to it in execution form by the Depositor, and filed pursuant to this Section 5.6 and any other returns as may be required by law and so furnished to it by the Depositor, and in doing so shall rely entirely upon, and shall have no liability for information provided by, or calculations provided by, the Depositor. In the event the Trust is characterized as a partnership for federal income tax purposes, the Depositor shall cause the Trust to elect under Section 1278 of the Code to include in income currently any market discount that accrues with respect to the Receivables, and the Trust shall not make the election provided under Section 754 of the Code. SECTION 5.7. SIGNATURE ON RETURNS; TAX MATTERS PARTNER. (a) Notwithstanding the provisions of Section 5.6, the Owner Trustee shall sign on behalf of the Trust the tax returns of the Trust, if any, furnished to it in execution form by the Depositor, unless applicable law requires a Certificateholder to sign such documents, in which case such documents shall be signed by the Depositor so long as it is a Certificateholder, in its capacity as "tax matters partner." (b) In the event the Trust is characterized as a partnership for federal income tax purposes, and the Depositor is a Certificateholder, the Depositor shall be the "tax matters partner" of the Trust pursuant to the Code. ARTICLE VI. AUTHORITY AND DUTIES OF OWNER TRUSTEE SECTION 6.1. GENERAL AUTHORITY. The Owner Trustee is authorized and directed to execute and deliver the Basic Documents to which the Trust is named as a party and each certificate or other document attached as an exhibit to or contemplated by the Basic Documents to which the Trust is named as a party and any amendment thereto, in each case, in such form as the Depositor shall approve as evidenced conclusively by the Owner Trustee's execution thereof, and on behalf of the Trust, to direct the Trustee to authenticate and deliver Class A-1 Notes in the aggregate principal amount of $[ ], Class A-2 Notes in the aggregate principal amount of $[ ], Class A-3 Notes in the aggregate principal amount of $[ ], Class A-4 Notes in the aggregate principal amount of $[ ], Class A-5 Notes in the aggregate principal amount of $[ ] and Class B Notes in the aggregate principal amount of $[ ]. In addition to the foregoing, the Owner Trustee is authorized, but shall not be obligated, to take all actions required of the Trust pursuant to the Basic Documents. The Owner Trustee is further authorized from time to time to take such action as the Servicer recommends to it in writing with respect to the Basic Documents. It shall be the duty of the Owner Trustee to discharge (or cause to be discharged) all of its responsibilities pursuant to the terms of this Agreement and the Basic Documents and to administer the Trust in the interest of the Owners, subject to the Basic Documents and in accordance with the provisions of this Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed to have discharged its duties and responsibilities hereunder and under the Basic Documents to the extent the Servicer has agreed in the Sale and Servicing Agreement, or the Depositor has agreed hereunder or thereunder, to perform any act or to discharge any duty of the Owner Trustee hereunder or of the Trust under any Basic Document, and the Owner Trustee shall not be liable for the default or failure of the Servicer or the Depositor to carry out its obligations hereunder or thereunder. SECTION 6.2. ACTION UPON INSTRUCTION. (a) Subject to Article IV, the Certificateholders may, by written instruction, direct the Owner Trustee in the management of the Trust. Such direction may be exercised at any time by written instruction of the Certificateholders pursuant to Article IV. (b) The Owner Trustee shall not be required to take any action hereunder or under any Basic Document if the Owner Trustee shall have reasonably determined, or shall have been advised by counsel, that such action is likely to result in liability on the part of the Owner Trustee or is contrary to the terms hereof or of any Basic Document or is otherwise contrary to law. (c) Whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Agreement or any Basic Document, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction as to the course of action to be adopted, and to the extent the Owner Trustee acts in good faith in accordance with any written instruction of the Certificateholders received, the Owner Trustee shall not be liable on account of such action to any Person. If the Owner Trustee shall not have received appropriate instruction within ten days of such notice (or within such shorter period of time as may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with this Agreement or the Basic Documents, as it shall deem to be in the best interests of the Certificateholders, and shall have no liability to any Person for such action or inaction. (d) In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any Basic Document or any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement permits any determination by the Owner Trustee or is silent or is incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee may give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction and, to the extent that the Owner Trustee acts or refrains from acting in good faith in accordance with any such instruction received, the Owner Trustee shall not be liable, on account of such action or inaction, to any Person. If the Owner Trustee shall not have received appropriate instruction within 10 days of such notice (or within such shorter period of time as may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with this Agreement or the Basic Documents, as it shall deem to be in the best interests of the Certificateholders, and shall have no liability to any Person for such action or inaction. SECTION 6.3. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to manage, make any payment with respect to, register, record, sell, dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from taking any action under, or in connection with, any document contemplated hereby to which the Owner Trustee is a party, except as expressly provided by the terms of this Agreement or in any direction or written instruction received by the Owner Trustee pursuant to Section 6.3; and no implied duties or obligations shall be read into this Agreement or any Basic Document against the Owner Trustee. The Owner Trustee shall have no responsibility for filing any financing or continuation or termination statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien or to prepare or file any Securities and Exchange Commission filing for the Trust or to record this Agreement or any Basic Document. The Owner Trustee nevertheless agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any Liens on any part of the Owner Trust Estate that result from actions by, or claims against, the Owner Trustee that are not related to the ownership or the administration of the Owner Trust Estate. SECTION 6.4. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal with any part of the Owner Trust Estate except (i) in accordance with the powers granted to and the authority conferred upon the Owner Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents and (iii) in accordance with any direction or instruction delivered to the Owner Trustee pursuant to Section 6.3. SECTION 6.5. RESTRICTIONS. The Owner Trustee shall not take any action (a) that is inconsistent with the purposes of the Trust set forth in Section 2.3 or (b) that, to the actual knowledge of a Responsible Officer of the Owner Trustee, would result in the Trust's becoming taxable as a corporation for Federal income tax purposes. The Certificateholders shall not direct the Owner Trustee to take action that would violate the provisions of this Section. SECTION 6.6. NOTICE OF DEFAULT UNDER INDENTURE. Within 5 business days of receipt of a notice of Default under the Indenture, the Owner trustee shall provide notice to each Certificateholder by letter. ARTICLE VII. CONCERNING THE OWNER TRUSTEE SECTION 7.1. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee accepts the trusts hereby created and agrees to perform its duties hereunder with respect to such trusts but only upon the terms of this Agreement. The Owner Trustee also agrees to disburse all moneys actually received by it constituting part of the Owner Trust Estate upon the terms of the Basic Documents and this Agreement. The Owner Trustee shall not be answerable or accountable hereunder or under any Basic Document under any circumstances, except (i) for its own willful misconduct, bad faith or negligence or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 7.3 expressly made by the Owner Trustee. In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence): (a) the Owner Trustee shall not be liable for any error of judgment made by a Responsible Officer of the Owner Trustee; (b) the Owner Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the instructions of the Servicer or any Certificateholder; (c) no provision of this Agreement or any Basic Document shall require the Owner Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder or under any Basic Document if the Owner Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it; (d) under no circumstances shall the Owner Trustee be liable for indebtedness evidenced by or arising under any of the Basic Documents, including the principal of and interest on the Notes; (e) the Owner Trustee shall not be responsible for or in respect of the validity or sufficiency of this Agreement or for the due execution hereof by the Depositor or for the form, character, genuineness, sufficiency, value or validity of any of the Owner Trust Estate or for or in respect of the validity or sufficiency of the Basic Documents, other than the certificate of authentication on the Trust Certificates, and the Owner Trustee shall in no event assume or incur any liability, duty or obligation to any Noteholder or to any Certificateholder, other than as expressly provided for herein and in the Basic Documents; (f) the Owner Trustee shall not be liable for the default or misconduct of the Trustee or the Servicer or the Depositor under any of the Basic Documents or otherwise and the Owner Trustee shall have no obligation or liability to insure compliance by the Servicer or the Depositor with any agreement to which it is a party or to perform the obligations of the Trust under this Agreement or the Basic Documents that are required to be performed by the Trustee under the Indenture or the Servicer under the Sale and Servicing Agreement or the Depositor under this Agreement; and (g) the Owner Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation under this Agreement or otherwise or in relation to this Agreement or any Basic Document, at the request, order or direction of any of the Certificateholders, unless such Certificateholders have offered to the Owner Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Agreement or in any Basic Document shall not be construed as a duty, and, except as otherwise provided in the third sentence of this Section 7.1, the Owner Trustee shall not be answerable to any Certificateholder in the performance of any such act. SECTION 7.2. FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish to the Certificateholders promptly upon receipt of a written request therefor, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee under the Basic Documents. SECTION 7.3. REPRESENTATIONS AND WARRANTIES. The Owner Trustee hereby represents and warrants to the Depositor, for the benefit of the Certificateholders, that: (a) It is a banking corporation duly organized and validly existing in good standing under the laws of the State of [ ] and having an office within the State of [ ]. It has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. (b) It has taken all corporate action necessary to authorize the execution and delivery by it of this Agreement, and this Agreement will be executed and delivered by one of its officers who is duly authorized to execute and deliver this Agreement on its behalf. (c) Neither the execution nor the delivery by it of this Agreement, nor the consummation by it of the transactions contemplated hereby nor compliance by it with any of the terms or provisions hereof will contravene any federal or [ ] state law, governmental rule or regulation governing the banking or trust powers of the Owner Trustee or any judgment or order binding on it, or constitute any default under its charter documents or by-laws or any indenture, mortgage, contract, agreement or instrument to which it is a party or by which any of its properties may be bound. SECTION 7.4. RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of the determination of which is not specifically prescribed herein, the Owner Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer, secretary or other authorized officers of the relevant party, as to such fact or matter, and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. (b) In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Agreement or the Basic Documents, the Owner Trustee (i) may act directly or through its agents or attorneys pursuant to agreements entered into with any of them, and the Owner Trustee shall not be liable for the conduct or misconduct of such agents or attorneys if such agents or attorneys shall have been selected by the Owner Trustee with reasonable care, and (ii) may consult with counsel, accountants and other skilled persons to be selected with reasonable care and employed by it. The Owner Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the written opinion or advice of any such counsel, accountants or other such persons and not contrary to this Agreement or any Basic Document. SECTION 7.5. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in this Article VII, in accepting the trusts hereby created [ ] acts solely as Owner Trustee hereunder and not in its individual capacity and all Persons having any claim against the Owner Trustee by reason of the transactions contemplated by this Agreement or any Basic Document shall look only to the Owner Trust Estate for payment or satisfaction thereof. SECTION 7.6. OWNER TRUSTEE NOT LIABLE FOR TRUST CERTIFICATES OR RECEIVABLES. The recitals contained herein and in the Trust Certificates (other than the signature and countersignature of the Owner Trustee on the Trust Certificates) shall be taken as the statements of the Depositor and the Owner Trustee assumes no responsibility for the correctness thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Agreement, of any Basic Document or of the Trust Certificates (other than the signature and countersignature of the Owner Trustee on the Trust Certificates) or the Notes, or of any Receivable or related documents. The Owner Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Receivable, or the perfection and priority of any security interest created by any Receivable in any Financed Vehicle or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Owner Trust Estate or its ability to generate the payments to be distributed to Certificateholders under this Agreement or the Noteholders under the Indenture, including, without limitation: the existence, condition and ownership of any Financed Vehicle; the existence and enforceability of any insurance thereon; the existence and contents of any Receivable or any computer or other record thereof; the validity of the assignment of any Receivable to the Trust or of any intervening assignment; the completeness of any Receivable; the performance or enforcement of any Receivable; the compliance by the Depositor or the Servicer with any warranty or representation made under any Basic Document or in any related document or the accuracy of any such warranty or representation or any action of the Trustee or the Servicer or any subservicer taken in the name of the Owner Trustee. SECTION 7.7. OWNER TRUSTEE MAY OWN TRUST CERTIFICATES AND NOTES. The Owner Trustee in its individual or any other capacity may become the owner or pledgee of Trust Certificates or Notes and may deal with the Depositor, the Trustee and the Servicer in banking transactions with the same rights as it would have if it were not Owner Trustee. ARTICLE VIII. COMPENSATION OF OWNER TRUSTEE SECTION 8.1. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee shall receive as compensation for its services hereunder such fees as have been separately agreed upon before the date hereof between the Sponsor and the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Depositor for its other reasonable expenses hereunder, including the reasonable compensation, expenses and disbursements of such agents, representatives, experts and counsel as the Owner Trustee may employ in connection with the exercise and performance of its rights and its duties hereunder. SECTION 8.2. INDEMNIFICATION. The Depositor shall be liable as primary obligor for, and shall indemnify the Owner Trustee and its successors, assigns, agents and servants (collectively, the "Indemnified Parties") from and against, any and all liabilities, obligations, losses, damages, taxes, claims, actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, "Expenses") which may at any time be imposed on, incurred by, or asserted against the Owner Trustee or any Indemnified Party in any way relating to or arising out of this Agreement, the Basic Documents, the Owner Trust Estate, the administration of the Owner Trust Estate or the action or inaction of the Owner Trustee hereunder, except only that the Depositor shall not be liable for or required to indemnify the Owner Trustee from and against Expenses arising or resulting from any of the matters described in the third sentence of Section 7.1. The indemnities contained in this Section shall survive the resignation or termination of the Owner Trustee or the termination of this Agreement. In any event of any claim, action or proceeding for which indemnity will be sought pursuant to this Section, the Owner Trustee's choice of legal counsel shall be subject to the approval of the Depositor, which approval shall not be unreasonably withheld. SECTION 8.3. PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of the Owner Trust Estate immediately after such payment. ARTICLE IX. DISSOLUTION AND TERMINATION OF TRUST SECTION 9.1. TERMINATION OF TRUST AGREEMENT. (a) The Trust shall dissolve, (i) upon the final distribution by the Owner Trustee of all moneys or other property or proceeds of the Owner Trust Estate in accordance with the terms of the Indenture, the Sale and Servicing Agreement and Article V. The bankruptcy, liquidation, dissolution, death or incapacity of any Certificateholder or Owner, shall not (x) operate to terminate this Agreement or the Trust, nor (y) entitle such Certificateholder's or Owner's legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of all or any part of the Trust or Owner Trust Estate nor (z) otherwise affect the rights, obligations and liabilities of the parties hereto. (b) Except as provided in clause (a), neither the Depositor nor any Certificateholder shall be entitled to revoke or terminate the Trust. (c) Notice of any termination of the Trust, specifying the Distribution Date upon which the Certificateholders shall surrender their Trust Certificates to the Paying Agent for payment of the final distribution and cancellation, shall be given by the Owner Trustee by letter to Certificateholders mailed within five Business Days of receipt of notice of such termination from the Servicer given pursuant to Section 9.1(c) of the Sale and Servicing Agreement, stating (i) the Distribution Date upon or with respect to which final payment of the Trust Certificates shall be made upon presentation and surrender of the Trust Certificates at the office of the Paying Agent therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Trust Certificates at the office of the Paying Agent therein specified. The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Paying Agent (if other than the Owner Trustee) at the time such notice is given to Certificateholders. Upon presentation and surrender of the Trust Certificates, the Paying Agent shall cause to be distributed to Certificateholders amounts distributable on such Distribution Date pursuant to Section 5.2. In the event that all of the Certificateholders shall not surrender their Trust Certificates for cancellation within six months after the date specified in the above mentioned written notice, the Owner Trustee shall give a second written notice to the remaining Certificateholders to surrender their Trust Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all the Trust Certificates shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Trust Certificates, and the cost thereof shall be paid out of the funds and other assets that shall remain subject to this Agreement. Any funds remaining in the Trust after exhaustion of such remedies shall be distributed, subject to applicable escheat laws, by the Owner Trustee to the Depositor. Certificateholders shall thereafter look solely to the Depositor as general unsecured creditors. (d) Any funds remaining in the Trust after funds for final distribution have been distributed or set aside for distribution shall be distributed by the Owner Trustee to the Depositor. (e) Upon dissolution and completion of the winding up of the Trust, the Owner Trustee shall cause the Certificate of Trust to be canceled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of Section 3810 of the Business Trust Statute and thereupon the Trust and this Agreement shall terminate. The Owner Trustee shall furnish notice of such dissolution to each Rating Agency. SECTION 9.2. [Reserved] ARTICLE X. SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES SECTION 10.1. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner Trustee shall at all times be a corporation authorized to exercise corporate trust powers; and having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or state authorities and have (or have a parent which has) a long-term unsecured debt rating of at least "BBB" by Standard & Poor's and at least "Baa3" by Moody's; PROVIDED that with respect to the Owners Trustee (but not any successor trustee) the combined capital and surplus of the parent organization of such banking corporation shall be included in the determination of the combined capital and surplus of such banking corporation. If such corporation shall publish reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 10.2. In addition, at all times the Owner Trustee or a co-trustee shall be a person that satisfies the requirements of Section 3807(a) of the Business Trust Statute (the "Delaware Trustee"). SECTION 10.2. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Servicer. Upon receiving such notice of resignation, the Servicer shall promptly appoint a successor Owner Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner Trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 10.1 and shall fail to resign after written request therefor by the Servicer, or if at any time the Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Servicer may remove the Owner Trustee. If the Servicer shall remove the Owner Trustee under the authority of the immediately preceding sentence, the Servicer shall promptly appoint a successor Owner Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one copy to the successor Owner Trustee and payment of all fees owed to the outgoing Owner Trustee. Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Owner Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to the outgoing Owner Trustee. The Servicer shall provide notice of such resignation or removal of the Owner Trustee to each of the Rating Agencies. SECTION 10.3. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the Servicer and to its predecessor Owner Trustee an instrument accepting such appointment under this Agreement, and thereupon the resignation or removal of the predecessor Owner Trustee shall become effective and such successor Owner Trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor under this Agreement, with like effect as if originally named as Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and expenses deliver to the successor Owner Trustee all documents and statements and monies held by it under this Agreement; and the Servicer and the predecessor Owner Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties and obligations. No successor Owner Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Owner Trustee shall be eligible pursuant to Section 10.1. Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section, the Servicer shall mail notice of the successor of such Owner Trustee to all Certificateholders, the Trustee, the Noteholders and the Rating Agencies. If the Servicer shall fail to mail such notice within 10 days after acceptance of appointment by the successor Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed at the expense of the Servicer. SECTION 10.4. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any corporation into which the Owner Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided such corporation shall be eligible pursuant to Section 10.1, without the execution or filing of any instrument or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided further that the Owner Trustee shall mail notice of such merger, sale, conversion or consolidation to the Rating Agencies. SECTION 10.5. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Owner Trust Estate or any Financed Vehicle may at the time be located or relating to the transactions contemplated by the Basic Documents, the Servicer and the Owner Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Owner Trustee to act as co-trustee, jointly with the Owner Trustee, or separate trustee or separate trustees, of all or any part of the Owner Trust Estate, and to vest in such Person, in such capacity, such title to the Owner Trust Estate, or any part thereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Servicer and the Owner Trustee may consider necessary or desirable. If the Servicer shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, the Owner Trustee alone shall have the power to make such appointment. No co-trustee or separate trustee under this Agreement shall be required to meet the terms of eligibility as a successor trustee pursuant to Section 10.1 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 10.3. Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Owner Trust Estate or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee; (ii) no trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under this Agreement; and (iii) the Servicer and the Owner Trustee acting jointly may at any time accept the resignation of or remove any separate trustee or co-trustee. Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a copy thereof given to the Servicer. Any separate trustee or co-trustee may at any time appoint the Owner 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 Owner Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. ARTICLE XI. MISCELLANEOUS SECTION 11.1. SUPPLEMENTS AND AMENDMENTS. (a) This Agreement may be amended by the Depositor and the Owner Trustee, with prior written notice to the Rating Agencies, without the consent of any of the Noteholders or the Certificateholders, to cure any ambiguity or defect, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Noteholder or Certificateholder; PROVIDED, further, that any amendment within the scope of Section 11.1(b)(i) or (ii) shall be deemed to materially and adversely affect the interests of the Noteholders or the Certificateholders, as evidenced by an Officer's Certificate of the Servicer delivered to the Owner Trustee. (b) This Agreement may also be amended from time to time by the Depositor and the Owner Trustee, with prior written notice to the Rating Agencies, with the consent of the Holders of Notes evidencing not less than a majority of the Outstanding Amount of the Notes and, to the extent affected thereby, the consent of the Holders of Certificates evidencing not less than a majority of the Certificate Balance for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that shall be required to be made for the benefit of the Noteholders or the Certificateholders or (ii) reduce the aforesaid percentage of the Outstanding Amount of the Notes and the Certificate Balance required to consent to any such amendment, without the consent of the Holders of all the outstanding Notes and Holders of all outstanding Certificates. Promptly after the execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to each Certificateholder, the Trustee and each of the Rating Agencies. (c) It shall not be necessary for the consent of Certificateholders, the Noteholders or the Trustee pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Certificateholders provided for in this Agreement or in any other Basic Document) and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable requirements as the Owner Trustee may prescribe. (d) Promptly after the execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause the filing of such amendment with the Secretary of State. (e) Prior to the execution of any amendment to this Agreement or the Certificate of Trust, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent to the execution and delivery of such amendment have been satisfied. The Owner Trustee may, but shall not be obligated to, enter into any such amendment which affects the Owner Trustee's own rights, duties or immunities under this Agreement or otherwise. The Owner Trustee shall furnish copies of any such amendments to this Agreement to each Rating Agency. SECTION 11.2. NO LEGAL TITLE TO OWNER TRUST ESTATE IN CERTIFICATEHOLDERS. The Certificateholders shall not have legal title to any part of the Owner Trust Estate. The Certificateholders shall be entitled to receive distributions with respect to their undivided beneficial ownership interest therein only in accordance with Articles V and IX. No transfer, by operation of law or otherwise, of any right, title or interest of the Certificateholders to and in their ownership interest in the Owner Trust Estate shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of legal title to any part of the Owner Trust Estate. SECTION 11.3. LIMITATIONS ON RIGHTS OF OTHERS. Except for Section 2.7, the provisions of this Agreement are solely for the benefit of the Owner Trustee, the Depositor, the Certificateholders, the Servicer and, to the extent expressly provided herein, the Trustee and the Noteholders, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Owner Trust Estate or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. SECTION 11.4. NOTICES. Unless otherwise expressly specified or permitted by the terms hereof, all notices shall be in writing and shall be deemed given upon receipt personally delivered, delivered by overnight courier or mailed certified mail, return receipt requested and shall be deemed to have been duly given upon receipt, if to the Owner Trustee, addressed to the Corporate Trust Office; if to the Depositor, addressed to Ace Securities Corp., 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211, Attention: General Counsel; or, as to each party, at such other address as shall be designated by such party in a written notice to each other party. (a) Any notice required or permitted to be given to a Certificateholder shall be given by first-class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. SECTION 11.5. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 11.6. SEPARATE COUNTERPARTS. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 11.7. SUCCESSORS AND ASSIGNS. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, the Depositor, the Owner Trustee and its successors and each Certificateholder and its successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by a Certificateholder shall bind the successors and assigns of such Certificateholder. SECTION 11.8. [Reserved] SECTION 11.9. NO PETITION. The Owner Trustee (not in its individual capacity but solely as Owner Trustee), by entering into this Agreement, each Certificateholder, by accepting a Trust Certificate, and the Trustee and each Noteholder by accepting the benefits of this Agreement, hereby covenants and agrees that they will not at any time institute against the Depositor, or join in any institution against the Depositor of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, this Agreement or any of the Basic Documents. SECTION 11.10. NO RECOURSE. Each Certificateholder by accepting a Trust Certificate acknowledges that such Certificateholder's Trust Certificates represent beneficial ownership interests in the Trust only and do not represent interests in or obligations of the Depositor, the Servicer, the Owner Trustee, the Trustee or any Affiliate thereof and no recourse by such Certificateholder may be had against such parties or their assets, except as may be expressly set forth or contemplated in this Agreement, the Trust Certificates or the Basic Documents. SECTION 11.11. HEADINGS. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. SECTION 11.13. [RESERVED] SECTION 11.14. SERVICER. The Servicer is authorized to execute on behalf of the Trust all such documents, reports, filings, tax returns, instruments, certificates and opinions as it shall be the duty of the Trust to prepare, file or deliver pursuant to the Basic Documents. Upon written request, the Owner Trustee on behalf of the Trust shall execute and deliver to the Servicer a power of attorney appointing the Servicer the Trust's agent and attorney-in-fact to execute all such documents, reports, filings, tax returns, instruments, certificates and opinions. IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed by their respective officers hereunto duly authorized as of the day and year first above written. [ ], as Owner Trustee By:____________________ Name: Title: ACE SECURITIES CORP., as Depositor By: ____________________ Name: Title: EXHIBIT A NUMBER __% Percentage Interest R- CUSIP NO. ___________ SEE REVERSE FOR CERTAIN DEFINITIONS THE TRUST CERTIFICATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS. THE HOLDER HEREOF, BY PURCHASING ANY TRUST CERTIFICATE, AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH TRUST CERTIFICATE IS BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY BE RESOLD, PLEDGED OR TRANSFERRED ONLY (1) TO THE ISSUER (UPON REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (3) IN A TRANSACTION COMPLYING WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. NO INTEREST IN THIS TRUST CERTIFICATE MAY BE ACQUIRED BY OR FOR THE ACCOUNT OF (i) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (ii) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (INCLUDING, WITHOUT LIMITATION, INDIVIDUAL RETIREMENT ACCOUNTS AND KEOGH PLANS), OR (iii) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF SUCH PLAN'S INVESTMENT IN THE ENTITY (EACH A "BENEFIT PLAN"). BY ACCEPTING AND HOLDING THIS CERTIFICATE, THE HOLDER HEREOF AND THE CERTIFICATE OWNER SHALL EACH BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT PLAN. [ ] ASSET BACKED CERTIFICATE evidencing a beneficial ownership interest in certain distributions of the Trust, as defined below, the property of which includes a pool of retail installment sale contracts and other motor vehicle installment chattel paper secured by new and used automobiles (including passenger cars, minivans, sport/utility vehicles and light trucks), and sold to the Trust by Ace Securities Corp. (THIS TRUST CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ACE SECURITIES CORP. OR ANY OF ITS AFFILIATES, EXCEPT TO THE EXTENT DESCRIBED BELOW.) THIS CERTIFIES THAT Ace Securities Corp. is the registered owner of 100% Percentage Interest nonassessable, fully-paid, beneficial ownership interest in [ ] (the "Trust") formed by Ace Securities Corp., a [ ] corporation (the "Depositor"). The Trust was created pursuant to a Trust Agreement dated as of [ ] (the "Trust Agreement"), between the Depositor and [ ], not in its individual capacity but solely as owner trustee (the "Owner Trustee"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Trust Agreement. This Certificate is one of the duly authorized Trust Certificates designated as "Asset Backed Certificates" (herein called the "Trust Certificates"). Also issued under the Indenture dated as of [ ], between the Trust and [ ] as trustee, are Notes designated as "Class A-1 [ ]% Asset Backed Notes" (the "Class A-1 Notes"), "Class A-2 [ ]% Asset Backed Notes" (the "Class A-2 Notes"), "Class A-3 [ ]% Asset Backed Notes" (the "Class A-3 Notes"), "Class A-4 [ ]% Asset Backed Notes" (the "Class A-4 Notes"), "Class A-5 [ ]% Asset Backed Notes" (the "Class A-5 Notes") and "Class B [ ]% Asset Backed Notes" (the "Class B Notes" and, together with the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class A-5 Notes, the "Notes"). This Trust Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which Trust Agreement the holder of this Trust Certificate by virtue of the acceptance hereof assents and by which such holder is bound. The property of the Trust includes a pool of retail installment sale contracts and other motor vehicle installment chattel paper secured by new and used automobiles (including passenger cars, minivans, sport/utility vehicles and light trucks), (the "Receivables"), all monies received on the Receivables on or after [ ], security interests in the vehicles financed thereby, certain bank accounts and the proceeds thereof, proceeds from claims on certain insurance policies and certain other rights under the Trust Agreement and the Sale and Servicing Agreement. Under the Trust Agreement, there will be distributed on the 15th day of each month or, if such 15th day is not a Business Day, the next Business Day (the "Distribution Date"), commencing in [ ] to the Person in whose name this Trust Certificate is registered at the close of business on the last day of the calendar month immediately preceding the Distribution Date (the "Record Date") such Certificateholder's Percentage Interest in the amount to be distributed to Certificateholders on such Distribution Date. The holder of this Trust Certificate acknowledges and agrees that its rights to receive distributions in respect of this Trust Certificate are subordinated to the rights of the Noteholders as described in the Sale and Servicing Agreement, the Indenture and the Trust Agreement, as applicable. It is the intent of the Depositor, Servicer, and Certificateholders that, for purposes of Federal income taxes, the Trust will be disregarded as an entity apart from its owner if there is only one owner for Federal income tax purposes, or, if there is more than one owner for Federal income tax purposes, will be treated as a partnership the partners of which are the Certificateholders. The Certificateholders by acceptance of a Trust Certificate, agree to treat, and to take no action inconsistent with the treatment of, the Trust and the Trust Certificates for such tax purposes as just described. Each Certificateholder, by its acceptance of a Trust Certificate, covenants and agrees that such Certificateholder will not at any time institute against the Trust or the Depositor, or join in any institution against the Trust or the Depositor of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, the Trust Agreement or any of the Basic Documents. Distributions on this Trust Certificate will be made as provided in the Trust Agreement by the Owner Trustee by wire transfer or check mailed to the Certificateholder of record in the Trust Certificate Register without the presentation or surrender of this Trust Certificate or the making of any notation hereon. Except as otherwise provided in the Trust Agreement and notwithstanding the above, the final distribution on this Trust Certificate will be made after due notice by the Owner Trustee of the pendency of such distribution and only upon presentation and surrender of this Trust Certificate at the office or agency maintained for the purpose by the Owner Trustee in the [ ]. Reference is hereby made to the further provisions of this Trust Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Owner Trustee, by manual signature, this Trust Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose. THIS TRUST CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in its individual capacity, has caused this Trust Certificate to be duly executed. Date: [ ] By: [ ], solely as Owner Trustee and not in its individual capacity By: ________________________ Authorized Signatory OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Trust Certificates of [ ] referred to in the within-mentioned Trust Agreement. Date: [ ], solely as Owner Trustee and not in its individual capacity By:___________________________ Authorized Signatory (Reverse of Trust Certificate) The Trust Certificates do not represent an obligation of, or an interest in, the Depositor, the Servicer, the Owner Trustee or any Affiliates of any of them and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated herein or in the Trust Agreement, the Indenture or the Basic Documents. In addition, this Trust Certificate is not guaranteed by any governmental agency or instrumentality and is limited in right of payment to certain collections with respect to the Receivables (and certain other amounts), all as more specifically set forth herein and in the Sale and Servicing Agreement. The Trust Certificates are limited in right of payment to certain collections and recoveries respecting the Receivables, all as more specifically set forth in the Sale and Servicing Agreement. A copy of each of the Sale and Servicing Agreement and the Trust Agreement may be examined during normal business hours at the principal office of the Depositor, and at such other places, if any, designated by the Depositor, by any Certificateholder upon written request. The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor and the rights of the Certificateholders under the Trust Agreement at any time by the Depositor and the Owner Trustee with the consent of the holders of the Notes and the Trust Certificates evidencing not less than a majority of the outstanding principal balance of the Notes and the Certificate Balance. Any such consent by the holder of this Trust Certificate shall be conclusive and binding on such holder and on all future holders of this Trust Certificate and of any Trust Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Trust Certificate. The Trust Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the holders of any of the Trust Certificates. As provided in the Trust Agreement and subject to certain limitations therein set forth, the transfer of this Trust Certificate is registerable in the Certificate Register upon surrender of this Trust Certificate for registration of transfer at the offices or agencies of the Certificate Registrar maintained by the Owner Trustee in the [ ], accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the holder hereof or such holder's attorney duly authorized in writing, and thereupon one or more new Trust Certificates in authorized denominations evidencing the same aggregate interest in the Trust will be issued to the designated transferee. The initial Certificate Registrar appointed under the Trust Agreement is the Owner Trustee. As provided in the Trust Agreement and subject to certain limitations therein set forth, Trust Certificates are exchangeable for new Trust Certificates in authorized denominations evidencing the same aggregate denomination, as requested by the holder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Owner Trustee, the Certificate Registrar and any agent of the Owner Trustee or the Certificate Registrar may treat the person in whose name this Trust Certificate is registered as the owner hereof for all purposes, and none of the Owner Trustee, the Certificate Registrar or any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Trust Agreement and the Trust created thereby shall terminate upon the payment to Certificateholders of all amounts required to be paid to them pursuant to the Trust Agreement and the Sale and Servicing Agreement and the disposition of all property held as part of the Owner Trust Estate. The Servicer may at its option purchase the corpus of the Trust at a price specified in the Sale and Servicing Agreement, and such purchase of the Receivables and other property of the Trust will effect early retirement of the Trust Certificates; however, such right of purchase is exercisable, subject to certain restrictions, only as of the last day of any Collection Period as of which the Pool Balance is 5% or less of the Initial Pool Balance. In addition, if the Servicer does not exercise its option to purchase the Receivables within 90 days after the last day of the Collection Period as of which such right can first be exercised, an auction sale shall be conducted (as described in the Sale and Servicing Agreement) and such auction shall effect early retirement of the Certificates. ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (Please print or type name and address, including postal zip code, of assignee) the within Trust Certificate, and all rights thereunder, hereby irrevocably constituting and appointing _______________________________________________ Attorney to transfer said Trust Certificate on the books of the Trust Certificate Registrar, with full power of substitution in the premises. Dated: * Signature Guaranteed: * - -------------------------- *NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Trust Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Certificate Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Certificate Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. EXHIBIT B [FORM OF] CERTIFICATE OF TRUST OF [ ] THIS Certificate of Trust of [ ] (the "Trust"), is being duly executed and filed by[ ], a [ ] banking corporation, as trustee, to form a business trust under the Delaware Business Trust Act (12 DEL. CODE, ss. 3801 ET SEQ.). 1. NAME. The name of the business trust formed hereby is [ ]. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust in the State of Delaware is _______________________, , , Delaware ___________________________________________, Attention: _____________________________. IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust, has executed this Certificate of Trust. ___________________________, not in its individual capacity but solely as owner trustee of the Trust. By:________________________________ Name: Title: EX-4.4.2 13 0013.txt EXHIBIT 4.4.2 TRUST AGREEMENT BETWEEN ACE SECURITIES CORP. SELLER AND OWNER TRUSTEE DATED AS OF ______, 20__ TABLE OF CONTENTS ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE 1.1 Definitions.......................................................5 ARTICLE II ORGANIZATION 2.1 Name..............................................................5 2.2 Office............................................................5 2.3 Purposes and Powers...............................................5 2.4 Appointment of Owner Trustee......................................6 2.5 Initial Capital Contribution of Owner Trust Estate................6 2.6 Declaration of Trust..............................................6 2.7 Liability of the Certificate Owners...............................7 2.8 Title to Trust Property...........................................7 2.9 Situs of Trust....................................................7 2.10 Representations and Warranties of the Seller......................7 2.11 Tax Treatment.....................................................8 ARTICLE III THE CERTIFICATES 3.1 [Intentionally Omitted]...........................................8 3.2 Form of the Certificates..........................................8 3.3 Execution, Authentication and Delivery............................9 3.4 Registration; Registration of Transfer and Exchange of Certificates......................................................10 3.5 Mutilated, Destroyed, Lost or Stolen Certificates.................11 3.6 Persons Deemed Certificateholders.................................12 3.7 Access to List of Certificateholders' Names and Addresses.........12 3.8 Maintenance of Corporate Trust Office.............................12 3.9 Appointment of Paying Agent.......................................13 3.10 Certificates Issued to Seller.....................................13 3.11 Book Entry Certificates...........................................13 3.12 Notices to Clearing Agency........................................14 3.14 Seller as Certificateholder.......................................15 ARTICLE IV ACTIONS BY OWNER TRUSTEE 4.1 Prior Notice to Certificateholders with Respect to Certain Matters...................................................15 4.2 Action by Certificateholders with Respect to Certain Matters......16 4.3 Action by Certificateholders with Respect to Bankruptcy...........16 4.4 Restrictions on Certificateholders' Power.........................16 ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES 5.1 Establishment of Certificate Distribution Account.................17 5.2 Application of Trust Funds........................................17 5.3 Method of Payment.................................................18 5.4 Accounting and Reports to the Certificateholders, the Internal Revenue Service and Others...............................19 5.5 Signature on Returns; Tax Matters Partner.........................19 ARTICLE VI THE OWNER TRUSTEE 6.1 Duties of Owner Trustee...........................................19 6.2 Rights of Owner Trustee...........................................20 6.3 Acceptance of Trusts and Duties...................................20 6.4 Action upon Instruction by Certificateholders.....................22 6.5 Furnishing of Documents...........................................23 6.6 Representations and Warranties of Owner Trustee...................23 6.7 Reliance; Advice of Counsel.......................................24 6.8 Owner Trustee May Own Certificates and Notes......................24 6.9 Compensation and Indemnity........................................24 6.10 Replacement of Owner Trustee......................................25 6.11 Merger or Consolidation of Owner Trustee..........................26 6.12 Appointment of Co-Trustee or Separate Trustee.....................26 6.13 Eligibility Requirements for Owner Trustee........................27 ARTICLE VII TERMINATION OF TRUST AGREEMENT 7.1 Termination of Trust Agreement....................................28 7.2 [Reserved]........................................................30 ARTICLE VIII AMENDMENTS 8.1 Amendments Without Consent of Securityholders.....................30 8.2 Amendments With Consent of Certificateholders and Noteholders.....30 8.3 Form of Amendments................................................31 ARTICLE IX MISCELLANEOUS 9.1 No Legal Title to Owner Trust Estate..............................32 9.2 Limitations on Rights of Others...................................32 9.3 Derivative Actions................................................32 9.4 Notices...........................................................32 9.5 Severability of Provisions........................................33 9.6 Counterparts......................................................33 9.7 Successors and Assigns............................................33 9.8 No Petition Covenants.............................................33 9.9 No Recourse.......................................................33 9.10 Headings..........................................................34 9.11 GOVERNING LAW.....................................................34 9.12 Certificate Transfer Restrictions.................................34 9.13 Indemnification by and Reimbursement of the Servicer..............35 EXHIBITS Exhibit A Form of Certificate Exhibit B Form of Certificate of Trust Exhibit C Form of Undertaking Letter Exhibit D Form of Investor Letter Exhibit E Form of Certificate Depository Agreement THIS TRUST AGREEMENT, dated as of __________, 20__, between ACE Securities Corp., a Delaware corporation, as Seller, and _____________________ as Owner Trustee. In consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions. Certain capitalized terms used in this Agreement shall have the respective meanings assigned to them in Part I of Appendix A to the Trust Sale and Servicing Agreement of even date herewith, among the Seller, the Servicer and the Trust (the "Trust Sale and Servicing Agreement"). All references herein to "the Agreement" or "this Agreement" are to the Trust Agreement as it may be amended and supplemented from time to time, and all references herein to Articles, Sections and subsections are to Articles, Sections and subsections of this Agreement unless otherwise specified. The rules of construction set forth in Part II of such Appendix shall be applicable to this Agreement. ARTICLE II ORGANIZATION SECTION 2.1 Name. The Trust created hereby shall be known as " __________" in which name the Owner Trustee may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued on behalf of the Trust. SECTION 2.2 Office. The office of the Trust shall be in care of the Owner Trustee at the Corporate Trust Office or at such other address in [state] as the Owner Trustee may designate by written notice to the Certificate Owners and the Seller. SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust is, and the Trust shall have the power and authority, to engage in the following activities: (i) to acquire, manage and hold the Receivables to be transferred to the Trust from time to time pursuant to the Trust Sale and Servicing Agreement; (ii) to issue and sell the Notes pursuant to the Indenture or to another indenture, note purchase agreement or similar agreement and the Certificates pursuant to this Agreement, and to sell, transfer or exchange the Notes and the Certificates; (iii) to acquire property and assets from the Seller pursuant to the Trust Sale and Servicing Agreement, to make payments or distributions on the Securities, to make withdrawals from the Reserve Fund and other accounts established pursuant to the Basic Documents and to pay the organizational, start-up and transactional expenses of the Trust; (iv) to establish, acquire, hold and terminate liquidity, credit and other enhancement arrangements, including each basis swap and other Specified Support Arrangement from time to time, and perform its obligations thereunder; (v) to assign, grant, transfer, pledge, mortgage and convey the Trust Estate pursuant to the terms of the Indenture and to hold, manage and distribute to the Certificate Owners pursuant to the terms of this Agreement and the Trust Sale and Servicing Agreement any portion of the Trust Estate released from the lien of, and remitted to the Trust pursuant to, the Indenture; (vi) to enter into and perform its obligations and exercise its rights under the Basic Documents to which it is to be a party; (vii) to engage in those activities, including entering into agreements, that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith; and (viii) subject to compliance with the Basic Documents, to engage in such other activities as may be required in connection with conservation of the Owner Trust Estate and the making of distributions to the Securityholders. The Trust shall not engage in any activity other than in connection with the foregoing or other than as required or authorized by the terms of this Agreement or the Basic Documents. SECTION 2.4 Appointment of Owner Trustee. The Seller hereby appoints the Owner Trustee as trustee of the Trust effective as of the date hereof, to have all the rights, powers and duties set forth herein. SECTION 2.5 Initial Capital Contribution of Owner Trust Estate. The Seller hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges receipt in trust from the Seller, as of the date hereof, of the foregoing contribution, which shall constitute the initial Owner Trust Estate and shall be deposited in the Certificate Distribution Account. The Seller shall pay organizational expenses of the Trust as they may arise or shall, upon the request of the Owner Trustee, promptly reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. SECTION 2.6 Declaration of Trust. The Owner Trustee hereby declares that it shall hold the Owner Trust Estate in trust upon and subject to the conditions and obligations set forth herein and in the Trust Sale and Servicing Agreement for the use and benefit of the Certificate Owners, subject to the obligations of the Trust under the Basic Documents. It is the intention of the parties hereto that the Trust constitute a business trust under the Business Trust Statute, that this Agreement constitute the governing instrument of such business trust and that the Certificates represent the equity interests therein. The rights of the Certificateholders shall be determined as set forth herein and in the Business Trust Statute and the relationship between the parties created by this Agreement shall not constitute indebtedness. The parties hereto agree that, unless otherwise required by appropriate taxing authorities, the Trust shall file or cause to be filed annual or other necessary returns, reports and other forms consistent with the characterization of the Trust as a partnership for such tax purposes. Effective as of the date hereof, the Owner Trustee shall have all rights, powers and duties set forth in this Agreement, the Trust Sale and Servicing Agreement and the Business Trust Statute with respect to accomplishing the purposes of the Trust. The Owner Trustee agrees to file the certificate required under ss. 3810 et seq. of the Business Trust Statute in connection with the formation of the Trust as a business trust under the Business Trust Statute. SECTION 2.7 Liability of the Certificate Owners. Certificateholders and holders of beneficial interests in Certificates shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the Delaware General Corporation Law. SECTION 2.8 Title to Trust Property. Legal title to all the Owner Trust Estate shall be vested at all times in the Trust as a separate legal entity except where applicable law in any jurisdiction requires title to any part of the Owner Trust Estate to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case may be. SECTION 2.9 Situs of Trust. The Trust shall be located and administered in the State of Delaware. All bank accounts maintained by the Owner Trustee on behalf of the Trust shall be located in the State of Delaware or the State of New York. The Trust shall not have any employees in any state other than Delaware; provided, however, that nothing herein shall restrict or prohibit the Owner Trustee from having employees within or without the State of Delaware. Payments shall be received by the Trust only in Delaware or New York, payments and distributions shall be made by the Trust only from Delaware or New York. The only office of the Trust shall be the Corporate Trust Office in Delaware. SECTION 2.10 Representations and Warranties of the Seller. The Seller hereby represents and warrants to the Owner Trustee that: (a) The Seller has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently conducted, and had at all relevant times, and now has, power, authority and legal right to acquire and own the Receivables contemplated to be transferred to the Trust pursuant to the Trust Sale and Servicing Agreement. (b) The Seller is duly qualified to do business and, where necessary is in good standing (or is exempt from such requirement), and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualifications, except where the failure to so qualify or obtain licenses or approvals would not have a material adverse effect on its ability to perform its obligations under the Basic Documents to which it is a party. (c) The Seller has the power and authority to execute and deliver this Agreement, to carry out its terms and to consummate the transactions contemplated herein; and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by the Seller by all necessary corporate action. (d) The execution of this Agreement and the consummation of the transactions contemplated herein by the Seller and the fulfillment of the terms of this Agreement by the Seller shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice or lapse of time) a default under, the certificate of incorporation or by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument (other than pursuant to the Basic Documents), or violate any law or, to the best of the Seller's knowledge, any order, rule or regulation applicable to the Seller of any Governmental Authority having jurisdiction over the Seller or any of its properties. SECTION 2.11 Tax Treatment. The Seller and Owner Trustee, by entering into this Agreement, and the Certificateholders and the Certificate Owners, by acquiring any Certificate or interest in the Trust, (i) express their intention that the Certificates shall qualify under applicable tax law as partnership interests in a partnership, with the assets of the partnership held by the Trust, (ii) unless otherwise required by appropriate taxing authorities, agree to treat the Certificates as partnership interests for purposes of federal, state and local income and franchise taxes, [state] single business tax and any other taxes imposed upon, measured by or based upon gross or net income, and (iii) agree that immediately upon there being more than one owner of Certificates, Section 5.5 of this Agreement will become applicable. ARTICLE III THE CERTIFICATES SECTION 3.1 [Intentionally Omitted]. SECTION 3.2 Form of the Certificates. (a) The Certificates shall be issued in denominations of at least $ (or such other amount as the Seller may determine in order to prevent the Trust from being treated as a "publicly traded partnership" under Section 7704 of the Code, but in no event less than $ ). The Certificates shall represent the entire beneficial interest in the Trust. The Certificates shall be executed on behalf of the Trust by manual or facsimile signature of a Responsible Officer of the Owner Trustee. Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be duly issued, fully paid and non-assessable beneficial interests in the Trust, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such offices at the date of authentication and delivery of such Certificates. (b) The Definitive Certificates, if and when issued in accordance with the terms applicable to the relevant class of Certificates, shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders) all as determined by the officers executing such Certificates, as evidenced by their execution of such Certificates. (c) The Certificates shall be issued in fully-registered form. The Class ______ Certificates will be substantially in the form set forth in Exhibit A to this Agreement. The Certificates of any other class will be substantially in the form attached to the Certificate Issuance Order pursuant to which Certificates of such other class are issued for the first time. The terms of any Certificates as set forth in the form attached to this Agreement or a Certificate Issuance Order, as the case may be, shall form part of this Agreement. SECTION 3.3 Execution, Authentication and Delivery. (a) On the Initial Closing Date, concurrently with the initial sale, transfer and assignment of Receivables to the Trust pursuant to the Trust Sale and Servicing Agreement, the Owner Trustee shall cause Certificates with an aggregate initial Certificate Balance equal to $ to be executed on behalf of the Trust, authenticated and delivered to or upon the written order of the Seller, signed by its chairman of the board, its president or any vice president, without further corporate action by the Seller, in authorized denominations. Such Certificates shall be designated as Floating Rate Asset Backed Certificates, , and the Certificate Rate for such Certificates shall equal, with respect to any Certificate Payment Date, the product of (i) a fraction, the numerator of which is the number of days elapsed from and including the prior Certificate Payment Date (or, in the case of the initial Certificate Payment Date, from and including the Initial Closing Date) to but excluding such Certificate Payment Date and the denominator of which is 360 and (ii) USD Three-Month LIBOR plus % per annum. "Certificate Payment Date" for the Certificates is the 15th day of each month, or if such day is not a Business Day, the next succeeding Business Day. (b) From time to time after the Initial Closing Date, at the direction of the Seller (a "Certificate Issuance Order"), and upon satisfaction of the conditions set forth in Section 4.9 of the Trust Sale and Servicing Agreement, the Owner Trustee shall cause additional Certificates of any class theretofore issued, or Certificates of a new class, with an aggregate initial Certificate Balance specified by the Seller, to be executed on behalf of the Trust, authenticated and delivered to or upon the written order of the Seller, signed by its chairman of the board, its president or any vice president, without further corporate action by the Seller, in authorized denominations. All such Certificates shall have the terms, provisions and rights specified in the related Certificate Issuance Order for such class of Certificates, may have a different Certificate Rate than the Certificates of any other class, and may be issued in book entry form pursuant to Section 3.11 hereof. The Certificate Rate for any such Certificates issued after the Initial Closing Date shall be set forth in the related Certificate Issuance Order. The terms of any Certificates as provided in a Certificate Issuance Order shall be considered terms of this Agreement. Any Certificate Issuance Order issued pursuant to this Section shall be considered a part of this Agreement. (c) No Certificate of any class shall entitle its holder to any benefit under this Agreement, or shall be valid for any purpose, unless there shall appear on such Certificate a certificate of authentication substantially in the form set forth in Exhibit A, executed by the Owner Trustee or the Owner Trustee's authenticating agent, by manual signature. Such authentication shall constitute conclusive evidence that such Certificate shall have been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. [ ] is hereby appointed as the Owner Trustee's authenticating agent. SECTION 3.4 Registration; Registration of Transfer and Exchange of Certificates. (a) The Certificate Registrar shall keep or cause to be kept, at the office or agency maintained pursuant to Section 3.8, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Owner Trustee shall provide for the registration of Certificates and of transfers and exchanges of Certificates as provided herein; provided, however, that no Certificate may be subdivided upon transfer or exchange in a manner such that the resulting Certificate if it had been sold in the original offering would have had an initial offering price of less than $ (or such other amount as the Seller may determine in order to prevent the Trust from being treated as a "publicly traded partnership" under Section 7704 of the Code, but in no event less than $ ) and any attempted transfer of a Certificate in contravention of this restriction shall be void ab initio and the purported transferor shall continue to be treated as the owner of such Certificate for all purposes. shall be the initial Certificate Registrar. Upon any resignation of a Certificate Registrar, the Owner Trustee shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Certificate Registrar. (b) Upon surrender for registration of transfer of any Certificate at the office or agency maintained pursuant to Section 3.8, the Owner Trustee shall execute on behalf of the Trust, authenticate and deliver (or shall cause , as its authenticating agent to authenticate and deliver), in the name of the designated transferee or transferees, one or more new Certificates of the same class in authorized denominations of a like aggregate amount dated the date of authentication by the Owner Trustee or any authenticating agent. (c) At the option of a Holder, Certificates may be exchanged for other Certificates of the same class in authorized denominations of a like amount upon surrender of the Certificates to be exchanged at the Corporate Trust Office maintained pursuant to Section 3.8. Whenever any Certificates are so surrendered for exchange, the Owner Trustee shall execute on behalf of the Trust, authenticate and deliver (or shall cause , as its authenticating agent, to authenticate and deliver) one or more Certificates dated the date of authentication by the Owner Trustee or any authenticating agent. Such Certificates shall be delivered to the Holder making the exchange. (d) Every Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the Holder or his attorney duly authorized in writing and such other documents and instruments as may be required by Section 9.12. Each Certificate surrendered for registration of transfer or exchange shall be canceled and subsequently destroyed by the Owner Trustee or Certificate Registrar in accordance with its customary practice. The Owner Trustee shall certify to the Seller that surrendered Certificates have been duly canceled and retained or destroyed, as the case may be. (e) No service charge shall be made for any registration of transfer or exchange of Certificates, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates. (a) If (i) any mutilated Certificate is surrendered to the Certificate Registrar, or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (ii) there is delivered to the Certificate Registrar, the Owner Trustee and the Trust such security or indemnity as may be required by them to hold each of them harmless, then, in the absence of notice to the Certificate Registrar or the Owner Trustee that such Certificate has been acquired by a protected purchaser, the Owner Trustee shall execute on behalf of the Trust and the Owner Trustee shall authenticate and deliver (or shall cause , as its authenticating agent, to authenticate and deliver), in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a replacement Certificate of the same class in authorized denominations of a like amount; provided, however, that if any such destroyed, lost or stolen Certificate, but not a mutilated Certificate, shall have become or within seven days shall be due and payable, then instead of issuing a replacement Certificate the Owner Trustee may pay distributions to such destroyed, lost or stolen Certificate when so due or payable. (b) If, after the delivery of a replacement Certificate or distribution in respect of a destroyed, lost or stolen Certificate pursuant to subsection 3.5(a), a protected bona fide purchaser of the original Certificate in lieu of which such replacement Certificate was issued presents for payment such original Certificate, the Owner Trustee shall be entitled to recover such replacement Certificate (and any distributions or payments made with respect thereto) from the Person to whom it was delivered or any Person taking such replacement Certificate from such Person to whom such replacement Certificate was delivered or any assignee of such Person, except a protected bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Owner Trustee in connection therewith. (c) In connection with the issuance of any replacement Certificate under this Section 3.5, the Owner Trustee may require the payment by the Holder of such Certificate of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Owner Trustee and the Certificate Registrar) connected therewith. (d) Any duplicate Certificate issued pursuant to this Section 3.5 in replacement of any mutilated, destroyed, lost or stolen Certificate shall constitute an original additional beneficial interest in the Trust, whether or not the mutilated, destroyed, lost or stolen Certificate shall be found at any time or be enforced by anyone, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Certificates duly issued hereunder. (e) The provisions of this Section 3.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. SECTION 3.6 Persons Deemed Certificateholders. Prior to due presentation of a Certificate for registration of transfer, the Owner Trustee or the Certificate Registrar may treat the Person in whose name any Certificate shall be registered in the Certificate Register as the Certificateholder of such Certificate for the purpose of receiving distributions pursuant to Article V and for all other purposes whatsoever, and neither the Owner Trustee nor the Certificate Registrar shall be affected by any notice to the contrary. SECTION 3.7 Access to List of Certificateholders' Names and Addresses. The Owner Trustee shall furnish or cause to be furnished to the Servicer and the Seller, within 15 days after receipt by the Owner Trustee of a request therefor from the Servicer or the Seller in writing, a list, in such form as the Servicer or the Seller may reasonably require, of the names and addresses of the Certificateholders as of the most recent Record Date. Each Holder, by receiving and holding a Certificate, shall be deemed to have agreed not to hold any of the Servicer, the Seller or the Owner Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. SECTION 3.8 Maintenance of Corporate Trust Office. The Owner Trustee shall maintain in the City of New York an office or offices or agency or agencies where Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Owner Trustee in respect of the Certificates and the Basic Documents may be served. The Owner Trustee initially designates the offices of , as its principal office for such purposes. The Owner Trustee shall give prompt written notice to the Seller and to the Certificateholders of any change in the location of the Certificate Register or any such office or agency. SECTION 3.9 Appointment of Paying Agent. The Paying Agent shall make distributions to Certificateholders from the Certificate Distribution Account pursuant to Section 5.2 and shall report the amounts of such distributions to the Owner Trustee and the Servicer; provided that no such reports shall be required so long as the Seller is the sole Certificateholder. Any Paying Agent shall have the revocable power to withdraw funds from the Certificate Distribution Account for the purpose of making the distributions referred to above. The Owner Trustee may revoke such power and remove the Paying Agent if the Owner Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect. The Paying Agent shall initially be ____________________. _____________________ shall be permitted to resign as Paying Agent upon 30 days' written notice to the Owner Trustee. If _______________________ shall no longer be the Paying Agent, the Owner Trustee shall appoint a successor to act as Paying Agent (which shall be a bank or trust company). The Owner Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Owner Trustee that as Paying Agent, such successor Paying Agent or additional Paying Agent shall hold all sums, if any, held by it for distribution to the Certificateholders in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to such Certificateholders. The Paying Agent shall return all unclaimed funds to the Owner Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Owner Trustee. The provisions of Sections 6.3, 6.6, 6.7 and 6.9 shall apply to the Owner Trustee also in its role as Paying Agent, for so long as the Owner Trustee shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. SECTION 3.10 Certificates Issued to Seller. On and after the Initial Closing Date, the Seller shall retain beneficial and record ownership of Certificates representing at least __% of the Certificate Balance of each class of Certificates. Certificates issued to the Seller shall be in definitive form only. SECTION 3.11 Book Entry Certificates. The Certificates to be issued on the Initial Closing Date (other than those described in Section 3.10) shall be issued as Book Entry Certificates and shall be subject to a Certificate Depository Agreement substantially in the form attached as Exhibit E hereto. Such Certificates shall be delivered to DTC, the initial Clearing Agency by or on behalf of the Trust and shall initially be registered on the Certificate Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no such Certificate Owner shall receive a Definitive Certificate. If, and to the extent, so provided in the related Certificate Issuance Order, Certificates to be issued after the Initial Closing Date (other than those described in Section 3.10) may be issued in the form of a typewritten certificate or certificates representing Book Entry Certificates. Any such Book Entry Certificate shall be delivered to the Clearing Agency by or on behalf of the Trust and shall be registered on the Certificate Register in the name of the Clearing Agency (or its nominee) and no Certificate Owner shall receive a Definitive Certificate. If and to the extent Book Entry Certificates have been issued pursuant to this Section 3.11 with respect to any Certificates: (a) the provisions of this Section 3.11 shall be in full force and effect; (b) the Certificate Registrar and the Owner Trustee shall be entitled to deal with the Clearing Agency for all purposes of this Agreement (including the distribution of Certificate Balance and interest on such Certificates and the giving of instructions or directions hereunder) as the sole Holder of such Certificates, and shall have no obligation to the Certificate Owners; (c) to the extent that the provisions of this Section 3.11 conflict with any other provisions of this Agreement, the provisions of this Section 3.11 shall control; (d) the rights of the Certificate Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency and/or the Clearing Agency Participants and, unless and until Definitive Certificates are issued pursuant to Section 3.13, the initial Clearing Agency shall make book entry transfers among the Clearing Agency Participants and receive and transmit distributions of Certificate Balance and interest on such Certificates to such Clearing Agency Participants; and (e) whenever this Agreement requires or permits actions to be taken based upon instructions or directions of Holders of Certificates evidencing a specified percentage of the Voting Interests, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received written instructions to such effect from Certificate Owners and/or Clearing Agency Participants owning or representing, respectively, such required percentage of Voting Interests and has delivered such instructions to the Owner Trustee. The Seller or the Owner Trustee may set a record date for the purpose of determining the identity of Holders of Certificates entitled to vote or to consent to any action by vote as provided in this Agreement. SECTION 3.12 Notices to Clearing Agency. With respect to any Certificates issued as Book Entry Certificates, whenever a notice or other communication to the Certificateholders is required under this Agreement, unless and until Definitive Certificates representing such Certificates shall have been issued to the related Certificate Owners pursuant to Section 3.13, the Owner Trustee shall give all such notices and communications specified herein to be given to the related Certificateholders to the Clearing Agency and shall have no further obligation to such Certificate Owners. SECTION 3.13 Termination of Book Entry Registration. If for any Certificates issued as Book Entry Certificates (i) the Administrator advises the Owner Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Certificates, and the Administrator is unable to locate a qualified successor, (ii) the Administrator at its option advises the Owner Trustee in writing that it elects to terminate the book entry system through the Clearing Agency or (iii) after the occurrence of an Event of Default or a Servicing Default, Certificate Owners representing beneficial interests aggregating at least a majority of the then outstanding Voting Interests advise the Clearing Agency in writing that the continuation of a book entry system through the Clearing Agency is no longer in the best interest of the Certificate Owners, then the Clearing Agency shall notify all Certificate Owners and the Owner Trustee of the occurrence of any such event and of the availability of Definitive Certificates to Certificate Owners requesting the same. Upon surrender to the Owner Trustee of the typewritten Certificate or Certificates representing Book Entry Certificates by the Clearing Agency, accompanied by registration instructions, the Owner Trustee shall execute and authenticate the related Definitive Certificates in accordance with the instructions of the Clearing Agency. Neither the Certificate Registrar nor the Owner Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. No Certificate Owner shall have the right to request that Definitive Certificates be issued to such Certificate Owner (or its nominee) or request that its interest be exchanged for a Definitive Certificate or Definitive Certificates other than in accordance with the foregoing provisions of this Section 3.13, unless, in respect of a class of Certificates other than the Class Certificates, the relevant Certificate Issuance Order provides otherwise. Upon the issuance of Definitive Certificates, the Owner Trustee shall recognize the Holders of such Definitive Certificates as Certificateholders. SECTION 3.14 Seller as Certificateholder. The Seller in its individual or any other capacity may become the owner or pledgee of Certificates and may otherwise deal with the Owner Trustee or its Affiliates as if it were not the Seller. ARTICLE IV ACTIONS BY OWNER TRUSTEE SECTION 4.1 Prior Notice to Certificateholders with Respect to Certain Matters. The Owner Trustee shall not take action with respect to the following matters, unless (i) the Owner Trustee shall have notified the Certificateholders in writing of the proposed action at least 30 days before the taking of such action, and (ii) the Certificateholders shall not have notified the Owner Trustee in writing prior to the 30th day after such notice is given that such Certificateholders have withheld consent or provided alternative direction: (a) the initiation of any claim or lawsuit by the Trust (other than an action to collect on a Receivable or an action by the Indenture Trustee pursuant to the Indenture) and the compromise of any action, claim or lawsuit brought by or against the Trust (other than an action to collect on a Receivable or an action by the Indenture Trustee pursuant to the Indenture); (b) the election by the Trust to file an amendment to the Certificate of Trust, a conformed copy of which is attached hereto as Exhibit B; (c) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is required; (d) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is not required and such amendment materially adversely affects the interest of the Certificateholders (it being understood that the issuance of additional Certificates as contemplated by Section 3.3 shall not be deemed to materially adversely affect the interests of the Certificateholders); (e) the amendment, change or modification of the Administration Agreement, except to cure any ambiguity or to amend or supplement any provision in a manner that would not materially adversely affect the interests of the Certificateholders; or (f) the appointment pursuant to the Indenture of a successor Note Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a successor Certificate Registrar, or the consent to the assignment by the Note Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its obligations under the Indenture or this Agreement, as applicable. SECTION 4.2 Action by Certificateholders with Respect to Certain Matters. The Owner Trustee shall not have the power, except upon the written direction of the Certificateholders, to (a) remove the Administrator under the Administration Agreement pursuant to Section 10 thereof, (b) appoint a successor Administrator pursuant to Section 10 of the Administration Agreement, (c) remove the Servicer under the Trust Sale and Servicing Agreement pursuant to Section 8.2 thereof or (d) except as expressly provided in the Basic Documents, sell the Receivables transferred to the Trust pursuant to the Trust Sale and Servicing Agreement or any interest therein after the termination of the Indenture. The Owner Trustee shall take the actions referred to in the preceding sentence only upon the affirmative vote of, or a written consent signed by, the holders of a majority of the Voting Interests upon at least 30 days prior notice thereof. SECTION 4.3 Action by Certificateholders with Respect to Bankruptcy. The Owner Trustee shall not have the power to commence a voluntary proceeding in bankruptcy relating to the Trust without the unanimous prior approval of all Holders of Certificates (including the Seller) and the delivery to the Owner Trustee by each such Certificateholder of a certificate certifying that such Certificateholder reasonably believes that the Trust is insolvent. By its acceptance of any Certificate issued to it on any Closing Date, the Seller agrees that it, at any time that it is the holder thereof, shall not approve or be deemed to have approved the commencement of a voluntary proceeding in bankruptcy relating to the Trust for purposes of this Section 4.3 unless such commencement is approved by the affirmative vote of all of the members of the Seller's board of directors. SECTION 4.4 Restrictions on Certificateholders' Power. The Certificateholders shall not direct the Owner Trustee to take or refrain from taking any action if such action or inaction would be contrary to any obligation of the Trust or the Owner Trustee under this Agreement or any of the Basic Documents or would be contrary to Section 2.3, nor shall the Owner Trustee be obligated to follow any such direction, if given. SECTION 4.5 Majority Control. Except as expressly provided herein, any action that may be taken or consent that may be given or withheld by the Certificateholders under this Agreement shall be effective if such action is taken or such consent is given or withheld by the Holders of Certificates evidencing not less than a majority of the Voting Interests thereof. Except as expressly provided herein, any written notice of the Certificateholders delivered pursuant to this Agreement shall be effective if signed by Holders of Certificates evidencing not less than a majority of the Voting Interests at the time of the delivery of such notice. ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES SECTION 5.1 Establishment of Certificate Distribution Account. (a) The Servicer, for the benefit of the Certificateholders, shall establish and maintain in the name of the Owner Trustee an Eligible Deposit Account known as the Certificate Distribution Account (the "Certificate Distribution Account"), bearing an additional designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders. The Certificate Distribution Account shall initially be established with . (b) The Owner Trustee shall possess all right, title and interest in and to all funds on deposit from time to time in the Certificate Distribution Account and in all proceeds thereof (except Investment Proceeds therefrom as set forth in the Trust Sale and Servicing Agreement) for the benefit of the Certificateholders. Except as otherwise provided herein or in the Trust Sale and Servicing Agreement, the Certificate Distribution Account shall be under the sole dominion and control of the Owner Trustee for the benefit of the Certificateholders. If, at any time, the Certificate Distribution Account ceases to be an Eligible Deposit Account, the Owner Trustee (or the Servicer on behalf of the Owner Trustee, if the Certificate Distribution Account is not then held by the Owner Trustee or an Affiliate thereof) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Certificate Distribution Account as an Eligible Deposit Account and shall transfer any cash and/or any investments to such new Certificate Distribution Account. SECTION 5.2 Application of Trust Funds. (a) On each Certificate Payment Date, the Owner Trustee shall distribute to the Certificateholders the amounts deposited in the Certificate Distribution Account pursuant to Section 4.5 of the Trust Sale and Servicing Agreement with respect to such Certificate Payment Date (i) to the extent of the amount deposited with respect to Aggregate Certificateholders' Interest, pro rata based upon the amount of interest due with respect to each Certificate and (ii) to the extent of any amount deposited with respect to Aggregate Certificateholder's Principal, on a pro rata basis. (b) On each Certificate Payment Date, the Owner Trustee shall include with each distribution to each Certificateholder the statement provided to the Owner Trustee by the Servicer pursuant to Section 4.8 of the Trust Sale and Servicing Agreement in respect of such Certificate Payment Date setting forth, among other things, the amount of the distribution allocable to Certificate Balance and to interest, the Certificate Balance after giving effect to such distribution, the balance of the Reserve Fund (and amounts, if any, distributed from the Reserve Fund), and the Monthly Servicing Fee with respect to the Certificate Payment Date or the related Collection Period, as applicable, each since the last statement so provided to such Certificateholders; provided that no such statement shall be required to be sent by the Owner Trustee so long as the Seller is the sole Certificateholder. (c) If any withholding tax is imposed on the Trust's distribution (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to the Certificateholder in accordance with this Section 5.2; provided that the Owner Trustee shall not have an obligation to withhold any such amount so long as the Seller is the sole Certificateholder. The Owner Trustee is hereby authorized and directed to retain from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax that is legally owed by the Trust (but such authorization shall not prevent the Owner Trustee from contesting any such tax in appropriate proceedings and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to such Certificateholder at the time it is withheld by the Trust and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution (such as a distribution to a non-U.S. Certificateholder), the Owner Trustee may in its sole discretion withhold such amounts in accordance with this subsection 5.2(c). If a Certificateholder wishes to apply for a refund of any such withholding tax, the Owner Trustee shall reasonably cooperate with such Certificateholder in making such claim so long as such Certificateholder agrees to reimburse the Owner Trustee for any out-of-pocket expenses incurred. (d) If the Indenture Trustee holds escheated funds for payment to the Trust pursuant to Section 3.3(e) of the Indenture, the Owner Trustee shall, upon notice from the Indenture Trustee that such funds exist, submit on behalf of the Trust an Issuer Order to the Indenture Trustee pursuant to Section 3.3(e) of the Indenture instructing the Indenture Trustee to pay such funds to or at the order of the Seller. SECTION 5.3 Method of Payment. Subject to Section 7.1(c) and subject to the right of the Owner Trustee and the Clearing Agency to agree otherwise in the case of Book Entry Certificates, distributions required to be made to Certificateholders of any class on any Certificate Payment Date shall be made to each Certificateholder of record of such class on the related Record Date either by wire transfer, in immediately available funds, to the account of such Holder at a bank or other entity having appropriate facilities therefor, if such Certificateholder shall have provided to the Certificate Registrar appropriate written instructions at least five Business Days prior to such Record Date, or, if not, by check mailed to such Certificateholder at the address of such Holder appearing in the Certificate Register. SECTION 5.4 Accounting and Reports to the Certificateholders, the Internal Revenue Service and Others. The Owner Trustee shall (a) maintain (or cause to be maintained) the books of the Trust on a calendar year basis on the accrual method of accounting, (b) deliver to each Certificateholder, as may be required by the Code and applicable Treasury Regulations or otherwise, such information as may be required to enable each Certificateholder to prepare its federal income tax return, (c) file such tax returns relating to the Trust and make such elections as may from time to time be required or appropriate under any applicable state or federal statute or rule or regulation thereunder so as to maintain the Trust's characterization as a partnership for federal income tax purposes, (d) cause such tax returns to be signed in the manner required by law and (e) collect or cause to be collected any withholding tax as described in and in accordance with subsection 5.2(c) with respect to income or distributions to Certificateholders. In preparing and filing tax returns for the Trust, the Owner Trustee shall allocate taxable income of the Trust for each Collection Period in the following manner: (A) to the Certificateholders, an amount equal to the sum of (1) interest distributable on the Certificates on the Certificate Payment Date related to such Collection Period and (2) any Trust income attributable to discount on the Receivables that corresponds to any excess of the Certificate Balance of the Certificates over their initial issue price; and (B) to the Seller, if and to the extent that the taxable income of the Trust for such Collection Period exceeds the amount computed under (A) above. Unless otherwise permitted or required by any applicable law or regulation, the Owner Trustee shall allocate amounts of taxable income of the Trust for a particular Collection Period among the Certificateholders in proportion to the Certificate Balance owned by them as of the Record Date for the related Certificate Payment Date. SECTION 5.5 Signature on Returns; Tax Matters Partner. Subject to Section 2.11, the Owner Trustee shall sign on behalf of the Trust any and all tax returns of the Trust, unless applicable law requires a Certificateholder to sign such documents, in which case such documents shall be signed by the Seller. The Seller shall be the "tax matters partner" of the Trust pursuant to the Code. ARTICLE VI THE OWNER TRUSTEE SECTION 6.1 Duties of Owner Trustee. (a) The Owner Trustee undertakes to perform such duties, and only such duties, as are specifically set forth in this Agreement and the other Basic Documents, including the administration of the Trust in the interest of the Certificateholders, subject to the Basic Documents and in accordance with the provisions of this Agreement. No implied covenants or obligations shall be read into this Agreement. (b) Notwithstanding the foregoing, the Owner Trustee shall be deemed to have discharged its duties and responsibilities hereunder and under the Basic Documents to the extent the Administrator has agreed in the Administration Agreement to perform any act or to discharge any duty of the Owner Trustee hereunder or under any Basic Document, and the Owner Trustee shall not be liable for the default or failure of the Administrator to carry out its obligations under the Administration Agreement. (c) In the absence of bad faith on its part, the Owner Trustee may conclusively rely upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement in determining the truth of the statements and the correctness of the opinions contained therein; provided, however, that the Owner Trustee shall have examined such certificates or opinions so as to determine compliance of the same with the requirements of this Agreement. (d) The Owner Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this subsection 6.1(d) shall not limit the effect of subsection 6.1(a) or (b); (ii) the Owner Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Owner Trustee was negligent in ascertaining the pertinent facts; and (iii) the Owner Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 4.1, 4.2 or 6.4. (e) Subject to Sections 5.1 and 5.2, monies received by the Owner Trustee hereunder need not be segregated in any manner except to the extent required by law or the Trust Sale and Servicing Agreement and may be deposited under such general conditions as may be prescribed by law, and the Owner Trustee shall not be liable for any interest thereon. (f) The Owner Trustee shall not take any action that (i) is inconsistent with the purposes of the Trust set forth in Section 2.3 or (ii) would, to the actual knowledge of a Responsible Officer of the Owner Trustee, result in the Trust's becoming taxable as a corporation for federal income tax purposes. (g) The Certificateholders shall not direct the Owner Trustee to take action that would violate the provisions of this Section 6.1. SECTION 6.2 Rights of Owner Trustee. The Owner Trustee is authorized and directed to execute and deliver the Basic Documents and each certificate or other document attached as an exhibit to or contemplated by the Basic Documents to which the Trust is to be a party, in such form as the Seller shall approve as evidenced conclusively by the Owner Trustee's execution thereof. In addition to the foregoing, the Owner Trustee is authorized, but shall not be obligated, to take all actions required of the Trust pursuant to the Basic Documents. The Owner Trustee is further authorized from time to time to take such action as the Administrator recommends with respect to the Basic Documents. SECTION 6.3 Acceptance of Trusts and Duties. Except as otherwise provided in this Article VI, in accepting the trusts hereby created, acts solely as Owner Trustee hereunder and not in its individual capacity and all Persons having any claim against the Owner Trustee by reason of the transactions contemplated by this Agreement or any Basic Document shall look only to the Owner Trust Estate for payment or satisfaction thereof. The Owner Trustee accepts the trusts hereby created and agrees to perform its duties hereunder with respect to such trusts but only upon the terms of this Agreement. The Owner Trustee also agrees to disburse all monies actually received by it constituting part of the Owner Trust Estate upon the terms of the Basic Documents and this Agreement. The Owner Trustee shall not be liable or accountable hereunder or under any Basic Document under any circumstances, except (i) for its own negligent action, its own negligent failure to act or its own wilful misconduct or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 6.6 and expressly made by the Owner Trustee. In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence): (a) the Owner Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Receivable held by the Trust, or the perfection and priority of any security interest created by any such Receivable in any Vehicle or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Owner Trust Estate or its ability to generate the distributions and payments to be made to Certificateholders under this Agreement or to Noteholders under the Indenture, including, without limitation: the existence and contents of any such Receivable on any computer or other record thereof; the validity of the assignment of any such Receivable to the Trust or of any intervening assignment; the completeness of any such Receivable; the performance or enforcement of any such Receivable; the compliance by the Seller or the Servicer with any warranty or representation made under any Basic Document or in any related document or the accuracy of any such warranty or representation or any action of the Administrator, the Trustee or the Servicer or any subservicer taken in the name of the Owner Trustee; (b) the Owner Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the instructions of the Administrator or any Certificateholder; (c) no provision of this Agreement or any Basic Document shall require the Owner Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder or under any Basic Document, if the Owner Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it; (d) under no circumstances shall the Owner Trustee be liable for indebtedness evidenced by or arising under any of the Basic Documents, including the principal of and interest on the Notes or the Certificate Balance of and interest on the Certificates; (e) the Owner Trustee shall not be responsible for or in respect of and makes no representation as to the validity or sufficiency of any provision of this Agreement or for the due execution hereof by the Seller or for the form, character, genuineness, sufficiency, value or validity of any of the Owner Trust Estate or for or in respect of the validity or sufficiency of the Basic Documents, the Notes, the Certificates (other than the certificate of authentication on the Certificates) or of any Receivables held by the Trust or any related documents, and the Owner Trustee shall in no event assume or incur any liability, duty or obligation to any Noteholder or to any Certificateholder, other than as expressly provided for herein and in the Basic Documents; (f) the Owner Trustee shall not be liable for the default or misconduct of the Administrator, the Indenture Trustee, the Seller or the Servicer under any of the Basic Documents or otherwise and the Owner Trustee shall have no obligation or liability to perform the obligations of the Trust under this Agreement or the Basic Documents that are required to be performed by the Administrator under the Administration Agreement, the Indenture Trustee under the Indenture or the Servicer under the Pooling and Servicing Agreement or the Trust Sale and Servicing Agreement; and (g) the Owner Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation under this Agreement or otherwise or in relation to this Agreement or any Basic Document, at the request, order or direction of any of the Certificateholders, unless such Certificateholders have offered to the Owner Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Agreement or in any Basic Document shall not be construed as a duty, and the Owner Trustee shall not be answerable for other than its negligence or wilful misconduct in the performance of any such act. SECTION 6.4 Action upon Instruction by Certificateholders. (a) Subject to Section 4.4, the Certificateholders may by written instruction direct the Owner Trustee in the management of the Trust. Such direction may be exercised at any time by written instruction of the Certificateholders pursuant to Section 4.5. (b) Notwithstanding the foregoing, the Owner Trustee shall not be required to take any action hereunder or under any Basic Document if the Owner Trustee shall have reasonably determined, or shall have been advised by counsel, that such action is likely to result in liability on the part of the Owner Trustee or is contrary to the terms hereof or of any Basic Document or is otherwise contrary to law. (c) Whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Agreement or any Basic Document, or is unsure as to the application, intent, interpretation or meaning of any provision of this Agreement or the Basic Documents, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction as to the course of action to be adopted, and, to the extent the Owner Trustee acts in good faith in accordance with any such instruction received, the Owner Trustee shall not be liable on account of such action to any Person. If the Owner Trustee shall not have received appropriate instructions within ten days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action which is consistent, in its view, with this Agreement or the Basic Documents, and as it shall deem to be in the best interests of the Certificateholders, and the Owner Trustee shall have no liability to any Person for any such action or inaction. SECTION 6.5 Furnishing of Documents. The Owner Trustee shall furnish (a) to the Certificateholders, promptly upon receipt of a written request therefor, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee under the Basic Documents and (b) to the Noteholders and the Certificateholders, promptly upon receipt of a written request therefor, copies of the Pooling and Servicing Agreement, the Trust Sale and Servicing Agreement, the Administration Agreement, the Custodian Agreement and this Agreement. SECTION 6.6 Representations and Warranties of Owner Trustee. The Owner Trustee hereby represents and warrants to the Seller, for the benefit of the Certificateholders, that: (a) It is a banking corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation. (b) It has full power, authority and legal right to execute, deliver and perform this Agreement, and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement. The eligibility requirements set forth in Section 6.13 are satisfied with respect to it. (c) The execution, delivery and performance by it of this Agreement (i) shall not violate any provision of any law or regulation governing the banking and trust powers of the Owner Trustee or any order, writ, judgment or decree of any court, arbitrator or governmental authority applicable to the Owner Trustee or any of its assets, (ii) shall not violate any provision of the corporate charter or by-laws of the Owner Trustee or (iii) shall not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have a materially adverse effect on the Owner Trustee's performance or ability to perform its duties as Owner Trustee under this Agreement or on the transactions contemplated in this Agreement. (d) The execution, delivery and performance by the Owner Trustee of this Agreement shall not require the authorization, consent or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any Governmental Authority regulating the banking and corporate trust activities of banks or trust companies in the jurisdiction in which the Trust was formed. (e) This Agreement has been duly executed and delivered by the Owner Trustee and constitutes the legal, valid and binding agreement of the Owner Trustee, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights in general and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. SECTION 6.7 Reliance; Advice of Counsel. (a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties and need not investigate any fact or matter in any such document. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of the determination of which is not specifically prescribed herein, the Owner Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter, and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. (b) In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Agreement or the Basic Documents, the Owner Trustee: (i) may act directly or through its agents, attorneys, custodians or nominees pursuant to agreements entered into with any of them, and the Owner Trustee shall not be liable for the conduct or misconduct of such agents, attorneys, custodians or nominees if such agents, attorneys, custodians or nominees shall have been selected by the Owner Trustee with reasonable care; and (ii) may consult with counsel, accountants and other skilled professionals to be selected with reasonable care and employed by it. The Owner Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the opinion or advice of any such counsel, accountants or other such Persons and not contrary to this Agreement or any Basic Document. SECTION 6.8 Owner Trustee May Own Certificates and Notes. The Owner Trustee in its individual or any other capacity may become the owner or pledgee of Certificates or Notes and may deal with the Seller, the Administrator, the Indenture Trustee and the Servicer in transactions in the same manner as it would have if it were not the Owner Trustee. SECTION 6.9 Compensation and Indemnity. The Owner Trustee shall receive as compensation for its services hereunder such fees as have been separately agreed upon before the date hereof between the Seller and the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Servicer for its other reasonable expenses hereunder, including the reasonable compensation, expenses and disbursements of such agents, custodians, nominees, representatives, experts and counsel as the Owner Trustee may employ in connection with the exercise and performance of its rights and its duties hereunder. The Servicer shall indemnify the Owner Trustee and its successors, assigns, agents and servants in accordance with the provisions of Section 7.1 of the Trust Sale and Servicing Agreement. The indemnities contained in this Section 6.9 shall survive the resignation or termination of the Owner Trustee or the termination of this Agreement. Any amounts paid to the Owner Trustee pursuant to this Article VI shall be deemed not to be a part of the Owner Trust Estate immediately after such payment. SECTION 6.10 Replacement of Owner Trustee. (a) The Owner Trustee may at any time give notice of its intent to resign and be discharged from the trusts hereby created by giving written notice thereof to the Administrator; provided that no such resignation shall become effective, and the Owner Trustee shall not resign, prior to the time set forth in Section 6.10(c). The Administrator may appoint a successor Owner Trustee by delivering written instrument, in duplicate, to the resigning Owner Trustee and the successor Owner Trustee. If no successor Owner Trustee shall have been appointed and have accepted appointment within 30 days after the giving of such notice, the resigning Owner Trustee giving such notice may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. The Administrator shall remove the Owner Trustee if: (i) the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 6.13 and shall fail to resign after written request therefor by the Administrator; (ii) the Owner Trustee shall be adjudged bankrupt or insolvent; (iii) a receiver or other public officer shall be appointed or take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; or (iv) the Owner Trustee shall otherwise be incapable of acting. (b) If the Owner Trustee resigns or is removed or if a vacancy exists in the office of Owner Trustee for any reason the Administrator shall promptly appoint a successor Owner Trustee by written instrument, in duplicate (one copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one copy to the successor Owner Trustee) and shall pay all fees owed to the outgoing Owner Trustee. (c) Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section 6.10 shall not become effective, and no such resignation shall be deemed to have occurred, until a written acceptance of appointment is delivered by the successor Owner Trustee to the outgoing Owner Trustee and the Administrator, and all fees and expenses due to the outgoing Owner Trustee are paid. Any successor Owner Trustee appointed pursuant to this Section 6.10 shall be eligible to act in such capacity in accordance with Section 6.13 and, following compliance with the preceding sentence, shall become fully vested with all the rights, powers, duties and obligations of its predecessor under this Agreement, with like effect as if originally named as Owner Trustee. The Administrator shall provide notice of such resignation or removal of the Owner Trustee to each of the Rating Agencies. (d) The predecessor Owner Trustee shall upon payment of its fees and expenses deliver to the successor Owner Trustee all documents and statements and monies held by it under this Agreement. The Administrator and the predecessor Owner Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties and obligations. (e) Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section 6.10, the Administrator shall mail notice of the successor of such Owner Trustee to all Certificateholders, the Indenture Trustee, the Noteholders and the Rating Agencies. SECTION 6.11 Merger or Consolidation of Owner Trustee. Any Person into which the Owner Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided such Person shall be eligible pursuant to Section 6.13, and without the execution or filing of any instrument or any further act on the part of any of the parties hereto; provided, however, that the Owner Trustee shall mail notice of such merger or consolidation to the Rating Agencies. SECTION 6.12 Appointment of Co-Trustee or Separate Trustee. (a) Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Owner Trust Estate or any of the Dealers may at the time be located, the Administrator and the Owner Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Owner Trustee to act as co-trustee, jointly with the Owner Trustee, or as separate trustee or trustees, of all or any part of the Owner Trust Estate, and to vest in such Person, in such capacity, such title to the Trust, or any part thereof, and, subject to the other provisions of this Section 6.12, such powers, duties, obligations, rights and trusts as the Administrator and the Owner Trustee may consider necessary or desirable. If the Administrator shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, the Owner Trustee alone shall have the power to make such appointment. No co-trustee or separate trustee under this Agreement shall be required to meet the terms of eligibility as a successor trustee pursuant to Section 6.13 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 6.10. (b) Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee; (ii) no trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under this Agreement; and (iii) the Administrator and the Owner Trustee acting jointly may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a copy thereof given to the Administrator. (d) Any separate trustee or co-trustee may at any time appoint the Owner Trustee as its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Owner Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 6.13 Eligibility Requirements for Owner Trustee. The Owner Trustee shall at all times satisfy the requirements of Section 26(a)(1) of the Investment Company Act. The Owner Trustee shall at all times: (a) be a corporation satisfying the provisions of Section 3807(a) of the Business Trust Statute; (b) be authorized to exercise corporate trust powers; (c) have an aggregate capital, surplus and undivided profits of at least $50,000,000 and be subject to supervision or examination by federal or state authorities; and (d) have (or have a parent which has) a long-term unsecured debt rating of at least by and at least Baa3 by Moody's. If such corporation shall publish reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section 6.13, the aggregate capital, surplus and undivided profits of such corporation shall be deemed to be its aggregate capital, surplus and undivided profits as set forth in its most recent report of condition so published. If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section 6.13, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 6.10. ARTICLE VII TERMINATION OF TRUST AGREEMENT SECTION 7.1 Termination of Trust Agreement. (a) The Trust shall terminate in accordance with Section 3808 of the Business Trust Statute on the date (the "Trust Termination Date") on which the first of the following occurs: (i) if the Seller so elects, the day following the Certificate Payment Date on which all amounts required to be paid to the Securityholders pursuant to the Basic Documents have been paid (or deposited in the related Distribution Account and the aggregate Outstanding Amount of the Revolving Notes is zero and (ii) the Specified Trust Termination Date. This Agreement and the obligations of the parties hereunder (other than Section 6.9 hereof and as otherwise expressly provided herein) shall terminate and be of no further force or effect (x) if the Trust Termination Date is determined pursuant to clause (i) above, on the Trust Termination Date and (y) if the Trust Termination Date is determined pursuant to clause (ii) above on the date following the Certificate Payment Date on which the final payments to be made to the Securityholders pursuant to the Basic Documents have been paid (or deposited in the appropriate Distribution Accounts). (b) The bankruptcy, liquidation, dissolution, death or incapacity of any Certificateholder shall not (x) operate to terminate this Agreement or the Trust, nor (y) 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 all or any part of the Trust or the Owner Trust Estate nor (z) otherwise affect the rights, obligations and liabilities of the parties hereto. Except as provided in Section 7.1(a), neither the Seller nor any Certificateholder shall be entitled to revoke or terminate the Trust or this Agreement. (c) Notice of any termination of the Trust specifying the Certificate Payment Date upon which the Certificateholders shall surrender their Certificates to the Paying Agent for distribution of the final distribution and cancellation, shall be given by the Owner Trustee by letter to Certificateholders mailed within five Business Days of receipt of notice of such termination from the Servicer given pursuant to Section 9.4 of the Trust Sale and Servicing Agreement, stating: (i) the Certificate Payment Date upon or with respect to which the final distribution of the Certificate Balance of the Certificates shall be made upon presentation and surrender of the Certificates at the office of the Paying Agent therein designated; (ii) the amount of any such final distribution of the Certificate Balance; and (iii) that the Record Date otherwise applicable to such Certificate Payment Date is not applicable, distributions being made only upon presentation and surrender of the Certificates at the office of the Paying Agent therein specified. The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates, the Paying Agent shall cause to be distributed to Certificateholders amounts distributable on such Certificate Payment Date pursuant to Section 5.2. (d) Notice of any termination of the Trust specifying the Certificate Payment Date upon which the Certificateholders shall surrender their Certificates to the Paying Agent for distribution of the final distribution and cancellation, shall be given by the Owner Trustee by letter to Certificateholders mailed within five Business Days of receipt of notice of such termination from the Servicer given pursuant to Section 9.4 of the Trust Sale and Servicing Agreement, stating: (i) the Certificate Payment Date upon or with respect to which the final distribution of the Certificate Balance of the Certificates shall be made upon presentation and surrender of the Certificates at the office of the Paying Agent therein designated; (ii) the amount of any such final distribution of the Certificate Balance; and (iii) that the Record Date otherwise applicable to such Certificate Payment Date is not applicable, distributions being made only upon presentation and surrender of the Certificates at the office of the Paying Agent therein specified. The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates, the Paying Agent shall cause to be distributed to Certificateholders amounts distributable on such Certificate Payment Date pursuant to Section 5.2. The Seller shall have the beneficial interest in any assets remaining in the Trust following final payment of the Certificates. (e) If all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the written notice specified in subsection 7.1(c), the Owner Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all the Certificates shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds and other assets that shall remain subject to this Agreement. Subject to applicable laws with respect to escheat of funds, any funds remaining in the Trust after exhaustion of such remedies in the preceding sentence shall be deemed property of the Seller and distributed by the Owner Trustee to the Seller and the Owner Trustee shall have no further liability to the Certificateholders with respect thereto. (f) Upon the winding up of the Trust and its termination, the Owner Trustee shall cause the Certificate of Trust to be canceled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of Section 3810 of the Business Trust Statute. SECTION 7.2 [Reserved]. ARTICLE VIII AMENDMENTS SECTION 8.1 Amendments Without Consent of Securityholders. This Agreement may be amended by the Seller and the Owner Trustee without the consent of any of the Securityholders (but with prior notice to the Rating Agencies) to: (i) cure any ambiguity, (ii) correct or supplement any provision in this Agreement that may be defective or inconsistent with any other provision in this Agreement, (iii) add or supplement any credit, liquidity or other enhancement arrangement for the benefit of any Securityholders (provided that if any such addition shall affect any series or class of Securityholders differently than any other series or class of Securityholders, then such addition shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any series or class of Securityholders), (iv) add to the covenants, restrictions or obligations of the Seller or the Owner Trustee for the benefit of the Securityholders, (v) evidence and provide for the acceptance of the appointment of a successor trustee with respect to the Owner Trust Estate and add to or change any provisions as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee pursuant to Article VI, (vi) restrict transfers of Certificates (or interests therein) or as otherwise required to prevent the Trust from being treated as a "publicly traded partnership" under Section 7704 of the Code, (vii) to add provisions to or delete or modify the existing provisions of this Agreement as appropriate to allow the Trust to issue foreign currency-denominated Notes, or (viii) add, change or eliminate any other provision of this Agreement in any manner that shall not, as evidenced by an Opinion of Counsel, materially and adversely affect the interests of the Securityholders. SECTION 8.2 Amendments With Consent of Certificateholders and Noteholders. This Agreement may be amended from time to time by the Seller and the Owner Trustee with the consent of Noteholders whose Notes evidence not less than a majority of the Outstanding Amount of the Notes as of the close of business on the preceding Monthly Certificate Payment Date and the consent of Certificateholders whose Certificates evidence not less than a majority of the Voting Interests as of the close of business on the preceding Monthly Certificate Payment Date (which consent, whether given pursuant to this Section 8.2 or pursuant to any other provision of this Agreement, shall be conclusive and binding on such Person and on all future Holders of such Notes or Certificates and of any Notes or Certificates issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made upon the Notes or Certificates for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, that no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, distributions that shall be required to be made on any Security without the consent of the Holder thereof (it being understood that the issuance of any Securities after the Initial Closing Date as contemplated by this Agreement, the Trust Sale and Servicing Agreement and the Indenture and the specification of the terms and provisions thereof pursuant to a Certificate Issuance Order (with respect to any Certificates) or an Officer's Issuance Certificate (with respect to any Notes) shall not be deemed to have such effect for purposes hereof), (b) adversely effect the rating of any series or class of Securities without the consent of the Holders of two-thirds of the Outstanding Amount of such series of Notes or the Voting Interests with respect to such class of Certificates, as appropriate or (c) reduce the aforesaid percentage required to consent to any such amendment, without the consent of the Holders of all of the Notes and all of the Voting Interests with respect to Certificates then outstanding. Prior to the execution of any such amendment, supplement or consent, the Owner Trustee shall furnish written notification of the substance of such amendment, supplement or consent to the Rating Agencies. SECTION 8.3 Form of Amendments. (a) Promptly after the execution of any amendment, supplement or consent pursuant to Section 8.1 or 8.2, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to each Certificateholder and the Indenture Trustee. (b) It shall not be necessary for the consent of Securityholders or the Indenture Trustee pursuant to Section 8.2 to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Securityholders provided for in this Agreement or in any other Basic Document) and of evidencing the authorization of the execution thereof by Securityholders shall be subject to such reasonable requirements as the Owner Trustee may prescribe. (c) Promptly after the execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause the filing of such amendment with the Secretary of State. (d) Prior to the execution of any amendment to this Agreement or the Certificate of Trust, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement. The Owner Trustee may, but shall not be obligated to, enter into any such amendment which affects the Owner Trustee's own rights, duties or immunities under this Agreement or otherwise. ARTICLE IX MISCELLANEOUS SECTION 9.1 No Legal Title to Owner Trust Estate. The Certificateholders shall not have legal title to any part of the Owner Trust Estate. The Certificateholders shall be entitled to receive distributions with respect to their undivided ownership interest therein only in accordance with Articles V and VII. No transfer, by operation of law or otherwise, of any right, title, and interest of the Certificateholders to and in their ownership interest in the Owner Trust Estate shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of legal title to any part of the Owner Trust Estate. SECTION 9.2 Limitations on Rights of Others. Except for Section 2.7, Section 7.1(c) and Section 9.13, the provisions of this Agreement are solely for the benefit of the Owner Trustee, the Seller, the Certificateholders, the Administrator and, to the extent expressly provided herein, the Indenture Trustee and the Noteholders, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Owner Trust Estate or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. SECTION 9.3 Derivative Actions. Any provision contained herein to the contrary notwithstanding, the right of any Certificate Owner to bring a derivative action in the right of the Trust is hereby made expressly subject to the following limitations and requirements: (a) such Certificate Owner must meet all requirements set forth in the Business Trust Statute; and (b) no Certificate Owner may bring a derivative action in the right of the Trust without the prior written consent of Certificate Owners owning, in the aggregate, a beneficial interest in Certificates representing __% of the then outstanding Certificate Balance. SECTION 9.4 Notices. (a) All demands, notices and communications upon or to the Seller, the Servicer, the Administrator, the Indenture Trustee, the Owner Trustee or the Rating Agencies under this Agreement shall be delivered as specified in Appendix B to the Trust Sale and Servicing Agreement. (b) Any notice required or permitted to be given to a Certificateholder shall be given by first-class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. SECTION 9.5 Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed enforceable to the fullest extent permitted, and if not so permitted, 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 9.6 Counterparts. This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 9.7 Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, the Seller, the Owner Trustee and each Certificateholder and their respective successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by a Certificateholder shall bind the successors and assigns of such Certificateholder. SECTION 9.8 No Petition Covenants. The Owner Trustee by entering this Trust Agreement and each Certificateholder, by accepting a Certificate (or interest therein) issued hereunder, hereby covenants and agrees that they shall not, prior to the day that is one year and one day after the termination of the Trust, acquiesce, petition or otherwise invoke or cause the Seller or the Trust to invoke in any court or government authority for the purpose of commencing or sustaining a case against the Seller or the Trust under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Seller or the Trust or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Seller or the Trust. SECTION 9.9 No Recourse. Each Certificateholder and Certificate Owner, by accepting a Certificate (or interest therein), shall agree that such Person's Certificates (or interest therein) represent beneficial interests in the Trust only and do not represent interests in or obligations of the Seller, the Servicer, the Administrator, the Owner Trustee, the Indenture Trustee or any Affiliate thereof and no recourse, either directly or indirectly, may be had against such parties or their assets, except as may be expressly set forth or contemplated in this Agreement, the Certificates or the Basic Documents. Except as expressly provided in the Basic Documents, neither the Seller, the Servicer nor the Owner Trustee in their respective individual capacities, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns, shall be personally liable for, nor shall recourse be had to any of them for, the distribution of Certificate Balance with respect to or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Certificates or this Agreement, it being expressly understood that said covenants, obligations and indemnifications have been made by the Owner Trustee solely as the Owner Trustee in the assets of the Issuer. Each Certificateholder or Certificate Owner by the acceptance of a Certificate (or beneficial interest therein) shall agree that, except as expressly provided in the Basic Documents, in the case of nonpayment of any amounts with respect to the Certificates, it shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom. SECTION 9.10 Headings. The headings herein are for purposes of reference only and shall not affect the meaning or interpretation of any provision hereof. SECTION 9.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF OR OF ANY OTHER JURISDICTION, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 9.12 Certificate Transfer Restrictions. (a) The Certificates (or interests therein) may not be acquired by or for the account of a Benefit Plan unless the Benefit Plan acquiring a Certificate (or interest therein) has available to it an exemption from the prohibited transaction rules under Section 406(a) of ERISA and Section 4975 of the Code and such exemption is applicable to the purchase and holding of the Certificate (or interest therein). Unless the Seller determines that such an exemption is available, by accepting and holding a Certificate (or interest therein), the Holder thereof and any related Certificate Owner shall each be deemed to have represented and warranted that it is not a Benefit Plan and, if requested to do so by the Seller pursuant to Section 3.4(b), the Certificateholder and the Certificate Owner shall execute and deliver to the Owner Trustee an Undertaking Letter in the form set forth in Exhibit C. The Certificates are also subject to the minimum denomination specified in Section 3.4(a). (b) The Certificates will not be registered under the Securities Act or the securities or blue sky laws of any other jurisdiction. Consequently, the Certificates are not transferable other than pursuant to an exemption from the registration requirements of the Securities Act and satisfaction of certain other provisions specified herein. No sale, pledge or other transfer of the Certificates (or interest therein) may be made by any Person unless either (i) such sale, pledge or other transfer is made to the Seller, (ii) so long as the Certificates are eligible for resale pursuant to Rule 144A under the Securities Act, such sale, pledge or other transfer is made to a person whom the transferor reasonably believes after due inquiry is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act (a "Qualified Institutional Buyer") acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are Qualified Institutional Buyers) to whom notice is given that the sale, pledge or transfer is being made in reliance on Rule 144A under the Securities Act, or (iii) such sale, pledge or other transfer is otherwise made in a transaction exempt from the registration requirements of the Securities Act, in which case (A) the Owner Trustee shall require that both the prospective transferor and the prospective transferee certify to the Owner Trustee and the Seller in writing the facts surrounding such transfer, which certification shall be in form and substance satisfactory to the Owner Trustee and the Seller, and (B) the Owner Trustee shall require a written opinion of counsel (which will not be at the expense of the Seller or the Owner Trustee) satisfactory to the Seller and the Owner Trustee to the effect that such transfer will not violate the Securities Act. No sale, pledge or other transfer may be made to any one person for Certificates with a face amount of less than $ (or such other amount as the Seller may determine in order to prevent the Trust from being treated as a "publicly traded partnership" under Section 7704 of the Code, but in no event less than $ ) and, in the case of any Person acting on behalf of one or more third parties (other than a bank (as defined in Section 3(a)(2) of the Securities Act) acting in its fiduciary capacity), for Certificates with a face amount of less than such amount for each such third party. Any attempted transfer in contravention of the immediately preceding restriction will be void ab initio and the purported transferor will continue to be treated as the owner of the Certificates for all purposes. Neither the Seller nor the Owner Trustee shall be obligated to register the Certificates under the Securities Act, qualify the Certificates under the securities laws of any state or provide registration rights to any purchaser or holder thereof. (c) Each Certificate shall bear a legend to the effect set forth in subsections (a) and (b) above. (d) The Seller shall be responsible for determining compliance with the restrictions set forth in this Section 9.12. SECTION 9.13 Indemnification by and Reimbursement of the Servicer. The Owner Trustee acknowledges and agrees to reimburse (i) the Servicer and its directors, officers, employees and agents in accordance with Section 7.3(b) of the Trust Sale and Servicing Agreement and (ii) the Seller and its directors, officers, employees and agents in accordance with Section 3.4 of the Trust Sale and Servicing Agreement. The Owner Trustee further acknowledges and accepts the conditions and limitations with respect to the Servicer's obligation to indemnify, defend and hold the Owner Trustee harmless as set forth in Section 7.1(a) of the Trust Sale and Servicing Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed by their respective officers hereunto duly authorized, as of the day and year first above written. , as _______________________________ Owner Trustee By:____________________________ Name: Title: ACE SECURITIES CORP., Seller By:_____________________________ Name: _______________ Title: _______________ EXHIBIT A FORM OF CLASS ______ CERTIFICATE NUMBER$____________ R_____CUSIP NO. ____ SEE REVERSE FOR CERTAIN DEFINITIONS UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE , A [STATE] CORPORATION ( ), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF ________ TRANSFER, EXCHANGE OR DISTRIBUTION, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF _________ (AND ANY DISTRIBUTION IS MADE TO _________. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF _________), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, , HAS AN INTEREST HEREIN. THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE IN THE UNITED STATES OF AMERICA OR ANY FOREIGN SECURITIES LAWS. BY ITS ACCEPTANCE OF THIS CERTIFICATE (OR INTEREST THEREIN) THE HOLDER (OR OWNER) OF THIS CERTIFICATE (OR SUCH INTEREST) IS DEEMED TO REPRESENT TO ______________________________________ OR ITS ASSIGNEE OR SUCCESSOR (THE "SELLER") AND THE OWNER TRUSTEE THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT AND IS ACQUIRING THIS CERTIFICATE (OR INTEREST THEREIN) FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL BUYERS). NO SALE, PLEDGE OR OTHER TRANSFER OF THIS CERTIFICATE (OR INTEREST THEREIN) MAY BE MADE BY ANY PERSON UNLESS EITHER (i) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO THE SELLER, (ii) SO LONG AS THIS CERTIFICATE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO A PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A), ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL BUYERS) TO WHOM NOTICE IS GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (iii) SUCH SALE, PLEDGE OR OTHER TRANSFER IS OTHERWISE MADE IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN WHICH CASE (A) THE OWNER TRUSTEE SHALL REQUIRE THAT BOTH THE PROSPECTIVE TRANSFEROR AND THE PROSPECTIVE TRANSFEREE CERTIFY TO THE OWNER TRUSTEE AND THE SELLER IN WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE AND THE SELLER, AND (B) THE OWNER TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL (WHICH SHALL NOT BE AT THE EXPENSE OF THE SELLER OR THE OWNER TRUSTEE) SATISFACTORY TO THE SELLER AND THE OWNER TRUSTEE TO THE EFFECT THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT. NO SALE, PLEDGE OR OTHER TRANSFER MAY BE MADE TO ANY ONE PERSON FOR CERTIFICATES WITH A FACE AMOUNT OF LESS THAN $ (OR SUCH OTHER AMOUNT AS THE SELLER MAY DETERMINE IN ORDER TO PREVENT THE TRUST FROM BEING TREATED AS A "PUBLICLY TRADED PARTNERSHIP" UNDER SECTION 7704 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE " CODE"), BUT IN NO EVENT LESS THAN $ ) AND, IN THE CASE OF ANY PERSON ACTING ON BEHALF OF ONE OR MORE THIRD PARTIES (OTHER THAN A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE SECURITIES ACT) ACTING IN ITS FIDUCIARY CAPACITY), FOR CERTIFICATES WITH A FACE AMOUNT OF LESS THAN SUCH AMOUNT FOR EACH SUCH THIRD PARTY. ANY ATTEMPTED TRANSFER IN CONTRAVENTION OF THE IMMEDIATELY PRECEDING RESTRICTION WILL BE VOID AB INITIO AND THE PURPORTED TRANSFEROR WILL CONTINUE TO BE TREATED AS THE OWNER OF THE CLASS CERTIFICATES FOR ALL PURPOSES. THIS CERTIFICATE (OR AN INTEREST THEREIN) MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF (i) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE UNITED STATES EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")), THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (ii) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE CODE, OR (iii) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH A "BENEFIT PLAN"), UNLESS THE SELLER DETERMINES THAT THE BENEFIT PLAN ACQUIRING THIS CERTIFICATE, (OR AN INTEREST THEREIN) HAS AVAILABLE TO IT AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES UNDER SECTION 406(a) OF ERISA AND SECTION 4975 OF THE CODE AND SUCH EXEMPTION IS APPLICABLE TO THE PURCHASE AND HOLDING OF THIS CERTIFICATE (OR AN INTEREST THEREIN). UNLESS THE SELLER DETERMINES THAT SUCH AN EXEMPTION IS AVAILABLE, BY ACCEPTING AND HOLDING THIS CERTIFICATE (OR AN INTEREST THEREIN), THE HOLDER HEREOF AND ANY RELATED CERTIFICATE OWNER SHALL EACH BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT PLAN AND, IF REQUESTED TO DO SO BY THE SELLER, SUCH PERSON SHALL EXECUTE AND DELIVER TO THE OWNER TRUSTEE AN UNDERTAKING LETTER TO SUCH EFFECT IN THE FORM SPECIFIED IN THE TRUST AGREEMENT. EACH CERTIFICATEHOLDER OR CERTIFICATE OWNER, BY ACCEPTING THIS CERTIFICATE (OR INTEREST THEREIN), (i) EXPRESSES ITS INTENTION THAT THE CERTIFICATES WILL QUALIFY UNDER APPLICABLE TAX LAW AS PARTNERSHIP INTERESTS IN A PARTNERSHIP, WITH THE ASSETS OF THE PARTNERSHIP BEING THE ASSETS HELD BY THE TRUST, AND (ii) UNLESS OTHERWISE REQUIRED BY APPROPRIATE TAXING AUTHORITIES, AGREES TO TREAT THE CLASS CERTIFICATES AS INTERESTS IN SUCH A PARTNERSHIP FOR PURPOSES OF FEDERAL INCOME, STATE AND LOCAL INCOME AND FRANCHISE TAXES, MICHIGAN SINGLE BUSINESS TAX AND ANY OTHER TAXES IMPOSED UPON, MEASURED BY OR BASED UPON GROSS OR NET INCOME. EACH CERTIFICATEHOLDER OR CERTIFICATE OWNER, BY ITS ACCEPTANCE OF THIS CERTIFICATE (OR INTEREST THEREIN), COVENANTS AND AGREES THAT SUCH CERTIFICATEHOLDER OR CERTIFICATE OWNER, AS THE CASE MAY BE, SHALL NOT, PRIOR TO THE DATE WHICH IS ONE YEAR AND ONE DAY AFTER THE TERMINATION OF THE TRUST AGREEMENT, ACQUIESCE, PETITION OR OTHERWISE INVOKE OR CAUSE THE SELLER TO INVOKE THE PROCESS OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF COMMENCING OR SUSTAINING A CASE AGAINST THE SELLER UNDER ANY FEDERAL OR STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR LAW OR APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN, SEQUESTRATOR OR OTHER SIMILAR OFFICIAL OF THE SELLER OR ANY SUBSTANTIAL PART OF ITS PROPERTY, OR ORDERING THE WINDING-UP OR LIQUIDATION OF THE AFFAIRS OF THE SELLER. FLOATING RATE ASSET BACKED CERTIFICATE, CLASS _____ evidencing a fractional undivided interest in the Trust, as defined below, the property of which includes a pool of wholesale receivables generated from time to time in a portfolio of revolving financing arrangements with dealers to finance automobile and other vehicle inventories and collections thereon and certain other property. (This Certificate does not represent an interest in or obligation of ACE Securities Corp., ________________________, ______________________, the Owner Trustee or any of their respective affiliates, except to the extent described in the Basic Documents.) THIS CERTIFIES THAT is the registered owner of a nonassessable, fully-paid, fractional undivided interest in ___________________ (the "Trust") formed by ACE Securities Corp., a Delaware corporation. The Trust was created pursuant to a Trust Agreement, dated as of ________, 20__ (as amended and supplemented from time to time, the "Trust Agreement"), between the Seller and , as owner trustee (the "Owner Trustee"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Trust Agreement. This Certificate is one of the duly authorized Certificates designated as "Floating Rate Asset Backed Certificates," (the "Certificates"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, the terms of which are incorporated herein by reference and made a part hereof, to which Trust Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such holder is bound. Under the Trust Agreement, there shall be distributed on the __th day of each ________, _________, _________ and __________ or, if such __th day is not a Business Day, the next succeeding Business Day, commencing on ________, 20__ (each, a "Certificate Payment Date"), to the person in whose name this Certificate is registered on the related Record Date (as defined below), interest accrued hereon to the extent of funds available therefor and such Certificateholder's fractional undivided interest in the amount of distributions in respect of Certificate Balance to be distributed to Certificateholders on such Certificate Payment Date. Interest shall accrue on this Certificate at the applicable Certificate Rate (as set forth on the reverse hereof) on the Certificate Balance represented by this Certificate (without reduction for any unreimbursed Trust Charge-Offs), and interest accrued hereon as of any Certificate Payment Date but not distributed on such Certificate Payment Date shall be due on the next Certificate Payment Date. No distributions of Certificate Balance shall be made on any Certificate until all Notes have been paid (or provided for) in full. The entire unpaid Certificate Balance on this Certificate shall be due and payable on the Certificate Payment Date in [DATE] (the "Stated Final Payment Date"). However, the actual distribution in full of the Certificate could occur sooner or later than such date. The "Record Date," with respect to any Certificate Payment Date, means the last day of the preceding Collection Period. The distributions in respect of Certificate Balance and interest on this Certificate are payable in such coin or currency of the United States of America as at the time of distribution is legal tender for payment of public and private debts. All distributions made by the Trust with respect to this Certificate shall be applied first to interest due and payable on this Certificate as provided above and then to the unpaid distributions in respect of Certificate Balance of this Certificate. The Holder of this Certificate acknowledges and agrees that its rights to receive distributions in respect of this Certificate are subordinated to the rights of the Noteholders as and to the extent described in the Trust Sale and Servicing Agreement and the Indenture. Each Certificateholder or Certificate Owner, by its acceptance of a Certificate (or interest therein), covenants and agrees that such Certificateholder or Certificate Owner, as the case may be, shall not, prior to the date which is one year and one day after the termination of the Trust Agreement, acquiesce, petition or otherwise invoke or cause the Seller to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Seller under any federal or state bankruptcy, insolvency, reorganization or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Seller or any substantial part of its property, or ordering the winding-up or liquidation of the affairs of the Seller. By its acceptance of this Certificate, the Seller agrees that it shall not be deemed to have approved the commencement of a voluntary proceeding in bankruptcy relating to the Trust for purposes of Section 4.3 of the Trust Agreement unless such commencement was approved by the affirmative vote of all of the members of the Seller's board of directors. Distributions on this Certificate shall be made as provided in the Trust Agreement without the presentation or surrender of this Certificate or the making of any notation hereon, to each Certificateholder of record on the immediately preceding Record Date either by wire transfer, in immediately available funds, to the account of such Holder at a bank or other entity having appropriate facilities therefor, if such Certificateholder shall have provided to the Certificate Registrar appropriate written instructions at least five Business Days prior to such Record Date, or, if not, by check mailed to such Certificateholder at the address of such Holder appearing in the Certificate Register. Except as otherwise provided in the Trust Agreement and notwithstanding the above, the final distribution on this Certificate shall be made after due notice by the Owner Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office maintained for such purpose by the Owner Trustee in the City of New York. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Owner Trustee by manual signature, this Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or the Trust Sale and Servicing Agreement or be valid for any purpose. THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF [STATE], WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF OR OF ANY OTHER JURISDICTION, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in its individual capacity, has caused this Certificate to be duly executed. Dated: ____________, 20__ _______________________ ___________ By:_______________________, not in its individual capacity but solely as Owner Trustee By: Name: Title: OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Trust Agreement. _____________________________, OR ________________________________, not in its individual capacity not in its individual capacity but but solely as Owner Trustee solely as Owner Trustee by _______, as Authenticating Agent By: By: Name: Name: Title: Title: REVERSE OF CERTIFICATE The Certificates do not represent an obligation of, or an interest in, the Seller, the Servicer, _____________, the Indenture Trustee, the Owner Trustee or any affiliates of any of them and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated herein or in the Trust Agreement or the Basic Documents. In addition, this Certificate is not guaranteed by any governmental agency or instrumentality and is limited in right of payment to certain collections and recoveries with respect to the Receivables held by the Trust (and certain other amounts), all as more specifically set forth herein, in the Trust Agreement and the Trust Sale and Servicing Agreement. A copy of each of the Trust Sale and Servicing Agreement and the Trust Agreement may be examined during normal business hours at the principal office of the Seller, and at such other places, if any, designated by the Seller, by any Certificateholder upon written request. The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Seller and the rights of the Certificateholders under the Trust Agreement at any time by the Seller and the Owner Trustee with the consent of the Noteholders whose Notes evidence not less than a majority of the Outstanding Amount of the Notes as of the close of business on the preceding Monthly Certificate Payment Date and the consent of Certificateholders whose Certificates evidence not less than a majority of the Voting Interests as of the close of business on the preceding Monthly Certificate Payment Date. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and on all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Trust Agreement also permits the amendment thereof, in certain circumstances, without the consent of the Holders of any of the Certificates or the Notes. The term "Certificate Rate" as used in this Certificate means, with respect to any Certificate Payment Date, the product of (i) a fraction, the numerator of which is the number of days elapsed from and including the prior Certificate Payment Date (or, in the case of the first Certificate Payment Date, from and including the Initial Closing Date) to but excluding such Certificate Payment Date and the denominator of which is 360 and (ii) USD Three-Month LIBOR plus ____________%, or if the certificates are not paid in full on their Targeted Final Payment Date, USD One-Month LIBOR plus ____%. As provided in the Trust Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies of the Certificate Registrar maintained by the Owner Trustee in the City of _______________, accompanied by (i) a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the Holder hereof or such Holder's attorney duly authorized in writing, (ii) any certificate and/or Opinion of Counsel required by Section 9.12(b) of the Trust Agreement, and (iii) if requested by the Seller, the Undertaking Letter required by Section 9.12(a) of the Trust Agreement, and thereupon one or more new Certificates of the same class of authorized denominations evidencing the same aggregate interest in the Trust shall be issued to the designated transferee. The initial Certificate Registrar appointed under the Trust Agreement is ____________________________. The Certificates are issuable only as registered Certificates without coupons in denominations of $______ or greater (or such other amount as the Seller may determine in order to prevent the Trust from being treated as a "publicly traded partnership" under Section 7704 of the Code, but in no event less than $______). As provided in the Trust Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same class of authorized denominations evidencing the same aggregate denomination, as requested by the Holder surrendering the same; provided, however, that no Certificate may be subdivided upon transfer or exchange in a manner such that the resulting Certificate if it had been sold in the original offering would have had an initial offering price of less than $ (or such other amount as the Seller may determine in order to prevent the Trust from being treated as a "publicly traded partnership" under Section 7704 of the Code, but in no event less than $_______). No service charge shall be made for any such registration of transfer or exchange, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Owner Trustee, the Certificate Registrar and any agent of the Owner Trustee or the Certificate Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Owner Trustee, the Certificate Registrar or any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Trust Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be paid to them pursuant to the Trust Agreement and the Trust Sale and Servicing Agreement and the disposition of all property held as part of the Trust. CERTIFICATE OF TRANSFER OR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (Please print or type name and address, including postal zip code, of assignee) the within Certificate, and all rights thereunder, hereby irrevocably constituting and appointing ___________________________________________________ Attorney to transfer said Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. In connection with any sale, pledge or transfer of this Certificate the undersigned hereby represents to the Owner Trustee and the Seller that such sale, pledge or transfer is being made to a person whom the undersigned reasonably believes after due inquiry is a "qualified institutional buyer" (as defined in Rule 144A under the United States Securities Act of 1933, as amended) acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are qualified institutional buyers) to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A. If such sale, pledge or other transfer is being made pursuant to (a) above, the undersigned acknowledges that such institutional investor must execute a certificate substantially in the form specified in the Trust Agreement. Dated: * Signature Guaranteed: * * NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. EXHIBIT B CERTIFICATE OF TRUST OF THIS Certificate of Trust of ________________(the "Trust"), dated as of _____, 20__ , is being duly executed and filed by ________, a [state] banking corporation, as trustee, to form a business trust under the Delaware Business Trust Act (12 Del. C. ss.3801 et seq.). 1. Name. The name of the business trust formed hereby is ______________________________________________. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware is ___________________________, [Address]. 3. This Certificate of Trust shall be effective on , 20 . IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust, has executed this Certificate of Trust as of the date first-above written. _____________________, not in its individual capacity but solely as Owner Trustee under a Trust Agreement dated as of ____, 20__. By: Name: Title: EXHIBIT C UNDERTAKING LETTER ACE Securities Corp. 6525 Morrison Boulevard Suite 318 Charlotte, North Carolina 28211 _________________________ _________________________ _________________________ Ladies and Gentlemen: In connection with our purchase or record or beneficial ownership of one or more Floating Rate Asset Backed Certificates, _______________(the "Certificates") of _______________, the undersigned purchaser, record owner or beneficial owner hereby acknowledges, represents and warrants that such purchaser, record owner or beneficial owner: (1) is not, and has not acquired the Certificates by or for the benefit of, (i) an employee benefit plan (as defined in Section 3(3) of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the United States Internal Revenue Code of 1986, as amended, or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in such entity; and (2) acknowledges that you and others will rely on our acknowledgments, representations and warranties, and agrees to notify you promptly in writing if any of our representations or warranties herein cease to be accurate and complete. Name of Certificateholder/Certificate Owner By: Name: Title: Date: EXHIBIT D INVESTOR LETTER ACE Securities Corp. 6525 Morrison Boulevard Suite 318 Charlotte, North Carolina 28211 ________________________ ________________________ ________________________ Ladies and Gentlemen: In connection with our proposed purchase of a one or more Floating Rate Asset- Backed Certificates, Class _____ (the "Certificates"), representing a fractional undivided interest in the _________, issued under a trust agreement, dated as of _____, 20__ (the "Trust Agreement"), between ______________, a Delaware corporation (the "Seller") and __________________, as owner trustee, acting thereunder not in its individual capacity but solely as owner trustee of the Trust (the "Owner Trustee"), we confirm that: 1. We understand that the Certificate has not been registered under the United States Securities Act of 1933, as amended (the "Securities Act"), and may not be sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that such Certificates (or an interest therein) may be resold, pledged or transferred only (i) to the Seller, (ii) so long as such Certificates are eligible for resale pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person whom the transferor reasonably believes after due inquiry to be a "qualified institutional buyer" as defined in Rule 144A acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are "qualified institutional buyers") to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, or (iii) in a sale, pledge or other transfer made in a transaction otherwise exempt from the registration requirements of the Securities Act, in which case (A) the Owner Trustee shall require that both the prospective transferor and the prospective transferee certify to the Owner Trustee and the Seller in writing the facts surrounding such transfer, which certification shall be in form and substance satisfactory to the Owner Trustee and the Seller, and (B) the Owner Trustee shall require a written opinion of counsel (which will not be at the expense of the Seller or the Owner Trustee) satisfactory to the Seller and the Owner Trustee to the effect that such transfer will not violate the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. We will notify any purchaser of the Certificates (or an interest therein) from us of the above resale restrictions, if then applicable. We further understand that in connection with any transfer of the Certificates (or interest therein) by us that the Seller and the Owner Trustee may request, and if so requested we will furnish, such certification and other information as they may reasonably require to confirm that any such transfer complies with the foregoing restrictions. We understand that no sale, pledge or other transfer may be made to any one person for Certificates (or an interest therein) with a face amount of less than $ (or such other amount as the Seller may determine in order to prevent the Trust from being treated as a "publicly traded partnership" under Section 7704 of the United States Internal Revenue Code of 1986, as amended, but in no event less than $ ) and, in the case of any person acting on behalf of one or more third parties (other than a bank (as defined in Section 3(a)(2) of the Securities Act) acting in its fiduciary capacity), for Certificates with a face amount of less than such amount for each such third party. Any attempted transfer will be void ab initio and the purported transferor will continue to be treated as the owner of the Certificates for all purposes. 2. We are a "qualified institutional buyer" as defined under Rule 144A under the Securities Act and are acquiring the Certificates (or an interest therein) for our own account (and not for the account of others) or as a fiduciary or agent for others (which others also are "qualified institutional buyers"). We are familiar with Rule 144A under the Securities Act and are aware that the transferor of the Certificates (or an interest therein) and other parties intend to rely on the statements made herein and the exemption from the registration requirements of the Securities Act provided by Rule 144A. 3. You are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, (Name of Purchaser) By: Date: EXHIBIT E [FORM OF CERTIFICATE DEPOSITORY AGREEMENT] EX-4.4.3 14 0014.txt EXHIBIT 4.4.3 TRUST AGREEMENT by and between ACE SECURITIES CORP. as Trust Depositor, and [ ] as Owner Trustee Dated as of [ ] [ ] EQUIPMENT SECURITIES [ ] TABLE OF CONTENTS ARTICLE I DEFINITIONS...............................................................1 Section 1.01. Defined Terms Generally..................................1 Section 1.02. Specific Defined Terms...................................1 Section 1.03. Usage of Terms...........................................4 Section 1.04. Section References.......................................4 Section 1.05. Accounting Terms.........................................4 ARTICLE II ORGANIZATION AND ESTABLISHMENT OF TRUST...................................4 Section 2.01. Establishment of Trust; Name.............................4 Section 2.02. Office...................................................4 Section 2.03. Purposes and Powers......................................4 Section 2.04. Appointment of Owner Trustee.............................5 Section 2.05. Initial Capital Contribution; Organizational Expenses....5 Section 2.06. Declaration of Trust.....................................5 Section 2.07. Liability of Trust Depositor.............................6 Section 2.08. Title to Trust Property..................................6 Section 2.09. Situs of Trust...........................................6 Section 2.10. Representations and Warranties of the Trust Depositor....7 Section 2.11. Federal Income Tax Treatment.............................8 ARTICLE III EQUITY CERTIFICATE AND TRANSFERS OF INTERESTS THEREIN.....................9 Section 3.01. Initial Ownership........................................9 Section 3.02. The Equity Certificate...................................9 Section 3.03. Authentication and Delivery of Equity Certificate........9 Section 3.04. Registration of Transfer and Exchange of the Equity Certificates..........................................10 Section 3.05. Mutilated, Destroyed, Lost or Stolen Trust Equity Certificate............................................10 Section 3.06. Persons Deemed Owners...................................11 Section 3.07. Access to List of Equity Certificateholder's Name and Addresses..........................................11 Section 3.08. Maintenance of Office or Agency.........................11 Section 3.09. Ownership by Trust Depositor of Equity Certificate......11 ARTICLE IV ACTIONS BY OWNER TRUSTEE.................................................12 Section 4.01. Prior Notice to Equity Certificateholder with Respect to Certain Matters.....................................12 Section 4.02. Action by Owner with Respect to Certain Matters.........12 Section 4.03. Action by Owner with Respect to Bankruptcy..............13 Section 4.04. Restrictions on Owner's Power...........................13 ARTICLE V APPLICATION AND DISTRIBUTION OF TRUST FUNDS; CERTAIN DUTIES..............13 Section 5.01. Collection Account......................................13 Section 5.02. Distributions From Collection Account...................13 Section 5.03. Reports.................................................13 Section 5.04. Taxes...................................................14 Section 5.05. Method of Payment.......................................14 Section 5.06. No Segregation of Moneys; No Interest...................14 Section 5.07. Accounting and Reports to the Equity Certificateholder, the Internal Revenue Service and Others..............15 Section 5.08. Signature on Returns; Tax Matters Partner...............15 ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE....................................16 Section 6.01. General Authority.......................................16 Section 6.02. General Duties..........................................16 Section 6.03. Action Upon Instruction.................................16 Section 6.04. No Duties Except as Specified in This Agreement or in Instructions.....................................17 Section 6.05. No Action Except Under Specified Documents or Instructions........................................18 Section 6.06. Restrictions............................................18 Section 6.07. Administration Agreement................................18 ARTICLE VII CONCERNING THE OWNER TRUSTEE..............................................19 Section 7.01. Acceptance of Trusts and Duties..........................19 Section 7.02. Furnishing of Documents..................................20 Section 7.03. Representations and Warranties...........................20 Section 7.04. Reliance; Advice of Counsel..............................21 Section 7.05. Not Acting in Individual Capacity........................21 Section 7.06. Owner Trustee Not Liable for Notes, Equity Certificate or Contracts............................................22 Section 7.07. Owner Trustee May Own Notes..............................22 ARTICLE VIII COMPENSATION OF OWNER TRUSTEE.............................................23 Section 8.01. Owner Trustee's Fees and Expenses........................23 Section 8.02. Indemnification..........................................23 Section 8.03. Non-recourse Obligations.................................23 ARTICLE IX TERMINATION OF TRUST......................................................24 Section 9.01. Termination of Trust.....................................24 Section 9.02. Dissolution upon Bankruptcy of Trust Depositor...........25 ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES....................25 Section 10.01. Eligibility Requirements for Owner Trustee..............25 Section 10.02. Resignation or Removal of Owner Trustee................26 Section 10.03. Successor Owner Trustee.................................26 Section 10.04. Merger or Consolidation of Owner Trustee................27 Section 10.05. Appointment of Co-Trustee or Separate Trustee...........27 ARTICLE XI MISCELLANEOUS.............................................................28 Section 11.01. Supplements and Amendments..............................28 Section 11.02. Limitations on Rights of Others.........................29 Section 11.03. Notices.................................................30 Section 11.04. Severability of Provisions..............................31 Section 11.05. Counterparts............................................31 Section 11.06. Successors and Assigns..................................31 Section 11.07. No Petition.............................................31 Section 11.08. No Recourse.............................................32 Section 11.09. Headings................................................32 Section 11.10. Governing Law...........................................32 Section 11.11. Certain Servicer Payment Obligations....................32 Section 11.12. Jurisdiction............................................32 Section 11.13. Waiver of Jury Trial....................................32 EXHIBIT A Form of Delaware Certificate of Trust......................A-1 EXHIBIT B Form of Equity Certificate.................................B-1 This TRUST AGREEMENT dated as of [ ], is made by and between ACE Securities Corp., a Delaware corporation, as Trust Depositor (the "Trust Depositor"), and [ ], as owner trustee (the "Owner Trustee"). In consideration of the mutual agreements herein contained, and for other good and valuable consideration, the receipt and adequacy of which are acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. DEFINED TERMS GENERALLY. Capitalized terms used that are not otherwise specifically defined herein shall have the same meaning given to such terms when used in the Pooling Agreement (as defined in Section 1.02 below). Section 1.02. SPECIFIC DEFINED TERMS. Whenever used in this Agreement, the following words and phrases, unless otherwise specified or the context otherwise requires, shall have the following meanings: "Administration Agreement" means the Administration Agreement, dated as of the date hereof, among the Trust, the Trust Depositor, the Indenture Trustee and [ ], as Administrator. "Administrator" has the meaning given such term in the Administration Agreement. "Agreement" means this Trust Agreement, as the same may be amended, supplemented or restated from time to time. "Benefit Plan" means (i) an employee benefit plan (as such term is defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity. "Business Trust Statute" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code 'SS' 3801 et seq., as the same may be amended from time to time. "Certificate Balance" means $[ ]. "Certificate of Trust" means the Certificate of Trust filed for the Trust pursuant to Section 3810(a) of the Business Trust Statute, substantially in the form of Exhibit A hereto. "Certificate Register" and "Certificate Registrar" mean the register maintained and the registrar (or any successor thereto) appointed pursuant to Section 3.04. "Closing Date" means [ ]. "Code" means the Internal Revenue Code of 1986, as amended. "Equity Certificate" means the trust certificate evidencing the beneficial equity interest of the Owner in the Trust and Trust Assets, substantially in the form of Exhibit C hereto. "Equity Certificateholder" means the Person in whose name the Equity Certificate is registered in the Certificate Register. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Event of Termination" has the meaning given such term in Section 8.01. "Expenses" shall have the meaning assigned to such term in Section 9.02. "Foreign Person" means any Person other than (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust whose administration is subject to the primary supervision of a court within the United States and which has one or more U.S. fiduciaries who have authority to control all substantial decisions of the Trust. "Holder" means a Noteholder or an Equity Certificateholder, as applicable. "Indemnified Parties" shall have the meaning assigned to such term in Section 9.02. "Indenture" means the Indenture dated as of the date of between the Trust and [ ], as Indenture Trustee. "Note Depository Agreement" means the Agreement dated as of the Closing Date among the Trust, the Indenture Trustee, the Administrator and DTC, as the Clearing Agency, relating to the Notes, as the same may be amended and supplemented from time to time. "Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class B Notes, the Class C Notes, and the Class D Notes in each case issued pursuant to the Indenture. "Noteholders" means each Person in whose name a Notes is registered in the Note Register maintained by the Owner Trustee. "Owner" means the Equity Certificateholder. "Owner Trustee" means [ ], not in its individual capacity but solely as owner trustee under this Agreement, and any successor Owner Trustee hereunder. "Owner Trustee Corporate Trust Office" means the office of the Owner Trustee at which its corporate trust business shall be administered, which initially shall be [ ], [ ], [ ], or such other office at such other address in the State of [ ] as the Owner Trustee may designate from time to time by notice to the Equity Certificateholder, the Servicer, the Indenture Trustee and the Trust Depositor. "Person" means any individual, corporation, estate, partnership, joint venture, association, limited liability company, joint stock company, trust (including any beneficiary thereof) unincorporated organization or government or any agency or political subdivision thereof. "Pooling Agreement" means the Pooling and Servicing Agreement, dated as of [ ], among the Trust, the Trust Depositor, [ ], and [ ], in its individual capacity and as Servicer thereunder, as the same may be amended, supplemented or restated from time to time. "Required Holders" has the meaning given such term in the Pooling Agreement. "Secretary of State" means the Secretary of State of the State of Delaware. "Treasury Regulations" means regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. "Trust" means the trust established by this Agreement, the estate of which consists of the Trust Assets. "Trust Assets" means the property and proceeds of every description conveyed from time to time pursuant to Section 2.01 and 2.04 of the Pooling Agreement, together with the Trust Accounts (including all investments therein and proceeds and income therefrom), but not including any of such property which has been released and reconveyed from the Trust in accordance with and pursuant to the Pooling Agreement. "Trust Depositor" means ACE Securities Corp. in its capacity as Trust Depositor hereunder, and its successors. "Trust Estate" means all right, title and interest of the Trust in and to the property and rights assigned to the Trust pursuant to Article Two of the Pooling and Servicing Agreement, all funds on deposit from time to time in the Trust Accounts and all other property of the Trust from time to time, including any rights of the Owner Trustee and the Trust pursuant to the Pooling and Servicing Agreement and the Administration Agreement. Section 1.03. USAGE OF TERMS. With respect to all terms in this Agreement, the singular includes the plural and the plural the singular; words importing one gender include the other gender; references to "writing" include printing, typing, lithography and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all amendments, modifications and supplements thereto or any changes therein entered into in accordance with their respective terms and not prohibited by this Agreement; references to Persons include their permitted successors and assigns; and the term "including" means "including without limitation". Section 1.04. SECTION REFERENCES. All section references, unless otherwise indicated, shall be to Sections in this Agreement. Section 1.05. ACCOUNTING TERMS. All accounting terms used but not specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States. ARTICLE II ORGANIZATION AND ESTABLISHMENT OF TRUST Section 2.01. ESTABLISHMENT OF TRUST; NAME. There is hereby formed and established pursuant to the Business Trust Statute a Delaware business trust which shall be known as "[ ] Equipment Trust Securities [ ]", in which name the Owner Trustee may conduct the activities of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued on behalf of the Trust. Section 2.02. OFFICE. The office of the Trust shall be in care of the Owner Trustee at the Owner Trustee Corporate Trust Office or at such other address as the Owner Trustee may designate by written notice to the Noteholders and the Trust Depositor. Section 2.03. PURPOSES AND POWERS. (a) The sole purpose of the Trust is to manage the Trust Assets, and collect and disburse the periodic income therefrom for the use and benefit of the Equity Certificateholder, and in furtherance of such purpose to engage in the following ministerial activities: (i) to issue the Notes pursuant to the Indenture and the Equity Certificate pursuant to this Agreement; (ii) with the proceeds of the sale of the Notes and the Trust Certificate, to purchase the Contracts and other Trust Assets, organizational, start-up and transactional expenses of the Trust (to the extent not paid by the Trust Depositor or the Servicer or Administrator); and to pay the balance to the Owner from time to time pursuant to the Pooling Agreement; (iii) to acquire, hold, manage, distribute, dispose of, release or convey, to or at the direction of the Owner pursuant to the Pooling Agreement, any portion of the Trust Assets in the manner described in and pursuant to the Pooling Agreement; (iv) to enter into and perform its obligations under the Transaction Documents to which it is to be a party; (v) to engage in those activities, including entering into agreements, that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith; and (vi) subject to compliance with the Transaction Documents, to engage in such other activities as may be required in connection with conservation of the Trust Assets and the making of distributions to the Owner and the Noteholders. (b) The Owner Trustee is hereby authorized to engage in the foregoing activities on behalf of the Trust. The Trust shall not engage in any activities other than in connection with the foregoing. Nothing contained herein shall be deemed to authorize the Owner Trustee to engage in any business operations or any activities other than those set forth in this Section 2.03. Specifically, the Owner Trustee shall have no authority to engage in any business operations, or acquire any assets other than those specifically included in the Trust Assets, or otherwise vary the assets held by the Trust. Similarly, the Owner Trustee shall have no discretionary duties other than performing those ministerial acts set forth above necessary to accomplish the purpose of this Trust as set forth in this Section 2.03. Section 2.04. APPOINTMENT OF OWNER TRUSTEE. The Trust Depositor hereby appoints the Owner Trustee as trustee of the Trust effective as of the date hereof, to have all the rights, powers and duties set forth herein and in the Business Trust Statute, and the Owner Trustee hereby accepts such appointment. Section 2.05. INITIAL CAPITAL CONTRIBUTION; ORGANIZATIONAL EXPENSES. The Trust Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee on behalf of the Trust, as of the date hereof, the sum of $10, which shall constitute the initial contribution of the Trust Depositor in respect of the establishment and formation of the Trust. The Owner Trustee hereby acknowledges receipt in trust from the Trust Depositor, as of the date hereof, of the foregoing contribution. The Trust Depositor shall pay or provide for the payment of further organizational expenses of the Trust as they may arise or shall, upon the request of the Owner Trustee, promptly reimburse or provide for the reimbursement of the Owner Trustee for any such expenses paid by the Owner Trustee. Section 2.06. DECLARATION OF TRUST. The Owner Trustee hereby declares that it will hold the Trust Assets in trust upon and subject to the conditions set forth herein for the sole purpose of conserving the Trust Assets and collecting and disbursing the periodic income therefrom for the use and benefit of the Owner, subject to the obligations of the Trust under the Transaction Documents. It is the intention of the parties hereto that the Trust constitute a business trust under the Business Trust Statute and that this Agreement constitute the governing instrument of such business trust. Effective as of the date hereof, the Owner Trustee shall have all rights, powers and duties set forth herein and in the Business Trust Statute for the sole purpose and to the extent necessary to accomplish the purposes of this Trust as set forth in Section 2.03. Section 2.07. LIABILITY OF TRUST DEPOSITOR. (a) Pursuant to Section 3803(a) of the Business Trust Statute, the Trust Depositor as Owner shall be liable directly to and will indemnify any injured party or any other creditor of the Trust for all losses, claims, damages, liabilities and expenses of the Trust to the extent that the Owner would be liable if the Trust were a partnership under the Delaware Revised Uniform Limited Partnership Act in which Trust Depositor were a general partner; provided, however, that the Owner shall not be liable for any losses incurred by the Equity Certificateholder in the capacity of an investor in the Trust Certificate or a Noteholder in the capacity of an investor in the Notes; and provided further, that the Owner shall not be so liable to any injured party or other creditor if such party has agreed that its recourse against the Trust for any obligation or liability of the Trust to such party shall be limited to the assets of the Trust. In addition, any third party creditors of the Trust (other than in connection with the obligations described in the immediately preceding sentence for which the Owner shall not be liable) shall be deemed third party beneficiaries of this paragraph. (b) No Equity Certificateholder, other than to the extent set forth in Section 2.07(a), shall have any personal liability for any liability or obligation of the Trust or by reason of any action taken by the parties to this Agreement pursuant to any provisions of this Agreement or any other Transaction Document. Section 2.08. TITLE TO TRUST PROPERTY. (a) Legal title to the Trust Assets shall be vested at all times in the Trust as a separate legal entity except where applicable law in any jurisdiction requires title to any part of the Trust Assets to be vested in an owner trustee or owner trustees, in which case title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case may be. (b) The Holders shall not have legal title to any part of the Trust Assets. The Holders shall be entitled to receive distributions from the Trust. Section 2.09. SITUS OF TRUST. The Trust will be located and administered in the State of [ ] or the State of New York. All bank accounts maintained by the Owner Trustee on behalf of the Trust shall be located in the State of New York or the State of [ ]. The Trust shall not have any employees in any state other than [ ]; provided, however, that nothing herein shall restrict or prohibit the Owner Trustee, [ ] or any agent of the Trust from having employees within or without the State of [ ]. Payments will be received by the Trust only in [ ] or New York and payments will be made by the Trust only from [ ] or New York. The only office of the Trust will be at the Owner Trustee Corporate Trust Office. Section 2.10. REPRESENTATIONS AND WARRANTIES OF THE TRUST DEPOSITOR. The Trust Depositor hereby represents and warrants to the Owner Trustee, that: (i) The Trust Depositor is duly organized and validly existing as a corporation organized and existing, and in good standing, under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business and had at all relevant times, and has, power, authority and legal right to acquire and own the assets conveyed and to be conveyed by it to the Trust from time to time. (ii) The Trust Depositor is duly qualified to do business as a foreign corporation in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualifications. (iii) The Trust Depositor has the power and authority to execute and deliver this Agreement and to carry out its terms; the Trust Depositor has full power and authority to sell and assign the property to be sold and assigned from time to time to and deposited with the Owner Trustee on behalf of the Trust as part of the Trust Assets and has or will have duly authorized such sale and assignment and deposit with the Owner Trustee on behalf of the Trust by all necessary entity action; the execution, delivery and performance of this Agreement have been duly authorized by the Trust Depositor by all necessary entity action; and this Agreement constitutes the legal, valid and binding obligation of the Trust Depositor, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. (iv) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the certificate of formation or limited liability company agreement of the Trust Depositor, or any indenture, agreement or other instrument to which the Trust Depositor is a party or by which it is bound; nor result in the creation or imposition of any Lien upon any of the properties of the Trust Depositor pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Transaction Documents); nor violate any law or any order, rule or regulation applicable to the Trust Depositor of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Trust Depositor or its properties. (v) All approvals, authorizations, consents, orders or other actions of any Person or any governmental entity required in connection with the execution and delivery of this Agreement and the fulfillment of the terms hereof have been obtained. (vi) There are no proceedings or investigations pending, or to the Trust Depositor's knowledge threatened, before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Trust Depositor or its properties: (A) asserting the invalidity of this Agreement, any of the Transaction Documents or, (B) seeking to prevent the issuance of the Equity Certificate or the consummation of any of the transactions contemplated by this Agreement or the other Transaction Documents, (C) seeking any determination or ruling that might materially and adversely affect the performance by the Trust Depositor of its obligations under, or the validity or enforceability of, this Agreement, the Equity Certificate or any other Transaction Document, or (D) involving the Trust Depositor and which might adversely affect the federal income tax or other federal, state or local tax attributes of the Equity Certificate. Section 2.11. FEDERAL INCOME TAX TREATMENT. It is the intention of the Trust Depositor that the Trust be disregarded as a separate entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3(b)(1)(ii) as in effect for periods after January 1, 1997. The Equity Certificate constitutes the sole equity interest in the Trust and must at all times be held by either the Trust Depositor or its transferee as sole Owner. The Trust Depositor agrees not to take any action inconsistent with such intended federal income tax treatment. Because for federal income tax purposes the Trust will be disregarded as a separate entity, Trust items of income, gain, loss and deduction for any month as determined for federal income tax purposes shall be allocated entirely to the Owner; provided, that this sentence shall not limit or otherwise affect the provisions of the Transaction Documents pertaining to distributions of Trust Assets or proceeds thereof to Persons other than the Trust Depositor. ARTICLE III EQUITY CERTIFICATE AND TRANSFERS OF INTERESTS THEREIN Section 3.01. INITIAL OWNERSHIP. (a) Upon the formation of the Trust by the contribution by the Trust Depositor pursuant to Section 2.05 and until the issuance of the Equity Certificate, the Trust Depositor shall be the sole beneficiary of the Trust. The Equity Certificate must at all times be held by either the Trust Depositor or its transferee (to the extent permitted under Section 3.01(b) and Section 2.12(a)) as sole owner. (b) No transfer of the Equity Certificate shall be made unless such transfer is made in a transaction which does not require registration or qualification under the Securities Act or qualification under any state securities or "Blue Sky" laws. Neither the Owner Trustee nor the Certificate Registrar shall effect the registration of any transfer of the Equity Certificate unless, prior to such transfer the Owner Trustee shall have received (i) a Tax Opinion, and (ii) a certificate from the proposed transferee certifying that (A) following such transfer, there would be no more than one holder of the Equity Certificate and the holder of the Equity Certificate would not be a Foreign Person, a partnership, Subchapter S corporation or grantor trust and (B) such transfer does not violate any state securities or Blue Sky laws or the Securities Act. Section 3.02. THE EQUITY CERTIFICATE. (a) On the Closing Date, the Equity Certificate shall be issued to the Trust Depositor, substantially in the form of Exhibit B hereto. The Equity Certificate shall be issued with an original Certificate balance equal to the Certificate Balance. The Equity Certificate shall be executed by the Owner Trustee on behalf of the Trust by manual or facsimile signature of an authorized officer of the Owner Trustee and, upon authentication pursuant to Section 3.03, shall be deemed to have been validly issued when so executed and authenticated. The Equity Certificate bearing the manual or facsimile signature of individuals who were, at the time when such signatures were affixed, authorized to sign on behalf of the Owner Trustee shall be a valid and binding obligation of the Trust, notwithstanding that such individuals or any of them have ceased to be so authorized prior to the authentication and delivery of such Certificate or did not hold such offices at the date of the authentication and delivery of the Equity Certificate. The Equity Certificate shall be dated the date of its authentication. Section 3.03. AUTHENTICATION AND DELIVERY OF EQUITY CERTIFICATE. The Equity Certificate shall not entitle its holder to any benefit under this Agreement, or be valid for any purpose, unless there shall appear on such Equity Certificate a certificate of authentication substantially in the form set forth in Exhibit B executed by the Owner Trustee or its authenticating agent, by manual or facsimile signature; such authentication shall constitute conclusive evidence that the Equity Certificate shall have been duly authenticated and delivered hereunder. The Equity Bank is hereby initially appointed Authentication Agent. Section 3.04. REGISTRATION OF TRANSFER AND EXCHANGE OF THE EQUITY CERTIFICATES. (a) The Certificate Registrar shall maintain or cause to be maintained, at the office or agency maintained pursuant to Section 3.08, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, it shall provide for the registration of the Equity Certificate and of transfers and exchanges of the Equity Certificate as provided in this Agreement. [ ] is hereby initially appointed Certificate Registrar for the purpose of registering the Equity Certificate and transfers and exchanges of the Equity Certificate as provided in this Agreement. In the event that the Owner Trustee notifies the Servicer that [ ] is unable to act as Certificate Registrar, the Servicer shall appoint another bank or trust company, having an office or agency located in The City of New York, agreeing to act in accordance with the provisions of this Agreement applicable to it, and otherwise acceptable to the Owner Trustee and the Administrative Agent, to act as successor Certificate Registrar hereunder. (b) Upon surrender for registration of transfer of the Equity Certificate otherwise permitted to be transferred in accordance herewith at the office or agency maintained pursuant to Section 3.08, the Owner Trustee shall (subject to Section 3.01(b) execute, authenticate and deliver (or shall cause its authenticating agent to authenticate and deliver), in the name of the designated transferee, one new Trust Certificate having the same aggregate principal amount. (c) Every Equity Certificate presented or surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the Holder thereof or his attorney duly authorized in writing. (d) No service charge shall be made for any registration of transfer or exchange of the Equity Certificate, but the Owner Trustee or Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer of the Equity Certificate. (e) All Equity Certificates surrendered for registration of transfer or exchange shall be canceled and subsequently destroyed by the Owner Trustee or Certificate Registrar in accordance with its customary practice. Section 3.05. MUTILATED, DESTROYED, LOST OR STOLEN TRUST EQUITY CERTIFICATE. If (a) any mutilated Certificate is surrendered to the Certificate Registrar, or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Equity Certificate, and (b) there is delivered to the Certificate Registrar and the Owner Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice that such Equity Certificate has been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee or the Authenticating Agent shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Equity Certificate, a new Equity Certificate of like tenor. In connection with the issuance of any new Equity Certificate under this Section, the Owner Trustee or 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 reasonable fees and expenses of the Owner Trustee and the Certificate Registrar) connected therewith. Any duplicate Equity Certificate issued pursuant to this Section shall constitute conclusive evidence of beneficial ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Equity Certificate shall be found at any time. Section 3.06. PERSONS DEEMED OWNERS. Prior to due presentation of a Equity Certificate for registration of transfer, the Owner Trustee, the Certificate Registrar and any of their respective agents may treat the Person in whose name the Equity Certificate is registered as the owner of the Equity Certificate for the purpose of receiving distributions pursuant to Section 5.02 and for all other purposes whatsoever, and none of the Owner Trustee, the Certificate Registrar or any of their respective agents shall be affected by any notice of the contrary. Section 3.07. ACCESS TO LIST OF EQUITY CERTIFICATEHOLDER'S NAME AND ADDRESSES. The Owner Trustee shall furnish or cause to be furnished to the Servicer, the Indenture Trustee and the Trust Depositor within 15 days after receipt by the Owner Trustee of a written request therefor from the Servicer, the Indenture Trustee or the Trust Depositor, name and address of the Equity Certificateholder as of the most recent Record Date in such form as the Servicer, the Indenture Trustee or the Trust Depositor may reasonably require. The Equity Certificateholder, by receiving and holding the Equity Certificate, agrees that neither the Servicer, the Trust Depositor nor the Owner Trustee, nor any agent thereof, shall be held accountable by reason of the disclosure of any such information as to the name and address of the Equity Certificateholder hereunder, regardless of the source from which such information was derived. Section 3.08. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall maintain in The City of New York an office or offices or agency or agencies where Equity Certificate may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Owner Trustee in respect of the Equity Certificate and any Transaction Documents may be served. The Owner Trustee initially designates the corporate trust office of [ ], Attention: [ ], as its office for such purposes. The Owner Trustee shall give prompt written notice to the Trust Depositor, the Servicer, the Administrative Agent and the Equity Certificateholder of any change in the location of the Certificate Register or any such office or agency. Section 3.09. OWNERSHIP BY TRUST DEPOSITOR OF EQUITY CERTIFICATE. Trust Depositor shall on the Closing Date purchase from the Trust the Equity Certificate representing the Certificate Balance. [remainder of page intentionally left blank] ARTICLE IV ACTIONS BY OWNER TRUSTEE Section 4.01. PRIOR NOTICE TO EQUITY CERTIFICATEHOLDER WITH RESPECT TO CERTAIN MATTERS. Subject to the provisions and limitations of Section 4.04, with respect to the following matters, the Owner Trustee shall not take action unless at least 30 days before the taking of such action, the Owner Trustee shall have notified the Equity Certificateholder in writing of the proposed action, the Indenture Trustee shall have consented to such action in the event any Notes are outstanding and the Equity Certificateholder shall not have notified the Owner Trustee in writing prior to the 30th day after such notice is given that such Equity Certificateholder has withheld consent or provided alternative direction: (a) the initiation of any claim or lawsuit by the Trust (except claims or lawsuits brought in connection with the collection of Trust Assets) and the compromise of any action, claim or lawsuit brought by or against the Trust (except with respect to the aforementioned claims or lawsuits for collection of Trust Assets); (b) the election by the Trust to file an amendment to the Certificate of Trust (unless such amendment is required to be filed under the Business Trust Statute); or (c) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is required (d) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is not required and such amendment materially and adversely affects the interest of the Owner; (e) the amendment, change or modification of the Administration Agreement, except to cure any ambiguity or to amend or supplement any provision in a manner or add any provision that would not materially and adversely effect the interest of the Owner; or (f) the appointment pursuant to the Indenture of a successor Note Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a successor Certificate Registrar, or the consent to the assignment by the Note Registrar, Paying Agent, Indenture Trustee or Certificate Registrar of its obligations under the Indenture or the Agreement, as applicable. Section 4.02. ACTION BY OWNER WITH RESPECT TO CERTAIN MATTERS. Subject to the provisions and limitations of Section 4.04, the Owner Trustee shall not have the power, except upon the direction of the Owner, to (a) remove the Administrator pursuant to Section 8 of the Administration Agreement, (b) appoint a successor Administrator pursuant to Section 8 of the Administration Agreement, (c) remove the Servicer pursuant to Article VIII of the Pooling Agreement, (d) except as expressly provided in the relevant Transaction Documents, release or convey from the Trust any Trust Assets, (e) initiate any claim, suit or proceeding by the Trust or compromise any claim, suit or proceeding brought by or against the Trust, (f) authorize the merger or consolidation of the Trust with or into any other business trust or entity (other than in accordance with applicable restrictions or conditions thereon contained in a Transaction Document) or (g) amend the Certificate of Trust. The Owner Trustee shall take the actions referred to in the preceding sentence upon (and only upon) written instructions signed by the Owner. Section 4.03. ACTION BY OWNER WITH RESPECT TO BANKRUPTCY. The Owner Trustee shall not have the power to commence a voluntary proceeding in a bankruptcy relating to the Trust without the prior approval of the Owner and the delivery to the Owner Trustee by such Owner of a certificate certifying that such Owner reasonably believes that the Trust is no longer Solvent. Section 4.04. RESTRICTIONS ON OWNER'S POWER. Neither the Administrator nor the Owner shall direct the Owner Trustee to take or to refrain from taking any action if such action or inaction would be contrary to any obligation of the Trust or the Owner Trustee under this Agreement or any of the other Transaction Documents, or would be contrary to the purpose of this Trust as set forth in Section 2.03, nor shall the Owner Trustee be obligated to follow any such direction, if given. ARTICLE V APPLICATION AND DISTRIBUTION OF TRUST FUNDS; CERTAIN DUTIES Section 5.01. COLLECTION ACCOUNT. The Owner Trustee shall establish (or direct the Servicer to establish on its behalf) the Collection Account with a Qualified Institution pursuant to and in accordance with Article VII of the Pooling Agreement. Section 5.02. DISTRIBUTIONS FROM COLLECTION ACCOUNT. On each Payment Date the Owner Trustee (based solely on the information contained in the Servicer's monthly payment instructions referred to in Sections 7.05(a) or (b), as applicable, of the Pooling Agreement) shall make the distributions and payments from the Available Amounts on deposit in the Collection Account to the parties, for the purposes and in the order of priorities specified in such Sections 7.05(a) or (b) of the Pooling Agreement, as applicable. Section 5.03. REPORTS. On each Payment Date, the Owner Trustee shall send or cause to be sent to the Equity Certificateholder, the Administrative Agent and each Managing Agent, a statement (to be prepared by the Servicer or the Administrator) based on information in the Servicer's Monthly Report delivered on the related Determination Date pursuant to Section 9.01 of the Pooling Agreement, setting forth for the Accrual Period or Collection Period, as applicable, relating to such Payment Date the following information: (i) the amount of such distribution allocable to principal; (ii) the amount of such distribution allocable to interest; (iii) the principal balance of each Class of Notes and the Equity Certificate Balance (after giving effect to distributions made on such Payment Date); (iv) the aggregate remaining shortfalls (after giving effect to distributions on such Payment Date), if any, referred to in the allocation provisions of Section 7.05 of the Pooling Agreement with respect to allocations previously required to be made but not made due to insufficiency of Available Amounts therefor, as well as the change in such amounts from the preceding statement; and (v) the amount of fees and expenses, and payments in respect of Hedging Agreements and in respect of the [ ] Hedged Amount (if applicable), paid from the Trust Assets with respect to such Collection Period.] Section 5.04. TAXES. In the event that any withholding tax is imposed on the Trust's payment (or allocation of income) to the Equity Certificateholder, such tax shall reduce the amount otherwise distributable to the Equity Certificateholder in accordance with this Section. The Owner Trustee is hereby authorized and directed to retain from amounts otherwise distributable to the Equity Certificateholder sufficient funds for the payment of any tax that is legally owed by the Trust (but such authorization shall not prevent the Owner Trustee from contesting any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to the Equity Certificateholder shall be treated as cash distributed to such Equity Certificateholder at the time it is withheld by the Trust and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution the Owner Trustee may in its sole discretion withhold such amounts in accordance with this Section. In the event that the Equity Certificateholder wishes to apply for a refund of any such withholding tax, the Owner Trustee shall reasonably cooperate with the Equity Certificateholder in making such claim so long as the Equity Certificateholder agrees to reimburse the Owner Trustee for any out-of-pocket expenses incurred. Section 5.05. METHOD OF PAYMENT. Subject to Section 10.01(c), distributions required to be made to the Equity Certificateholder on any Payment Date shall be made to the Equity Certificateholder of record on the preceding Record Date by wire transfer, in immediately available funds, to the account of the Equity Certificateholder at a bank or other entity having appropriate facilities therefor, which the Equity Certificateholder shall have designated to the Certificate Registrar, with appropriate written wire transfer instructions, at least three Business Days prior to such Payment Date. In the absence of such designation, such distributions shall be made by check mailed to such the Equity Certificateholder at the address of such Holder appearing in the Certificate Register. Section 5.06. NO SEGREGATION OF MONEYS; NO INTEREST. Subject to Sections 5.01 and 5.02, moneys received by the Owner Trustee hereunder need not be segregated in any manner except to the extent required by law or any applicable Transaction Document, and may be deposited under such general conditions as may be prescribed by law, and the Owner Trustee shall not be liable for any interest thereon. Section 5.07. ACCOUNTING AND REPORTS TO THE EQUITY CERTIFICATEHOLDER, THE INTERNAL REVENUE SERVICE AND OTHERS. The Owner Trustee shall (a) maintain (or cause to be maintained) the books of the Trust on a calendar year basis and the accrual method of accounting, (b) deliver or cause to be delivered to the Equity Certificateholder, as may be required by the Code and applicable Treasury Regulations, such information as may be required (including Form 1099 or Schedule K-1) to enable the Equity Certificateholder to prepare its federal and state income tax returns, (c) file or cause to be filed such tax returns relating to the Trust and make such elections as from time to time may be required or appropriate under any applicable state or federal statute or any rule or regulation thereunder so as to maintain the federal income tax treatment for the Trust as set forth in Section 2.11, (d) cause such tax returns to be signed in the manner required by law and (e) collect or cause to be collected any withholding tax as described in and in accordance with Section 5.04 with respect to income or distributions to the Equity Certificateholder. The Owner Trustee shall elect under Section 1278 of the Code to include in income currently any market discount that accrues with respect to Contracts becoming part of the Contract Pool. If applicable, the Owner Trustee shall not make the election provided under Section 754 or Section 761 of the Code. Section 5.08. SIGNATURE ON RETURNS; TAX MATTERS PARTNER. (a) The Owner shall sign on behalf of the Trust the tax returns of the Trust, if any. (b) If Subchapter K of the Code should be applicable to the Trust, the Owner shall be designated the "tax matters partner" of the Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury Regulations. [remainder of page intentionally left blank] ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE Section 6.01. GENERAL AUTHORITY. Subject to the provisions and limitations of Sections 2.03 and 2.06, the Owner Trustee is authorized and directed to execute and deliver on behalf of the Trust from time to time the Transaction Documents to which the Trust is to be a party and each certificate or other document attached as an exhibit to or contemplated by such Transaction Documents to which the Trust is to be a party and any amendment or other agreement relating thereto (in each case, in such form as is approved by the Trust Depositor), as evidenced conclusively by the Owner Trustee's execution thereof. In addition to the foregoing, the Owner Trustee is authorized, but shall not be obligated, to take all actions required of the Trust pursuant to the Transaction Documents. The Owner Trustee is further authorized from time to time to take such action as the Administrator directs or recommends in writing with respect to the Transaction Documents, subject to the terms of the Transaction Documents. Section 6.02. GENERAL DUTIES. It shall be the duty of the Owner Trustee to discharge (or cause to be discharged through the Administrator or such other agents as shall be appointed) all of its responsibilities pursuant to the terms of this Agreement and the Transaction Documents to which the Trust is a party and to administer the Trust in the interest of the Equity Certificateholder, subject to the Transaction Documents and in accordance with the provisions of this Agreement. Without limiting the foregoing, the Owner Trustee shall on behalf of the Trust file and prove any claim or claims that may exist against a Financing Originator or [ ] in connection with any claims-paying procedure as part of a proceeding in respect of an Insolvency Event involving such Financing Originator or [ ]. Notwithstanding the foregoing, the Owner Trustee shall be deemed to have discharged its duties and responsibilities hereunder and under the other Transaction Documents to the extent the Administrator has agreed in the Administration Agreement to perform any act or to discharge any duty of the Owner Trustee or the Trust hereunder or under any such Transaction Document, and the Owner Trustee shall not be held liable for the default or failure of the Administrator to carry out its obligations under the Administration Agreement. Section 6.03. ACTION UPON INSTRUCTION. (a) Subject to Article IV, and in all events subject to the terms of the applicable Transaction Documents, the Equity Certificateholder may be written instruction direct the Owner Trustee in the management of the Trust. (b) The Owner Trustee shall not be required to take any action hereunder or under any other Transaction Document if the Owner Trustee shall have reasonably determined, or shall have been advised by counsel, that such action is likely to result in liability on the part of the Owner Trustee or is contrary to the terms hereof or of any other applicable Transaction Document or is otherwise contrary to law. (c) Whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Agreement or under any other Transaction Document, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Equity Certificateholder requesting instruction as to the course of action to be adopted, and to the extent the Owner Trustee acts in good faith in accordance with any written instruction received from the Equity Certificateholder, the Owner Trustee shall not be liable on account of such action to any Person. If the Owner Trustee shall not have received appropriate instruction within ten days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Agreement and the other Transaction Documents, as it shall deem to be in the best interests of the Equity Certificateholder, and shall have no liability to any Person for such action or inaction. (d) In the event that the Owner Trustee is unsure as to the applicability of any provision of this Agreement or any other Transaction Document or any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee may give notice (in such form as shall be appropriate under the circumstances) to the Equity Certificateholder requesting instruction and, to the extent that the Owner Trustee acts or refrains from acting in good faith in accordance with any such instruction received from the Equity Certificateholder, the Owner Trustee shall not be liable, on account of such action or inaction, to any Person. If the Owner Trustee shall not have received appropriate instruction within ten days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Agreement or the other Transaction Documents, as it shall deem to be in the best interests of the Equity Certificateholder, and shall have no liability to any Person for such action or inaction. (e) Notwithstanding anything contained herein to the contrary, the Owner Trustee shall not be required to take any action in any jurisdiction other than in the State of Delaware if the taking of such action will (i) require the registration with, licensing by or the taking of any other similar action in respect of, any state or other governmental authority or agency of any jurisdiction other than the State of Delaware by or with respect to the Owner Trustee; (ii) result in any fee, tax or other governmental charge under the laws of any jurisdiction or any political subdivisions thereof in existence on the date hereof other than the State of Delaware being payable by the Owner Trustee; or (iii) subject the Owner Trustee to personal jurisdiction in any jurisdiction other than the State of Delaware for causes of action arising from acts unrelated to the consummation of the transactions by the Owner Trustee contemplated in this Agreement. In the event that the Owner Trustee has determined that any action set forth in clauses (i)-(iii) will result in the consequences stated therein, the Administrator and the Owner Trustee shall appoint one or more Persons to act as co-trustee pursuant to Section 11.05. Section 6.04. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to manage, make any payment with respect to, register, record, sell, dispose of or otherwise deal with the Trust Assets, or to otherwise take or refrain from taking any action under, or in connection with, any document contemplated hereby to which the Owner Trustee is a party, except as expressly provided by the terms of this Agreement (including Section 6.02) or any document or written instruction received by the Owner Trustee pursuant to Article IV or Section 6.03; and no implied duties or obligations shall be read into this Agreement or any other Transaction Document against the Owner Trustee. The Owner Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to prepare or file any securities law filing for the Trust or to record this Agreement or any other Transaction Document. The Owner Trustee nevertheless agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any liens on any part of the Trust Assets that result from actions by, or claims against, the Owner Trustee, in its individual capacity, that are not related to the ownership or the administration of the Trust Assets. Section 6.05. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal with any part of the Trust Assets except (i) in accordance with the powers granted to and the authority conferred upon the Owner Trustee pursuant to this Agreement, (ii) in accordance with the Transaction Documents, and (iii) in accordance with any document or instruction delivered to the Owner Trustee pursuant to Article IV or Section 6.03. Section 6.06. RESTRICTIONS. The Owner Trustee shall not take any action (i) that is inconsistent with the purposes of the Trust set forth in Section 2.03 or (ii) that, to the actual knowledge of the Owner Trustee, would result in the Trust's becoming taxable as a corporation for federal or state income tax purposes. Neither the Administrator nor the Equity Certificateholder shall direct the Owner Trustee to take actions that would violate the provisions of this Section. Section 6.07. ADMINISTRATION AGREEMENT. (a) The Administrator is authorized to execute on behalf of the Trust all documents, reports, filings, instruments, Equity Certificate and opinions as it shall be the duty of the Trust to prepare, file or deliver pursuant to the Transaction Documents. Upon written request, the Owner Trustee shall execute and deliver to the Administrator a power of attorney appointing the Administrator its agent and attorney-in-fact to execute all such documents, reports, filings, instruments, Equity Certificate and opinions. (b) If the Administrator shall resign or be removed pursuant to the terms of the Administration Agreement, the Owner Trustee may, at the written direction of the Required Holders, appoint or consent to the appointment of a successor Administrator pursuant to the Administration Agreement. (c) If the Administration Agreement is terminated, the Owner Trustee may, and is hereby authorized and empowered to, at the written direction of the Equity Certificateholder, appoint or consent to the appointment of a Person to perform substantially the same duties as are assigned to the Administrator in the Administration Agreement pursuant to an agreement containing substantially the same provisions as are contained in the Administration Agreement. (d) The Owner Trustee shall promptly notify the Equity Certificateholder of any default by or misconduct of the Administrator under the Administration Agreement of which the Owner Trustee has received written notice or of which a Responsible Officer of the Owner Trustee has actual knowledge. ARTICLE VII CONCERNING THE OWNER TRUSTEE Section 7.01. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee accepts the trusts hereby created and agrees to perform its duties hereunder with respect to such trusts but only upon the terms of this Agreement. The Owner Trustee also agrees to disburse all moneys actually received by it constituting part of the Trust Assets upon the terms of the Transaction Documents and this Agreement. The Owner Trustee shall not be answerable or accountable hereunder or under any other Transaction Document under any circumstances, except (i) for its own willful misconduct or negligence, (ii) in the case of the inaccuracy of any representation or warranty contained in Section 7.03 expressly made by the Owner Trustee in its individual capacity, (iii) for liabilities arising from the failure of the Owner Trustee to perform obligations expressly undertaken by it in the last sentence of Section 6.04 hereof, (iv) for any investments issued by the Owner Trustee or any branch or affiliate thereof in its commercial capacity, or (v) for taxes, fees or other charges on, based on or measured by, any fees, commissions or compensation received by the Owner Trustee in connection with any of the transactions contemplated by this Agreement or any other Transaction Document. In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence): (a) the Owner Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Owner Trustee which did not result from negligence on the part of such Responsible Officer; (b) the Owner Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the instructions of the Administrator or the Equity Certificateholder (so long as not contrary to the express terms of the Transaction Documents); (c) no provision of this Agreement or any other Transaction Document shall require the Owner Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder or under any other Transaction Document if the Owner Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it; (d) under no circumstances shall the Owner Trustee be liable for indebtedness evidenced by or arising under any of the Transaction Documents, including the principal of and interest on the Notes; (e) the Owner Trustee shall not be responsible for or in respect of the validity or sufficiency of this Agreement or for the due execution hereof by the Trust Depositor or for the form, character, genuineness, sufficiency, value or validity of any of the Trust Assets, or for or in respect of the validity or sufficiency of any Transaction Documents, other than its signature on behalf of the Trust on, and the certificate of authentication on, the Equity Certificate, and the Owner Trustee shall in no event assume or incur any liability, duty, or obligation to any Noteholder or to the Equity Certificateholder, other than as expressly provided for herein or expressly agreed to in the Transaction Documents; (f) the Owner Trustee shall not be liable for the default or misconduct of the Administrator, the Trust Depositor, the Indenture Trustee or the Servicer under any of the Transaction Documents or otherwise and the Owner Trustee shall have no obligation or liability to perform the obligations of the Trust under this Agreement or the other Transaction Documents that are required to be performed by the Administrator under the Administration Agreement, the Indenture Trustee under the Indenture or by the Servicer or the Trust Depositor under any other Transaction Document; and (g) the Owner Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation under this Agreement or otherwise or in relation to this Agreement or any other Transaction Document, at the request, order or direction of the Equity Certificateholder, unless the Equity Certificateholder has offered to the Owner Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Agreement or in any other Transaction Document shall not be construed as a duty, and the Owner Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of any such act. Section 7.02. FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish to the Equity Certificateholder promptly upon receipt of a written request therefor from an Equity Certificateholder, duplicates or copies of all reports, notices, requests, demands, Equity Certificate, financial statements and any other instruments furnished to the Owner Trustee under the Transaction Documents. Section 7.03. REPRESENTATIONS AND WARRANTIES. The Owner Trustee hereby represents and warrants to the Trust Depositor and the Equity Certificateholder that: (a) It is a banking corporation duly organized and validly existing in good standing under the laws of the State of Delaware. It has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to execute and deliver on behalf of the Trust each other Transaction Document to which the Trust is a party ("Related Documents"). (b) It has taken all corporate action necessary to authorize the execution and delivery by it of this Agreement and, on behalf of the Trust, the Related Documents, and this Agreement and each Related Document will be executed and delivered by one of its officers who is duly authorized to execute and deliver the same on its behalf. (c) Neither the execution nor the delivery by it of this Agreement or, on behalf of the Trust, any Related Document, nor the consummation by it of the transactions contemplated hereby nor compliance by it with any of the terms or provisions hereof will contravene any federal or Delaware law, governmental rule or regulation governing the banking or trust powers of the Owner Trustee or any judgment or order binding on it, or constitute any default under its charter documents or bylaws or any indenture, mortgage, contract, agreement or instrument to which it is a party or by which any of its properties may be bound or result in the creation or imposition of any lien, charge or encumbrance on the Trust Assets resulting from actions by or claims against the Owner Trustee individually which are unrelated to this Agreement or the other Transaction Documents. Section 7.04. RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of determination of which is not specifically prescribed herein, the Owner Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. (b) In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Agreement or other Transaction Documents, the Owner Trustee (i) may act directly or through its agents or attorneys pursuant to agreements entered into by any of them, and the Owner Trustee shall not be liable for the conduct or misconduct of such agents or attorneys as shall have been selected by the Owner Trustee with reasonable care, and (ii) may consult with counsel, accountants and other skilled persons to be selected with reasonable care and employed by it. The Owner Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the written opinion or advice of any such counsel, accountants or other such persons, provided that such actions do not conflict with the express terms of the Transaction Documents. Section 7.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in this Article VII, in accepting the trusts hereby created, [ ] acts solely as Owner Trustee hereunder and not in its individual capacity, and all Persons having any claim against the Owner Trustee by reason of the transactions contemplated by this Agreement or any other Transaction Document shall look only to the Trust Assets for payment or satisfaction thereof. Section 7.06. OWNER TRUSTEE NOT LIABLE FOR NOTES, EQUITY CERTIFICATE OR CONTRACTS. The recitals contained herein and in the Equity Certificate (other than the signature of the Owner Trustee on behalf of the Trust on, and the certificate of authentication on, the Equity Certificate) shall be taken as the statements of the Trust Depositor, and the Owner Trustee assumes no responsibility for the correctness thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Agreement, any other Transaction Document or the Equity Certificate (other than the signature of the Owner Trustee and the certificate of authentication on the Equity Certificates, or of any Contract or related documents or assets. The Owner Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Contract, or the perfection and priority of any security interest created by any Contract in any related Equipment or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Trust Assets or its ability to generate the payments to be distributed to the Equity Certificateholder under this Agreement or the Noteholders under the Indenture, including, without limitation, the existence, condition and ownership of any Equipment; the existence and enforceability of any insurance thereon; the existence and contents of any Contract on any computer or other record thereof; the validity of the assignment of any Contract to the Trust or of any intervening assignment; the completeness of any Contract; the performance or enforcement of any Contract; the compliance by the Trust Depositor, applicable Financing Originator , [ ] or the Servicer with any warranty or representation made under any Transaction Document or in any related document or the accuracy of any such warranty or representation; or any action of the Administrator, the Indenture Trustee or the Servicer or any subservicer taken in the name of the Owner Trustee. Section 7.07. OWNER TRUSTEE MAY OWN NOTES. The Owner Trustee in its individual or any other capacity may become the owner or pledgee of Notes or the Equity Certificate and may deal with the Trust Depositor, the Administrator, the Indenture Trustee, Servicer and Affiliates thereof in banking transactions with the same rights as it would have if it were not Owner Trustee. ARTICLE VIII COMPENSATION OF OWNER TRUSTEE Section 8.01. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee shall receive as compensation for its services hereunder such fees as have been separately agreed upon between the Owner Trustee and the Servicer and which shall be paid consistent with Section 5.19 of the Pooling Agreement. Additionally, the Owner Trustee shall be entitled to be reimbursed by the Trust Depositor or Servicer for its other reasonable expenses hereunder, including the reasonable compensation, expenses and disbursements of such agents, representatives, experts and counsel as the Owner Trustee may employ in connection with the exercise and performance of its rights and its duties hereunder; provided, however, that the Owner Trustee shall only be entitled to reimbursement for expenses hereunder to the extent such expenses (i) are fees of outside counsel engaged by the Owner Trustee in respect of the performance of its obligations hereunder, or (ii) relate to the performance of its obligations pursuant to Section 5.02. Section 8.02. INDEMNIFICATION. The Trust Depositor shall be liable as primary obligor for, and shall indemnify the Owner Trustee and its successors, assigns and servants (collectively, the "Indemnified Parties") from and against, any and all liabilities, obligations, losses, damages, taxes, claims, actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, "Expenses") which may at any time be imposed on, incurred by or asserted against the Owner Trustee or any Indemnified Party in any way relating to or arising out of this Agreement, any other Transaction Document, the Trust Assets, the administration of the Trust Assets or the action or inaction of the Owner Trustee hereunder; provided, however, the Trust Depositor shall not be liable for or required to indemnify an Indemnified Party from and against Expenses arising or resulting from any of the matters described in the third sentence of Section 7.01; provided, further, that the liability of the Trust Depositor under this Section shall be limited to the assets of the Trust Depositor and any indemnity payments to be made pursuant to this Section shall not be made from the Trust Assets and such indemnity payments, if unpaid, do not constitute a general recourse claim against the Trust. The indemnities contained in this Section shall survive the resignation or termination of the Owner Trustee or the termination of this Agreement. In the event of any claim, action or proceeding for which indemnity will be sought pursuant to this Section, the Owner Trustee's choice of legal counsel shall be subject to the approval of the Trust Depositor, which approval shall not be unreasonably withheld. The indemnities contained in this Section shall be in addition to the indemnities provided by the Servicer pursuant to the Pooling Agreement and the Administrator pursuant to the Administration Agreement. Section 8.03. NON-RECOURSE OBLIGATIONS. Notwithstanding anything in this Agreement or any other Transaction Document, the Owner Trustee agrees in its individual capacity and in its capacity as Owner Trustee for the Trust that all obligations of the Trust to the Owner Trustee individually or as Owner Trustee for the Trust shall be recourse to the Trust Assets only and specifically shall not be recourse to the assets of the Equity Certificateholder. ARTICLE IX TERMINATION OF TRUST Section 9.01. TERMINATION OF TRUST. (a) The respective obligations and responsibilities of the Trust Depositor and the Owner Trustee created by this Agreement and the Trust created by this Agreement shall terminate upon the earliest of (i) the maturity or other liquidation of the last Contract and related Transferred Assets, and the subsequent distribution of amounts in respect of such Transferred Assets as provided in the Transaction Documents, or (ii) the payment to the Noteholders and any other party entitled thereto of the entire outstanding principal balance of the Notes, together with accrued interest thereon to the date of repayment, and all other amounts required to be paid to such parties or to which such parties are entitled pursuant to this Agreement, the Pooling Agreement and the other Transaction Documents, or (iii) at the time provided in Section 9.02 below; provided, however, that in no event shall the trust created by this Agreement continue beyond the expiration of 21 years from the death of the last survivor of the descendants living on the date of this Agreement of Rose Kennedy of the Commonwealth of Massachusetts; and provided, further, that the rights to indemnification under Section 8.02 shall survive the termination of the Trust. The Servicer shall promptly notify the Owner Trustee and the Administrative Agent of any prospective termination pursuant to this Section 9.01. Except as provided in Section 9.02, the bankruptcy, liquidation, dissolution, termination, resignation, expulsion, withdrawal, death or incapacity of the Equity Certificateholder, shall not (x) operate to terminate this Agreement or the Trust, nor (y) entitle such Equity 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 all or any part of the Trust or Trust Assets, nor (z) otherwise affect the rights, obligations and liabilities of the parties hereto. (b) Except as provided in Section 9.01(a), neither the Trust Depositor nor the Equity Certificateholder shall be entitled to revoke or terminate the Trust. (c) Promptly upon receipt of notice of final distribution on the Equity Certificate from the Servicer given pursuant to Section 10.01 of the Pooling Agreement, the Owner Trustee shall mail written notice to the Equity Certificateholder specifying (i) the Payment Date upon which final payment of the Equity Certificate shall be made upon presentation and surrender of Equity Certificate at the office of the Owner Trustee as therein specified, (ii) the amount of any such final payment, and (iii) that the Record Date otherwise applicable to such Payment Date is not applicable, payments being made only upon presentation and surrender of the Equity Certificate at the office of the Owner Trustee therein specified. The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at the time such notice is given to Equity Certificateholder. Upon presentation and surrender of the Equity Certificate, the Owner Trustee shall cause to be distributed to Equity Certificateholder amounts distributable on such Payment Date pursuant to Section 5.02. (d) In the event that the Equity Certificateholder shall not surrender the Equity Certificate for cancellation within six months after the date specified in the above-mentioned written notice, the Owner Trustee shall give a second written notice to the Equity Certificateholder to surrender the Equity Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice the Equity Certificate shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the Equity Certificateholder concerning surrender of the Equity Certificate, and the cost thereof shall be paid out of the funds and other assets that remain subject to this Agreement. Any funds which are payable to the Equity Certificateholder remaining in the Trust after exhaustion of such remedies shall be distributed by the Owner Trustee to the Trust Depositor. (e) Upon the winding up of the Trust and its termination, the Owner Trustee shall cause the Certificate of Trust to be canceled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of Section 3810 of the Business Trust Statute. Section 9.02. DISSOLUTION UPON BANKRUPTCY OF TRUST DEPOSITOR. In the event that an Insolvency Event shall occur with respect to the Trust Depositor, then this Agreement shall be terminated in accordance with Section 9.01 90 days after the date of such event, unless within such 90 day period, the Owner Trustee shall have received written instructions from the Required Holders not to dissolve or terminate the Trust. Promptly after the occurrence of an Insolvency Event with respect to the Trust Depositor (i) the Trust Depositor shall give the Indenture Trustee and Owner Trustee written notice thereof, and the Indenture Trustee shall give prompt written notice to the Noteholders thereof. Upon a termination pursuant to this Section, the Owner Trustee shall direct the Indenture Trustee promptly sell the Trust Assets in a commercially reasonable manner and on commercially reasonable terms. The proceeds of such a sale shall be treated, allocated and distributed as Collections in accordance with the Pooling Agreement. ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES Section 10.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner Trustee shall at all times be a corporation (i) satisfying the provisions of Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise corporate trust powers; (iii) having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authorities; (iv) having (or having a parent which has) a rating of at least Baa3 by Moody's or BBB by Standard & Poor's; (v) which is not an Affiliate of the Issuer, the Trust Depositor, or any Financing Originator, and (vi) does not offer or provide credit or credit enhancement to the Issuer or the Trust Depositor. If such corporation shall publish reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 10.02. Section 10.02. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Trust Depositor and the Servicer at least 30 days before the date specified in such instrument. Upon receiving such notice of resignation, the Administrator shall promptly appoint a successor Owner Trustee meeting the qualifications set forth in Section 10.01 by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner Trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 10.01 and shall fail to resign after written request therefor by the Administrator or if at any time the Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Administrator, may remove the Owner Trustee. If the Administrator shall remove the Owner Trustee under the authority of the immediately preceding sentence, the Trust Depositor shall promptly appoint a successor Owner Trustee meeting the qualification requirements of Section 10.01 by written instrument, in duplicate, one copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one copy to the successor Owner Trustee together with payment of all fees owed to the outgoing Owner Trustee. Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section shall not become effective until all fees and expenses, including any indemnity payments, due to the outgoing Owner Trustee have been paid and until acceptance of appointment by the successor Owner Trustee pursuant to Section 10.03. Section 10.03. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to the Trust Depositor and to its predecessor Owner Trustee an instrument accepting such appointment under this Agreement, and thereupon the resignation or removal of the predecessor Owner Trustee shall become effective and such successor Owner Trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties, and obligations of its predecessor under this Agreement, with like effect as if originally named as Owner Trustee. The predecessor Owner Trustee shall deliver to the successor Owner Trustee all documents and statements and monies held by it under this Agreement; and the Trust Depositor and the predecessor Owner Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties, and obligations. No successor Owner Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Owner Trustee shall be eligible pursuant to Section 10.01. Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section, the Administrator shall mail notice thereof to the Equity Certificateholder, the Indenture Trustee, the Noteholders and each Rating Agency. If the Administrator shall fail to mail such notice within 10 days after acceptance of appointment by the successor Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed at the expense of the Trust Depositor. Any successor Owner Trustee appointed pursuant to this Section 10.03 shall file an amendment to the Certificate of Trust with the Delaware Secretary of State identifying the name and principal place of business of such successor in the State of Delaware. Section 10.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any corporation into which the Owner Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided such corporation shall be eligible pursuant to Section 11.01, without the execution or filing of any instrument or any further act on the part of any of the parties hereto. Notwithstanding anything contained herein to the contrary, the successor Owner Trustee under this Section 10.04 shall file an amendment to the Certificate of Trust with the Delaware Secretary of State identifying the name and principal place of business of such successor in the State of Delaware. Section 10.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Assets may at the time be located, the Owner Trustee shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Owner Trustee to act as co-trustee, jointly with the Owner Trustee, or separate trustee or separate trustees, of all or any part of the Trust Assets, and to vest in such Person, in such capacity, such title to the Trust Assets, or any part thereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Owner Trustee may consider necessary or desirable. No co-trustee or separate trustee under this Agreement shall be required to meet the terms of eligibility as a successor trustee pursuant to Section 10.01 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 10.01. Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (a) all rights, powers, duties, and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties, and obligations (including the holding of title to the Trust Assets or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee; (b) no trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under this Agreement; and (c) the Owner Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee. Any separate trustee or co-trustee may at any time appoint the Owner 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 Owner Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. ARTICLE XI MISCELLANEOUS Section 11.01. SUPPLEMENTS AND AMENDMENTS. (a) This Agreement may be amended by the Trust Depositor and the Owner Trustee, without the consent of any of the Noteholders or the Equity Certificateholder, to cure any ambiguity, to correct or supplement any provisions in this Agreement or to add any other provisions with respect to matters or questions arising under this Agreement that shall not be inconsistent with the provisions of this Agreement; provided, however, that any such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interest of any Noteholder or the Equity Certificateholder. (b) This Agreement may also be amended from time to time by the Trust Depositor and the Owner Trustee, with the consent of the Required Holders and the Equity Certificateholder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, or of modifying in any manner the rights of the Noteholders or the Equity Certificateholder; provided, however, that no such amendment shall increase or reduce in any manner the amount of, or accelerate or delay the timing of, (i) collections of payments on Contracts or distributions that shall be required to be made for the benefit of the Noteholders or the Equity Certificateholder, or (ii) eliminate the Equity Certificateholder consent or reduce the aforesaid percentage of the Outstanding Amount of the Notes required to consent to any such amendment, without the consent of the Holders of all outstanding Notes and the Equity Certificates. (c) Prior to the execution of any such amendment or consent, the Trust Depositor shall furnish written notification of the substance of such amendment or consent, together with a copy thereof, to the Indenture Trustee and the Administrator. (d) Promptly after the execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to the Equity Certificateholder. It shall not be necessary for the consent of the Equity Certificateholder, Noteholders or the Indenture Trustee pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of the Equity Certificateholder provided for in this Agreement or in any other Transaction Document) and of evidencing the authorization of the execution thereof by the Equity Certificateholder shall be subject to such reasonable requirements as the Owner Trustee may prescribe. (e) Promptly after the execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause the filing of such amendment with the Secretary of State. (f) Prior to the execution of any amendment or supplement to this Agreement or the Certificate of Trust, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and the other Transaction Documents, and that all conditions precedent to the execution and delivery of such amendment as set forth in the applicable Transaction Documents have been satisfied. The Owner Trustee may, but shall not be obligated to, enter into any such amendment that affects the Owner Trustee's own rights, duties or immunities under this Agreement or otherwise. Section 11.02. LIMITATIONS ON RIGHTS OF OTHERS. Except for Section 2.07, the provisions of this Agreement are solely for the benefit of the Owner Trustee, the Trust Depositor, the Owner, the Administrator and, to the extent expressly provided herein, the Indenture Trustee, the Noteholders and the Equity Certificateholder, and nothing in this Agreement (other than Section 2.07), whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Trust Assets or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. Section 11.03. NOTICES. All notices, demands, Equity Certificate, requests and communications hereunder ("notices") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an authorized officer of the party to which sent, or (d) on the date transmitted by legible telefax transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to the initial Servicer/Administrator: [ ] [ ] [ ] Fax No.: [ ] Telephone No.: [ ] with a copy to: [ ] [ ] [ ] Attention: [ ] Fax No.: [ ] Telephone No.: [ ] (ii) If to the Trust Depositor: ACE Securities Corp. [ ] [ ] Attention: [ ] Fax No.: [ ] Telephone No.: [ ] (iii) If to the Owner Trustee: [ ] Attention: Corporate Trust Administration Fax No.: Telephone No.: with a copy to: [ ] Attention: [ ] Fax No.: [ ] Telephone No.: [ ] Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. Section 11.04. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions, or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or the Certificate or the rights of the Equity Certificateholder thereof. Section 11.05. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 11.06. SUCCESSORS AND ASSIGNS. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the Trust Depositor, and the Owner Trustee and their respective successors and permitted assigns and the Owner and its successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by the Owner shall bind the successors and assigns of such Owner. Section 11.07. NO PETITION. (a) The Trust Depositor will not at any time institute against (or solicit or cooperate with or encourage any Person to institute against) the Trust any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Equity Certificate, the Notes, this Agreement or any of the other Transaction Documents existing from time to time. (b) The Owner Trustee, by entering into this Agreement, and the Equity Certificateholder, by accepting the Equity Certificate, and the Indenture Trustee and each Noteholder, by accepting the benefits of this Agreement, hereby covenant and agree that they will not at any time institute against (or solicit or cooperate with or encourage any Person to institute against) the Trust Depositor or the Trust, or join in any institution against the Trust Depositor or the Trust of, any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Equity Certificate, the Notes, this Agreement or any of the other Transaction Documents existing from time to time. Section 11.08. NO RECOURSE. The Equity Certificateholder by accepting the Equity Certificate acknowledges that the Equity Certificateholder's Equity Certificate represents beneficial interests in the Trust only and does not represent interests in or obligations of the Trust Depositor, the Servicer, any Financing Originator, the Administrator, the Owner Trustee, the Indenture Trustee or any of their respective Affiliates and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated in this Agreement, the Equity Certificate or the other applicable Transaction Documents. Section 11.09. HEADINGS. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 11.10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 11.11. CERTAIN SERVICER PAYMENT OBLIGATIONS. It is understood that the Servicer shall be responsible for payment of the Administrator's compensation pursuant to Section 3 of the Administration Agreement and shall reimburse the Administrator for all expenses and liabilities of the Administrator incurred thereunder, consistent with the provisions of Section 5.19 of the Pooling Agreement. The parties hereto agree that any such payments, if unpaid, do not constitute a general recourse claim against the Trust or the Trust Assets. Section 11.12. JURISDICTION. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURT HAVING JURISDICTION TO REVIEW THE JUDGMENTS THEREOF. EACH OF THE PARTIES HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS. Section 11.13. WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE PARTIES HERETO EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OF THIS AGREEMENT OR A TRANSACTION DOCUMENT OR ANY PROVISION HEREOF OR THEROF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, AMENDMENTS AND RESTATEMENTS, OR MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. [remainder of this page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers hereunto duly authorized, as of the day and year first above written. ACE SECURITIES CORP. as Trust Depositor By: [ ] Printed Name: [ ] Title: [ ] [ ] as Owner Trustee By: [ ] Printed Name: [ ] Title: [ ] EXHIBIT A Form of Delaware Certificate of Trust CERTIFICATE OF TRUST OF [ ] EQUIPMENT TRUST SECURITIES [ ] This Certificate of Trust of [ ] Equipment Trust Securities [ ] (the "Trust"), dated [ ], [ ], is being duly executed and filed by [ ], as Owner Trustee, to form a business trust under the Delaware Business Trust Act (12 Del. Code, 'SS' 3801 et seq.). 1. Name. The name of the business trust formed hereby is [ ] Equipment Trust Securities [ ]. 2. Delaware Trustee. The name and business address of the Owner Trustee of the Trust in the State of Delaware is [ ] of [ ], [ ]. 3. Effective Date. This Certificate of Trust shall be effective upon filing. IN WITNESS WHEREOF, the undersigned, being the sole Owner Trustee of the Trust, has executed this Certificate of Trust as of the date first above written. [ ] not in its individual capacity but solely as Owner Trustee By: [ ] Printed Name: [ ] Title: [ ] EXHIBIT B Form of Equity Certificate THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO NOTES TO THE EXTENT DESCRIBED IN THE TRUST AGREEMENT AND THE POOLING AGREEMENT REFERRED TO HEREIN. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN [ ], [ ], [ ] OR ANY AFFILIATE THEREOF, OTHER THAN THE [ ] EQUIPMENT TRUST SECURITIES [ ]. THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED UNLESS THE CONDITIONS SET FORTH IN SECTION 3.04 OF THE TRUST AGREEMENT HAVE BEEN COMPLIED WITH. THIS CERTIFICATE IS TRANSFERABLE ONLY IN WHOLE AND NOT IN PART. THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS CERTIFICATE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. [ ] EQUIPMENT TRUST SECURITIES [ ] EQUITY CERTIFICATE NO. 1 Equity Certificate THIS CERTIFIES THAT [ ] is the registered owner of a beneficial interest in the [ ] Equipment Trust Securities [ ] (the "Trust") formed by ACE Securities Corp., a Delaware corporation (the "Trust Depositor"). The Trust was created pursuant to a Trust Agreement dated as of [ ] (as amended, restated, supplemented and/or otherwise modified from time to time, the "Trust Agreement"), between ACE Securities Corp., as Trust Depositor (the "Trust Depositor"), and [ ], as owner trustee (the "Owner Trustee"), a summary of certain of the pertinent provisions of which is set forth below. In the event of any conflict or inconsistency between this Certificate and the Trust Agreement (or the Pooling Agreement, as the case may be), the Trust Agreement (or the Pooling Agreement, as the case may be) shall govern. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings which would be given to them if used in the Trust Agreement. This Certificate is the duly authorized Equity Certificate issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which Trust Agreement the Holder of this Certificate by virtue of its acceptance hereof assents and by which such Holder is bound. The Trust has also issued Notes, in right of payment to which this Equity Certificate is subordinate. The property of the Trust includes, among other things, all the right, title and interest of the Trust Depositor in and to the Transferred Assets identified in one or more related Transfer Agreements delivered from time to time on related Transfer Dates. The amount to be distributed to the Holder of this Certificate on each Payment Date will be determined pursuant to the Pooling Agreement. The Holder of this Certificate acknowledges and agrees that its rights to receive distributions in respect of this Certificate are subordinated to the rights of Noteholders to the extent described in the Trust Agreement and the Pooling Agreement. It is the intent of each Financing Originator, the Servicer, the Administrator, the Trust Depositor, the Owner Trustee, and the Equity Certificateholder that, for purposes of federal income, state and local income and single business tax and any other income taxes, the Trust will be disregarded as a separate entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3(b)(1)(ii) and that all items of income, deduction, gain, loss or credit of the Trust will be treated as such items of the Equity Certificateholder. The Trust Depositor and the Equity Certificateholder, by acceptance of this Certificate, agrees to treat, and to take no action inconsistent with such treatment of, the Trust for federal income tax purposes. The Equity Certificateholder, by its acceptance of this Certificate or a beneficial interest in this Certificate, covenants and agrees that such Equity Certificateholder will not at any time institute against (or solicit or cooperate with or encourage any Person to institute against) the Trust or the Trust Depositor, or join in any institution against the Trust or the Trust Depositor any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Certificate, any Senior Certificate, the Trust Agreement or any of the other Transaction Documents in existence from time to time. Distributions on this Certificate from or in respect of Trust Assets will be made as provided in the Trust Agreement and the Pooling Agreement, by the Owner Trustee or its agent by wire transfer or check mailed to the Equity Certificateholder of record in the Certificate Register without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Trust Agreement and notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Owner Trustee of the tendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency maintained for that purpose by the Owner Trustee. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Owner Trustee, by manual signature, this Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or any other Transaction Document or be valid for any purpose. THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. [REVERSE OF CERTIFICATE] The Equity Certificate does not represent an obligation of, or an interest in, the Trust Depositor, [ ], [ ], any Financing Originator, the Owner Trustee, or any of their respective Affiliates (other than the Trust) and no recourse may be had against such parties or their assets, except as expressly set forth or contemplated herein or in the Trust Agreement or the other Transaction Documents. In addition, this Certificate is not guaranteed by any governmental agency or instrumentality and is limited in right of payment to certain collections and recoveries with respect to the Trust Assets and certain other amounts, in each case as more specifically set forth in the Trust Agreement and in the Pooling Agreement. A copy of each of the Pooling Agreement and the Trust Agreement may be examined by any Equity Certificateholder upon written request during normal business hours at the principal office of the Trust Depositor and at such other places, if any, designated by the Trust Depositor. The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Trust Depositor and the rights of the Equity Certificateholder under the Trust Agreement at any time by the Trust Depositor and the Owner Trustee, with the consent of the parties described therein. Any such consent shall be conclusive and binding on the Equity Certificateholder and on all future Equity Certificateholder of this Certificate and of any Certificate issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent is made upon this Certificate. As provided in the Trust Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies of the Certificate Registrar maintained by the Owner Trustee in [ ], accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar executed by the Equity Certificateholder hereof or such Equity Certificateholder's attorney duly authorized in writing, and thereupon a new Certificate evidencing the same beneficial interest in the Trust will be issued to the designated transferee. The initial Certificate Registrar appointed under the Trust Agreement is the [ ]. Except as provided in the Trust Agreement, this Certificate is issuable only as a registered Equity Certificate without coupons. No service charge will be made for any registration of transfer of this Certificate, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Owner Trustee, the Certificate Registrar and any of their respective agents may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Owner Trustee, the Certificate Registrar or any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Trust Agreement and the Trust created thereby shall terminate upon the payment to the Equity Certificateholder of all amounts required to be paid to such Equity Certificateholder pursuant to the Trust Agreement and the Pooling Agreement and the disposition in accordance with any applicable Transaction Document of all property held as part of the Trust Assets. This Trust Certificate may not be acquired by a Benefit Plan. By accepting and holding this Certificate, the Holder hereof shall be deemed to have represented and warranted that it is not a Benefit Plan and is not acquiring this Certificate for the account of such an entity. IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in its individual capacity, has caused this Certificate to be duly executed. Dated: [ ] [ ] EQUIPMENT TRUST SECURITIES [ ] By: [ ], not in its individual capacity but solely as Owner Trustee By: [ ] Authorized Signatory OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is the Equity Certificate referred to in the within-mentioned Trust Agreement. By: [ ], not in its individual capacity but solely as Owner Trustee By: [ ] Authorized Signatory ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (Please print or type name and address, including postal zip code, of assignee) - ----------------------------------------------------------------------------- the within Certificate, and all rights thereunder, hereby irrevocably constituting and appointing - ------------------------------------------------------------------------------ to transfer said Certificate on the books of the Certificate Registrar, will full power of substitution in the premises. Dated:_________________________ Signature Guaranteed: - ------------------------------------------------------------------------------ - ------------------------------------ ----------------------------------- NOTICE: Signature(s) must be NOTICE: The signature to this guaranteed by an eligible guarantor assignment must correspond with the institution. name of the registered owner as it appears on the face of the within Certificate in every particular, without alteration or enlargement or any change whatever. EX-4.4.4 15 0015.txt Exhibit 4.4.4 ================================================================================ FORM OF TRUST AGREEMENT between ACE SECURITIES CORP. as Depositor and [OWNER TRUSTEE NAME], as Owner Trustee CARD ACCOUNT TRUST, SERIES [ ] Dated as of [ ] ================================================================================ TABLE OF CONTENTS PAGE ARTICLE I Definitions and Usage...........................................3 Section 1.01. Defined Terms...............................................3 Section 1.02. Other Definitional Provisions and Rules of Construction....11 ARTICLE II Conveyance of the CRB Securities; Original Issuance of Certificates................................................12 Section 2.01. Creation and Declaration of Trust; Conveyance of the CRB Securities......................................12 Section 2.02. Acceptance by Owner Trustee................................13 Section 2.03. Representations and Warranties of the Depositor............13 Section 2.04. Agreement to Authenticate and Deliver Certificates.........15 Section 2.05. Federal Income Tax Allocations.............................16 ARTICLE III Administration of the Trust Property; Distributions and Reports to Certificateholders..........................16 Section 3.01. Administration of the Trust Property.......................16 Section 3.02. CRB Collection Account, Certificate Account and Note Account............................................16 Section 3.03. Investment of Funds in the CRB Collection Account, Certificate Account and Note Account....................18 Section 3.04. Permitted Withdrawals from the CRB Collection Account......18 Section 3.05. Distributions..............................................19 Section 3.06. Compliance with Withholding Requirements...................20 Section 3.07. Statements to Certificateholders...........................20 Section 3.08. Reports of the Owner Trustee; [CRB Collection] [Certificate] Account...................................21 Section 3.09. Access to Certain Documentation and Information............21 ARTICLE IV The Certificates..............................................21 Section 4.01. The Certificates...........................................22 Section 4.02. Registration of Transfer and Exchange of Certificates......22 Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates..........23 Section 4.04. Persons Deemed Owners......................................23 Section 4.05. Maintenance of Office or Agency............................24 Section 4.06. ERISA Considerations.......................................24 Section 4.07. Authenticating Agent.......................................24 Section 4.08. Book-Entry Certificates....................................25 Section 4.09. Notices to Clearing Agency.................................26 Section 4.10. Definitive Certificates....................................26 ARTICLE V The Owner Trustee.............................................27 Section 5.01. Duties of the Owner Trustee................................27 Section 5.02. Certain Matters Affecting the Owner Trustee................29 Section 5.03. Owner Trustee Not Liable for Certificates..................30 Section 5.04. Owner Trustee May Own Certificates.........................30 Section 5.05. Owner Trustee's Fees and Expenses..........................30 Section 5.06. Eligibility Requirements for Owner Trustee.................31 Section 5.07. Resignation and Removal of the Owner Trustee...............31 Section 5.08. Successor Owner Trustee....................................32 Section 5.09. Merger or Consolidation of Owner Trustee...................33 Section 5.10. Appointment of Co-Owner Trustee or Separate Owner Trustee..33 Section 5.11. Accounting and Reports to the Holders, the Internal Revenue Service and Others.............................34 Section 5.12. Signature on Returns; Tax Matters Partner..................34 Section 5.13. Representations and Warranties of Owner Trustee............35 Section 5.14. Limitation of Powers and Duties............................36 ARTICLE VI The Depositor.................................................36 Section 6.01. Liability of the Depositor.................................36 Section 6.02. Merger, Consolidation or Conversion of the Depositor.......36 Section 6.03. Limitation on Liability of the Depositor and Others........37 ARTICLE VII Termination; Optional Purchase of CRB Securities.............37 Section 7.01. Termination................................................37 Section 7.02 Optional Purchase of CRB Securities........................38 ARTICLE VIII.................................................................39 Section 8.01 Amendment; Waiver..........................................39 Section 8.02 Limitation on Rights of Certificateholders.................40 Section 8.03 Governing Law..............................................41 Section 8.04 Notices....................................................41 Section 8.05 Severability of Provisions.................................41 Section 8.06 Notice.....................................................42 Section 8.07 No Petition................................................42 Section 8.08 No Recourse................................................42 Section 8.09 Grant of Security Interest.................................42 Section 8.10 Successors and Assigns.....................................43 Section 8.11 Article and Section Headings...............................44 Section 8.12 Certificates Nonassessable and Fully Paid..................44 TRUST AGREEMENT dated as of [ ], between ACE SECURITIES CORP., as depositor (the "Depositor"), and [OWNER TRUSTEE NAME], not in its individual capacity but solely as trustee (the "Owner Trustee"). In consideration of the mutual agreements herein contained, the Depositor and the Owner Trustee agree as follows: ARTICLE I DEFINITIONS AND USAGE Section 1.01. DEFINED TERMS. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: "AFFILIATE" means, as to any specified Person, (i) any other Person, directly or indirectly, controlling, controlled by or under common control with such specified Person and (ii) any officer, director or partner of such specified Person. The term "control", with respect to any Person, means possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "AGGREGATE COLLATERAL BALANCE" means as of any date of determination, the aggregate of the outstanding principal amounts of all the CRB Securities. As of the Cutoff Date, the Aggregate Collateral Balance shall be $[__]. "AGREEMENT" means this Trust Agreement and all amendments hereof and supplements hereto. "ANCILLARY ARRANGEMENT" means the [Ancillary Arrangement] dated as of [ ] between [_____] and [_____]. "AVAILABLE FUNDS" means, as of any date of determination, the aggregate amount then on deposit in the CRB Collection Account, net of any portion thereof which represents amounts payable pursuant to clauses (iii) and (iv) of Section 3.04. "BASIC DOCUMENTS" means the Indenture, the Note Depository Agreement, the Certificate Depository Agreement and the other documents and certificates delivered in connection therewith. "BENEFIT PLAN" has the meaning specified in Section 4.06. "BOOK-ENTRY CERTIFICATES" means a beneficial interest in the Certificates, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 4.08. "BUSINESS DAY" means any day other than a Saturday or a Sunday or a day on which banking institutions in New York, New York, or in the city in which the Corporate Trust Office of the Owner Trustee is located, are authorized or obligated by law, regulation or executive order to be closed. "CERTIFICATE" means any one of the certificates issued by the Trust and executed and authenticated by the Owner Trustee substantially in the form attached hereto as Exhibit A. "CERTIFICATE ACCOUNT" means the segregated, non-interest-bearing trust account or accounts, which shall at all times be Eligible Accounts, created and maintained by the Owner Trustee pursuant to Section 3.02(b). Funds deposited in the Certificate Account shall be held in trust for the Certificateholders for the uses and purposes set forth in this Agreement. "CERTIFICATE AVAILABLE FUNDS" means, as of any date of determination, an amount equal to (i) the amount of Available Funds, less (ii) the Note Interest Distributable Amount, less (iii) the Note Principal Distributable Amount. ["CERTIFICATE INTEREST AMOUNT" means, as to any Distribution Date, an amount equal to the sum of (i) the amount of interest accrued at the Certificate Rate for the related Collection Period on the Certificate Principal Balance on the immediately preceding Distribution Date, (or, in the case of the first Distribution Date, on the Closing Date), after giving effect to all distributions on such prior Distribution Date, and (ii) any unpaid Interest Amounts from prior Distribution Dates, together with interest thereon, to the extent permitted by law, at the Certificate Rate.] "CERTIFICATE INTEREST DISTRIBUTABLE AMOUNT" means [the Certificate Interest Amount] [insert Certificate Interest Distributable Amount formula]. "CERTIFICATE PRINCIPAL BALANCE" means, as of any date of determination, the Initial Certificate Principal Balance, less all payments made with respect to the Certificates in accordance with Section 3.05(a)(iii) on previous Distribution Dates. "CERTIFICATE RATE" means [[_____]% per annum] [the sum of (i) the Group 1 Certificate Percentage of the Group 1 CRB Interest Rate and (ii) the Group 2 Certificate Percentage of the Group 2 CRB Interest Rate] [insert interest formula]. "CERTIFICATE REGISTER" means the register maintained pursuant to Section 4.02. "CERTIFICATEHOLDER" or "Holder" means the Person in whose name a Certificate is registered in the Certificate Register, except that, solely for the purpose of giving any consent pursuant to this Agreement, any Certificate registered in the name of the Depositor shall be deemed not to be Outstanding and the Percentage Interest evidenced thereby shall not be taken into account in determining whether the requisite amount of Percentage Interests necessary to effect such consent has been obtained; provided, however, that if any such Person owns 100% of the Percentage Interests evidenced by such Certificates, all such Certificates shall be deemed to be Outstanding. "CLASS [A-1] NOTES" means the Class [A-1] [Adjustable Rate] [Variable Rate] [Floating Rate] [ %] Asset Backed Notes, issued pursuant to the Indenture and substantially in the form of Exhibit A of the Indenture. "CLASS [A-2] NOTES" means the Class [A-2] [Adjustable Rate] [Variable Rate] [Floating Rate] [ %] Asset Backed Notes, issued pursuant to the Indenture and substantially in the form of Exhibit B of the Indenture. "CLEARING AGENCY" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "CLOSING DATE" means [ ]. "CODE" means the Internal Revenue Code of 1986, as amended, and Treasury Regulations promulgated thereunder. "COLLATERAL HOLDER" means the registered holder of any CRB Security, which, following the execution and delivery of this Agreement by the parties hereto, shall be the Owner Trustee. "CORPORATE TRUST OFFICE" means the principal corporate trust office of the Owner Trustee in the State of New York at which, at any particular time, its corporate trust business with respect to this Agreement and the Trust shall be administered, which office at the date of the execution of this Agreement is located at [----------]. "CRB SECURITY" or "Card Receivables Backed Security" means any one of the credit card receivables backed certificates issued by [_____] and transferred to the Owner Trustee by the Depositor pursuant to Section 2.01, as from time to time are held as a part of the Trust Property and as are more fully described in the CRB Security Schedule attached hereto as Exhibit B. "CRB SECURITY SCHEDULE" means the schedule attached as Exhibit B hereto identifying the CRB Securities and setting forth the following information as to each CRB Security: (i) the original principal amount as of the date the CRB Securities were originally issued and, if different, the current principal amount as of the Cutoff Date; and (ii) the fractional undivided interest evidenced thereby as compared to the Aggregate Collateral Balance as of such dates. "CRB SECURITY STATEMENT" means the servicing report or other statement setting forth the amount of interest and, if applicable, principal payable on each CRB Security Payment Date with respect to the CRB Securities that is required to be furnished to each holder of CRB Securities with respect to each CRB Security Payment Date pursuant to the related Pooling and Servicing Agreement. "CRB COLLECTION ACCOUNT" means the segregated, non-interest-bearing trust account or accounts, which shall at all times be Eligible Accounts, created and maintained by the Owner Trustee pursuant to Section 3.02(a). Funds deposited in the CRB Collection Account shall be held in trust for the Certificateholders (subject to the rights of the Noteholders pursuant to the Indenture and the Notes) for the uses and purposes set forth in this Agreement. "CRB SECURITY AMORTIZATION EVENT" means a Rapid Amortization Event, Early Amortization Event, Payout Event or Economic Payout Event as such terms are defined in the Pooling and Servicing Agreements. "CRB SECURITY PAYMENT DATE" means the dates on which payments are due in respect of the CRB Securities, as specified in the related Pooling and Servicing Agreement. "CUTOFF DATE" means [ ]. "DEFINITIVE CERTIFICATES" has the meaning specified in Section 4.08. "DEPOSITOR" means ACE Securities Corp., a Delaware corporation. "DEPOSITORY AGREEMENT" means the Depository Agreement dated as of the Closing Date among the Trust, the Owner Trustee and DTC, as the initial Clearing Agency, substantially in the form attached hereto as Exhibit D. "DETERMINATION DATE" has the meaning specified in Section 3.07. "DISTRIBUTION DATE" means the [second] [third] Business Day following each CRB Security Payment Date, commencing on [ ]. "DISTRIBUTION DATE STATEMENT" has the meaning specified in Section 3.07. "DTC" means The Depository Trust Company, as the initial Clearing Agency. "ELIGIBLE ACCOUNT" means either (i) an account maintained with a Federal or state chartered depository institution or trust company, the unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the unsecured debt obligations of which holding company) are rated by the Rating Agency in one of its generic rating categories which signifies investment grade at the time any amounts are held in deposit therein, (ii) an account the deposits in which are insured by the FDIC to the limits established by such corporation, provided that any such deposits not so insured shall be otherwise maintained such that (as evidenced by an Opinion of Counsel delivered to the Owner Trustee and to each Rating Agency) the Certificateholders have a claim with respect to the funds in such account or a perfected first priority security interest against any collateral (which shall be limited to Eligible Investments) fully securing such funds that is superior to claims of any other depositors or creditors of the depository institution or trust company with which such account is maintained, or (iii) a trust account maintained with a Federal or state chartered depository institution or trust company acting in its fiduciary capacity or (iv) such other account that will not cause each Rating Agency to downgrade or withdraw the rating of the Certificates as evidenced by a letter from each Rating Agency to such effect delivered to the Owner Trustee. "ELIGIBLE INVESTMENTS" means any one or more of the following (any of which may be obligations of, or may be purchased from the Depositor or the Owner Trustee if the indicated requirements are met): (i) direct obligations of, or obligations fully guaranteed as to principal and interest by, the United States of America or any agency or instrumentality thereof, provided such obligations are backed by the full faith and credit of the United States; (ii) repurchase obligations (the collateral for which is held by a party or the Owner Trustee) with respect to any security described in clause (i) above, provided that the long-term unsecured obligations of the party agreeing to repurchase such obligations are at the time rated by each Rating Agency in its highest long-term rating category; (iii) certificates of deposit, time deposits, demand deposits and bankers' acceptances of any bank or trust company incorporated under the laws of the United States or of any state thereof or the District of Columbia, including the Owner Trustee and any Affiliate thereof, provided that the long-term debt obligations of such bank or trust company (or, in the case of the principal depository institution in a depository institution holding company, the long-term unsecured debt obligations of the depository institution holding company) at the date of acquisition thereof have been rated by each Rating Agency in its highest long-term rating category or the short-term unsecured debt obligations of which are rated "A1" or the equivalent. (iv) commercial paper of any corporation incorporated under the laws of the United States or any state thereof or the District of Columbia which on the date of investment or contractual commitment to invest has been rated by each Rating Agency in its highest short-term rating category; (v) investment in money market funds having a rating from each Rating Agency in the highest investments category granted thereby (including funds for which the Owner Trustee or the Depositor or any of their respective Affiliates is investment manager or advisor); and (vi) any other obligation or security acceptable to each Rating Agency (as certified by a letter from each Rating Agency to the Owner Trustee). "ERISA" has the meaning specified in Section 4.06. "FDIC" means the Federal Deposit Insurance Corporation. "[GROUP 1] CERTIFICATE PERCENTAGE" means a fraction, expressed as a percentage, (i) the numerator of which is the [Group 1] CRB Security Collateral Balance [as of the Cutoff Date] and (ii) the denominator of which is the sum of the [Group 1] CRB Security Collateral Balance [as of the Cutoff Date] and the [Group 2] CRB Security Collateral Balance [as of the Cutoff Date]. "[GROUP 1] CRB INTEREST AMOUNT" means, with respect to any Distribution Date, an amount equal to (i) the aggregate amount actually distributed in respect of the [Group 1] CRB Securities on the immediately preceding CRB Security Payment Date and identified as allocable to interest in the related CRB Security Statement, plus (ii) the interest portion of the purchase price paid by the Depositor in connection with the repurchase of any [Group 1] CRB Securities pursuant to Section 2.03 since the preceding Distribution Date. "[GROUP 1] CRB INTEREST RATE" means [ %] [insert [Group 1] Interest Rate formula]. "[GROUP 1] CRB PRINCIPAL AMOUNT" means, with respect to any Distribution Date, an amount equal to (i) the aggregate amount actually distributed in respect of the [Group 1] CRB Securities on the immediately preceding CRB Security Payment Date and identified as allocable to principal in the related CRB Security Statement, plus (ii) the principal portion of the purchase price paid by the Depositor in connection with the repurchase of any [Group 1] CRB Securities pursuant to Section 2.03 since the preceding Distribution Date. "[GROUP 1] CRB SECURITIES" means the CRB Securities identified as a [Group 1] CRB Security in the CRB Security Schedule attached hereto as Exhibit C. "[GROUP 1] CRB SECURITY COLLATERAL BALANCE" means, as of any date of determination, the aggregate of the outstanding principal amounts of all the [Group 1] CRB Securities. As of the Cutoff Date, the [Group 1] CRB Security Collateral Balance shall be $[_____]. "[GROUP 2] CERTIFICATE PERCENTAGE" means a fraction, expressed as a percentage, (i) the numerator of which is the [Group 2] CRB Security Collateral Balance [as of the Cutoff Date] and (ii) the denominator of which is the sum of the [Group 1] CRB Security Collateral Balance [as of the Cutoff Date] and the [Group 2] CRB Security Collateral Balance [as of the Cutoff Date]. "[GROUP 2] CRB INTEREST AMOUNT" means, as to any Distribution Date, an amount equal to (i) the aggregate amount actually distributed in respect of the [Group 2] CRB Securities on the immediately preceding CRB Security Payment Date and identified as allocable to interest in the related CRB Security Statement, plus (ii) the interest portion of the purchase price paid by the Depositor in connection with the repurchase of any [Group 2] CRB Securities pursuant to Section 2.03 since the preceding Distribution Date. "[GROUP 1] CRB INTEREST RATE" means [ %] [insert [Group 1] Interest Rate formula]. "[GROUP 2] CRB PRINCIPAL AMOUNT" means, as to any Distribution Date, an amount equal to (i) the aggregate amount actually distributed in respect of the [Group 2] CRB Securities on the immediately preceding CRB Security Payment Date and identified as allocable to principal in the related CRB Security Statement, plus (ii) the principal portion of the purchase price paid by the Depositor in connection with the repurchase of any [Group 2] CRB Securities pursuant to Section 2.03 since the preceding Distribution Date. "[GROUP 2] CRB SECURITIES" means the CRB Securities identified as a [Group 2] CRB Security in the CRB Security Schedule attached hereto as Exhibit C. "[GROUP 2] CRB SECURITY COLLATERAL BALANCE" means, as of any date of determination, the aggregate of the outstanding principal amounts of all the [Group 2] CRB Securities. As of the Cutoff Date, the [Group 2] CRB Security Collateral Balance shall be $[_____]. "INDENTURE" means the Indenture dated as of [ ], between the Trust and [Indenture Trustee Name], as Indenture Trustee. "INDENTURE TRUSTEE" means [Indenture Trustee Name], a [_____] banking corporation, not in its individual capacity, but solely as Indenture Trustee pursuant to the Indenture and any successor Indenture Trustee thereunder. "INITIAL CERTIFICATE PRINCIPAL BALANCE" means the aggregate principal balance of the Certificates on the Closing Date. "INTEREST DISTRIBUTION AMOUNT" means, as to any Distribution Date, an amount equal to (i) the aggregate amount actually distributed in respect of the CRB Securities on the immediately preceding CRB Security Payment Date and identified as allocable to interest in the related CRB Security Statement plus (ii) the interest portion of the purchase price paid by the Depositor in connection with the repurchase of any CRB Securities pursuant to Section 2.03 since the preceding Distribution Date. "LIEN OF THE INDENTURE" means all right, title and interest of the Indenture Trustee in and to the Trust Property granted by the Owner Trustee to the Indenture Trustee pursuant to the Indenture for the benefit of the Noteholders. "MAJORITY IN INTEREST" means the Holders of Certificates evidencing, in the aggregate, at least 51% of the Percentage Interests evidenced by all Certificates. "MOODY'S" means Moody's Investors Service, Inc. "NOTE" means a Class [A-1] Note or a Class [A-2] Note. "NOTE ACCOUNT" means the segregated, non-interest-bearing trust account or accounts, which shall at all times be Eligible Accounts, created and maintained by the Owner Trustee pursuant to the Indenture and Section 3.02(c) hereof. "NOTE DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date, the sum of the Note Principal Distributable Amount and the Note Interest Distributable Amount for such Distribution Date. "NOTE INTEREST DISTRIBUTABLE AMOUNT" has the meaning specified in the Indenture. "NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" has the meaning specified in the Indenture. "NOTEHOLDER" means a Person in whose name a Note is registered. "OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant Secretaries of the Depositor, as required by this Agreement. "OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel for the Depositor, which opinion is reasonably acceptable to the Owner Trustee. "OUTSTANDING" means, with respect to the Certificates as of any date of determination, all Certificates theretofore executed and authenticated under this Agreement but excluding: (i) Certificates theretofore canceled by the Owner Trustee or delivered to the Owner Trustee for cancellation; and (ii) Certificates in exchange for which or in lieu of which other Certificates have been executed and delivered pursuant to this Agreement unless proof satisfactory to the Owner Trustee is presented that any such Certificates are held by a holder in due course. "OWNER TRUST ACCOUNTS" means any or all of the CRB Collection Account, the Certificate Account or the Note Account, as applicable. "OWNER TRUST ESTATE" means all right, title and interest of the Owner Trustee, as trustee, in and to the Trust property and rights assigned to the Trust pursuant to Article II, and all funds on deposit from time to time in the Owner Trust Accounts. "OWNER TRUSTEE" means [Owner Trustee Name], a [_____] banking corporation, not in its individual capacity but solely as owner trustee under this Agreement, and any successor Owner Trustee hereunder. "PERCENTAGE INTEREST" means, with respect to any Certificate, the undivided beneficial ownership interest in the Trust Property evidenced by such Certificate. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government, or any agency or political subdivision thereof. "PLAN ASSETS REGULATION" means the plan assets regulation adopted by the Department of Labor under ERISA and codified at 29 C.F.R. ss. 2510.3-101. "POOLING AND SERVICING AGREEMENT[S]" means the Pooling and Servicing Agreement[s] pursuant to which the CRB Securities were issued, attached hereto as Exhibit C. "PRINCIPAL DISTRIBUTION AMOUNT" means, as to any Distribution Date, an amount equal to (i) the aggregate amount, if any, actually distributed in respect of the CRB Securities on the immediately preceding CRB Security Payment Date and identified as allocable to principal in the related CRB Security Statement, plus (ii) the principal portion of the purchase price paid by the Depositor in connection with the repurchase of any of the CRB Securities pursuant to Section 2.03 since the preceding Distribution Date. "RATING AGENCY" means each of [S&P] and [Moody's]. [References herein to the highest rating categories of any Rating Agency shall mean such ratings without any modifiers.] "RECORD DATE" means, with respect to any Distribution Date, the close of business on the last day immediately preceding such Distribution Date (or, in the case of Definitive Certificates, the last day of the month preceding the month in which such Distribution Date occurs). "RESPONSIBLE OFFICER", when used with respect to the Owner Trustee, means the Chairman or Vice Chairman of the Board of Directors or Owner Trustees, the Chairman or Vice Chairman of the Executive or Standing Committee of the Board of Directors or Owner Trustees, the President, the Chairman of the Committee on Trust Matters, any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer or Assistant Trust Officer, the Controller and any Assistant Controller or any other officer of the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. "TREASURY REGULATIONS" means regulations, including proposed or temporary regulations, promulgated under the Code. References in any document or instrument to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. "TRUST" means the trust created by this Agreement and denominated as Card Account Trust, Series [ ]. "TRUST PROPERTY" means the corpus of the Trust, which shall consist of: (i) the CRB Securities described in the CRB Security Schedule; (ii) all distributions thereon on and after the Cutoff Date; and (iii) the CRB Collection Account, the Certificate Account, the Note Account and such assets that are deposited therein from time to time and any investments thereof, together with any and all income, proceeds and payments with respect thereto. Section 1.02. OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement as a whole and not to any particular provision of this Agreement; Article, Section and Exhibit references contained in this Agreement are references to Articles, Sections and Exhibits in or to this Agreement unless otherwise specified; and the term "including" shall mean "including without limitation". (c) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. (d) Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns. ARTICLE II CONVEYANCE OF THE CRB SECURITIES; ORIGINAL ISSUANCE OF CERTIFICATES Section 2.01. CREATION AND DECLARATION OF TRUST; CONVEYANCE OF THE CRB SECURITIES. (a) The Depositor, concurrently with the execution and delivery of this Agreement, does hereby sell, transfer, assign, set over and otherwise convey to the Owner Trustee, in trust, for the use and benefit of the Certificateholders, without recourse, all the right, title and interest of the Depositor including any security interest therein, in, to and under the CRB Securities, all payments and all proceeds therefrom, and all other assets constituting the Trust Property. (b) In connection with such transfer and assignment, the Depositor does hereby deliver to, and deposit with, the Owner Trustee the following: (i) confirmation of DTC of the sale by the Depositor of the CRB Securities to the Owner Trustee and of the making by DTC of entries on its records identifying the CRB Securities as belonging to the Owner Trustee; and (ii) a copy of the Pooling and Servicing Agreement together with all exhibits and amendments thereto. (c) It is intended that the conveyance of the Depositor's right, title and interest in and to the CRB Securities and all other assets constituting the Trust Property pursuant to this Agreement shall constitute, and be construed as, an absolute sale of the CRB Securities by the Depositor to the Owner Trustee for the benefit of the Certificateholders, subject to the rights of the Noteholders pursuant to the Indenture and the Notes. Furthermore, it is not intended that such conveyance be deemed a pledge of the CRB Securities and the other assets constituting the Trust Property by the Depositor to the Owner Trustee to secure a debt or other obligation of the Depositor. However, in the event that, notwithstanding the aforementioned intent of the parties, the CRB Securities and the other assets constituting the Trust Property are held to be the property of the Depositor, or if for any other reason this Agreement is held or deemed to create a security interest in the CRB Securities and the other assets constituting the Trust Property, then it is intended as follows: (a) this Agreement shall also be deemed to be a security agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code as in effect from time to time in the State of New York; (b) the conveyance provided for in this Section shall be deemed to be a grant by the Depositor to the Owner Trustee of a security interest in all the Depositor's right, title and interest in and to the CRB Securities and all amounts payable to the holders of the CRB Securities after the Closing Date in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including without limitation all amounts from time to time held or invested in the Certificate Account, whether in the form of cash, instruments, securities or other property, (c) the possession by the Owner Trustee or its agent of the CRB Securities and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be "possession by the secured party" for purposes of perfecting the security interest pursuant to Section 9-305 of the Uniform Commercial Code; and (d) notifications to persons holding such property, and acknowledgments, receipts or confirmations from, financial intermediaries, bailees or agents (as applicable) of the Owner Trustee for the purpose of perfecting such security interest under applicable law. Notwithstanding the foregoing, the parties to this Agreement intend the transfer pursuant to this Section to be a true, absolute and unconditional sale of the CRB Securities and all such other assets constituting the Trust Property by the Depositor to the Owner Trustee. (d) If the CRB Securities are reissued as definitive certificates as provided in the Pooling and Servicing Agreement, the Owner Trustee shall cause such definitive certificates to be issued in its name as Owner Trustee on behalf of the Trust and shall thereafter maintain possession of such definitive certificates during the term of this Agreement unless otherwise required to surrender such definitive certificates for final payment as provided in the Pooling and Servicing Agreement. Section 2.02. ACCEPTANCE BY OWNER TRUSTEE. The Owner Trustee hereby acknowledges the receipt by it of the CRB Securities and the documents referred to in Section 2.01(b)(ii) and declares that it holds and will hold such CRB Securities, such other documents and all other assets and documents delivered to it pursuant to this Agreement, and that it will hold all such assets and all such other assets comprising the Trust Property in trust for the exclusive use and benefit of all present and future Certificateholders, subject to the Lien of the Indenture and the rights of all present and future Noteholders pursuant to the Indenture and the Notes, and for the purposes and subject to the terms and conditions set forth in this Agreement. Section 2.03. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The Depositor hereby represents and warrants to the Owner Trustee that as of the Closing Date: (a) With respect to the CRB Securities: (i) the information set forth in the CRB Security Schedule is true and correct in all material respects as of the date or dates such information is furnished; (ii) immediately prior to the sale and assignment herein contemplated, the Depositor was the sole owner of the CRB Securities free and clear of any lien, pledge, charge or encumbrance of any kind; (iii) the Depositor acquired its ownership in the CRB Securities in good faith without notice of any adverse claim; and (iv) the Depositor has not assigned any interest in the CRB Securities or any distributions thereon, except as contemplated herein. The representations and warranties set forth in this Section 2.03(a) shall survive the transfer and assignment of the CRB Securities. Upon discovery by the Depositor or the Owner Trustee of a breach of any of the foregoing representations and warranties which materially and adversely affects the Lien of the Indenture or the interests of the Certificateholders or the Noteholders in the CRB Securities, the Depositor or the Owner Trustee shall give prompt written notice to the other, to the Certificateholders and to each Rating Agency. Within 90 days of its discovery or its receipt of notice of any such breach, the Depositor shall cure such breach in all material respects or, if such breach cannot be cured, the Depositor shall repurchase the affected CRB Securities from the Owner Trustee if the Depositor is so directed by a Majority in Interest of the Certificateholders. Any such repurchase of a CRB Security by the Depositor shall be accomplished prior to the Distribution Date next following the receipt of such direction by a Majority in Interest of the Certificateholders at a price equal to the sum of (i) the outstanding principal amount of such CRB Security as of the date of such repurchase and (ii) all unpaid accrued interest on such CRB Security to the date of such repurchase at [ ] per annum (the "Purchase Price"). The payment of the Purchase Price in connection with repurchased CRB Securities shall be considered a prepayment in full of such CRB Securities and shall be delivered to the Owner Trustee for deposit in the Certificate Account in accordance with the provisions of Section 3.02. Upon such deposit into the CRB Collection Account, such CRB Securities shall be released to the Depositor, and the Owner Trustee shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as shall be reasonably requested and provided by the Depositor to vest in the Depositor, or its designee or assignee, title to the CRB Securities repurchased pursuant hereto. The Depositor shall be entitled to all amounts received by the Owner Trustee in respect of any repurchased CRB Security to the extent the distribution of such amounts would not make the total amount distributed in respect of any such repurchased CRB Security greater than the Purchase Price therefor. The obligation of the Depositor to cure or repurchase the CRB Securities as to which a breach specified in this Section 2.03(a) has occurred and is continuing shall constitute the sole remedy respecting such breach against the Depositor available to Certificateholders or the Owner Trustee on behalf of Certificateholders. (b) With respect to the Depositor: (i) the Depositor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full power and authority to execute, deliver and perform this Agreement; (ii) the Certificates will be free and clear of any right, charge, security interest, or lien or claim in favor of the Depositor; (iii) this Agreement has been duly authorized, executed and delivered by the Depositor and assuming due authorization, execution and delivery by the Owner Trustee, constitutes the valid, legal and binding obligation of the Depositor, enforceable against it in accordance with its terms, except as enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) neither the execution nor the delivery of this Agreement nor the issuance, delivery and sale of the Certificates, nor the consummation of any other of the transactions contemplated herein nor the performance of its obligations under this Agreement or the Certificates will result in the breach of any term or provision of the certificate of incorporation or bylaws of the Depositor or conflict with, result in a breach, violation or acceleration of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, the terms of any material contract, indenture or other agreement or instrument to which the Depositor is a party or by which it is bound or any of its assets is bound, or any statute, order or regulation applicable to the Depositor of any court, regulatory body, administrative agency or governmental body having jurisdiction over the Depositor; and (v) there are no actions or proceedings against, or investigations of, the Depositor pending, or, to the knowledge of the Depositor, threatened, before any court, administrative agency or other tribunal (A) asserting the invalidity of this Agreement or the Certificates, (B) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement or (C) which might materially and adversely affect the validity or enforceability of this Agreement or the Certificates. Section 2.04. AGREEMENT TO AUTHENTICATE AND DELIVER CERTIFICATES. The Owner Trustee acknowledges the transfer, delivery and assignment to it of the Trust Property, and concurrently with such transfer and delivery, the Owner Trustee has executed, authenticated and delivered, to or upon the order of the Depositor, the Certificates duly executed and authenticated by the Owner Trustee in authorized denominations evidencing ownership of the entire Trust Property and registered in such names as the Depositor shall direct in writing, all in accordance with the terms and subject to the conditions hereof. Section 2.05. FEDERAL INCOME TAX ALLOCATIONS. Net income of the Trust for any month as determined for federal income tax purposes (and each item of income, gain, loss and deduction entering into the computation thereof) shall be allocated: (a) among the Holders as of the first day following the end of such month, in proportion to their ownership of principal amount of Certificates on such date, net income in an amount up to the sum of [insert amounts distributable to and Holders] the portion of the market discount on the CRB Securities accrued during such month that is allocable to the excess, if any, of the initial aggregate principal amount of the Certificates over their initial aggregate issue price, such sum to be reduced by an amortization by the Trust of premium on CRB Securities that corresponds to any excess of the issue price of Certificates over their principal amount; and (b) to the Depositor, to the extent of any remaining net income. The net income of the Trust for any month is insufficient for the allocations described in clause (a) above, subsequent net income shall first be allocated to make up such shortfall before being allocated as provided in the preceding sentence. ARTICLE III ADMINISTRATION OF THE TRUST PROPERTY; DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS Section 3.01. ADMINISTRATION OF THE TRUST PROPERTY. The Owner Trustee shall administer the Trust Property for the benefit of the Certificateholders, subject to the rights of the Noteholders pursuant to the Notes and the Indenture. The Owner Trustee shall make reasonable effort to collect all payments required to be made pursuant to the terms of the CRB Securities and the Pooling and Servicing Agreement in a manner consistent with the terms of the Pooling and Servicing Agreements and such CRB Securities. In connection with its receipts of any funds distributed in respect of a CRB Security on any CRB Security Payment Date, the Owner Trustee shall review the related CRB Security Statement and shall confirm that the principal and interest payments received on such CRB Security Payment Date are equal to the distribution amount shown on the related CRB Security Statement. If (i) the amount of any distribution on a CRB Security varies from the amount reported to the Owner Trustee on the applicable CRB Security Statement for such distribution, (ii) the Owner Trustee shall not have received a distribution on any CRB Security by the close of business on the date on which such distribution was to be received by the Owner Trustee or (iii) the Owner Trustee shall gain actual knowledge of any other default or event of default under the Pooling and Servicing Agreement, then the Owner Trustee shall promptly notify the Depositor and the Certificateholders and shall proceed in accordance with the provisions hereof, including Section 5.01(c), (d) and (e). Section 3.02. CRB COLLECTION ACCOUNT, CERTIFICATE ACCOUNT AND NOTE ACCOUNT. (a) CRB Collection Account. The Owner Trustee, for the benefit of the Certificateholders subject to the rights of the Noteholders pursuant to the Notes and the Indenture, shall establish and maintain one or more non-interest bearing Eligible Accounts (collectively, the "CRB Collection Account"), entitled [ ], as Owner Trustee, in trust for the registered holders of Certificates in Card Account Trust, Series [ ]. The Owner Trustee, on behalf of the Certificateholders, shall possess all right, title and interest (subject to the Lien of the Indenture) in all funds deposited from time to time in the CRB Collection Account and in all proceeds thereof. The Owner Trustee shall upon receipt deposit in the CRB Collection Account all amounts collected and payments received in respect of the CRB Securities, including: (i) all distributions received on the CRB Securities subsequent to the Cutoff Date; and (ii) any amount required to be deposited in the CRB Collection Account pursuant to Section 2.03(a) in connection with the repurchase of a CRB Security by the Depositor. If, at any time, the CRB Collection Account ceases to be an Eligible Account, the Owner Trustee shall within five Business Days establish a new CRB Collection Account meeting the conditions specified above and transfer any cash and any investments on deposit in the CRB Collection Account to such new CRB Collection Account, and from the date such new CRB Collection Account is established, it shall be the CRB Collection Account. (b) Certificate Account. The Owner Trustee, for the benefit of the Certificateholders shall establish and maintain one or more non-interest bearing Eligible Accounts (collectively, the "Certificate Account"), entitled [ ], as Owner Trustee, in trust for the registered holders of Certificates in Card Account Trust, Series [ ]. The Owner Trustee, on behalf of the Certificateholders, shall possess all right, title and interest in all funds deposited from time to time in the Certificate Account and in all proceeds thereof. The Owner Trustee shall transfer from the CRB Collection Account to the Certificate Account certain amounts on deposit therein after [payment to the Indenture Trustee] [withdrawal therefrom and deposit in the Note Account] certain amounts for the benefit of the Noteholders, pursuant to clause (i) of Section 3.04 and clauses (i) and (iv) of Section 3.05 and the terms of the Indenture. If, at any time, the Certificate Account ceases to be an Eligible Account, the Owner Trustee shall within five Business Days establish a new Certificate Account meeting the conditions specified above and transfer any cash and any investments on deposit in the Certificate Account to such new Certificate Account, and from the date such new Certificate Account is established, it shall be the Certificate Account. (c) Note Account. The Owner Trustee, for the benefit of the Noteholders shall establish and maintain one or more non-interest bearing Eligible Accounts (collectively, the "Note Account"), entitled [ ], as Owner Trustee. The Owner Trustee shall transfer from the CRB Collection Account to the Note Account certain amounts on deposit therein in accordance with clause (i) of Section 3.04 and clauses (i) and (iv) of Section 3.05 and the terms of the Indenture. If, at any time, the Note Account ceases to be an Eligible Account, the Owner Trustee shall within five Business Days establish a new Note Account meeting the conditions specified above and transfer any cash and any investments on deposit in the Note Account to such new Note Account, and from the date such new Note Account is established, it shall be the Note Account. (d) The Owner Trustee shall give written notice to the Depositor and each Rating Agency of the location of each Eligible Account constituting the CRB Collection Account, the Certificate Account and the Note Account upon establishment thereof and prior to any change thereof. Section 3.03. INVESTMENT OF FUNDS IN THE CRB COLLECTION ACCOUNT, CERTIFICATE ACCOUNT AND NOTE Account. The Depositor, on behalf of the Trust, may direct in writing any depository institution maintaining the Owner Trust Accounts to invest the funds in such Owner Trust Accounts in one or more Eligible Investments, which shall mature not later than the Business Day immediately preceding the next Distribution Date (or, if the Owner Trustee in its commercial capacity is the obligor of such Eligible Investments and the Owner Trust Accounts is maintained by the Owner Trustee, such Eligible Investments shall mature not later than the next Distribution Date) and shall not be sold or disposed of prior to their respective maturities; provided, however, that if the Depositor fails to select any such Eligible Investment, the Owner Trustee shall direct such institution to invest such funds in demand deposits meeting the requirements described in item (iii) of the definition of Eligible Investments. All such Eligible Investments shall be made in the name of the Owner Trustee, in trust for the Holders of the Certificates, or its nominee. All proceeds of any such investment shall be deposited in the Owner Trust Accounts may not be reinvested and may only be withdrawn and applied for the purposes set forth herein. Section 3.04. PERMITTED WITHDRAWALS FROM THE CRB COLLECTION ACCOUNT. The Owner Trustee, may from time to time withdraw funds from the CRB Collection Account for the following purposes: (i) to make [payments to the Indenture Trustee] [deposits in the Note Account] for the benefit of the Noteholders in the amounts and in the manner provided for in the Indenture and pursuant to the terms of the Notes; (ii) to make [payments to Certificateholders] [deposits in the Certificate Account for distribution to the Certificateholders] in the amounts and in the manner provided for in Section 3.05; (iii) to reimburse the Owner Trustee, to the extent of the net proceeds recovered on any defaulted CRB Securities, prior to the distribution of such proceeds to Certificateholders, for any unreimbursed expenses incurred with respect to the exercise of remedies in respect of such CRB Securities pursuant to Section 5.01; (iv) to reimburse the Depositor for expenses incurred by and reimbursable to the Depositor pursuant to Section 6.03; (v) to clear and terminate the CRB Collection Account upon the termination of this Agreement. Section 3.05. DISTRIBUTIONS. (a) On each Distribution Date, the Owner Trustee shall withdraw from the CRB Collection Account all Available Funds then on deposit therein and shall deposit such Available Funds (in each case to the extent of the remaining Available Funds) in the Note Account or the Certificate Account, as the case may be, for the following purposes and in the following order of priority: (i) to pay [into the Note Account] [the Indenture Trustee] for the benefit of the Noteholders an amount equal to the Note Interest Distributable Amount for such Distribution Date; (ii) to pay into the Certificate Account for distribution to the Holders of the Certificates the Certificate Interest Distributable Amount for such Distribution Date; (iii) to pay to the Owner Trustee a pro rata portion of the Owner Trustee's annual fee for services; (iv) to pay [into the Note Account] [to the Indenture Trustee] for the benefit of the Noteholders an amount equal to the Note Principal Distributable Amount for such Distribution Date; (v) to pay into the Certificate Account for distribution to the Holders of the Certificates the Certificate Principal Distributable Amount for such Distribution Date; and (vi) to pay to the Owner Trustee any unreimbursed expenses incurred by the Owner Trustee but not covered by the Owner Trustee's annual fee. (b) All distributions from the Certificate Account made with respect to the Certificates on each Distribution Date shall be allocated pro rata among the Outstanding Certificates based upon their respective Percentage Interests in respect of the aggregate Outstanding principal amount of the Certificates. Payments to the Certificateholders on each Distribution Date will be made to the Certificateholders of record on the related Record Date (other than as provided in Section 7.01 with respect to the final distribution). Distributions to any Certificateholder on any Distribution Date shall be made by wire transfer of immediately available funds, at the expense of the Certificateholder requesting such wire transfer by deducting a wire transfer fee from the related transfer, to the account of such Certificateholder at a bank or other entity having appropriate facilities therefor, if such Certificateholder shall have so notified the Owner Trustee in writing at least five Business Days prior to the related Record Date and such Certificateholder shall hold Certificates with an aggregate Certificate Principal Balance as of the Closing Date of at least $1,000,000 or in such other manner as shall be agreed to by the Owner Trustee and such Certificateholder, or otherwise by check mailed by first class mail to the address of such Certificateholder appearing in the Certificate Register. Final distribution on each Certificate will be made in like manner, but only upon present and surrender of such Certificate at the Corporate Trust Office or such other location specified in the notice to Certificateholders of such final distribution. Section 3.06. COMPLIANCE WITH WITHHOLDING REQUIREMENTS. Notwithstanding any other provision of this Agreement to the contrary, the Owner Trustee shall comply with all Federal income tax withholding requirements respecting distributions to, or receipts of amounts on behalf of, Certificateholders that the Owner Trustee reasonably believes are applicable under the Code. The consent of Certificateholders shall not be required for such withholding. In the event the Owner Trustee does withhold any amount from interest or principal distribution thereof to any Certificateholder pursuant to federal withholding requirements, the Owner Trustee shall indicate in the statement required pursuant to Section 3.07 the amount so withheld. Section 3.07. STATEMENTS TO CERTIFICATEHOLDERS. On the second Business Day preceding each Distribution Date (each, a "Determination Date"), the Depositor (or its designee) shall prepare and forward a statement (a "Distribution Date Statement") to the Owner Trustee, who in turn shall forward such statement by mail to each Rating Agency and each Certificateholder. Each such Distribution Date Statement shall set forth the following information: (i) the Certificate Available Funds for such Distribution Date; (ii) the Certificate Interest Distributable Amount for such Distribution Date; (iii) the Certificate Principal Distributable Amount, if any, for such Distribution Date; (iv) the Certificate Principal Balance after giving effect to distributions of principal of such Certificates on such Distribution Date; and (v) the amount of any withdrawals made from the CRB Collection Account since the immediately preceding Distribution Date pursuant to clauses (ii) through (iv) of Section 3.04, together with a general description of the purpose of each such withdrawal. In the case of the information furnished pursuant to clauses (i) and (iv) above, the foregoing amounts shall also be stated as a dollar amount per $1,000 principal amount of the Certificates. In addition, the Owner Trustee promptly shall furnish to Certificateholders copies of any notices, statements, reports or other communications received by the Owner Trustee as the Collateral Holder. On or before January 31 of each calendar year, beginning with calendar year [ ], the Owner Trustee shall furnish by first class mail to each Person who at any time during the previous calendar year was a Certificateholder of record a statement containing the information required to be contained in the regular report to Certificateholders, as set forth in clauses (ii) and (iii) above, aggregated for such calendar year or the applicable portion thereof during which such Person was a Certificateholder which statement shall contain sufficient information to allow Certificateholders to calculate their United States federal income tax liability with respect to the Certificates. Such obligation of the Owner Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Owner Trustee pursuant to any requirements of the Code. The Owner Trustee shall furnish to each Certificateholder during the term of this Agreement such periodic, special or other reports or information, whether or not provided for herein, as shall be necessary, reasonable or appropriate with respect to the Certificateholder or otherwise with respect to the purposes of this Agreement, all such reports or information to be provided by and in accordance with such applicable instructions and directions as the Certificateholder may reasonably require and at the expense of such Certificateholder. Section 3.08. REPORTS OF THE OWNER TRUSTEE; [CRB COLLECTION] [CERTIFICATE] ACCOUNT. Upon request of a Certificateholder, the Owner Trustee shall make available to Certificateholders a statement setting forth the status of the [CRB Collection] [Certificate] Account as of the close of business on the Distribution Date immediately preceding such request, and showing, for the period covered by such statement, the aggregate of deposits into and withdrawals from the [CRB Collection] [Certificate] Account. Section 3.09. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION. The Owner Trustee shall provide the Certificateholders with access to a copy of each report received by it as Collateral Holder under the Pooling and Servicing Agreement with respect to the CRB Securities. The Owner Trustee shall also provide the Depositor with access to each such report and to all written reports, documents and records required to be maintained by the Owner Trustee in respect of its duties hereunder. The Owner Trustee shall keep a certified copy or duplicate original of this Agreement on file at its Corporate Trust Office for inspection by any Certificateholder. The Owner Trustee shall provide, at the written request of three or more Certificateholders or one or more Certificateholders evidencing Percentage Interests of not less than 25% of the Certificates, access to the current list of the names and addresses of all Certificateholders for the purpose of communicating with other Certificateholders with respect to their rights under this Agreement or under the Certificates. Such access shall be afforded without charge but only upon reasonable request evidenced by prior written notice to the Owner Trustee and during normal business hours at offices designated by the Owner Trustee. ARTICLE IV THE CERTIFICATES Section 4.01. THE CERTIFICATES. (a) The Certificates shall be substantially in the respective forms set forth in Exhibits A hereto. The Certificates shall, on original issue, be executed and authenticated by the Owner Trustee and delivered by the Owner Trustee to or upon the order of the Depositor upon receipt by the Owner Trustee of the CRB Securities and any other documents specified in Section 2.01. (b) The Certificates shall be issuable in fully registered form only, in the minimum original principal amounts of $1,000 and integral multiples thereof. (c) The Certificates shall be executed by manual signature on behalf of the Owner Trustee in its capacity as trustee hereunder by a Responsible Officer. Certificates bearing the manual signatures of individuals who were at any time the proper officers of the Owner Trustee shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the date of such Certificate. No Certificates shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Owner Trustee by manual signature, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates issued on the Closing Date shall be dated the Closing Date. All Certificates issued thereafter shall be dated the date of their authentication. Section 4.02. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a) The Owner Trustee shall keep at one of the offices or agencies to be maintained by the Owner Trustee in accordance with Section 4.05 a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Owner Trustee shall provide for the registration of Certificates and of transfers and exchanges of Certificates as herein provided. (b)......Upon surrender for registration of transfer of any Certificate at the Corporate Trust Office, the Owner Trustee shall execute and deliver, in the name of the designated transferee or transferees, one or more new Certificates in authorized denominations and of the same aggregate Percentage Interest. (c) At the option of the Certificateholders, each Certificate may be exchanged for a Certificate of like aggregate original principal amount, series, class, original issue date and maturity, in different authorized denominations upon surrender of the Certificates to be exchanged at the office maintained by the Owner Trustee pursuant to Section 4.05. Whenever any Certificates are so surrendered for exchange, the Owner Trustee shall execute, authenticate and deliver the Certificates that the Certificateholder making the exchange is entitled to receive. Each Certificate presented or surrendered for registration of transfer or exchange shall (if so required by the Owner Trustee) be duly endorsed by, or be accompanied by a written instrument of transfer in the form satisfactory to the Owner Trustee, duly executed by the Holder thereof or his attorney duly authorized in writing. (d) Certificates delivered upon any exchange will evidence the same obligations, and will be entitled to the same rights and privileges, as the Certificates surrendered. (e) No service charge shall be imposed for any registration of transfer or exchange of Certificates, but the Owner Trustee may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. (f) All Certificates surrendered for registration of transfer and exchange shall be canceled and destroyed by the Owner Trustee in accordance with its standard procedures without liability on its part. Section 4.03. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a)(i) any mutilated Certificate is surrendered to the Owner Trustee or (ii) the Depositor and the Owner Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Certificate and of the ownership thereof and (b) there is delivered to the Owner Trustee and the Depositor such security or indemnity as may be required by them to save each of them harmless, then, in the absence of receipt by either the Owner Trustee or the Depositor of written notice that such Certificate has been acquired by a bona fide purchaser, the Owner Trustee shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor, form, terms and principal amount, as applicable, bearing a number not contemporaneously Outstanding, so that neither gain nor loss in interest shall result from such exchange or substitution. Upon the issuance of any new Certificate under this Section 4.03, the Owner Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Owner Trustee) connected therewith. Any duplicate Certificate issued pursuant to this Section 4.03 shall constitute complete and indefeasible evidence of the rights of a Holder of the originally issued Certificate as if such duplicate Certificate was originally issued, whether or not the lost, stolen or destroyed Certificate shall be, at any time, enforceable by anyone and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Certificates duly issued hereunder. All Certificates surrendered to the Owner Trustee under the terms of this Section 4.03 shall be canceled and destroyed by the Owner Trustee in accordance with its standard procedures without liability on its part. The provisions of this Section 4.03 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. Section 4.04. PERSONS DEEMED OWNERS. The Owner Trustee and the Depositor and any agent of either of them may treat the Person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 3.05 and for all other purposes whatsoever, and neither the Owner Trustee, the Depositor nor any such agent shall be affected by notice to the contrary. Section 4.05. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee will maintain at its expense in the Borough of Manhattan, The City of New York, State of New York, an office or agency where Certificates may be surrendered for registration of transfer or exchange and presented for final distribution and where notices and demands to or upon the Trust Property in respect of the Certificates and this Agreement may be served. Such office or agency shall initially be maintained at [_____]. The Owner Trustee will give prompt written notice to the Certificateholders and the Depositor of any change in the location of any such office or agency. Section 4.06. ERISA CONSIDERATIONS. No Certificate may be acquired by an employee benefit plan, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that is subject to the provisions of Title I of ERISA, a plan described in Section 4975(e)(i) of the Code or any entity whose underlying assets include plan assets by reason of a plan's investment in the entity (each, a "Benefit Plan"). Each Certificateholder, by virtue of the acquisition and holding of a Certificate, will be deemed to have represented and warranted to the Depositor and the Owner Trustee that such Certificateholder is not a Benefit Plan. Section 4.07. AUTHENTICATING AGENT. (a)The Owner Trustee may appoint one or more authenticating agents with respect to the Certificates which shall be authorized to act on behalf of the Owner Trustee in authenticating the Certificates in connection with the issuance, delivery, registration of transfer, exchange or repayment of the Certificates. Whenever reference is made in this Agreement to the authentications of Certificates by the Owner Trustee or the Owner Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Owner Trustee by an authenticating agent and a certificate of authentication executed on behalf of the Owner Trustee by an authenticating agent. Each authenticating agent must be acceptable to the Depositor. (b) Any institution succeeding to the corporate agency business of any authenticating agent shall continue to be an authenticating agent without the execution or filing of any power or any further act on the part of the Owner Trustee or such authenticating agent. An authenticating agent may at any time resign by giving notice of resignation to the Owner Trustee and to the Depositor. The Owner Trustee may at any time terminate the agency of an authenticating agent by giving notice of termination to such authenticating agent and to the Depositor. Upon receiving such a notice of resignation or upon such a termination, or in case at any time an authenticating agent shall cease to be acceptable to the Owner Trustee or the Depositor, the Owner Trustee promptly may appoint a successor authenticating agent. Any successor authenticating agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an authenticating agent. No successor authenticating agent shall be appointed unless acceptable to the Owner Trustee and the Depositor. The Depositor agrees to pay to each authenticating agent from time to time reasonable compensation for its services under this Section. In the event the Owner Trustee acts as authenticating agent hereunder, the provisions of Article V shall be applicable to the Owner Trustee in such other capacity as authenticating agent. (c) Pursuant to an appointment made under this Section, the Certificates may have endorsed thereon, in lieu of the Owner Trustee's certificate of authentication, an alternate certificate of authentication in substantially the following form: This is one of the Certificates described in the Trust Agreement referred to herein. ----------------------------------- ----------------------------------- as Authenticating Agent for the Owner Trustee, By _______________________________ Authorized Officer Section 4.08. BOOK-ENTRY CERTIFICATES. The Certificates, upon original issuance, shall be issued in the form of one or more typewritten Certificates representing the Book-Entry Certificates, to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. The Certificates shall initially be registered on the Certificate Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Certificateholder will receive a Definitive Certificate (as defined below) representing such Certificateholder's interest in the Certificates, except as provided in Section 4.10. Unless and until definitive, fully registered Certificates ("Definitive Certificates") have been issued to the applicable Certificateholder pursuant to Section 4.10.: (a) the provisions of this Section shall be in full force and effect; (b) the Depositor and the Owner Trustee may deal with the Clearing Agency and the Clearing Agency Participant for all purposes (including the making of distributions in respect of the Certificates) as the authorized representatives of the respective Certificateholders; (c) to the extent that the provisions of this Section conflict with any other provisions of this Agreement, the provisions of this Section shall control; (d) the rights of the respective Certificateholders shall be exercised only through the Clearing Agency and the Clearing Agency participants and shall be limited to those established by law and agreements between such Certificateholders and the Clearing Agency and/or the Clearing Agency Participants pursuant to the Depository Agreement. Unless and until Definitive Certificates are issued pursuant to Section 4.10, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principle and interest and any other amounts on the related Certificates to such Clearing Agency Participants; and (e) whenever this agreement requires or permits actions to be taken with the consent of, or at the direction of, Certificateholders evidencing a specified percentage of the aggregate principal amount of Outstanding Certificates, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Certificateholders and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the principal amount of Certificates and has delivered instructions to the Owner Trustee. Section 4.09. NOTICES TO CLEARING AGENCY. Whenever any notice or other communication is required to be given to Certificateholders with respect to which Book-Entry Certificates have been issued, unless and until Definitive Certificates shall have been issued to the related Certificateholders, the Owner Trustee shall give all such notices and communications to the Clearing Agency. Section 4.10. DEFINITIVE CERTIFICATES. If Book-Entry Certificates have been issued and (a) the Depositor advised the Owner Trustee that DTC is no longer willing or able to discharge properly its responsibilities under the Depository Agreement with respect to the Certificates and the Owner Trustee or the Depositor is unable to locate a qualified successor, (b) the Depositor, at its option, advises the Owner Trustee that it elects to terminate the book-entry system with respect to the Certificates through the Clearing Agency or (c) after the occurrence of a payment default with respect to the CRB Securities, Certificateholders representing at least a majority of the outstanding principal amount of Certificates advise the Clearing Agency (which shall then notify the Owner Trustee) in writing that the continuation of a book-entry system with respect to the Certificates through the Clearing Agency is no longer in the best interests of the holders of such Certificates, then the Owner Trustee shall cause the Clearing Agency to notify all holders of Certificates, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Certificates to Certificateholders requesting the same. Upon surrender to the Owner Trustee of any such Certificates representing Book-Entry Certificates by the Clearing Agency, accompanied by instructions for re-registration, the Owner Trustee shall execute authenticate and deliver such Certificates as Definitive Certificates to such Certificateholders in accordance with the instructions of the Clearing Agency. None of the Trust, the Depositor or the Owner Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of such Definitive Certificate, all references herein to obligations imposed upon or to be performed by the Clearing Agency shall be deemed to be imposed upon and performed by the Owner Trustee, to the extent applicable with respect to such Definitive Certificates and the Owner Trustee shall recognize the Holders of such Definitive Certificates as Certificateholders hereunder. Upon the issuance of Definitive Certificates, distributions of amounts in respect of such Definitive Certificates shall thereafter be made by the Owner Trustee on each Distribution Date in accordance with the procedures set forth in Section 3.05 directly to holders of Definitive Certificates in whose names the Definitive Certificates were registered at the close of business on the related Record Date. Such distributions shall be made by check mailed to the address of such holder as it appears on the Certificate Register maintained by the Owner Trustee (or, as provided in Section 3.05, by wire transfer); provided, however, that the final payment on any such Definitive Certificate shall be made only upon presentation and surrender of such Definitive Certificate at the office or agency specified in the notice of final distribution to Certificateholders. ARTICLE V THE OWNER TRUSTEE Section 5.01. Duties of the Owner Trustee. (a) The Owner Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Agreement. The Owner Trustee shall have the authority to exercise the rights and powers vested in it by this Agreement. Any permissive right of the Owner Trustee set forth in this Agreement shall not be construed as a duty. (b) The Owner Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Owner Trustee which are specifically required to be furnished to it pursuant to any provision of this Agreement or to it in its capacity as Collateral Holder pursuant to the Pooling and Servicing Agreement, shall examine them to determine whether they conform to the requirements of this Agreement or the Pooling and Servicing Agreement. If any such instrument is found not to conform to the requirements of this Agreement or the Pooling and Servicing Agreement in a material manner, the Owner Trustee shall take such action as a Majority in Interest of Certificateholders shall direct, and the Owner Trustee will provide notice thereof to the Depositor, the Certificateholders and each Rating Agency. (c) In the event of a default in respect of the CRB Securities, the Owner Trustee shall proceed to enforce its rights as a holder of the CRB Securities under the Pooling and Servicing Agreement, unless otherwise directed by a Majority in Interest of Certificates affected thereby. The Owner Trustee may, in its discretion, and will, if so directed by a Majority in Interest of Certificates affected thereby, proceed to enforce any rights which it may have as a holder of CRB Securities. In addition, a Majority in Interest of Certificates may together direct the time, method and place of conducting any proceeding for any remedy available to the Owner Trustee as a holder of CRB Securities. Notwithstanding the foregoing, the Owner Trustee shall in no event exercise any of its rights as a Collateral Holder in an manner inconsistent with the terms of paragraphs (d) and (e) of this Section 5.01. (d) In the event that: (i) the Owner Trustee has the right to vote or give consent in respect of the CRB Securities or receives a request from the trustee or the issuer of the CRB Securities for its consent to any amendment, modification or waiver under any document relating to the CRB Securities, or receives any other solicitation for any action with respect to the CRB Securities, (ii) the Depositor notifies the Owner Trustee of its determination that taking any such action is primarily intended to maintain the initial value or credit rating of the CRB Securities, and any additional consequences that might arise as a result of taking any such action are incidental, and (iii) either (A) the CRB Security are in default, (B) the Depositor notifies the Owner Trustee of its determination that the CRB Securities will probably have their credit rating downgraded (or be in default) in the reasonably foreseeable future absent such action or (C) the Depositor delivers to the Owner Trustee an opinion of tax counsel to the effect that the Trust will continue to qualify as a grantor trust under the Code if any such action were to be taken, then, (x) the Owner Trustee shall mail a notice of such proposed action, including a description thereof, to each Certificateholder of record as of such date, (y) the Owner Trustee shall request instructions from the Certificateholders as to whether or not to take such action and (z) the Owner Trustee shall vote, give consent or otherwise act as Collateral Holder with respect to a particular matter in the same proportion as the Certificates of the Trust were actually voted with respect to such matter (or, if such a proportional action is not permitted, in accordance with the instructions of Holders of a Majority in Interest of the Certificates) as of a date determined by the Owner Trustee prior to the date on which such action is required, provided that the Owner Trustee shall have no liability for any failure to act resulting from Certificateholders' late return of, or failure to return, directions requested by the Owner Trustee from the Certificateholders. If each of the conditions set forth in clauses (ii) and (iii) of the next preceding sentence are not satisfied, then the Owner Trustee shall abstain from taking any action with respect to any vote, consent or other action that is referred to in clause (i) of the next preceding sentence. (e) Notwithstanding anything to the contrary contained herein, the Owner Trustee shall be under no obligation to exercise or enforce any of the rights or powers vested in it by this Agreement or as the Collateral Holder, at the request, order or direction of any of the Certificateholders, unless such Certificateholders have offered to the Owner Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee in compliance with such request, order or direction or if such request, order or direction is in conflict with any rule of law or this Agreement. In the event of any default under this Agreement by the Depositor or any default under the CRB Securities, subject to compliance with paragraph (d) above, the Owner Trustee may in its discretion proceed to protect and enforce the rights of Certificateholders by any action, suit or proceeding deemed proper by the Owner Trustee which is not inconsistent with any request or direction by the Holders of a Majority in Interest of the Certificates affected thereby. (f) No provision of this Agreement shall be construed to relieve the Owner Trustee from liability for its own negligent action, its own negligent failure to act or its own misconduct or from liability for any negligent action or any negligent failure to act in respect of the Trust Property, the CRB Securities or the Pooling and Servicing Agreement in any capacity other than as Owner Trustee; provided, however, that: (i) the duties and obligations of the Owner Trustee shall be determined solely by the express provisions of this Agreement, the Owner 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 Owner Trustee and, in the absence of bad faith or negligence on the part of the Owner Trustee, the Owner Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates, opinions, documents and other statements furnished to the Owner Trustee that conform on their face to the requirements of this Agreement; (ii) the Owner Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Owner Trustee, unless it shall be proved that the Owner Trustee was negligent in ascertaining the pertinent facts; and (iii) the Owner Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith and believed by it to be authorized or within its discretion or authority hereunder or in accordance with the direction of the Holders of Certificates evidencing Percentage Interests aggregating not less than 66- 2/3% of all the Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Owner Trustee, or exercising any trust or power conferred upon the Owner Trustee, under this Agreement. Section 5.02. CERTAIN MATTERS AFFECTING THE OWNER TRUSTEE. Except as otherwise provided in Section 5.01: (i) the Owner Trustee may request and rely upon and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (ii) the Owner Trustee may consult with counsel and any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance therewith; (iii) except for the duties and obligations of the Owner Trustee expressly created by this Agreement, the Owner Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Agreement or to make any investigation of matters arising hereunder or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Certificateholders, pursuant to the provisions of this Agreement, or if such request or direction is in conflict with any rule of law or this Agreement, unless such Certificateholders shall have offered to the Owner Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; nothing contained herein shall, however, relieve the Owner Trustee of the obligation, to use the same degree of care and skill in its exercise of rights and remedies hereunder on behalf of Certificateholders as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (iv) the Owner Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; (v) the Owner Trustee shall not be personally liable for any loss resulting from the investment of funds held in the CRB Collection Account pursuant to Section 3.03; and (vi) the Owner Trustee shall not be deemed to have notice or knowledge of any matter unless a Responsible Officer assigned to and working in the Corporate Trust Office has actual knowledge thereof or unless written notice thereof is received by the Owner Trustee at the Corporate Trust Office and such notice references the Certificates generally or this Agreement. Section 5.03. Owner Trustee Not Liable for Certificates. The recitals contained herein and in the Certificates, other than the signature of the Owner Trustee on the Certificates and the certificate of authentication, shall be taken as the statements of the Depositor, and the Owner Trustee assumes no responsibility for their correctness. The Owner Trustee makes no representations or warranties as to the validity or sufficiency of this Agreement or of the Certificates or of the CRB Securities or related documents, other than the signature of the Owner Trustee on the Certificates and the certificate of authentication. The Owner Trustee shall not be accountable hereunder or under the Certificates, except (i) for its own bad faith or negligence or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 5.12 expressly made by the Owner Trustee. Section 5.04. OWNER TRUSTEE MAY OWN CERTIFICATES. The Owner Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not Owner Trustee; provided, however, that in determining whether the Holders of the required Percentage Interest shall have consented to any action hereunder requiring such consent, the Owner Trustee's interest shall be excluded. Section 5.05. OWNER TRUSTEE'S FEES AND EXPENSES. The Depositor covenants and agrees to pay to the Owner Trustee on the Closing Date, and the Owner Trustee shall be entitled to receive from time to time out of amounts collected and payments received in respect of the CRB Securities, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder or of the Owner Trustee, and the Depositor will pay or reimburse the Owner Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Owner Trustee in accordance with any of the provisions of this Agreement (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ), except any such expense, disbursement or advance as may arise from the Owner Trustee's willful misfeasance, negligence or bad faith. The Owner Trustee and any director, officer, employee or agent of the Owner Trustee shall be indemnified by the Depositor and held harmless against any loss, liability or expense incurred in connection with any legal action relating to this Agreement or the Certificates, or the performance of any of the Owner Trustee's duties hereunder, other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence in the performance of duties hereunder or by reason of reckless disregard of obligations and duties hereunder; provided that (i) with respect to any such loss, liability or expense, the Owner Trustee shall have given to the Depositor written notice thereof promptly after the Owner Trustee shall have knowledge thereof and (ii) while maintaining control over its own defense, the Owner Trustee shall cooperate and consult fully with the Depositor. Such indemnity shall survive the termination or discharge of this Agreement and the resignation or removal of the Owner Trustee. Any payment hereunder made by the Depositor to the Owner Trustee shall be from the Depositor's own funds, without reimbursement from the Trust Property therefor. Section 5.06. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner Trustee shall at all times be a corporation or a national banking association organized and doing business under the laws of any state or the United States of America or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and the long-term debt obligations of which are rated in one of the four highest categories assigned long-term debt obligations by one of the Rating Agencies, and is subject to supervision or examination by federal or state authority. If such corporation or association publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so published. In the event that any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 5.07. The corporation or national banking association serving as Owner Trustee may have normal banking and trust relationships with the Depositor and its Affiliates; provided, however, that such corporation shall not be an Affiliate of the Depositor. Section 5.07. RESIGNATION AND REMOVAL OF THE OWNER TRUSTEE. (a) Subject to the last sentence of this subSection (a), the Owner Trustee may at any time resign and be discharged from the Trust hereby created by giving notice thereof to the Depositor, the Certificateholders and each Rating Agency. Upon receiving such notice of resignation, the Depositor (with the consent of a Majority in Interest of Certificateholders) shall as promptly as possible (and in any event within 30 days after the date of such notice of resignation) appoint a successor trustee by written instrument, in duplicate, which instrument shall be delivered to the resigning Owner Trustee and to the successor trustee. A copy of such instrument shall be delivered to the Certificateholders and each Rating Agency by the Depositor. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee for the Certificates. (b) If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 5.06 and shall fail to resign after written request therefor by the Depositor or a Majority in Interest of the Certificateholders, or if at any time the Owner Trustee shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, reorganization, conservation or liquidation, then the Depositor (with the consent of a Majority in Interest of Certificateholders) may remove the Owner Trustee and appoint a successor trustee by written instrument, in duplicate, which instrument shall be delivered to the Owner Trustee so removed and to the successor trustee. A copy of such instrument shall be delivered to the Certificateholders and each Rating Agency by the Depositor. (c) The Holders of Certificates representing not less than a Majority in Interest of Certificateholders may at any time remove the Owner Trustee and appoint a successor trustee upon 30 days' notice to the Owner Trustee by written instrument or instruments, in triplicate, signed by such Holders or their attorneys-in-fact duly authorized, one complete set of which instruments shall be delivered to the Depositor, one complete set to the Owner Trustee so removed and one complete set to the successor trustee so appointed. A copy of such instrument shall be delivered to the Certificateholders and each Rating Agency by the Depositor. (d) Any resignation or removal of the Owner Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor trustee as provided in Section 5.08. Section 5.08. SUCCESSOR OWNER TRUSTEE. (a) Any successor trustee appointed as provided in Section 5.07 shall execute, acknowledge and deliver to each of the Depositor, the Certificateholders and its predecessor trustee and each Rating Agency an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Owner Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with the like effect as if originally named as Owner Trustee herein. The predecessor Owner Trustee shall deliver to the successor trustee the CRB Securities and all related documents and statements held by it hereunder, and the Depositor and the predecessor Owner Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for more fully and certainly vesting and confirming in the successor trustee all the rights, powers, duties and obligations of the Owner Trustee under this Agreement. No successor trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 5.06. (b) Upon acceptance of appointment by a successor trustee as provided in this Section, the Depositor shall mail notice of the succession of such trustee hereunder to all Holders of Certificates at their addresses as shown in the Certificate Register. Section 5.09. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any corporation into which the Owner Trustee may be merged or converted or with which it may be consolidated or any corporation resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided such corporation shall be eligible under the provisions of Section 5.06, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Owner Trustee shall provide notice of any such merger to each Rating Agency. Section 5.10. APPOINTMENT OF CO-OWNER TRUSTEE OR SEPARATE OWNER TRUSTEE. (a) Notwithstanding any other provisions hereof, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Property or property securing the same may at the time be located, the Depositor and the Owner Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Owner Trustee to act as co-trustee or co-trustees, jointly with the Owner Trustee, or separate trustee or separate trustees, of all or any part of the Trust Property, and to vest in such Person or Persons, in such capacity, such title to the Trust Property, or any part thereof, and subject to the other provisions of this Section 5.10, such powers, duties, obligations, rights and trusts as the Depositor and the Owner Trustee may consider necessary or desirable. If the Depositor shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, the Owner Trustee alone shall have the power to make such appointment. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 5.06 hereunder and no notice to Holders of Certificates or Rating Agencies of the appointment of co-trustee(s) or separate trustee(s) shall be required under Section 5.08. (b) In the case of any appointment of a co-trustee or separate trustee pursuant to this Section 5.10, all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Property or any portion thereof in any such jurisdiction) shall be exercised and performed by such separate trustee or co-trustee at the direction of the Owner Trustee. The Depositor and the Owner Trustee acting jointly may at any time accept the resignation or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article V. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Every such instrument shall be filed with the Owner Trustee and a copy thereof given to the Depositor. (d) Any separate trustee or co-trustee may, at any time, constitute and appoint the Owner Trustee as its agent or attorney-in-fact, with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Owner Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. Section 5.11. ACCOUNTING AND REPORTS TO THE HOLDERS, THE INTERNAL REVENUE SERVICE AND OTHERS. The Owner Trustee shall (a) maintain (or cause to be maintained) the books of the Trust on a calendar year basis and the accrual method of accounting, (b) deliver to each Holder, as may be required by the Code and applicable Treasury Regulations, such information as may be required (including Schedule K-1) to enable each Holder to prepare its federal and state income tax returns, (c) file such tax returns relating to the Trust (including a partnership information return, IRS Form 1065) and make such elections as from time to time may be required or appropriate under any applicable state or federal statute or any rule or regulation thereunder so as to maintain the Trust's characterization as a partnership for federal income tax purposes, (d) cause such tax returns to be signed in the manner required by law and (e) collect or cause to be collected any withholding tax required to be collected under the Code and applicable Treasury Regulations as with respect to income or distributions to Holders. The Owner Trustee shall elect under Section 1278 of the Code to include in income currently any market discount that accrues with respect to the CRB Securities. The Owner Trustee shall not make the election provided under Section 754 of the Code. Section 5.12. SIGNATURE ON RETURNS; TAX MATTERS PARTNER. (a) The Owner Trustee shall sign on behalf of the Trust the tax returns of the Trust unless applicable law requires a Holder to sign such documents, in which case such documents shall be signed by the Depositor. (b) The Depositor shall be designated the "tax matters partner" of the Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury Regulations. Section 5.13. REPRESENTATIONS AND WARRANTIES OF OWNER TRUSTEE. (a) The Owner Trustee represents and warrants that: (i) the Owner Trustee is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or association; (ii) the Owner Trustee has full power, authority and right to execute, deliver and perform its duties and obligations under this Agreement and the Certificates and has taken all necessary action to authorize the execution, delivery and performance by it (or, with respect to the Certificates, by it and an authenticating agent on its behalf, if applicable) of this Agreement and the Certificates; (iii) the execution and delivery of this Agreement and the Certificates by the Owner Trustee and its performance of the compliance with the terms of this Agreement, and the Certificates will not violate the Owner Trustee's articles of incorporation, association or other constitutive documents or By-laws or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the breach or acceleration of, any material contract, agreement or other instrument to which the Owner Trustee is a party or which may be applicable to the Owner Trustee or any of its assets; (iv) as of the Closing Date, each of this Agreement and the Certificates have been duly executed and delivered by the Owner Trustee (and, with respect to the Certificates, by an authenticating agent on its behalf, if applicable) and this Agreement constitutes the legal, valid and binding obligation of the Owner Trustee, enforceable in accordance with its terms, except as enforcement may be limited by the applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (v) the Owner Trustee is not in violation, and the execution and delivery of this Agreement and the Certificates by the Owner Trustee and its performance and compliance with the respective terms of this Agreement and the Certificates will not constitute a violation, of any order or decree of any court or any order or regulation of any federal, state, municipal or governmental agency having jurisdiction over the Owner Trustee or its properties, which violation would reasonably be expected to have a material adverse effect on the condition (financial or otherwise) or operations of the Owner Trustee or its properties or on the performance of its duties thereunder); (vi) there are no actions or proceedings against, or investigations of, the Owner Trustee pending, or, to the knowledge of the Owner Trustee, threatened, before any court, administrative agency or other tribunal (A) that could reasonably be expected to prohibit its entering into this Agreement or to render the Certificates invalid, (B) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated hereunder or (C) that could reasonably be expected to prohibit or materially and adversely affect the performance by the Owner Trustee of its obligations under, or the validity or enforceability of this Agreement or the Certificates; and (vii) no consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Owner Trustee of, or compliance by the Owner Trustee with, this Agreement or the Certificates, or for consummation of the transactions contemplated herein, except for such consents, approvals, authorizations and orders, if any, as have been obtained prior to the Closing Date. (b) Within 30 days of the earlier of discovery by the Owner Trustee or receipt by the Owner Trustee of notice from the Depositor or any Certificateholder of a breach of any representation or warranty of the OwnerTrustee set forth in paragraph (a) above that materially and adversely affects the interests of the Certificateholders, the Owner Trustee shall promptly cure such breach in all material respects. Section 5.14. LIMITATION OF POWERS AND DUTIES. The Trust is constituted solely for the purposes of acquiring and holding the CRB Securities, issuing the Certificates and the Notes, making distributions thereon and other activities incidental thereto. The Owner Trustee is not authorized to acquire any other investments or engage in any activities not authorized herein and, in particular, the Owner Trustee is not authorized (i) to sell, assign, transfer, exchange, pledge, set-off or otherwise dispose of any of the CRB Securities or interests therein, including to Certificateholders (except the creation of the Lien of the Indenture and except upon termination of the Trust in accordance with Article VII or in accordance with Section 5.01), (ii) to do anything that would cause the Trust to fail or cease to qualify as a "grantor trust" for Federal income tax purposes or (iii) to do anything that would cause the assets of a Trust to be treated as "plan assets" as determined pursuant to the Plan Assets Regulation. ARTICLE VI THE DEPOSITOR Section 6.01. LIABILITY OF THE DEPOSITOR. The Depositor shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Depositor herein. Section 6.02. MERGER, CONSOLIDATION OR CONVERSION OF THE DEPOSITOR. Subject to the following paragraph, the Depositor will keep in full effect its existence, rights and franchises as a corporation under the laws of the jurisdiction of its incorporation, and will obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement and the Certificates and to perform its duties under this Agreement. The Depositor may be merged or consolidated with or into any Person, or transfer all or substantially all of its assets to any Person, in which case any Person resulting from any merger or consolidation to which the Depositor shall be a party, or any Person succeeding to the business of the Depositor, shall be the successor of the Depositor hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 6.03. LIMITATION ON LIABILITY OF THE DEPOSITOR AND OTHERS. Neither the Depositor nor any of the directors, officers, employees or agents of the Depositor shall be under any liability to the Trust, the Owner Trustee or the Certificateholders for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement or for errors in judgment; provided, however, that this provision shall not protect the Depositor or any such person against any breach of warranties or representations made herein, or against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence. The Depositor and any director, officer, employee or agent of the Depositor may rely in good faith on any document of any kind which, prima facie, is properly executed and submitted by any Person respecting any matters arising hereunder. The Depositor and any director, officer, employee or agent of the Depositor shall be indemnified and held harmless by the Trust Property against any loss, liability or expense incurred in connection with any legal action relating to this Agreement or the Certificates, other than any loss, liability or expense incurred by reason of any breach of warranties or representations made by it herein, or willful misfeasance, bad faith or gross negligence. The Depositor shall not be under any obligation to appear in, prosecute or defend any legal action unless such action is related to its duties under this Agreement and which in its opinion does not involve it in any expense or liability. ARTICLE VII TERMINATION; OPTIONAL PURCHASE OF CRB SECURITIES Section 7. 01. TERMINATION. (a) The respective obligations and responsibilities of the Depositor and the Owner Trustee created hereby with respect to the Certificates (other than the obligation to make certain payments and to send certain notices to Certificateholders as hereinafter set forth) shall terminate immediately upon the occurrence of the last action required to be taken by the Owner Trustee on the Distribution Date pursuant to this Article VII following the earlier to occur of (i) the final distribution by the Owner Trustee of all money or other property or proceeds of the Trust Property in accordance with the terms hereof and the terms of the Indenture and the Notes, and (ii) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James, living on the date hereof. (b) Notice of any termination, specifying the Distribution Date upon which all Certificateholders may surrender their Certificates to the Owner Trustee for payment and cancellation, shall be given promptly by the Owner Trustee by letter to Certificateholders mailed no later than the first day of the month of such final distribution specifying (i) the Distribution Date upon which final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency appointed by the Owner Trustee for that purpose, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Distribution Date is not applicable and that payments shall be made only upon presentation and surrender of the Certificates at the office or agency of the Owner Trustee therein specified. Upon presentation and surrender of the Certificates, the Owner Trustee shall cause to be distributed to Certificateholders an amount equal to the amount otherwise distributable on such Distribution Date. (c) Any funds not distributed on the final Distribution Date because of the failure of any Certificateholders to tender their Certificates shall be set aside and held in trust for the account of the appropriate nontendering Certificateholders, whereupon the Trust Property shall terminate. If any Certificates as to which notice of the termination date has been given pursuant to this Section 7.01 shall not have been surrendered for cancellation within six months after the time specified in such notice, the Owner Trustee shall mail a second notice to the remaining Certificateholders, at their last addresses shown in the Certificate Register, to surrender their Certificates for cancellation in order to receive, from such funds held, the final distribution with respect thereto. If within one year after the second notice any Certificate shall not have been surrendered for cancellation, the Owner Trustee shall directly or through an agent, take reasonable steps to contact the remaining Certificateholders concerning surrender of their Certificates. The costs and expenses of maintaining such funds and of contacting Certificateholders shall be paid out of the assets which remain held. If within two years after the second notice any Certificates shall not have been surrendered for cancellation, the Owner Trustee shall pay to the Depositor all amounts distributable to the Holders thereof and the Depositor shall thereafter hold such amounts for the benefit of such Holders. No interest shall accrue or be payable to any Certificateholder on any amount held as a result of such Certificateholder's failure to surrender its Certificate(s) for final payment thereof in accordance with this Section 7.01. Section 7.02. OPTIONAL PURCHASE OF CRB SECURITIES. As of any Distribution Date as of which the then outstanding Aggregate Collateral Balance is [5%] or less of the Aggregate Collateral Balance as of the Cutoff Date, the Depositor shall have the option to purchase the outstanding CRB Securities. To exercise such option, the Depositor shall deposit in the CRB Collection Account an amount equal to the aggregate unpaid principal balance of the then outstanding CRB Securities together with any accrued interest thereon through the related CRB Security Payment Date, and shall succeed to all interests of the Trust, the Owner Trustee and the Certificateholders in and to such CRB Securities. The Owner Trustee shall apply such funds deposited in the CRB Collection Account by the Depositor pursuant to this Section 7.02 in order to retire the Certificates as of such Distribution Date. ARTICLE VIII MISCELLANEOUS Section 8.01. AMENDMENT; WAIVER. (a) This Agreement may be amended from time to time by the Depositor and the Owner Trustee without the consent of any of the Certificateholders (i) to cure any ambiguity, (ii) to correct or supplement any provisions herein which may be defective or inconsistent with any other provisions herein, (iii) to add any other provisions with respect to matters or questions arising under this Agreement not inconsistent with the terms of this Agreement or (iv) if such amendment, as evidenced by an Opinion of Counsel delivered to the Owner Trustee, is reasonably necessary to comply with any requirements imposed by the Code or other written official announcement or interpretation relating to federal income tax laws or any such proposed action which, if made effective, would apply retroactively to the Trust Property at least from the effective date of such amendment; provided that such action (except any amendment described in (iv) above) shall not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee, adversely affect in any material respect the rights of any Certificateholder. (b) Without limiting the generality of the foregoing, this Agreement may also be amended from time to time by the Depositor and the Owner Trustee with the consent of the Holders of Certificates evidencing not less than 66-2/3% of the then outstanding aggregate principal amount of the Certificates for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Certificateholders; provided, however, that no such amendment shall (i) reduce in any manner the amount of, or delay the timing of, payments required to be distributed on any such Certificate without he consent of the Holder of such Certificate, (ii) adversely affect in any material respect the interests of the Holders of Certificates in a manner other than as described in clause (i), without the consent of the Holders of Certificates evidencing not less than 66-2/3% of the then outstanding aggregate principal amount or (iii) change the aforesaid percentages of Certificates the Holders of which are required to consent to any such amendment, without the consent of the Holders of all such Certificates then outstanding. (c) Promptly after the execution of any such amendment, the Owner Trustee shall furnish a written statement describing the substance of the amendment to each Certificateholder and each Rating Agency. It shall not be necessary for the consent of Certificateholders under this Section 8.01 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable regulations as the Owner Trustee may prescribe. (d) Notwithstanding the foregoing, no amendment or modification to this Agreement shall be permitted unless the Owner Trustee receives an Opinion of Counsel that such amendment or modification will not alter the status of the trust for United States federal income tax purposes. (e) The Holders of Certificates representing not less than a Majority in Interest of Certificateholders may, on behalf of all Certificateholders, waive in writing any default by the Depositor or the Owner Trustee in the performance of its obligations hereunder and any consequences thereof, except a default by the Owner Trustee in failing to distribute amounts received in respect of the CRB Securities and except a default in respect of a covenant or provision the modification or amendment of which would require the consent of the Holder of each Outstanding Certificate affected thereby. Upon any such waiver of a past default, such default shall cease to exist; provided, however, that no such waiver shall extend to any subsequent or other default or impair any right consequent thereto. Section 8.02. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (a) The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust Property, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of the Trust Property, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. (b) No Certificateholder shall have any right to vote (except as expressly provided for herein) or in any manner otherwise control the operation and management of the Trust Property, or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as partners or members of any association; nor shall any Certificateholder be under any liability to any third party by reason of any action taken by the parties to this Agreement pursuant to any provision hereof. (c) No Certificateholder shall have any right by virtue of any provision of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless (i) the Holders of Certificates evidencing Percentage Interests aggregating not less than 25% of all the Certificates shall have made written request upon the Owner Trustee to institute such action, suit or proceeding in its own name as Owner Trustee hereunder and shall have offered to the Owner Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, (ii) the Owner Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding and (iii) no direction inconsistent with such written request shall have been given to the Owner Trustee during such 60-day period by the Holders of Certificates evidencing a majority of Percentage Interests of all the Certificates. It is understood and agreed that the Owner Trustee shall be under no obligation to make any investigation of matters arising under this Agreement or to institute conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any Certificateholders unless such Certificateholders have offered to the Owner Trustee the reasonable indemnity referred to above. It is further understood and agreed, and expressly covenanted by each Certificateholder with every other Certificateholder and the Owner Trustee, that no one or more Holders of Certificates shall have any right in any manner whatever by virtue of any provision of this Agreement to affect, disturb or prejudice the rights of the Holders of any other Certificates, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Agreement, except in the manner herein provided. For the protection and enforcement of the provisions of this Section, each and every Certificateholder and the Owner Trustee shall be entitled to such relief as can be given either at law or in equity. Section 8.03. GOVERNING LAW. This Agreement and the Certificates shall be construed in accordance with the laws of the State of New York without reference to such state's principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. Section 8.04. NOTICES. All demands, notices and directions hereunder shall be in writing and shall be deemed effective upon receipt if personally delivered at or mailed by registered or first class mail, postage prepaid, by express delivery service or by telecopy when confirmed in writing, to: (a) in the case of the Depositor, ACE Securities Corp. 6525 Morrison Boulevard Suite 318 Charlotte, North Carolina 28211 Attention: ________________________ (b) in the case of the Owner Trustee, ----------------------------------- ----------------------------------- ----------------------------------- Attention: ________________________ or, in each case, such other address as may hereafter be furnished by any party to the others. Any notice required or permitted to be mailed to a Certificateholder shall be given by first class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. Section 8.05. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the rights of the Holders thereof. Section 8.06. NOTICE TO EACH RATING AGENCY. The Owner Trustee shall use its best efforts promptly to provide notice to each Rating Agency with respect to each of the following of which it has actual knowledge: (i) any material change or amendment to this Agreement; (ii) the resignation or termination of the Owner Trustee; (iii) the final payment to Holders of the Certificates; and (iv) any change in the location of the CRB Collection Account. In addition, the Owner Trustee shall promptly furnish to each Rating Agency copies of each report to Certificateholders described in Section 3.07. Any such notice pursuant to this Section shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by first class mail, postage prepaid, or by express delivery service to each Rating Agency at the address provided to the Owner Trustee from time to time. Section 8.07. NO PETITION. Each of the Owner Trustee and the Depositor, by entering into this Agreement, and each Certificateholder, by accepting a Certificate, hereby covenant and agree that they will not at any time institute against the Trust, or join in any institution against the Trust of, any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Certificates, or this Agreement. The Owner Trustee covenants and agrees that it will have secured a written acknowledgment (which need not be a separate document) from any Person proposing to provide any service by such Person, that such Person will not at any time institute against the Trust, or join in any institution against the Trust of, any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with the provision of such service. Section 8.08. NO RECOURSE. Each Certificateholder by accepting a Certificate acknowledges that such Certificateholder's Certificates represent beneficial interests in the Trust only and do not represent interests in or obligations of the Depositor, the Owner Trustee, or any Affiliate, employee or agent of the foregoing Persons and no recourse may be had against such Persons or their respective assets, except as may be expressly set forth in this Agreement or the Certificates. Section 8.09. GRANT OF SECURITY INTEREST. It is the express intent of the parties to this Agreement that the conveyance of the CRB Securities by the Depositor to the Owner Trustee be, and be construed as, a sale of the CRB Securities by the Depositor and not a pledge of any CRB Securities by the Depositor to secure a debt or other obligation of the Depositor. However, in the event that, notwithstanding the aforementioned intent of the parties, any CRB Securities are held to be property of the Depositor, then, (a) it is the express intent of the parties that such conveyance be deemed a pledge of such CRB Securities by the Depositor to the Owner Trustee to secure a debt or other obligation of the Depositor and (b)(1) this Agreement shall also be deemed to be a security agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code as in effect from time to time in the State of New York; (2) the conveyance provided for in Section 2.01 shall be deemed to be a grant by the Depositor to the Owner Trustee of a security interest in all the Depositor's right, title and interest in and to such CRB Securities and all amounts payable to the holders of such CRB Securities in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including all amounts from time to time held or invested in the CRB Collection Account, whether in the form of cash, instruments, securities or other property; (3) the obligations secured by such security agreement shall be deemed to be all the Depositor's obligations under this Agreement, including the obligation to provide to the Certificateholders the benefits of this Agreement; and (4) notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmation from, financial intermediaries, bailees or agents (as applicable) of the Owner Trustee for the purpose of perfecting such security interest under applicable law. Accordingly, the Depositor hereby grants to the Owner Trustee a security interest in the CRB Securities and all other property described in clause (2) of the immediately preceding sentence for the purpose of securing to the Owner Trustee the performance by the Depositor of the obligations described in clause (3) of the immediately preceding sentence. Notwithstanding the foregoing, the parties to this Agreement intend the transfer pursuant to Section 2.01 to be true, absolute and unconditional sale of the CRB Securities and assets constituting the Trust Property by the Depositor to the Owner Trustee. The depositor and the Owner Trustee shall to the extent consistent with this Agreement take such actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the CRB Securities, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such for so long as any of the CRB Securities remain outstanding. Without limiting the generality of the foregoing, the Owner Trustee shall file, or shall cause to be filed, all filings necessary to maintain the effectiveness of any original filings necessary under the Uniform Commercial Code as in effect in any jurisdiction to perfect the Owner Trustee's security interest in or lien on the CRB Securities, including (x) continuation statements and (y) such other statements as may be occasioned by (A) any change of name of the Depositor or the Owner Trustee, (B) any change of location of the place of business or the chief executive office of the Depositor or (C) any transfer of any interest of the Depositor in any CRB Security. Section 8.10. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto, and all such provisions shall inure to the benefit of the Certificate holders. Section 8.11. ARTICLE AND SECTION HEADINGS. The article and Section headings herein are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Section 8.12. CERTIFICATES NONASSESSABLE AND FULLY PAID. It is the intention of this Agreement that Certificateholders shall not be personally liable for obligations of the Trust Property, that the beneficial ownership interests represented by the Certificates shall be nonassessable for any losses or expenses of the Trust Property or for any reason whatsoever, and that Certificates, upon execution, authentication and delivery thereof by the Owner Trustee pursuant to Section 2.04, are and shall be deemed fully paid. IN WITNESS WHEREOF, the Depositor and the Owner Trustee have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written. ACE SECURITIES CORP., as Depositor by:____________________________ Name: Title: [OWNER TRUSTEE NAME], not in its individual capacity but solely as Owner Trustee by: _____________________________ Name: Title: EXHIBIT A NUMBER $ R- CUSIP NO. SEE REVERSE FOR CERTAIN DEFINITIONS UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE PRINCIPAL BALANCE OF THIS CERTIFICATE IS DISTRIBUTABLE IN INSTALLMENTS AS SET FORTH IN THE TRUST AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND IS NOT GUARANTEED BY THE DEPOSITOR OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THIS CERTIFICATE, THE CRB SECURITIES OR THE UNDERLYING ACCOUNTS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON. THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT PLAN. CARD ACCOUNT TRUST, SERIES [ ] [ %] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE] ASSET BACKED CERTIFICATE evidencing a fractional undivided beneficial ownership interest in the Trust, as defined below, the property of which included certain CRB Securities created pursuant to a Pooling and Servicing Agreement[s] dated as of [ ], among [_____], as seller, [_____], as servicer, and [_____], as trustee, and distributions thereon, deposited in trust by ACE Securities Corp. (the "Depositor"). THIS CERTIFIES THAT [_____], is the registered owner of [ ] DOLLARS nonassessable, fully-paid, fractional undivided interest in Card Account Trust, Series [ ] formed by the Depositor. The Certificates have a pass-through rate of [[ %] per annum] [insert interest rate formula]. OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Certificates described in the Trust Agreement referred to herein. [OWNER TRUSTEE NAME], not in _____________________________________ its individual capacity but solely as _____________________________________ Owner Trustee, or as Authenticating Agent for the Owner Trustee, by by - ----------------- ------------------ Authorized Officer Authorized Officer The Trust was created pursuant to a Trust Agreement dated as of [ ] (the "Trust Agreement"), between the Depositor and [_____], a New York banking corporation, not in its individual capacity but solely as Owner Trustee (the "Owner Trustee"). Reference is hereby made to the Trust Agreement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby and the rights, duties and obligations of the Owner Trustee with respect hereto. A copy of the Trust Agreement may be obtained from the Owner Trustee by written request sent to the Corporate Trust Office. Capitalized terms used but not defined herein have the meanings assigned to them in the Trust Agreement. This Certificate is one of the duly authorized Certificates designated as "[ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Certificates" (herein called the "Certificates") pursuant to the Trust Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which the acceptance hereof assents and by which such Holder is bound. The Trust Property consists of: (i) certain CRB Securities described in the Trust Agreement; (ii) all distributions thereon on and after the Cutoff Date; and (iii) the CRB Collection Account and such assets that are deposited therein from time to time and any investments thereof, together with any and all income, proceeds and payments with respect thereto. Pursuant to the terms of the Trust Agreement, distributions will be made on each Distribution Date, commencing on [ ], to the Person in whose name this Certificate is registered on the applicable Record Date, in an amount equal to such Certificateholder's fractional undivided interest in the amount required to be distributed to the Holders of the Certificates on such Distribution Date. The Record Date applicable to any Distribution Date is the close of business on the day immediately preceding such Distribution Date (or, in the event Definitive Certificates are issued, the last day of the month preceding the month in which such Distribution Date occurs). Each Certificateholder, by its acceptance of a Certificate, covenants and agrees that such Certificateholder will not at any time institute against the Trust, or join in any institution against the Trust of, any bankruptcy proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Certificates or the Trust Agreement. Distributions made on this Certificate will be made as provided in the Trust Agreement by the Owner Trustee by wire transfer in immediately available funds, or check mailed to the Certificateholder of record in the Certificate Register without the presentation or surrender of this Certificate or the making of any notation hereon, except that with respect to Certificates registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee shall be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Except as otherwise provided in the Trust Agreement and notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Owner Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the Corporate Trust Office or such other location as may be specified in such notice. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by or on behalf of the Owner Trustee, by manual signature, this Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or be valid for any purpose. THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. IN WITNESS WHEREOF, the Owner Trustee has caused this Certificate to be duly executed as of the date set forth below. CARD ACCOUNT TRUST, SERIES [ ], by [OWNER TRUSTEE NAME], not in its individual capacity but solely as Owner Trustee by: _______________________________ Authorized Officer Dated: [ ] (REVERSE OF TRUST CERTIFICATE) The Certificates are limited in right of distribution to certain collections and recoveries respecting the CRB Securities, all as more specifically set forth herein and in the Trust Agreement. The registered Holder hereof, by its acceptance hereof, agrees that it will look solely to the Trust Property (to the extent of its rights therein) for distributions hereunder. As provided in the Trust Agreement, withdrawals from the CRB Collection Account may be made from time to time for purposes other than, and, in certain cases, prior to, distributions to Certificateholders, such purposes including reimbursement of certain expenses incurred with respect to the Trust Property. The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor and the Owner Trustee and the rights of the Certificateholders under the Trust Agreement at any time by the Depositor and the Owner Trustee with the consent of the Holders of Certificates evidencing at least 66-2/3% of the then outstanding aggregate principal amount subject to certain provisions set forth in the Trust Agreement. Any such consent by the Holder of this Certificate (or any predecessor Certificate) shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Trust Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. The Certificates are issuable in fully registered form only in minimum original principal amounts of $1,000 and integral multiples thereof. As provided in the Trust Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same principal amount, class, original issue date and maturity, in authorized denominations as requested by the Holder surrendering the same. As provided in the Trust Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies of the Certificate Registrar maintained by the Owner Trustee in the Borough of Manhattan, the City of New York, duly endorsed by or accompanied by an assignment in the form below and by such other documents as required by the Trust Agreement, and thereupon one or more new Certificates of the same class in authorized denominations evidencing the same principal amount will be issued to the designated transferee or transferees. The initial Certificate Registrar appointed under the Trust Agreement is [_____], New York, New York. No service charge will be made for any registration of transfer or exchange, but the Owner Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor and the Owner Trustee and any agent of the Depositor or the Owner Trustee may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Depositor, the Owner Trustee, nor any such agent shall be affected by any notice to the contrary. The Trust and the obligations of the Depositor and the Owner Trustee created by the Trust Agreement with respect to the Certificates shall terminate upon distribution (or provision for distribution) to the Certificateholders of all amounts held by or on behalf of the Owner Trustee and required to be distributed to them pursuant to the Trust Agreement following the earlier to occur of (i) the final distribution by the Owner Trustee of all moneys or other property or proceeds of the Trust Property in accordance with the terms of the Trust Agreement and (ii) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James, living on the date hereof. The Depositor may at its option purchase the outstanding CRB Securities at a price specified in the Trust Agreement, and such purchase of the CRB Securities will effect early retirement of the Certificates; however, the Depositor may exercise such right of purchase only as of a Distribution Date as of which the then outstanding Aggregate Collateral Balance is [5%] or less of the Aggregate Collateral Balance as of the Cutoff Date. The Certificates may not be acquired by or for the account of (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(i) of the Code or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity (each, a "Benefit Plan"). By acquiring and holding this Certificate, the Holder hereof shall be deemed to have represented and warranted that it is not a Benefit Plan. ASSIGNMENT FOR VALUE RECEIVED the Undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ---------------------------------------------------------------- Please print or type name and address, including postal zip code, or assignee) - ---------------------------------------------------------------- the within Trust Certificate, and all rights thereunder, hereby irrevocably constituting and appointing ________________________________________________________________ Attorney to transfer said Trust Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated: _________________________________* Signature Guaranteed: _________________________________* * NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Trust Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. EXHIBIT B CRB SECURITY SCHEDULE [To come] Issuer Servicer Trustee Designation Principal Amount to be Sold to Trust (i) Original Principal Amount as of date of Issuance (ii) Fractional Undivided interest was compared to Aggregate Collateral Balance EXHIBIT C POOLING AND SERVICING AGREEMENT [To come] EXHIBIT D FORM OF DEPOSITORY AGREEMENT[S] [To come] EX-4.4.5 16 0016.txt EXHIBIT 4.4.5 ===================================================================== [FORM OF TRUST AGREEMENT] between ACE SECURITIES CORP., Depositor and [TRUSTEE NAME], as Trustee Dated as of [ ] ==================================================================== TABLE OF CONTENTS PAGE ARTICLE I Definitions and Usage SECTION 1.01. Defined Terms..............................................1 SECTION 1.02. Other Definitional Provisions and Rules of Construction....7 ARTICLE II Conveyance of the CRB Certificates; Original Issuance of Certificates SECTION 2.01. Creation and Declaration of Trust; Conveyance of the CRB Certificates........................................8 SECTION 2.02. Acceptance by Trustee......................................9 SECTION 2.03. Representations and Warranties of the Depositor............9 SECTION 2.04. Agreement to Authenticate and Deliver Certificates........11 ARTICLE III Administration of the Trust Property; Distributions and Reports to Certificateholders SECTION 3.01. Administration of the Trust Property......................12 SECTION 3.02. Certificate Account.......................................12 SECTION 3.03. Investment of Funds in the Certificate Account............13 SECTION 3.04. Permitted Withdrawals from the Certificate Account........13 SECTION 3.05. Distributions.............................................13 SECTION 3.06. Compliance with Withholding Requirements..................14 SECTION 3.07. Statements to Certificateholders..........................14 SECTION 3.08. Reports of the Trustee; Certificate Account...............16 SECTION 3.09. Access to Certain Documentation and Information...........16 ARTICLE IV The Certificates SECTION 4.01. The Certificates..........................................16 SECTION 4.02. Registration of Transfer and Exchange of Certificates.....17 SECTION 4.03. Mutilated, Destroyed, Lost or Stolen Certificates.........17 SECTION 4.04. Persons Deemed Owners.....................................18 SECTION 4.05. Maintenance of Office or Agency...........................18 SECTION 4.06. ERISA Considerations......................................18 SECTION 4.07. Authenticating Agent......................................19 SECTION 4.08. BookEntry Certificates....................................20 SECTION 4.09. Notices to Clearing Agency................................20 SECTION 4.10. Definitive Certificates...................................21 ARTICLE V The Trustee SECTION 5.01. Duties of the Trustee.....................................21 SECTION 5.02. Certain Matters Affecting the Trustee.....................24 SECTION 5.03. Trustee Not Liable for Certificates.......................24 SECTION 5.04. Trustee May Own Certificates..............................25 SECTION 5.05. Trustee's Fees and Expenses...............................25 SECTION 5.06. Eligibility Requirements for Trustee......................25 SECTION 5.07. Resignation and Removal of the Trustee....................26 SECTION 5.08. Successor Trustee.........................................27 SECTION 5.09. Merger or Consolidation of Trustee........................27 SECTION 5.10. Appointment of CoTrustee or Separate Trustee..............27 SECTION 5.11. Tax Returns...............................................28 SECTION 5.12. Representations and Warranties of Trustee.................28 SECTION 5.13. Limitation of Powers and Duties...........................30 ARTICLE VI The Depositor SECTION 6.01. Liability of the Depositor................................30 SECTION 6.02. Merger, Consolidation or Conversion of the Depositor......30 SECTION 6.03. Limitation on Liability of the Depositor and Others.......31 ARTICLE VII Termination; Optional Purchase of CRB Certificates SECTION 7.01. Termination...............................................31 SECTION 7.02. Optional Purchase of CRB Certificates.....................32 ARTICLE VIII Miscellaneous SECTION 8.01. Amendment; Waiver.........................................32 SECTION 8.02. Limitation on Rights of Certificateholders................34 SECTION 8.03. Governing Law.............................................34 SECTION 8.04. Notices...................................................35 SECTION 8.05. Severability of Provisions................................35 SECTION 8.06. Notice to Each Rating Agency..............................35 SECTION 8.07. No Petition...............................................36 SECTION 8.08. No Recourse...............................................36 SECTION 8.09. Grant of Security Interest................................36 SECTION 8.10. Successors and Assigns....................................37 SECTION 8.11. Article and Section Headings..............................37 SECTION 8.12. Certificates Nonassessable and Fully Paid.................37 TRUST AGREEMENT dated as of [ ], between ACE SECURITIES CORP., as depositor (the "Depositor"), and [TRUSTEE NAME], not in its individual capacity but solely as trustee (the "Trustee") In consideration of the mutual agreements herein contained, the Depositor and the Trustee agree as follows: ARTICLE I DEFINITIONS AND USAGE SECTION 1.01. DEFINED TERMS. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: "AFFILIATE" means, as to any specified Person, (i) any other Person, directly or indirectly, controlling, controlled by or under common control with such specified Person and (ii) any officer, director or partner of such specified Person. The term "control", with respect to any Person, means possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "AGGREGATE COLLATERAL BALANCE" means as of any date of determination, the aggregate of the outstanding principal amounts of all of the CRB Certificates. As of the Cutoff Date, the Aggregate Collateral Balance shall be $[ ]. "AGREEMENT" means this Trust Agreement and all amendments hereof and supplements hereto. "AVAILABLE FUNDS" means, as of any date of determination, the aggregate amount then on deposit in the Certificate Account, net of any portion thereof which represents amounts payable pursuant to clauses (ii) and (iii) of Section 3.04. "BENEFIT PLAN" has the meaning specified in Section 4.02(d). "BOOKENTRY CERTIFICATES" means a beneficial interest in the Certificates, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 4.08. "BUSINESS DAY" means any day other than a Saturday or a Sunday or a day on which banking institutions in New York, New York, or in the city in which the Corporate Trust Office of the Trustee is located, are authorized or obligated by law, regulation or executive order to be closed. "CERTIFICATE" means any one of the certificates executed and authenticated by the Trustee substantially in the forms attached thereto as Exhibits A and B. "CERTIFICATE ACCOUNT" means the segregated, noninterest bearing trust account or accounts, which shall at all times be Eligible Accounts, created and maintained by the Trustee pursuant to Section 3.02. Funds deposited in the Certificate Account shall be held in trust for the Certificateholders for the uses and purposes set forth in this Agreement. "CERTIFICATE REGISTER" means the register maintained pursuant to Section 4.02. "CERTIFICATEHOLDER" or "HOLDER" means the Person in whose name a Certificateholder is registered in the Certificate Register, except that, solely for the purpose of giving any consent pursuant to this Agreement, any Certificate registered in the name of the Depositor shall be deemed not to be Outstanding and the Percentage Interest evidenced thereby shall not be taken into account in determining whether the requisite amount of Percentage Interests necessary to effect such consent has been obtained; provided, however, that if any such Person owns 100% of the Percentage Interests evidenced by a Class of Certificates, all such Certificates shall be deemed to be Outstanding. "CLASS" means all Certificates bearing the same designation as set forth in Section 4.01. "[CLASS [A]] CERTIFICATE" means any one of the certificates issued by the Trust and executed and authenticated by the Trustee substantially in the form attached hereto as Exhibit A. "[CLASS [A]] CERTIFICATE PRINCIPAL BALANCE" means, with respect to the [Class [A]] Certificates as of any date of determination, the Initial Certificate Principal Balance thereof less all payments made with respect to the Certificates of such Class in accordance with Section 3.05(a)(iii) on previous Distribution Dates. "[CLASS [A]] CERTIFICATE RATE" means [[ ]% per annum] [insert Class [A] interest formula]. "[CLASS [A]] INTEREST AMOUNT" means, as to any Distribution Date, an amount equal to the sum of (i) the amount of interest accrued at the [Class [A]] Certificate Rate for the related Collection Period on the [Class [A]] Certificate Principal Balance on the immediately preceding Distribution Date, (or, in the case of the first Distribution Date, on the Closing Date), after giving effect to all distributions on such prior Distribution Date, and (ii) any unpaid [Class [A]] Interest Amounts from prior Distribution Dates, together with interest thereon, to the extent permitted by law, at the [Class [A]] Certificate Rate. "[CLASS [B]] CERTIFICATE" means any one of the certificates issued by the Trust and executed and authenticated by the Trustee substantially in the form attached hereto as Exhibit B. "[CLASS [B]] CERTIFICATE PRINCIPAL BALANCE" means, with respect to the [Class [B]] Certificates as of any date of determination, the Initial Certificate Principal Balance thereof less all payments made with respect to the Certificates of such Class in accordance with Section 3.05(a)(iii) on previous Distribution Dates. "[CLASS [B]] CERTIFICATE RATE" means [[ ]% per annum] [insert Class [B] interest formula]. "[CLASS [B]] INTEREST AMOUNT" means, as to any Distribution Date, an amount equal to the sum of (i) the amount of interest accrued at the [Class [B]] Certificate Rate for the related Collection Period on the [Class [B]] Certificate Principal Balance on the immediately preceding Distribution Date, (or, in the case of the first Distribution Date, on the Closing Date), after giving effect to all distributions on such prior Distribution Date, and (ii) any unpaid [Class [B]] Interest Amounts from prior Distribution Dates, together with interest thereon, to the extent permitted by law, at the [Class [B]] Certificate Rate. "CLEARING AGENCY" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects bookentry transfers and pledges of securities deposited with the Clearing Agency. "CLOSING DATE" means [ ]. "CODE" means the Internal Revenue Code of 1986, as amended, and Treasury Regulations promulgated thereunder. "CRB CERTIFICATE" means any one of the [] issued by [ ] and transferred to the Trustee by the Depositor pursuant to Section 2.01, as from time to time are held as a part of the Trust Property and as are more fully described in the CRB Certificate Schedule attached hereto as Exhibit C. "CRB CERTIFICATE SCHEDULE" means the schedule attached as Exhibit C hereto identifying the CRB Certificates and setting forth the following information as to each CRB Certificate: (i) the original principal amount as of the date the CRB Certificates were originally issued and, if different, the current principal amount as of the Cutoff Date; and (ii) the fractional undivided interest evidenced thereby as compared to the Aggregate Collateral Balance as of such dates. "CRB CERTIFICATE STATEMENT" means the servicing report or other statement setting forth the amount of interest and, if applicable, principal payable on each Payment Date with respect to the CRB Certificates that is required to be furnished to each holder of CRB Certificates with respect to each Payment Date pursuant to the related Pooling and Servicing Agreement. "COLLATERAL HOLDER" means the registered holder of any CRB Certificate, which following the execution and delivery of this Agreement by the parties hereto shall be the Trustee. "CORPORATE TRUST OFFICE" means the principal corporate trust office of the Trustee in the State of New York at which at any particular time its corporate trust business with respect to this Agreement and the Trust shall be administered, which office at the date of the execution of this Agreement is located at [ ]. "CUTOFF DATE" means [ ]. "DEFINITIVE CERTIFICATES" has the meaning specified in Section 4.08. "DEPOSITOR" means ACE Securities Corp., a Delaware corporation. "DEPOSITORY AGREEMENT" means the Depository Agreement dated as of the Closing Date among the Trust, the Trustee and DTC, as the initial Clearing Agency, substantially in the form attached hereto as Exhibit E. "DETERMINATION DATE" has the meaning specified in Section 3.07. "DISTRIBUTION DATE" means the [second] [third] Business Day following each Payment Date, commencing on [ ]. "DISTRIBUTION DATE STATEMENT" has the meaning specified in Section 3.07. "DTC" means The Depositary Trust Company, as the initial Clearing Agency. "ELIGIBLE ACCOUNT" means either (i) an account maintained with a Federal or state chartered depository institution or trust company the unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the unsecured debt obligations of such holding company) are rated by the Rating Agency in one of its generic rating categories which signifies investment grade at the time any amounts are held in deposit therein, (ii) an account the deposits in which are insured by the FDIC to the limits established by such corporation, provided that any such deposits not so insured shall be otherwise maintained such that (as evidenced by an Opinion of Counsel delivered to the Trustee and to each Rating Agency) the Certificateholders have a claim with respect to the funds in such account or a perfected first priority security interest against any collateral (which shall be limited to Eligible Investments) fully securing such funds that is superior to claims of any other depositors or creditors of the depository institution or trust company with which such account is maintained, or (iii) a trust account maintained with a Federal or state chartered depository institution or trust company acting in its fiduciary capacity or (iv) such other account that will not cause each Rating Agency to downgrade or withdraw the rating of the Certificates as evidenced by a letter from each Rating Agency to such effect delivered to the Trustee. "ELIGIBLE INVESTMENTS" means any one or more of the following (any of which may be obligations of, or may be purchased from the Depositor or the Trustee if the indicated requirements are met): (i) direct obligations of, or obligations fully guaranteed as to principal and interest by, the United States of America or any agency or instrumentality thereof, provided such obligations are backed by the full faith and credit of the United States; (ii) repurchase obligations (the collateral for which is held by a third party or the Trustee) with respect to any security described in clause (i) above, provided that the longterm unsecured obligations of the party agreeing to repurchase such obligations are at the time rated by each Rating Agency in its highest longterm rating category; (iii) certificates of deposit, time deposits, demand deposits and bankers' acceptances of any bank or trust company incorporated under the laws of the United States or of any state thereof or the District of Columbia, including the Trustee and any Affiliate thereof, provided that the longterm debt obligations of such bank or trust company (or, in the case of the principal depository institution in a depository institution holding company, the long term unsecured debt obligations of the depository institution holding company) at the date of acquisition thereof have been rated by each Rating Agency in its highest longterm rating category or the shortterm unsecured debt obligations of which are rated "A1" or the equivalent. (iv) commercial paper of any corporation incorporated under the laws of the United States or any state thereof or the District of Columbia which on the date of investment or contractual commitment to invest has been rated by each Rating Agency in its highest shortterm rating category; (v) investment in money market funds having a rating from each Rating Agency in the highest investments category granted thereby (including funds for which the Trustee or the Depositor or any of their respective Affiliates is investment manager or advisor); and (vi) any other obligation or security acceptable to each Rating Agency (as certified by a letter from each Rating Agency to the Trustee). "ERISA" has the meaning specified in Section 4.06. "FDIC" means the Federal Deposit Insurance Corporation. "INITIAL [CLASS [A]] CERTIFICATE PRINCIPAL BALANCE" means with respect to the [Class [A]] Certificates, the aggregate principal balance of the [Class [A]] Certificates on the Closing Date as set forth in Section 4.01. "INITIAL [CLASS [B]] CERTIFICATE PRINCIPAL BALANCE" means with respect to the [Class [B]] Certificates, the aggregate principal balance of the [Class [B]] Certificates on the Closing Date as set forth in Section 4.01. "INTEREST DISTRIBUTION AMOUNT" means, as to any Distribution Date, an amount equal to (i) the aggregate amount actually distributed on the CRB Certificates on the immediately preceding Payment Date and identified as allocable to interest in the related CRB Certificate Statement plus (ii) the interest portion of the purchase price paid by the Depositor in connection with the repurchase of any CRB Certificates pursuant to Section 2.03 since the preceding Distribution Date. "MAJORITY IN INTEREST" means the Holders of Certificates evidencing, in the aggregate, at least 51% of the Percentage Interests evidenced by all Certificates. "MOODY'S" means Moody's Investors Service, Inc. "OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant Secretaries of the Depositor, as required by this Agreement. "OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel for the Depositor, which opinion is reasonably acceptable to the Trustee. "OUTSTANDING" means, with respect to the Certificates as of any date of determination, all Certificates theretofore executed and authenticated under this Agreement but excluding: (i) Certificates theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; and (ii) Certificates in exchange for which or in lieu of which other Certificates have been executed and delivered pursuant to this Agreement unless proof satisfactory to the Trustee is presented that any such Certificates are held by a holder in due course. "PAYMENT DATE" means the dates on which payments are due in respect of the CRB Certificates, as specified in the related Pooling and Servicing Agreement. "PERCENTAGE INTEREST" means, with respect to any Certificate, the undivided beneficial ownership interest in the Trust Property evidenced by Certificates of the same Class as such Certificate or by all Certificates, in either case as specified more fully herein. "PERSON" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government, or any agency or political subdivision thereof. "PLAN ASSETS REGULATION" means the plan assets regulation adopted by the Department of Labor under ERISA and codified at 29 C.F.R. (S) 2510.3101. "POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing Agreement dated as of [ ], among [ ], as seller, [ ], as servicer, and [ ], as trustee, pursuant to which the CRB Certificates were issued, attached hereto as Exhibit D. "PRINCIPAL DISTRIBUTION AMOUNT" means, as to any Distribution Date, an amount equal to (i) the aggregate amount, if any, actually distributed on the CRB Certificates on the immediately preceding Payment Date and identified as allocable to principal in the related CRB Certificate Statement plus (ii) the principal portion of the purchase price paid by the Depositor in connection with the repurchase of any of the CRB Certificates pursuant to Section 2.03 since the preceding Distribution Date. "RATING AGENCY" means each of [S&P and Moody's]. References herein to the highest rating categories of any Rating Agency shall mean such ratings without any modifiers. "RECORD DATE" means, with respect to any Distribution Date, the close of business on the last day immediately preceding such Distribution Date (or, in the case of Definitive Certificates, the last day of the month preceding the month in which such Distribution Date occurs). "RESPONSIBLE OFFICER", when used with respect to the Trustee, means the Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or Vice Chairman of the Executive or Standing Committee of the Board of Directors or Trustees, the President, the Chairman of the Committee on Trust Matters, any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer or Assistant Trust Officer, the Controller and any Assistant Controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "S&P" means Standard & Poor's Corporation. "TREASURY REGULATIONS" means regulations, including proposed or temporary regulations, promulgated under the Code. References in any document or instrument to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. "TRUST" means the trust created by this Agreement and denominated as Card Account Trust, Series [ ]. "TRUST PROPERTY" means the corpus of the Trust, which shall consist of: (i) the CRB Certificates described in the CRB Certificate Schedule; (ii) all distributions thereon on and after the Cutoff Date; and (iii) the Certificate Account and such assets that are deposited therein from time to time and any investments thereof, together with any and all income, proceeds and payments with respect thereto. "TRUSTEE" means [ ], a [ ] banking corporation, not in its individual capacity but solely as Trustee hereunder. SECTION 1.02. OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement as a whole and not to any particular provision of this Agreement; Article, Section and Exhibit references contained in this Agreement are references to Articles, Sections and Exhibits in or to this Agreement unless otherwise specified; and the term "including" shall mean "including without limitation". (c) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. (d) Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns. ARTICLE II Conveyance of the CRB Certificates; ORIGINAL ISSUANCE OF CERTIFICATES SECTION 2.01. CREATION AND DECLARATION OF TRUST; CONVEYANCE OF THE CRB CERTIFICATES. (a) The Depositor, concurrently with the execution and delivery of this Agreement, does hereby sell, transfer, assign, set over and otherwise convey to the Trustee, in trust, for the use and benefit of the Certificateholders, without recourse, all the right, title and interest of the Depositor including any security interest therein, in, to and under the CRB Certificates, all payments and all proceeds therefrom, and all other assets constituting the Trust Property. (b) In connection with such transfer and assignment, the Depositor does hereby deliver to, and deposit with, the Trustee the following: (i) confirmation of DTC of the sale by the Depositor of the CRB Certificates to the Trustee and of the making by DTC of entries on its records identifying the CRB Certificates as belonging to the Trustee; and (ii) a copy of the Pooling and Servicing Agreement together with all exhibits and amendments thereto. (c) It is intended that the conveyance of the Depositor's right, title and interest in and to the CRB Certificates and all other assets constituting the Trust Property pursuant to this Agreement shall constitute, and be construed as, an absolute sale of the CRB Certificates by the Depositor to the Trustee for the benefit of the Certificateholders. Furthermore, it is not intended that such conveyance be deemed a pledge of the CRB Certificates and the other assets constituting the Trust Property by the Depositor to the Trustee to secure a debt or other obligation of the Depositor. However, in the event that, notwithstanding the aforementioned intent of the parties, the CRB Certificates and the other assets constituting the Trust Property are held to be the property of the Depositor, or if for any other reason this Agreement is held or deemed to create a security interest in the CRB Certificates and the other assets constituting the Trust Property, then it is intended as follows:(a) this Agreement shall also be deemed to be a security agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code as in effect from time to time in the State of New York; (b) the conveyance provided for in this Section shall be deemed to be a grant by the Depositor to the Trustee of a security interest in all the Depositor's right, title and interest in and to the CRB Certificates and all amounts payable to the holders of the CRB Certificates after the Closing Date in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including without limitation all amounts from time to time held or invested in the Certificate Account, whether in the form of cash, instruments, securities or other property, (c) the possession by the Trustee or its agent of the CRB Certificates and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be "possession by the secured party" for purposes of perfecting the security interest pursuant to Section 9305 of the Uniform Commercial Code; and (d) notifications to persons holding such property, and acknowledgments, receipts or confirmations from, financial intermediaries, bailees or agents (as applicable) of the Trustee for the purpose of perfecting such security interest under applicable law. Notwithstanding the foregoing, the parties to this Agreement intend the transfer pursuant to this section to be a true, absolute and unconditional sale of the CRB Certificates and all such other assets constituting the Trust Property by the Depositor to the Trustee. (d) If the CRB Certificates are reissued as definitive certificates as provided in the Pooling and Servicing Agreement, the Trustee shall cause such definitive certificates to be issued in its name as Trustee on behalf of the Trust and shall thereafter maintain possession of such definitive certificates during the term of this Agreement unless otherwise required to surrender such definitive certificates for final payment as provided in the Pooling and Servicing Agreement. SECTION 2.02. ACCEPTANCE BY TRUSTEE. The Trustee hereby acknowledges the receipt by it of the CRB Certificates and the documents referred to in Section 2.01(b)(ii) and declares that it holds and will hold such CRB Certificates; such other documents and all other assets and documents delivered to it pursuant to this Agreement, and that it will hold all such assets and all such other assets comprising the Trust Property in trust for the exclusive use and benefit of all present and future Certificateholders and for the purposes and subject to the terms and conditions set forth in this Agreement. SECTION 2.03. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The Depositor hereby represents and warrants to the Trustee that as of the Closing Date: (a) With respect to the CRB Certificates: (i) the information set forth in the CRB Certificate Schedule is true and correct in all material respects as of the date or dates such information is furnished; (ii) immediately prior to the sale and assignment herein contemplated, the Depositor was the sole owner of the CRB Certificates free and clear of any lien, pledge, charge or encumbrance of any kind; (iii) the Depositor acquired its ownership in the CRB Certificates in good faith without notice of any adverse claim; and (iv) the Depository has not assigned any interest in the CRB Certificates or any distributions thereon, except as contemplated herein. The representations and warranties set forth in this Section 2.03(a) shall survive the transfer and assignment of the CRB Certificates. Upon discovery by the Depositor or the Trustee of a breach of any of the foregoing representations and warranties which materially and adversely affects the interests of the Certificateholders in the CRB Certificates, the Depositor or the Trustee shall give prompt written notice to the other, to the Certificateholders and to each Rating Agency. Within 90 days of its discovery or its receipt of notice of any such breach, the Depositor shall cure such breach in all material respects or, if such breach cannot be cured, the Depositor shall repurchase the affected CRB Certificates from the Trustee if the Depositor is so directed by a Majority in Interest of the Certificateholders. Any such repurchase of a CRB Certificate by the Depositor shall be accomplished prior to the Distribution Date next following the receipt of such direction by a Majority in Interest of the Certificateholders at a price equal to the sum of (i) the outstanding principal amount of such CRB Certificate as of the date of such repurchase and (ii) all unpaid accrued interest on such CRB Certificate to the date of such repurchase at [ ] per annum (the "Purchase Price"). The payment of the Purchase Price in connection with repurchased CRB Certificates shall be considered a prepayment in full of such CRB Certificates and shall be delivered to the Trustee for deposit in the Certificate Account in accordance with the provisions of Section 3.02. Upon such deposit into the Certificate Account, such CRB Certificates shall be released to the Depositor, and the Trustee shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as shall be reasonably requested and provided by the Depositor to vest in the Depositor, or its designee or assignee, title to the CRB Certificates repurchased pursuant hereto. The Depositor shall be entitled to all amounts received by the Trustee in respect of any repurchased CRB Certificate to the extent the distribution of such amounts would not make the total amount distributed in respect of any such repurchased CRB Certificate greater than the Purchase Price therefor. The obligation of the Depositor to cure or repurchase the CRB Certificates as to which a breach specified in this Section 2.03(a) has occurred and is continuing shall constitute the sole remedy respecting such breach against the Depositor available to Certificateholders or the Trustee on behalf of Certificateholders. (b With respect to the Depositor: (i) the Depositor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full power and authority to execute, deliver and perform this Agreement; (ii) the Certificates will be free and clear of any right, charge, security interest, or lien or claim in favor of the Depositor; (iii) this Agreement has been duly authorized, executed and delivered by the Depositor and assuming due authorization, execution and delivery by the Trustee, constitutes the valid, legal and binding obligation of the Depositor, enforceable against it in accordance with its terms, except as enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally or by general principles of equity(regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) neither the execution nor the delivery of this Agreement nor the issuance, delivery and sale of the Certificates, nor the consummation of any other of the transactions contemplated herein nor the performance of its obligations under this Agreement or the Certificates will result in the breach of any term or provision of the certificate of incorporation or bylaws of the Depositor or conflict with, result in a breach, violation or acceleration of, or constitute a default(or an event which, with notice or lapse of time or both, would constitute a default) under, the terms of any material contract, indenture or other agreement or instrument to which the Depositor is a party or by which it is bound or any of its assets is bound, or any statute, order or regulation applicable to the Depositor of any court, regulatory body, administrative agency or governmental body having jurisdiction over the Depositor; and (v) there are no actions or proceedings against, or investigations of, the Depositor pending, or, to the knowledge of the Depositor, threatened, before any court, administrative agency or other tribunal(A) asserting the invalidity of this Agreement or the Certificates,(B) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement or(C) which might materially and adversely affect the validity or enforceability of this Agreement or the Certificates. SECTION 2.04. AGREEMENT TO AUTHENTICATE AND DELIVER CERTIFICATES. The Trustee acknowledges the transfer, delivery and assignment to it of the Trust Property, and concurrently with such transfer and delivery, the Trustee has executed, authenticated and delivered, to or upon the order of the Depositor, the Certificates duly executed and authenticated by the Trustee in authorized denominations evidencing ownership of the entire Trust Property and registered in such names as the Depositor shall direct in writing, all in accordance with the terms and subject to the conditions hereof. ARTICLE III Administration of the Trust Property; DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS SECTION 3.01. ADMINISTRATION OF THE TRUST PROPERTY. The Trustee shall administer the Trust Property for the benefit of the Certificateholders. The Trustee shall make reasonable effort to collect all payments required to be made pursuant to the terms of the CRB Certificates and the Pooling and Servicing Agreement in a manner consistent with the terms of the Pooling and Servicing Agreement and such CRB Certificates. In connection with its receipts of any funds distributed in respect of a CRB Certificate on any Payment Date, the Trustee shall review the related CRB Certificate Statement and shall confirm that the principal and interest payments received on such Payment Date are equal to the distribution amount shown on the related CRB Certificate Statement. If (i) the amount of any distribution on a CRB Certificate varies from the amount reported to the Trustee on the applicable CRB Certificate Statement for such distribution, (ii) the Trustee shall not have received a distribution on any CRB Certificate by the close of business on the date on which such distribution was to be received by the Trustee or (iii) the Trustee shall gain actual knowledge of any other default or event of default under the Pooling and Servicing Agreement, the Trustee shall promptly notify the Depositor and the Certificateholders and shall proceed in accordance with the provisions hereof, including Section 5.01(c), (d) and (e). SECTION 3.02. CERTIFICATE ACCOUNT. (a) The Trustee, for the benefit of the Certificateholders, shall establish and maintain one or more noninterest bearing Eligible Accounts (collectively, the "Certificate Account"), entitled [ ], as Trustee, in trust for the registered holders of Certificates in Card Account Trust, Series [ ]. The Trustee, on behalf of the Certificateholders, shall possess all right, title and interest in all funds deposited from time to time n the Certificate Account and in all proceeds thereof. The Trustee shall upon receipt deposit in the Certificate Account all amounts collected and payments received in respect of the CRB Certificates, including: (i) all distributions received on the CRB Certificates subsequent to the Cutoff Date; and (ii) any amount required to be deposited in the Certificate Account pursuant to Section 2.03(a) in connection with the repurchase of a CRB Certificate by the Depositor. If, at any time, the Certificate Account ceases to be an Eligible Account, the Trustee shall within five Business Days establish a new Certificate Account meeting the conditions specified above and transfer any cash and any investments on deposit in the Certificate Account to such new Certificate Account, and from the date such new Certificate Account is established, it shall be the Certificate Account. (c) The Trustee shall give written notice to the Depositor and each Rating Agency of the location of each Eligible Account constituting the Certificate Account upon establishment thereof and prior to any change thereof. SECTION 3.03. INVESTMENT OF FUNDS IN THE CERTIFICATE ACCOUNT. The Depositor, on behalf of the Trust, may direct in writing any depository institution maintaining the Certificate Account to invest the funds in such Certificate Account in one or more Eligible Investments, which shall mature not later than the Business Day immediately preceding the next Distribution Date (or, if the Trustee in its commercial capacity is the obligor of such Eligible Investments and the Certificate Account is maintained by the Trustee, such Eligible Investments shall mature not later than the next Distribution Date) and shall not be sold or disposed of prior to their respective maturities; PROVIDED, HOWEVER, that if the Depositor fails to select any such Eligible Investment, the Trustee shall direct such institution to invest such funds in demand deposits meeting the requirements described in item (iii) of the definition of Eligible Investments. All such Eligible Investments shall be made in the name of the Trustee, in trust for the Holders of the Certificates, or its nominee. All proceeds of any such investment shall be deposited in the Certificate Account, may not be reinvested and may only be withdrawn and applied for the purposes set forth herein. SECTION 3.04. PERMITTED WITHDRAWALS FROM THE CERTIFICATE ACCOUNT. The Trustee, may from time to time withdraw funds from the Certificate Account for the following purposes: (i) to make payments to Certificateholders in the amounts and in the manner provided for in Section 3.05; (ii) to reimburse the Trustee, to the extent of the net proceeds recovered on any defaulted CRB Certificates, prior to the distribution of such proceeds to Certificateholders, for any unreimbursed expenses incurred with respect to the exercise of remedies in respect of such CRB Certificates pursuant to Section 5.01; (iii) to reimburse the Depositor for expenses incurred by and reimbursable to the Depositor pursuant to Section 6.03; (iv) to clear and terminate the Certificate Account upon the termination of this Agreement. SECTION 3.05. DISTRIBUTIONS. (a) On each Distribution Date, the Trustee shall withdraw from the Certificate Account all Available Funds then on deposit and shall distribute such Available Funds (in each case to the extent of the remaining Available Funds) for the following purposes and in the following order of priority: (i) to pay to the Holders of the [Class [A]] Certificates the [Class [A]] Interest Amount for such Distribution Date and to pay to the Holders of the [Class [B]] Certificates the [Class [B]] Interest Amount for such Distribution Date, without preference or priority one over the other; (ii) to pay to the Trustee a pro rata portion of the Trustee's annual fee for services; (iii) to pay to the Holders of the [Class [A]] Certificates the [Class [A]] Principal Distribution Amount for such Distribution Date and to pay to the Holders of the [Class [B]] Certificates the [Class [B]] Principal Distribution Amount for such Distribution Date, without preference or priority one over the other; and (iv) to pay to the Trustee any unreimbursed expenses incurred by the Trustee but not covered by the Trustee's annual fee. (d) All distributions made with respect to each Class on each Distribution Date shall be allocated pro rata among the Outstanding Certificates of such Class based upon their respective Percentage Interests in respect of such Class. Payments to the Certificateholders of each Class on each Distribution Date will be made to the Certificateholders of record on the related Record Date (other than as provided in Section 7.01 with respect to the final distribution). Distributions to any Certificateholder on any Distribution Date shall be made by wire transfer of immediately available funds, at the expense of the Certificateholder requesting such wire transfer by deducting a wire transfer fee from the related transfer, to the account of such Certificateholder at a bank or other entity having appropriate facilities therefor, if such Certificateholder shall have so notified the Trustee in writing at least five Business Days prior to the related Record Date and such Certificateholder shall hold Certificates with an aggregate Certificate Principal Balance as of the Closing Date of at least $1,000,000 or in such other manner as shall be agreed to by the Trustee and such Certificateholder, or otherwise by check mailed by first class mail to the address of such Certificateholder appearing in the Certificate Register. Final distribution on each Certificate will be made in like manner, but only upon present and surrender of such Certificate at the Corporate Trust Office or such other location specified in the notice to Certificateholders of such final distribution. SECTION 3.06. COMPLIANCE WITH WITHHOLDING REQUIREMENTS. Notwithstanding any other provision of this Agreement to the contrary, the Trustee shall comply with all Federal income tax withholding requirements respecting distributions to, or receipts of amounts on behalf of, Certificateholders that the Trustee reasonably believes are applicable under the Code. The consent of Certificateholders shall not be required for such withholding. In the event the Trustee does withhold any amount from interest or principal distribution thereof to any Certificateholder pursuant to federal withholding requirements, the Trustee shall indicate in the statement required pursuant to Section 3.07 the amount so withheld. SECTION 3.07. STATEMENTS TO CERTIFICATEHOLDERS. On the second Business Day preceding each Distribution Date (each, a "Determination Date"), the Depositor (or its designee) shall prepare and forward a statement (a "Distribution Date Statement") to the Trustee, who in turn shall forward such statement by mail to each Rating Agency and each Certificateholder. Each such Distribution Date Statement shall set forth the following information: (i) the Available Funds for such Distribution Date; (ii) the Interest Distribution Amount for such Distribution Date; (iii) the Principal Distribution Amount, if any, for such Distribution Date; (iv) with respect to such Distribution Date, the [Class [A]] Interest Amount, the [Class [A]] Principal Distribution Amount and the aggregate amount of distributions made to the [Class [A]] Certificateholders on such Distribution Date in respect of each such item pursuant to Section 3.05; (v) with respect to such Distribution Date, the [Class [B]] Interest Amount, the [Class [B]] Principal Distribution Amount and the aggregate amount of distributions made to the [Class [B]] Certificateholders on such Distribution Date in respect of each such item pursuant to Section 3.05; (vi) the [Class [A]] Certificate Principal Balance and the [Class [B]] Certificate Principal Balance, after giving effect to distributions of principal of such Certificates on such Distribution Date; and (vii) the amount of any withdrawals made from the Certificate Account since the immediately preceding Distribution Date pursuant to clauses (ii) through (iv) of Section 3.04, together with a general description of the purpose of each such withdrawal. In the case of the information furnished pursuant to clauses (i), (iv) and (v) above, the foregoing amounts shall also be stated as a dollar amount per $1,000 principal amount of the applicable Class. In addition, the Trustee promptly shall furnish to Certificateholders copies of any notices, statements, reports or other communications received by the Trustee as the Collateral Holder. On or before January 31 of each calendar year, beginning with calendar year [ ], the Trustee shall furnish by first class mail to each Person who at any time during the previous calendar year was a Certificateholder of record a statement containing the information required to be contained in the regular report to Certificateholders, as set forth in clauses (iv) and (v) above, aggregated for such calendar year or the applicable portion thereof during which such Person was a Certificateholder which statement shall contain sufficient information to allow Certificateholders to calculate their United States federal income tax liability with respect to the Certificates. Such obligation of the Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Trustee pursuant to any requirements of the Code. The Trustee shall furnish to each Certificateholder during the term of this Agreement such periodic, special or other reports or information, whether or not provided for herein, as shall be necessary, reasonable or appropriate with respect to the Certificateholder or otherwise with respect to the purposes of this Agreement, all such reports or information to be provided by and in accordance with such applicable instructions and directions as the Certificateholder may reasonably require and at the expense of such Certificateholder. SECTION 3.08. REPORTS OF THE TRUSTEE; CERTIFICATE ACCOUNT. Upon request of a Certificateholder, the Trustee shall make available to Certificateholders a statement setting forth the status of the Certificate Account as of the close of business on the Distribution Date immediately preceding such request, and showing, for the period covered by such statement, the aggregate of deposits into and withdrawals from the Certificate Account. SECTION 3.09. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION. (a) The Trustee shall provide the Certificateholders with access to a copy of each report received by it as Collateral Holder under the Pooling and Servicing Agreement with respect to the CRB Certificates. The Trustee shall also provide the Depositor with access to each such report and to all written reports, documents and records required to be maintained by the Trustee in respect of its duties hereunder. The Trustee shall keep a certified copy or duplicate original of this Agreement on file at its Corporate Trust Office for inspection by any Certificateholder. The Trustee shall provide, at the written request of three or more Certificateholders or one or more Certificateholders evidencing Percentage Interests of not less than 25% of the Certificates, access to the current list of the names and addresses of all Certificateholders for the purpose of communicating with other Certificateholders with respect to their rights under this Agreement or under the Certificates. Such access shall be afforded without charge but only upon reasonable request evidenced by prior written notice to the Trustee and during normal business hours at offices designated by the Trustee. ARTICLE IV THE CERTIFICATES SECTION 4.01. THE CERTIFICATES. (a) The [Class [A]] Certificates and the [Class [B]] Certificates shall be substantially in the respective forms set forth in Exhibits A and B hereto. The Certificates shall, on original issue, be executed and authenticated by the Trustee and delivered by the Trustee to or upon the order of the Depositor upon receipt by the Trustee of the CRB Certificates and any other documents specified in Section 2.01. (b) The Certificates shall be issuable in fully registered form only, in the minimum original principal amounts of $1,000 and integral multiples thereof. (c) The Certificates shall be executed by manual signature on behalf of the Trustee in its capacity as trustee hereunder by a Responsible Officer. Certificates bearing the manual signatures of individuals who were at any time the proper officers of the Trustee shall bind the Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the date of such Certificate. No Certificates shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates issued on the Closing Date shall be dated the Closing Date. All Certificates issued thereafter shall be dated the date of their authentication. SECTION 4.02. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a) The Trustee shall keep at one of the offices or agencies to be maintained by the Trustee in accordance with Section 4.05 a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of Certificates and of transfers and exchanges of Certificates as herein provided. (b) Upon surrender for registration of transfer of any Certificate at the Corporate Trust Office, the Trustee shall execute and deliver, in the name of the designated transferee or transferees, one or more new Certificates in authorized denominations and of the same Class and aggregate Percentage Interest. (c) At the option of the Certificateholders, each Certificate may be exchanged for a Certificate of like aggregate original principal amount, series, class, original issue date and maturity, in different authorized denominations upon surrender of the Certificates to be exchanged at the office maintained by the Trustee pursuant to Section 4.05. Whenever any Certificates are so surrendered for exchange, the Trustee shall execute, authenticate and deliver the Certificates that the Certificateholder making the exchange is entitled to receive. Each Certificate presented or surrendered for registration of transfer or exchange shall (if so required by the Trustee) be duly endorsed by, or be accompanied by a written instrument of transfer in the form satisfactory to the Trustee, duly executed by the Holder thereof or his attorney duly authorized in writing. (d) Certificates delivered upon any exchange will evidence the same obligations, and will be entitled to the same rights and privileges, as the Certificates surrendered. (e) No service charge shall be imposed for any registration of transfer or exchange of Certificates of any Class, but the Trustee may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. (f) All Certificates surrendered for registration of transfer and exchange shall be cancelled and destroyed by the Trustee in accordance with its standard procedures without liability on its part. SECTION 4.03. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a)(i) any mutilated Certificate is surrendered to the Trustee or (ii) the Depositor and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Certificate and of the ownership thereof and (b) there is delivered to the Trustee and the Depositor such security or indemnity as may be required by them to save each of them harmless, then, in the absence of receipt by either the Trustee or the Depositor of written notice that such Certificate has been acquired by a bona fide purchaser, the Trustee shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor, form, terms and principal amount, as applicable, bearing a number not contemporaneously Outstanding, so that neither gain nor loss in interest shall result from such exchange or substitution. Upon the issuance of any new Certificate under this Section 4.03, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Any duplicate Certificate issued pursuant to this Section 4.03 shall constitute complete and indefeasible evidence of the rights of a Holder of the originally issued Certificate as if such duplicate Certificate was originally issued, whether or not the lost, stolen or destroyed Certificate shall be, at any time, enforceable by anyone and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Certificates of the respective Class, if any, duly issued hereunder. All Certificates surrendered to the Trustee under the terms of this Section 4.03 shall be cancelled and destroyed by the Trustee in accordance with its standard procedures without liability on its part. The provisions of this Section 4.03 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. SECTION 4.04. PERSONS DEEMED OWNERS. The Trustee and the Depositor and any agent of either of them may treat the Person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 3.05 and for all other purposes whatsoever, and neither the Trustee, the Depositor nor any such agent shall be affected by notice to the contrary. SECTION 4.05. MAINTENANCE OF OFFICE OR AGENCY. The Trustee will maintain at its expense in the Borough of Manhattan, The City of New York, State of New York, an office or agency where Certificates may be surrendered for registration of transfer or exchange and presented for final distribution and where notices and demands to or upon the Trust Property in respect of the Certificates and this Agreement may be served. Such office or agency shall initially be maintained at [ ]. The Trustee will give prompt written notice to the Certificateholders and the Depositor of any change in the location of any such office or agency. SECTION 4.06. ERISA CONSIDERATIONS. No Certificate may be acquired by an employee benefit plan, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that is subject to the provisions of Title I of ERISA, a plan described in Section 4975(e)(i) of the Code or any entity whose underlying assets include plan assets by reason of a plan's investment in the entity (each, a "Benefit Plan"). Each Certificateholder, by virtue of the acquisition and holding of a Certificate, will be deemed to have represented and warranted to the Depositor and the Trustee that such Certificateholder is not a Benefit Plan. SECTION 4.07. AUTHENTICATING AGENT. (a) The Trustee may appoint one or more authenticating agents with respect to the Certificates which shall be authorized to act on behalf of the Trustee in authenticating the Certificates in connection with the issuance, delivery, registration of transfer, exchange or repayment of the Certificates. Whenever reference is made in this Agreement to the authentications of Certificates by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an authenticating agent and a certificate of authentication executed on behalf of the Trustee by an authenticating agent. Each authenticating agent must be acceptable to the Depositor. (b) Any institution succeeding to the corporate agency business of any authenticating agent shall continue to be an authenticating agent without the execution or filing of any power or any further act on the part of the Trustee or such authenticating agent. An authenticating agent may at any time resign by giving notice of resignation to the Trustee and to the Depositor. The Trustee may at any time terminate the agency of an authenticating agent by giving notice of termination to such authenticating agent and to the Depositor. Upon receiving such a notice of resignation or upon such a termination, or in case at any time an authenticating agent shall cease to be acceptable to the Trustee or the Depositor, the Trustee promptly may appoint a successor authenticating agent. Any successor authenticating agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an authenticating agent. No successor authenticating agent shall be appointed unless acceptable to the Trustee and the Depositor. The Depositor agrees to pay to each authenticating agent from time to time reasonable compensation for its services under this Section. In the event the Trustee acts as authenticating agent hereunder, the provisions of Article V shall be applicable to the Trustee in such other capacity as authenticating agent. (c) Pursuant to an appointment made under this Section, the Certificates may have endorsed thereon, in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication in substantially the following form: This is one of the [Class [A]] [Class [B]] Certificates described in the Trust Agreement referred to herein. ------------------------------- ------------------------------- as Authenticating Agent for the Trustee, By _____________________ Authorized Officer SECTION 4.08. BOOKENTRY CERTIFICATES. The Certificates, upon original issuance, shall be issued in the form of one or more typewritten Certificates for each Class representing the BookEntry Certificates, to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. The Certificates shall initially be registered on the Certificate Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Certificateholder will receive a Definitive Certificate (as defined below) representing such Certificateholder's interest in the Certificates, except as provided in Section 4.10. Unless and until definitive, fully registered Certificates ("Definitive Certificates") have been issued to the applicable Certificateholder pursuant to Section 4.10. (a) the provisions of this Section shall be in full force and effect; (b) the Depositor and the Trustee may deal with the Clearing Agency and the Clearing Agency Participant for all purposes (including the making of distributions in respect of the Certificates) as the authorized representatives of the respective Certificateholders; (c) to the extent that the provisions of this Section conflict with any other provisions of this Agreement, the provisions of this Section shall control; (d) the rights of the respective Certificateholders shall be exercised only through the Clearing Agency and the Clearing Agency participants and shall be limited to those established by law and agreements between such Certificateholders and the Clearing Agency and/or the Clearing Agency Participants pursuant to the Depository Agreement. Unless and until Definitive Certificates are issued pursuant to Section 4.10, the initial Clearing Agency will make bookentry transfers among the Clearing Agency Participants and receive and transmit distributions of principle and interest and any other amounts on the related Certificates to such Clearing Agency Participants; and (e) whenever this agreement requires or permits actions to be taken with the consent of, or at the direction of, Certificateholders evidencing a specified percentage of the aggregate principal amount or notional amount, as the case may be, of Outstanding Certificates of any Class, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Certificateholders and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the principal amount or notional amount, as the case may be, of the applicable Class of Certificates and has delivered instructions to the Trustee. SECTION 4.09. NOTICES TO CLEARING AGENCY. Whenever any notice or other communication is required to be given to Certificateholders with respect to which BookEntry Certificates have been issued, unless and until Definitive Certificates shall have been issued to the related Certificateholders, the Trustee shall give all such notices and communications to the Clearing Agency. SECTION 4.10. DEFINITIVE CERTIFICATES. If BookEntry Certificates have been issued with respect to any Class and (a) the depositor advised the Trustee that DTC is no longer willing or able to discharge properly its responsibilities under the Depository Agreement with respect to such Class and the Trustee or the Depositor is unable to locate a qualified successor, (b) the Depositor, at its option, advises the Trustee that it elects to terminate the bookentry system with respect to such Class through the Clearing Agency or (c) after the occurrence of a payment default with respect to the CRB Certificates, Certificateholders representing at least a majority of the outstanding principal amount of Certificate of such Class advise the Clearing Agency (which shall then notify the Trustee) in writing that the continuation of a bookentry system with respect to the Certificates of such Class through the Clearing Agency is no longer in the best interests of the holders of such Certificates, then the Trustee shall cause the Clearing Agency to notify all holders of such Certificates, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Certificates to holders of such Certificates requesting the same. Upon surrender to the Trustee of any such Certificates representing BookEntry Certificates by the Clearing Agency, accompanied by instructions for reregistration, the Trustee shall execute authenticate and deliver such Certificates as Definitive Certificates to such Certificateholders in accordance with the instructions of the Clearing Agency. None of the Trust, the Depositor or the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of such Definitive Certificate, all references herein to obligations imposed upon or to be performed by the Clearing Agency shall be deemed to be imposed upon and performed by the Trustee, to the extent applicable with respect to such Definitive Certificates and the Trustee shall recognize the Holders of such Definitive Certificates as Certificateholders hereunder. Upon the issuance of Definitive Certificates, distributions of amount in respect of such Definitive Certificates shall thereafter be made by the Trustee on each Distribution Date in accordance with the procedures set forth in Section 3.05 directly to holders of Definitive Certificates in whose names the Definitive Certificates were registered at the close of business on the related Record Date. Such distributions shall be made by check mailed to the address of such holder as it appears on the Certificate Register maintained by the Trustee (or, as provided in Section 3.05, by wire transfer); provided, however, that the final payment on any such Definitive Certificate shall be made only upon presentation and surrender of such Definitive Certificate at the office or agency specified in the notice of final distribution to Certificateholders. ARTICLE V THE TRUSTEE SECTION 5.01. DUTIES OF THE TRUSTEE. (a) The Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Agreement. The Trustee shall have the authority to exercise the rights and powers vested in it by this Agreement. Any permissive right of the Trustee set forth in this Agreement shall not be construed as a duty. (b) The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee which are specifically required to be furnished to it pursuant to any provision of this Agreement or to it in its capacity as Collateral Holder pursuant to the Pooling and Servicing Agreement, shall examine them to determine whether they conform to the requirements of this Agreement or the pooling and Servicing Agreement. If any such instrument is found not to conform to the requirements of this Agreement or the Pooling and Servicing Agreement in a material manner, the Trustee shall take such action as a Majority in Interest of Certificateholders shall direct, and the Trustee will provide notice thereof to the Depositor, the Certificateholders and each Rating Agency. (c) In the event of a default in respect of the CRB Certificates, the Trustee shall proceed to enforce its rights as a holder of the CRB Certificates under the Pooling and Servicing Agreement, unless otherwise directed by a Majority in Interest of each Class of Certificates affected thereby. The Trustee may, in its discretion, and will, if so directed by a Majority in Interest of each Class of Certificates affected thereby, proceed to enforce any rights which it may have as a holder of CRB Certificates. In addition, a Majority in Interest of each Class of Certificates may together direct the time, method and place of conducting any proceeding for any remedy available to the Trustee as a holder of CRB Certificates. Notwithstanding the foregoing, the Trustee shall in no event exercise any of its rights as a Collateral Holder in an manner inconsistent with the terms of paragraphs (d) and (e) of this Section 5.01. (d) In the event that (i) the Trustee has the right to vote or give consent in respect of the CRB Certificates or receives a request from the trustee or the issuer of the CRB Certificates for its consent to any amendment, modification or waiver under any document relating to the CRB Certificates, or receives any other solicitation for any action with respect to the CRB Certificates, (ii) the Depositor notifies the Trustee of its determination that taking any such action is primarily intended to maintain the initial value or credit rating of the CRB Certificates, and any additional consequences that might arise as a result of taking any such action are incidental, and (iii) either (A) the CRB Certificate are in default, (B) the Depositor notifies the Trustee of its determination that the CRB Certificates will probably have their credit rating downgraded (or be in default) in the reasonably foreseeable future absent such action or (C) the Depositor delivers to the Trustee an opinion of tax counsel to the effect that the Trust will continue to qualify as a grantor trust under the Code if any such action were to be taken, then, (x) the Trustee shall mail a notice of such proposed action, including a description thereof, to each Certificateholder of record as of such date, (y) the Trustee shall request instructions from the Certificateholders as to whether or not to take such action and (z) the Trustee shall vote, give consent or otherwise act as Collateral Holder with respect to a particular matter in the same proportion as the Certificates of the Trust were actually voted with respect to such matter (or, if such a proportional action is not permitted, in accordance with the instructions of Holders of a Majority in Interest of the Certificates) as of a date determined by the Trustee prior to the date on which such action is required, provided that the Trustee shall have no liability for any failure to act resulting from Certificateholders' late return of, or failure to return, directions requested by the Trustee from the Certificateholders. If each of the conditions set forth in clauses (ii) and (iii) of the next preceding sentence are not satisfied, then the Trustee shall abstain from taking any action with respect to any vote, consent or other action that is referred to in clause (i) of the next preceding sentence. (e) Notwithstanding anything to the contrary contained herein, the Trustee shall be under no obligation to exercise or enforce any of the rights or powers vested in it by this Agreement or as the Collateral Holder, at the request, order or direction of any of the Certificateholders, unless such Certificateholders have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Trustee in compliance with such request, order or direction or if such request, order or direction is in conflict with any rule of law or this Agreement. In the event of any default under this Agreement by the Depositor or any default under the CRB Certificates, subject to compliance with paragraph (d) above, the Trustee may in its discretion proceed to protect and enforce the rights of Certificateholders by any action, suit or proceeding deemed proper by the Trustee which is not inconsistent with any request or direction by the Holders of a Majority in Interest of the Certificates of each Class affected thereby. (f) No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own misconduct or from liability for any negligent action or any negligent failure to act in respect of the Trust Property, the CRB Certificates or the Pooling and Servicing Agreement in any capacity other than as Trustee; PROVIDED, HOWEVER, that: (i) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Agreement, the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, no implied covenants or obligations shall be read into this Agreement against the Trustee and, in the absence of bad faith or negligence on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates, opinions, documents and other statements furnished to the Trustee that conform on their face to the requirements of this Agreement; (ii) the Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith and believed by it to be authorized or within its discretion or authority hereunder or in accordance with the direction of the Holders of Certificates evidencing Percentage Interests aggregating not less than 66 2/3% of all the Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement. SECTION 5.02. CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as otherwise provided in Section 5.01: (i) the Trustee may request and rely upon and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (ii) the Trustee may consult with counsel and any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance therewith; (iii) except for the duties and obligations of the Trustee expressly created by this Agreement, the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Agreement or to make any investigation of matters arising hereunder or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Certificateholders, pursuant to the provisions of this Agreement, or if such request or direction is in conflict with any rule of law or this Agreement, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; nothing contained herein shall, however, relieve the Trustee of the obligation, to use the same degree of care and skill in its exercise of rights and remedies hereunder on behalf of Certificateholders as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (iv) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; (v) the Trustee shall not be personally liable for any loss resulting from the investment of funds held in the Certificate Account pursuant to Section 3.03; and (vi) the Trustee shall not be deemed to have notice or knowledge of any matter unless a Responsible Officer assigned to and working in the Corporate Trust Office has actual knowledge thereof or unless written notice thereof is received by the Trustee at the Corporate Trust Office and such notice references the Certificates generally or this Agreement. SECTION 5.03. TRUSTEE NOT LIABLE FOR CERTIFICATES. The recitals contained herein and in the Certificates, other than the signature of the Trustee on the Certificates and the certificate of authentication, shall be taken as the statements of the Depositor, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations or warranties as to the validity or sufficiency of this Agreement or of the Certificates or of the CRB Certificates or related documents, other than the signature of the Trustee on the Certificates and the certificate of authentication. The Trustee shall not be accountable hereunder or under the Certificates, except (i) for its own bad faith or negligence or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 5.12 expressly made by the Trustee. SECTION 5.04. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights it would have if it were not Trustee; provided, however, that in determining whether the Holders of the required Percentage Interest shall have consented to any action hereunder requiring such consent, the Trustee's interest shall be excluded. SECTION 5.05. TRUSTEE'S FEES AND EXPENSES. The Depositor covenants and agrees to pay to the Trustee on the Closing Date, and the Trustee shall be entitled to receive from time to time out of amounts collected and payments received in respect of the CRB Certificates, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder or of the Trustee, and the Depositor will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Agreement (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ), except any such expense, disbursement or advance as may arise from the Trustee's willful misfeasance, negligence or bad faith. The Trustee and any director, officer, employee or agent of the Trustee shall be indemnified by the Depositor and held harmless against any loss, liability or expense incurred in connection with any legal action relating to this Agreement or the Certificates, or the performance of any of the Trustee's duties hereunder, other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence in the performance of duties hereunder or by reason of reckless disregard of obligations and duties hereunder; provided that (i) with respect to any such loss, liability or expense, the Trustee shall have given to the Depositor written notice thereof promptly after the Trustee shall have knowledge thereof and (ii) while maintaining control over its own defense, the Trustee shall cooperate and consult fully with the Depositor. Such indemnity shall survive the termination or discharge of this Agreement and the resignation or removal of the Trustee. Any payment hereunder made by the Depositor to the Trustee shall be from the Depositor's own funds, without reimbursement from the Trust Property therefor. SECTION 5.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee shall at all times be a corporation or a national banking association organized and doing business under the laws of any state or the United States of America or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and the longterm debt obligations of which are rated in one of the four highest categories assigned longterm debt obligations by one of the Rating Agencies, and is subject to supervision or examination by federal or state authority. If such corporation or association publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so published. In the event that any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 5.07. The corporation or national banking association serving as Trustee may have normal banking and trust relationships with the Depositor and its Affiliates; provided, however, that such corporation shall not be an Affiliate of the Depositor. SECTION 5.07. RESIGNATION AND REMOVAL OF THE TRUSTEE. (a) Subject to the last sentence of this subsection (a), the Trustee may at any time resign and be discharged from the Trust hereby created by giving notice thereof to the Depositor, the Certificateholders and each Rating Agency. Upon receiving such notice of resignation, the Depositor (with the consent of a Majority in Interest of Certificateholders) shall as promptly as possible (and in any event within 30 days after the date of such notice of resignation) appoint a successor trustee by written instrument, in duplicate, which instrument shall be delivered to the resigning Trustee and to the successor trustee. A copy of such instrument shall be delivered to the Certificateholders and each Rating Agency by the Depositor. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee for the Certificates. (b) If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section 5.06 and shall fail to resign after written request therefor by the Depositor or a Majority in Interest of the Certificateholders, or if at any time the Trustee shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, reorganization, conservation or liquidation, then the Depositor (with the consent of a Majority in Interest of Certificateholders) may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, which instrument shall be delivered to the Trustee so removed and to the successor trustee. A copy of such instrument shall be delivered to the Certificateholders and each Rating Agency by the Depositor. (c) The Holders of Certificates representing not less than a Majority in Interest of Certificateholders may at any time remove the Trustee and appoint a successor trustee upon 30 days' notice to the Trustee by written instrument or instruments, in triplicate, signed by such Holders or their attorneysinfact duly authorized, one complete set of which instruments shall be delivered to the Depositor, one complete set to the Trustee so removed and one complete set to the successor trustee so appointed. A copy of such instrument shall be delivered to the Certificateholders and each Rating Agency by the Depositor. (d) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor trustee as provided in Section 5.08. SECTION 5.08. SUCCESSOR TRUSTEE. (a) Any successor trustee appointed as provided in Section 5.07 shall execute, acknowledge and deliver to each of the Depositor, the Certificateholders and its predecessor trustee and each Rating Agency an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with the like effect as if originally named as Trustee herein. The predecessor Trustee shall deliver to the successor trustee the CRB Certificates and all related documents and statements held by it hereunder, and the Depositor and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for more fully and certainly vesting and confirming in the successor trustee all the rights, powers, duties and obligations of the Trustee under this Agreement. No successor trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 5.06. (b) Upon acceptance of appointment by a successor trustee as provided in this Section, the Depositor shall mail notice of the succession of such trustee hereunder to all Holders of Certificates at their addresses as shown in the Certificate Register. SECTION 5.09. MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be eligible under the provisions of Section 5.06, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Trustee shall provide notice of any such merger to each Rating Agency. SECTION 5.10. APPOINTMENT OF COTRUSTEE OR SEPARATE TRUSTEE. (a) Notwithstanding any other provisions hereof, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Property or property securing the same may at the time be located, the Depositor and the Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Trustee to act as cotrustee or cotrustees, jointly with the Trustee, or separate trustee or separate trustees, of all or any part of the Trust Property, and to vest in such Person or Persons, in such capacity, such title to the Trust Property, or any part thereof, and subject to the other provisions of this Section 5.10, such powers, duties, obligations, rights and trusts as the Depositor and the Trustee may consider necessary or desirable. If the Depositor shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, the Trustee alone shall have the power to make such appointment. No cotrustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 5.06 hereunder and no notice to Holders of Certificates or Rating Agencies of the appointment of cotrustee(s) or separate trustee(s) shall be required under Section 5.08. (b) In the case of any appointment of a cotrustee or separate trustee pursuant to this Section 5.10, all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co trustee jointly (it being understood that such separate trustee or cotrustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Property or any portion thereof in any such jurisdiction) shall be exercised and performed by such separate trustee or cotrustee at the direction of the Trustee. The Depositor and the Trustee acting jointly may at any time accept the resignation or remove any separate trustee or cotrustee. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or cotrustee shall refer to this Agreement and the conditions of this Article V. Each separate trustee and cotrustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Depositor. (d) Any separate trustee or cotrustee may, at any time, constitute and appoint the Trustee as its agent or attorneyinfact, 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 cotrustee shall die, become incapable of acting, resign or be removed, all its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 5.11. TAX RETURNS. The Trustee will prepare or cause to be prepared, sign and file or cause to be filed all tax or informational returns required to be prepared and filed on behalf of the Trust under any Federal, state or local income tax laws. SECTION 5.12. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. (a) The Trustee represents and warrants that: (i) the Trustee is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or association; (ii) the Trustee has full power, authority and right to execute, deliver and perform its duties and obligations under this Agreement and the Certificates and has taken all necessary action to authorize the execution, delivery and performance by it (or, with respect to the Certificates, by it and an authenticating agent on its behalf, if applicable) of this Agreement and the Certificates; (iii) the execution and delivery of this Agreement and the Certificates by the Trustee and its performance of and compliance with the terms of this Agreement, and the Certificates will not violate the Trustee's articles of incorporation, association or other constitutive documents or Bylaws or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the breach or acceleration of, any material contract, agreement or other instrument to which the Trustee is a party or which may be applicable to the Trustee or any of its assets; (iv) as of the Closing Date, each of this Agreement and the Certificates have been duly executed and delivered by the Trustee (and, with respect to the Certificates, by an authenticating agent on its behalf, if applicable) and this Agreement constitutes the legal, valid and binding obligation of the Trustee, enforceable in accordance with its terms, except as enforcement may be limited by the applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (v) the Trustee is not in violation, and the execution and delivery of this Agreement and the Certificates by the Trustee and its performance and compliance with the respective terms of this Agreement and the Certificates will not constitute a violation, of any order or decree of any court or any order or regulation of any federal, state, municipal or governmental agency having jurisdiction over the Trustee or its properties, which violation would reasonably be expected to have a material adverse effect on the condition (financial or otherwise) or operations of the Trustee or its properties or on the performance of its duties thereunder); (vi) there are no actions or proceedings against, or investigations of, the Trustee pending, or, to the knowledge of the Trustee, threatened, before any court, administrative agency or other tribunal (A) that could reasonably be expected to prohibit its entering into this Agreement or to render the Certificates invalid, (B) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated hereunder or (C) that could reasonably be expected to prohibit or materially and adversely affect the performance by the Trustee of its obligations under, or the validity or enforceability of this Agreement or the Certificates; and (vii) no consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Trustee of, or compliance by the Trustee with, this Agreement or the Certificates, or for consummation of the transactions contemplated herein, except for such consents, approvals, authorizations and orders, if any, as have been obtained prior to the Closing Date. (b) Within 30 days of the earlier of discovery by the Trustee or receipt by the Trustee of notice from the Depositor or any Certificateholder of a breach of any representation or warranty of the Trustee set forth in paragraph (a) above that materially and adversely affects the interests of the Certificateholders, the Trustee shall promptly cure such breach in all material respects. SECTION 5.13. LIMITATION OF POWERS AND DUTIES. The Trust is constituted solely for the purposes of acquiring and holding the CRB Certificates, issuing the Certificates, making distributions thereon and other activities incidental thereto. The Trustee is not authorized to acquire any other investments or engage in any activities not authorized herein and, in particular, the Trustee is not authorized (i) to sell, assign, transfer, exchange, pledge, setoff or otherwise dispose of any of the CRB Certificates or interests therein, including to Certificateholders (except upon termination of the Trust in accordance with Article VII or in accordance with Section 5.01), (ii) to do anything that would cause the Trust to fail or cease to qualify as a "grantor trust" for Federal income tax purposes or (iii) to do anything that would cause the assets of a Trust to be treated as "plan assets" as determined pursuant to the Plan Assets Regulation. ARTICLE VI The Depositor SECTION 6.01. LIABILITY OF THE DEPOSITOR. The Depositor shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Depositor herein. SECTION 6.02. MERGER, CONSOLIDATION OR CONVERSION OF THE DEPOSITOR. Subject to the following paragraph, the Depositor will keep in full effect its existence, rights and franchises as a corporation under the laws of the jurisdiction of its incorporation, and will obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement and the Certificates and to perform its duties under this Agreement. The Depositor may be merged or consolidated with or into any Person, or transfer all or substantially all of its assets to any Person, in which case any Person resulting from any merger or consolidation to which the Depositor shall be a party, or any Person succeeding to the business of the Depositor, shall be the successor of the Depositor hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. SECTION 6.03. LIMITATION ON LIABILITY OF THE DEPOSITOR AND OTHERS. Neither the Depositor nor any of the directors, officers, employees or agents of the Depositor shall be under any liability to the Trust, the Trustee or the Certificateholders for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement or for errors in judgment; provided, however, that this provision shall not protect the Depositor or any such person against any breach of warranties or representations made herein, or against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence. The Depositor and any director, officer, employee or agent of the Depositor may rely in good faith on any document of any kind which, prima facie, is properly executed and submitted by any Person respecting any matters arising hereunder. The Depositor and any director, officer, employee or agent of the Depositor shall be indemnified and held harmless by the Trust Property against any loss, liability or expense incurred in connection with any legal action relating to this Agreement or the Certificates, other than any loss, liability or expense incurred by reason of any breach of warranties or representations made by it herein, or willful misfeasance, bad faith or gross negligence. The Depositor shall not be under any obligation to appear in, prosecute or defend any legal action unless such action is related to its duties under this Agreement and which in its opinion does not involve it in any expense or liability. ARTICLE VII Termination; Optional Purchase OF CRB CERTIFICATES SECTION 7.01. TERMINATION. (a) The respective obligations and responsibilities of the Depositor and the Trustee created hereby with respect to the Certificates (other than the obligation to make certain payments and to send certain notices to Certificateholders as hereinafter set forth) shall terminate immediately upon the occurrence of the last action required to be taken by the Trustee on the Distribution Date pursuant to this Article VII following the earlier to occur of (i) the final distribution by the Trustee of all money or other property or proceeds of the Trust Property in accordance with the terms hereof and (ii) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James, living on the date hereof. (b) Notice of any termination, specifying the Distribution Date upon which all Certificateholders may surrender their Certificates to the Trustee for payment and cancellation, shall be given promptly by the Trustee by letter to Certificateholders mailed no later than the first day of the month of such final distribution specifying (i) the Distribution Date upon which final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency appointed by the Trustee for that purpose, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Distribution Date is not applicable and that payments shall be made only upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified. Upon presentation and surrender of the Certificates, the Trustee shall cause to be distributed to Certificateholders an amount equal to the amount otherwise distributable on such Distribution Date. (c) Any funds not distributed on the final Distribution Date because of the failure of any Certificateholders to tender their Certificates shall be set aside and held in trust for the account of the appropriate nontendering Certificateholders, whereupon the Trust Property shall terminate. If any Certificates as to which notice of the termination date has been given pursuant to this Section 7.01 shall not have been surrendered for cancellation within six months after the time specified in such notice, the Trustee shall mail a second notice to the remaining Certificateholders, at their last addresses shown in the Certificate Register, to surrender their Certificates for cancellation in order to receive, from such funds held, the final distribution with respect thereto. If within one year after the second notice any Certificate shall not have been surrendered for cancellation, the Trustee shall directly or through an agent, take reasonable steps to contact the remaining Certificateholders concerning surrender of their Certificates. The costs and expenses of maintaining such funds and of contacting Certificateholders shall be paid out of the assets which remain held. If within two years after the second notice any Certificates shall not have been surrendered for cancellation, the Trustee shall pay to the Depositor all amounts distributable to the Holders thereof and the Depositor shall thereafter hold such amounts for the benefit of such Holders. No interest shall accrue or be payable to any Certificateholder on any amount held as a result of such Certificateholder's failure to surrender its Certificate(s) for final payment thereof in accordance with this Section 7.01. SECTION 7.02. OPTIONAL PURCHASE OF CRB CERTIFICATES. As of any Distribution Date as of which the then outstanding Aggregate Collateral Balance is [5%] or less of the Aggregate Collateral Balance as of the Cutoff Date, the Depositor shall have the option to purchase the outstanding CRB Certificates. To exercise such option, the Depositor shall deposit in the Certificate Account an amount equal to the aggregate unpaid principal balance of the then outstanding CRB Certificates together with any accrued interest thereon through the related Payment Date, and shall succeed to all interests of the Trust, the Trustee and the Certificateholders in and to such CRB Certificates. The Trustee shall apply such funds deposited in the Certificate Account by the Depositor pursuant to this Section 7.02 in order to retire the Certificates as of such Distribution Date. ARTICLE VIII MISCELLANEOUS SECTION 8.01. AMENDMENT; WAIVER. (a) This Agreement may be amended from time to time by the Depositor and the Trustee without the consent of any of the Certificateholders (i) to cure any ambiguity, (ii) to correct or supplement any provisions herein which may be defective or inconsistent with any other provisions herein, (iii) to add any other provisions with respect to matters or questions arising under this Agreement not inconsistent with the terms of this Agreement or (iv) if such amendment, as evidenced by an Opinion of Counsel delivered to the Trustee, is reasonably necessary to comply with any requirements imposed by the Code or other written official announcement or interpretation relating to federal income tax laws or any such proposed action which, if made effective, would apply retroactively to the Trust Property at least from the effective date of such amendment; provided that such action (except any amendment described in (iv) above) shall not, as evidenced by an Opinion of Counsel delivered to the Trustee, adversely affect in any material respect the rights of any Certificateholder. (b) Without limiting the generality of the foregoing, this Agreement may also be amended from time to time by the Depositor and the Trustee with the consent of the Holders of Certificates evidencing not less than 66 2/3% of the then outstanding aggregate principal amount or notional amount, as the case may be, of the Certificates of each Class adversely affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Certificateholders of such Class; provided, however, that no such amendment shall (i) reduce in any manner the amount of, or delay the timing of, payments required to be distributed on any such Certificate without he consent of the Holder of such Certificate, (ii) adversely affect in any material respect the interests of the Holders of any Class of Certificates in a manner other than as described in clause (i), without the consent of the Holders of Certificates of such Class evidencing not less than 66 2/3% of the then outstanding aggregate principal amount or notional amount, as applicable, of such Class or (iii) change the aforesaid percentages of Certificates the Holders of which are required to consent to any such amendment, without the consent of the Holders of all such Certificates then outstanding of the given Class. (c) Promptly after the execution of any such amendment, the Trustee shall furnish a written statement describing the substance of the amendment to each Certificateholder and each Rating Agency. It shall not be necessary for the consent of Certificateholders under this Section 8.01 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable regulations as the Trustee may prescribe. (d) Notwithstanding the foregoing, no amendment or modification to this Agreement shall be permitted unless the Trustee receives an Opinion of Counsel that such amendment or modification will not alter the status of the trust for United States federal income tax purposes. (e) The Holders of Certificates representing not less than a Majority in Interest of Certificateholders may, on behalf of all Certificateholders, waive in writing any default by the Depositor or the Trustee in the performance of its obligations hereunder and any consequences thereof, except a default by the Trustee in failing to distribute amounts received in respect of the CRB Certificates and except a default in respect of a covenant or provision the modification or amendment of which would require the consent of the Holder of each Outstanding Certificate affected thereby. Upon any such waiver of a past default, such default shall cease to exist; provided, however, that no such waiver shall extend to any subsequent or other default or impair any right consequent thereto. SECTION 8.02. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (a) The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust Property, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of the Trust Property, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. (b) No Certificateholder shall have any right to vote (except as expressly provided for herein) or in any manner otherwise control the operation and management of the Trust Property, or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as partners or members of any association; nor shall any Certificateholder be under any liability to any third party by reason of any action taken by the parties to this Agreement pursuant to any provision hereof. (c) No Certificateholder shall have any right by virtue of any provision of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless (a) the Holders of Certificates evidencing Percentage Interests aggregating not less than 25% of all the Certificates shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, (b) the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding and (c) no direction inconsistent with such written request shall have been given to the Trustee during such 60 day period by the Holders of Certificates evidencing a majority of Percentage Interests of all the Certificates. It is understood and agreed that the Trustee shall be under no obligation to make any investigation of matters arising under this Agreement or to institute conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any Certificateholders unless such Certificateholders have offered to the Trustee the reasonable indemnity referred to above. It is further understood and agreed, and expressly covenanted by each Certificateholder with every other Certificateholder and the Trustee, that no one or more Holders of Certificates shall have any right in any manner whatever by virtue of any provision of this Agreement to affect, disturb or prejudice the rights of the Holders of any other Certificates, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Agreement, except in the manner herein provided. For the protection and enforcement of the provisions of this Section, each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 8.03. GOVERNING LAW. This Agreement and the Certificates shall be construed in accordance with the laws of the State of New York without reference to such state's principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. SECTION 8.04. NOTICES. All demands, notices and directions hereunder shall be in writing and shall be deemed effective upon receipt if personally delivered at or mailed by registered or first class mail, postage prepaid, by express delivery service or by telecopy when confirmed in writing, to: (a) in the case of the Depositor, ACE Securities Corp. 6525 Morrison Boulevard Suite 318 Charlotte, North Carolina 28211 Attention: [ ] (b)in the case of the Trustee, --------------------------- --------------------------- Attention: _______________________ or, in each case, such other address as may hereafter be furnished by any party to the others. Any notice required or permitted to be mailed to a Certificateholder shall be given by first class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. SECTION 8.05. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the rights of the Holders thereof. SECTION 8.06. NOTICE TO EACH RATING AGENCY. The Trustee shall use its best efforts promptly to provide notice to each Rating Agency with respect to each of the following of which it has actual knowledge: (i) any material change or amendment to this Agreement; (ii) the resignation or termination of the Trustee; (iii) the final payment to Holders of the Certificates; and (iv) any change in the location of the Certificate Account. In addition, the Trustee shall promptly furnish to each Rating Agency copies of each report to Certificateholders described in Section 3.07. Any such notice pursuant to this Section shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by first class mail, postage prepaid, or by express delivery service to each Rating Agency at the address provided to the Trustee from time to time. SECTION 8.07. NO PETITION. Each of the Trustee and the Depositor, by entering into this Agreement, and each Certificateholder, by accepting a Certificate, hereby covenant and agree that they will not at any time institute against the Trust, or join in any institution against the Trust of, any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Certificates, or this Agreement. The Trustee covenants and agrees that it will have secured a written acknowledgement (which need not be a separate document) from any Person proposing to provide any service by such Person, that such Person will not at any time institute against the Trust, or join in any institution against the Trust of, any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with the provision of such service. SECTION 8.08. NO RECOURSE. Each Certificateholder by accepting a Certificate acknowledges that such Certificateholder's Certificates represent beneficial interests in the Trust only and do not represent interests in or obligations of the Depositor, the Trustee, or any Affiliate, employee or agent of the foregoing Persons and no recourse may be had against such Persons or their respective assets, except as may be expressly set forth in this Agreement or the Certificates. SECTION 8.09. GRANT OF SECURITY INTEREST. It is the express intent of the parties to this Agreement that the conveyance of the CRB Certificates by the Depositor to the Trustee be, and be construed as, a sale of the CRB Certificates by the Depositor and not a pledge of any CRB Certificates by the Depositor to secure a debt or other obligation of the Depositor. However, in the event that, notwithstanding the aforementioned intent of the parties, any CRB Certificates are held to be property of the Depositor, then, (a) it is the express intent of the parties that such conveyance be deemed a pledge of such CRB Certificates by the Depositor to the Trustee to secure a debt or other obligation of the Depositor and (b)(1) this Agreement shall also be deemed to be a security agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code as in effect from time to time in the State of New York; (2) the conveyance provided for in Section 2.01 shall be deemed to be a grant by the Depositor to the Trustee of a security interest in all the Depositor's right, title and interest in and to such CRB Certificates and all amounts payable to the holders of such CRB Certificates in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including all amounts from time to time held or invested in the Certificate Account, whether in the form of cash, instruments, securities or other property; (3) the obligations secured by such security agreement shall be deemed to be all the Depositor's obligations under this Agreement, including the obligation to provide to the Certificateholders the benefits of this Agreement; and (4) notifications to persons holding such property, and acknowledgements, receipts or confirmations from persons holding such property, shall be deemed notifications to, or acknowledgements, receipts or confirmation from, financial intermediaries, bailees or agents (as applicable) of the Trustee for the purpose of perfecting such security interest under applicable law. Accordingly, the Depositor hereby grants to the Trustee a security interest in the CRB Certificates and all other property described in clause (2) of the immediately preceding sentence for the purpose of securing to the Trustee the performance by the Depositor of the obligations described in clause (3) of the immediately preceding sentence. Notwithstanding the foregoing, the parties to this Agreement intend the transfer pursuant to Section 2.01 to be true, absolute and unconditional sale of the CRB Certificates and assets constituting the Trust Property by the Depositor to the Trustee. The depositor and the Trustee shall to the extent consistent with this Agreement take such actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the CRB Certificates, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such for so long as any of the CRB Certificates remain outstanding. Without limiting the generality of the foregoing, the Trustee shall file, or shall cause to be filed, all filings necessary to maintain the effectiveness of any original filings necessary under the Uniform Commercial Code as in effect in any jurisdiction to perfect the Trustee's security interest in or lien on the CRB Certificates, including (x) continuation statements and (y) such other statements as may be occasioned by (A) any change of name of the Depositor or the Trustee, (B) any change of location of the place of business or the chief executive office of the Depositor or (C) any transfer of any interest of the Depositor in any CRB Certificate. SECTION 8.10. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto, and all such provisions shall inure to the benefit of the Certificate holders. SECTION 8.11. ARTICLE AND SECTION HEADINGS. The article and section headings herein are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. SECTION 8.12. CERTIFICATES NONASSESSABLE AND FULLY PAID. It is the intention of this Agreement that Certificateholders shall not be personally liable for obligations of the Trust Property, that the beneficial ownership interests represented by the Certificates shall be nonassessable for any losses or expenses of the Trust Property or for any reason whatsoever, and that Certificates, upon execution, authentication and delivery thereof by the Trustee pursuant to Section 2.04, are and shall be deemed fully paid. IN WITNESS WHEREOF, the Depositor and the Trustee have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written. ACE SECURITIES CORP., as Depositor by ____________________________ Name: Title: [TRUSTEE NAME], not in its individual capacity but solely as Trustee by _____________________________ Name: Title: EXHIBIT A NUMBER $ R- CUSIP NO. SEE REVERSE FOR CERTAIN DEFINITIONS UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE PRINCIPAL BALANCE OF THIS CERTIFICATE IS DISTRIBUTABLE IN INSTALLMENTS AS SET FORTH IN THE TRUST AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND IS NOT GUARANTEED BY THE DEPOSITOR OR THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THIS CERTIFICATE, THE CRB CERTIFICATES OR THE UNDERLYING ACCOUNTS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON. THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT PLAN. CARD ACCOUNT TRUST, SERIES [ ] [CLASS [A]] [ %] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE] ASSET BACKED CERTIFICATE evidencing a fractional undivided beneficial ownership interest in the Trust, as defined below, the property of which included certain CRB Certificates created pursuant to a Pooling and Servicing Agreement dated as of [], among [ ], as seller, [ ], as servicer, and [ ], as trustee, and distributions thereon, deposited in trust by ACE Securities Corp. (the "Depositor"). THIS CERTIFIES THAT [ ] is the registered owner of [ ] DOLLARS nonassessable, fullypaid, fractional undivided interest in Card Account Trust, Series [ ] formed by the Depositor. The [Class [A]] Certificates have a passthrough rate of [[ %] per annum] [insert interest rate formula]. TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the [Class [A]] Certificates described in the Trust Agreement referred to herein. [TRUSTEE NAME], not in its individual ______________________________ capacity but solely as Trustee, ______________________________ or or as Authenticating Agent for the Trustee, by ____________________________ by ____________________________ Authorized Officer Authorized Officer The Trust was created pursuant to a Trust Agreement dated as of [ ] (the "Trust Agreement"), between the Depositor and [ ], a [ ] banking corporation, not in its individual capacity but solely as Trustee (the "Trustee"). Reference is hereby made to the Trust Agreement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby and the rights, duties and obligations of the Trustee with respect hereto. A copy of the Trust Agreement may be obtained from the Trustee by written request sent to the Corporate Trust Office. Capitalized terms used but not defined herein have the meanings assigned to them in the Trust Agreement. This Certificate is one of the duly authorized Certificates designated as "[Class [A]] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Certificates" (herein called the "Certificates") pursuant to the Trust Agreement. The Trust is also issuing [Class [B]] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Certificates (the "[Class [B]] Certificates"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which the acceptance hereof assents and by which such Holder is bound. The Trust Property consists of: (i) certain CRB Certificates described in the Trust Agreement; (ii) all distributions thereon on and after the Cutoff Date; and (iii) the Certificate Account and such assets that are deposited therein from time to time and any investments thereof, together with any and all income, proceeds and payments with respect thereto. Pursuant to the terms of the Trust Agreement, distributions will be made on each Distribution Date, commencing on [ ], to the Person in whose name this Certificate is registered on the applicable Record Date, in an amount equal to such Certificateholder's fractional undivided interest in the amount required to be distributed to the Holders of the [Class [A]] Certificates on such Distribution Date. The Record Date applicable to any Distribution Date is the close of business on the day immediately preceding such Distribution Date (or, in the event Definitive Certificates are issued, the last day of the month preceding the month in which such Distribution Date occurs). Each Certificateholder, by its acceptance of a Certificate, covenants and agrees that such Certificateholder will not at any time institute against the Trust, or join in any institution against the Trust of, any bankruptcy proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Certificates or the Trust Agreement. Distributions made on this Certificate will be made as provided in the Trust Agreement by the Trustee by wire transfer in immediately available funds, or check mailed to the Certificateholder of record in the Certificate Register without the presentation or surrender of this Certificate or the making of any notation hereon, except that with respect to Certificates registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee shall be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Except as otherwise provided in the Trust Agreement and notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the Corporate Trust Office or such other location as may be specified in such notice. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or be valid for any purpose. THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed as of the date set forth below. CARD ACCOUNT TRUST, SERIES [ ], by [TRUSTEE NAME], not in its individual capacity but solely as Trustee by: ___________________________ Authorized Officer Dated: (REVERSE OF TRUST CERTIFICATE) The Certificates are limited in right of distribution to certain collections and recoveries respecting the CRB Certificates, all as more specifically set forth herein and in the Trust Agreement. The registered Holder hereof, by its acceptance hereof, agrees that it will look solely to the Trust Property (to the extent of its rights therein) for distributions hereunder. As provided in the Trust Agreement, withdrawals from the Certificate Account may be made from time to time for purposes other than, and, in certain cases, prior to, distributions to Certificateholders, such purposes including reimbursement of certain expenses incurred with respect to the Trust Property. The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor and the Trustee and the rights of the Certificateholders under the Trust Agreement at any time by the Depositor and the Trustee with the consent of the Holders of Certificates evidencing at least 66 2/3% of the then outstanding aggregate principal amount subject to certain provisions set forth in the Trust Agreement. Any such consent by the Holder of this Certificate (or any predecessor Certificate) shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Trust Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. The [Class [A]] Certificates are issuable in fully registered form only in minimum original principal amounts of $1,000 and integral multiples thereof. As provided in the Trust Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same principal amount, class, original issue date and maturity, in authorized denominations as requested by the Holder surrendering the same. As provided in the Trust Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies of the Certificate Registrar maintained by the Trustee in the Borough of Manhattan, the City of New York, duly endorsed by or accompanied by an assignment in the form below and by such other documents as required by the Trust Agreement, and thereupon one or more new Certificates of the same class in authorized denominations evidencing the same principal amount will be issued to the designated transferee or transferees. The initial Certificate Registrar appointed under the Trust Agreement is [ ], New York, New York. No service charge will be made for any registration of transfer or exchange, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor and the Trustee and any agent of the Depositor or the Trustee may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Depositor, the Trustee, nor any such agent shall be affected by any notice to the contrary. The Trust and the obligations of the Depositor and the Trustee created by the Trust Agreement with respect to the Certificates shall terminate upon distribution (or provision for distribution) to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be distributed to them pursuant to the Trust Agreement following the earlier to occur of (i) the final distribution by the Trustee of all moneys or other property or proceeds of the Trust Property in accordance with the terms of the Trust Agreement and (ii) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James, living on the date hereof. The Depositor may at its option purchase the outstanding CRB Certificates at a price specified in the Trust Agreement, and such purchase of the CRB Certificates will effect early retirement of the Certificates; however, the Depositor may exercise such right of purchase only as of a Distribution Date as of which the then outstanding Aggregate Collateral Balance is [5%] or less of the Aggregate Collateral Balance as of the Cutoff Date. The Certificates may not be acquired by or for the account of (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(i) of the Code or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity (each, a "Benefit Plan"). By acquiring and holding this Certificate, the Holder hereof shall be deemed to have represented and warranted that it is not a Benefit Plan. ASSIGNMENT FOR VALUE RECEIVED the Undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ------------------------------------------------------------------------------ Please print or type name and address, including postal zip code, or assignee) - ------------------------------------------------------------------------------ the within Trust Certificate, and all rights thereunder, hereby irrevocably constituting and appointing ________________________________________________________________ Attorney to transfer said Trust Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated: _____________________________* Signature Guaranteed: _____________________________* * NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Trust Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. EXHIBIT B NUMBER $ R- CUSIP NO. SEE REVERSE FOR CERTAIN DEFINITIONS UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE PRINCIPAL BALANCE OF THIS CERTIFICATE IS DISTRIBUTABLE IN INSTALLMENTS AS SET FORTH IN THE TRUST AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND IS NOT GUARANTEED BY THE DEPOSITOR OR THE TRUSTEE OF ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THIS CERTIFICATE, THE CRB CERTIFICATES OR THE UNDERLYING ACCOUNTS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON. THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT PLAN. CARD ACCOUNT TRUST, SERIES [ ] [CLASS [B]] [ %] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE] ASSET BACKED CERTIFICATE evidencing a fractional undivided beneficial ownership interest in the Trust, as defined below, the property of which included certain CRB Certificates created pursuant to a Pooling and Servicing Agreement dated as of [ ], among [ ], as seller, [ ], as servicer, and [ ], as trustee, and distributions thereon, deposited in trust by ACE Securities Corp. (the "Depositor"). THIS CERTIFIES THAT [ ] is the registered owner of [ ] DOLLARS nonassessable, fully paid, fractional undivided interest in Card Account Trust, Series [ ] formed by the Depositor. The [Class [A]] Certificates have a passthrough rate of [[ %] per annum] [insert interest rate formula]. TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the [Class [B]] Certificates described in the Trust Agreement referred to herein. [TRUSTEE NAME], not in its individual ______________________________ capacity buy solely as Trustee, ______________________________ or as Authenticating Agent for the Trustee, by: by: -------------------------- -------------------------- Authorized Officer Authorized Officer The Trust was created pursuant to a Trust Agreement dated as of [ ] (the "Trust Agreement"), between the Depositor and [ ], a [ ] banking corporation, not in its individual capacity but solely as Trustee (the "Trustee"). Reference is hereby made to the Trust Agreement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby and the rights, duties and obligations of the Trustee with respect hereto. A copy of the Trust Agreement may be obtained from the Trustee by written request sent to the Corporate Trust Office. Capitalized terms used but not defined herein have the meanings assigned to them in the Trust Agreement. This Certificate is one of the duly authorized Certificates designated as "[Class [B]] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Certificates" (herein called the "Certificates"). The Trust is also issuing [Class [A]] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Certificates (the "[Class [A]] Certificate") pursuant to the Trust Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which Trust Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. The Trust Property consists of:(i) certain CRB Certificates described in the Trust Agreement; (ii) all distributions thereon on and after the Cutoff Date; and (iii) the Certificate Account and such assets that are deposited therein from time to time and any investments thereof, together with any and all income, proceeds and payments with respect thereto. Pursuant to the terms of the Trust Agreement, distributions will be made on each Distribution Date, commencing on [ ], to the Person in whose name this Certificate is registered on the applicable Record Date, in an amount equal to such Certificateholder's fractional undivided interest in the amount required to be distributed to the Holders of the [Class [B]] Certificates on such Distribution Date. The Record Date applicable to any Distribution Date is the close of business on the day immediately preceding such Distribution Date (or, in the event Definitive Certificates are issued, the last day of the month preceding the month in which such Distribution Date occurs). Each Certificateholder, by its acceptance of a Certificate, covenants and agrees that such Certificateholder will not at any time institute against the Trust, or join in any institution against the Trust of, any bankruptcy proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Certificates or the Trust Agreement. Distributions made on this Certificate will be made as provided in the Trust Agreement by the Trustee by wire transfer in immediately available funds, or check mailed to the Certificateholder of record in the Certificate Register without the presentation or surrender of this Certificate or the making of any notation hereon, except that with respect to Certificates registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee shall be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Except as otherwise provided in the Trust Agreement and notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the Corporate Trust Office or such other location as may be specified in such notice. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or be valid for any purpose. THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed as of the date set forth below. CARD ACCOUNT TRUST, SERIES [ ], by [TRUSTEE NAME], not in its individual capacity but solely as Trustee, by: ________________________ Authorized Officer Dated: (REVERSE OF TRUST CERTIFICATE) The Certificates are limited in right of distribution to certain collections and recoveries respecting the CRB Certificates, all as more specifically set forth herein and in the Trust Agreement. The registered Holder hereof, by its acceptance hereof, agrees that it will look solely to the Trust Property (to the extent of its rights therein) for distributions hereunder. As provided in the Trust Agreement, withdrawals from the Certificate Account may be made from time to time for purposes other than, and, in certain cases, prior to, distributions to Certificateholders, such purposes including reimbursement of certain expenses incurred with respect to the Trust Property. The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor and the Trustee and the rights of the Certificateholders under the Trust Agreement at any time by the Depositor and the trustee with the consent of the Holders of Certificates evidencing at least 66 2/3% of then outstanding aggregate notional amount subject to certain provisions set forth in the Trust Agreement. Any such consent by the Holder of this Certificate (or any predecessor Certificate) shall be conclusive and binding on such Holder and upon all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Trust Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. The [Class [B]] Certificates are issuable in fully registered form only in minimum original notional amounts of $1,000 and integral multiples thereof. As provided in the Trust Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same notional amount, class, original issue date and maturity, in authorized denominations as requested by the Holder surrendering the same. As provided in the Trust Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies of the Certificate Registrar maintained by the Trustee in the Borough of Manhattan, the City of New York, duly endorsed by or accompanied by an assignment in the form below and by such other documents as required by the Trust Agreement, and thereupon one or more new Certificates of the same class in authorized denominations evidencing the same notional amount will be issued to the designated transferee or transferees. The initial Certificate Registrar appointed under the Trust Agreement is [ ], New York, New York. No service charge will be made for any registration of transfer or exchange, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. The Depositor and the Trustee and any agent of the Depositor or the Trustee may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Depositor, the Trustee, nor any such agent shall be affected by any notice to the contrary. The Trust and the obligations of the Depositor and the Trustee created by the Trust Agreement with respect to the Certificates shall terminate upon distribution (or provision for distribution) to the Certificateholders of all amounts held by or on behalf of the Trustee and required to be distributed to them pursuant to the Trust Agreement following the earlier to occur of (i) the final distribution by the Trustee of all moneys or other property or proceeds of the Trust Property in accordance with the terms of the Trust Agreement and (ii) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James, living on the date hereof. The Depositor may at its option purchase the outstanding CRB Certificates at a price specified in the Trust Agreement, and such purchase of the CRB Certificates will effect early retirement of the Certificates; however, the Depositor may exercise such right of purchase only as of a Distribution Date as of which the then outstanding Aggregate Collateral Balance is [5%] or less of the Aggregate Collateral Balance as of the Cutoff Date. The Certificates may not be acquired by or for the account of (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(i) of the Code or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity (each, a "Benefit Plan"). By acquiring and holding this Certificate, the Holder hereof shall be deemed to have represented and warranted that it is not a Benefit Plan. ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ------------------------------------------------------------------------------ (Please print or type name and address, including postal zip code, of assignee) - ------------------------------------------------------------------------------ the within Trust Certificate, and all rights thereunder, hereby irrevocably constituting and appointing ________________________________________________________ Attorney to transfer said Trust Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated: ______________________________* Signature Guaranteed: ______________________________* * NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Trust Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. EXHIBIT C CRB CERTIFICATE SCHEDULE [To come] EXHIBIT D POOLING AND SERVICING AGREEMENT [To come] EXHIBIT E FORM OF DEPOSITORY AGREEMENT [To come] EX-5.1 17 0017.txt EXHIBIT 5.1 Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, New York 10038-4982 [ ] ACE Securities Corp. 6525 Morrison Boulevard Suite 318 Charlotte, North Carolina 28211 Gentlemen: We have acted as special counsel to ACE Securities Corp. (the "Company") in connection with the preparation of a registration statement on Form S-3 (the "Registration Statement") relating to the proposed offering from time to time in one or more series (each, a "Series") by one or more trusts of Asset-Backed Certificates (the "Certificates") and Asset-Backed Notes (the "Notes" and together with the Certificates, the "Securities"). The Registration Statement has been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"). As set forth in the Registration Statement, each Series of Securities is to be issued under and pursuant to the terms of a separate pooling and servicing agreement, or sale and servicing agreement, trust agreement and indenture (each, an "Agreement") among the Company, as depositor, the servicer and an independent trustee (the "Trustee") to be identified in the prospectus supplement for each Series of Securities. As such counsel, we have examined copies of the Certificate of Incorporation and By-Laws of the Company, the Registration Statement, each base Prospectus and forms of Prospectus Supplement included therein, the form of each Agreement, and originals or copies of such other corporate minutes, records, agreements and other instruments of the Company, certificates of public officials and other documents and have made such examinations of law, as we have deemed necessary to form the basis for the opinions hereinafter expressed. In our examination of such materials, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all copies submitted to us. As to various questions of fact material to such opinions, we have relied, to the extent we deemed appropriate, upon representations, statements and certificates of officers and representatives of the Company and others. Attorneys involved in the preparation of this opinion are admitted to practice law in the State of New York and we do not express any opinion herein concerning any law other than the federal laws of the United States of America, the laws of the State of New York and the General Corporation Law of the State of Delaware. Based upon and subject to the foregoing, we are of the opinion that: 1. When the issuance, execution and delivery of each Series of Notes has been authorized by all necessary corporate action of the Company in accordance with the provisions of the related Agreement or Agreements, and when such Notes have been duly executed and delivered, authenticated by the Trustee and sold as described in the Registration Statement, assuming that the terms of such Notes are otherwise in compliance with applicable law at such time, such Notes will constitute binding obligations of the issuer thereof in accordance with their terms and the terms of such Agreement or Agreements. This opinion is subject to the effect of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws relating to or affecting creditors' rights generally and court decisions with respect thereto and we express no opinion with respect to the application of equitable principles or remedies in any proceeding, whether at law or in equity. 2. When the issuance, execution and delivery of each Series of Certificates has been authorized by all necessary corporate action of the Company in accordance with the provisions of the related Agreement or Agreements, and when such Certificates have been duly executed and delivered, authenticated by the Trustee and sold as described in the Registration Statement, assuming that the terms of such Certificates are otherwise in compliance with applicable law at such time, such Certificates will be legally issued, fully paid and non-assessable. 3. The statements set forth in a base Prospectus under the heading "Certain Income Tax Consequences," "Material Federal Income Tax Consequences," and "Tax Matters," to the extent they constitute matters of law or legal conclusions with respect thereto, are correct in all material respects. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, to the references to this firm in the Prospectus and the related Prospectus Supplement which forms a part of the Registration Statement and to the filing of this opinion as an exhibit to any application made by or on behalf of the Company or any dealer in connection with the registration of the Securities under the securities or blue sky laws of any state or jurisdiction. In giving such consent, we do not admit hereby that we come within the category of persons whose consent is required under Section 7 of the Act or the Rules and Regulations of the Commission thereunder. Very truly yours, /s/ Stroock & Stroock & Lavan LLP STROOCK & STROOCK & LAVAN LLP EX-10.1.1 18 0018.txt Exhibit 10.1.1 LOAN CONTRIBUTION AGREEMENT, among [---------------------------] and [-----------------] as Contributors, [-----------------] as Sponsor and ACE SECURITIES CORP. Dated as of [_______________] TABLE OF CONTENTS ARTICLE I CERTAIN DEFINITIONS ARTICLE II CONTRIBUTION OF RECEIVABLES
2.1. Contribution of Receivables...............................................................................3 2.2. The Closing...............................................................................................4 ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1. Representations and Warranties of the Company.............................................................4 3.2. Representations and Warranties of each Contributor........................................................6 ARTICLE IV CONDITIONS 4.1. Conditions to Obligation of the Company..................................................................13 4.2. Conditions to Obligation of the Contributors.............................................................14 ARTICLE V COVENANTS OF THE CONTRIBUTORS 5.1. Protection of Right, Title and Interest..................................................................15 5.2. Other Liens or Interests.................................................................................17 5.3. Chief Executive Office...................................................................................16 5.4. Costs and Expenses.......................................................................................16 5.5. Delivery of Receivable Files.............................................................................16 5.6. Indemnification..........................................................................................17 5.7. Sale.....................................................................................................17 5.8. No Petition..............................................................................................17 5.9. Collected Funds..........................................................................................17 ARTICLE VI MISCELLANEOUS PROVISIONS 6.1. Obligations of Contributors..............................................................................18 6.2. Repurchase Events........................................................................................18 6.3. Assignment of Contributed Receivables....................................................................18 6.4. [Reserved]...............................................................................................18 6.5. Trust....................................................................................................18 6.6. Amendment................................................................................................19 6.7. Accountants' Letters.....................................................................................20 6.8. Waivers..................................................................................................21 6.9. Notices..................................................................................................20 6.10. Costs and Expenses.......................................................................................20 6.11. Representations of the Contributors and the Company......................................................21 6.12. Confidential Information.................................................................................21 6.13. Headings and Cross-References............................................................................21 6.14. Third Party Beneficiaries................................................................................21 6.15. Governing Law............................................................................................22 6.16. Counterparts.............................................................................................22
EXHIBITS Exhibit A Schedule of Receivables Exhibit B Location of Receivables LOAN CONTRIBUTION AGREEMENT, dated as of [______________], by and among [________________], a [__________] corporation and [_________], a [________] corporation, having its principal executive offices at [________], a "CONTRIBUTOR"), ACE SECURITIES CORP., a [_______] corporation (the "COMPANY"), having its principal executive office at 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211 and [___________] as sponsor (the "Sponsor"). WHEREAS, in the regular course of each Contributor's business, such Contributor purchases from motor vehicle dealers or otherwise originates certain motor vehicle retail installment sale contracts secured by new and used automobiles (including passenger cars, sport/utility vehicles, light trucks and minivans). WHEREAS, each Contributor and the Company wish to set forth the terms pursuant to which the Receivables (as hereinafter defined), are to be contributed by such Contributor to the Company, which Receivables will be transferred by the Company, pursuant to the Sale and Servicing Agreement (as hereinafter defined) to the [_____________] (the "TRUST") to be created thereunder, which Trust will issue notes (the "NOTES") and certificates (the "CERTIFICATES") representing beneficial ownership interests in such Receivables and the other property of the Trust. NOW, THEREFORE, in consideration of the foregoing, other good and valuable consideration, and the mutual terms and covenants contained herein, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINITIONS Terms not defined in this Agreement shall have the meaning set forth in the Sale and Servicing Agreement. As used in this Agreement, the following terms shall, unless the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms of the terms defined): "AGREEMENT" shall mean this Loan Contribution Agreement and all amendments and supplements hereof. "CERTIFICATES" shall have the meaning assigned to such term in the PREAMBLE. "CLOSING DATE" shall mean [_____________]. "COMPANY" shall have the meaning assigned to such term in the PREAMBLE. "CONTRIBUTION EXCHANGE" shall mean 1,000 shares of common stock of the Company. "CONTRIBUTOR" shall have the meaning assigned to such term in the PREAMBLE. "CUTOFF DATE" shall mean [________________]. "DISTRIBUTION DATE" shall mean, for each Collection Period, the 15th day of the following month or, if such 15th day is not a Business Day, the next succeeding Business Day. "INDENTURE" shall mean the Indenture dated as of [________________] between the Trust and [________________], as trustee. "NOTES" shall have the meaning assigned to said term in the PREAMBLE. "PRELIMINARY PROSPECTUS" shall have the meaning assigned to such term in the Underwriting Agreement. "PROSPECTUS" shall have the meaning assigned to such term in the Underwriting Agreement. "PURCHASE EVENT" shall have the meaning specified in Section 6.2 hereof. "RECEIVABLE" shall mean each motor vehicle retail installment sale contract for a Financed Vehicle which shall appear on the Schedule of Receivables. "RELATING TO" shall mean with respect to any Receivable and any Contributor, any Receivable transferred or assigned, or to be transferred or assigned by such Contributor. "RESERVE ACCOUNT INITIAL DEPOSIT" equals $[________________]. "SALE AND SERVICING AGREEMENT" shall mean the Sale and Servicing Agreement dated as of [________________], among Ace Securities Corp., as depositor, [________________], as servicer and sponsor and the Trust. "SCHEDULE OF RECEIVABLES" shall mean the list of Receivables annexed hereto as Exhibit A. "SERVICER" shall mean [________________], in its capacity as Servicer of the Receivables, its successors and assigns. "SPONSOR" shall have the meaning assigned to such term in the PREAMBLE. "TRUST" shall mean the [________________] created by the Trust Agreement. "TRUST PROPERTY" shall have the meaning specified in Section 2.1 hereof. "UCC" shall mean the Uniform Commercial Code, as in effect from time to time in the relevant jurisdictions. "UNDERWRITING AGREEMENT" shall mean the Underwriting Agreement dated [________________], among [________________], as representative of the several underwriters specified therein, the Company and the Sponsor. ARTICLE II CONTRIBUTION OF RECEIVABLES 2.1. CONTRIBUTION OF RECEIVABLES. On the Closing Date, subject to the terms and conditions of this Agreement, each Contributor agrees to contribute to the Company, and the Company agrees to acquire from each Contributor, the Receivables owned by such Contributor immediately prior to the Closing Date and the other Trust Property relating thereto. (a) TRANSFER OF RECEIVABLES. On the Closing Date and simultaneously with the transactions to be consummated on the Closing Date pursuant to the Sale and Servicing Agreement, each Contributor shall contribute, transfer, assign, grant, set over and otherwise convey to the Company, without recourse (subject to the obligations herein), whether now or hereafter acquired: (i) all right, title and interest of such Contributor in and to the Receivables owned by it immediately prior to the Closing Date and listed in Exhibit A hereto and all monies received thereon (other than any proceeds from any Dealer commission) on or after the Cutoff Date and, with respect to Receivables which are Actuarial Receivables, all monies received thereon prior to the Cutoff Date that are due on or after the Cutoff Date; (ii) all right, title and interest of such Contributor in and to its security interests in the Financed Vehicles granted by Obligors pursuant to the Receivables contributed by it and any other interest of such Contributor in such Financed Vehicles; (iii) all right, title and interest of such Contributor in and to any proceeds from claims on any physical damage, repossession loss, skip, credit life and credit accident, vendor's single interest and health insurance policies or certificates relating to the Financed Vehicles or the Obligors; (iv) all right, title and interest of such Contributor in and to refunds for the costs of extended service contracts with respect to Financed Vehicles, refunds of unearned premiums with respect to credit life and credit accident and health insurance policies or certificates covering an Obligor or Financed Vehicle or his or her obligations with respect to a Financed Vehicle and any recourse to Dealers for any of the foregoing; (v) the interest of such Contributor in any proceeds from any Receivable repurchased by a Dealer, pursuant to a Dealer Agreement, as a result of a breach of representation or warranty in the related Dealer Agreement or a default by an Obligor resulting in the repossession of the Financed Vehicle under such Dealer Agreement; and (vi) the proceeds of any and all of the foregoing (collectively, the "TRUST Property"). It is the intention of the parties hereto that the transfer and assignment contemplated by this Agreement shall constitute a contribution of the Receivables and the other Trust Property from the Contributors to the Company, conveying good title thereto free and clear of any Liens (however the parties hereto understand that the Lien of the applicable Contributor will be noted on the certificate of title to the Financed Vehicles), and the Receivables and the other Trust Property shall not be part of any Contributor's estate in the event of the filing of a bankruptcy petition by or against such Contributor under any bankruptcy or similar law. In the event that, notwithstanding the intent of the Contributors, the transaction and assignment contemplated hereby is held not to be a contribution, this Agreement shall constitute a grant of a security interest in the property referred to in this Section 2.1 for the benefit of the Company. 2.2. THE CLOSING. The contribution of the Receivables shall take place at a closing (the "CLOSING") at the offices of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038 on the Closing Date, simultaneously with the closings under: (a) the Sale and Servicing Agreement pursuant to which (i) the Company will assign all of its right, title and interest in and to the Receivables and the other Trust Property to the Trust for the benefit of the Noteholders and Certificateholders and (ii) the Trust will issue and deliver to the Company in exchange for the Receivables and the other Trust Property, the Notes and the Certificates (b) the Underwriting Agreement pursuant to which the Company shall sell the Notes to the Underwriters. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to each Contributor as of the date hereof and as of the Closing Date: (a) ORGANIZATION AND GOOD STANDING. The Company is duly organized and is validly existing as a corporation in good standing under the laws of the State of [________________], with corporate power and authority to own its properties and to conduct its business as such properties shall be currently owned and such business is presently conducted, and had at all relevant times, and shall have, power, authority and legal right to acquire and own the Receivables. (b) DUE QUALIFICATION. The Company is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications where failure to do so would have a material adverse effect on its business, the transaction contemplated by this Agreement or the Receivables. (c) POWER AND AUTHORITY. The Company has the corporate power and authority to execute and deliver this Agreement and to carry out its terms and the execution, delivery and performance of this Agreement has been duly authorized by the Company by all necessary corporate action. (d) BINDING OBLIGATION. This Agreement shall constitute a legal, valid and binding obligation of the Company enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and similar laws now or hereafter in effect relating to creditors' rights generally and subject to general principles of equity (whether applied in a proceeding at law or in equity). (e) NO VIOLATION. The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not result in any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the certificate of incorporation, as amended, or by-laws of the Company, or any indenture, agreement, or other instrument to which the Company is a party or by which it is bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any indenture, agreement, or other instrument (other than the Sale and Servicing Agreement); nor violate any law, order, rule or regulation applicable to the Company of any court or of any Federal or State regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Company or its properties. (f) NO PROCEEDINGS. There are no proceedings or investigations pending, or to the Company's best knowledge, threatened against the Company, before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Company or its properties: (A) asserting the invalidity of this Agreement, the Notes or the Certificates; (B) seeking to prevent the issuance of the Notes or the Certificates or the consummation of any of the transactions contemplated by this Agreement; (C) seeking any determination or ruling that might materially and adversely affect the performance by the Company of its obligations under, or the validity or enforceability of, this Agreement, the Notes or the Certificates; or (b) seeking to affect adversely the Federal or state income tax or ERISA attributes of the Trust, the Noteholders or the Certificateholders. (g) ALL CONSENTS. All authorizations, licenses, consents, orders or approvals of or registrations or declarations with any court, regulatory body, administrative agency or other government instrumentality required to be obtained, effected or given by the Company in connection with the execution and delivery by the Company of this Agreement and the performance by the Company of the transactions contemplated by this Agreement, have been duly obtained, effected or given and are in full force and effect, except where failure to obtain the same would not have a material adverse effect upon the rights of the Issuer, the Noteholders or the Certificateholders. (h) INSOLVENCY. The Company is not insolvent, will not be made insolvent after giving effect to the conveyance set forth in Article II of this Agreement and is not aware of any pending insolvency of the Company. 3.2 REPRESENTATIONS AND WARRANTIES OF EACH CONTRIBUTOR; REPRESENTATIONS AND WARRANTIES OF THE SPONSOR. (a) Each Contributor hereby severally represents and warrants to the Company as of the date hereof and as of the Closing Date: (i) ORGANIZATION AND GOOD STANDING. Such Contributor is duly organized and is validly existing as a corporation in good standing under the laws of the state of its incorporation designated in the preamble hereof, with corporate power and authority to own its properties and to conduct its business as such properties shall be currently owned and such business is presently conducted and had at all relevant times, and shall have, power, authority and legal right to acquire, own and contribute the Receivables. (ii) DUE QUALIFICATION. Such Contributor is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications where the failure to do so would have a material adverse effect on its business or the transaction contemplated in this Agreement. (iii) POWER AND AUTHORITY. Such Contributor has the corporate power and authority to execute and deliver this Agreement and to carry out its terms; such Contributor has full power and authority to contribute and assign the property contributed and assigned to the Company and has duly authorized such contribution and assignment to the Company by all necessary corporate action; and the execution, delivery and performance of this Agreement has been duly authorized by such Contributor by all necessary corporate action. (iv) VALID CONTRIBUTION; BINDING OBLIGATION. This Agreement effects a valid contribution, transfer and assignment of the Receivables and the other Trust Property conveyed by such Contributor to the Company pursuant to Section 2.1, enforceable against creditors of and purchasers from such Contributor; and this Agreement constitutes a legal, valid and binding obligation of such Contributor enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and similar laws now or hereafter in effect relating to creditors' rights generally and subject to general principles of equity (whether applied in a proceeding at law or in equity). (v) NO VIOLATION. The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not result in any material breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the certificate of incorporation, as amended, or by-laws of such Contributor, or any indenture, agreement, or other instrument to which such Contributor is a party or by which it is bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, or other instrument (other than the Sale and Servicing Agreement); nor violate any law, order, rule or regulation applicable to such Contributor of any court or of any Federal or State regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Contributor or its properties. (vi) NO PROCEEDINGS. There are no proceedings or investigations pending, or to such Contributor's best knowledge, threatened against such Contributor, before any court, regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over such Contributor or its properties: (A) asserting the invalidity of this Agreement, the Notes or the Certificates; (B) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement; (C) seeking any determination or ruling that might materially and adversely affect the performance by such Contributor of its obligations under, or the validity or enforceability of, this Agreement, the Notes or the Certificates; or (D) seeking to adversely affect the Federal or State tax or ERISA attributes of the Trust, the Noteholders or the Certificateholders. (vii) ALL CONSENTS. All authorizations, licenses, consents, orders or approvals of or registrations or declarations with any court, regulatory body, administrative agency or other government instrumentality required to be obtained, effected or given by such Contributor in connection with the execution and delivery by such Contributor of this Agreement and the performance by such Contributor of the transactions contemplated by this Agreement, have been duly obtained, effected or given and are in full force and effect, except where failure to obtain the same would not have a material adverse effect upon the rights of the Issuer, the Noteholders or the Certificateholders. (viii) INSOLVENCY. Such Contributor is not insolvent, will not be made insolvent after giving effect to the conveyance set forth in Article II of this Agreement, and is not aware of any pending insolvency of such Contributor. (ix) SECURITY INTERESTS. The Financed Vehicles relating to such Contributor are not subject to any security interest, other than pursuant to this Agreement. (x) CHIEF EXECUTIVE OFFICES. The principal place of business and chief executive office of each Contributor is as specified in the preamble of this Agreement. (b) Each Contributor makes the following representations and warranties relating only with respect to the Receivables and the other related Trust Property conveyed by such Contributor on which the Company relies in accepting such Receivables and the other Trust Property relating thereto. Such representations and warranties speak as of the execution and delivery of this Agreement, but shall survive the contribution, transfer, and assignment of such Receivables and the other Trust Property relating thereto to the Company and the subsequent assignment and transfer thereof pursuant to the Sale and Servicing Agreement and Indenture: (i) TITLE. It is the intention of each Contributor that the transfer and assignment herein contemplated constitute a contribution of the Receivables conveyed by such Contributor to the Company pursuant to Section 2.1 and that the beneficial interest in and title to such Receivables not be part of the debtor's estate in the event of the filing of a petition for receivership by or against such Contributor. No Receivable has been transferred by such Contributor to any Person other than the Company and no Receivable is subject to any lien other than pursuant to this Agreement. Immediately prior to the transfer and assignment herein contemplated, such Contributor had good and marketable title to each Receivable, free and clear of all Liens and, immediately upon the transfer thereof, the Company shall have good and marketable title to each such Receivable, free and clear of all Liens; and the transfer of the Receivables to the Company has been perfected under the UCC. (ii) ALL FILINGS MADE. All filings (including UCC filings) necessary in any jurisdiction to give the Company a first priority perfected security interest in the Receivables, shall have been presented to the Trustee, on behalf of the Company, for filing in the appropriate filing office. Upon such filing, the Company will have a first priority protected security interest in the Trust Property. (iii) CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) has been originated by a Dealer in the regular course of such Dealer's business and purchased from such Dealer by a Contributor in the ordinary course of such Contributor's business or otherwise originated by such Contributor in the ordinary course of such Contributor's business, and each Obligor was approved in accordance with such Contributor's standard underwriting procedures in effect at the time such Receivable was originated or purchased, (B) is being conveyed by the related Contributor to the Company, (C) has created or shall create a valid, subsisting and enforceable first priority security interest in favor of the related Contributor in the related Financed Vehicle, which security interest has been assigned by such Contributor to the Company and which is assignable by the Company to the Trust and by the Trust to the Trustee, (D) contains customary and enforceable provisions under the laws of the State governing such Receivable such that the rights and remedies of the holder thereof are adequate for realization against the collateral of the benefits of the security; and (E) provides for level monthly payments that fully amortizes the Amount Financed by maturity (except for the last payment, which may be different from the level payment and except, with respect to a Balloon Loan, to the extent of the Balloon Payment). (iv) COMPLIANCE WITH LAW. Each Receivable, the sale of the Financed Vehicle and the sale of any physical damage and credit life and credit accident and health insurance and any extended service contracts complied in all material respects at the time it was originated or made and at the Closing Date (after giving effect to the transactions contemplated by the Basic Documents) complies in all material respects with all requirements of applicable Federal, state and local laws and regulations thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the Soldier's and Sailor's Civil Relief Act of 1940, state adaptations of the National Consumer Act and the Uniform Consumer Credit Code (if applicable), and other consumer credit laws and equal credit opportunity and disclosure laws. (v) BINDING OBLIGATION. Each Receivable represents the legal, valid and binding payment obligation in writing of the Obligor thereunder, enforceable by the holder thereof in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and similar laws now or hereafter in effect related to or affecting creditors' rights generally and subject to general principles of equity (whether applied in a proceeding at law or in equity) and all parties to such Receivable had full legal capacity to execute and deliver such Receivable and all other documents related thereto and to grant the security interest purported to be granted thereby. (vi) NO GOVERNMENT OBLIGOR. None of the Receivables is due from the United States of America or any State or from any agency, department or instrumentality of the United States of America or any State. (vii) SECURITY INTEREST IN FINANCED VEHICLE. Immediately prior to the contribution, assignment, and transfer thereof under the Agreement, (i) each Receivable shall be secured by a validly perfected first priority security interest in the Financed Vehicle in favor of such Contributor as secured party, or (ii) application has been made with the appropriate governmental authority for a valid perfected first priority security interest in the Financed Vehicle in favor of such Contributor, and such security interest is or shall be prior to all other Liens upon and security interests in such Financed Vehicle which now exist or may hereafter arise or be created (except, as to priority, for any tax liens or mechanics' liens which may arise after the Closing Date). (viii) RECEIVABLES IN FORCE. No Receivable has been satisfied, subordinated or rescinded, nor has any Financed Vehicle been released from the Lien granted by the related Receivable in whole or in part unless another vehicle has been substituted as collateral securing the Receivable without any other modification to such Receivable. (ix) NO WAIVER. No provision of a Receivable has been modified or waived except as reflected in the Receivable File relating to such Receivable. (x) NO AMENDMENTS. No Receivable has been amended, except as would have been permitted pursuant to Section 4.2 of the Sale and Servicing Agreement if such Receivable had been owned by the Trust. (xi) NO DEFENSES. No right of rescission, setoff, counterclaim or defense has been asserted or threatened with respect to any Receivable. The operation of the terms of any Receivable or the exercise of any right thereunder will not render such Receivable unenforceable in whole or in part or subject to any such right of rescission, setoff, counterclaim, or defense. (xii) NO LIENS. As of the Cutoff Date, there are no Liens or claims, including Liens for work, labor, materials or unpaid state or federal taxes relating to any Financed Vehicle securing the related Receivable, that are or may be prior to or equal to the Lien granted by such Receivable. (xiii) NO DEFAULT. Except for payment delinquencies continuing for a period of not more than thirty days as of the Cutoff Date and, except as permitted in this paragraph, no default, breach, violation or event (in any such case) permitting acceleration under the terms of any Receivable has occurred; and no continuing condition that with notice or the lapse of time would constitute a default, breach, violation or event (in any such case) permitting acceleration under the terms of any Receivable has arisen; and such Contributor has not waived and shall not waive any of the foregoing. (xiv) NO BANKRUPTCIES. No Obligor on any Receivable was noted in the related Receivable File as having filed for bankruptcy in a proceeding which remained undischarged as of the Cutoff Date. (xv) NO REPOSSESSIONS. As of the Cutoff Date, no Financed Vehicle securing any Receivable is in repossession status. (xvi) CHATTEL PAPER. Each Receivable constitutes "chattel paper" as defined in the UCC. (xvii) INSURANCE; OTHER. The related Contributor, in accordance with its customary procedures, has confirmed (A) that each Obligor has obtained insurance covering the Financed Vehicle as of the date of execution of the Receivable insuring against loss and damage due to fire, theft, collision and other risks generally covered by comprehensive and collision coverage and that each Receivable requires the Obligor to maintain such insurance naming the applicable Contributor and its successors and assigns as a loss payee, (B) each Receivable that finances the cost of premiums for credit life and credit accident and health insurance is covered by an insurance policy or certificate of insurance naming the applicable Contributor as loss payee (lienholder) under each such insurance policy and certificate of insurance and (C) as to each Receivable that finances the cost of an extended service contract, the respective Financed Vehicle which secures the Receivable is covered by an extended service contract. (xviii) LAWFUL ASSIGNMENT. No Receivable has been originated in, or as of the Closing Date is subject to the laws of, any jurisdiction under which the contribution, transfer and assignment of such Receivable or this Agreement or the pledge of such Receivable to the Trustee under the Indenture (i) is unlawful, void, voidable or unenforceable in accordance with its terms or (ii) would render such Receivable void, voidable or unenforceable in accordance with its terms. No Contributor has entered into any agreement with any account debtor that prohibits, restricts or conditions the assignment of all or any portion of the Receivable. (xix) NO INSURANCE PREMIUMS. As of the Cutoff Date, no portion of the principal balance of any Receivable included amounts attributable to the payment of any physical damage or theft insurance premium. (xx) ONE ORIGINAL. There is only one manually executed original copy of each Receivable. (xxi) COMPUTER RECORDS. As of the Closing Date, the accounting and computer records relating to the Receivables of such Contributor have been marked to show the absolute ownership by the Owner Trustee on behalf of the Trust of the Receivables. (c) The Sponsor makes the following representations and warranties relating to the Receivables and the other related Trust Property on which the Company relies in accepting such Receivables and the other Trust Property relating thereto. Such representations and warranties speak as of the execution and delivery of this Agreement, but shall survive the contribution, transfer, and assignment of such Receivables and the other Trust Property relating thereto to the Company and the subsequent assignment and transfer thereof pursuant to the Sale and Servicing Agreement and Indenture: (i) SCHEDULE OF RECEIVABLES. The information set forth in Exhibit A to this Agreement is true and correct in all material respects as of the close of business on the Cutoff Date and no selection procedures believed by such Contributor to be adverse to the Noteholders or the Certificateholders were utilized in selecting the Receivables. The Computer Tape regarding the Receivables is true and correct in all material respects as of the Cutoff Date. (ii) MATURITY OF RECEIVABLES. Each Receivable has an original maturity of not more than [__] months; the weighted average original maturity of the Receivables is [__] months as of the Cutoff Date; the remaining term of each Receivable is [__] months or less as of the Cutoff Date; the weighted average remaining term of the Receivables is [__] months as of the Cutoff Date; and the latest scheduled maturity of any Receivable shall be no later than the Final Scheduled Maturity Date. (iii) APR. The weighted average Annual Percentage Rate of the Receivables as of the Cutoff Date is approximately [__]%. (iv) PRINCIPAL BALANCE. Each Receivable has an outstanding principal balance as of the Cutoff Date of not less than $[______] or more than $[______]. The average principal balance of the Receivables as of the Cutoff Date is $[______]. The aggregate principal balance of the Receivables as of the Cutoff Date is $[______]. (v) FINANCING. Approximately [____]% of the aggregate principal balance of the Receivables, constituting approximately [____]% of the number of Receivables, as of the Cutoff Date, represents financing of new vehicles; the remainder of the Receivables represents financing of used vehicles. Approximately [____]% of the aggregate principal balance of the Receivables, constituting approximately [____]% of the number of Receivables, as of the Cutoff Date, represents financing of Balloon Loans. Approximately [____]% of the aggregate Principal Balance of the Receivables, constituting approximately [____]% of the number of Receivables, as of the Cutoff Date, represents financing of Simple Interest Receivables; the remainder of the Receivables represents financing of Actuarial Receivables. (vi) PAID-AHEAD. Not more than 1.0% of the aggregate Principal Balance of the Receivables is paid-ahead more than six months. (vii) ORIGINATION OF RECEIVABLES. Based on the billing address of the Obligors and the principal balance of Receivables as of the Cutoff Date, approximately [____]% of the Receivables were originated by Dealers in [_______]. Each Obligor has been approved by the Contributor based on the Contributor's standard underwriting procedures as in effect at the time the related Receivable was entered into. Based on the billing address of the Obligors and the principal balance of the Receivables as of the Cutoff Date, not more than 10% of the Receivables were originated in any one state other than [______]. ARTICLE IV CONDITIONS 4.1. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the Company to accept the contribution of the Receivables is subject to the satisfaction of the following conditions: (a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties of each Contributor and the Sponsor hereunder shall be true and correct in all material respects on the Closing Date with the same effect as if then made, and each Contributor shall have performed in all material respects all obligations to be performed by it hereunder on or prior to the Closing Date. (b) COMPUTER FILES MARKED. Each Contributor shall, at its own expense, on or prior to the Closing Date, indicate in its computer files that the Receivables have been contributed to the Company pursuant to this Agreement and will be sold to the Trust pursuant to the Sale and Servicing Agreement and shall deliver to the Company the Schedule of Receivables certified by the Chairman, the President, any Vice President or the Treasurer of such Contributor to be true, correct and complete. (c) RESERVED. (d) DOCUMENTS TO BE DELIVERED BY THE CONTRIBUTORS AT THE CLOSING. (i) EVIDENCE OF UCC FILING. On or prior to the Closing Date, each Contributor shall present to the Trustee, on behalf of the Company, for filing, at its own expense, a UCC-1 financing statement in each jurisdiction in which such filing is required by applicable law, executed by such Contributor, as transferor or debtor, and naming the Company, as transferee or secured party, naming the Receivables and the other Trust Property conveyed hereafter as collateral, meeting the requirements of the laws of each such jurisdiction and in such manner as is necessary to perfect the transfer, assignment and conveyance of such Receivables to the Company. Each Contributor shall deliver a file-stamped copy, or other evidence satisfactory to the Company of such filing, to the Company as soon as practicable after the Closing Date. (ii) OTHER DOCUMENTS. Such other documents as the Company may reasonably request. (e) OTHER TRANSACTIONS. The transactions contemplated by the Sale and Servicing Agreement and the Underwriting Agreement shall be consummated on the Closing Date. 4.2. CONDITIONS TO OBLIGATION OF THE CONTRIBUTORS. The obligation of the Contributors to contribute the Receivables to the Company is subject to the satisfaction of the following conditions: (a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties of the Company hereunder shall be true and correct in all material respects on the Closing Date with the same effect as if then made, and the Company shall have performed all obligations in all material respects to be performed by it hereunder on or prior to the Closing Date. (b) ISSUANCE OF SHARES. At the Closing Date, the Company will issue shares of common stock to each Contributor in an amount so that each Contributor receives a percentage of the Contribution Exchange equal to (x) the aggregate principal balance of the Receivables, as of the Cutoff Date, contributed hereunder by such Contributor divided by (y) the aggregate principal balance of all Receivables, as of the Cutoff Date, contributed hereunder by the Contributors. (c) TRANSFER AND ASSUMPTION OF INDEBTEDNESS. At the Closing Date, the Company will assume unsecured indebtedness of each Contributor to [________] in a principal amount with respect to each Contributor equal to the product of (i) the amount received by the Company pursuant to the Underwriting Agreement (net of the Reserve Account Initial Deposit) and (ii) (x) the aggregate principal balance of the Receivables, as of the Cutoff Date, contributed hereunder by such Contributor, divided by (y) the aggregate principal balance of all Receivables, as of the Cutoff Date, contributed hereunder by the Contributors. Simultaneously with the transactions contemplated in the Sale and Servicing Agreement, the indebtedness assumed by the Company above will be extinguished. [________] will deliver evidence thereof on the Closing Date. ARTICLE V COVENANTS OF THE CONTRIBUTORS Each Contributor severally agrees with the Company as follows; PROVIDED, HOWEVER, that to the extent that any provision of this ARTICLE V conflicts with any provision of the Sale and Servicing Agreement, the Sale and Servicing Agreement shall govern: 5.1. PROTECTION OF RIGHT, TITLE AND INTEREST. (a) FILINGS. Such Contributor shall cause all financing statements and continuation statements and any other necessary documents covering the right, title and interest of the Company in and to the Receivables contributed by it and the other related Trust Property to be promptly filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Company hereunder to such Receivables and the other Trust Property. Each Contributor shall deliver to the Company file stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recordation, registration or filing. The Company shall cooperate fully with each Contributor in connection with the obligations set forth above and will execute any and all documents reasonably required to fulfill the intent of this Section 5.1(a). (b) NAME AND OTHER CHANGES. If any Contributor makes any change in its name, identity or corporate structure which would make any financing statement or continuation statement filed pursuant hereto seriously misleading within the applicable provisions of the UCC or any title statute, such Contributor shall give the Owner Trustee, the Trustee, and the Company written notice of any such change and shall file appropriate amendments to all previously filed financing statements or continuation statements within thirty days of the effectiveness thereof. Upon any relocation of its principal executive office, such Contributor shall give the Owner Trustee, the Trustee, and the Company written notice thereof within a reasonable period of time (not to exceed 30 days) thereafter if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement and such Contributor shall within such time file any such amendment or new financing statement. (c) ACCOUNTS AND RECORDS. The Servicer shall maintain accounts and records as to each Receivable accurately and in sufficient detail to permit the reader thereof to know at any time the status of such Receivable, including payments and recoveries made and payments owing (and the nature of each). (d) MAINTENANCE OF COMPUTER SYSTEMS. The Servicer shall maintain its computer systems and each Contributor shall maintain its files so that, from and after the time of contribution hereunder of the Receivables to the Company, the Servicer's master computer records (including any back-up archives) and such Contributor's files that refer to a Receivable shall indicate clearly the interest of the Company in such Receivable and that such Receivable is owned by the Company. Indication of the Company's ownership of a Receivable shall be deleted from or modified on the Servicer's computer systems and such Contributor's files when, and only when, the Receivable shall have been paid in full, by the Contributor or Servicer, or sold to the Trust under the Sale and Servicing Agreement. (e) SALE OF OTHER RECEIVABLES. If at any time any Contributor shall propose to sell, grant a security interest in, or otherwise transfer any interest in any automobile receivables (other than the Receivables) to any prospective purchaser, lender, or other transferee, such Contributor shall give to such prospective purchaser, lender, or other transferee computer tapes, records, or print-outs (including any restored from back-up archives) that, if they shall refer in any manner whatsoever to any Receivable, shall indicate clearly that such Receivable has been contributed to and is owned by the Company unless such Receivable has been paid in full or repurchased. (f) ACCESS TO RECORDS. The Servicer and each Contributor shall permit the Company and its agents at their own cost and expense at any time during normal business hours and upon reasonable written notice to inspect, audit, and make copies of and abstracts from the applicable Contributor's records regarding any Receivable. (g) LIST OF RECEIVABLES. Upon request, the Servicer shall furnish to the Company, within five Business Days, a list of all Receivables (by contract number and name of Obligor) then owned by the Company, together with a reconciliation of such list to the Schedule of Receivables. 5.2. OTHER LIENS OR INTERESTS. Except for the conveyances hereunder and pursuant to the Sale and Servicing Agreement, each Contributor will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any interest therein, and each Contributor shall defend the right, title, and interest of the Company in, to and under such Receivables and each related Financed Vehicle against all claims of third parties claiming through or under such Contributor; PROVIDED, HOWEVER, that such Contributor's obligations under this Section 5.2 shall terminate upon the termination of the Trust pursuant to the Sale and Servicing Agreement. 5.3. CHIEF EXECUTIVE OFFICE. During the term of the Receivables, each Contributor other than [_____] will maintain its principal place of business and chief executive office in the State of [__________] and [_____] will maintain its principal place of business and chief executive office in the State of [________]. 5.4. COSTS AND EXPENSES. Each Contributor agrees to pay all reasonable costs and disbursements in connection with the perfection, as against all third parties, of the Company's right, title and interest in and to the Receivables. 5.5. DELIVERY OF RECEIVABLE FILES. On or prior to the Closing Date, each Contributor shall deliver the Receivable Files relating thereto to the Company at the location specified in Exhibit B hereto and shall cause the Receivable Files to be marked to indicate the transfer thereof to the Company. 5.6. INDEMNIFICATION. (a) Each Contributor shall indemnify the Company for any liability as a result of the failure of a Receivable originated by it to be originated in compliance with all requirements of law and for any material breach of any of its representations and warranties contained herein. (b) Each Contributor shall defend, indemnify, and hold harmless the Company from and against any and all reasonable costs, expenses, losses, damages, claims, and liabilities, resulting from the use, ownership, or operation by such Contributor or any affiliate thereof of a Financed Vehicle related to a Receivable originated by it. (c) Each Contributor shall defend, indemnify, and hold harmless the Company from and against any and all taxes, except for taxes on the net income of the Company, that may at any time be asserted against the Company with respect to the transactions contemplated herein with respect to the Receivables originated by it, including, without limitation, any sales, gross receipts, general corporation, tangible personal property, privilege, or license taxes and reasonable costs and expenses in defending against the same. (d) Each Contributor shall defend, indemnify, and hold harmless the Company from and against any and all reasonable costs, expenses, losses, damages, claims and liabilities to the extent that such reasonable cost, expense, loss, damage, claim or liability resulted from the gross negligence, willful misfeasance, or bad faith of such Contributor in the performance of its duties under the Agreement, or by reason of reckless disregard of such Contributor's obligations and duties under this Agreement. 5.7. CONTRIBUTION Each Contributor agrees to treat this conveyance as a contribution on all relevant books, records and other applicable documents. 5.8. NO PETITION. Each Contributor, by entering into this Agreement, hereby covenants and agrees that it will not at any time institute against the Company, or join in any institution against the Company of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to this Agreement. 5.9. COLLECTED FUNDS. Each Contributor hereby covenants that on the Closing Date it will deposit or cause to be deposited all collected funds received prior to the Closing Date and conveyed to the Company hereunder. ARTICLE VI MISCELLANEOUS PROVISIONS 6.1. OBLIGATIONS OF CONTRIBUTORS. The obligations of the Contributors under this Agreement shall not be affected by reason of any invalidity, illegality or irregularity of any Receivable. 6.2. PURCHASE EVENTS. The Sponsor hereby covenants and agrees with the Company for the benefit of the Company, the Owner Trustee, the Trustee, the Noteholders and the Certificateholders, that the occurrence of a breach of any representations and warranties contained in Section 3.2(b) or 3.2(c) hereof (without regard to any limitations regarding knowledge) shall constitute events obligating the Sponsor to purchase the affected Receivables hereunder ("Purchase Events"), at the Purchase Amount from the Trust. The provisions of this Section 6.2 are intended to grant the Trustee a direct right against the Sponsor to demand performance hereunder, and in connection therewith the Sponsor waives any requirement of prior demand against the Company and waives any defaults it would have against the Company with respect to such repurchase obligation. Any such purchase shall take place in the manner specified in Section 3.2 of the Sale and Servicing Agreement. The sole remedy of the Noteholders, the Certificateholders, the Trust, the Owner Trustee, the Trustee or the Company against the Sponsor, with respect to any Purchase Event shall be to enforce the Sponsor's obligation to purchase such Receivables pursuant to this Agreement; PROVIDED, HOWEVER, that the Sponsor shall indemnify the Owner Trustee, the Trustee, the Trust, the Noteholders and the Certificateholders against all reasonable costs, reasonable expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them, as a result of third party claims arising out of the events or facts giving rise to such breach. Upon receipt of the Purchase Amount, the Company shall cause the Trust to release the related Receivables File to the Sponsor and to execute and deliver all instruments of transfer or assignment, without recourse, as are necessary to vest in the Sponsor title to the Receivable. 6.3. ASSIGNMENT OF PURCHASED RECEIVABLES. With respect to all Receivables purchased by the Sponsor pursuant to this Agreement, the Company shall assign, without recourse except as provided herein, representation or warranty, to the Sponsor all the Company's right, title and interest in and to such Receivables, and all security and documents relating thereto. 6.4. [Reserved] 6.5. TRUST. Each Contributor and the Sponsor acknowledge that the Company will, pursuant to the Sale and Servicing Agreement, sell the Receivables to the Trust and assign its rights under this Agreement to the Trust for the benefit of the Noteholders and Certificateholders and that the representations and warranties contained in this Agreement and the rights of the Company under this Agreement, including under Sections 6.2 and 6.3 hereof are intended to benefit such Trust and the Noteholders and Certificateholders. Each Contributor and the Sponsor also acknowledge that the Trust on behalf of the Noteholders and Certificateholders as assignee of the Company's rights hereunder may directly enforce, without making any prior demand on the Company, all the rights of the Company hereunder including the rights under Section 6.2 and 6.3 hereof. Each Contributor and the Sponsor hereby consent to such sale and assignment. 6.6. AMENDMENT. This Agreement may be amended by the Company, the Contributors and the Sponsor, with the consent of the Trustee and the Owner Trustee (which consent may not be unreasonably withheld), but without the consent of any of the Noteholders or the Certificateholders, to cure any ambiguity or defect, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee and the Trustee, adversely affect in any material respect the interests of any Noteholder or Certificateholder. This Agreement may also be amended from time to time by the Company, the Contributors and the Sponsor, with the consent of the Trustee and the Owner Trustee, the consent of the Holders of Notes evidencing not less than a majority of the Outstanding Amount of the Notes and the consent of the Holders (as defined in the Trust Agreement) of Certificates evidencing not less than a majority of the Percentage Interest for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that shall be required to be made for the benefit of the Noteholders or the Certificateholders or (b) reduce the aforesaid percentage of the Outstanding Amount of the Notes and the Percentage Interest, the Holders of which are required to consent to any such amendment, without the consent of the Holders of all the outstanding Notes and the Holders (as defined in the Trust Agreement) of all the outstanding Certificates affected thereby. Prior to the execution of any such amendment or consent, the Trustee and Owner Trustee shall furnish written notification of the substance of such amendment or consent to the Rating Agencies. Promptly after the execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to each Certificateholder and the Trustee shall furnish written notification to each Noteholder. It shall not be necessary for the consent of Certificateholders or Noteholders pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. Prior to the execution of any amendment to this Agreement, the Owner Trustee and the Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent to the execution and delivery of such amendment have been satisfied and the Opinion of Counsel. 6.7. ACCOUNTANTS' LETTERS. (a) [_____________] will review the characteristics of the Receivables described in the Schedule of Receivables set forth as Exhibit A hereto and will compare those characteristics to the information with respect to the Receivables contained in the Preliminary Prospectus and the Prospectus; (b) each Contributor will cooperate with the Company and [_______________] in making available all information and taking all steps reasonably necessary to permit such accountants to complete the review set forth in Section 6.7(a) above and to deliver the letters required of them under the Underwriting Agreement; (c) [_____________] will deliver to the Company a letter, dated the date of the Prospectus, in the form previously agreed to by the Contributor and the Company, with respect to the financial and statistical information contained in the Preliminary Prospectus under the caption "Delinquency Experience" and "Historical Loss Experience," certain information relating to the Receivables on magnetic tape obtained from each Contributor and with respect to such other information as may be agreed in the form of letter; and (d) [_____________] will deliver to the Company a letter, dated the Closing Date, in the form previously agreed to by each Contributor and the Company, with respect to the financial and statistical information contained in the Prospectus under the caption "Delinquency Experience" and "Historical Loss Experience," certain information relating to the Receivables on magnetic tape obtained from such Contributor and with respect to such other information as may be agreed in the form of letter. 6.8. WAIVERS. No failure or delay on the part of the Company in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy. 6.9. NOTICES. All communications and notices pursuant hereto to either party shall be in writing or by telegraph or telex and addressed or delivered to it at its address (or in case of telex, at its telex number at such address) shown in the opening portion of this Agreement or at such other address as may be designated by it by notice to the other party and, if mailed or sent by telegraph or telex, shall be deemed given when mailed, communicated to the telegraph office or transmitted by telex. 6.10. COSTS AND EXPENSES. The Contributors will pay all expenses incident to the performance of their respective obligations under this Agreement and each Contributor agrees to pay all reasonable out-of-pocket costs and expenses of the Company, excluding fees and expenses of counsel, in connection with the perfection as against third parties of the Company's right, title and interest in and to the Receivables and security interests in the Financed Vehicles and the enforcement of any obligation of any Contributor hereunder. 6.11. REPRESENTATIONS OF THE CONTRIBUTORS AND THE COMPANY. The respective agreements, representations, warranties and other statements by the respective Contributors and the Company set forth in or made pursuant to this Agreement shall remain in full force and effect and will survive the closing under Section 2.2 hereof. 6.12. CONFIDENTIAL INFORMATION. The Company agrees that it will neither use nor disclose to any person the names and addresses of the Obligors, except in connection with the enforcement of the Company's rights hereunder, under the Receivables, under the Sale and Servicing Agreement or as required by law. 6.13. HEADINGS AND CROSS-REFERENCES. The various headings in this Agreement are included for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. References in this Agreement to Section names or numbers are to such Sections of this Agreement. 6.14. THIRD PARTY BENEFICIARIES. The parties hereto hereby expressly agree that each of the Owner Trustee for the benefit of the Certificateholders shall be third party beneficiaries and the Trustee for the benefit of the Noteholders with respect to this Agreement, PROVIDED, HOWEVER, that no third party other than the Owner Trustee or Trustee shall be deemed a third party beneficiary of this Agreement. 6.15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 6.16. COUNTERPARTS. This Agreement may be executed in two or more counterparts and by different parties on separate counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date and year first above written. [ ] By: ___________________________ Name: Title: [ ] By: ___________________________ Name: Title: ACE SECURITIES CORP. By: ___________________________ Name: Title: EXHIBIT A Schedule of Receivables [Delivered to the Trustee at Closing] EXHIBIT B Location of Receivables EX-10.1.2 19 0019.txt FORM OF RECEIVABLES PURCHASE AGREEMENT EXHIBIT 10.1.2 =============================================================================== FORM OF RECEIVABLES PURCHASE AGREEMENT Dated as of [ ], [ ] CARD ACCOUNT MASTER TRUST SERIES [ ] ACE SECURITIES CORP., and [SELLER NAME], =============================================================================== RECEIVABLES PURCHASE AGREEMENT, dated as of [_______], by and between [SELLER NAME], a [_________] corporation (the "Seller"), and ACE SECURITIES CORP., a Delaware corporation ("ACE"). W I T N E S S E T H: WHEREAS, ACE desires to purchase, from time to time, certain Receivables (hereinafter defined) due or to become due under certain credit card accounts of the Seller; WHEREAS, the Seller desires to sell from time to time and assign certain Receivables to ACE upon the terms and conditions hereinafter set forth; WHEREAS, it is contemplated that the Receivables purchased hereunder will be transferred by ACE to the Trust (hereinafter defined) in connection with the issuance of certain Certificates (hereinafter defined); and WHEREAS, the Seller agrees that all covenants and agreements made by the Seller herein with respect to the Accounts (hereinafter defined) and Receivables shall also be for the benefit of the Trustee (hereinafter defined) and all beneficiaries of the Trust, including the holders of the Certificates. NOW, THEREFORE, it is hereby agreed by and between ACE and the Seller as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINITIONS. All capitalized terms used herein or in any certificate, document, or Conveyance Paper made or delivered pursuant hereto, and not defined herein or therein, shall have the meaning ascribed thereto in the Pooling and Servicing Agreement; in addition, the following words and phrases shall have the following meanings: "ACCOUNT" shall mean (a) each account established pursuant to a Credit Card Agreement between the Seller and any Person, which account is identified by account number and by the receivables balance in the computer file, microfiche list or printed list delivered to ACE by the Seller on the Closing Date (b) each Additional Account (but only from and after the Addition Date with respect thereto), (c) each Related Account, and (d) each account into which an Account shall be transferred (a "Transferred Account") provided that (i) such transfer was made in accordance with the Credit Card Guidelines and (ii) such account can be traced or identified as an account into which an Account has been transferred, but shall exclude (g) any Account that (x) after the Removal Date, the newly generated Receivables in which are reassigned to the Seller pursuant to Section 2.06, (y) all the Receivables in which are reassigned to the Seller pursuant to Section 6.01 or (z) all the Receivables in which are assigned and transferred to the Servicer pursuant to Section 3.03 of the Pooling and Servicing Agreement. "ACE" shall mean ACE Securities Corp., a Delaware Corporation. --- "ADDITIONAL ACCOUNT" shall mean each New Account and each Aggregate Additional Account. "ADDITIONAL CUT-OFF DATE" shall mean (i) with respect to Aggregate Addition Accounts, the date specified as such in the notice delivered with respect thereto pursuant to Section 2.02, and (ii) with respect to New Accounts, the later of the dates on which such New Accounts are originated or designated pursuant to Section 2.03. "ADDITION DATE" shall mean (a) with respect to Aggregate Addition Accounts, the date from and after which such Aggregate Addition Accounts are to be included as Accounts pursuant to Section 2.02 and (b) with respect to New Accounts, the first Distribution Date following the calendar month in which such New Accounts are originated. "ADDITION NOTICE DATE" shall have the meaning specified in Section 2.02 of this Agreement. "AGGREGATE ADDITION ACCOUNT" shall mean each Eligible Account that is designated pursuant to Section 2.02 to be included as an Account and is identified in the computer file or microfiche list delivered to ACE by the Seller pursuant to Sections 2.01 and 2.05. "AGREEMENT" shall mean this Receivables Purchase Agreement and all amendments hereof and supplements hereto. "CLOSING DATE" shall mean [ ]. "CONVEYANCE" shall have the meaning specified in subsection 2.01(a). "CONVEYANCE PAPERS" shall have the meaning specified in subsection 4.01(c). "CREDIT ADJUSTMENT" shall have the meaning specified in subsection 3.02. "DEBTOR RELIEF LAWS" shall mean (i) the Bankruptcy Code in the United States of America and (ii) all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, readjustment of debt, marshaling of assets or similar debtor relief laws of the United States, any state or any foreign country from time to time in effect affecting the rights of creditors generally. "FINANCE CHARGE RECEIVABLES" shall mean all Receivables in the Accounts which would be treated as "Finance Charge Receivables" in accordance with the definition for such term in the Pooling and Servicing Agreement. "INITIAL ACCOUNT" shall mean any Account designated as an "Account" hereunder and as an "Account" under the Pooling and Servicing Agreement on the Closing Date. "INITIAL CUT-OFF DATE" shall mean the close of business on [ ]. "INSOLVENCY EVENT" shall have the meaning specified in Section 8.02. "INTERCHANGE" shall mean interchange fees payable to the Seller in its capacity as credit card issuer, through VISA or MasterCard [or any similar entity or organization with respect to any other type of revolving credit card accounts included as Accounts, except as otherwise provided in the initial Assignment with respect to any such other type of Accounts, in connection with cardholder charges for goods and services with respect to the Accounts. "NEW ACCOUNT" shall mean each MasterCard and VISA consumer revolving credit card account established pursuant to a Credit Card Agreement, which account is designated pursuant to Section 2.03 to be included as an Account and is identified in the computer file or microfiche list delivered to ACE by the Seller pursuant to Sections 2.01 and 2.05. "NEW PRINCIPAL RECEIVABLES" shall have the meaning set forth in Section 3.01. "OBLIGOR" shall mean, with respect to each Account, each person that would be treated as an "Obligor" in accordance with the definition for such term in the Pooling and Servicing Agreement. "POOLING AND SERVICING AGREEMENT" shall mean the Pooling and Servicing Agreement, dated as of [ ], , among [Servicer Name], as Servicer, ACE, as Depositor and the Trustee, and all amendments and supplements thereto. "PORTFOLIO REASSIGNMENT PRICE" shall mean the portion of the amount payable by ACE to the Trustee pursuant to Section 2.06 of the Pooling and Servicing Agreement with respect to the Receivables. "PRINCIPAL RECEIVABLES" shall mean all Receivables in the Accounts that would be treated as "Principal Receivables" in accordance with the definition for such term in the Pooling and Servicing Agreement. "PURCHASE PRICE" shall have the meaning set forth in Section 3.01. "PURCHASED ASSETS" shall have the meaning set forth in Section 2.01. "RECEIVABLES" shall mean Receivables as defined in the Pooling and Servicing Agreement, existing or created after the Initial Cut Off Date in respect of the Initial Accounts or the Additional Cut Off Date in respect of Additional Accounts. "REMOVED ACCOUNT" shall mean an Account hereunder that is a "Removed Account" (as such term is defined in the Pooling and Servicing Agreement) that is designated for removal pursuant to Section 2.10 of the Pooling and Servicing Agreement. "REPURCHASE PRICE" shall have the meaning set forth in Section 6.01(b). "SELLER" shall mean [Seller Name], a [______________] and its successors and permitted assigns. "SUPPLEMENTAL CONVEYANCE" shall have the meaning set forth in Section 2.02. "TRUST" shall mean the trust created by the Pooling and Servicing Agreement. "TRUSTEE" shall mean [Trustee Name], a [_____________] banking corporation, the institution executing the Pooling and Servicing Agreement as, and acting in the capacity of Trustee thereunder, or its successor in interest, or any successor trustee appointed as provided in the Pooling and Servicing Agreement. SECTION 1.02. OTHER DEFINITIONAL PROVISIONS. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificate, other document, or Conveyance Paper made or delivered pursuant hereto unless otherwise defined therein. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement or any Conveyance Paper shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, Subsection, Schedule and Exhibit references contained in this Agreement are references to Sections, Subsections, Schedules and Exhibits in or to this Agreement unless otherwise specified. (c) All determinations of the principal or finance charge balance of Receivables, and of any collections thereof, shall be made in accordance with the Pooling and Servicing Agreement and all applicable Supplements. ARTICLE II PURCHASE AND CONVEYANCE OF RECEIVABLES SECTION 2.01. PURCHASE. (a) By execution of this Agreement, the Seller does hereby sell, transfer, assign, set over and otherwise convey to ACE (collectively, the "Conveyance"), without recourse except as provided herein, all its right, title and interest in, to and under (i) the Receivables existing at the close of business on the Closing Date, in the case of Receivables arising in the Initial Accounts, and on each Additional Date, in the case of Receivables arising in the Additional Accounts, and in each case thereafter created from time to time until the termination of this Agreement pursuant to Article VIII hereof and all monies due and or to become due and all amounts received with respect thereto and all proceeds (including, without limitation, "proceeds" as defined in the UCC) thereof and (ii) the right to receive Interchange and Recoveries with respect to such Receivables that are allocable to the Trust as provided in the Pooling and Servicing Agreement (the "Purchased Assets"). (b) In connection with such Conveyance, the Seller agrees (i) to record and file, at its own expense, any financing statements (and continuation statements with respect to such financing statements when applicable) with respect to the Receivables now existing and hereafter created, meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect, and maintain perfection of, the Conveyance of such Purchased Assets from the Seller to ACE, (ii) that such financing statements shall name the Seller, as seller, and ACE, as purchaser, of the Receivables and (iii) to deliver a file-stamped copy of such financing statements or other evidence of such filings (excluding such continuation statements, which shall be delivered as filed) to ACE as soon as is practicable after filing. (c) In connection with such Conveyance, the Seller further agrees that it will, at its own expense, (i) on or prior to (x) the Closing Date, in the case of Initial Accounts, (y) the applicable Addition Date, in the case of Additional Accounts, and (z) the applicable Removal Date, in the case of Removed Accounts, to indicate in its computer files that Receivables created (or reassigned, in the case of Removed Accounts) in connection with the Accounts have been conveyed to ACE in accordance with this Agreement and have been conveyed by ACE to the Trustee pursuant to the Pooling and Servicing Agreement for the benefit of the Certificateholders (or conveyed to the Seller or its designee in accordance with Section 2.06, in the case of Removed Accounts) by including (or deleting, in the case of newly originated Receivables in Removed Accounts) in such computer files the code identifying each such Account and (ii) on or prior to (w) the Closing Date, in the case of the Initial Accounts, (x) the date that is five Business Days after the applicable Addition Date, in the case of designation of Aggregate Addition Accounts, (y) the date that is 90 days after the applicable Addition Date, in the case of New Accounts, and (z) the date that is five business Days after the applicable Removal Date, in the case of Removed Accounts, to deliver to ACE a computer file or microfiche list containing a true and complete list of all such Accounts specifying for each such Account, as of the Initial Cut-Off Date, in the case of the Initial Accounts, the applicable Additional Cut-off Date, in the case of Additional Accounts, the applicable Removal Date, and in the case of Removed Accounts, (A) its account number, (B) the aggregate amount outstanding in such Account. Each such file or list, as supplemented from time to time to reflect Additional Accounts or Removed Accounts, shall be marked as Schedule I to this Agreement, shall be delivered to ACE, and is hereby incorporated into and made a part of this Agreement. The Seller further agrees not to alter the code referenced in clause (i) of this paragraph with respect to any Account during the term of this Agreement unless and until such Account becomes a Removed Account. (d) The parties hereto intend that the conveyance of the Seller's right, title and interest in and to the Receivables shall constitute an absolute sale, conveying good title free and clear of any liens, claims, encumbrances or rights of others from the Seller to ACE. It is the intention of the parties hereto that the arrangements with respect to the Receivables shall constitute a purchase and sale of such Receivables and not a loan. In the event, however, that a court of competent jurisdiction were to hold that the transactions evidenced hereby constitute a loan and not a purchase and sale, it is the intention of the parties hereto that this Agreement shall constitute a security agreement under applicable law, and that the Seller shall be deemed to have granted and does hereby grant to ACE a first priority perfected security interest, whether now owned or hereafter acquired, in all of the Seller's right, title and interest in, to and under the Receivables and other Purchased Assets to secure the rights of ACE hereunder and the Obligations of the Seller hereunder. SECTION 2.02. ADDITION OF AGGREGATE ADDITION ACCOUNTS. (a) If, from time to time, ACE becomes obligated to designate Aggregate Addition Accounts (as such term is defined in the Pooling and Servicing Agreement) pursuant to subsection 2.09(a) of the Pooling and Servicing Agreement, then ACE may, at its option, give the Seller written notice thereof on or before the eighth Business Day (the "Addition Notice Date") prior to the Addition Date therefor, and upon receipt of such notice the Seller shall on or before the Addition Date, designate sufficient Eligible Accounts to be included as Additional Accounts so that after the inclusion thereof ACE will be in compliance with the requirements of said subsection 2.09(a). Additionally, subject to subsections 2.09(b) and (c) of the Pooling and Servicing Agreement and subsection 2.02(b), from time to time Eligible Accounts may be designated to be included as Aggregate Addition Accounts, upon the mutual agreement of ACE and the Seller. In either event, the Seller shall have sole responsibility for selecting the Aggregate Addition Accounts. (b) On the Addition Date with respect to any designation of Aggregate Addition Accounts, ACE shall purchase the Seller's right, title and interest in, to and under the Receivables in Aggregate Addition Accounts (and such Aggregate Addition Accounts shall be deemed to be Accounts for purposes of this Agreement), subject to the satisfaction of the following conditions: (i) any Aggregate Addition Accounts shall all be Eligible Accounts; (ii) the Seller shall have delivered to ACE copies of UCC-1 financing statements covering such Aggregate Addition Accounts, if necessary to perfect ACE's undivided interest in the Receivables arising therein; (iii) to the extent required of ACE by Section 4.03 of the Pooling and Servicing Agreement, the Seller shall have deposited in the Collection Account all Collections with respect to such Aggregate Addition Accounts since the Additional Cut-Off Date; (iv) as of each of the Additional Cut-Off Date and the Addition Date, no Insolvency Event with respect to the Seller or other Account Owner, as applicable shall have occurred nor shall the transfer of the Receivables arising in the Aggregate Addition Accounts to ACE have been made in contemplation of the occurrence thereof; (v) solely with respect to Aggregate Addition Accounts designated pursuant to the second sentence of subsection 2.02(a), the Rating Agency Condition shall have been satisfied; (vi) the Seller shall have delivered to ACE an Officer's Certificate, dated the Addition Date, confirming, to the extent applicable, the items set forth in clauses (i) through (v) above; and (vii) the transfer of the Receivables arising in the Aggregate Addition Accounts to ACE and by ACE to the Trust will not result in an Adverse Effect and, in the case of Aggregate Addition Accounts, the Seller shall have delivered to ACE an Officer's Certificate, dated the Addition Date, stating that the Seller reasonably believes that the addition of the Receivables arising in the Aggregate Addition Accounts to ACE and by ACE to the Trust will not have an Adverse Effect. SECTION 2.03. ADDITION OF NEW ACCOUNTS. (a) Upon the mutual agreement of ACE and the Seller, subject to compliance by ACE with the conditions specified in subsections 2.09(d) and (e) of the Pooling and Servicing Agreement and compliance by the Seller with subsection 2.03(b), the Seller may designate newly originated Eligible Accounts to be included as New Accounts. Upon such designation, such New Accounts shall be deemed to be Accounts hereunder. The Seller shall take all actions necessary to comply, or to enable ACE to comply, with the requirements of Section 2.09 of the Pooling and Servicing Agreement and shall cooperate with ACE to enable it to perform with respect to the Receivables in such New Accounts all actions specified in subsections 2.09(d) and (e) of the Pooling and Servicing Agreement. (b) On the Addition Date with respect to any New Accounts, ACE shall purchase the Seller's right, title and interest in, to and under the Receivables in New Accounts (and such New Accounts shall be deemed to be Accounts for purposes of this Agreement) as of the close of business on the applicable Additional Cut-Off Date, subject to the satisfaction of the following conditions: (i) the New Accounts shall all be Eligible Accounts; (ii) the Seller shall have delivered to ACE copies of UCC-1 financing statements covering such New Accounts, if necessary to perfect ACE's interest in the Receivables arising therein; (iii) to the extent required of ACE by Section 4.03 of the Pooling and Servicing Agreement, the Seller shall have deposited in the Collection Account all Collections with respect to such New Accounts since the Additional Cut-Off Date; (iv) as of each of the Additional Cut-Off Date and the Addition Date, no Insolvency Event with respect to the Seller shall have occurred nor shall the transfer of the Receivables arising in the New Accounts to ACE have been made in contemplation of the occurrence thereof; and (v) the transfer of the Receivables arising in the New Accounts to ACE and by ACE to the Trust will not result in the occurrence of a Pay Out Event or a Reinvestment Event. SECTION 2.04. REPRESENTATIONS AND WARRANTIES. The Seller hereby represents and warrants to ACE as of the related Addition Date as to the matters set forth in Section 2.01(b) (iv) and (viii) above and that, in the case of Additional Accounts, the list delivered pursuant to Section 2.05 below is, as of the applicable Additional Cut-Off Date, true and complete in all material respects. SECTION 2.05. DELIVERY OF DOCUMENTS. In the case of the designation of Additional Accounts, the Seller shall deliver to ACE (i) the computer file or microfiche list required to be delivered pursuant to Section 2.01 with respect to such Additional Accounts on the date such file or list is required to be delivered pursuant to Section 2.01 (the "Document Delivery Date") and (ii) a duly executed, written assignment (including an acceptance by ACE), substantially in the form of Exhibit A (the "Supplemental Conveyance"), on the Document Delivery Date. In addition, in the case of the designation of New Accounts, the Seller shall deliver to ACE on the Document Delivery Date an Officer's Certificate confirming, to the extent applicable, the items set forth in clause (i) through (v) of subsection 2.03(b) above. ARTICLE III CONSIDERATION AND PAYMENT SECTION 3.01. PURCHASE PRICE. (a) The "Purchase Price" for the Receivables which came into existence on or prior to the Closing Date conveyed to ACE under this Agreement shall be payable on the Closing Date and shall be an amount equal to [100% of the aggregate balance of Principal Receivables so conveyed, adjusted to reflect such factors as the Seller and ACE mutually agree will result in a Purchase Price determined to be the fair market value of such Receivables]. This computation of initial purchase price should assume no reinvestment in the new Receivables. The Purchase Price for the Receivables (including Receivables in Additional Accounts) to be conveyed to ACE under this Agreement which come into existence after the Closing Date, [shall be payable on the date on which such Receivables are conveyed by the Seller to ACE in an amount equal to 100% of the aggregate balance of the Principal Receivables so conveyed (the "New Principal Receivables"), adjusted to reflect such factors as the Seller and ACE mutually agree will result in a Purchase Price determined to be at the fair market value of such New Principal Receivables]. The Purchase Price to be paid by ACE on the Closing Date and on each Distribution Date following a Monthly Period during which New Principal Receivables are conveyed to ACE shall be paid in cash. SECTION 3.02. ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be adjusted on each Distribution Date (a "Credit Adjustment") with respect to any Receivable previously conveyed to ACE by the Seller which has since been reversed by the Seller or the Servicer because of a rebate, refund, unauthorized charge or billing error to a cardholder because such Receivable was created in respect of merchandise with was refused or returned by a cardholder or due to the occurrence of any other event referred to in Section 3.09 of the Pooling and Servicing Agreement. The amount of such adjustment shall equal [(x) the reduction in the principal balance of such Receivable resulting from the occurrence of such event multiplied by (y) the quotient (expressed as a percentage) of (i) the purchase Price payable on such Distribution Date computed in accordance with Section 3.01 divided by (ii) the Principal Receivables paid for on such date pursuant to such Section]. In the event that an adjustment pursuant to this Section 3.02 causes the Purchase Price to be a negative number, the Seller agrees that, not later than 1:00 P.M. New York City time on such Distribution Date, the Seller shall pay to ACE, an amount equal to the amount by which the Purchase Price minus the Credit Adjustment would be reduced below zero. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE SELLER RELATING TO THE SELLER. The Seller hereby represents and warrants to, and agrees with, ACE as of the Closing Date and on each Addition Date, that: (a) ORGANIZATION AND GOOD STANDING. The Seller is a corporation duly organized and validly existing in good standing under the laws of the State of [______________] and has, in all material respects, full power and authority to own its properties and conduct its business as such properties are presently owned and such business is presently conducted,and to execute, deliver and perform its obligations under this Agreement. (b) DUE QUALIFICATION. The Seller is duly qualified to do business and is in good standing as a foreign corporation (or is exempt from such requirements) and has obtained all necessary licenses and approvals, in each jurisdiction in which failure to so qualify or to obtain such licenses and approvals would (i) render any Credit Card Agreement relating to an Account, or any Receivable unenforceable by the Seller, ACE or the Trust and (ii) have a material adverse effect on the Investor Certificateholders. (c) DUE AUTHORIZATION. The execution, delivery and performance of this Agreement and any other document or instrument delivered pursuant hereto, including any Supplemental Conveyance (such other documents or instruments, collectively, the "Conveyance Papers"), and the consummation of the transactions provided for in this Agreement and the Conveyance Papers have been duly authorized by the Seller by all necessary corporate action on the part of the Seller. (d) NO CONFLICT. The execution and delivery of this Agreement and the Conveyance Papers by the Seller, the performance of the transactions contemplated by this Agreement and the Conveyance Papers, and the fulfillment of the terms of this Agreement and the Conveyance Papers applicable to the Seller will not conflict with, violate or result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Seller is a party or by which it or any of its properties are bound. (e) NO VIOLATION. The execution, delivery and performance of this Agreement and the Conveyance Papers by the Seller and the fulfillment of the terms contemplated herein and therein applicable to the Seller will not conflict with or violate any Requirements of Law applicable to the Seller. (f) NO PROCEEDINGS. There are no proceedings or investigations pending or, to the best knowledge of the Seller, threatened against the Seller, before any Governmental Authority (i) asserting the invalidity of this Agreement or the Conveyance Papers, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or the Conveyance Papers, (iii) seeking any determination or ruling that, in the reasonable judgment of the Seller, would materially and adversely affect the performance by the Seller of its obligations under this Agreement or the Conveyance Papers, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or the attributes of the Trust under United States Federal or [________________] income tax systems. (g) ALL CONSENTS. All authorizations, consents, orders or approvals of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by the Seller in connection with the execution and delivery by the Seller of this Agreement and the Conveyance Papers and the performance of the transactions contemplated by this Agreement or the Conveyance Papers by the Seller have been duly obtained, effected or given and are in full force and effect. The representations and warranties set forth in this Section 4.01 shall survive the transfer and assignment of the Receivables to ACE. Upon discovery by the Seller or ACE of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give written notice to the other party and the Trustee within three Business Days following such discovery. SECTION 4.02. REPRESENTATIONS AND WARRANTIES OF THE SELLER RELATING TO THE AGREEMENT AND THE RECEIVABLES. (a) REPRESENTATIONS AND WARRANTIES. The Seller hereby represents and warrants to ACE as of the date of this Agreement, as of the Closing Date and, with respect to Additional Accounts, as of the related Addition Date that: (i) this Agreement and, in the case of Additional Accounts, the related Supplemental Conveyance, each constitutes a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally from time to time in effect or general principles of equity; (ii) as of the Initial Cut-Off Date, and as of the related Additional Cut-Off Date with respect to Additional Accounts, Schedule I to this Agreement, as supplemented to such date, is an accurate and complete listing in all material respects of all the Accounts as of the Initial Cut-Off Date or such Additional Cut-Off Date, as the case may be, and the information contained therein supplied by the Seller with respect to the identity of such Accounts and the Receivables existing thereunder is true and correct in all material respects as of the Initial Cut-Off Date or such applicable Additional Cut-Off Date, as the case may be and as of the Initial Cut-Off Date, the aggregate amount of Receivables in all the Initial Accounts was $[_______], of which $[________] were Principal Receivables; (iii) each Receivable has been conveyed to ACE free and clear of any Lien; (iv) all authorizations, consents, orders or approvals of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by the Seller in connection with the conveyance of Receivables to ACE have been duly obtained, effected or given and are in full force and effect; (v) this Agreement or, in the case of Additional Accounts, the related Supplemental Conveyance constitutes a valid sale, transfer and assignment to ACE of all right, title and interest of the Seller in the Receivables and the proceeds thereof and the Interchange payable pursuant to this Agreement and the Recoveries payable pursuant to this Agreement; (vi) on the Initial Cut-Off Date, each Account is an Eligible Account and, in the case of Additional Accounts, on the Additional Cut-Off Date, each related Additional Account is an Eligible Account; (vii) on the Initial Cut-Off Date, each Receivable then existing is an Eligible Receivable, and in the case of Additional Accounts, on the applicable Additional Cut-Off Date, each Receivable generated thereunder is an Eligible Receivable; (viii) as of the date of the creation of any new Receivable, such Receivable is an Eligible Receivable; and (ix) no selection procedures believed by the Seller to be materially adverse to the interests of ACE or the Investor Certificateholders have been used in selecting such Accounts. (b) NOTICE OF BREACH. The representations and warranties set forth in this Section 4.02 shall survive the transfer and assignment of the Receivables to ACE. Upon discovery by either the Seller or ACE of a breach of any of the representations and warranties set forth in this Section 4.02, the party discovering such breach shall give written notice to the other party and the Trustee within three Business Days following such discovery; provided that the failure to give notice within three Business Days does not preclude subsequent notice. The Seller hereby acknowledges that ACE intends to rely on the representations hereunder in connection with representations made by ACE to secured parties, assignees or subsequent transferees including but not limited to transfers made by ACE to the Trust pursuant to the Pooling and Servicing Agreement. SECTION 4.03. REPRESENTATIONS AND WARRANTIES OF ACE. As of the Closing Date, ACE hereby represents and warrants to, and agrees with, the Seller that: (a) ORGANIZATION AND GOOD STANDING. ACE is a corporation duly organized and validly existing under the laws of the State of Delaware and has, in all material respects, full power and authority to own its properties and conduct its business as such properties are presently owned and such business is presently conducted and to execute, deliver and perform its obligations under this Agreement. (b) DUE AUTHORIZATION. The execution and delivery of this Agreement and the Conveyance Papers and the consummation of the transactions provided for in this Agreement and the Conveyance Papers have been duly authorized by ACE by all necessary corporate action on the part of ACE. (c) NO CONFLICT. The execution and delivery of this Agreement and the Conveyance Papers by ACE, the performance of the transactions contemplated by this Agreement and the Conveyance Papers, and the fulfillment of the terms of this Agreement and the Conveyance Papers applicable to ACE, will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which ACE is a party or by which it or any of its properties are bound. (d) NO VIOLATION. The execution, delivery and performance of this Agreement and the Conveyance Papers by ACE and the fulfillment of the terms contemplated herein and therein applicable to ACE will not conflict with or violate any Requirements of Law applicable to ACE. (e) NO PROCEEDINGS. There are no proceedings or investigations pending or, to the best knowledge of ACE, threatened against ACE, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement or the Conveyance Papers, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or the Conveyance Papers, (iii) seeking any determination or ruling that, in the reasonable judgment of ACE, would materially and adversely affect the performance by ACE of its obligations under this Agreement or the Conveyance Papers or (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or the Conveyance Papers. (f) ALL CONSENTS. All authorizations, consents, orders or approvals of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by ACE in connection with the execution and delivery by ACE of this Agreement and the Conveyance Papers and the performance of the transactions contemplated by this Agreement and the Conveyance Papers have been duly obtained, effected or given and are in full force and effect. The representations and warranties set forth in this Section 4.03 shall survive the Conveyance of the Receivables to ACE. Upon discovery by ACE or the Seller of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the other party. ARTICLE V COVENANTS SECTION 5.01. COVENANTS OF THE SELLER. The Seller hereby covenants and agrees with ACE as follows: (a) RECEIVABLES NOT TO BE EVIDENCED BY PROMISSORY NOTES. Except in connection with its enforcement or collection of an Account, the Seller will take no action to cause any Receivable to be evidenced by any instrument (as defined in the UCC) and if any Receivable is so evidenced as a result of any action by the Seller it shall be deemed to be an ineligible Receivable in accordance with Section 6.01(a) and shall be reassigned to the Seller in accordance with Section 6.01(b). (b) SECURITY INTERESTS. Except for the conveyances hereunder, the Seller will not sell, pledge, assign or transfer to any other Person, or take any other action inconsistent with ACE's ownership of the Receivables or grant, create, incur, assume or suffer to exist any Lien on, any Receivable, whether now existing or hereafter created, or any interest therein, and the Seller shall not claim any ownership interest in the Receivables and shall defend the right, title and interest of ACE in, to and under the Receivables, whether now existing or hereafter created, against all claims of third parties claiming through or under the Seller. (c) ACCOUNTING ALLOCATIONS. In the event that the Seller is unable for any reason to transfer Receivables to ACE in accordance with the provisions of this Agreement (including, without limitation, by reason of the application of the provisions of Section 8.02 or any order of any Governmental Authority), then, in any such event, the Seller agrees (except as prohibited by any such order) to allocate and pay to ACE, after the date of such inability, all amounts in the manner by which ACE will allocate and pay to the Trust after such inability by ACE pursuant to Section 2.11 of the Pooling and Servicing Agreement. (d) DELIVERY OF COLLECTIONS OR RECOVERIES. In the event that the Seller receives Collections or Recoveries, the Seller agrees to pay to ACE (or to the Servicer if ACE so directs) all such Collections and Recoveries to the extent such amounts are payable to ACE as soon as practicable after receipt thereof. (e) NOTICE OF LIENS. The Seller shall notify ACE promptly after becoming aware of any Lien on any Receivable other than the conveyances hereunder under the Pooling and Servicing Agreement. (f) INTERCHANGE. Not later than 1:00 p.m., New York City time, on each Transfer Date, the Seller shall deposit into the Collection Account, in immediately available funds, (i) the amount of Interchange to be included as Collections of Finance Charge Receivables with respect to the preceding Monthly Period or (ii) if at any time the Servicer cannot identify the amount of such Interchange, the amount reasonably estimated and notified to the Seller by the Servicer as the amount of such Interchange. (g) DOCUMENTATION OF TRANSFER. The Seller shall undertake to file the documents which would be necessary to perfect and maintain the transfer of the Purchased Assets to ACE. (h) PERIODIC RATE FINANCE CHARGES. (i) Except (x) as otherwise required by any Requirements of Law or (y) as is deemed by the Seller [or other Account Owner, as the case may be], to be necessary in order for it to maintain its credit card business or a program operated by such credit card business on a competitive basis based on a good faith assessment by it of the nature of the competition with respect to the credit card business or such program, it shall not at any time take any action which would have the effect of reducing the Portfolio Yield to a level that could be reasonably expected to cause any Series to experience any Pay Out Event or Reinvestment Event based on the insufficiency of the Portfolio Yield or any similar test and (ii) except as otherwise required by any Requirements of Law, it shall not take any action which would have the effect of reducing the Portfolio Yield to be less than the highest Average Rate for any Group. (i) CREDIT CARD AGREEMENTS AND GUIDELINES. Subject to compliance with all Requirements of Law and paragraph (h) above, the Seller [or other Account Owner, as the case may be], may change the terms and provisions of the applicable Credit Card Agreements or the applicable Credit Card Guidelines in any respect (including the calculation of the amount or the timing of charge- offs and the Periodic Rate Finance Charges to be assessed thereon). Notwithstanding the above, unless required by Requirements of Law or as permitted by Section 5.02(a), the Seller [or other Account Owner, as the case may be], will take no action with respect to the applicable Credit Card Agreements or the applicable Credit Card Guidelines, which, at the time of such action [or other Account Owner, as the case may be,] reasonably believes will have a material adverse effect on ACE or the Investor Certificateholders. ACE covenants that, at any time that the Seller is not the Servicer under the Pooling and Servicing Agreement, it will provide the Seller with such information as the Seller may reasonably request to enable the Seller to determine compliance with the covenants contained in Section 5.02(b). ARTICLE VI REPURCHASE OBLIGATION SECTION 6.01. REASSIGNMENT OF INELIGIBLE RECEIVABLES. (a) In the event any representation or warranty under Section 4.02(a)(ii), (iii), (iv), (vi), (vii) or (viii) is not true and correct in any material respect as of the date specified therein with respect to any Receivable or the related Account and as a result of such breach ACE is required to accept reassignment of Ineligible Receivables previously sold by the Seller to ACE pursuant to Section 2.05(a) of the Pooling and Servicing Agreement, the Seller shall accept reassignment of ACE's interest in such Ineligible Receivables on the terms and conditions set forth in Section 6.01(b). (b) The Seller shall accept reassignment of any Ineligible Receivables previously sold by the Seller to ACE from ACE on or prior to the end of the Monthly Period in which such reassignment obligation arises, [and shall pay for such reassigned Ineligible Receivables by treating such Ineligible Receivables as if they were subject to a reversal of the entire unpaid principal balance thereof plus accrued and unpaid finance charges at the annual percentage rate applicable to such Receivables from the last date billed through the end of such Monthly Period and by adjusting the purchase price of future Receivables purchased as provided in Section 3.02 (the "Repurchase Price")]. Upon reassignment of such Ineligible Receivables, ACE shall automatically and without further action be deemed to sell, transfer, assign, set-over and otherwise convey to the Seller, without recourse, representation or warranty, all the right, title and interest of ACE in and to such Ineligible Receivables, all monies due or to become due with respect thereto and all proceeds thereof; and such reassigned Ineligible Receivables shall be treated by ACE as collected in full as of the date on which they were transferred. ACE shall execute such documents and instruments of transfer or assignment and take such other action as shall reasonably be requested by the Seller to effect the conveyance of such Ineligible Receivables pursuant to this subsection. SECTION 6.02. REASSIGNMENT OF CERTIFICATEHOLDERS' INTEREST IN TRUST PORTFOLIO. In the event any representation or warranty set forth in Section 4.01(a) or (c) or Section 4.02(a)(i) or (a)(v) is not true and correct in any material respect and as a result of such breach ACE is required to accept a reassignment of the Certificateholders' Interest in the Receivables previously sold by the Seller to ACE pursuant to Section 2.06 of the Pooling and Servicing Agreement, the Seller shall be obligated to accept a reassignment of ACE's interest in such Receivables on the terms set forth below. The Seller shall pay to ACE by depositing in the Collection Account in immediately available funds, not later than 1:00 P.M. New York City time, on the first Transfer Date following the Monthly Period in which such reassignment obligation arises, in payment for such reassignment, an amount equal to the Portfolio Reassignment Price. ARTICLE VII CONDITIONS PRECEDENT SECTION 7.01. CONDITIONS TO ACE'S OBLIGATIONS REGARDING INITIAL RECEIVABLES. The obligations of ACE to purchase the Receivables in the Initial Accounts on the Closing Date shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of the Seller contained in this Agreement shall be true and correct on the Closing Date with the same effect as though such representations and warranties had been made on such date; (b) All information concerning the Initial Accounts provided to ACE shall be true and correct as of the Initial Cut-Off Date in all material respects; (c) The Seller shall have (i) delivered to ACE a computer file or microfiche list containing a true and complete list of all Initial Accounts identified by account number and by the Receivables balance as of the Initial Cut-Off Date and (ii) substantially performed all other obligations required to be performed by the provisions of this Agreement; (d) The Seller shall have recorded and filed, at its expense, any financing statement with respect to the Receivables (other than Receivables in Additional Accounts) now existing and hereafter created for the transfer of accounts and general intangibles (each as defined in Section 9-106 of the UCC) meeting the requirements of applicable state law in such manner and in such jurisdiction as would be necessary to perfect the sale of and security interest in the Receivables from the Seller to ACE, and shall deliver a file-stamped copy of such financing statements or other evidence of such filings to ACE; (e) On or before the closing Date, ACE and the Trustee shall have entered into the Pooling and Servicing Agreement and the closing under the Pooling and Servicing Agreement shall take place simultaneously with the initial closing hereunder; and (f) All corporate and legal proceedings and all instruments in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to ACE, and ACE shall have received from the Seller copies of all documents (including, without limitation, records of corporate proceedings) relevant to the transactions herein contemplated as ACE may reasonably have requested. SECTION 7.02. CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS. The obligations of the Seller to sell Receivables in the Initial Accounts on the Closing Date shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of ACE contained in this Agreement shall be true and correct with the same effect as though such representations and warranties had been made on such date; (b) Payment or provision for payment of the Purchase Price in accordance with the provision of Section 3.01 hereof shall have been made; and (c) All corporate and legal proceedings and all instruments in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Seller, and the Seller shall have received from ACE copies of all documents (including, without limitation, records for corporate proceedings) relevant to the transactions herein contemplated as the Seller may reasonably have requested. ARTICLE VIII TERM AND PURCHASE TERMINATION SECTION 8.01. TERM. This Agreement shall commence as of the date of execution and delivery hereof and shall continue until the termination of the Trust as provided in Article XII of the Pooling and Servicing Agreement. SECTION 8.02. PURCHASE TERMINATION. If the Seller shall fail generally to, or admit in writing its inability to, pay its debts as they become due; or if a proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of the Seller in an involuntary case under any Debtors Relief law, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of the Seller or for any substantial part of the Seller's property, or for the winding-up or liquidation of the Seller's affairs and, if instituted against the Seller, any such proceeding shall continue undismissed or unstayed and in effect, for a period of 60 consecutive days, or any of the actions sought in such proceeding shall occur; or if the Seller shall commence a voluntary case under any debtor Relief Law, or if the Seller shall consent to the entry of an order for relief in an involuntary case under any Debtor Relief Law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of, or for, any substantial part of its property, or any general assignment for the benefit of its creditors; or the Seller or any subsidiary of the Seller shall have taken any corporate action in furtherance of any of the foregoing actions (each an "Insolvency Event"); then the Seller shall immediately cease to transfer Principal Receivables to ACE and shall promptly give notice to ACE and the Trustee of such Insolvency Event. Notwithstanding any cessation of the transfer to ACE of additional Principal Receivables, Principal Receivables transferred to ACE prior to the occurrence of such Dissolution Event and Collections in respect of such Principal Receivables and Finance Charge Receivables whenever created, accrued in respect of such Principal Receivables, shall continue to be properly of ACE available for transfer by ACE to the Trust pursuant to the Pooling and Servicing Agreement. ARTICLE IX MISCELLANEOUS PROVISIONS SECTION 9.01. AMENDMENT. This Agreement and any Conveyance Papers and the rights and obligations of the parties hereunder may not be changed orally, but only by an instrument in writing signed by ACE and the Seller in accordance with this Section 9.01. This Agreement and any Conveyance Papers may be amended from time to time by ACE and the Seller (i) to cure any ambiguity, (ii) to correct or supplement any provisions herein which may be inconsistent with any other provisions herein or in any such other Conveyance Papers, (iii) to add any other provisions with respect to matters or questions arising under this Agreement or any Conveyance Papers which shall not be inconsistent with the provisions of this Agreement or any Conveyance Papers, (iv) to change or modify the Purchase Price and (v) to change, modify, delete or add any other obligation of the Seller or ACE; provided, however, that no amendment pursuant to clause (v) of this Section 9.01 shall be effective unless the Seller and ACE have been notified in writing that the Rating Agency Condition has been satisfied; provided, further, that such action shall not (as evidenced by an Opinion of Counsel delivered to the Trustee) adversely affect in any material respect the interests of the Trustee or the Investor Certificateholders, unless the Trustee shall consent thereto. Any reconveyance executed in accordance with the provisions hereof shall not be considered to be an amendment to this Agreement. A copy of any amendment to this Agreement shall be sent to the Rating Agency. SECTION 9.02. GOVERNING LAW. THIS AGREEMENT AND THE CONVEYANCE PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 9.03. NOTICES. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by registered mail, return receipt requested, to (a) in the case of the Seller: ------------------------------------- ------------------------------------- ------------------------------------- Attention: ------------------------------------- Facsimile No.: (b) in the case of ACE: ACE Securities Corp. 6525 Morrison Boulevard Suite 318 Charlotte, North Carolina 28211 Attention: [ ] Facsimile No.: [ ] (c) in the case of the Trustee: --------------------------------------- --------------------------------------- --------------------------------------- Attention: --------------------------------------- Facsimile No.: or, as to each party, at such other address as shall be designated by such party in written notice to each other party. SECTION 9.04. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement or any Conveyance Paper shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, and terms of this Agreement or any Conveyance Paper and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of any Conveyance Paper. SECTION 9.05. ASSIGNMENT. Notwithstanding anything to the contrary contained herein, other than ACE's assignment of its rights, title, and interest in, to, and under this Agreement to the Trustee for the benefit of the beneficiaries of the Trust, including the Certificateholders as contemplated by the Pooling and Servicing Agreement and Section 9.06 hereof, this Agreement and all other Conveyance Papers may not be assigned by the parties hereto; provided, however, that the Seller shall have the right to assign its rights, title and interests, in to and under this Agreement to (i) any successor by merger assuming this Agreement (ii) to any affiliate owned directly or indirectly by ACE which assumes the obligations of this Agreement or (iii) to any entity provided that the Rating Agency has advised ACE and the Seller that the Rating Agency Condition has been satisfied. SECTION 9.06. ACKNOWLEDGMENT AND AGREEMENT OF THE SELLER. By execution below, the Seller expressly acknowledges and agrees that all of ACE's right, title, and interest in, to, and under this Agreement, including, without limitation, all of ACE's right, title, and interest in and to the Receivables purchased pursuant to this Agreement, shall be assigned by ACE to the Trustee for the benefit of the beneficiaries of the Trust, including the Certificateholders, and the Seller consents to such assignment. The Seller further agrees that notwithstanding any claim, counterclaim, right or setoff or defense which it may have against ACE, due to a breach by ACE of this Agreement or for any other reason, and notwithstanding the bankruptcy of ACE or any other event whatsoever, the Seller's sole remedy shall be a claim against ACE for money damages and, then only to the extent of funds received by ACE pursuant to the Pooling and Servicing Agreement, and in no event shall the Seller assert any claim on or any interest in the Receivables or any proceeds thereof or take any action which would reduce or delay receipt by Certificateholders of collections with respect to the Receivables. Additionally, the Seller agrees for the benefit of the Trustee that any amounts payable by the Seller to ACE hereunder which are to be paid by ACE to the Trustee for the benefit of the Certificateholders shall be paid by the Seller, on behalf of ACE, directly to the Trustee. SECTION 9.07. FURTHER ASSURANCES. ACE and the Seller agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other party or the Trustee more fully to effect the purposes of this Agreement and the Conveyance Papers, including, without limitation, the execution of any financing statements or continuation statements or equivalent documents relating to the Receivables for filing under the provisions of the UCC or other law of any applicable jurisdiction. SECTION 9.08. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of ACE or the Seller, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, powers or privilege. Subject to Section 9.06, the rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. SECTION 9.09. COUNTERPARTS. This Agreement and all Conveyance Papers may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 9.10. BINDING; THIRD-PARTY BENEFICIARIES. This Agreement and the Conveyance Papers will inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. The Trustee shall be considered a third-party beneficiary of this Agreement. SECTION 9.11. MERGER AND INTEGRATION. Except as specifically stated otherwise herein, this Agreement and the Conveyance Papers set forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement and Conveyance Papers. This Agreement and the Conveyance Papers may not be modified, amended, waived or supplemented except as provided herein. SECTION 9.12. HEADINGS. The headings are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. SECTION 9.13. SCHEDULES AND EXHIBITS. The schedules and exhibits attached hereto and referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement for all purposes. SECTION 9.14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations, warranties and agreements contained in this Agreement or contained in any Supplemental Conveyance, shall remain operative and in full force and effect and shall survive conveyance of the Receivables by ACE to the Trustee pursuant to the Pooling and Servicing Agreement. SECTION 9.15. NONPETITION COVENANT. Notwithstanding any prior termination of this Agreement, the Seller shall not, prior to the date which is one year and one day after the termination of this Agreement, acquiesce, petition or otherwise invoke or cause ACE to invoke the process of any Governmental Authority for the purpose of commencing or sustaining a case against ACE under any Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of ACE or any substantial part of its property or ordering the winding-up or liquidation or the affairs of ACE. IN WITNESS WHEREOF, ACE and the Seller have caused this Receivables Purchase Agreement to be duly executed by their respective officers as of the day and year first above written. [SELLER NAME] By: _______________________________ Title: ____________________________ ACE SECURITIES CORP. By: _______________________________ Title: ____________________________ EXHIBIT A FORM OF SUPPLEMENTAL CONVEYANCE (As required by Section 2.05 of the Receivables Purchase Agreement) SUPPLEMENTAL CONVEYANCE No. ___ dated as of ____________, by and between [SELLER NAME], as Seller ("the Seller"), and ACE SECURITIES CORP. ("ACE") pursuant to the Receivables Purchase Agreement referred to below. WITNESSETH: WHEREAS, the Seller and ACE are parties to a Receivables Purchase Agreement, dated as of [ ], (hereinafter as such agreement may have been, or may from time to time be, amended, supplemented or otherwise modified, the "Receivables Purchase Agreement"); WHEREAS, pursuant to the Receivables Purchase Agreement, the Seller wishes to designate Additional Accounts to be included as Accounts and the Seller wishes to convey its right, title and interest in the Receivables of such Additional Accounts, whether now existing or hereafter created, to ACE pursuant to the Receivables Purchase Agreement (as each such term is defined in the Receivables Purchase Agreement); and WHEREAS, ACE is willing to accept such designation and conveyance subject to the terms and conditions hereof. NOW, THEREFORE, the Seller and ACE hereby agree as follows: 1. DEFINED TERMS. all capitalized terms used herein shall have the meanings ascribed to them in the Receivables Purchase Agreement unless otherwise defined herein. "Addition Date" shall mean, with respect to the Additional Accounts designated hereby, [ ]. "Additional Cut-Off Date" shall mean, with respect to the Additional Accounts designated hereby, [ ]. 2. DESIGNATION OF ADDITIONAL ACCOUNTS. the Seller delivers herewith a computer file or microfiche list containing a true and complete schedule identifying all such Additional Accounts and specifying for each such Account, as of the Additional Cut-Off Date, its account number, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables in such Account. Such computer file, microfiche list or other documentation shall be as of the date of this Supplemental conveyance incorporated into and made part of this Supplemental Conveyance and is marked as Schedule I to this Supplemental Conveyance. 3. CONVEYANCE OF RECEIVABLES. (a) The Seller does hereby sell, transfer, assign, set over and otherwise convey to ACE, without recourse except as provided in the Receivables Purchase Agreement, all its right, title and interest in, to and under (i) the Receivables generated by such Additional Accounts, now existing at the close of business on the Additional Cut-Off Date and hereafter created until termination of the Receivables Purchase Agreement, all monies due or to become due and all amounts received with respect thereto and all "proceeds" (including, without limitation, "Proceeds" as defined in Article 9 of the UCC) thereof and (ii) the right to receive Interchange and Recoveries with respect to such Receivables allocable to the Trust as provided in the Pooling and Servicing Agreement. The foregoing sale, transfer, assignment, set-over and conveyance does not constitute and is not intended to result in a creation of an assumption by ACE of any obligation of the Servicer, the Seller or any other Person in connection with the Accounts, the Receivables or under any agreement or instrument relating thereto, including, without limitation, any obligation to any Obligor, merchant banks, merchants clearance systems, VISA USA, Inc., MasterCard International Incorporated or insurers. (b) In connection with such sale, the Seller agrees to record and file, at its own expense, one or more financing statements (and continuation statements with respect to such financing statements when applicable) with respect to the Receivables, now existing and hereafter created, for the transfer of accounts and general intangibles meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect the sale and assignment of and to deliver a file-stamped copy of such financing statement or other evidence of such filing to ACE. (c) In connection with such sale, the Seller further agrees, at its own expense, on or prior to the date of this Supplemental Conveyance, to indicate in the appropriate computer files or microfiche list that all Receivables created in connection with the Additional Accounts designated hereby have been conveyed to ACE pursuant to this Supplemental conveyance. 4. ACCEPTANCE BY ACE. Subject to the satisfaction of the conditions set forth in Section 6 of this Supplemental Conveyance, ACE hereby acknowledges its acceptance of all right, title and interest to the property, now existing and hereafter created, conveyed to ACE pursuant to Section 3(a) of this Supplemental Conveyance, and declares that it shall maintain such right, title and interest. ACE further acknowledges that, prior to or simultaneously with the execution and delivery of this Supplemental Conveyance, the Seller delivered to ACE the computer file or microfiche list described in Section 2 of this Supplemental Conveyance. 5. REPRESENTATION AND WARRANTIES OF THE SELLER. The Seller hereby represents and warrants to ACE as of the date of this Supplemental Conveyance and as of the Addition Date that: (a) LEGAL, VALID AND BINDING OBLIGATION. This Supplemental Conveyance constitutes a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally from time to time in effect or general principles of equity; (b) ELIGIBILITY OF ACCOUNTS. On the Additional Cut-Off Date, each Additional Account designated hereby is an Eligible Account; (c) NO LIENS. Each Receivable in an Additional account designated hereby has been conveyed to ACE free and clear of any Lien; (d) ELIGIBILITY OF RECEIVABLES. On the Additional Cut-Off Date, each Receivable existing in an Additional Account designate hereby is an Eligible Receivable and as of the date of creation of any Receivables in an Additional Account designated hereby, such Receivable is an Eligible Receivable; (e) SELECTION PROCEDURES. No selection procedure believed by the Seller to be adverse to the interests of ACE or the Investor Certificateholders was utilized in selecting the Additional Accounts; (f) TRANSFER OF RECEIVABLES. This Supplemental Conveyance constitutes a valid sale, transfer and assignment to ACE of all right, title and interest of the Seller in the Receivables arising in the Additional Accounts designated hereby now existing or hereafter created, all monies due or to become due and all amounts received with respect thereto and the "proceeds" (including, without limitation, "proceeds" as defined in Article 9 of the UCC) thereof and the Interchange and the Recoveries with respect thereto payable pursuant to the Receivables Purchase Agreement; (g) NO CONFLICT. The execution and delivery of this Supplemental Conveyance, the performance of the transactions contemplated by this Supplemental conveyance and the fulfillment of the terms hereof, will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it or its properties are bound; (h) NO VIOLATION. The execution and delivery of this Supplemental Conveyance by the Seller, the performance of the transactions contemplated by this Supplemental Conveyance and the fulfillment of the terms hereof applicable to the Seller will not conflict with or violate any Requirements of Law applicable to the Seller; (i) NO PROCEEDINGS. There are no proceedings or investigations, pending or, to the best knowledge of the Seller, threatened against the Seller before any Governmental Authority (i) asserting the invalidity of this Supplemental Conveyance, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Supplemental Conveyance, (iii) seeking any determination or ruling that, in the reasonable judgment of the Seller, would materially and adversely affect the performance by the Seller of its obligations under this Supplemental Conveyance or (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Supplemental Conveyance; and (j) ALL CONSENTS. All authorizations, consents, orders or approval of any court or other governmental authority required to be obtained by the Seller in connection with the execution and delivery of this Supplemental Conveyance by the Seller and the performance of the transactions contemplated by this Supplemental Conveyance by the Seller, have been obtained. 1. RATIFICATION OF THE RECEIVABLES PURCHASE AGREEMENT. The Receivables Purchase Agreement is hereby ratified, and all references to the "Receivables Purchase Agreement", to "this Agreement" and "herein" shall be deemed from and after the Addition Date to be a reference to the Receivables Purchase Agreement as supplemented by this Supplemental Conveyance. Except as expressly amended hereby, all the representations, warranties, terms, covenants and conditions of the Receivables Purchase Agreement shall remain unamended and shall continue to be, and shall, remain, in full force and effect in accordance with its terms and except as expressly provided herein shall not constitute or be deemed to constitute a waiver of compliance with or consent to non-compliance with any term or provision of the Receivables Purchase Agreement. 2. COUNTERPARTS. This Supplemental Conveyance may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have caused this Supplemental Conveyance to be duly executed and delivered by their respective duly authorized officers on the day and the year first above written. ACE SECURITIES CORP. By: __________________________ Name: ________________________ Title: _______________________ [SELLER NAME] By: _______________________ Name: _______________________ Title: _______________________ Schedule I to Supplemental Conveyance ADDITIONAL ACCOUNTS SCHEDULE I LIST OF ACCOUNTS DEEMED INCORPORATED BY REFERENCE EX-10.2.1 20 0020.txt Exhibit 10.2.1 --------------------------------------------------------- SALE AND SERVICING AGREEMENT among [ ] as Issuer, [ ] as Servicer and Sponsor, and ACE SECURITIES CORP. as Depositor Dated as of [ ] --------------------------------------------------------- TABLE OF CONTENTS ARTICLE 1. Definitions SECTION 1.1 Definitions..............................................1 SECTION 1.2 Other Definitional Provisions...........................16 ARTICLE 2. Conveyance of Receivables SECTION 2.1 Conveyance of Receivables...............................17 ARTICLE 3. The Receivables SECTION 3.1 Representations and Warranties of Depositor and Sponsor.................................................18 SECTION 3.2 Repurchase upon Breach..................................23 SECTION 3.3 Custody of Receivable Files.............................23 SECTION 3.4 Duties of Servicer as Custodian.........................24 SECTION 3.5 Instructions; Authority To Act..........................24 SECTION 3.6 Custodian's Indemnification.............................25 SECTION 3.7 Effective Period and Termination........................25 ARTICLE 4. Administration and Servicing of Receivables SECTION 4.1 Duties of Servicer.....................................26 SECTION 4.2 Collection and Allocation of Receivable Payments.......26 SECTION 4.3 Realization upon Receivables...........................27 SECTION 4.4 Physical Damage Insurance; Other Insurance.............27 SECTION 4.5 Maintenance of Security Interests in Financed Vehicles...............................................28 SECTION 4.6 Covenants of Servicer..................................28 SECTION 4.7 Purchase of Receivables upon Breach....................28 SECTION 4.8 Servicing Fee..........................................29 SECTION 4.9 Servicer's Certificate.................................29 SECTION 4.10 Annual Statement as to Compliance; Notice of Default...29 SECTION 4.11 Annual Independent Certified Public Accountants' Report.................................................30 SECTION 4.12 Access to Certain Documentation and Information Regarding Receivables..................................30 SECTION 4.13 Servicer Expenses......................................31 SECTION 4.14 Appointment of Subservicer.............................31 ARTICLE 5. Distributions; Reserve Account; Statements to Certificateholders and Noteholders SECTION 5.1 Establishment of Trust Accounts........................31 SECTION 5.2 Collections............................................33 SECTION 5.3 Application of Collections.............................34 SECTION 5.4 Additional Deposits....................................34 SECTION 5.5 Distributions..........................................35 SECTION 5.6 Reserve Account........................................36 SECTION 5.7 Advances...............................................36 SECTION 5.8 Statements to Certificateholders and Noteholders.......37 SECTION 5.9 Net Deposits...........................................38 SECTION 5.10 Reserved...............................................39 ARTICLE 6. The Depositor SECTION 6.1 Representations of Depositor...........................39 SECTION 6.2 Corporate Existence....................................40 SECTION 6.3 Liability of Depositor; Indemnities....................41 SECTION 6.4 Merger or Consolidation of, or Assumption of the Obligations of, Depositor..............................42 SECTION 6.5 Limitation on Liability of Depositor and Others........43 SECTION 6.6 Depositor May Own Certificates or Notes................43 SECTION 6.7 Security Interest......................................43 ARTICLE 7. The Servicer and the Sponsor SECTION 7.1 Representations of [ ]............................44 SECTION 7.2 Indemnities of Servicer................................45 SECTION 7.3 Merger or Consolidation of, or Assumption of the Obligations of, [ ].................47 SECTION 7.4 Limitation on Liability of [ ] and Others...........47 SECTION 7.5 [ ] Not To Resign as Servicer.......................47 SECTION 7.6 Corporate Existence....................................48 ARTICLE 8. Default SECTION 8.1 Servicer Default.......................................49 SECTION 8.2 Appointment of Successor...............................50 SECTION 8.3 Payment of Servicing Fee; Repayment of Advances........50 SECTION 8.4 Notification to Noteholders and Certificateholders.....50 SECTION 8.5 Waiver of Past Defaults................................51 ARTICLE 9. Termination SECTION 9.1 Optional Purchase of All Receivables...................51 SECTION 9.2 Mandatory Sale of all Contracts........................51 ARTICLE 10. Administrative Duties of the Servicer SECTION 10.1 Administrative Duties..................................53 SECTION 10.2 Records................................................55 SECTION 10.3 Additional Information To Be Furnished to the Issuer.................................................55 ARTICLE 11. Miscellaneous Provisions SECTION 11.1 Amendment..............................................56 SECTION 11.2 Protection of Title to Trust...........................57 SECTION 11.3 Notices................................................59 SECTION 11.4 Assignment.............................................59 SECTION 11.5 Limitations on Rights of Others........................59 SECTION 11.6 Severability...........................................59 SECTION 11.7 Separate Counterparts..................................60 SECTION 11.8 Headings...............................................60 SECTION 11.9 Governing Law..........................................60 SECTION 11.10 Assignment to Trustee..................................60 SECTION 11.11 Nonpetition Covenant...................................60 SECTION 11.12 Limitation of Liability of Owner Trustee and Trustee...60 SECTION 11.13 Independence of the Servicer...........................61 SECTION 11.14 No Joint Venture.......................................61 SCHEDULES Schedule A - Schedule of Receivables Schedule B - Location of Receivables EXHIBITS Exhibit A - Form of Monthly Securityholder Statement Exhibit B - Form of Servicer's Certificate Exhibit C - Auction Procedures SALE AND SERVICING AGREEMENT dated as of [ ], among [ ], a Delaware business trust, as issuer (the "Issuer"), ACE SECURITIES CORP., as depositor (the "Depositor") and [ ], ("[ ]") as servicer (the "Servicer") and sponsor (the "Sponsor"). WHEREAS the Issuer desires to purchase a portfolio of receivables arising in connection with motor vehicle retail installment sale contracts and other motor vehicle installment sale contracts generally purchased by the Originators (as hereinafter defined) from motor vehicle dealers, all of which receivables were acquired by the Depositor pursuant to the Loan Contribution Agreement; WHEREAS the Sponsor as of the date hereof has caused the Depositor to form the Issuer; WHEREAS the Depositor is willing to sell such receivables to the Issuer and assign its rights but none of its obligations under the Loan Contribution Agreement to the Issuer; and WHEREAS the Servicer is willing to service such receivables. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS SECTION 1.1 DEFINITIONS. Whenever used in this Agreement, the following words and phrases shall have the following meanings: "Adviser" has the meaning specified in Section 9.2. "Actuarial Receivable" means any Receivable under which the portion of a payment allocable to principal and the portion of a payment allocable to interest is determined in accordance with the Scheduled Payment. "Advance" means the amount, as of the close of business on the last day of a Collection Period, which the Servicer is required to advance on the related Actuarial Receivable pursuant to Section 5.7(a). "Agreement" means this Sale and Servicing Agreement, as the same may be amended and supplemented from time to time. "Amount Financed" with respect to a Receivable means the amount advanced under the Receivable toward the purchase price of the Financed Vehicle and any related costs. "Auction" has the meaning specified in Section 9.2. "Auction Procedures" has the meaning specified in Section 9.2. "Auction Property" has the meaning specified in Section 9.2. "Available Principal" means, with respect to any Distribution Date, the sum of the following amounts without duplication: (a) that portion of all collections on the Receivables allocable to principal in respect of the preceding Collection Period using (x) in the case of a Simple Interest Receivable, the Simple Interest Method and (y) in the case of an Actuarial Receivable, the actuarial method (including, with respect to Actuarial Receivables, amounts withdrawn from the Payahead Account and allocable to principal and excluding amounts deposited into the Payahead Account and allocable to principal, in each case, in respect of the preceding Collection Period); (b) Liquidation Proceeds attributable to the principal amount of Receivables which became Liquidated Receivables during the preceding Collection Period in accordance with the Servicer's customary servicing procedures; (c) all Advances made by the Servicer of principal due on the Actuarial Receivables in respect of the preceding Collection Period; (d) to the extent attributable to principal, the Purchase Amount of each Receivable repurchased by the Depositor or the Sponsor or purchased by the Servicer as of the close of business on the last day of the preceding Collection Period; and (e) partial prepayments on Receivables in respect of the preceding Collection Period relating to refunds of extended warranty contract costs or of credit life or disability insurance policy premiums, but only if such costs or premiums were financed by the respective Obligor and only to the extent not included in clause (a) above; provided, however, that in calculating the Available Principal all payments and proceeds (including Liquidation Proceeds) of any Receivables (i) repurchased by the Depositor or the Sponsor or purchased by the Servicer the Purchase Amount of which has been included in the Available Principal on a prior Distribution Date, and (ii) distributed to the Servicer, with respect to such Distribution Date, as reimbursement for Outstanding Advances in accordance with Section 5.7 shall all be excluded. "Balloon Loan" means a Receivable originated with a stated maturity of less than the period of time of the corresponding amortization schedule. "Balloon Payment" means the final payment required to be made under a Balloon Loan. "Basic Documents" means the Certificate of Trust, the Trust Agreement, the Indenture, the Loan Contribution Agreement, the Depository Agreement and other documents and certificates delivered in connection therewith. "Certificate" means a Trust Certificate (as defined in the Trust Agreement). "Certificateholder" has the meaning assigned to such term in the Trust Agreement. "Certificateholders' Distributable Amount" means, with respect to any Distribution Date, the amounts to be distributed to the Certificateholders pursuant to Section 5.6(b). "Class A Noteholders' Distributable Amount" means, with respect to any Distribution Date, the sum of the Class A Noteholders' Principal Distributable Amount and the Class A Noteholders' Interest Distributable Amount. "Class A Noteholders' Interest Carryover Shortfall" means, with respect to any Distribution Date, the excess of the Class A Noteholders' Monthly Interest Distributable Amount for the preceding Distribution Date and any outstanding Class A Noteholders' Interest Carryover Shortfall on such preceding Distribution Date, over the amount in respect of interest that is actually deposited in the Note Distribution Account with respect to the Class A Notes on such preceding Distribution Date, plus interest on the amount of interest due but not paid to Class A Noteholders on the preceding Distribution Date, to the extent permitted by law, at the Interest Rate borne by the Class A Notes from such preceding Distribution Date through the current Distribution Date. "Class A Noteholders' Interest Distributable Amount" means, with respect to any Distribution Date, the sum of the Class A Noteholders' Monthly Interest Distributable Amount for such Distribution Date and the Class A Noteholders' Interest Carryover Shortfall for such Distribution Date. Interest on the Class A-1 Notes shall be computed on the basis of the actual number of days in a 360 day year. Interest on the Class A Notes other than the Class A-1 Notes shall be computed on the basis of a 360 day year of twelve 30-day months. "Class A Noteholders' Monthly Interest Distributable Amount" means, with respect to any Distribution Date and the Class A Notes, the product of (i)(A) in the case of the Class A-1 Notes, the product of the Interest Rate for such class and a fraction, the numerator of which is the number of days elapsed from and including the prior Distribution Date (or, in the case of the first Distribution Date, from and including [ ]) to but excluding such Distribution Date and the denominator of which is 360 and (B) in the case of each other class of Class A Notes, one-twelfth of the Interest Rate for such class and (ii) the outstanding principal balance of such class on the immediately preceding Distribution Date, after giving effect to all distributions of principal to Noteholders of such class on such Distribution Date (or, in the case of the first Distribution Date, on the Closing Date). "Class A Noteholders' Monthly Principal Distributable Amount" means, with respect to any Distribution Date, the Class A Noteholders' Percentage of the Principal Distribution Amount. "Class A Noteholders' Percentage" means 100% until the point in time at which the Class A Notes have been paid in full and zero thereafter. "Class A Noteholders' Principal Carryover Shortfall" means, as of the close of any Distribution Date, the excess of the Class A Noteholders' Monthly Principal Distributable Amount and any outstanding Class A Noteholders' Principal Carryover Shortfall from the preceding Distribution Date over the amount in respect of principal that is actually deposited in the Note Distribution Account with respect to the Class A Notes. "Class A Noteholders' Principal Distributable Amount" means, with respect to any Distribution Date, the sum of the Class A Noteholder's Monthly Principal Distributable Amount for such Distribution Date and the Class A Noteholders' Principal Carryover Shortfall as of the close of the preceding Distribution Date; provided, however, that the Class A Noteholders' Principal Distributable Amount shall not exceed the outstanding principal balance of the Class A Notes. In addition, on the Final Scheduled Distribution Date of each class of Class A Notes, the principal required to be deposited in the Note Distribution Account will include the amount necessary (after giving effect to the other amounts to be deposited in the Note Distribution Account on such Distribution Date and allocable to principal) to reduce the Outstanding Amount of such class of Class A Notes to zero. "Class B Noteholders' Distributable Amount" means, with respect to any Distribution Date, the sum of the Class B Noteholders' Principal Distributable Amount and the Class B Noteholders' Interest Distributable Amount. "Class B Noteholders' Interest Carryover Shortfall" means, with respect to any Distribution Date, the excess of the Class B Noteholders' Monthly Interest Distributable Amount for the preceding Distribution Date and any outstanding Class B Noteholders' Interest Carryover Shortfall on such preceding Distribution Date, over the amount in respect of interest that is actually deposited in the Note Distribution Account with respect to the Class B Notes on such preceding Distribution Date, plus interest on the amount of interest due but not paid to Class B Noteholders on the preceding Distribution Date, to the extent permitted by law, at the Interest Rate borne by the Class B Notes from such preceding Distribution Date through the current Distribution Date. "Class B Noteholders' Interest Distributable Amount" means, with respect to any Distribution Date, the sum of the Class B Noteholders' Monthly Interest Distributable Amount for such Distribution Date and the Class B Noteholders' Interest Carryover Shortfall for such Distribution Date. Interest on the Class B Notes shall be computed on the basis of a 360 day year of twelve 30-day months. "Class B Noteholders' Monthly Interest Distributable Amount" means, with respect to any Distribution Date and the Class B Notes, the product of (i) one-twelfth of the Interest Rate for such class and (ii) the outstanding principal balance of such class on the immediately preceding Distribution Date, after giving effect to all distributions of principal to Noteholders of such class on such Distribution Date (or, in the case of the first Distribution Date, on the Closing Date). "Class B Noteholders' Monthly Principal Distributable Amount" means, with respect to any Distribution Date, the Class B Noteholders' Percentage of the Principal Distribution Amount. "Class B Noteholders' Percentage" means 0% until the point in time at which the Class B Notes have been paid in full and 100% thereafter. "Class B Noteholders' Principal Carryover Shortfall" means, as of the close of any Distribution Date, the excess of the Class B Noteholders' Monthly Principal Distributable Amount and any outstanding Class B Noteholders' Principal Carryover Shortfall from the preceding Distribution Date over the amount in respect of principal that is actually deposited in the Note Distribution Account with respect to the Class B Notes. "Class B Noteholders' Principal Distributable Amount" means, with respect to any Distribution Date, the sum of the Class B Noteholder's Monthly Principal Distributable Amount for such Distribution Date and the Class B Noteholders' Principal Carryover Shortfall as of the close of the preceding Distribution Date; provided, however, that the Class B Noteholders' Principal Distributable Amount shall not exceed the outstanding principal balance of the Class B Notes. In addition, on the Final Scheduled Distribution Date of the Class B Notes, the principal required to be deposited in the Note Distribution Account will include the amount necessary (after giving effect to the other amounts to be deposited in the Note Distribution Account on such Distribution Date and allocable to principal) to reduce the Outstanding Amount of the Class B Notes to zero. "Closing Date" means [ ]. "Collection Account" means the account designated as such, established and maintained pursuant to Section 5.1. "Collection Period" means a calendar month, except with respect to the first Collection Period, which shall be the period from the Cutoff Date to [ ]. Any amount stated "as of the close of business on the last day of a Collection Period" shall give effect to the following calculations as determined as of the end of the day on such last day: (1) all applications of collections, (2) all current and previous Payaheads, (3) all applications of Payahead Balances, (4) all Advances and reductions of Outstanding Advances and (5) all distributions to be made on the immediately following Distribution Date. "Computer Tape" means the computer tapes furnished to the Trustee describing certain characteristics of the Receivables as of the Cutoff Date. "Contract" means a motor vehicle retail installment sale contract. "Contract Rate" of a Receivable means the annual rate of finance charges stated in the related Contract. "Cram Down Loss" means, with respect to a Receivable if a court of appropriate jurisdiction in a bankruptcy or insolvency proceeding shall have issued an order reducing the amount owed on such Receivable or otherwise modifying or restructuring the scheduled payments to be made on such Receivable, an amount equal to (i) the excess of the principal balance of such Receivable immediately prior to such order over the principal balance of such Receivable as so reduced and/or (ii) if such court shall have issued an order reducing the effective rate of interest on such Receivable, the net present value (using as the discount rate the higher of the Contract Rate on such Receivable or the rate of interest, if any, specified by the court in such order) of the scheduled payments as so modified or restructured. A "Cram Down Loss" shall be deemed to have occurred on the date of issuance of such order. "Cutoff Date" means [ ]. "Dealer" means a motor vehicle dealer who sold a Financed Vehicle and who originated and assigned the respective Receivable to an Originator under an existing agreement between such Dealer and such Originator. "Dealer Agreement" means any agreement between a Dealer and an Originator relating to the acquisition of Receivables from a Dealer by such Originator. "Delivery" when used with respect to Trust Account Property means: (a) with respect to bankers' acceptances, commercial paper, negotiable certificates of deposit and other obligations that constitute "instruments" within the meaning of Section 9.105(1)(i) of the UCC and are susceptible of physical delivery, transfer thereof to the Trustee or its nominee or custodian by physical delivery to the Trustee or its nominee or custodian endorsed to, or registered in the name of, the Trustee or its nominee or custodian or endorsed in blank, and, with respect to a certificated security (as defined in Section 8-102 of the UCC) transfer thereof (i) by delivery of such certificated security endorsed to, or registered in the name of, the Trustee or its nominee or custodian or endorsed in blank to a financial intermediary (as defined in Section 8-313 of the UCC) and the making by such financial intermediary of entries on its books and records identifying such certificated securities as belonging to the Trustee or its nominee or custodian and the sending by such financial intermediary of a confirmation of the purchase of such certificated security by the Trustee or its nominee or custodian, or (ii) by delivery thereof to a "clearing corporation" (as defined in Section 8-102(3) of the UCC) and the making by such clearing corporation of appropriate entries on its books reducing the appropriate securities account of the transferor and increasing the appropriate securities account of a financial intermediary by the amount of such certificated security, the identification by the clearing corporation of the certificated securities for the sole and exclusive account of the financial intermediary, the maintenance of such certificated securities by such clearing corporation or a "custodian bank" (as defined in Section 8-102(4) of the UCC) or the nominee of either subject to the clearing corporation's exclusive control, the sending of a confirmation by the financial intermediary of the purchase by the Trustee or its nominee or custodian of such securities and the making by such financial intermediary of entries on its books and records identifying such certificated securities as belonging to the Trustee or its nominee or custodian (all of the foregoing, "Physical Property"), and, in any event, any such Physical Property in registered form shall be in the name of the Trustee or its nominee or custodian; and such additional or alternative procedures as may hereafter become appropriate to effect the complete transfer of ownership of any such Trust Account Property to the Trustee or its nominee or custodian, consistent with changes in applicable law or regulations or the interpretation thereof; (b) with respect to any securities issued by the U.S. Treasury, the Federal Home Loan Mortgage Corporation or by the Federal National Mortgage Association that is a book-entry security held through the Federal Reserve System pursuant to Federal book-entry regulations, the following procedures, all in accordance with applicable law, including applicable Federal regulations and Articles 8 and 9 of the UCC: book-entry registration of such Trust Account Property to an appropriate book-entry account maintained with a Federal Reserve Bank by a financial intermediary which is also a "depository" pursuant to applicable Federal regulations and issuance by such financial intermediary of a deposit advice or other written confirmation of such book-entry registration to the Trustee or its nominee or custodian of the purchase by the Trustee or its nominee or custodian of such book-entry securities; the making by such financial intermediary of entries in its books and records identifying such book-entry security held through the Federal Reserve System pursuant to Federal book-entry regulations as belonging to the Trustee or its nominee or custodian and indicating that such custodian holds such Trust Account Property solely as agent for the Trustee or its nominee or custodian; and such additional or alternative procedures as may hereafter become appropriate to effect complete transfer of ownership of any such Trust Account Property to the Trustee or its nominee or custodian, consistent with changes in applicable law or regulations or the interpretation thereof; and (c) with respect to any item of Trust Account Property that is an uncertificated security under Article 8 of the UCC and that is not governed by clause (b) above, registration on the books and records of the issuer thereof in the name of the financial intermediary, the sending of a confirmation by the financial intermediary of the purchase by the Trustee or its nominee or custodian of such uncertificated security, the making by such financial intermediary of entries on its books and records identifying such uncertificated certificates as belonging to the Trustee or its nominee or custodian. "Depositor" means Ace Securities Corp., as the depositor of the Receivables, and each successor to Ace Securities Corp., (in the same capacity) to the extent permitted hereunder. "Depository Agreement" means the Note Depository Agreement. "Determination Date" means, with respect to any Distribution Date, the earlier of the eighth Business Day of the month in which a Distribution Date occurs and the fourth Business Day preceding such Distribution Date. "Distribution Date" means, with respect to each Collection Period, the fifteenth day of the following month, or if such day is not a Business Day, the immediately following Business Day, commencing in [ ]. "Eligible Deposit Account" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution (other than the Depositor or any affiliate of the Depositor) organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution have a credit rating from each Rating Agency in one of its generic rating categories which signifies investment grade. "Eligible Institution" means a depository institution (other than the Depositor or any affiliate of the Depositor) organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank), which (i) has (A) either a long-term senior unsecured debt rating of AAA or a short-term senior unsecured debt or certificate of deposit rating of A-l+ or better by Standard & Poor's and (B)(1) a long-term senior unsecured debt rating of Al or better and (2) a short-term senior unsecured debt rating of P-l or better by Moody's, or any other long-term, short-term or certificate of deposit rating acceptable to the Rating Agencies and (ii) whose deposits are insured by the Federal Deposit Insurance Corporation. If so qualified, the Owner Trustee or the Trustee may be considered an Eligible Institution. "Eligible Investments" mean book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form which evidence: (a) direct obligations of, and obligations fully guaranteed as to timely payment by, the United States of America; (b) demand deposits, time deposits or certificates of deposit of any depository institution (including the Depositor or any Affiliate of the Depositor) or trust company incorporated under the laws of the United States of America or any state thereof or the District of Columbia (or any domestic branch of a foreign bank) and subject to supervision and examination by federal or state banking or depository institution authorities (including depository receipts issued by any such institution or trust company as custodian with respect to any obligation referred to in clause (a) above or portion of such obligation for the benefit of the holders of such depository receipts); provided, however, that at the time of the investment or contractual commitment to invest therein (which shall be deemed to be made again each time funds are reinvested following each Distribution Date), the commercial paper or other short-term senior unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such depository institution or trust company) of such depository institution or trust company shall have a credit rating from Standard & Poor's of A-1+ and from Moody's of P-1; (c) commercial paper (including commercial paper of the Depositor or any Affiliate of the Depositor) having, at the time of the investment or contractual commitment to invest therein, a rating from Standard & Poor's of A-1+ and from Moody's of P-1; (d) investments in money market funds (including funds for which the Depositor, the Trustee or the Owner Trustee or any of their respective Affiliates is investment manager or advisor) having a rating from Standard & Poor's of AAA-m or AAAm-G and from Moody's of Aaa; (e) bankers' acceptances issued by any depository institution or trust company referred to in clause (b) above; (f) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a depository institution or trust company (acting as principal) referred to in clause (b) above; and (g) any other investment which would not cause either Rating Agency to downgrade or withdraw its then current rating of any class of the Notes. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Final Scheduled Distribution Date" means with respect to (i) the Class A-1 Notes, the [ ] Distribution Date, (ii) the Class A-2 Notes, the [ ] Distribution Date, (iii) the Class A-3 Notes, the [ ] Distribution Date, (iv) the Class A-4 Notes, the [ ] Distribution Date, (iv) the Class A-5 Notes, the February 2003 Distribution Date, and (vi) the Class B Notes, the [ ] Distribution Date. "Final Scheduled Maturity Date" means [ ]. "Financed Vehicle" means a new or used automobile, (including passenger car, minivan, sport/utility vehicle or light truck) together with all accessions thereto, securing an Obligor's indebtedness under the respective Receivable. "Indenture" means the Indenture dated as of [ ], between the Issuer and the Trustee, as the same may be amended and supplemented from time to time. "Initial Pool Balance" means the Pool Balance as of the Cutoff Date, which is $[ ]. "Insolvency Event" means, with respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver (including any receiver appointed under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended), liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person's affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing. "Interest Distribution Amount" means, with respect to any Distribution Date, the sum of the following amounts without duplication: (a) that portion of all collections on the Receivables allocable to interest in respect of the preceding Collection Period using (x) in the case of a Simple Interest Receivable, the Simple Interest Method and (y) in the case of an Actuarial Receivable, the actuarial method (including, with respect to Actuarial Receivables, amounts withdrawn from the Payahead Account and allocable to interest, and excluding amounts deposited into the Payahead Account and allocable to interest, in each case in respect of the preceding Collection Period); (b) Liquidation Proceeds attributable to interest on the Receivables which became Liquidated Receivables during the preceding Collection Period in accordance with the Servicer's customary servicing procedures; (c) all Advances made by the Servicer of interest due on the Actuarial Receivables; (d) the Purchase Amount of each Receivable repurchased by the Depositor or the Sponsor or purchased by the Servicer as of the close of business on the last day of the preceding Collection Period to the extent attributable to accrued interest on such Receivable; (e) Recoveries for such Collection Period and (f) Investment Earnings for such Distribution Date; provided, however, that in calculating the Interest Distribution Amount (i) all payments and proceeds (including Liquidation Proceeds) of any Receivables repurchased by the Depositor or the Sponsor or purchased by the Servicer the Purchaser Amount of which has been included in the Interest Distribution Amount on a prior Distribution Date, and (ii) distributed to the Servicer with respect to such Distribution Date, as reimbursement for Outstanding Advances in accordance with Section 5.7 shall all be excluded. "Investment Earnings" means, with respect to any Distribution Date, the investment earnings (net of losses and investment expenses) on amounts on deposit in the Trust Accounts (except the Payahead Account) to be deposited into the Collection Account on such Distribution Date pursuant to Section 5.1(b). "Issuer" means [ ]. "Lien" means a security interest, lien, charge, pledge or encumbrance of any kind, other than tax liens, mechanics' liens and any liens which attach to the respective Receivable by operation of law as a result of any act or omission by the related Obligor. "Liquidated Receivables" means, Receivables (i) which have been liquidated by the Servicer through the sale of the related Financed Vehicle, (ii) as to which all or a portion representing 10% or more of a scheduled payment due is 150 or more days delinquent or (iii) with respect to which proceeds have been received which, in the Servicer's judgment, constitute the final amounts recoverable in respect of such Receivable. "Liquidation Distribution Date" has the meaning specified in Section 9.2. "Liquidation Proceeds" means, with respect to any Liquidated Receivable, the moneys collected in respect thereof, from whatever source (other than any proceeds from any Dealer commission) on a Liquidated Receivable during the Collection Period in which such Receivable became a Liquidated Receivable, net of the sum of any amounts expended by the Servicer in connection with such liquidation and any amounts required by law to be remitted to the Obligor on such Liquidated Receivable. "Loan Contribution Agreement" means the Loan Contribution Agreement dated as of [ ] among the Originators and the Depositor. "Moody's" means Moody's Investors Service, Inc., or its successor. "Net Losses" means the sum of Realized Losses and Cram Down Losses minus Recoveries for any Collection Period. "Note Distribution Account" means the account designated as such, established and maintained pursuant to Section 5.1. "Note Pool Factor" for each class of Notes as of the close of business on a Distribution Date means a seven-digit decimal figure equal to the outstanding principal balance of such class of Notes divided by the original outstanding principal balance of such class of Notes. The Note Pool Factor for the Notes will be 1.0000000 as of the Cutoff Date; thereafter, the Note Pool Factor for each class of Notes will decline to reflect reductions in the outstanding principal balance of such class of Notes. "Obligor" on a Receivable means the purchaser or co-purchasers of the Financed Vehicle and any other Person who owes payments under the Receivable. "Officers' Certificate" means a certificate signed by (a) the president, any senior vice president or any vice president and (b) a secretary or assistant secretary of the Depositor, the Sponsor or the Servicer, as appropriate, provided that no one person may sign in a capacity fulfilling both clause (a) and clause (b). "Originators" means the direct and indirect subsidiaries of [ ] which contributed Receivables to the Depositor pursuant to the Loan Contribution Agreement. "Outstanding Advances" on the Actuarial Receivables means the sum, as of the close of business on the last day of a Collection Period, of all Advances as reduced as provided in Section 5.7(a). "Owner Trust Estate" has the meaning assigned to such term in the Trust Agreement. "Owner Trustee" means [ ], not in its individual capacity but solely as Owner Trustee under the Trust Agreement, its successors in interest or any successor Owner Trustee under the Trust Agreement. "Payahead" on an Actuarial Receivable means the amount, as of the close of business on the last day of a Collection Period, computed in accordance with Section 5.3 with respect to such Receivable. "Payahead Account" means the account designated as such, established and maintained pursuant to Section 5.1. "Payahead Balance" on an Actuarial Receivable means the sum, as of the close of business on the last day of a Collection Period, of all Payaheads made by or on behalf of the Obligor with respect to such Actuarial Receivable, as reduced by applications of previous Payaheads with respect to such Actuarial Receivable, pursuant to Sections 5.3 and 5.7. "Percentage Interest" shall mean, with respect to any Certificate, the percentage interest of ownership in the Trust represented thereby as set forth on the face thereof. "Person" means any individual, corporation, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "Physical Property" has the meaning assigned to such term in the definition of "Delivery" above. "Pool Balance" as of the close of business on the last day of a Collection Period means the aggregate Principal Balance of the Receivables (excluding Purchased Receivables and Liquidated Receivables). "Principal Balance" of a Receivable, as of the close of business on the last day of a Collection Period, means the Amount Financed minus the sum of (i)(a) with respect to a Simple Interest Receivable, that portion of all payments made by or on behalf of the related Obligor on or prior to such day and allocable to principal using the Simple Interest Method and (b) in the case of an Actuarial Receivable, that portion of all Scheduled Payments due on or prior to such day allocable to principal using the actuarial method, (ii) any refunded portion of extended warranty protection plan costs or of physical damage, theft, credit life, credit accident or health insurance premiums included in the Amount Financed, (iii) any payment of the Purchase Amount with respect to the Receivable allocable to principal, (iv) any prepayment in full or any partial prepayments applied to reduce the Principal Balance of the Receivable and (v) Cram Down Losses in respect of such Receivable. "Principal Distribution Amount" means, with respect to any Distribution Date, the sum of (i) (a) with respect to Simple Interest Receivables, that portion of all collections on the Receivable allocable to principal in respect of the preceding Collection Period and (b) with respect to Actuarial Receivables, the sum of (x) the amount of all Scheduled Payments allocable to principal due during the preceding Collection Period and (y) the portion of all prepayments in full allocable to principal received during the preceding Collection Period, in the case of both (a) and (b), without regard to any extensions or modifications thereof effected after the Cutoff Date, other than with respect to any extensions or modifications required in connection with Cram Down Losses during such Collection Period; (ii) the principal balance of each Receivable that was repurchased by the Depositor or the Sponsor, or purchased by the Servicer, in each case, as of the close of business on the last day of the preceding Collection Period (except to the extent included in (i) above); (iii) the principal balance of each Liquidated Receivable which became such during the preceding Collection Period (except to the extent included in (i) above); (iv) partial prepayments on Receivables in respect of the preceding Collection Period relating to refunds of extended service contracts, or of physical damage, credit life, credit accident or heath insurance premium, disability insurance policy premiums, but only if such costs or premiums were financed by the respective Obligor and only to the extent not included in clause (i) above; and (v) the aggregate amount of Cram Down Losses during such Collection Period. "Purchase Amount" means the amount, as of the close of business on the last day of a Collection Period, required to prepay in full the respective Receivable under the terms thereof including interest at the Contract Rate to the end of the month of purchase (without giving effect to Outstanding Advances). "Purchased Receivable" means a Receivable purchased as of the close of business on the last day of a Collection Period by (i) the Servicer pursuant to Section 4.7 or (ii) repurchased by the Depositor or the Sponsor pursuant to Section 3.2. "Rating Agency" means Moody's and/or Standard & Poor's. If no such organization or successor is any longer in existence, "Rating Agency" shall be a nationally recognized statistical rating organization or other comparable Person designated by the Depositor, notice of which designation shall be given to the Trustee, the Owner Trustee and the Servicer. "Rating Agency Condition" means, with respect to any action, that (i) each Rating Agency (other than Standard & Poor's) shall have been given 10 days' prior notice thereof (or such shorter period as shall be acceptable to the Rating Agencies) and that none of the Rating Agencies shall have notified the Depositor, the Servicer, the Owner Trustee or the Trustee in writing that such action will, in and of itself, result in a reduction or withdrawal of the then current rating of any class of the Notes and (ii) Standard & Poor's, if it is still a Rating Agency, shall have notified the Depositor, the Servicer, the Owner Trustee or the Trustee in writing that such action will not, in and of itself, result in a reduction or the withdrawal of the then current rating of any class of the Notes. "Realized Losses" means the excess of the Principal Balance of any Liquidated Receivable over Liquidation Proceeds to the extent allocable to principal. "Receivable" means any Contract listed on Schedule A (which Schedule may be in the form of microfiche) but excluding Liquidated Receivables and Purchased Receivables. "Receivable Files" means the documents specified in Section 3.3. "Recoveries" means, with respect to any Liquidated Receivable, monies collected in respect thereof, from whatever source (other than any proceeds from any Dealer commission), during any Collection Period following the Collection Period in which such Receivable became a Liquidated Receivable, net of the sum of any amounts expended by the Servicer for the account of the Obligor and any amounts required by law to be remitted to the Obligor. "Related Financed Vehicle" means a Financed Vehicle securing the Obligor's indebtedness under a Related Receivable. "Related Originator" means, with respect to any Receivable, the Originator who originated such Receivable and who contributed such Receivable to the Depositor pursuant to the Loan Contribution Agreement. "Related Receivable" means, with respect to any Originator, a Receivable originated by such Originator who contributed such Receivable to the Depositor pursuant to the Loan Contribution Agreement. "Reserve Account" means the account designated as such, established and maintained pursuant to Section 5.1. "Reserve Account Initial Deposit" means an amount equal to $[ ]. "Reserve Account Transfer Amount" means an amount equal to the lesser of (i) the amount of cash or other immediately available funds on deposit in the Reserve Account on such Distribution Date (before giving effect to any withdrawals therefrom relating to such Distribution Date) or (ii) the amount, if any, by which (x) the sum of the Total Servicing Fee, the Class A Noteholders' Interest Distributable Amount, the Class B Noteholders' Distributable Amount, the Class A Noteholders' Principal Distributable Amount and the Class B Noteholders' Principal Distributable Amount for such Distribution Date exceeds (y) the sum of the Interest Distribution Amount and the Available Principal for such Distribution Date. "Scheduled Payment" on an Actuarial Receivable means that portion of the payment required to be made by the Obligor during the respective Collection Period sufficient to amortize the Principal Balance under the actuarial method over the term of the Actuarial Receivable (except, in the case a Balloon Loan, to the extent necessary to amortize the Principal Balance to the amount of the Balloon Payment over the life of the Actuarial Receivable) and to provide interest at the Contract Rate. "Securities" means the Notes and the Certificates. "Securities Act" means the Securities Act of 1933, as amended. "Securityholder" means a Noteholder or Certificateholder. "Servicer" means [ ], the servicer of the Receivables, and each successor to [ ], (in the same capacity) pursuant to Section 7.3 or 8.2. "Servicer Default" means an event specified in Section 8.1. "Servicer's Certificate" means an Officers' Certificate of the Servicer delivered pursuant to Section 4.9, substantially in the form of Exhibit B. "Servicing Fee" has the meaning specified in Section 4.8. "Servicing Fee Rate" means 1.00% per annum. "Simple Interest Method" means the method of allocating a fixed level payment to principal and interest, pursuant to which the portion of such payment that is allocated to interest is equal to the product of the fixed rate of interest multiplied by the unpaid principal balance multiplied by the period of time elapsed since the preceding payment of interest was made and the remainder of such payment is allocable to principal. "Simple Interest Receivable" means any Receivable under which the portion of a payment allocable to principal and the portion of a payment allocable to interest is determined in accordance with the Simple Interest Method. "Specified Reserve Account Balance" means, with respect to any Distribution Date the greater of (a) 5.0% of the sum of the aggregate outstanding principal amount of the Notes on such Distribution Date (after giving effect to all payments on the Notes to be made on such Distribution Date), or (b) 2.0% of the sum of the aggregate initial principal balance of the Notes. "Sponsor" means [ ], as the sponsor of the Issuer. "Standard & Poor's" means Standard & Poor's Ratings Group, or its successor. "Total Distribution Amount" means, for each Distribution Date, the sum of (i) the Interest Distribution Amount, (ii) the Available Principal and (iii) the Reserve Account Transfer Amount, in each case in respect of such Distribution Date. "Total Servicing Fee" means with respect to each Distribution Date the Servicing Fee for the related Collection Period and all accrued and unpaid Servicing Fees for prior Collection Periods. "Transfer Date" means, with respect to any Distribution Date, the Business Day preceding such Distribution Date. "Trust" means the Issuer. "Trust Account Property" means the Trust Accounts, all amounts and investments held from time to time in any Trust Account (whether in the form of deposit accounts, Physical Property, book-entry securities, uncertificated securities or otherwise), including the Reserve Account Initial Deposit, and all proceeds of the foregoing. "Trust Accounts" has the meaning assigned thereto in Section 5.1. "Trust Agreement" means the Trust Agreement dated as of [ ], between the Depositor and the Owner Trustee, as the same may be amended and supplemented from time to time. "Trust Officer" means, (i) in the case of the Trustee, any Officer within the Corporate Trust Office of the Trustee, including any Vice President, Assistant Vice President, Assistant Treasurer, Assistant Secretary or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject and (ii) in the case of the Owner Trustee, any officer in the corporate trust office of the Owner Trustee with direct responsibility for the administration of this Agreement or any of the Basic Documents on behalf of the Owner Trustee. "Trust Property" has the meaning assigned thereto in Section 2.1. "Trustee" means the Person acting as Trustee under the Indenture, its successors in interest and any successor trustee under the Indenture. SECTION 1.2 OTHER DEFINITIONAL PROVISIONS. (a) Capitalized terms used herein and not otherwise defined herein have the meanings assigned to them in the Indenture, or, if not defined therein, in the Trust Agreement. (b) All terms defined in this Agreement shall have the defined meanings when used in any instrument governed hereby and in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (c) As used in this Agreement, in any instrument governed hereby and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such instrument, certificate or other document, and accounting terms partly defined in this Agreement or in any such instrument, certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles as in effect on the date of this Agreement or any such instrument, certificate or other document, as applicable. To the extent that the definitions of accounting terms in this Agreement or in any such instrument, certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such instrument, certificate or other document shall control. (d) The words "hereof," "herein," "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, Schedule and Exhibit references contained in this Agreement are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the term "including" shall mean "including without limitation." (e) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. ARTICLE 2. CONVEYANCE OF RECEIVABLES SECTION 2.1 CONVEYANCE OF RECEIVABLES. In consideration of the Issuer's delivery to or upon the order of the Depositor on the Closing Date of the Certificates and of the net proceeds from the sale of the Notes and the other amounts to be distributed from time to time to the Depositor in accordance with the terms of this Agreement, the Depositor does hereby sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse (subject to the obligations herein): (a) all right, title and interest of the Depositor in and to the Receivables, and all moneys received thereon (other than any proceeds from any Dealer commission), on or after the Cutoff Date and, with respect to Receivables which are Actuarial Receivables, all monies received thereon prior to the Cutoff Date that are due on or after the Cutoff Date; (b) all right, title and interest of the Depositor in the security interests in the Financed Vehicles granted by Obligors pursuant to the Receivables and any other interest of the Depositor in the Financed Vehicles; (c) all right, title and interest of the Depositor in and to any proceeds from claims on any physical damage, repossession, loss, skip, credit life and credit accident, vendor's single interest and health insurance policies or certificates relating to the Financed Vehicles or the Obligors; (d) all right, title and interest of the Depositor in and to refunds for the costs of extended service contracts with respect to Financed Vehicles, refunds of unearned premiums with respect to credit life and credit accident and health insurance policies or certificates covering an Obligor or Financed Vehicle or his or her obligations with respect to a Financed Vehicle and any recourse to Dealers for any of the foregoing; (e) the interest of the Depositor in any proceeds from any Receivable repurchased by a Dealer, pursuant to a Dealer Agreement, as a result of a breach of representation or warranty in the related Dealer Agreement or a default by an Obligor resulting in the repossession of the Financed Vehicle under such Dealer Agreement; (f) all right, title and interest in all funds on deposit from time to time in the Trust Accounts, including the Reserve Account Initial Deposit, and in all investments and proceeds thereof (including all income thereon); (g) all right, title and interest of the Depositor under the Loan Contribution Agreement; and (h) the proceeds of any and all of the foregoing (the items specified in clauses (a) through (h) is referred to herein as the "Trust Property"). It is the intention of the Depositor that the transfer and assignment contemplated by this Agreement shall constitute a sale of the Receivables and other Trust Property from the Depositor to the Trust and the beneficial interest in and title to the Receivables and such other Trust Property shall not be part of the Depositor's estate in the event of the filing of a bankruptcy petition by or against the Depositor under any bankruptcy law. In the event that, notwithstanding the intent of the Depositor, the transfer and assignment contemplated hereby is held not to be a sale, this Agreement shall constitute a grant of a security interest to the Owner Trustee in the Trust Property for the benefit of the Securityholders. ARTICLE 3. THE RECEIVABLES SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF DEPOSITOR AND SPONSOR. The Sponsor and the Depositor, jointly and severally, make the following representations and warranties as to the Receivables on which the Issuer is deemed to have relied in acquiring the Receivables. Such representations and warranties speak as of the execution and delivery of the Agreement, but shall survive the sale, transfer and assignment of the Receivables to the Issuer and the pledge thereof to the Trustee pursuant to the Indenture. (a) TITLE. It is the intention of the Depositor that the transfer and assignment contemplated by the Loan Contribution Agreement constitute a contribution of the Related Receivables from the Originators to the Depositor pursuant to the Loan Contribution Agreement and that the beneficial interest in and title to such Related Receivables not be part of the debtor's estate in the event of the filing of a petition for bankruptcy or insolvency by or against such Originator. No Related Receivable has been sold, transferred, contributed, assigned or pledged by such Originator to any Person other than the Depositor pursuant to the Loan Contribution Agreement. Immediately prior to the transfer and assignment contemplated by the Loan Contribution Agreement, such Originator had good and marketable title to each Related Receivable conveyed by it to the Depositor, free and clear of all Liens and, immediately upon the transfer thereof, the Depositor shall have good and marketable title to each such Related Receivable, free and clear of all Liens; and the transfer of the Related Receivables to the Depositor has been perfected under the UCC. It is the intention of the Depositor that the transfer and assignment herein contemplated constitute a sale of the Receivables from the Depositor to the Issuer and that the beneficial interest in and title to such Receivables not be part of the debtor's estate in the event of the filing of a petition for receivership by or against the Depositor. No Receivable has been sold, transferred, assigned or pledged by the Depositor to any Person other than the Issuer. Immediately prior to the transfer and assignment herein contemplated, the Depositor had good and marketable title to each Receivable, free and clear of all Liens and, immediately upon the transfer thereof, the Issuer shall have good and marketable title to each such Receivable, free and clear of all Liens; and the transfer of the Receivables to the Issuer has been perfected under the UCC. (b) ALL FILINGS MADE. All filings (including UCC filings) necessary in any jurisdiction to give the Depositor a first priority perfected security interest in the Receivables, to give the Issuer a first priority perfected ownership interest in the Receivables, and to give the Trustee a first priority perfected security interest therein, shall have been presented to the Trustee for filing in the appropriate filing offices. Upon such filing by the Servicer, the Trustee will have a first priority perfected security interest in the Trust Property. (c) CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) has been either originated by a Dealer in the regular course of such Dealer's business and purchased from such Dealer by an Originator in the ordinary course of the Originator's business or otherwise originated by the Originator in the ordinary course of the Originator's business, and each Obligor was approved in accordance with the Related Originator's standard underwriting procedures in effect at the time such Receivable was originated or purchased, (B) was conveyed by the Related Originator to the Depositor, (C) has created or shall create a valid, subsisting and enforceable first priority security interest in favor of the Related Originator in the Related Financed Vehicle, which security interest has been assigned by the Related Originator to the Depositor, which is assignable by the Depositor to the Issuer and by the Issuer to the Trustee, (D) contains customary and enforceable provisions under the laws of the State governing such Receivable such that the rights and remedies of the holder thereof are adequate for realization against the collateral of the benefits of the security; and (E) provides for level monthly payments that fully amortizes the Amount Financed by maturity (except for the last payment, which may be different from the level payment and except, with respect to a Balloon Loan, to the extent of the Balloon Payment). (d) SCHEDULE OF RECEIVABLES. The information set forth in Schedule A to this Agreement is true and correct in all material respects as of the opening of business on the Cutoff Date and no selection procedures believed by the Depositor to be adverse to the Noteholders or the Certificateholders were utilized in selecting the Receivables. The Computer Tape regarding the Receivables is true and correct in all material respects as of the Cutoff Date. (e) COMPLIANCE WITH LAW. Each Receivable, the sale of the Financed Vehicle and the sale of any physical damage and credit life and credit accident and health insurance and any extended service contracts complied in all material respects at the time it was originated or made and at the Closing Date (after giving effect to the transactions contemplated by the Basic Documents) complies in all material respects with all requirements of applicable federal, state and local laws and regulations thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the Soldier's and Sailor's Civil Relief Act of 1940, state adaptations of the National Consumer Act and the Uniform Consumer Credit Code, and other consumer credit laws and equal credit opportunity and disclosure laws. (f) BINDING OBLIGATION. Each Receivable represents the legal, valid and binding payment obligation in writing of the Obligor thereunder, enforceable by the holder thereof in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and similar laws now or hereafter in effect related to or affecting creditors' rights generally and subject to general principles of equity (whether applied in a proceeding at law or in equity) and all parties to such Receivable had full legal capacity to execute and deliver such Receivable and all other documents related thereto and to grant the security interest purported to be granted thereby. (g) NO GOVERNMENT OBLIGOR. None of the Receivables is due from the United States of America or any state or from any agency, department or instrumentality of the United States of America or any state. (h) SECURITY INTEREST IN FINANCED VEHICLE. Immediately prior to the sale, assignment, and transfer thereof under the Agreement, (i) each Receivable shall be secured by a validly perfected first priority security interest in the Financed Vehicle in favor of the Related Originator as secured party or (ii) application has been made with the appropriate governmental authority for a valid perfected first priority security interest in the Financed Vehicle in favor of the Related Originator, and such security interest is or shall be prior to all other Liens upon and security interests in such Financed Vehicle which now exist or may hereafter arise or be created (except, as to priority, for any tax liens or mechanics' liens which may arise after the Closing Date). (i) RECEIVABLES IN FORCE. No Receivable has been satisfied, subordinated or rescinded, nor has any Financed Vehicle been released from the Lien granted by the related Receivable in whole or in part unless another vehicle has been substituted as collateral securing the Receivable without any other modification to such Receivable. (j) NO WAIVER. No provision of a Receivable has been modified or waived except as reflected in the Receivable File relating to such Receivable. (k) NO AMENDMENTS. No Receivable has been amended, except as permitted pursuant to Section 4.2. (l) NO DEFENSES. No right of rescission, setoff, counterclaim or defense has been asserted or threatened with respect to any Receivable. The operation of the terms of any Receivable or the exercise of any right thereunder will not render such Receivable unenforceable in whole or in part or subject to any such right of rescission, setoff, counterclaim, or defense. (m) NO LIENS. As of the Cutoff Date, there are no Liens or claims, including Liens for work, labor, materials or unpaid state or federal taxes relating to any Financed Vehicle securing the related Receivable, that are or may be prior to or equal to the Lien granted by such Receivable. (n) NO DEFAULT. Except for payment delinquencies continuing for a period of not more than thirty days as of the Cutoff Date and, except as permitted in this paragraph, no default, breach, violation or event (in any such case) permitting acceleration under the terms of any Receivable has occurred; and no continuing condition that with notice or the lapse of time would constitute a default, breach, violation or event (in any such case) permitting acceleration under the terms of any Receivable has arisen; and the Depositor has not waived and shall not waive any of the foregoing. (o) MATURITY OF RECEIVABLES. Each Receivable has an original maturity of not more than [ ] months; the weighted average original maturity of the Receivables is [ ] months as of the Cutoff Date; the remaining term of each Receivable is [ ] months or less as of the Cutoff Date; the weighted average remaining term of the Receivables is [ ] months as of the Cutoff Date; and the latest scheduled maturity of any Receivable shall be no later than the Final Scheduled Maturity Date. (p) NO BANKRUPTCIES. No Obligor on any Receivable was noted in the related Receivable File as having filed for bankruptcy in a proceeding which remained undischarged as of the Cutoff Date. (q) NO REPOSSESSIONS. As of the Cutoff Date, no Financed Vehicle securing any Receivable is in repossession status. (r) CHATTEL PAPER. Each Receivable constitutes "chattel paper" as defined in the UCC. (s) CONTRACT RATE. The weighted average Contract Rate of the Receivables as of the Cutoff Date is approximately [ ]%. (t) PRINCIPAL BALANCE. Each Receivable has an outstanding principal balance as of the Cutoff Date of not less than $[ ] or more than $[ ]. The average principal balance of the Receivables as of the Cutoff Date is $[ ]. The aggregate principal balance of the Receivables as of the Cutoff Date is $[ ]. (u) FINANCING. Approximately [ ]% of the aggregate principal balance of the Receivables, constituting approximately [ ]% of the number of Receivables, as of the Cutoff Date, represents financing of new vehicles; the remainder of the Receivables represents financing of used vehicles. Approximately [ ]% of the aggregate principal balance of the Receivables, constituting approximately [ ]% of the number of Receivables, as of the Cutoff Date, represents financing of Balloon Loans. Approximately [ ]% of the aggregate Principal Balance of the Receivables, constituting approximately [ ]% of the number of Receivables, as of the Cutoff Date, represents financing of Simple Interest Receivables; the remainder of the Receivables represents financing of Actuarial Receivables. (v) PAID-AHEAD. Not more than [ ]% of the aggregate Principal Balance of the Receivable is paid-ahead more than six months. (w) INSURANCE; OTHER. Each Related Originator, in accordance with its customary procedures, has confirmed (A) that each Obligor has obtained insurance covering the Financed Vehicle as of the date of execution of the Related Receivable insuring against loss and damage due to fire, theft, collision and other risks generally covered by comprehensive and collision coverage and that each Receivable requires the Obligor to maintain such insurance naming the applicable Originator and its successors and assigns as a loss payee, (B) each Receivable that finances the cost of premiums for credit life and credit accident and health insurance is covered by an insurance policy or certificate of insurance naming the applicable Originator as loss payee (lienholder) under each such insurance policy and certificate of insurance and (C) as to each Receivable that finances the cost of an extended service contract, the respective Financed Vehicle which secures the Receivable is covered by an extended service contract. (x) LAWFUL ASSIGNMENT. No Receivable has been originated in, or as of the Closing Date is subject to the laws of, any jurisdiction under which the sale, transfer and assignment of such Receivable or this Agreement or the pledge of such Receivable to the Trustee under the Indenture (i) is unlawful, void, voidable or unenforceable in accordance with its terms or (ii) would render such Receivable void, voidable or unenforceable in accordance with its terms. None of any of the Originators nor the Depositor has entered into any agreement with any account debtor that prohibits, restricts or conditions the assignment of all or any portion of the Receivable. (y) NO INSURANCE PREMIUMS. As of the Cutoff Date, no portion of the principal balance of any Receivable included amounts attributable to the payment of any physical damage or theft insurance premium. (z) ONE ORIGINAL. There is only one manually executed original copy of each Receivable. (aa) ORIGINATION OF RECEIVABLES. Based on the billing address of the Obligors and the principal balance of Receivables as of the Cutoff Date, approximately [ ]% of the Receivables were originated by Dealers in [ ], each Obligor has been approved by the Originator based on the Originator's standard underwriting procedures as in effect at the time the related Receivable was entered into. Based on the billing address of the Obligors and the principal balance of the Receivables as of the Cutoff Date, not more than [ ]% of the Receivables were originated in any one state other than [ ]. (bb) RECEIVABLE FILES. The Receivable Files are kept at the locations listed in Schedule B. (cc) COMPUTER RECORDS. As of the Closing Date, the accounting and computer records relating to the Receivables of the Depositor and each Originator have been marked to show the absolute ownership by the Owner Trustee on behalf of the Trust of the Receivables. SECTION 3.2 REPURCHASE UPON BREACH. The Sponsor, the Depositor, the Servicer or the Owner Trustee, as the case may be, shall inform the other parties to this Agreement and the Trustee promptly, in writing, upon its discovery of any breach of the Depositor's and the Sponsor's representations and warranties made pursuant to Section 3.1. Unless any such breach shall have been cured by the last day of the first Collection Period following the discovery thereof by the Owner Trustee or receipt by the Owner Trustee of written notice from the Sponsor, the Depositor or the Servicer of such breach, the Sponsor and the Depositor shall be jointly and severally obligated to repurchase any Receivable in which the interests of the Noteholders or Certificateholders are materially and adversely affected by any such breach as of the last day of such Collection Period. In consideration of and simultaneously with the repurchase of the Receivable, the Sponsor and/or the Depositor shall remit to the Collection Account the Purchase Amount in the manner specified in Section 5.4 and the Issuer shall execute such assignments and other documents reasonably requested by the Sponsor and/or the Depositor in order to effect such repurchase. The sole remedy of the Issuer, the Owner Trustee, the Trustee, the Noteholders or the Certificateholders with respect to a breach of representations and warranties pursuant to Section 3.1 and the agreement contained in this Section shall be to require the Sponsor and/or the Depositor to repurchase Receivables pursuant to this Section, subject to the conditions contained herein. Neither the Owner Trustee nor the Trustee shall have a duty to conduct any affirmative investigation as to the occurrence of any conditions requiring the repurchase of any Receivable pursuant to this Section. SECTION 3.3 CUSTODY OF RECEIVABLE FILES. To assure uniform quality in servicing the Receivables and to reduce administrative costs, the Issuer and the Trustee hereby revocably appoints the Servicer, and the Servicer hereby accepts such appointment, to act as the agent of the Issuer and the Trustee as custodian of the following documents or instruments which are hereby constructively delivered to the Trustee, as pledgee of the Issuer with respect to each Receivable: (a) the original of the Receivable; (b) a record of the information supplied by the Obligor in the original credit application; (c) the original certificate of title or such documents that the Servicer shall keep on file, in accordance with its customary procedures, evidencing the security interest of the Depositor in the Financed Vehicle (it being understood that the original certificates of title generally are not delivered to the Servicer for 90 days but that promptly upon delivery they shall be delivered to the Servicer as custodian hereunder); and (d) any and all other documents that the Servicer shall keep on file, in accordance with its customary procedures, relating to a Receivable, an Obligor or a Financed Vehicle. SECTION 3.4 DUTIES OF SERVICER AS CUSTODIAN. (a) SAFEKEEPING. The Servicer shall hold the Receivable Files on behalf of the Issuer and the Trustee and maintain such accurate and complete accounts, records and computer systems pertaining to each Receivable File as shall enable the Issuer to comply with this Agreement. In performing its duties as custodian the Servicer shall act with reasonable care, using that degree of skill and attention that the Servicer exercises with respect to the receivable files relating to all comparable automotive receivables that the Servicer services for itself or others. The Servicer shall conduct, or cause to be conducted, periodic audits of the Receivable Files held by it under this Agreement and of the related accounts, records and computer systems, in such a manner as shall enable the Issuer or the Trustee to verify the accuracy of the Servicer's record keeping. The Servicer shall promptly report to the Issuer and the Trustee any failure on its part to hold the Receivable Files and maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure. (b) Maintenance of and Access to Records. The Servicer shall maintain each Receivable File at one of its offices specified in Schedule B to this Agreement or at such other office as shall be specified to the Issuer and the Trustee by written notice not later than 90 days after any change in location. Upon reasonable prior notice, the Servicer shall make available to the Issuer and the Trustee or their respective duly authorized representatives, attorneys or auditors a list of locations of the Receivable Files and records and computer systems maintained by the Servicer at such times during normal business hours as the Issuer or the Trustee shall instruct. (c) Release of Documents. Upon written instruction from the Trustee, the Servicer shall release any Receivable File to the Trustee, the Trustee's agent, or the Trustee's designee, as the case may be, at such place or places as the Trustee may designate, as soon as practicable and upon the release and delivery of any such document in accordance with the instructions of the Trustee, the Servicer shall be released from any further liability and responsibilities under this Section 3.4 with respect to such documents unless and until such time as such document may be returned to the Servicer. SECTION 3.5 INSTRUCTIONS; AUTHORITY TO ACT. The Servicer shall be deemed to have received proper instructions with respect to the Receivable Files upon its receipt of written instructions signed by a Trust Officer of the Trustee. SECTION 3.6 CUSTODIAN'S INDEMNIFICATION. The Servicer as custodian shall indemnify and hold harmless the Trust, the Owner Trustee and the Trustee and each of their officers, directors, employees and agents for any and all liabilities, obligations, losses, compensatory damages, payments, costs or expenses (including reasonable attorneys' fees and expenses) that may be imposed on, incurred by or asserted against the Trust, the Owner Trustee or the Trustee or any of their officers, directors, employees and agents as the result of any improper act or omission in any way relating to the maintenance and custody by the Servicer as custodian of the Receivable Files where the final determination that any such improper act or omission by the Servicer resulted in such liability, obligation, loss, damage, payment, cost or expense is established by a court of law, by an arbitrator or by way of settlement agreed to by the Servicer; provided, however, that the Servicer shall not be liable to the Trust or the Owner Trustee for any portion of any such amount resulting from the willful misfeasance, bad faith or negligence of the Owner Trustee and the Servicer shall not be liable to the Trustee for any portion of any such amount resulting from the willful misfeasance, bad faith or negligence of the Trustee. This provision shall not be considered to limit the Servicer's or any other party's rights, obligations, liabilities, claims or defenses which arise as a matter of law or pursuant to any other provision of this Agreement. SECTION 3.7 EFFECTIVE PERIOD AND TERMINATION. The Servicer's appointment as custodian shall become effective as of the Cutoff Date and shall continue in full force and effect until terminated pursuant to this Section. If [ ] shall resign as Servicer in accordance with the provisions of this Agreement or if all of the rights and obligations of any Servicer shall have been terminated under Section 8.1, the appointment of such Servicer as custodian shall be terminated by the Trustee or by the Holders of Notes evidencing not less than 25% of the Outstanding Amount of the Notes or such Holders may terminate the rights and obligations of the Servicer under Section 8.1. The Trustee or, with the consent of the Trustee, the Owner Trustee, may terminate the Servicer's appointment as custodian, with cause, at any time upon written notification to the Servicer, and without cause upon 30 days' prior written notification to the Servicer and the Rating Agencies. As soon as practicable after any termination of such appointment, the Servicer shall deliver the Receivable Files to the Trustee or the Trustee's agent at such place or places as the Trustee may reasonably designate in writing. If the Servicer shall be terminated as custodian hereunder for any reason but shall continue to serve as Servicer, the Trustee shall, or shall cause its agent to, make the Receivable Files available to the Servicer during normal business hours upon reasonable notice so as to permit the Servicer to perform its obligations as Servicer hereunder. ARTICLE 4. ADMINISTRATION AND SERVICING OF RECEIVABLES SECTION 4.1 DUTIES OF SERVICER. The Servicer, as agent for the Issuer (to the extent provided herein), shall manage, service, administer and make collections on the Receivables (other than Purchased Receivables) with reasonable care, using that degree of skill and attention that the Servicer exercises with respect to all comparable automotive receivables that it services for itself or others. The Servicer's duties shall include collection and posting of all payments, responding to inquiries of Obligors on such Receivables, investigating delinquencies, sending payment coupons or periodic statements or invoices to Obligors, reporting any tax information to Obligors, accounting for collections and furnishing monthly and annual statements to the Owner Trustee and the Trustee with respect to distributions and making Advances pursuant to Section 5.7. Subject to the provisions of Section 4.2, the Servicer shall follow its customary standards, policies and procedures in performing its duties as Servicer. Without limiting the generality of the foregoing, the Servicer is authorized and empowered to execute and deliver, on behalf of itself, the Issuer, the Owner Trustee, the Trustee, the Certificateholders and the Noteholders or any of them, any and all instruments of satisfaction or cancellation, or partial or full release or discharge, and all other comparable instruments, with respect to such Receivables or to the Financed Vehicles securing such Receivables. If the Servicer shall commence a legal proceeding to enforce a Receivable, the Issuer (in the case of a Receivable other than a Purchased Receivable) shall thereupon be deemed to have automatically assigned, solely for the purpose of collection, such Receivable to the Servicer. If in any enforcement suit or legal proceeding it shall be held that the Servicer may not enforce a Receivable on the ground that it shall not be a real party in interest or a holder entitled to enforce such Receivable, the Owner Trustee shall, at the Servicer's expense and direction, take steps to enforce such Receivable, including bringing suit in its name or the name of the Trustee, the Certificateholders or the Noteholders. The Owner Trustee shall upon the written request of the Servicer furnish the Servicer with any powers of attorney and other documents reasonably necessary or appropriate (as certified to the Owner Trustee by the Servicer) to enable the Servicer to carry out its servicing and administrative duties hereunder. SECTION 4.2 COLLECTION AND ALLOCATION OF RECEIVABLE PAYMENTS. (a) The Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Receivables as and when the same shall become due and shall follow such collection procedures as it follows with respect to all comparable automotive receivables that it services for itself or others. The Servicer shall allocate collections between principal and interest in accordance with the customary servicing procedures it follows with respect to all comparable automotive receivables that it services for itself or others. (b) The Servicer may not grant extensions or modify the original due dates of a Receivable; provided, however, that the Servicer may (i) modify the original due date of a Receivable by authorizing an Obligor to skip up to two scheduled principal and interest payments in any rolling 12-month period and extend the final maturity date with respect to any such Receivable by a term equal to one month for each payment skipped, (ii) modify the original due date and terms of a Receivable by re-amortizing the Receivable and extending the final maturity date once during the term of a Receivable, and (iii) grant extensions or modify the original due dates of a Receivable with respect to a Receivable for which a court of appropriate jurisdiction in a bankruptcy or insolvency proceeding shall have issued an order reducing the amount owed on such Receivable or otherwise modifying or restructuring the scheduled payments or other terms on such Receivable; provided, however, that the Servicer may not extend the date for final payment by the Obligor of any Receivable beyond the last day of the Collection Period preceding the Class B Note Final Scheduled Distribution Date. The Servicer may in its discretion waive any late payment charge or any other fees that may be collected in the ordinary course of servicing a Receivable. The Servicer shall not voluntarily agree to any reduction of (i) the original interest rate, (ii) the amount of any Scheduled Payment on an Actuarial Receivable or the original regular scheduled payment on a Simple Interest Receivable, or (iii) the Principal Balance of any Receivable. SECTION 4.3 REALIZATION UPON RECEIVABLES. On behalf of the Issuer, the Servicer shall use all reasonable efforts, consistent with its customary servicing procedures, to repossess or otherwise convert the ownership of the Financed Vehicle securing any Receivable as to which the Servicer shall have determined eventual payment in full is unlikely. From time to time, as appropriate for servicing or foreclosing upon any Receivable, the Owner Trustee shall, upon written request of the Servicer, execute such documents as shall be necessary to prosecute any such proceedings. The Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of automotive receivables, which may include reasonable efforts to realize proceeds from Receivables repurchased by a Dealer, pursuant to a Dealer Agreement, as a result of a breach of representation or warranty in the related Dealer Agreement or a default by an Obligor resulting in the repossession of the Financed Vehicle under such Dealer Agreement. The foregoing shall be subject to the provision that, in any case in which the Financed Vehicle shall have suffered damage, the Servicer shall not expend funds in connection with the repair or the repossession of such Financed Vehicle unless it shall determine in its reasonable discretion that such repair and/or repossession will increase the Liquidation Proceeds by an amount greater than the amount of such expenses. SECTION 4.4 PHYSICAL DAMAGE INSURANCE; OTHER INSURANCE. (a) The Servicer shall, in accordance with its customary servicing procedures, verify (i) that each Obligor shall have obtained insurance covering the Financed Vehicle, as of the date of the execution of the Receivable, insuring against loss and damage due to fire, theft, collision and other risks generally covered by comprehensive and collision coverage and that each Receivable requires the Obligor to maintain such physical loss and damage insurance naming the Related Originator and its successors and assigns as a loss payee, (ii) that each Receivable that finances the cost of premiums for credit life and credit accident and health insurance is covered by an insurance policy or certificate naming the Originator as policyholder (creditor) and (iii) as to each Receivable that finances the cost of an extended service contract, the respective Financed Vehicle which secures the Receivable is covered by an extended service contract. (b) To the extent applicable, the Servicer shall not take any action which would result in noncoverage under any of the insurance policies referred to in Section 4.4(a) which, but for the actions of the Servicer, would have been covered thereunder. The Servicer, on behalf of the Trustee shall take such reasonable action as shall be necessary to permit recovery under any of the foregoing insurance policies. Any amounts collected by the Servicer under any of the foregoing insurance policies, shall be deposited in the Collection Account pursuant to Section 5.2. The parties hereto acknowledge that the Servicer shall not be required to force place any insurance coverage referred to in Section 4.4(a)(i) above, or any other insurance coverage. SECTION 4.5 MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES. The Servicer shall, in accordance with its customary servicing procedures, take such steps as are necessary to maintain perfection of (i) the security interest created by each Receivable in the related Financed Vehicle and (ii) the interest of the Trust in the Receivables created by this Agreement, including but not limited to obtaining the execution by the Obligors and the recording, registering, filing, re-recording, re-registering and refiling of all security agreements, financing statements and continuation statements or instruments as are necessary to maintain the security interest granted by Obligors under the respective Receivables, the Originators under the Loan Contribution Agreement, the Depositor hereunder and the Issuer under the Indenture. The Servicer is hereby authorized to take such steps as are necessary to re-perfect such security interest on behalf of the Issuer and the Trustee in the event of the relocation of a Financed Vehicle or for any other reason. SECTION 4.6 COVENANTS OF SERVICER. The Servicer shall not release the Financed Vehicle securing any Receivable from the security interest granted by such Receivable in whole or in part except in the event of payment in full by the Obligor thereunder or repossession or except as may be required by an insurer in order to receive proceeds from insurance covering such Financed Vehicle, nor shall the Servicer impair the rights of the Issuer, the Trustee, the Certificateholders or the Noteholders in such Receivables (it being understood that no action of the Servicer taken in compliance with the terms of this Agreement shall be deemed to impair such rights), nor shall the Servicer increase the number of scheduled payments due under a Receivable. Notwithstanding the foregoing, the Servicer may, as described in Section 4.2(b), grant extensions or modify the original due dates of a Receivable or make such other changes with respect to a Receivable for which a court of appropriate jurisdiction in a bankruptcy or insolvency proceeding shall have issued an order reducing the amount owed on such Receivable or otherwise modifying or restructuring the scheduled payments on such Receivable; provided, however, that the Servicer may not extend the date for final payment by the Obligor of any Receivable beyond the last day of the Collection Period preceding the Class B Note Final Scheduled Distribution Date. SECTION 4.7 PURCHASE OF RECEIVABLES UPON BREACH. The Servicer or the Owner Trustee shall inform the other party and the Trustee and the Depositor promptly, in writing, upon the discovery of any breach pursuant to Section 4.2(b), 4.5 or 4.6. Unless the breach shall have been cured by the last day of the second Collection Period following such discovery thereof by the Owner Trustee or the receipt by the Owner Trustee of notice of such breach, the Servicer shall be obligated to purchase any Receivable in which the interests of the Noteholders or the Certificateholders are materially and adversely affected by such breach as of the last day of such second Collection Period (or, at the Servicer's option, the last day of the first Collection Period following the discovery). In consideration of the purchase of any such Receivable pursuant to the preceding sentence, the Servicer shall remit the Purchase Amount in the manner specified in Section 5.4. The sole remedy of the Issuer, the Owner Trustee, the Trustee, the Certificateholders or the Noteholders with respect to a breach of Section 4.2(b), 4.5 or 4.6 shall be to require the Servicer to purchase Receivables pursuant to this Section. Neither the Trustee nor the Owner Trustee shall have any duty to conduct any affirmative investigation as to the occurrence of any condition requiring the purchase of any Receivable pursuant to this Section. SECTION 4.8 SERVICING FEE. The servicing fee for each Distribution Date shall equal the product of (i) one-twelfth, (ii) the Servicing Fee Rate and (iii) the Pool Balance as of the first day of the related Collection Period (the "Servicing Fee"). In addition, the "Servicing Fee" described in (a) and (b) above shall include late fees, prepayment charges and other similar charges allowed by applicable law with respect to Receivables collected (from whatever source) on the Receivables. SECTION 4.9 SERVICER'S CERTIFICATE. Not later than 11:00 a.m. (New York time) on each Determination Date, the Servicer shall deliver to the Owner Trustee, the Trustee and the Depositor, with a copy to the Rating Agencies, a Servicer's Certificate containing all information necessary to make the distributions pursuant to Sections 5.5 and 5.6 (including, if required, withdrawals from or deposits to the Payahead Account and Advances by the Servicer pursuant to Section 5.7) for the Collection Period preceding the date of such Servicer's Certificate. Receivables to be purchased by the Servicer or to be repurchased by the Depositor or the Sponsor shall be identified by the Servicer by account number with respect to such Receivable (as specified in Schedule A). SECTION 4.10 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT. (a) The Servicer shall deliver to the Owner Trustee and the Trustee, on or before April 30 of each year beginning April 30, [ ], an Officers' Certificate, dated as of December 31 of the preceding year, stating that (i) a review of the activities of the Servicer during the preceding 12-month period (or, in the case of the first such report, during the period from the Closing Date to December 31, [ ]) and of its performance under this Agreement has been made under such officers' supervision and (ii) to the best of such officers' knowledge, based on such review, the Servicer has fulfilled all its obligations under this Agreement throughout such year (or, in the case of the first such certificate, such shorter period) or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officers and the nature and status thereof. The Trustee shall send a copy of such certificate and the report referred to in Section 4.11 to the Rating Agencies. A copy of such certificate and the report referred to in Section 4.11 may be obtained by any Certificateholder by a request in writing to the Owner Trustee addressed to the Corporate Trust Office (as defined in the Trust Agreement) or by any Noteholder by a request in writing to the Trustee addressed to the Corporate Trust Office. Upon the telephone request of the Owner Trustee, the Trustee will promptly furnish the Owner Trustee a list of Noteholders as of the date specified by the Owner Trustee. (b) The Servicer shall deliver to the Owner Trustee, the Trustee and the Rating Agencies, promptly after having obtained knowledge thereof, but in no event later than five (5) Business Days thereafter, written notice in an Officers' Certificate of any event which with the giving of notice or lapse of time, or both, would become a Servicer Default under Section 8.1(a) or (b). SECTION 4.11 ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT. The Servicer shall cause a firm of independent certified public accountants, which may also render other services to the Servicer or the Depositor, to deliver to the Depositor, the Owner Trustee and the Trustee on or before April 30 of each year as of December 31 of the preceding fiscal year, beginning April 30, [ ], (1) a report addressed to the Board of Directors of the Servicer, to the effect that such firm has examined the financial statements of the Servicer and issued its report and that such examination was made in accordance with generally accepted auditing standards (except as otherwise noted therein), and accordingly included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances; and (2) a report on description of lease and loan servicing operations and tests of operating effectiveness in form and substance as is currently prepared on an annual basis with respect to Servicer. The Servicer shall also concurrently cause the accountants to deliver a report addressed to the Servicer, the Trustee and the Owner Trustee to the effect that (1) a review in accordance with agreed upon procedures was made of three randomly selected Servicer Certificates; (2) except as disclosed in the report, no exceptions or errors in the Servicer Certificates were found; and (3) the delinquencies and loss information, relating to the Receivables contained in the Servicer Certificates were found to be accurate. Such report will also indicate that the firm is independent of the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants. SECTION 4.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING RECEIVABLES. The Servicer shall provide to the Certificateholders and Noteholders access to the Receivable Files in such cases where the Certificateholders or the Noteholders shall be required by applicable statutes or regulations to review such documentation as demonstrated by evidence satisfactory to the Servicer in its reasonable judgment. Access shall be afforded without charge, but only upon reasonable request (not less than seventy-two hours) and during the normal business hours at the respective offices of the Servicer. Nothing in this Section shall affect the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors and the failure of the Servicer to provide access to information as a result of such obligation shall not constitute a breach of this Section. SECTION 4.13 SERVICER EXPENSES. The Servicer shall be required to pay all expenses incurred by it in connection with its activities hereunder, including fees and disbursements of independent accountants, taxes imposed on the Servicer and expenses incurred in connection with distributions and reports to Certificateholders and Noteholders. SECTION 4.14 APPOINTMENT OF SUBSERVICER. The Servicer may at any time appoint a subservicer to perform all or any portion of its obligations as Servicer hereunder; provided, however, that the Rating Agency Condition shall have been satisfied in connection therewith; provided further that the Servicer shall remain obligated and be liable to the Issuer, the Owner Trustee, the Trustee, the Certificateholders and the Noteholders for the servicing and administering of the Receivables in accordance with the provisions hereof without diminution of such obligation and liability by virtue of the appointment of such subservicer and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Receivables. The fees and expenses of the subservicer shall be as agreed between the Servicer and its subservicer from time to time and none of the Issuer, the Owner Trustee, the Trustee, the Certificateholders or the Noteholders shall have any responsibility therefor. ARTICLE 5. DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS SECTION 5.1 ESTABLISHMENT OF TRUST ACCOUNTS. (a) (i) The Servicer, for the benefit of the Noteholders and the Certificateholders, shall establish and maintain in the name of the Trustee an Eligible Deposit Account (the "Collection Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders and the Certificateholders. The Collection Account shall be maintained with the Trustee as long as such account is an Eligible Deposit Account. (ii) The Servicer, for the benefit of the Noteholders, shall establish and maintain in the name of the Trustee an Eligible Deposit Account (the "Note Distribution Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders. The Note Distribution Account shall be maintained with the Trustee as long as such account is an Eligible Deposit Account. (iii) The Servicer, for the benefit of the Noteholders and the Certificateholders, shall establish and maintain in the name of the Trustee an Eligible Deposit Account (the "Reserve Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders and the Certificateholders. The Reserve Account shall be maintained with the Trustee as long as such account is an Eligible Deposit Account. (b) Funds on deposit in the Collection Account, the Note Distribution Account, the Payahead Account and the Reserve Account (collectively, the "Trust Accounts") shall be invested by the Trustee (or any custodian with respect to funds on deposit in any such account) in Eligible Investments selected in writing by the Servicer (pursuant to standing instructions delivered to a Trust Officer of the Trustee and a Trust Officer of the Owner Trustee or other written notice so delivered); provided, however, it is understood and agreed that neither the Trustee nor the Owner Trustee shall be liable for any loss arising from such investment in Eligible Investments. All such Eligible Investments shall be held by or on behalf of the Trustee or the Owner Trustee, as applicable, for the benefit of the Noteholders or the Certificateholders, as applicable; on each Distribution Date all interest and other investment income (net of losses and investment expenses) on funds on deposit therein shall be deposited into the Collection Account and shall be deemed to constitute a portion of the Interest Distribution Amount. Other than as permitted by the Rating Agencies, funds on deposit in the Collection Account, the Note Distribution Account, the Payahead Account and the Reserve Account shall be invested in Eligible Investments that will mature so that such funds will be available at the close of business on the Transfer Date preceding the following Distribution Date. Funds deposited in a Trust Account on a Transfer Date which immediately precedes a Distribution Date upon the maturity of any Eligible Investments are not required to be invested overnight. (c) (i) The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Trust Accounts and in all proceeds thereof (including all income thereon) and all such funds, investments, proceeds and income shall be part of the Owner Trust Estate. Except as otherwise provided herein, the Trust Accounts shall be under the sole dominion and control of the Trustee for the benefit of the Noteholders and the Certificateholders, or the Noteholders, as the case may be. If, at any time, any of the Trust Accounts ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) or the Owner Trustee, as applicable, shall within 10 Business Days (or such longer period as to which each Rating Agency may consent) establish a new Trust Account as an Eligible Deposit Account and shall transfer any cash and/or any investments to such new Trust Account. In connection with the foregoing, the Servicer agrees that, in the event that any of the Trust Accounts are not accounts with the Trustee, the Servicer shall notify the Trustee or the Owner Trustee, as applicable, in writing promptly upon any of such Trust Accounts ceasing to be an Eligible Deposit Account. (ii) With respect to the Trust Account Property, the Trustee, agrees, by its acceptance hereof, that: (A) any Trust Account Property that is held in deposit accounts shall be held solely in Eligible Deposit Accounts subject to the penultimate sentence of Section 5.1(c)(i); and, except as otherwise provided herein, each such Eligible Deposit Account shall be subject to the exclusive custody and control of the Trustee, and the Trustee, shall have sole signature authority with respect thereto; (B) any Trust Account Property that constitutes Physical Property shall be delivered to the Trustee in accordance with paragraph (a) of the definition of "Delivery" and shall be held, pending maturity or disposition, solely by the Trustee or a financial intermediary (as such term is defined in Section 8-313(4) of the UCC) acting solely for the Trustee; (C) any Trust Account Property that is a book- entry security held through the Federal Reserve System pursuant to Federal book-entry regulations shall be delivered in accordance with paragraph (b) of the definition of "Delivery" and shall be maintained by the Trustee, pending maturity or disposition, through continued book-entry registration of such Trust Account Property as described in such paragraph; and (D) any Trust Account Property that is an "uncertificated security" under Article 8 of the UCC and that is not governed by clause (C) above shall be delivered to the Trustee in accordance with paragraph (c) of the definition of "Delivery" and shall be maintained by the Trustee, pending maturity or disposition, through continued registration of the Trustee's (or its nominee's) ownership of such security. (iii) The Servicer shall have the power, revocable by the Trustee or by the Owner Trustee with the consent of the Trustee, to instruct the Trustee to make withdrawals and payments from the Trust Accounts for the purpose of permitting the Servicer or the Owner Trustee to carry out its respective duties hereunder or permitting the Trustee to carry out its duties under the Indenture. (d) (i) The Servicer shall establish and maintain with the Trustee an Eligible Deposit Account (the "Payahead Account"). (ii) The Servicer shall on or prior to each Distribution Date (and prior to deposits to the Note Distribution Account) transfer from the Collection Account to the Payahead Account all Payaheads as described in Section 5.3 received by the Servicer during the Collection Period. Notwithstanding the foregoing and the first sentence of Section 5.2, for so long as the Servicer is permitted to make monthly remittances to the Collection Account pursuant to Section 5.2, Payaheads need not be remitted to and deposited in the Payahead Account but instead may be remitted to and held by the Servicer. So long as such condition is met, the Servicer shall not be required to segregate or otherwise hold separate any Payaheads remitted to the Servicer as aforesaid but shall be required to remit Payaheads to the Collection Account in accordance with Section 5.5(a). SECTION 5.2 COLLECTIONS. The Servicer shall remit within two Business Days of receipt thereof to the Collection Account all collected funds received from payments by or on behalf of the Obligors with respect to the Receivables, and all Liquidation Proceeds, both as collected during the Collection Period. Notwithstanding the foregoing, for so long as (i) the Servicer is [ ], (ii) no Servicer Default shall have occurred and be continuing, (iii) if the Servicer does not have a short term debt rating or deposit rating as applicable, of at least A-1 from Standard & Poor's and P-1 from Moody's, a guaranty, letter of credit, surety bond or other similar instrument is issued covering the amounts described in clauses (a), (b), (d) and (e) of the definition of Available Principal and amounts described in clauses (a), (b), (d) and (e) of the definition of Interest Distribution Amount, which is acceptable to the Rating Agencies and issued by an entity, which has a short-term debt or deposit rating, as applicable, of at least A-1 from Standard & Poor's and P-1 from Moody's; and (iv) the Rating Agency Condition shall have been satisfied (and any conditions or limitations imposed by the Rating Agencies in connection therewith are complied with), the Servicer shall remit such collections to the Collection Account on the related Transfer Date. For purposes of this Article V the phrase "payments by or on behalf of Obligors" shall mean payments made with respect to the Receivables by Persons other than the Servicer, the Sponsor or the Depositor. The Rating Agency Condition with respect to this Section 5.4 and the Closing Date shall be deemed to be satisfied upon the issuance to the Depositor of the rating letters on the Closing Date. SECTION 5.3 APPLICATION OF COLLECTIONS. (a) All collections for the Collection Period shall be applied by the Servicer as follows: With respect to each Actuarial Receivable (other than a Purchased Receivable), payments by or on behalf of the Obligor shall be applied first to reduce Outstanding Advances as described in Section 5.7(a). Next, any excess shall be applied, in the case of Actuarial Receivables, to the Scheduled Payment and, shall be applied in the case of Simple Interest Receivables, to interest and principal in accordance with the Simple Interest Method. With respect to Actuarial Receivables, any remaining excess shall be added to the Payahead Balance, and shall be applied to prepay the Actuarial Receivable, but only if the sum of such excess and the previous Payahead Balance shall be sufficient to prepay the Actuarial Receivable in full. Otherwise, any such remaining excess payments shall constitute a Payahead and shall increase the Payahead Balance. (b) All Liquidation Proceeds shall be applied to the related Receivable in accordance with the Servicer's customary servicing procedures. SECTION 5.4 ADDITIONAL DEPOSITS. The Servicer shall deposit in the Collection Account the aggregate Advances pursuant to Section 5.7. The Servicer, the Sponsor and the Depositor shall deposit or cause to be deposited in the Collection Account the aggregate Purchase Amount with respect to any Purchased Receivables and the Servicer shall deposit therein any amounts to be paid under Section 9.1. The Servicer will deposit or cause to be deposited the aggregate Purchase Amount with respect to Purchased Receivables within two Business Days after such obligations become due, unless the Servicer shall not be required to make deposits within two Business Days of receipt pursuant to Section 5.2 (in which case such deposit will be made by the related Transfer Date). All such other deposits shall be made on the Transfer Date following the end of the related Collection Period. SECTION 5.5 DISTRIBUTIONS. (a) On each Distribution Date, the Trustee shall cause to be transferred from the Payahead Account, or from the Servicer in the event the provisions of Section 5.1(d)(ii) are applicable, (i) to the Collection Account, in immediately available funds, the aggregate previous Payaheads to be applied to Scheduled Payments on Actuarial Receivables for the related Collection Period or prepayments for the related Collection Period, pursuant to Sections 5.3 and 5.7, in the amounts set forth in the Servicer's Certificate for such Distribution Date and (ii) to the Depositor, in immediately available funds, the investment earnings, net of losses on the Payaheads for the related Collection Period. A single, net transfer may be made. (b) On each Determination Date, the Servicer shall calculate all amounts required to determine the amounts to be deposited from the Reserve Account into the Collection Account and from the Collection Account into the Note Distribution Account. (c) On or before each Distribution Date, the Servicer shall instruct the Trustee (based on the information contained in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 4.9) to withdraw from the Reserve Account and deposit in the Collection Account and the Trustee shall so withdraw and deposit the Reserve Account Transfer Amount for such Distribution Date. (d) The Servicer shall instruct the Trustee (based on the information contained in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 4.9) to make, and the Trustee shall make, a distribution from the Collection Account to the Servicer by 11:00 a.m. (New York time), amounts in respect of Outstanding Advances to the extent that the Servicer is entitled to reimbursement in respect thereof in accordance with Section 5.7. Subject to the last paragraph of this Section 5.5(d), no later than each Distribution Date, the Servicer shall instruct the Trustee (based on the information contained in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 4.9) to make, and the Trustee shall make, the following deposits and distributions from the Collection Account for deposit in the applicable Account by 10:00 a.m. (New York time), to the extent of the Total Distribution Amount, in the following order of priority: (i) to the Servicer, from the Total Distribution Amount, the Total Servicing Fee; (ii) to the Note Distribution Account, from the Total Distribution Amount remaining after the application of clause (i), the Class A Noteholders' Interest Distributable Amount; (iii) to the Note Distribution Account, from the Total Distribution Amount remaining after the application of clause (i) and (ii), the Class B Noteholders' Interest Distributable Amount; (iv) to the Note Distribution Account, from the Total Distribution Amount remaining after the application of clauses (i) through (iii), the Class A Noteholders' Principal Distributable Amount; (v) to the Note Distribution Account, from the Total Distribution Amount remaining after the application of clauses (i) through (iv), the Class B Noteholders' Principal Distributable Amount; and (vi) to the Trustee for deposit in the Reserve Account, from the Total Distribution Amount, the amounts remaining after the application of clauses (i) through (v) above; provided, however, that following the occurrence of an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iv) or 5.1(v) of the Indenture or an acceleration of the Notes pursuant to Section 5.2 of the Indenture, amounts on deposit in the Collection Account, and, in the case of an acceleration, amounts in the Reserve Account, will be deposited in the Note Distribution Account and applied to the Class A Notes to the extent necessary to pay accrued and unpaid interest on the Class A Notes and then, to the extent funds are available therefore, principal on the Class A Notes until the principal balance of the Class A Notes has been reduced to zero, before any amounts are deposited in the Note Distribution Account for application to the Class B Notes. Following the payment in full of the Class A Notes, amounts on deposit in the Collection Account will be deposited in the Note Distribution Account to the extent necessary to pay accrued and unpaid interest on the Class B and then, to the extent funds are available therefore, principal on the Class B Notes until the principal balance thereof has been reduced to zero. In the event that the Collection Account is maintained with an institution other than the Trustee, the Servicer shall instruct and cause such institution to make all deposits and distributions pursuant to this Section 5.5(d) on the related Transfer Date. SECTION 5.6 RESERVE ACCOUNT. (a) On the Closing Date, the Depositor shall deposit the Reserve Account Initial Deposit into the Reserve Account. In no circumstances will the Depositor be required to deposit from its own funds any amounts in the Reserve Account other than the Reserve Account Initial Deposit to be made on the Closing Date. (b) If the amount on deposit in the Reserve Account on any Distribution Date (after giving effect to any and all deposits and withdrawals therefrom on such Distribution Date) is greater than the Specified Reserve Account Balance for such Distribution Date, the Servicer shall instruct the Trustee to distribute, and the Trustee shall distribute, the amount of the excess to the Paying Agent for distribution to the Certificateholders pursuant to the Trust Agreement. Amounts properly distributed pursuant to Section 5.6(b) shall be deemed released from the Trust and the security interest therein granted to the Trustee and the Depositor shall in no event thereafter be required to refund any such distributed amounts. SECTION 5.7 ADVANCES. (a) As of the close of business on the last day of each Collection Period, if the payments by or on behalf of the Obligor on an Actuarial Receivable (other than a Purchased Receivable) shall be less than the Scheduled Payment, the Payahead Balance shall be applied by the Servicer to the extent of the shortfall and such Payahead Balance shall be reduced accordingly. Next, the Servicer shall advance any remaining shortfall (such amount an "Advance"), to the extent that the Servicer, at its sole discretion, shall determine that the Advance shall be recoverable from the Obligor, the Purchase Amount, Liquidation Proceeds or proceeds of any other Actuarial Receivables. With respect to each Actuarial Receivable, the Advance shall increase Outstanding Advances. Outstanding Advances shall be reduced by subsequent payments by or on behalf of the Obligor, collections of Liquidation Proceeds in respect of the related Receivable or payments of the Purchase Amount of the related Receivable. If the Servicer shall determine that an Outstanding Advance with respect to any Actuarial Receivable shall not be recoverable as aforesaid, the Servicer shall be reimbursed from any collections (including Liquidation Proceeds) on other Actuarial Receivables in the Trust and Outstanding Advances with respect to such Actuarial Receivables shall be reduced accordingly. (b) The Servicer shall not make any advance with respect to interest on or principal of Simple Interest Receivables. SECTION 5.8 STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS. On each Determination Date, the Servicer shall provide to the Trustee (with a copy to the Rating Agencies) for the Trustee to forward to each Noteholder of record, to each Paying Agent, if any, and to the Owner Trustee for the Owner Trustee to forward to each Certificateholder of record, a statement substantially in the form of Exhibit A, setting forth at least the following information as to the Notes and the Certificates to the extent applicable: (i) the amount of such distribution allocable to principal of each class of the Notes; (ii) the amount of such distribution allocable to interest on or with respect to each class of the Notes; (iii) the Pool Balance as of the close of business on the last day of the preceding Collection Period, after giving effect to payments allocated to principal reported under (i) above; (iv) the aggregate outstanding principal balance of each class of the Notes and the Note Pool Factor for each such class after giving effect to payments allocated to principal reported under (i) above; (v) the amount of the Total Servicing Fee paid to the Servicer with respect to the related Collection Period; (vi) the amount of the aggregate Realized Losses for such Collection Period; (vii) cumulative Realized Losses from the Closing Date, including Realized Losses for such Collection Period; (viii) Recoveries, if any, for such Collection Period; (ix) aggregate outstanding principal balance of Receivables that are currently in repossession status (excluding Liquidated Receivables); (x) the Reserve Account Transfer Amount, if any, for such Distribution Date, the Specified Reserve Account Balance for such Distribution Date, the amount distributed to the Certificateholders from the Reserve Account on such Distribution Date, and the balance of the Reserve Account (if any) on such Distribution Date, after giving effect to changes therein on such Distribution Date; (xi) the Class A Noteholders' Interest Carryover Shortfall, the Class B Noteholders' Interest Carryover Shortfall, the Class A Noteholders' Principal Carryover Shortfall, and the Class B Noteholders' Principal Carryover Shortfall; (xii) the aggregate Purchase Amount paid by the Sponsor, the Depositor or the Servicer with respect to the related Collection Period; (xiii) the aggregate Payahead Balance; (xiv) the amounts collected by the Servicer; (xv) the amounts received by the Trust from the Servicer; and (xvi) delinquency information relating to the Receivables which are 30, 60 and 90 days delinquent. Each amount set forth pursuant to paragraph (i), (ii) or (xi) above shall be expressed as a dollar amount per $1,000 of the initial principal balance of the Notes. SECTION 5.9 NET DEPOSITS. As an administrative convenience, if the Servicer is not required to remit collected funds within two Business Days of receipt thereof, the Servicer will be permitted to make the deposit of such funds, aggregate Advances and Purchase Amounts for or with respect to the Collection Period net of distributions to be made to the Servicer with respect to the Collection Period. Similarly, the Servicer may cause to be made a single, net transfer, from the Collection Account to the Payahead Account, or vice versa. The Servicer, however, will account to the Owner Trustee, the Trustee, the Noteholders and the Certificateholders as if all deposits, distributions and transfers were made individually. SECTION 5.10 RESERVED. ARTICLE 6. THE DEPOSITOR SECTION 6.1 REPRESENTATIONS OF DEPOSITOR. The Depositor makes the following representations on which the Issuer is deemed to have relied in acquiring the Receivables. The representations speak as of the execution and delivery of this Agreement and shall survive the sale of the Receivables to the Issuer and the pledge thereof to the Trustee pursuant to the Indenture. (a) ORGANIZATION AND GOOD STANDING. The Depositor is duly organized and validly existing as a corporation in good standing under the laws of the State of [ ] with the corporate power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, and had at all relevant times, and has, the power, authority and legal right to acquire and own the Receivables. (b) DUE QUALIFICATION. The Depositor is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications, except where the failure to so obtain would not have a material adverse impact either on the Depositor, the transactions contemplated in the Basic Documents or the Receivables. (c) POWER AND AUTHORITY OF THE DEPOSITOR. The Depositor has the corporate power and authority to execute and deliver this Agreement and to perform its obligations under each of the Basic Documents to which the Depositor is a party; the Depositor has full corporate power and authority to sell and assign the property to be sold and assigned to and deposited with the Issuer; the Depositor has duly authorized such sale and assignment to the Issuer by all necessary corporate action; and the execution, delivery and performance of each of the Basic Documents to which the Depositor is a party has been duly authorized by the Depositor by all necessary corporate action. (d) BINDING OBLIGATION. This Agreement and each of the Basic Documents to which the Depositor is a party constitute legal, valid and binding obligations of the Depositor, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and similar laws now or hereafter in effect relating to creditors' rights generally and subject to general principles of equity (whether applied in a proceeding at law or in equity). (e) NO VIOLATION. The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time or both) a default under, the articles of association or by-laws of the Depositor, or any material indenture, agreement or other instrument to which the Depositor is a party or by which it shall be bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Basic Documents); nor violate any law or, to the best of its knowledge, any order, rule or regulation applicable to the Depositor of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties. (f) NO PROCEEDINGS. There are no proceedings or investigations pending against the Depositor or, to its best knowledge, threatened against the Depositor, before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties: (i) asserting the invalidity of this Agreement or any of the Basic Documents, the Notes or the Certificates, (ii) seeking to prevent the issuance of the Notes or the Certificates or the consummation of any of the transactions contemplated by this Agreement or any of the Basic Documents, (iii) seeking any determination or ruling that could reasonably be expected to have a material and adverse effect on the performance by the Depositor of its obligations under, or the validity or enforceability of the Basic Documents, the Notes or the Certificates or (iv) seeking to affect adversely the Federal or state income tax or ERISA attributes of the Issuer, the Notes or the Certificates. (g) ALL CONSENTS. All authorizations, licenses, consents, orders or approvals of or registrations or declarations with any court, regulatory body, administrative agency or other government instrumentality required to be obtained, effected or given by the Depositor in connection with the execution and delivery by the Depositor of this Agreement or any of the Basic Documents to which it is a party and the performance by the Depositor of the transactions contemplated by this Agreement or any of the Basic Documents to which it is a party, have been duly obtained, effected or given and are in full force and effect, except where failure to obtain the same would not have a material adverse effect upon the rights of the Issuer, the Noteholders or the Certificateholders. (h) INDEBTEDNESS. All indebtedness of the Depositor will be extinguished concurrently with the sale of the Trust Property by the Depositor to the Trust. SECTION 6.2 CORPORATE EXISTENCE. (a) During the term of this Agreement, subject to Section 6.4, the Depositor will keep in full force and effect its existence, rights and franchises as a corporation under the laws of the jurisdiction of its incorporation and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the Basic Documents and each other instrument or agreement necessary or appropriate to the proper administration of this Agreement and the transactions contemplated hereby. (b) During the term of this Agreement, the Depositor shall observe the applicable legal requirements for the recognition of the Depositor as a legal entity separate and apart from its affiliates, including as follows: (i) the Depositor shall maintain corporate records and books of account separate from those of its affiliates; (ii) except as otherwise provided in this Agreement, the Depositor shall not commingle its assets and funds with those of its affiliates; (iii) the Depositor shall hold such appropriate meetings of its Board of Directors as are necessary to authorize all the Depositor's corporate actions required by law to be authorized by the Board of Directors, shall keep minutes of such meetings and of meetings of its stockholder(s) and observe all other customary corporate formalities (and any successor Depositor not a corporation shall observe similar procedures in accordance with its governing documents and applicable law); (iv) the Depositor shall at all times hold itself out to the public under the Depositor's own name as a legal entity separate and distinct from its affiliates; and (v) all transactions and dealings between the Depositor and its affiliates will be conducted on an arm's-length basis SECTION 6.3 LIABILITY OF DEPOSITOR; INDEMNITIES. The Depositor shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Depositor under this Agreement and the representations made by the Depositor in this Agreement. (a) The Depositor shall indemnify, defend and hold harmless the Issuer, the Owner Trustee and the Trustee and their respective officers, directors, employees and agents from and against any taxes that may at any time be asserted against any such Person with respect to the transactions contemplated in this Agreement and any of the Basic Documents (except any income taxes arising out of fees paid to the Owner Trustee or the Trustee and except any taxes to which the Owner Trustee or the Trustee may otherwise be subject to), including any sales, gross receipts, general corporation, tangible personal property, privilege or license taxes (but, in the case of the Issuer, not including any taxes asserted with respect to, and as of the date of, the sale of the Receivables to the Issuer or the issuance of the Certificates and the issuance and original sale of the Notes, or asserted with respect to ownership of the Receivables or Federal or other income taxes arising out of distributions on the Certificates and the Notes) and reasonable costs and expenses in defending against the same or in connection with any application relating to the Notes or Certificates under any state securities laws. (b) The Depositor shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, the Trustee, the Certificateholders and the Noteholders and the officers, directors, employees and agents of the Issuer, the Owner Trustee and the Trustee from and against any and all costs, expenses, losses, claims, damages and liabilities to the extent arising out of, or imposed upon such Person through (i) the Depositor's willful misfeasance, bad faith or gross negligence in the performance of its duties under this Agreement, or by reason of reckless disregard of its obligations and duties under this Agreement and (ii) the Depositor's or the Issuer's violation of federal or state securities laws in connection with the offering and sale of the Notes or in connection with any application relating to the Notes under any state securities laws. (c) The Depositor shall be liable as primary obligor for, and shall indemnify, defend and hold harmless the Owner Trustee and its officers, directors, employees and agents from and against any and all losses, claims, damages and liabilities and reasonable costs and expenses arising out of, or incurred in connection with, this Agreement or any of the Basic Documents, the Owner Trust Estate, the acceptance or performance of the trusts and duties set forth herein and in the Trust Agreement or the action or the inaction of the Owner Trustee hereunder and under the Trust Agreement, except to the extent that such cost, expense, loss, claim, damage or liability: (i) shall be due to the failure of the Owner Trustee to perform in accordance with the Trust Agreement or the willful misfeasance, bad faith or negligence of the Owner Trustee, or (ii) shall arise from the breach by the Owner Trustee of any of its representations or warranties set forth in Section 7.3 of the Trust Agreement. Such liability and indemnification shall survive the termination of the Trust. In the event of any claim, action or proceeding for which indemnity will be sought pursuant to this paragraph, the Owner Trustee's choice of legal counsel shall be subject to the approval of the Depositor, which approval shall not be unreasonably withheld. (d) The Depositor shall pay any and all taxes levied or assessed upon all or any part of the Trust Estate (other than those taxes expressly excluded from the Depositor's responsibilities pursuant to the parentheticals in paragraph (a) above). Indemnification under this Section shall survive the resignation or removal of the Owner Trustee or the Trustee and the termination of this Agreement or the Indenture or the Trust Agreement, as applicable, and shall include reasonable fees and expenses of counsel and other reasonable expenses of litigation. If the Depositor shall have made any indemnity payments pursuant to this Section and the Person to or on behalf of whom such payments are made thereafter shall collect any of such amounts from others, such Person shall promptly repay such amounts to the Depositor, without interest. SECTION 6.4 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, DEPOSITOR. Any Person (a) into which the Depositor may be merged or consolidated, (b) which may result from any merger or consolidation to which the Depositor shall be a party or (c) which may succeed to the properties and assets of the Depositor substantially as a whole, shall be the successor to the Depositor without the execution or filing of any document or any further act by any of the parties to this Agreement; provided, however, that the Depositor hereby covenants that it will not consummate any of the foregoing transactions except upon satisfaction of the following: (i) the surviving Depositor if other than Ace Securities Corp. executes an agreement of assumption to perform every obligation of the Depositor under this Agreement, (ii) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 3.1 or 6.1 shall have been breached and no Event of Default, and no event that, after notice or lapse of time, or both, would become an Event of Default shall have happened and be continuing, (iii) the Depositor shall have delivered to the Owner Trustee and the Trustee an Officers' Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, and that the Rating Agency Condition shall have been satisfied with respect to such transaction, (iv) the surviving Depositor shall have a consolidated net worth at least equal to that of the predecessor Depositor, (v) such transaction will not result in a material adverse federal or state tax consequence to the Issuer, the Noteholders or the Certificateholders and (vi) unless Ace Securities Corp., is the surviving entity, the Depositor shall have delivered to the Owner Trustee and the Trustee an Opinion of Counsel either (A) stating that, in the opinion of such counsel, all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary fully to preserve and protect the interest of the Owner Trustee and Trustee, respectively, in the Receivables and reciting the details of such filings, or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interests. SECTION 6.5 LIMITATION ON LIABILITY OF DEPOSITOR AND OTHERS. The Depositor and any director or officer or employee or agent of the Depositor may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising under any Basic Document (provided that such reliance shall not limit in any way the Depositor's obligations under Section 3.2). Except as provided in this Agreement, the Depositor shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability. SECTION 6.6 DEPOSITOR MAY OWN CERTIFICATES OR NOTES. The Depositor and any Affiliate thereof may in its individual or any other capacity become the owner or pledgee of Certificates or Notes with the same rights as it would have if it were not the Depositor or an Affiliate thereof, except as expressly provided herein or in any Basic Document. SECTION 6.7 SECURITY INTEREST. During the term of this Agreement, the Depositor will not take any action to assign the security interest in any Financed Vehicles other than pursuant to the Basic Documents. ARTICLE 7. THE SERVICER AND THE SPONSOR SECTION 7.1 REPRESENTATIONS OF [ ]. [ ] makes the following representations on which the Issuer is deemed to have relied in acquiring the Receivables. The representations speak as of the execution and delivery of the Agreement and shall survive the sale of the Receivables to the Issuer and the pledge thereof to the Trustee pursuant to the Indenture. (a) ORGANIZATION AND GOOD STANDING. [ ] is duly organized and validly existing as a corporation in good standing under the laws of the State of Florida with the corporate power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, and had at all relevant times, and has, the power, authority and legal right to service the Receivables. (b) DUE QUALIFICATION. [ ] is duly qualified to do business and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Receivables as required by this Agreement) shall require such qualifications, except where the failure to so obtain would not have a material adverse impact either on [ ], the transactions contemplated in the Basic Documents or the Receivables. (c) POWER AND AUTHORITY OF [ ]. [ ] has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement have been duly authorized by [ ] by all necessary corporate action. All authorizations, consents, orders or approvals of or registrations or declarations with any court, regulatory body, administrative agency or other government instrumentality required to be obtained, effected or given by [ ] in connection with the execution and delivery by [ ] of this Agreement or any of the Basic Documents to which it is a party and the performance by [ ] of the transactions contemplated by this Agreement or any of the Basic Documents to which it is a party, have been duly obtained, effected or given and are in full force and effect, except where failure to obtain the same would not have a material adverse effect upon the rights of the Issuer, the Noteholders or the Certificateholders. (d) BINDING OBLIGATION. This Agreement constitutes a legal, valid and binding obligation of [ ], enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and similar laws now or hereafter in effect relating to creditors' rights generally and subject to general principles of equity (whether applied in a proceeding of law or in equity). (e) NO VIOLATION. The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time or both) a default under the certificate of incorporation or by-laws of [ ], or any material indenture, agreement or other instrument to which [ ] is a party or by which it shall be bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Basic Documents); nor violate any law or, to the best of its knowledge, any order, rule or regulation applicable to [ ] of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over [ ] or its properties. (f) NO PROCEEDINGS. There are no proceedings or investigations pending against [ ], or, to its best knowledge, threatened against [ ], before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over [ ] or its properties: (i) asserting the invalidity of this Agreement or any of the Basic Documents, the Notes or the Certificates, (ii) seeking to prevent the issuance of the Notes or the Certificates or the consummation of any of the transactions contemplated by this Agreement or any of the Basic Documents, (iii) seeking any determination or ruling that could reasonably be expected to have a material and adverse effect on the performance by [ ] of its obligations under, or the validity or enforceability of this Agreement or any of the Basic Documents, the Notes or the Certificates or (iv) seeking to affect adversely the federal or state income tax or ERISA attributes of the Issuer, the Notes or the Certificates. (g) NO AMENDMENT OR WAIVER. No provision of any Receivable has been waived, altered or modified in any respect, except pursuant to a document, instrument or writing included in the relevant Receivable File, and no such amendment, waiver, alteration or modification causes such Receivable not to conform to the other warranties contained in this Section or those of the Depositor and the Sponsor contained in Section 3.1. (h) APPROVALS. All approvals, licenses, authorizations, consents, orders or other actions of any person, corporation or other organization, or of any court, governmental agency or body or official, required in connection with the execution and delivery of this Agreement have been or will be taken or obtained on or prior to the Closing Date. (i) LOCATION OF RECEIVABLE FILES. The Receivable Files are kept in the offices of the Servicer, specified in Schedule B, or at such other office specified in accordance with Section 3.4(b). SECTION 7.2 INDEMNITIES OF SERVICER. The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer under this Agreement. The Servicer shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, the Trustee, the Depositor, the Certificateholders and the Noteholders and any of the officers, directors, employees and agents of the Issuer, the Owner Trustee, the Trustee or the Depositor from any and all losses, claims, damages, liabilities and reasonable costs and expenses (including reasonable attorneys' fees and expenses) to the extent arising out of, or imposed upon any such Person through, the gross negligence, willful misfeasance or bad faith of the Servicer in the performance of its obligations and duties under this Agreement or in the performance of the obligations and duties of any subservicer under any subservicing agreement or by reason of the reckless disregard of its obligations and duties under this Agreement or by reason of the reckless disregard of the obligations of any subservicer under any subservicing agreement, where the final determination that any such cost, expense, loss, claim, damage or liability arose out of, or was imposed upon any such Person through, any such gross negligence, willful misfeasance, bad faith or recklessness on the part of the Servicer or any subservicer, is established by a court of law, by an arbitrator or by way of settlement agreed to by the Servicer. Notwithstanding the foregoing, if the Servicer is rendered unable, in whole or in part, by virtue of an act of God, act of war, fires, earthquake or other natural disasters, to satisfy its obligations under this Agreement, the Servicer shall not be deemed to have breached any such obligation upon the sending of written notice of such event to the other parties hereto, for so long as the Servicer remains unable to perform such obligation as a result of such event. This provision shall not be construed to limit the Servicer's or any other party's rights, obligations, liabilities, claims or defenses which arise as a matter of law or pursuant to any other provision of this Agreement. The Servicer shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, the Trustee, the Depositor, the Certificateholders and the Noteholders or any of the officers, directors, employees and agents of the Issuer, the Owner Trustee, the Trustee or the Depositor from any and all losses, claims, damages, liabilities and reasonable costs and expenses (including reasonable attorneys' fees and expenses) to the extent arising out of or imposed upon any such Person as a result of any compensation payable to any subcustodian or subservicer (including any fees payable in connection with the release of any Receivable File from the custody of such subservicer or in connection with the termination of the servicing activities of such subservicer with respect to any Receivable) whether pursuant to the terms of any subservicing agreement or otherwise. The Servicer shall indemnify, defend and hold harmless the Trustee, the Owner Trustee, the Trust, the Depositor, the Certificateholders and the Noteholders from and against any taxes that may at any time be asserted against the Trustee, the Trust, the Owner Trustee, the Certificateholders, the Noteholders or the Depositor (other than any taxes based upon the income of any such person), with respect to the transactions contemplated herein including, without limitation, any sales, gross receipts, general corporation, tangible personal property, privilege, or license taxes and costs and expenses in defending against the same. The Servicer shall indemnify, defend, and hold harmless the Owner Trustee and Trustee and each of their agents, officers, employees and other Persons employed by each of them in connection with the Basic Documents from and against all reasonable costs and expenses, losses, claims, damages, and liabilities arising out of or incurred in connection with the acceptance or performance of the trusts and duties herein contained or contained in the Basic Documents, if any, except to the extent that such reasonable cost or expense, reasonable loss, claim, damage or liability: (a) shall be due to the willful misfeasance, bad faith, or negligence (except for errors in judgment) of the Owner Trustee or Trustee; (b) relates to any tax other than the taxes with respect to which the Servicer shall be required to indemnify the Owner Trustee or Trustee; or (c) shall arise from the Owner Trustee's or Trustee's breach of any of its representations or warranties set forth in the Trust Agreement or the Indenture, as applicable. Indemnification under this Section shall survive the resignation and removal of the Trustee and the Owner Trustee or the termination of this Agreement. SECTION 7.3 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, [ ]. Any Person (a) into which [ ] may be merged or consolidated, (b) which may result from any merger or consolidation to which [ ] shall be a party or (c) which may succeed to the properties and assets of [ ], substantially as a whole, shall be the successor to [ ] without the execution or filing of any document or any further act by any of the parties to this Agreement; provided, however, that [ ] hereby covenants that it will not consummate any of the foregoing transactions except upon satisfaction of the following: (i) the surviving Servicer if other than [ ], executes an agreement of assumption to perform every obligation of [ ] under this Agreement, (ii) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 7.1 shall have been breached and no Servicer Default, and no event that, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing, (iii) the Servicer shall have delivered to the Owner Trustee and the Trustee an Officers' Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, and that the Rating Agency Condition shall have been satisfied with respect to such transaction, (iv) the surviving Servicer shall have a consolidated net worth at least equal to that of the predecessor Servicer, and (v) such transaction will not result in a material adverse federal or state tax consequence to the Issuer, the Noteholders or the Certificateholders. SECTION 7.4 LIMITATION ON LIABILITY OF [ ] AND OTHERS. Neither [ ] nor any of its directors, officers, employees or agents shall be under any liability to the Issuer, the Noteholders or the Certificateholders, except as provided under this Agreement, for any action taken or for refraining from the taking of any action by [ ] or any subservicer pursuant to this Agreement or for errors in judgment; provided, however, that this provision shall not protect [ ] or any such person against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties under this Agreement. [ ] or any subservicer and any of their respective directors, officers, employees or agents may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement. Except as provided in this Agreement, [ ] shall not be under any obligation to appear in, prosecute or defend any legal action that shall be incidental to its duties to service the Receivables in accordance with this Agreement, and that in its opinion may involve it in any expense or liability; provided, however, that [ ], may (but shall not be required to) undertake any reasonable action that it may deem necessary or desirable in respect of the Basic Documents to protect the interests of the Certificateholders under this Agreement and the Noteholders under the Indenture. SECTION 7.5 [ ] NOT TO RESIGN AS SERVICER. Subject to the provisions of Section 7.3, [ ] hereby agrees not to resign from the obligations and duties hereby imposed on it as Servicer under this Agreement except upon determination that the performance of its duties hereunder shall no longer be permissible under applicable law or if such resignation is required by regulatory authorities. Notice of any such determination permitting the resignation of BDFS, as Servicer shall be communicated to the Owner Trustee and the Trustee at the earliest practicable time (and, if such communication is not in writing, shall be confirmed in writing at the earliest practicable time) and any such determination shall be evidenced by an Opinion of Counsel to such effect delivered to the Owner Trustee and the Trustee concurrently with or promptly after such notice. No such resignation shall become effective until the earlier of the Trustee or a Successor Servicer having assumed the responsibilities and obligations of the resigning Servicer in accordance with Section 8.2 or the date upon which any regulatory authority requires such resignation. SECTION 7.6 CORPORATE EXISTENCE. (a) During the term of this Agreement, subject to Section 6.4, [ ] will keep in full force and effect its existence, rights and franchises as a corporation under the laws of the jurisdiction of its incorporation and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the Basic Documents and each other instrument or agreement necessary or appropriate to the proper administration of this Agreement and the transactions contemplated hereby. (b) During the term of this Agreement, [ ] shall observe the applicable legal requirements for the recognition of [ ] as a legal entity separate and apart from its Affiliates, including as follows: (i) [ ] shall maintain corporate records and books of account separate from those of its Affiliates; (ii) except as otherwise provided in this Agreement, [ ] shall not commingle its assets and funds with those of its Affiliates; (iii) [ ] shall hold such appropriate meetings of its Board of Directors as are necessary to authorize all [ ] corporate actions required by law to be authorized by the Board of Directors, shall keep minutes of such meetings and of meetings of its stockholder(s) and observe all other customary corporate formalities (and any successor Servicer not a corporation shall observe similar procedures in accordance with its governing documents and applicable law); (iv) [ ] shall at all times hold itself out to the public under [ ] own name as a legal entity separate and distinct from its Affiliates; and (v) all transactions and dealings between [ ] and its Affiliates will be conducted on an arm's-length basis. ARTICLE 8. DEFAULT SECTION 8.1 SERVICER DEFAULT. If any one of the following events (a "Servicer Default") shall occur and be continuing: (a) any failure by the Servicer to deliver to the Trustee for deposit in any of the Trust Accounts any required payment or to direct the Trustee to make any required distributions therefrom that shall continue unremedied for a period of five Business Days after written notice of such failure is received by the Servicer from the Owner Trustee or the Trustee or after discovery of such failure by an Authorized Officer of the Servicer; or (b) failure on the part of the Servicer duly to observe or to perform in any material respect any other covenants or agreements of the Servicer set forth in this Agreement or any other Basic Document, which failure shall (i) materially and adversely affect the rights of either the Certificateholders or Noteholders and (ii) continue unremedied for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given (A) to the Servicer by the Owner Trustee or the Trustee or (B) to the Servicer and to the Owner Trustee and the Trustee by the Holders of Notes evidencing not less than 25% of the Outstanding Amount of the Notes (or for such longer period, not in excess of 120 days, as may be reasonably necessary to remedy such default; provided that such default is capable of remedy within 120 days and the Servicer delivers an Officers' Certificate to the Owner Trustee and the Trustee to such effect and to the effect that the Servicer has commenced or will promptly commence, and will diligently pursue, all reasonable efforts to remedy such default); or (c) an Insolvency Event occurs with respect to the Servicer or any successor; then, and in each and every case, so long as the Servicer Default shall not have been remedied, either the Trustee, or the Holders of Notes evidencing not less than 25% of the Outstanding Amount of the Notes, by notice then given in writing to the Servicer and the Owner Trustee (and to the Trustee if given by the Noteholders) may terminate all the rights and obligations (other than the obligations set forth in Section 7.2) of the Servicer under this Agreement. On or after the receipt by the Servicer of such written notice, all authority and power of the Servicer under this Agreement, whether with respect to the Notes, the Certificates or the Receivables or otherwise, shall, without further action, pass to and be vested in the Trustee or such successor Servicer as may be appointed under Section 8.2; and, without limitation, the Trustee and the Owner Trustee are hereby authorized and empowered to execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of the Receivables and related documents, or otherwise. The predecessor Servicer shall cooperate with the successor Servicer, the Trustee and the Owner Trustee in effecting the termination of the responsibilities and rights of the predecessor Servicer under this Agreement, including the transfer to the successor Servicer for administration by it of all cash amounts that shall at the time be held by the predecessor Servicer for deposit, or shall thereafter be received by it with respect to a Receivable. All reasonable costs and expenses (including reasonable attorneys' fees) incurred in connection with transferring the Receivable Files to the successor Servicer and amending this Agreement to reflect such succession as Servicer pursuant to this Section shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs and expenses. Upon receipt of notice of the occurrence of a Servicer Default, the Owner Trustee shall give notice thereof to the Rating Agencies. SECTION 8.2 APPOINTMENT OF SUCCESSOR. (a) Upon the Servicer's receipt of notice of termination, pursuant to Section 8.1 or the Servicer's resignation in accordance with the terms of this Agreement, the predecessor Servicer shall continue to perform its functions as Servicer under this Agreement, in the case of termination, only until the date specified in such termination notice or, if no such date is specified in a notice of termination, until receipt of such notice and, in the case of resignation, until the earlier of (x) the date 45 days from the delivery to the Owner Trustee and the Trustee of written notice of such resignation (or written confirmation of such notice) in accordance with the terms of this Agreement or (y) the date upon which the predecessor Servicer shall become unable to act as Servicer, as specified in the notice of resignation and accompanying Opinion of Counsel. In the event of the Servicer's termination hereunder, the Trustee shall appoint a successor Servicer, and the successor Servicer shall accept its appointment by a written assumption in form acceptable to the Owner Trustee and the Trustee. In the event that a successor Servicer has not been appointed at the time when the predecessor Servicer has ceased to act as Servicer in accordance with this Section, the Trustee without further action shall automatically be appointed the successor Servicer and the Trustee shall be entitled to the Servicing Fee. Notwithstanding the above, the Trustee shall, if it shall be unwilling or unable so to act, appoint or petition a court of competent jurisdiction to appoint, any established institution, having a net worth of not less than $50,000,000 and whose regular business shall include the servicing of automotive receivables, as the successor to the Servicer under this Agreement. (b) Upon appointment, the successor Servicer (including the Trustee acting as successor Servicer) shall be the successor in all respects to the predecessor Servicer and shall be subject to all the responsibilities, duties and liabilities arising thereafter relating thereto placed on the predecessor Servicer and shall be entitled to the Servicing Fee and all the rights granted to the predecessor Servicer by the terms and provisions of this Agreement. No successor Servicer shall be liable for any acts or omissions of any predecessor Servicer. SECTION 8.3 PAYMENT OF SERVICING FEE; REPAYMENT OF ADVANCES. If the Servicer shall change, the predecessor Servicer shall be entitled to (i) receive any accrued and unpaid Servicing Fees through the date of the successor Servicer's acceptance hereunder in accordance with Section 4.8. and (ii) reimbursement for Outstanding Advances pursuant to Sections 5.3 and 5.7 with respect to all Advances made by the predecessor Servicer. SECTION 8.4 NOTIFICATION TO NOTEHOLDERS AND CERTIFICATEHOLDERS. Upon the receipt by a Trust Officer of the Owner Trustee of written notice of any termination of, or appointment of a successor to, the Servicer pursuant to this Article VIII, the Owner Trustee shall give prompt written notice thereof to Certificateholders and the Trustee shall give prompt written notice thereof to Noteholders and to the Rating Agencies. SECTION 8.5 WAIVER OF PAST DEFAULTS. The Holders of Notes evidencing not less than a majority of the Outstanding Amount of the Notes (or the Holders (as defined in the Trust Agreement) of Certificates evidencing not less than a majority of the Percentage Interest, as applicable, in the case that the Outstanding Amount of the Notes is zero) may, on behalf of all Noteholders and Certificateholders, as the case may be, waive in writing any default by the Servicer in the performance of its obligations hereunder and its consequences, except a default in making any required deposits to or payments from any of the Trust Accounts in accordance with this Agreement. Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereto. ARTICLE 9. TERMINATION SECTION 9.1 OPTIONAL PURCHASE OF ALL RECEIVABLES. (a) On the last day of any Collection Period immediately preceding a Determination Date as of which the then outstanding Pool Balance is 5% or less of the Initial Pool Balance, the Servicer shall have the option to purchase the Owner Trust Estate, other than the Trust Accounts. To exercise such option, the Depositor shall deposit pursuant to Section 5.4 in the Collection Account an amount which, when added to the amounts on deposit in the Collection Account for such Distribution Date, equals the unpaid principal amount of the then outstanding Notes, plus accrued and unpaid interest thereon. Each class of Notes will be redeemed concurrently therewith. (b) Reserved. (c) Notice of any termination of the Trust shall be given by the Servicer to the Owner Trustee, the Trustee and the Rating Agencies as soon as practicable after the Servicer has received knowledge thereof. (d) Following the satisfaction and discharge of the Indenture and the payment in full of the principal of and interest on the Notes, the Certificateholders will succeed to the rights of the Noteholders hereunder and the Owner Trustee will succeed to the rights of, and assume the obligations of, the Trustee pursuant to this Agreement. SECTION 9.2 MANDATORY SALE OF ALL CONTRACTS. In accordance with the procedures and schedule set forth in Exhibit C hereto (the "Auction Procedures"), the Trustee (or, if the Notes have been paid in full and the Indenture shall have been discharged in accordance with its terms, the Owner Trustee) shall conduct or shall cause to be conducted an auction (the "Auction") of the Receivables remaining in the Trust (such Receivables hereinafter referred to as the "Auction Property") in order to effect a termination of the Trust pursuant to Section 9.1 of the Trust Agreement if the Servicer has not exercised its option to purchase the Receivables within 90 days after the last day of the Collection Period as of which such right can be exercised pursuant to Section 9.1 . Such Auction shall be conducted within 10 days following such date. The Depositor, the Sponsor, or the Servicer may, but shall not be required to, bid at the Auction. Such Trustee shall sell or shall cause the sale and transfer of the Auction Property to the highest bidder therefor at the Auction provided that; (i) the Auction has been conducted in accordance with the Auction Procedures; (ii) such Trustee has received good faith bids for the Auction Property from two prospective purchasers that are considered by such Trustee, in its sole discretion, to be competitive participants in the market for motor vehicle retail installment sale contracts and other motor vehicle installment sale contracts; (iii) a financial advisor, as advisor to such Trustee (in such capacity, the "Advisor"), shall have advised such Trustee in writing that at least two of such bidders (including the winning bidder) are participants in the market for motor vehicle retail installment sale contracts and other motor vehicle installment sale contracts willing and able to purchase the Auction Property; (iv) the highest bid in respect of the Auction Property is not less than the aggregate fair market value of the Auction Property (as determined by such Trustee in its sole discretion); (v) any bid submitted by the Depositor, the Sponsor, the Servicer or any Affiliate of any of them shall reasonably represent the fair market value of the Auction Property, as independently verified and represented in writing by a qualified independent third party evaluator (which may include the Advisor or an investment bank firm) selected by such Trustee; and (vi) the highest bid would result in proceeds from the sale of the Auction Property which will be at least equal to the sum of (A) the greater of (1) the aggregate Purchase Price for the Receivables (including defaulted Receivables), plus the appraised value of any other property held by the Trust (less liquidation expenses) or (2) an amount that, when added to amounts on deposit in the Collection Account and available for distribution to Securityholders on the second Distribution Date following the consummation of such sale (the "Liquidation Distribution Date"), would result in proceeds sufficient to distribute to Securityholders the amounts of interest due to the Securityholders for such Distribution Date and any unpaid interest payable to the Securityholders with respect to one or more prior Distribution Dates and the outstanding principal amount of the Notes, and (B) the Total Servicing Fee payable on such second Distribution Date. Provided that all of the conditions set forth in clauses (i) through (vi) have been met, such Trustee shall sell and transfer the Auction Property, without representation, warranty or recourse, to such highest bidder in accordance with and upon completion of the Auction Procedures. Such Trustee shall deposit the purchase price for the Auction Property in the Collection Account at least one Business Day prior to such second succeeding Distribution Date. In addition, the Auction must stipulate that the Servicer be retained to service the Receivables on terms substantially similar to those in the Agreement. In the event that any of such conditions are not met or such highest bidder fails or refuses to comply with any of the Auction Procedures, such Trustee shall decline to consummate such sale and transfer. In the event such sale and transfer is not consummated in accordance with the foregoing, however, such Trustee may from time to time in the future, but shall not be under any further obligation to, solicit bids for sale of the assets of the Trust upon the same terms and conditions as set forth above. If any of the foregoing conditions are not met, such Trustee shall decline to consummate such sale and shall not be under any obligation to solicit any further bids or otherwise negotiate any further sale of Receivables remaining in the Trust. In such event, however, such Trustee may from time to time solicit bids in the future for the purchase of such Receivables pursuant to this Section 9.2. If applicable, the Trustee shall provide notice to the Owner Trustee of the termination of the Trust pursuant to this Section 9.2 as soon as practicable upon the consummation of the mandatory sale of the Receivables pursuant to this Section 9.2. Each of the Servicer, the Trustee and the Depositor acknowledge that the duties and responsibilities of the Issuer under the Basic Documents shall be performed by the Servicer, and not by the Owner Trustee. ARTICLE 10. ADMINISTRATIVE DUTIES OF THE SERVICER SECTION 10.1 ADMINISTRATIVE DUTIES. (a) Duties with Respect to the Indenture and Depository Agreement and the Basic Documents. The Servicer shall perform all its duties and the duties of the Issuer under the Depository Agreement. In addition, the Servicer shall consult with the Owner Trustee as the Servicer deems appropriate regarding the duties of the Issuer under the Indenture, the Depository Agreement and the Basic Documents. The Servicer shall monitor the performance of the Issuer and shall provide notice to the Owner Trustee when action is necessary to comply with the Issuer's duties under the Indenture, the Depository Agreement and the Basic Documents. The Servicer shall prepare for execution by the Issuer or shall cause the preparation by other appropriate Persons of all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuer to prepare, file or deliver pursuant to the Indenture, the Depository Agreement and the Basic Documents. In furtherance of the foregoing, the Servicer shall take all appropriate action that is the duty of the Issuer to take pursuant to the Indenture and the Basic Documents. (b) DUTIES WITH RESPECT TO THE ISSUER. (i) In addition to the duties of the Servicer set forth in this Agreement or any of the Basic Documents, the Servicer shall perform such calculations and shall prepare for execution by the Issuer or the Owner Trustee or shall cause the preparation by other appropriate Persons of all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to this Agreement or any of the Basic Documents, and at the request of the Owner Trustee shall take all appropriate action that is the duty of the Issuer to take pursuant to this Agreement or any of the Basic Documents. The Servicer shall administer, perform or supervise the performance of such other activities in connection with the Collateral (including the Basic Documents) as are not covered by any of the foregoing provisions and as are expressly requested by the Owner Trustee and are reasonably within the capability of the Servicer. (ii) Notwithstanding anything in this Agreement or any of the Basic Documents to the contrary, the Servicer shall be responsible for promptly notifying the Owner Trustee in the event that any withholding tax is imposed on the Issuer's payments (or allocations of income) to a Certificateholder (as defined in the Trust Agreement) as contemplated in Section 5.2(c) of the Trust Agreement. Any such notice shall specify the amount of any withholding tax required to be withheld by the Owner Trustee pursuant to such provision. (iii) Notwithstanding anything in this Agreement or the Basic Documents to the contrary, the Servicer shall be responsible for performance of the duties of the Owner Trustee set forth in Section 5.6(a), (b), (c) and (d) of the Trust Agreement with respect to, among other things, accounting and reports to Owners (as defined in the Trust Agreement); provided, however, that the Owner Trustee shall retain responsibility for the distribution to Certificateholders of the Schedule K-1s furnished to the Owner Trustee by the Servicer which may be necessary to enable each Certificateholder to prepare its federal and state income tax returns. (iv) The Servicer shall perform the duties of the Servicer specified in Section 10.2 of the Trust Agreement required to be performed in connection with the resignation or removal of the Owner Trustee, and any other duties expressly required to be performed by the Servicer under this Agreement or any of the Basic Documents. (v) In carrying out the foregoing duties or any of its other obligations under this Agreement, the Servicer may enter into transactions with or otherwise deal with any of its Affiliates; provided, however, that the terms of any such transactions or dealings shall be in accordance with any directions received from the Issuer and shall be, in the Servicer's opinion, no less favorable to the Issuer in any material respect. (c) TAX MATTERS. The Servicer shall prepare and file all tax returns, tax elections, financial statements and such annual or other reports of the Issuer as are necessary for preparation of tax reports as provided in Article V of the Trust Agreement, including without limitation forms 1099 and 1065, if applicable. (d) NON-MINISTERIAL MATTERS. With respect to matters that in the reasonable judgment of the Servicer are non-ministerial, the Servicer shall not take any action pursuant to this Article X unless within a reasonable time before the taking of such action, the Servicer shall have notified the Owner Trustee and the Trustee of the proposed action and the Owner Trustee and, with respect to items (A), (B), (C) and (D) below, the Trustee shall not have withheld consent or provided an alternative direction. For the purpose of the preceding sentence, "non-ministerial matters" shall include: (A) the amendment of or any supplement to the Indenture; (B) the initiation of any claim or lawsuit by the Issuer and the compromise of any action, claim or lawsuit brought by or against the Issuer (other than in connection with the collection of the Receivables); (C) the amendment, change or modification of this Agreement or any of the Basic Documents; (D) the appointment of successor Note Registrars, successor Paying Agents and successor Trustees pursuant to the Indenture or the appointment of Successor Servicers or the consent to the assignment by the Note Registrar, Paying Agent or Trustee of its obligations under the Indenture; and (E) the removal of the Trustee. (e) EXCEPTIONS. Notwithstanding anything to the contrary in this Agreement, except as expressly provided herein or in the other Basic Documents, the Servicer, in its capacity hereunder, shall not be obligated to, and shall not, (1) make any payments to the Noteholders or Certificateholders under the Basic Documents, (2) sell the Indenture Trust Estate pursuant to Section 5.4 of the Indenture, (3) take any other action that the Issuer directs the Servicer not to take on its behalf or (4) in connection with its duties hereunder assume any indemnification obligation of any other Person. SECTION 10.2 RECORDS. The Servicer shall maintain appropriate books of account and records relating to services performed under this Agreement, which books of account and records shall be accessible for inspection by the Issuer at any time during normal business hours. SECTION 10.3 ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The Servicer shall furnish to the Issuer from time to time such additional information regarding the Collateral as the Issuer shall reasonably request. ARTICLE 11. MISCELLANEOUS PROVISIONS SECTION 11.1 AMENDMENT. This Agreement may be amended by all of the Sponsor, the Depositor, the Servicer and the Owner Trustee, with the consent of the Trustee (which consent may not be unreasonably withheld), but without the consent of any of the Noteholders or the Certificateholders, to cure any ambiguity or defect, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, that such action shall not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee and the Trustee, adversely affect in any material respect the interests of any Noteholder or Certificateholder. This Agreement may also be amended from time to time by all of the Sponsor, the Depositor, the Servicer and the Owner Trustee, with the consent of the Trustee, the consent of the Holders of Notes evidencing not less than a majority of the Outstanding Amount of the Notes and the consent of the Holders (as defined in the Trust Agreement) of Certificates evidencing not less than a majority of the Percentage Interest for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, that no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that shall be required to be made for the benefit of the Noteholders or the Certificateholders or (b) reduce the aforesaid percentage of the Outstanding Amount of the Notes and the Percentage Interest, the Holders of which are required to consent to any such amendment, without the consent of the Holders of all the outstanding Notes and the Holders (as defined in the Trust Agreement) of all the outstanding Certificates affected thereby. Prior to its execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to the Rating Agencies. Promptly after its execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to each Rating Agency, each Certificateholder and the Trustee. It shall not be necessary for the consent of Certificateholders or Noteholders pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. Prior to the execution of any amendment to this Agreement, the Owner Trustee and the Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent to the execution and delivery of such amendment have been satisfied and the Opinion of Counsel referred to in Section 11.2(i)(1) has been delivered. The Owner Trustee and the Trustee may, but shall not be obligated to, enter into any such amendment which affects the Owner Trustee's or the Trustee's, as applicable, own rights, duties or immunities under this Agreement or otherwise. SECTION 11.2 PROTECTION OF TITLE TO TRUST. (a) The Depositor shall execute and file such financing statements and cause to be executed and filed such continuation statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Issuer and the interests of the Trustee in the Receivables and in the proceeds thereof. The Depositor shall deliver (or cause to be delivered) to the Owner Trustee and the Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. (b) Neither the Depositor nor the Servicer shall (nor shall the Servicer permit an Originator to) change its name, identity or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed in accordance with paragraph (a) above seriously misleading within the meaning of ss. 9-402(7) of the UCC, unless it shall have given the Owner Trustee and the Trustee at least five days' prior written notice thereof and shall have promptly filed appropriate amendments to all previously filed financing statements or continuation statements. (c) Each of the Depositor and the Servicer shall have an obligation to give the Owner Trustee and the Trustee at least 60 days' prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement and shall promptly file any such amendment. The Servicer shall at all times maintain each office from which it shall service Receivables, and its principal executive office, within the United States of America. (d) The Servicer shall (and shall cause each Originator with respect to the Related Receivables to) maintain accounts and records as to each Receivable accurately and in sufficient detail to permit (i) the reader thereof to know at any time the status of such Receivable, including payments and recoveries made and payments owing (and the nature of each) and (ii) reconciliation between payments or recoveries on (or with respect to) each Receivable and the amounts from time to time deposited in the Collection Account and Payahead Account in respect of such Receivable. (e) The Servicer shall maintain its computer systems so that, from and after the time of sale under this Agreement of the Receivables, the Servicer's master computer records (including any backup archives) that refer to a Receivable shall indicate clearly the interest of the Issuer and the Trustee in such Receivable and that such Receivable is owned by the Issuer and has been pledged to the Trustee. Indication of the Issuer's and the Trustee's interest in a Receivable shall be deleted from or modified on the Servicer's computer systems when, and only when, the related Receivable shall have been paid in full or repurchased by the Depositor or the Sponsor or purchased by the Servicer. (f) If at any time the Sponsor, the Depositor or the Servicer shall propose to sell, grant a security interest in or otherwise transfer any interest in automotive receivables to any prospective purchaser, lender or other transferee, the Servicer shall give to such prospective purchaser, lender or other transferee computer tapes, records or printouts (including any restored from backup archives) that, if they shall refer in any manner whatsoever to any Receivable, shall indicate clearly that such Receivable has been sold and is owned by the Issuer and has been pledged to the Trustee. (g) The Servicer shall permit the Trustee and its agents at any time during normal business hours to inspect, audit and make copies of and abstracts from the Servicer's records regarding any Receivable. (h) Upon request at any time the Owner Trustee or the Trustee shall have reasonable grounds to believe that such request is necessary in connection with the performance of its duties under this Agreement or any of the Basic Documents, the Servicer shall furnish to the Owner Trustee or to the Trustee, within five Business Days, a list of all Receivables (by contract number and name of Obligor) then held as part of the Trust, together with a reconciliation of such list to the Schedule of Receivables and to each of the Servicer's Certificates furnished before such request indicating removal of Receivables from the Trust. (i) The Servicer shall deliver to the Owner Trustee and the Trustee: (1) promptly after the execution and delivery of this Agreement and of each amendment thereto, an Opinion of Counsel either (A) stating that, in the opinion of such counsel, all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Owner Trustee and the Trustee in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interest; and (2) within 120 days after the beginning of each calendar year beginning with the first calendar year beginning more than three months after the Cutoff Date, an Opinion of Counsel, dated as of a date during such 120-day period, either (A) stating that, in the opinion of such counsel, all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Owner Trustee and the Trustee in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interest. Each Opinion of Counsel referred to in clause (l) or (2) above shall specify any action necessary (as of the date of such opinion) to be taken in the following year to preserve and protect such interest. (j) The Depositor shall, to the extent required by applicable law, cause the Notes to be registered with the Securities and Exchange Commission pursuant to Section 12(b) or Section 12(g) of the Exchange Act within the time periods specified in such sections. SECTION 11.3 NOTICES. All demands, notices and communications upon or to the Depositor, the Servicer, the Owner Trustee, the Trustee or the Rating Agencies under this Agreement shall be in writing, personally delivered, sent by overnight courier or mailed by certified mail, return receipt requested, and shall be deemed to have been duly given upon receipt (a) in the case of the Depositor, to Ace Securities Corp., 6525 Morrison Boulevard, Suite 318, Charlotte, North Carolina 28211, Attention: General Counsel, (b) in the case of the Sponsor, to [ ], Attention: General Counsel, (c) in the case of the servicer, to [ ], Attention: General Counsel, (d) in the case of the Issuer or the Owner Trustee, at the Corporate Trust Office (as defined in the Trust Agreement), (e) in the case of the Trustee, at the Corporate Trust Office, (f) in the case of Moody's, to Moody's Investors Service, Inc., to 99 Church Street, New York, New York 10004, Attention: ABS Monitoring Department and (e) in the case of Standard & Poor's, to Standard & Poor's Corporation, 55 Water Street, New York, New York 10041, Attention of Asset Backed Surveillance Department. SECTION 11.4 ASSIGNMENT. Notwithstanding anything to the contrary contained herein, except as provided in Sections 6.4 and 7.3 and as provided in the provisions of this Agreement concerning the resignation of the Servicer, this Agreement may not be assigned by the Depositor or the Servicer. SECTION 11.5 LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this Agreement are solely for the benefit of the Depositor, the Servicer, the Issuer, the Owner Trustee and for the benefit of the Certificateholders, the Trustee and the Noteholders, as third-party beneficiaries, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Owner Trust Estate or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. SECTION 11.6 SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 11.7 SEPARATE COUNTERPARTS. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 11.8 HEADINGS. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 11.9 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 11.10 ASSIGNMENT TO TRUSTEE. The Depositor hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Trustee pursuant to the Indenture for the benefit of the Noteholders of all right, title and interest of the Issuer in, to and under the Receivables and/or the assignment of any or all of the Issuer's rights and obligations hereunder to the Trustee. SECTION 11.11 NONPETITION COVENANT. Notwithstanding any prior termination of this Agreement, the Servicer and the Depositor shall not, prior to the date which is one year and one day after the termination of this Agreement with respect to the Issuer, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer under any Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer. SECTION 11.12 LIMITATION OF LIABILITY OF OWNER TRUSTEE AND TRUSTEE. (a) Notwithstanding anything contained herein to the contrary, this Agreement has been countersigned by [ ], not in its individual capacity but solely in its capacity as Owner Trustee of the Issuer and in no event shall [ ], in its individual capacity or, except as expressly provided in the Trust Agreement, as Owner Trustee have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or under any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer. For all purposes of this Agreement, in the performance of its duties or obligations hereunder or in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust Agreement. (b) Notwithstanding anything contained herein to the contrary, this Agreement has been accepted by [ ] not in its individual capacity but solely as Trustee and in no event shall [ ] have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer. SECTION 11.13 INDEPENDENCE OF THE SERVICER. For all purposes of this Agreement, the Servicer shall be an independent contractor and shall not be subject to the supervision of the Issuer or the Owner Trustee with respect to the manner in which it accomplishes the performance of its obligations hereunder. Unless expressly authorized by the Issuer, the Servicer shall have no authority to act for or represent the Issuer or the Owner Trustee in any way and shall not otherwise be deemed an agent of the Issuer or the Owner Trustee. SECTION 11.14 NO JOINT VENTURE. Nothing contained in this Agreement (i) shall constitute the Servicer and either of the Issuer or the Owner Trustee as members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (ii) shall be construed to impose any liability as such on any of them or (iii) shall be deemed to confer on any of them any express, implied or apparent authority to incur any obligation or liability on behalf of the others. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written. [ ] By: [ ] not in its individual capacity but solely as Owner Trustee on behalf of the Trust, By:____________________________________ Name: Title: [ ] Servicer and Sponsor, By:____________________________________ Name: Title: ACE SECURITIES CORP. Depositor, By:____________________________________ Name: Title: Acknowledged and Accepted: [ ] in its individual capacity but solely as Trustee, By:___________________________ Name: Title: Acknowledged and Accepted: [ ] not in its individual capacity but solely as Owner Trustee, By:___________________________ Name: Title: SCHEDULE A SCHEDULE OF RECEIVABLES Delivered to the Owner Trustee and the Trustee at Closing SCHEDULE B LOCATION OF RECEIVABLES EXHIBIT A FORM OF MONTHLY SECURITYHOLDER STATEMENT [ ] [ ]% Class A-1 Asset-Backed Notes [ ]% Class A-2 Asset-Backed Notes [ ]% Class A-3 Asset-Backed Notes [ ]% Class A-4 Asset-Backed Notes [ ]% Class A-5 Asset-Backed Notes [ ]% Class B Asset-Backed Notes Asset Backed Certificates Distribution Date: Collection Period: Under the Sale and Servicing Agreement dated as of [ ] among [ ], as servicer (the "Servicer") and sponsor (the "Sponsor"), Ace Securities Corp., as depositor (the "Depositor"), [ ], as issuer (the "Trust"), the Servicer is required to prepare certain information each month regarding current distributions to Noteholders and Certificateholders and the performance of the Trust during the previous month. The information that is required to be prepared with respect to the Distribution Date and Collection Period listed above is set forth below. Certain of the information is presented on the basis of an original principal amount of $1,000 per Note, and certain other information is presented based upon the aggregate amounts for the Trust as a whole. A. Information Regarding the Current Monthly Distribution. 1. Notes. (a) The aggregate amount of the distribution with respect to each class of the Notes.................................. $-------- (b) The amount of the distribution set forth in paragraph A.1.(a) above in respect of interest on each class of the Notes...................................... $________ (c) The amount of the distribution set forth in paragraph A.1.(a) above in respect of principal of each class of the Notes...................................... $________ (d) The amount of the distributions set forth in paragraph A.1(a) payable out of amounts withdrawn from the Reserve Account with respect to the Notes....................................... $________ (e) The amount of the distribution set forth in paragraph A.1.(a) above per $1,000 interest in each class of the Notes....................................... $________ (f) The amount of the distribution set forth in paragraph A.1.(b) above per $1,000 interest in each class of the Notes........................................ $________ (g) The amount of the distribution set forth in paragraph A.1.(c) above per $1,000 interest in each class of the Notes........................................ $________ (h) The amount of the distribution set forth in paragraph A.1.(d) above per $1,000 interest in the Notes........................................ $________ 2. Certificates. (a) The aggregate amount of the distribution with respect to the Certificates.................................. $________ B. Information Regarding the Performance of the Trust. 1. Pool Balance and Note Principal Balance. (a) The Pool Balance at the close of business on the last day of the Collection Period giving effect to payments allocated to principal as set forth in Paragraph A.1(c)......................................... $________ (b) The Note Balance of each class after giving effect to payments allocated to principal as set forth in Paragraph A.1(c).......................................... $________ (c) The Note Pool Factor of each class after giving affect to the payments set forth in paragraph A.1(c)............................................ $________ (d) Reserved.......................................... $________ (e) Reserved.......................................... $________ (f) The aggregate Purchase Amount for all Receivables that were repurchased in the preceding Collection Period............................................ $________ (g) The aggregate Payahead Balance on such Distribution Date............................................... $________ (h) The change in the Payahead Balance from the preceding Distribution Date............................................... $________ (i) The amount of Outstanding Advances on such Distribution Date............................................... $________ (j) The change in Outstanding Advances from the preceding Distribution Date............................................... $________ (k) Total Collections by the Servicer........................................... $________ (l) All amounts received by the Trust from the Servicer........................................... $________ 2. Servicing Fee. The aggregate amount of the Servicing Fee paid to the Servicer with respect to the preceding Collection Period...................................................... $________ 3. Payment Shortfalls. (a) The amount of the Class A Noteholders' Interest Carryover Shortfall after giving effect to the payments set forth in paragraph A.1(b) above.............................................. $________ (b) The amount of the Class A Noteholders' Interest Carryover Shortfall set forth in paragraph B.3.(a) above per $1,000 interest with respect to the Class A Notes.............................................. $________ (c) The amount of the Class B Noteholders' Interest Carryover Shortfall after giving effect to the payments set forth in paragraph A.1(b) above:............................................. $________ (d) The amount of the Class B Noteholders' Interest Carryover Shortfall set forth in paragraph B.3.(c) above per $1,000 interest with respect to the Class B Notes:............................................. $________ (e) The amount of the Class A Noteholders' Principal Carryover Shortfall after giving effect to the payments set forth in paragraph A.1(c) above.............................................. $________ (f) The amount of the Class A Noteholders' Principal Carryover Shortfall set forth in paragraph B.3.(e) above per $1,000 interest with respect to the Class B Notes:............................................. $________ (g) The amount of the Class B Noteholders' Principal Carryover Shortfall after giving effect to the payments set forth in paragraph A.1(c) above.............................................. $________ (h) The amount of the Class B Noteholders' Principal Carryover Shortfall set forth in paragraph B.3.(g) above per $1,000 interest with respect to the Class B Notes:............................................. $________ 4. Losses and Delinquencies (a) The aggregate amount scheduled to be paid, including unearned finance and other charges, for which Obligors are delinquent 60 days or more............................................... $________ (b) The amount of the aggregate Realized Losses for such Collection Period............................................. $________ (c) Cumulative Realized Losses from the Closing Date, including Realized Losses for such Collection Period............................................. $________ (d) Recoveries, if any, for such Collection Period............................................. $________ (e) Aggregate outstanding principal balance of Receivables that are currently in repossession status (excluding Liquidation Receivables........................................ $________ 5. Reserve Account (a) The Reserve Account balance as of the last day of the preceding Collection Period, including earnings........................................... $________ (b) Earnings included in above balance............................................ $________ (c) Transfer to Reserve Account from Collection Account on Distribution Date............................................... $________ (d) The Reserve Account balance as of the Distribution Date set forth above after giving effect to the Collection Account on such Distribution Date............................................... $________ (e) The Specified Reserve Account Balance as of the Distribution Date set forth above.............................................. $________ 6. Delinquency (a) Percentage of principal balance of Receivables delinquent 1 to 30 days............................................... ________% (b) Percentage of principal balance of Receivables delinquent 31 to 60 days............................................... ________% (c) Percentage of principal balance of Receivables delinquent 61 to 90 days............................................... ________% EXHIBIT B FORM OF SERVICER'S CERTIFICATE [ ] CERTIFICATE OF SERVICING OFFICER The undersigned certifies that he is the [title], of [ ], a corporation organized under the laws of the State of [ ]("[ ]") and that as such he is duly authorized to execute and deliver this certificate on behalf of [ ] pursuant to Section 4.9 of the Sale and Servicing Agreement, dated as of [ ] (the "Agreement") by and among [ ], as servicer (the "Servicer") and sponsor (the "Sponsor"), Ace Securities Corp., as depositor (the "Depositor") and [ ], as issuer (the "Issuer"), (all capitalized terms used herein without definition having the respective meanings specified in the Agreement), and further certifies that: 1 The Monthly Securityholder Statement for the period from 2 As of the date hereof, no Servicer Default or event that with notice or lapse of time or both would become a Servicer Default has occurred. [If a Servicer Default has occurred, such Servicer Default shall be specified and its current status reported.] IN WITNESS WHEREOF, we have affixed hereunto our signatures this day of ____________________, _____. [ ] as Servicer By: _________________________ Name: Title: EXHIBIT C TERMINATION - AUCTION PROCEDURES The following sets forth the auction procedures to be followed in connection with a sale effected pursuant to Section 9.2 of the Sale and Servicing Agreement (the "Agreement"), dated as of [ ] by and among [ ] (the "Trust"), [ ], as servicer (the "Servicer") and sponsor (the "Sponsor") and Ace Securities Corp., as depositor (the "Depositor"). Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Agreement. All references herein to "Trustee" shall be references to [ ], as Indenture Trustee, pursuant to an Indenture, dated as of [ ], between the Trust and the Indenture Trustee. However, if the Notes have been paid in full, and the Indenture has been discharged in accordance with its terms, all references herein to "Trustee" shall be references to the Owner Trustee. PRE-AUCTION PROCESS (a) Upon receiving notice of the Auction, the Advisor will initiate its general Auction procedures consisting of the following: (i) with the assistance of the Servicer, prepare a general solicitation package along with a confidentiality agreement; (ii) derive a list of qualified bidders, in a commercially reasonable manner; (iii) initiate contact with all qualified bidders; (iv) send a confidentiality agreement to all qualified bidders; (v) upon receipt of a signed confidentiality agreement, send solicitation packages to all interested bidders on behalf of the applicable Trustee; and (vi) notify the Servicer of all potential bidders and anticipated timetable. (b) The general solicitation package will include: (i) the prospectus from the public offering of the Notes; (ii) a copy of all monthly servicing reports or a copy of all annual servicing reports and the prior year's monthly servicing reports; (iii) a form of a Purchase Agreement and Sale and Servicing Agreement; (iv) a description of the minimum purchase price required to cause the Trustee to sell the Auction Property as set forth in Section 9.2 of the Agreement; (v) a formal bidsheet; (vi) a detailed timetable; and (vii) a preliminary data tape of the Pool Balance as of the related Distribution Date reflecting the same data attributes used to create the Cutoff Date tables for the Prospectus Supplement dated [ ] relating to the offering of the Notes. (c) The applicable Trustee, with the assistance of the Servicer and the Advisor, will maintain an auction package beginning at the time of closing of the transaction, which will contain terms (i)-(iii) listed in the preceding paragraph. If the Advisor is unable to perform its role as advisor to the applicable Trustee, the Servicer acting in its capacity under the Agreement will select a successor Advisor and inform the applicable Trustee of its actions. (d) The Advisor will send solicitation packages to all bidders at least 15 business days before the date of the Auction. Bidders will be required to submit any due diligence questions in writing to the Advisor for determination of their relevancy, no later than 10 business days before the date of the Auction. The Servicer and the Advisor will be required to satisfy all relevant questions at least five Business Days prior to the date of the Auction and distribute the questions and answers to all bidders. AUCTION PROCESS (a) _______________________, in its role as Advisor to the applicable Trustee, will be allowed to bid in the Auction, but will not be required to do so. (b) The Servicer will also be allowed to bid in the Auction if it deems appropriate, but will not be required to do so. (c) On the date of the Auction, all bids will be due by facsimile to the offices of the applicable Trustee by 1:00 p.m. New York City time, with the winning bidder to be notified by 2:00 p.m. New York City time. All acceptable bids (as described in Section 9.2 of the Agreement) will be due on a conforming basis on the bid sheet contained in the solicitation package. (d) If the applicable Trustee receives fewer than two market value bids from participants in the market for motor vehicle retail installment sale contracts and other motor vehicle installment sale contracts willing and able to purchase the Auction Property, the applicable Trustee shall decline to consummate the sale. (e) Upon notification to the winning bidder, a good faith deposit equal to one percent (1%) of the Pool Balance will be required to be wired to the applicable Trustee upon acceptance of the bid. This deposit, along with any interest income attributable to it, will be credited to the purchase price but will not be refundable. The applicable Trustee will establish a separate account for the acceptance of the good faith deposit, until such time as the account is fully funded and all monies are transferred into the Collection Account, such time not to exceed one Business Day before the related Distribution Date (as described above). (f) The winning bidder will receive on the date of the Auction a copy of the draft Purchase Agreement, Sale and Servicing Agreement and Servicer's Representations and Warranties (which shall be substantially identical to the representations and warranties set forth in Section 7.1 of the Agreement). (g) ______________, in its capacity as Advisor to the applicable Trustee, will provide to the applicable Trustee a letter concluding whether or not the winning bid is a fair market value bid. __________________ will also provide such letter if it is the winning bidder. In the case where _____________ or the Servicer is the winning bidder it will in its letter provide for market comparable valuations. (h) The Auction will stipulate that the Servicer be retained to service the Receivables sold pursuant to the terms of the Purchase and Sale Agreement and Servicing Agreement. -----END PRIVACY-ENHANCED MESSAGE-----