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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
JULY 30, 1998
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Date of Report (Date of earliest event reported)
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC., (as
depositor under the Pooling and Servicing Agreement dated as of July
1, 1998, which forms FURST Mortgage Loan Trust 1998-B, which issued
Mortgage Pass-Through Certificates, Series 1998-B).
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.
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(Exact Name of Registrant as Specified in its Charter)
NORTH CAROLINA 333-3574 56-1967773
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(State or Other Jurisdiction of (Commission File Numbers) (I.R.S. Employer
Incorporation) Identification No.)
301 SOUTH COLLEGE STREET, CHARLOTTE, NORTH CAROLINA 28228-0600
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(Address of Principal Executive Offices) (ZIP code)
(704) 383-3624
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(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index appears on Page 5
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ITEM 5. OTHER EVENTS.
On July 30, 1998 (the "Closing Date"), a single series of
certificates, entitled First Union Residential Securitization Transactions,
Inc., FURST Mortgage Loan Trust 1998-B, Mortgage Pass-Through Certificates,
Series 1998-B (the "Certificates"), issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of July 1, 1998,
attached hereto as Exhibit 4.1, among First Union Residential Securitization
Transactions, Inc. as depositor (the "Registrant"), First Union National Bank
as seller (the "Seller"), as master servicer and as trust administrator, and
Norwest Bank Minnesota, National Association as trustee (in such capacity, the
"Trustee") and document custodian. The Certificates consist of twenty-eight
classes identified as the "Class 1A-1 Certificates," the "Class 1A-2
Certificates," the "Class 1A-3 Certificates," the "Class 1A-4 Certificates,"
the "Class 1A-5 Certificates," the "Class 1A-6 Certificates," the "Class 1A-7
Certificates," the "Class 1A-8 Certificates," the "Class 1A-9 Certificates,"
the "Class 1A-10 Certificates," the "Class 1A-11 Certificates," the "Class
1A-12 Certificates," the "Class 1A-PO Certificates," the "Class 1A-WIO
Certificates," the "Class A-R Certificates," the "Class 1M Certificates," the
"Class 1B-1 Certificates," the "Class 1B-2 Certificates," the "Class 1B-3
Certificates," the "Class 1B-4 Certificates," the "Class 1B-5 Certificates,"
the "Class 2A Certificates," the "Class 2M Certificates," the "Class 2B-1
Certificates," the "Class 2B-2 Certificates," the "Class 2B-3 Certificates,"
the "Class 2B-4 Certificates" and the "Class 2B-5 Certificates," respectively,
and were issued in exchange for, and evidence the entire beneficial ownership
interest in, the assets of a trust fund (the "Trust Fund") consisting primarily
of two pools of fixed-rate, first-lien mortgage loans (the "Mortgage Loans")
secured by mortgages, security deeds or deeds of trust on primarily one- to
four-family residential properties, all monies received thereunder on or after
a specified cut-off date, security interests in the properties which secure the
Mortgage Loans and certain other property. The aggregate principal balance of
the Mortgage Loans that were conveyed to the Trust Fund on the Closing Date as
of July 1, 1998 (the "Cut-Off Date") was $478,463,912.73.
The Class 1A-1, Class 1A-2, Class 1A-3, Class 1A-4, Class 1A-5, Class
1A-6, Class 1A-7, Class 1A-8, Class 1A-9, Class 1A-10, Class 1A-11, Class
1A-12, Class 1A-PO, Class 1A-WIO, Class A-R, Class 1M, Class 1B-1, Class 1B-2,
Class 2A, Class 2M, Class 2B-1 and Class 2B-2 Certificates were publicly
offered, as described in a Prospectus, dated July 24, 1998, and a Prospectus
Supplement, dated July 24, 1998, as previously filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(5).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits:
1.1(a) Underwriting Agreement, dated July 24, 1998, among
First Union Residential Securitization Transactions,
Inc., First Union National Bank, First Union Capital
Markets, a division of Wheat First Securities, Inc.
and Salomon Brothers Inc.
1.1(b) Underwriting Agreement, dated July 24, 1998, among
First Union Residential Securitization Transactions,
Inc., First Union National Bank, First Union Capital
Markets, a division of Wheat First Securities, Inc.,
and PaineWebber Incorporated.
4.1 Pooling and Servicing Agreement, dated as of July 1,
1998, among First Union Residential Securitization
Transactions, Inc. as depositor, First Union National
Bank as seller, master
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servicer and as trust administrator and Norwest Bank
Minnesota, National Association, as trustee and
document custodian.
4.2 Mortgage Loan Purchase Agreement, dated as of July 1,
1998, between First Union Residential Securitization
Transactions, Inc. and First Union National Bank.
8.1 Opinion of Kilpatrick Stockton LLP as to tax matters.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST UNION RESIDENTIAL SECURITIZATION
TRANSACTIONS, INC.
By: /s/ Pearl Wilson Bassard
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Pearl Wilson Bassard, Vice
President
Date: August 13, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
1.1(a) Underwriting Agreement, dated July 24, 1998, among
First Union Residential Securitization Transactions,
Inc., First Union National Bank, First Union Capital
Markets, a division of Wheat First Securities, Inc.
and Salomon Brothers Inc.
1.1(b) Underwriting Agreement, dated July 24, 1998, among
First Union Residential Securitization Transactions,
Inc., First Union National Bank, First Union Capital
Markets, a division of Wheat First Securities, Inc.,
and PaineWebber Incorporated
4.1 Pooling and Servicing Agreement, dated as of July 1,
1998, among First Union Residential Securitization
Transactions, Inc. as depositor, First Union National
Bank as seller, master servicer and trust
administrator and Norwest Bank Minnesota, National
Association, as trustee and document custodian.
4.2 Mortgage Loan Purchase Agreement, dated as of April
1, 1998, between First Union Residential
Securitization Transactions, Inc. and First Union
National Bank.
8.1 Opinion of Kilpatrick Stockton LLP as to tax matters.
</TABLE>
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EXHIBIT 1.1(a)
[EXECUTION COPY]
$406,790,618
(Approximate)
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.
Mortgage Pass-Through Certificates, Series 1998-B
UNDERWRITING AGREEMENT
July 24, 1998
FIRST UNION CAPITAL MARKETS,
a division of WHEAT FIRST SECURITIES, INC.
One First Union Center DC-8
Charlotte, North Carolina 28288
SALOMON BROTHERS INC
7 World Trade Center, 29th Floor
New York, New York 10048
Ladies and Gentlemen:
First Union Residential Securitization Transactions, Inc. (the
"Depositor"), a North Carolina corporation, is a wholly-owned, special-purpose
subsidiary of First Union National Bank ("FUNB"), a national banking
association. The Depositor has authorized the issuance and sale of its Mortgage
Pass-Through Certificates, Series 1998-B, consisting of (i) Class 1A-1, Class
1A-2, Class 1A-3, Class 1A-4, Class 1A-5, Class 1A-6, Class 1A-7, Class 1A-8,
Class 1A-9, Class 1A-10, Class 1A-11, Class 1A-12, Class 1A-PO, Class 1A-WIO,
Class A-R, Class 1M, Class 1B-1 and Class 1B-2 (collectively, the "Group 1
Offered Certificates"), (ii) Class 1B-3, Class 1B-4, and Class 1B-5
(collectively with the Group 1 Offered Certificates, the "Group 1
Certificates"), (iii) Class 2A, Class 2M, Class 2B-1 and Class 2B-2 (the "Group
2 Offered Certificates"), and (iv) Class 2B-3, Class 2B-4, and Class 2B-5
(collectively with the Group 2 Offered Certificates, the "Group 2
Certificates"). The Group 1 Certificates and the Group 2 Certificates are
collectively referred to herein as the "Certificates". The Certificates evidence
undivided interests in a trust fund (the "Trust Fund") consisting of two
distinct pools of fixed-
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rate mortgage loans (the "Pool 1 Mortgage Loans" and the "Pool 2 Mortgage Loans"
and, together, the "Mortgage Loans"), secured by first deeds of trust and
mortgages on properties that are primarily one- to four-family residential
properties.
Only the Group 1 Offered Certificates are being purchased pursuant to
this Agreement by First Union Capital Markets, a division of Wheat First
Securities, Inc. ("FUCM"), and Salomon Brothers Inc ("Salomon" and, together
with FUCM, the "Underwriters"), severally, in the amount set forth opposite
their names on Schedule A, except that the amount purchased by each Underwriter
may change in accordance with Section 10 of this Agreement. The Group 2 Offered
Certificates will be purchased pursuant to a separate underwriting agreement
(the "Group 2 Underwriting Agreement") among the Depositor, FUNB, FUCM and
PaineWebber Incorporated.
The Certificates will be issued under a pooling and servicing agreement
(the "Pooling and Servicing Agreement"), dated as of July 1, 1998, among the
Depositor, FUNB, as seller (in such capacity, the "Seller"), master servicer (in
such capacity, the "Master Servicer") and trust administrator (in such capacity,
the "Trust Administrator"), and Norwest Bank Minnesota, National Association, as
trustee and document custodian (the "Trustee"). The Group 1 Offered Certificates
will evidence fractional undivided interests in the Trust Fund, but will be
entitled to receive distributions of interest and principal solely from
collections of interest and principal on the Pool 1 Mortgage Loans. The assets
of the Trust Fund will include, among other things, the Mortgage Loans conveyed
to the Trust Fund on July 30, 1998, and such amounts as may be held by the
Trustee in any accounts held by the Trustee for the Trust Fund. The aggregate
undivided interest in the Trust Fund represented by the Group 1 Offered
Certificates initially will be equal to $406,790,618 of principal, which
represents approximately 98.75% of the actual principal balances of the Pool 1
Mortgage Loans as of July 1, 1998 (thc "Cut-Off Date"). Forms of the Pooling and
Servicing Agreement have been filed as exhibits to the Registration Statement
(hereinafter defined).
One or more elections will be made to treat certain segregated pools of
assets of the Trust Fund as "real estate mortgage investment conduits" (each, a
"REMIC") for federal income tax purposes. The Certificates (other than the Class
A-R Certificates) will constitute "regular interests" in a REMIC, and the Class
A-R Certificates will constitute "residual interests" in a REMIC.
The Group 1 Offered Certificates are more fully described in the
Registration Statement (defined below) which the Depositor has furnished to the
Underwriters. Capitalized terms used but not defined herein shall have the
meanings given to them in the Pooling and Servicing Agreement.
Simultaneously with the execution of the Pooling and Servicing
Agreement, the Depositor will enter into a mortgage loan purchase agreement (the
"Purchase Agreement") with the Seller, pursuant to which the Seller will
transfer to the Depositor all of its right, title and interest in and to the
Mortgage Loans as of the Cut-Off Date and the collateral securing each Mortgage
Loan.
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SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR
The Depositor represents and warrants to, and agrees with the
Underwriters that:
(a) A Registration Statement on Form S-3 (No. 333-3574), as amended,
has (i) been prepared by the Depositor in conformity with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations (the "Rules and Regulations") of the United States Securities and
Exchange Commission (the "Commission") thereunder, (ii) been filed with the
Commission under the Securities Act and (iii) as amended by Pre-Effective
Amendment No. 2 thereto, become effective under the Securities Act. Copies of
such Registration Statement have been delivered by the Depositor to the
Underwriters. As used in this Agreement, "Effective Time" means the date and the
time as of which such Registration Statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the Commission; "Effective
Date" means the date of the Effective Time; "Registration Statement" means such
registration statement at the Effective Time, including any documents
incorporated by reference therein at such time; and "Prospectus" means the final
prospectus, dated July 24, 1998, as first supplemented by a prospectus
supplement, dated July 24, 1998 (the "Prospectus Supplement"), relating to the
Group 1 Offered Certificates and the Group 2 Offered Certificates, as first
filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations.
Reference made herein to the Prospectus shall be deemed to refer to and include
any documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act, as of the date of the Prospectus and any reference to
any amendment or supplement to the Prospectus shall be deemed to refer to and
include any document filed under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), after the date of the Prospectus and incorporated by
reference in the Prospectus; and any reference to any amendment to the
Registration Statement shall be deemed to include any report of the Depositor
filed with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
after the Effective Time that is incorporated by reference in the Registration
Statement. The Commission has not issued, and the Depositor has not received any
notification that the Commission intends to issue any order preventing or
suspending the use of the Registration Statement. There are no contracts or
documents of the Depositor which are required to be filed as exhibits to the
Registration Statement pursuant to the Securities Act or the Rules and
Regulations which have not been so filed or incorporated by reference therein on
or prior to the Closing Date (defined below). The conditions for use of Form
S-3, as set forth in the General Instructions thereto, have been satisfied.
To the extent that any Underwriter (A) has provided to the Depositor
Collateral Term Sheets (defined below) that such Underwriter has provided to a
prospective investor, the Depositor has filed such Collateral Term Sheets as an
exhibit to a report on Form 8-K within two business days of its receipt thereof,
or (B) has provided to the Depositor Structural Term Sheets or Computational
Materials (each as defined below) that such Underwriter has provided to a
prospective investor, the Depositor will file or cause to be filed with the
Commission a report on Form 8-K containing such Structural Term Sheets and
Computational Material as soon as reasonably practicable after the date of this
Agreement, but in any event not later than the date on
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which the Prospectus is filed with the Commission pursuant to Rule 424 of the
Rules and Regulations.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the Commission, as
the case may be, conform in all respects to the requirements of the Securities
Act and the Rules and Regulations. The Registration Statement, as of the
Effective Date thereof and of any amendment thereto, did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Prospectus as of its date, and as amended or supplemented as of the Closing Date
does not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided
that no representation or warranty is made as to information contained in or
omitted from the Registration Statement or the Prospectus in reliance upon and
in conformity with written information furnished to the Depositor in writing by
the Underwriters expressly for use therein. The parties hereto acknowledge that
the only information provided by the Underwriters is that information described
in Section 8(h).
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Prospectus, when such
documents become effective or are filed with the Commission, as the case may be,
will conform in all material respects to the requirements of the Securities Act
or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and will not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Since the respective dates as of which information is given in the
Prospectus, there has not been any material adverse change in the general
affairs, management, financial condition, or results of operations of the
Depositor, otherwise than as set forth or contemplated in the Prospectus as
supplemented or amended as of the Closing Date.
(e) The Depositor has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification, and has all
power and authority necessary to own or hold its properties, to conduct the
business in which it is engaged and to enter into and perform its obligations
under this Agreement, the Pooling and Servicing Agreement and the Purchase
Agreement, and to cause the Certificates to be issued.
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(f) There are no actions, proceedings or investigations pending before
or, to the knowledge of the Depositor, threatened by any court, administrative
agency or other tribunal to which the Depositor is a party or of which any of
its properties is the subject (i) which if determined adversely to the Depositor
would have a material adverse effect on the business or financial condition of
the Depositor, (ii) asserting the invalidity of this Agreement, the Group 2
Underwriting Agreement, the Pooling and Servicing Agreement, the Purchase
Agreement or the Certificates, (iii) seeking to prevent the issuance of the
Certificates or the consummation by the Depositor of any of the transactions
contemplated by the Group 2 Underwriting Agreement, the Pooling and Servicing
Agreement, the Purchase Agreement or this Agreement, as the case may be, or (iv)
which might materially and adversely affect the performance by the Depositor of
its obligations under, or the validity or enforceability of, the Pooling and
Servicing Agreement, the Purchase Agreement, this Agreement or the Certificates.
(g) This Agreement and the Group 2 Underwriting Agreement have been,
and the Pooling and Servicing Agreement and the Purchase Agreement when executed
and delivered as contemplated hereby and thereby will have been, duly
authorized, executed and delivered by the Depositor, and this Agreement and the
Group 2 Underwriting Agreement constitute, and the Pooling and Servicing
Agreement and the Purchase Agreement, when executed and delivered as
contemplated herein, will constitute, legal valid and binding instruments
enforceable against the Depositor in accordance with their respective terms,
subject as to enforceability to (i) applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, (ii) general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law), and (iii) with respect to rights
of indemnity under this Agreement, the Group 2 Underwriting Agreement and the
Purchase Agreement, limitations of public policy under applicable securities
laws.
(h) The execution, delivery and performance of this Agreement, the
Group 2 Underwriting Agreement, the Pooling and Servicing Agreement and the
Purchase Agreement by the Depositor and the consummation of the transactions
contemplated hereby and thereby, and the issuance and delivery of the
Certificates do not and will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Depositor is a party, by which the Depositor is bound or
to which any of the property or assets of the Depositor or any of its
subsidiaries is subject, nor will such actions result in any violation of the
provisions of the articles of incorporation or bylaws of the Depositor or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Depositor or any of its properties or assets.
(i) Deloitte & Touche LLP are independent public accountants with
respect to the Depositor as required by the Securities Act and the Rules and
Regulations.
(j) The direction by the Depositor to the Trustee to execute,
authenticate, issue and deliver the Certificates has been duly authorized by the
Depositor, and assuming the Trustee has
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been duly authorized to do so, when executed, authenticated, issued and
delivered by the Trustee in accordance with the Pooling and Servicing Agreement,
the Certificates will be validly issued and outstanding and will be entitled to
the benefits provided by the Pooling and Servicing Agreement.
(k) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the United
States is required for the issuance of the Certificates and the sale of the
Certificates to the Underwriters, or the consummation by the Depositor of the
other transactions contemplated by this Agreement, the Group 2 Underwriting
Agreement, the Pooling and Servicing Agreement and the Purchase Agreement,
except such consents, approvals, authorizations, registrations or qualifications
as may be required under the Securities Act or state securities or Blue Sky laws
in connection with the purchase and distribution of the Certificates by the
Underwriters or as have been completed or obtained.
(l) The Depositor possesses all material licenses, certificates,
authorities or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now conducted by
it and as described in the Prospectus, and the Depositor has not received notice
of any proceedings relating to the revocation or modification of any such
license, certificate, authority or permit which if decided adversely to the
Depositor would, singly or in the aggregate, materially and adversely affect the
conduct of its business, operations or financial condition.
(m) At the time of execution and delivery of the Pooling and Servicing
Agreement, the Depositor will: (i) have good title to the interest in the
Mortgage Loans conveyed by the Seller, free and clear of any lien, mortgage,
pledge, charge, encumbrance, adverse claim or other security interest
(collectively, "Liens"); (ii) not have assigned to any person (other than the
Trustee) any of its right, title or interest in the Mortgage Loans, the Purchase
Agreement or the Pooling and Servicing Agreement; and (iii) have the power and
authority to sell its interest in the Mortgage Loans to the Trustee and to sell
the Group 1 Offered Certificates to the Underwriters. Upon execution and
delivery of the Pooling and Servicing Agreement by the Trustee and any related
instruments of transfer or assignment by the Depositor (except as permitted in
the Pooling and Servicing Agreement), the Trustee will have acquired beneficial
ownership of all of the Depositor's right, title and interest in and to the
Mortgage Loans. Upon delivery to the Underwriters of the Group 1 Offered
Certificates, the Underwriters will have good title to the Group 1 Offered
Certificates free of any Liens.
(n) As of the Cut-Off Date, the Mortgage Loans will meet the
eligibility criteria described in the Prospectus and will conform to the
descriptions thereof contained in the Prospectus.
(o) Neither the Depositor nor the Trust Fund created by the Pooling and
Servicing Agreement is an "investment company" within the meaning of such term
under the Investment Company Act of 1940, as amended (the "1940 Act"), and the
rules and regulations of the Commission thereunder.
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(p) At the Closing Date, the Certificates and the Pooling and Servicing
Agreement will conform in all material respects to the descriptions thereof
contained in the Prospectus.
(q) At the Closing Date, the Group 1 Offered Certificates so designated
in the Prospectus will be "mortgage related securities", as defined in Section
3(a)(41) of the Exchange Act.
(r) Any taxes, fees and other governmental charges in connection with
the execution, delivery and issuance of this Agreement, the Group 2 Underwriting
Agreement, the Pooling and Servicing Agreement, the Purchase Agreement and the
Certificates have been paid or will be paid at or prior to the Closing Date.
(s) At the Closing Date, each of the representations and warranties of
the Depositor set forth in the Pooling and Servicing Agreement will be true and
correct in all material respects.
(t) All Seller-Provided Information (defined below) was true and
correct in all material respects as of the date it was provided to the
Underwriters.
Any certificate signed by an officer of the Depositor and delivered to
the Underwriters or counsel for the Underwriters in connection with an offering
of the Certificates shall be deemed, and shall state that it is, a
representation and warranty as to the matters covered thereby to each person to
whom the representations and warranties in this Section 1 are made.
SECTION 2. PURCHASE AND SALE
The commitment of the Underwriters to purchase the Group 1 Offered
Certificates pursuant to this Agreement shall be deemed to have been made on the
basis of the representations and warranties herein contained and shall be
subject to the satisfaction of the terms and conditions set forth herein. The
Depositor agrees to instruct the Trustee to issue and agrees to sell to the
Underwriters, and the Underwriters agree (except as provided in Sections 10 and
11 hereof) to purchase from the Depositor the Group 1 Offered Certificates at
the purchase price set forth in Schedule A.
SECTION 3. DELIVERY AND PAYMENT
Delivery of and payment for the Group 1 Offered Certificates to be
purchased by the Underwriters shall be made at the offices of Kilpatrick
Stockton LLP, 3500 One First Union Center, 301 South College Street, Charlotte,
North Carolina 28202-6001, or at such other place as shall be agreed upon by the
Underwriters and the Depositor, at 10:00 a.m. Charlotte, North Carolina time on
July 30, 1998, or at such other time or date as shall be agreed upon in writing
by the Underwriters and the Depositor (such date being referred to as the
"Closing Date"). Payment shall be made to the Depositor by wire transfer of same
day funds payable to the account of the Depositor. Delivery of the Certificates
shall be made to the Underwriters for the
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account of the Underwriters against payment of the purchase price thereof. The
Group 1 Offered Certificates (other than the Class A-R Certificates) shall be
delivered in book-entry form through The Depository Trust Company in such
denominations and registered in such names as the Underwriters may request in
writing at least two business days prior to the Closing Date. The Class A-R
Certificates shall be registered in such names and delivered to such persons as
the Underwriters may request in writing at least two Business Days prior to the
Closing Date. The Group 1 Offered Certificates will be made available for
examination by the Underwriters no later than 2:00 p.m. Charlotte, North
Carolina time on the first business day prior to the Closing Date.
SECTION 4. OFFERING BY THE UNDERWRITERS
It is understood that, subject to the terms and conditions hereof, the
Underwriters propose to offer the Group 1 Offered Certificates for sale to the
public as set forth in the Prospectus.
SECTION 5. COVENANTS OF THE DEPOSITOR
The Depositor agrees as follows:
(a) To prepare the Prospectus in a form approved by the Underwriters
and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not
later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement; to make no further
amendment or any supplement to the Registration Statement or to the Prospectus
prior to the Closing Date except as permitted herein; to advise the
Underwriters, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has been filed and to
furnish the Underwriters with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be filed by the
Depositor with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and, for so long as
the delivery of a prospectus is required in connection with the offering or sale
of the Group 1 Offered Certificates, to promptly advise the Underwriters of its
receipt of notice of the issuance by the Commission of any stop order or of: (i)
any order preventing or suspending the use of the Prospectus; (ii) the
suspension of the qualification of the Group 1 Offered Certificates for the
offering or sale in any jurisdiction; (iii) the initiation of or threat of any
proceeding for any such purpose; or (iv) any request by the Commission for the
amending or supplementing of the Registration Statement or the Prospectus or for
additional information. In the event of the issuance of any stop order or of any
order preventing or suspending the use of the Prospectus or suspending any such
qualification, the Depositor promptly shall use its best efforts to obtain the
withdrawal of such order by the Commission.
(b) To furnish promptly to the Underwriters and to counsel for the
Underwriters a signed copy of the Registration Statement as originally filed
with the Commission, including all consents and exhibits filed therewith.
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(c) To deliver promptly to the Underwriters such number of the
following documents as the Underwriters shall reasonably request: (i) conformed
copies of the Registration Statement as originally filed with the Commission and
each amendment thereto (in each case including exhibits); (ii) the Prospectus
and any amended or supplemented Prospectus; and (iii) any document incorporated
by reference in the Prospectus (including exhibits thereto). If the delivery of
a prospectus is required at any time prior to the expiration of nine months
after the Effective Time in connection with the offering or sale of the Group 1
Offered Certificates, and if at such time any events shall have occurred as a
result of which the Prospectus as then amended or supplemented would include any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary during such same period to amend or
supplement the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with the
Securities Act or the Exchange Act, the Depositor shall notify the Underwriters
and, upon the Underwriters' request, shall file such document and prepare and
furnish without charge to the Underwriters and to any dealer in securities as
many copies as the Underwriters may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which corrects such
statement or omission or effects such compliance, and in case the Underwriters
are required to deliver a Prospectus in connection with sales of any of the
Group 1 Offered Certificates at any time nine months or more after the Effective
Time, upon the request of the Underwriters but at its expense, the Depositor
shall prepare and deliver to the Underwriters as many copies as the Underwriters
may reasonably request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Securities Act.
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Depositor or the Underwriters, be required by
the Securities Act or requested by the Commission.
(e) Prior to filing with the Commission any (i) supplement to the
Prospectus, or document incorporated by reference in the Prospectus, or (ii)
Prospectus pursuant to Rule 424 of the Rules and Regulations, to furnish a copy
thereof to the Underwriters and counsel for the Underwriters and obtain the
consent of the Underwriters to the filing.
(f) To use its best efforts, in cooperation with the Underwriters, to
qualify the Group 1 Offered Certificates for offering and sale under the
applicable securities laws of such states and other jurisdictions of the United
States as the Underwriters may designate, and maintain or cause to be maintained
such qualifications in effect for as long as may be required for the
distribution of the Group 1 Offered Certificates. The Depositor will file or
cause the filing of such statements and reports as may be required by the laws
of each jurisdiction in which the Group 1 Offered Certificates have been so
qualified.
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(g) So long as the Group 1 Offered Certificates shall be outstanding,
to deliver to the Underwriters as soon as such statements are furnished to the
Trustee: (i) the annual statement as to compliance delivered to the Trustee
pursuant to Section 3.10 of the Pooling and Servicing Agreement, (ii) the annual
statement of a firm of independent public accountants furnished to the Trustee
pursuant to Section 3.11 of the Pooling and Servicing Agreement; and (iii) the
Monthly Statement furnished to the Certificateholders pursuant to Section 5.2 of
the Pooling and Servicing Agreement.
(h) To apply the net proceeds from the sale of the Group 1 Offered
Certificates in the manner set forth in the Prospectus.
SECTION 6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS
The obligations of the Underwriters to purchase the Group 1 Offered
Certificates pursuant to this Agreement are subject to: (1) the accuracy on and
as of the Closing Date of the representations and warranties on the part of the
Depositor herein contained; (2) the performance by the Depositor of all of its
obligations hereunder; and (3) the following conditions as of the Closing Date:
(a) The Underwriter shall have received confirmation of the
effectiveness of the Registration Statement. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission. Any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus shall
have been complied with.
(b) Neither Underwriter shall have discovered and disclosed to the
Depositor on or prior to the Closing Date that the Registration Statement or the
Prospectus or any amendment or supplement thereto contains an untrue statement
of a fact or omits to state a fact which, in the opinion of Kennedy Covington
Lobdell & Hickman, L.L.P., counsel for the Underwriters, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading.
(c) All corporate proceedings and other legal matters relating to the
authorization, form and validity of this Agreement, the Pooling and Servicing
Agreement, the Purchase Agreement, the Group 1 Offered Certificates, the
Registration Statement and the Prospectus, and all other legal matters relating
to this Agreement and the transactions contemplated hereby shall be satisfactory
in all respects to counsel for the Underwriters, and the Depositor shall have
furnished to such counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.
(d) Kilpatrick Stockton LLP shall have furnished to the Underwriters
their written opinion, as counsel to the Depositor and FUNB, addressed to the
Underwriters and dated the Closing Date, in form and substance satisfactory to
Fitch IBCA, Inc. ("Fitch"), Moody's
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Investors Service, Inc. ("Moody's") and the Underwriters (all of whom shall be
entitled to rely on such opinion as if an addressee), to the effect that:
(i) This Agreement, the Pooling and Servicing Agreement and
the Purchase Agreement, assuming the due authorization, execution and
delivery of such agreements by the other parties thereto, constitute
the legal, valid and binding agreements of the Depositor and FUNB, as
applicable, enforceable against the Depositor and FUNB, as applicable,
in accordance with their terms, subject as to enforceability to (A)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally, (B) the qualification that the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion, with respect to
such remedies, of the court before which any proceedings with respect
thereto may be brought, and (C) with respect to rights of indemnity
under this Agreement, the Pooling and Servicing Agreement and the
Purchase Agreement, limitations of public policy under applicable
securities laws.
(ii) The conditions to the use by the Depositor of a
registration statement on Form S-3 under the Securities Act, as set
forth in the General Instructions to Form S-3, have been satisfied with
respect to the Registration Statement and the Prospectus.
(iii) The Registration Statement and any amendments thereto
have become effective under the Securities Act; to the best of such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and not withdrawn and no
proceedings for that purpose have been instituted or threatened and not
terminated; and the Registration Statement, the Prospectus and each
amendment or supplement thereto, as of their respective effective or
issue dates (other than the financial and statistical information
contained therein, as to which such counsel need express no opinion),
complied as to form in all material respects with the applicable
requirements of the Securities Act and the Rules and Regulations.
(iv) To the best of such counsel's knowledge, there are no
material contracts, indentures or other documents of a character
required to be described or referred to in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration
Statement other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto.
(v) The statements in the base Prospectus under the headings
"Summary of Terms--Certain Federal Income Tax Consequences" and
"--ERISA Considerations" and "Certain Legal Aspects of the Mortgage
Loans," "ERISA Considerations" and "Certain Federal Income Tax
Consequences," and the statements in the Prospectus Supplement under
the headings "Summary of Terms of the Offered Certificates--Certain
Federal Income Tax Consequences" and "--ERISA Considerations," "Certain
Federal Income Tax Consequences" and "ERISA Considerations," to the
extent that they constitute matters of federal law or legal conclusions
with respect thereto, have been reviewed by
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such counsel and are correct in all material respects with respects to
those consequences or aspects that are discussed.
(vi) The Pooling and Servicing Agreement and the Group 1
Offered Certificates conform in all material respects to the
description thereof contained in the Prospectus and are not required to
be qualified under the Trust Indenture Act of 1939, as amended, and the
Trust Fund is not required to be registered under the 1940 Act.
(vii) Neither the Depositor nor the Trust Fund is an
"investment company" or under the control of an "investment company" as
such terms are defined in the 1940 Act.
(viii) The Trust Fund as described in the Prospectus
Supplement and the Pooling and Servicing Agreement will qualify as one
or more "real estate mortgage investment conduits" within the meaning
of Section 860D of the Internal Revenue Code of 1986, as amended (the
"Code"), assuming: (A) elections are made to treat the Trust Fund as
one or more REMICs, (B) compliance with the Pooling and Servicing
Agreement and (C) compliance with changes in the law, including any
amendments to the Code or applicable Treasury regulations thereunder.
(ix) The Group 1 Offered Certificates will, when issued,
conform to the description thereof contained in the Prospectus, and the
Classes so designated in the Prospectus will be "mortgage related
securities", as defined in Section 3(a)(41) of the Exchange Act.
(x) FUNB is existing in good standing as a national banking
association organized under the laws of the United States of America.
(xi) FUNB has full corporate power and authority to enter into
and fulfill its obligations under the Purchase Agreement and the
Pooling and Servicing Agreement and to transfer the Mortgage Loans to
the Depositor as contemplated in the Purchase Agreement.
(xii) The Pooling and Servicing Agreement and the Purchase
Agreement have been duly authorized, executed and delivered by the
FUNB.
(xiii) No consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body having jurisdiction over FUNB is required for the
consummation by FUNB of the transactions contemplated by the Pooling
and Servicing Agreement and the Purchase Agreement, except such
consents, approvals, authorizations, registrations and qualifications
as have been obtained.
(xiv) The Depositor has been incorporated and is existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, is qualified to do business and is in good standing in
North Carolina, and has all power and authority
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necessary to own or hold its properties and to conduct the business in
which it is engaged and to enter into and perform its obligations under
this Agreement, the Pooling and Servicing Agreement and the Purchase
Agreement, and to cause the Certificates to be issued.
(xv) This Agreement, the Group 2 Underwriting Agreement, the
Pooling and Servicing Agreement, and the Purchase Agreement have been
duly authorized, executed and delivered by the Depositor.
(xvi) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body of
the United States is required for the issuance of the Certificates, and
the sale of the Certificates to the Underwriters, or the consummation
by the Depositor of the other transactions contemplated by this
Agreement, the Group 2 Underwriting Agreement, the Pooling and
Servicing Agreement and the Purchase Agreement, except such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Securities Act or state securities or Blue Sky laws
in connection with the purchase and distribution of the Certificates by
the Underwriters or as have been previously obtained.
(xvii) The direction by the Depositor to the Trustee to
execute, issue, authenticate and deliver the Certificates has been duly
authorized by the Depositor and, assuming that the Trustee has been
duly authorized to do so, when executed, authenticated and delivered by
the Trustee against payment of the agreed upon consideration therefor
in accordance with the Pooling and Servicing Agreement, the
Certificates will be validly issued and outstanding and will be
entitled to the benefits of the Pooling and Servicing Agreement.
Such counsel shall also have furnished to the Underwriters a written
statement addressed to the Underwriters and dated the Closing Date, in form and
substance satisfactory to the Underwriters to the effect that no facts have come
to the attention of such counsel which lead them to believe that: (A) the
Registration Statement (other than (1) the documents incorporated therein by
reference (including, without limitation, any Structural Term Sheets, Collateral
Term Sheets and Computational Materials) and (2) the financial and statistical
information contained therein, as to which no opinion shall be given at the time
it became effective, or at the date of such opinion) contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (B) the Prospectus (other than (1) the information incorporated
therein by reference (including, without, limitation, any Structural Term
Sheets, Collateral Term Sheets and Computational Materials) and (2) the
financial, statistical and numerical information contained therein, as to which
no opinion shall be expressed) contains an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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(e) The Underwriters shall have received the favorable opinion, dated
the Closing Date, of Kilpatrick Stockton LLP, counsel to the Depositor,
addressed to the Depositor and satisfactory to Fitch, Moody's and the
Underwriters, with respect to certain matters relating to the transfer of the
Mortgage Loans to the Trust Fund, and such counsel shall have consented to
reliance on such opinion by Fitch and Moody's as though such opinion had been
addressed to each such party.
(f) The Underwriters shall have received the favorable opinion, dated
the Closing Date, of Kilpatrick Stockton LLP, counsel to FUNB, addressed to the
Depositor and satisfactory to Fitch, Moody's and the Underwriters, with respect
to certain matters relating to the transfer of the Mortgage Loans to the
Depositor, and such counsel shall have consented to reliance on such, opinion by
Fitch and Moody's as though such opinion had been addressed to each such party.
(g) FUNB shall have furnished to the Underwriters a written opinion of
counsel to FUNB (who may be an employee of FUNB or of an affiliate of FUNB),
addressed to the Underwriters and dated the Closing Date, in form and substance
satisfactory to the Underwriters, to the effect that:
(i) The execution, delivery and performance of the Pooling and
Servicing Agreement and the Purchase Agreement by FUNB and the
consummation of the transactions contemplated thereby do not and will
not conflict with or result in a material breach or violation of any of
the terms or provisions of, or constitute a default under, any material
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument known to such counsel and to which FUNB is a party or by
which FUNB is bound or to which any of the property or assets of FUNB
or any of its subsidiaries is subject. Nor will such actions result in
any violation of the provisions of the articles of incorporation or
bylaws of FUNB or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over FUNB or
any of its properties or assets.
(ii) There are no actions, proceedings or investigations
pending before or, to the best knowledge of such counsel, threatened by
any court, administrative agency or other tribunal to which FUNB is a
party or of which any of its properties is the subject: (A) which if
determined adversely to FUNB would have a material adverse effect on
the business, results of operations or financial condition of FUNB; (B)
asserting the invalidity of the Pooling and Servicing Agreement, the
Purchase Agreement or the Certificates; (C) seeking to prevent the
issuance of the Certificates or the consummation by FUNB of any of the
transactions contemplated by the Pooling and Servicing Agreement or the
Purchase Agreement; or (D) which might materially and adversely affect
the performance by FUNB of its obligations under, or the validity or
enforceability of, the Pooling and Servicing Agreement, the Purchase
Agreement or the Certificates.
(h) Counsel for the Depositor (who may be an employee of FUNB or an
affiliate of FUNB) shall have furnished to the Underwriters its written opinion,
addressed to the
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Underwriters and dated the Closing Date, in form and substance satisfactory to
the Underwriters, to the effect that:
(i) The execution, delivery and performance of this Agreement,
the Group 2 Underwriting Agreement, the Pooling and Servicing Agreement
and the Purchase Agreement by the Depositor, the consummation of the
transactions contemplated hereby and thereby, and the issuance and
delivery of the Certificates do not and will not conflict with or
result in a material breach or violation of any of the terms or
provisions of, or constitute a default under, any material indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Depositor is a party or by which the Depositor
is bound or to which any of the property or assets of the Depositor or
any of its subsidiaries is subject, nor will such actions result in any
violation of the provisions of the articles of incorporation or bylaws
of the Depositor or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Depositor or any of its properties or assets.
(ii) There are no actions, proceedings or investigations
pending before or, to the best knowledge of such counsel, threatened by
any court, administrative agency or other tribunal to which the
Depositor is a party or of which any of its properties is the subject:
(A) which if determined adversely to the Depositor would have a
material adverse effect on the business, results of operations or
financial condition of the Depositor; (B) asserting the invalidity of
the Pooling and Servicing Agreement, the Purchase Agreement or the
Certificates; (C) seeking to prevent the issuance of the Certificates
or the consummation by the Depositor of any of the transactions
contemplated by the Pooling and Servicing Agreement, the Purchase
Agreement, the Group 2 Underwriting Agreement or this Agreement, as the
case may be; or (D) which might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity
or enforceability of, the Pooling and Servicing Agreement, the Purchase
Agreement, the Group 2 Underwriting Agreement, this Agreement or the
Certificates.
(i) The Underwriters shall have received the favorable opinion of
counsel to the Trustee, dated the Closing Date, addressed to the Underwriters
and in form and scope satisfactory to counsel to the Underwriters, which may
include, among other items, opinions to the effect that:
(i) The Trustee has been duly incorporated and is validly
existing as a national banking association in good standing under the
laws of the United States of America.
(ii) The Trustee has duly authorized, executed and delivered
the Pooling and Servicing Agreement, which constitutes the legal, valid
and binding agreement of the Trustee, enforceable against the Trustee
in accordance with its terms, subject, as to enforcement of remedies,
to (A) applicable bankruptcy, insolvency, reorganization, and
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other similar laws affecting the rights of creditors generally, and (B)
to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(iii) Upon the execution, authentication and delivery of the
Certificates by the Trustee on the Closing Date, the Certificates will
have been duly issued on behalf of the Trust Fund.
(iv) The execution and delivery by the Trustee of the Pooling
and Servicing Agreement and the performance by the Trustee of its
obligations thereunder, including the execution and authentication of
the Certificates, do not conflict with or result in a violation of the
certificate of incorporation or bylaws of the Trustee or any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Trustee or any of its properties or
assets.
(v) The Trustee has full power and authority to execute and
deliver the Pooling and Servicing Agreement and to perform its
obligations thereunder.
(vi) There are no actions, proceedings or investigations
pending or threatened against or affecting the Trustee before or by any
court, arbitrator, administrative agency or other governmental
authority which, if decided adversely to the Trustee, would materially
and adversely affect the ability of the Trustee to carry out the
transactions contemplated in the Pooling and Servicing Agreement.
(vii) No consent, approval or authorization of, or
registration, declaration or filing with, any court or governmental
agency or body of the United States of America or any state thereof is
required for the execution, delivery or performance by the Trustee of
the Pooling and Servicing Agreement.
(j) The Underwriters shall have received the favorable opinion or
opinions, dated the date of the Closing Date, of Kennedy Covington Lobdell &
Hickman, L.L.P., counsel for the Underwriters, with respect to the issue and
sale of the Certificates, the Registration Statement, this Agreement, the
Prospectus and such other related matters as the Underwriters may reasonably
require.
(k) The Depositor shall have furnished to the Underwriters a
certificate, dated the Closing Date, of its Chairman of the Board, its President
or a Vice President stating that:
(i) The representations and warranties of the Depositor in
Section 1 of this Agreement are true and correct as of the Closing
Date; and the Depositor has complied with all its agreements contained
herein; and
(ii) Such person has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion (A) as of the
Effective Date, the Registration
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Statement and Prospectus did not include an untrue statement of a
material fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and (B) since the Effective Date no event has occurred
which should have been set forth in a supplement or amendment to the
Registration Statement or the Prospectus.
(l) The Trustee shall have furnished to the Underwriters a certificate
of the Trustee, signed by one or more duly authorized officers of the Trustee,
dated the Closing Date, as to the due authorization, execution and delivery of
the Pooling and Servicing Agreement by the Trustee and the acceptance by the
Trustee of the trusts created thereby and the due execution, authentication and
delivery of the Certificates by the Trustee thereunder and such other matters as
the Underwriters shall reasonably request.
(m) The Group 1 Offered Certificates shall have received the ratings
described in the Prospectus.
(n) The Underwriters shall have received at or before the Closing Date,
from Deloitte & Touche LLP, one or more letters, dated as of the date of this
Agreement, in form reasonably acceptable to the Underwriters (the "Initial
Letters"), and corresponding bring down letters dated as of the Closing Date,
(A) confirming that they are independent public accountants within the meaning
of the Securities Act, and are in compliance with, the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (B) stating the conclusions and findings of such firm with
respect to the financial information and other matters covered by its letter,
and (C) in the case of the bring-down letters, confirming in all material
respects the conclusions and finding set forth in the Initial Letters.
(o) Prior to the Closing Date, counsel for the Underwriters shall have
been furnished with such documents and opinions as they may reasonably require
for the purpose of enabling them to pass upon the issuance and sale of the
Certificates as herein contemplated and related proceedings or in order to
evidence the accuracy and completeness of any of the representations and
warranties, or the fulfillment of any of the conditions, herein contained, and
all proceedings taken by the Depositor in connection with the issuance and sale
of the Certificates as herein contemplated shall be satisfactory in form and
substance to the Underwriters and counsel for the Underwriters.
(p) Subsequent to the execution and delivery of this Agreement none of
the following shall have occurred: (i) trading in securities generally on the
New York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market
shall have been suspended or minimum prices shall have been established on
either of such exchanges or such market by the Commission, by such exchange or
by any other regulatory body or governmental authority having jurisdiction; (ii)
a banking moratorium shall have been declared by federal or state authorities;
(iii) the United States shall have become engaged in hostilities, there shall
have been an escalation of hostilities involving the United States or there
shall have been a declaration of a national emergency or war by the United
States; or (iv) there shall have occurred such a material
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adverse change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets of the United States
shall be such) as to make it, in the judgment of the Underwriters, impractical
or inadvisable to proceed with the public offering or delivery of the
Certificates on the terms and in the manner contemplated in the Prospectus.
If any condition specified in this Section 6 shall not have been
fulfilled when and as required to be fulfilled this Agreement may be terminated
by the Underwriters by notice to the Depositor at any time at or prior to the
Closing Date, and such termination shall be without liability of any party to
any other party except as provided in Section 7.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
SECTION 7. PAYMENT OF EXPENSES
Each of the Underwriters agrees to pay one-half of the fees and
expenses of Kennedy Covington Lobdell & Hickman, L.L.P., as Underwriter's
counsel. Salomon agrees to pay (a) its own expenses arising from its due
diligence with respect to the Mortgage Loans, and (b) all fees and expenses of
qualifying the Certificates under the securities laws of the several
jurisdictions as provided in Section 5(f) hereof and of preparing, printing and
distributing a "Blue Sky Memorandum" (including related fees and expenses of
Blue Sky counsel). The Depositor shall pay all other expenses relating to the
transactions contemplated by this Agreement.
If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 6, Section 10 or Section 11, the Depositor shall
reimburse the Underwriters for all reasonable out-of-pocket expenses, including
fees and disbursements of Kennedy Covington Lobdell & Hickman, L.L.P.
SECTION 8. INDEMNIFICATION AND CONTRIBUTION
(a) (i) The Depositor and FUNB agree to indemnify and hold harmless the
Underwriters, their directors and each person, if any, who controls the
Underwriters within the meaning of Section 15 of the Securities Act
from and against any and all loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited
to, any loss, claim damage, liability or action relating to purchases
and sales of the Group 1 Offered Certificates), to which the
Underwriters, their directors or any such controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (A)
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, (B) the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, (C) any
untrue statement or alleged untrue statement of a material fact
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contained in the Prospectus or (D) the omission or alleged omission to
state, in the Prospectus, a material fact required to be stated therein
or necessary to make the statements in the Prospectus, in the light of
the circumstances under which they were made, not misleading and shall
reimburse each Underwriter, each such director and each such
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by such Underwriter, such director or such
controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or
action, as such expenses are incurred; provided, however, that the
Depositor and FUNB shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of,
or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in the Prospectus or the Registration
Statement in reliance upon and in conformity with written information
furnished to the Depositor by or on behalf of any of the Underwriters
specifically for inclusion therein (as specified in Section 8(h)
below). The foregoing indemnity agreement is in addition to any
liability which the Depositor and FUNB may otherwise have to the
Underwriters, its directors or any controlling person of the
Underwriters.
(ii) The Depositor and FUNB agree to indemnify and hold
harmless Salomon, its directors and each person, if any, who controls
Salomon within the meaning of Section 15 of the Securities Act from and
against any and all loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and
sales of the Group 1 Offered Certificates), to which Salomon, its
directors or any such controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (A) any untrue
statement or alleged untrue statement of a material fact contained in
any prospectus used after October 28, 1998 (a "Market Making
Prospectus"), or (B) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and shall reimburse Salomon, each such
director and each such controlling person promptly upon demand for any
legal or other expenses reasonably incurred by Salomon, such director
or such controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action, as such expenses are incurred; provided, however,
the Depositor and FUNB shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in a Market Making
Prospectus in reliance upon and in conformity with written information
furnished to the Depositor by Salomon specifically for inclusion
therein (as specified in Section 8(h) below). The foregoing indemnity
agreement is in addition to any liability which the Depositor and FUNB
may otherwise have to Salomon, its directors or any controlling person
of Salomon under this Agreement.
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(b) (i) Each Underwriter severally agrees to indemnify and hold
harmless the Depositor, each of its directors, each of its officers who
signed the Registration Statement, and each person, if any, who
controls the Depositor within the meaning of Section 15 of the
Securities Act against any and all loss, claim, damage or liability, or
any action in respect thereof, to which the Depositor or any such
director, officer or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) an untrue,
statement or alleged untrue statement of a material fact contained in
the Registration Statement, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (iii) any
untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or (iv) the omission or alleged omission to
state therein a material fact required to be stated in the Prospectus
or necessary to make the statements in the Prospectus, in the light of
the circumstances under which they were made, not misleading, but in
each case only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the
Depositor by or on behalf of the Underwriters specifically for
inclusion therein (as specified in Section 8(h) below), and shall
reimburse the Depositor and any such director, officer or controlling
person for any legal or other expenses reasonably incurred by the
Depositor or any director, officer or controlling person in connection
with investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action as such expenses are incurred.
The foregoing indemnity agreement is in addition to any liability which
the Underwriters may otherwise have to the Depositor or any such
director, officer or controlling person. Notwithstanding anything to
the contrary contained in this Section 8, Salomon shall have no
obligation to indemnify any party for any loss, claim, damage or
liability or contribute to any such loss, claim, damage or liability in
respect of untrue Statements or alleged untrue statements of material
fact or omissions or alleged omissions to state a material fact
contained in any Market Making Prospectus.
(ii) Salomon shall indemnify and hold harmless FUCM and each
person, if any, who controls FUCM within the meaning of Section 15 of
the Securities Act from and against any loss, claim, damage or
liability, joint or several, and any action in respect thereof, to
which FUCM or any such controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in
any Computational Materials (defined below) furnished or made available
by Salomon to offerees of the Group 1 Offered Certificates.
FUCM shall indemnify and hold harmless Salomon and each
person, if any, who controls Salomon within the meaning of Section 15
of the Securities Act from and against any loss, claim, damage or
liability, joint or several, and any action in respect thereof, to
which Salomon or any such controlling person may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is
20
<PAGE> 21
based upon, any untrue statement or alleged untrue statement of a
material fact contained in any Computational Materials furnished or
made available by FUCM to offerees of the Group 1 Offered Certificates.
(c) Promptly after receipt by any indemnified party under this Section
8 of notice of any claim or the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure; and, provided further, that the
failure to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Underwriters, if the indemnified
parties under this Section 8 consist of the Underwriters or any of their
directors and controlling persons, or by the Depositor, if the indemnified
parties under this Section 8 consist of the Depositor or any of the Depositor's
directors, officers or controlling persons.
21
<PAGE> 22
Each indemnified party, as a condition of the indemnity agreements
contained in Section 8(a) and (b), shall use its best efforts to cooperate with
the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected, without its
written consent if (A) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (B) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement.
(d) (i) Each Underwriter agrees to provide the Depositor no later than
two Business Days prior to the day on which the Prospectus Supplement
is required to be filed pursuant to Rule 424 with a copy of its
Structural Term Sheets and Computational Materials (each as defined
below), if any, for filing with the Commission an Form 8-K.
(ii) Each Underwriter agrees to provide the Depositor with its
Collateral Term Sheets no later than one Business Day prior to the day
on which such Collateral Term Sheets are distributed to potential
investors.
(e) Each Underwriter agrees, severally and not jointly, assuming all
Seller-Provided Information (defined below) is accurate and complete in all
material respects, to indemnify and hold harmless the Depositor, each of the
Depositor's officers who sign the Registration Statement and directors and each
person who controls the Depositor within the meaning of Section 15 of the
Securities Act against any and all losses, claims, damages or liabilities, joint
or several, to which they may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of a
material fact contained in the Derived Information (defined below) provided by
such Underwriter, or arise out of or are based upon the omission or alleged
omission, when read in conjunction with the Prospectus, to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and agrees to reimburse each such indemnified party for any legal or
other expenses reasonably incurred by him, her or it in connection with
investigating or defending or preparing to defend any such loss, claim, damage,
liability or action as such expenses are incurred. The obligations of an
Underwriter under this Section 8(e) shall be in addition to any liability which
such Underwriter may otherwise have.
The procedures set forth in Section 8(c) shall be equally applicable to
this Section 8(e).
22
<PAGE> 23
(f) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a), (b) or (e) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Depositor on the one hand and the Underwriters on the other from
the offering of the Certificates or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law or if the indemnified party failed
to give the notice required under Section 8(c), in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Depositor on the one hand and the
Underwriters on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations.
The relative benefits of the Underwriters and the Depositor shall be
deemed to be in such proportions that the Underwriters are responsible for their
pro rata portion of such losses, liabilities, claims, damages and expenses
determined in accordance with the ratio that the difference between the purchase
price paid to the Depositor by the Underwriters and the aggregate resale price
received by the Underwriters bears to the purchase price paid to the Depositor
by the Underwriters, and the Depositor shall be responsible for the balance.
The relative fault of the Underwriters and the Depositor shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Depositor or by the Underwriters, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission and other equitable
considerations.
The Depositor and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(f) were to be determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 8(f),
shall be deemed to include, for purposes of this Section 8(f), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
In no case shall the Underwriters be responsible for any amount in
excess of the difference between the purchase price paid to the Depositor by the
Underwriters and the aggregate resale price received by the Underwriters. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
23
<PAGE> 24
(g) For purposes of this Section 8, the term "Derived Information"
means such portion, if any, of the information delivered to the Depositor
pursuant to Section 8(d) for filing with the Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into
account information incorporated therein by reference;
(ii) does not constitute Seller-Provided Information; and
(iii) is of the type of information defined as Collateral Term
Sheets, Structural Term Sheets or Computational Materials (as such term
are interpreted in the No-Action Letters (defined below)).
"Seller-Provided Information" means the information contained on any computer
tape furnished to the Underwriters by FUNB concerning the assets comprising the
Trust Fund.
The terms "Collateral Term Sheet" and "Structural Term Sheet" shall
have the respective meanings assigned to them in the February 13, 1995, letter
(the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the Commission staff's response
thereto, were publicly available February 17, 1995). The term "Collateral Term
Sheet," as used herein, includes any subsequent Collateral Term Sheet that
reflects a substantive change in the information presented. The term
"Computational Materials" has the meaning assigned to it in the May 17, 1994,
letter (the "Kidder Letter" and, together with the PSA Letter, the "No-Action
Letters") of Brown & Wood an behalf of Kidder, Peabody & Co., Inc. (which
letter, and the SEC staffs response thereto, were publicly available May 20,
1994).
Each Underwriter shall cooperate with the Depositor and with Deloitte &
Touche LLP in obtaining a letter, in form and substance satisfactory to the
Depositor and such Underwriter, of Deloitte & Touche LLP regarding the
information in any Form 8-K consisting of Computational Materials and/or
Structural Term Sheets furnished by such Underwriter, in each case in EDGAR
format as formatted by the Depositor. Any such letter shall be obtained prior to
the filing of any such Form 8-K with the Commission at the applicable
Underwriter's sole expense.
Each Underwriter represents, warrants to, and covenants with, the
Depositor that the Derived Information prepared by such Underwriter is not
misleading and not inaccurate in any material respect and that any
Seller-Provided Information contained in any Form 8-K prepared by such
Underwriter which is not otherwise inaccurate in any material respect is not
presented in the Form 8-K in a way that is either misleading or inaccurate in
any material respect. Each Underwriter further covenants with the Depositor that
if any Computational Materials or Collateral Term Sheets contained in any Form
8-K prepared by such Underwriter are found to include any information that is
misleading or inaccurate in any material respect, such Underwriter promptly
shall inform the Depositor of such finding, provide the Depositor with revised
and/or corrected Computational Materials or Collateral Term Sheets, as the case
may be,
24
<PAGE> 25
and promptly prepare and deliver to the Depositor (in hard copy and EDGAR
format) for filing with the Commission in accordance herewith, revised and/or
corrected Computational Materials or Collateral Term Sheets, as the case may be.
Each Underwriter covenants that all Computational Materials and
Collateral Term Sheets used by it shall contain a legend substantially similar
to or including language substantially similar to the following:
THIS INFORMATION IS FURNISHED TO YOU SOLELY BY [NAME OF UNDERWRITER]
AND NOT BY THE ISSUER OR ANY OF ITS AFFILIATES. NEITHER THE ISSUER NOR
ANY OF ITS AFFILIATES MAKES ANY REPRESENTATION AS TO THE ACCURACY OR
COMPLETENESS OF THE INFORMATION HEREIN. THE INFORMATION HEREIN IS
PRELIMINARY, AND WILL BE SUPERSEDED BY THE APPLICABLE PROSPECTUS
SUPPLEMENT AND BY ANY OTHER INFORMATION SUBSEQUENTLY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Each Underwriter covenants that all Collateral Term Sheets used by it
shall contain an additional legend substantially similar to or including
language substantially similar to the following:
THIS INFORMATION CONTAINED HEREIN SUPERSEDED BY THE DESCRIPTION OF THE
MORTGAGE LOANS CONTAINED IN THE PROSPECTUS SUPPLEMENT.
Each Underwriter covenants that all Collateral Term Sheets (other than
the initial Collateral Term Sheet) shall contain an additional legend
substantially similar to or including language substantially similar to the
following:
THIS INFORMATION CONTAINED HEREIN SUPERSEDES THE INFORMATION IN ALL
PRIOR COLLATERAL TERM SHEETS, IF ANY.
If an Underwriter does not provide any Computation Materials or
Collateral Term Sheets to the Depositor pursuant to the preceding paragraphs,
such Underwriter shall be deemed to have represented, as of the Closing Date,
that it did not provide any prospective investors with any information in
written or electronic form in connection with the offering of the Certificates
that is required to be filed with the Commission in accordance with the
No-Action Letters, and such Underwriter shall provide the Depositor with a
certification to that effect on the Closing Date.
(h) The Underwriters confirm that the information set forth (i) in the
paragraph preceding the penultimate paragraph on the cover page, (ii) under the
caption "Summary of Terms of the Offered Certificates--Denominations" in the
Prospectus Supplement and (iii) in the first paragraph under the caption
"Underwriting" in the Prospectus Supplement is correct and,
25
<PAGE> 26
except for the additional information noted in the following sentence,
constitutes the only information furnished in writing to the Depositor by or on
behalf of the Underwriters specifically for inclusion in the Registration
Statement and the Prospectus. In addition, FUCM confirms that the information
set forth (i) in the penultimate paragraph on the cover page and (ii) in the
second and third paragraphs under the caption "Underwriting" in the Prospectus
Supplement is correct and has been furnished in writing to the Depositor by FUCM
specifically for inclusion in the Registration Statement and the Prospectus.
SECTION 9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY
All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Depositor submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Underwriters or controlling
persons thereof, or by or an behalf of the Depositor and shall survive delivery
of any Certificates to the Underwriters.
SECTION 10. DEFAULT BY ONE OF THE UNDERWRITERS
If one of the Underwriters participating in the public offering of the
Group 1 Offered Certificates shall fail at the Closing Date to purchase the
Group 1 Offered Certificates which it is obligated to purchase hereunder (the
"Defaulted Certificates"), then the non-defaulting Underwriter shall have the
right, within 24 hours thereafter, to purchase all, but not less than all, of
the Defaulted Certificates in such amounts as may be agreed upon and upon the
terms herein set forth. If, however, the non-defaulting Underwriter has not
completed such arrangements within such 24-hour period, then:
(a) if the aggregate principal amount of Defaulted
Certificates does not exceed 10% of the aggregate principal amount of
the Group 1 Offered Certificates to be purchased pursuant to this
Agreement, the non-defaulting Underwriter shall be obligated to
purchase the full amount thereof, or
(b) if the aggregate principal amount of Defaulted
Certificates exceeds 10% of the aggregate principal amount of the Group
1 Offered Certificates to be purchased pursuant to this Agreement, this
Agreement shall terminate, without any liability on the part of the
non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve a defaulting
Underwriter from the liability with respect to any default of such Underwriter
under this Agreement.
In the event of a default by any Underwriter as set forth in this
Section 10, the non-defaulting Underwriter and the Depositor shall have the
right to postpone the Closing Date for a period not exceeding five Business Days
in order that any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements may be effected.
26
<PAGE> 27
In no event shall either Underwriter have any liability for or
obligations arising from the failure of an underwriter under the Group 2
Underwriting Agreement to perform in accordance with the terms of such Group 2
Underwriting Agreement.
SECTION 11. TERMINATION OF AGREEMENT
The Underwriters may terminate this Agreement immediately upon notice
to the Depositor, at any time at or prior to the Closing Date if any of the
events or conditions described in Section 6(p) of this Agreement shall occur and
be continuing. In the event of any such termination, the covenant set forth in
Section 5(g), the provisions of Section 7, the indemnity agreement set forth in
Section 8, and the provisions of Sections 9 and 13 shall remain in effect.
SECTION 12. NOTICES
All statements, requests, notices and agreements hereunder shall be in
writing, and:
(a) if to First Union Capital Markets, a division of Wheat First
Securities, Inc., shall be delivered or sent by mail, telex or facsimile
transmission to One First Union TW-8, Charlotte, North Carolina 28288,
Attention: Patrick J. Tadie (Fax: (704) 383-6382), and if to Salomon Brothers
Inc, to 7 World Trade Center, 40th Floor, New York, New York 10048 Attention:
Mortgage Finance (Fax: (212) 783-4581) with a copy to the General Counsel's
office; or
(b) if to the Depositor, shall be delivered or sent by mail, telex or
facsimile transmission to First Union Residential Securitization Transactions,
Inc., 301 South College Street, Charlotte, North Carolina 28288, Attention:
Patrick J. Tadie (Fax (704) 383-6382).
SECTION 13. PERSONS ENTITLED TO THE BENEFIT OF THIS AGREEMENT
This Agreement shall inure to the benefit of and be binding upon the
Underwriters and the Depositor, and their respective successors. This Agreement
and the terms and provisions hereof are for the sole benefit of only those
persons, except that the representations, warranties, indemnities and agreements
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control any of the Underwriters within the
meaning of Section 15 of the Securities Act, and for the benefit of directors of
the Depositor, officers of Depositor who have signed the Registration Statement
and any person controlling the Depositor within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section 13, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
27
<PAGE> 28
SECTION 14. SURVIVAL
The respective indemnities, representations, warranties and agreements
of the Depositor and the Underwriters contained in this Agreement, or made by or
on behalf of them, respectively, pursuant to this Agreement, shall survive the
delivery of and payment for the Certificates and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any of them or
any person controlling any of them.
SECTION 15. DEFINITION OF THE TERM "BUSINESS DAY"
For purposes of this Agreement, "Business Day" means any day other than
(a) a Saturday or Sunday, or (b) a legal holiday in the States of New York or
North Carolina or (c) a day on which banking or savings and loan institutions in
the States of New York or North Carolina or the state in which the Corporate
Trust Office is located are authorized or obligated by law or executive order to
be closed or (d) a day on which the New York Stock Exchange, Inc. is closed for
trading.
SECTION 16. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina, without giving effect to the conflicts
of laws provisions thereof.
SECTION 17. COUNTERPARTS
This Agreement may be executed in counterparts and, if executed in more
than one counterpart, the executed counterparts shall each be deemed to be an
original but all such counterparts shall together constitute one and the same
instrument.
SECTION 18. HEADINGS
The headings herein are inserted for convenience of reference only and
are not intended to be part of, or to affect the meaning or interpretation of,
this Agreement.
28
<PAGE> 29
If the foregoing Underwriting Agreement correctly sets forth the
agreement between the Depositor and the Underwriters, please indicate your
acceptance in the space provided for that Purpose below.
Very truly yours,
FIRST UNION RESIDENTIAL
SECURITIZATION TRANSACTIONS, INC.
By: /s/ Patrick J. Tadie
-------------------------------------
Name: Patrick J. Tadie
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Patrick J. Tadie
-------------------------------------
Name: Patrick J. Tadie
Title: Vice President
CONFIRMED AND ACCEPTED, as of the date first above written:
FIRST UNION CAPITAL MARKETS,
a division of WHEAT FIRST SECURITIES, INC.
By: /s/ Curtis Y. Alridge
-----------------------------------------
Name: Curtis Y. Alridge
Title: Managing Director
SALOMON BROTHERS INC
By: /s/ Mark A. Hughes
-----------------------------------------
Name: Mark A. Hughes
Title: Vice President
29
<PAGE> 30
SCHEDULE A
TITLE AND DESCRIPTION OF THE GROUP 1 OFFERED CERTIFICATES
Mortgage Pass-Through Certificates, Series 1998-B, Class 1A-1, Class 1A-2, Class
1A-3, Class 1A-4, Class 1A-5, Class 1A-6, Class 1A-7, Class 1A-8, Class 1A-9,
Class 1A-10, Class 1A-11, Class 1A-12, Class 1A-PO, Class 1A-WIO, Class A-R,
Class 1M, Class 1B-1 and Class 1B-2
Underwriting Agreement, dated as of July 24, 1998
Cut-off Date: July 1, 1998
<TABLE>
<CAPTION>
Class Designation Certificate Principal Portion of Certificate Portion of Certificate Initial Pass Rating(3)
----------------- Balance or Class Principal Balance or Principal Balance or Through Rate Purchase Fitch/Moody's)
Notional Amount(1) Notional Amount to be Notional Amount to be ------------ Price(2) --------------
--------------------- Purchased by Salomon(1) Purchased by FUCM(1) --------
----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Class 1A-1 $ 23,175,000 $ 11,587,500 $ 11,587,500 6.75% 99.34375 AAA/Aaa
Class 1A-2 5,000,000 2,500,000 2,500,000 6.75% 99.34375 AAA/Aaa
Class 1A-3 124,054,000 62,027,000 62,027,000 6.75% 99.34375 AAA/Aaa
Class 1A-4 45,000,000 22,500,000 22,500,000 6.75% 99.34375 AAA/Aaa
Class 1A-5 15,145,000 7,572,500 7,572,500 6.75% 99.34375 AAA/Aaa
Class 1A-6 100,000,000 50,000,000 50,000,000 6.75% 99.34375 AAA/Aaa
Class 1A-7 776,000 388,000 388,000 6.75% 99.34375 AAA/Aaa
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
Class Designation Certificate Principal Portion of Certificate Portion of Certificate Initial Pass Rating(3)
----------------- Balance or Class Principal Balance or Principal Balance or Through Rate Purchase Fitch/Moody's)
Notional Amount(1) Notional Amount to be Notional Amount to be ------------ Price(2) --------------
--------------------- Purchased by Salomon(1) Purchased by FUCM(1) --------
----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Class 1A-8 6,589,000 3,295,000 3,294,000 6.75% 99.34375 AAA/Aaa
Class 1A-9 18,048,000 2,000,000 16,048,000 6.75% 99.34375 AAA/Aaa
Class 1A-10 41,194,000 20,597,000 20,597,000 6.75% 99.34375 AAA/Aaa
Class 1A-11 11,155,764 11,155,764 -0- 6.5063% 99.34375 AAA/Aaa
Class 1A-12 2,892,236 2,892,236 -0- 7.689985% 99.34375 AAA/Aaa
Class 1A-PO 372,518 -0- 372,518 0.00% 70.000 AAA/Aaa
Class 1A- WIO 378,009,974 -0- 378,009,974 0.4291% 1.6367 AAA/Aaa
Class A-R 100 -0- 100 6.75% (4) AAA/Aaa
Class 1M 6,180,000 -0- 6,180,000 6.75% 99.6875 AA/Aa
Class 1B-1 5,149,000 -0- 5,149,000 6.75% 98.90625 A/A
Class 1B-2 2,060,000 -0- 2,060,000 6.75% 96.7500 BBB/Baa
</TABLE>
- --------------------
(1) Subject to a variance of plus or minus 5.0%
(2) Expressed as a percentage of the Certificate Principal Balance or Class
Notional Amount of the relevant Class of Group 1 Offered Certificates
to be purchased, except with respect to the Class A-R Certificate. In
addition, as to each Class of the Group 1 Offered Certificates, the
Underwriters will pay the Depositor accrued interest at the initial
Pass-Through Rate therefor from the Cut-Off Date to but not including
the Closing Date.
(3) By Fitch and Moody's, as indicated.
(4) $ (20,000)
<PAGE> 1
EXHIBIT 1.1(b)
[EXECUTION COPY]
$66,091,000
(Approximate)
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.
Mortgage Pass-Through Certificates, Series 1998-B
UNDERWRITING AGREEMENT
July 24, 1998
FIRST UNION CAPITAL MARKETS,
a division of WHEAT FIRST SECURITIES, INC.
One First Union Center DC-8
Charlotte, North Carolina 28288
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas, 11th Floor
New York, New York 10019
Ladies and Gentlemen:
First Union Residential Securitization Transactions, Inc. (the
"Depositor"), a North Carolina corporation, is a wholly-owned, special-purpose
subsidiary of First Union National Bank ("FUNB"), a national banking
association. The Depositor has authorized the issuance and sale of its Mortgage
Pass-Through Certificates, Series 1998-B, consisting of (i) Class 1A-1, Class
1A-2, Class 1A-3, Class 1A-4, Class 1A-5, Class 1A-6, Class 1A-7, Class 1A-8,
Class 1A-9, Class 1A-10, Class 1A-11, Class 1A-12, Class 1A-PO, Class 1A-WIO,
Class A-R, Class 1M, Class 1B-1 and Class 1B-2 (collectively, the "Group 1
Offered Certificates"), (ii) Class 1B-3, Class 1B-4, and Class 1B-5
(collectively with the Group 2 Offered Certificates, the "Group 1
Certificates"), (iii) Class 2A, Class 2M, Class 2B-1 and Class 2B-2 (the "Group
2 Offered Certificates"), and (iv) Class 2B-3, Class 2B-4 and Class 2B-5
(collectively with the Group 2 Offered Certificates, the "Group 2
Certificates"). The Group 1 Certificates and the Group 2 Certificates are
collectively referred to herein as the "Certificates". The Certificates evidence
<PAGE> 2
undivided interests in a trust fund (the "Trust Fund") consisting of two
distinct pools of fixed-rate mortgage loans (the "Pool 1 Mortgage Loans" and the
"Pool 2 Mortgage Loans" and, together, the "Mortgage Loans"), secured by first
deeds of trust and mortgages on properties that are primarily one- to
four-family residential properties.
Only the Group 2 Offered Certificates are being purchased pursuant to
this Agreement by First Union Capital Markets, a division of Wheat First
Securities, Inc. ("FUCM"), and PaineWebber Incorporated ("PaineWebber" and,
together with FUCM, the "Underwriters"), severally, in the amount set forth
opposite their names on Schedule A, except that the amount purchased by each
Underwriter may change in accordance with Section 10 of this Agreement. The
Group 2 Offered Certificates will be purchased pursuant to a separate
underwriting agreement (the "Group 1 Underwriting Agreement") among the
Depositor, FUNB, FUCM and Salomon Brothers Inc.
The Certificates will be issued under a pooling and servicing agreement
(the "Pooling and Servicing Agreement"), dated as of July 1, 1998, among the
Depositor, FUNB, as seller (in such capacity, the "Seller"), master servicer (in
such capacity, the "Master Servicer") and trust administrator (in such capacity,
the "Trust Administrator"), and Norwest Bank Minnesota, National Association, as
trustee and document custodian (the "Trustee"). The Group 2 Offered Certificates
will evidence fractional undivided interests in the Trust Fund, but will be
entitled to receive distributions of interest and principal solely from
collections of interest and principal on the Pool 2 Mortgage Loans. The assets
of the Trust Fund will include, among other things, the Mortgage Loans conveyed
to the Trust Fund on July 30, 1998, and such amounts as may be held by the
Trustee in any accounts held by the Trustee for the Trust Fund. The aggregate
undivided interest in the Trust Fund represented by the Group 2 Offered
Certificates initially will be equal to $66,091,000 of principal, which
represents approximately 99.35% of the actual principal balances of the Pool 2
Mortgage Loans as of July 1, 1998 (thc "Cut-Off Date"). Forms of the Pooling and
Servicing Agreement have been filed as exhibits to the Registration Statement
(hereinafter defined).
One or more elections will be made to treat certain segregated pools of
assets of the Trust Fund as "real estate mortgage investment conduits" (each, a
"REMIC") for federal income tax purposes. The Certificates (other than the Class
A-R Certificates) will constitute "regular interests" in a REMIC, and the Class
A-R Certificates will constitute "residual interests" in a REMIC.
The Group 2 Offered Certificates are more fully described in the
Registration Statement (defined below) which the Depositor has furnished to the
Underwriters. Capitalized terms used but not defined herein shall have the
meanings given to them in the Pooling and Servicing Agreement.
Simultaneously with the execution of the Pooling and Servicing
Agreement, the Depositor will enter into a mortgage loan purchase agreement (the
"Purchase Agreement") with the Seller,
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<PAGE> 3
pursuant to which the Seller will transfer to the Depositor all of its right,
title and interest in and to the Mortgage Loans as of the Cut-Off Date and the
collateral securing each Mortgage Loan.
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR
The Depositor represents and warrants to, and agrees with the
Underwriters that:
(a) A Registration Statement on Form S-3 (No. 333-3574), as amended,
has (i) been prepared by the Depositor in conformity with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations (the "Rules and Regulations") of the United States Securities and
Exchange Commission (the "Commission") thereunder, (ii) been filed with the
Commission under the Securities Act and (iii) as amended by Pre-Effective
Amendment No. 2 thereto, become effective under the Securities Act. Copies of
such Registration Statement have been delivered by the Depositor to the
Underwriters. As used in this Agreement, "Effective Time" means the date and the
time as of which such Registration Statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the Commission; "Effective
Date" means the date of the Effective Time; "Registration Statement" means such
registration statement at the Effective Time, including any documents
incorporated by reference therein at such time; and "Prospectus" means the final
prospectus, dated July 24, 1998, as first supplemented by a prospectus
supplement, dated July 24, 1998 (the "Prospectus Supplement"), relating to the
Group 1 Offered Certificates and the Group 2 Offered Certificates, as first
filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations.
Reference made herein to the Prospectus shall be deemed to refer to and include
any documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act, as of the date of the Prospectus and any reference to
any amendment or supplement to the Prospectus shall be deemed to refer to and
include any document filed under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), after the date of the Prospectus and incorporated by
reference in the Prospectus; and any reference to any amendment to the
Registration Statement shall be deemed to include any report of the Depositor
filed with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
after the Effective Time that is incorporated by reference in the Registration
Statement. The Commission has not issued, and the Depositor has not received any
notification that the Commission intends to issue any order preventing or
suspending the use of the Registration Statement. There are no contracts or
documents of the Depositor which are required to be filed as exhibits to the
Registration Statement pursuant to the Securities Act or the Rules and
Regulations which have not been so filed or incorporated by reference therein on
or prior to the Closing Date (defined below). The conditions for use of Form
S-3, as set forth in the General Instructions thereto, have been satisfied.
To the extent that any Underwriter (A) has provided to the Depositor
Collateral Term Sheets (defined below) that such Underwriter has provided to a
prospective investor, the Depositor has filed such Collateral Term Sheets as an
exhibit to a report on Form 8-K within two business days of its receipt thereof,
or (B) has provided to the Depositor Structural Term Sheets or Computational
Materials (each as defined below) that such Underwriter has provided to a
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<PAGE> 4
prospective investor, the Depositor will file or cause to be filed with the
Commission a report on Form 8-K containing such Structural Term Sheets and
Computational Material as soon as reasonably practicable after the date of this
Agreement, but in any event not later than the date on which the Prospectus is
filed with the Commission pursuant to Rule 424 of the Rules and Regulations.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the Commission, as
the case may be, conform in all respects to the requirements of the Securities
Act and the Rules and Regulations. The Registration Statement, as of the
Effective Date thereof and of any amendment thereto, did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Prospectus as of its date, and as amended or supplemented as of the Closing Date
does not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided
that no representation or warranty is made as to information contained in or
omitted from the Registration Statement or the Prospectus in reliance upon and
in conformity with written information furnished to the Depositor in writing by
the Underwriters expressly for use therein. The parties hereto acknowledge that
the only information provided by the Underwriters is that information described
in Section 8(h).
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Prospectus, when such
documents become effective or are filed with the Commission, as the case may be,
will conform in all material respects to the requirements of the Securities Act
or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and will not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Since the respective dates as of which information is given in the
Prospectus, there has not been any material adverse change in the general
affairs, management, financial condition, or results of operations of the
Depositor, otherwise than as set forth or contemplated in the Prospectus as
supplemented or amended as of the Closing Date.
(e) The Depositor has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification, and has
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<PAGE> 5
all power and authority necessary to own or hold its properties, to conduct the
business in which it is engaged and to enter into and perform its obligations
under this Agreement, the Pooling and Servicing Agreement and the Purchase
Agreement, and to cause the Certificates to be issued.
(f) There are no actions, proceedings or investigations pending before
or, to the knowledge of the Depositor, threatened by any court, administrative
agency or other tribunal to which the Depositor is a party or of which any of
its properties is the subject (i) which if determined adversely to the Depositor
would have a material adverse effect on the business or financial condition of
the Depositor, (ii) asserting the invalidity of this Agreement, the Group 1
Underwriting Agreement, the Pooling and Servicing Agreement, the Purchase
Agreement or the Certificates, (iii) seeking to prevent the issuance of the
Certificates or the consummation by the Depositor of any of the transactions
contemplated by the Group 1 Underwriting Agreement, the Pooling and Servicing
Agreement, the Purchase Agreement or this Agreement, as the case may be, or (iv)
which might materially and adversely affect the performance by the Depositor of
its obligations under, or the validity or enforceability of, the Pooling and
Servicing Agreement, the Purchase Agreement, this Agreement or the Certificates.
(g) This Agreement and the Group 1 Underwriting Agreement have been,
and the Pooling and Servicing Agreement and the Purchase Agreement when executed
and delivered as contemplated hereby and thereby will have been, duly
authorized, executed and delivered by the Depositor, and this Agreement and the
Group 1 Underwriting Agreement constitute, and the Pooling and Servicing
Agreement and the Purchase Agreement, when executed and delivered as
contemplated herein, will constitute, legal valid and binding instruments
enforceable against the Depositor in accordance with their respective terms,
subject as to enforceability to (i) applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, (ii) general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law), and (iii) with respect to rights
of indemnity under this Agreement, the Group 1 Underwriting Agreement and the
Purchase Agreement, limitations of public policy under applicable securities
laws.
(h) The execution, delivery and performance of this Agreement, the
Group 1 Underwriting Agreement, the Pooling and Servicing Agreement and the
Purchase Agreement by the Depositor and the consummation of the transactions
contemplated hereby and thereby, and the issuance and delivery of the
Certificates do not and will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Depositor is a party, by which the Depositor is bound or
to which any of the property or assets of the Depositor or any of its
subsidiaries is subject, nor will such actions result in any violation of the
provisions of the articles of incorporation or bylaws of the Depositor or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Depositor or any of its properties or assets.
(i) Deloitte & Touche LLP are independent public accountants with
respect to the Depositor as required by the Securities Act and the Rules and
Regulations.
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<PAGE> 6
(j) The direction by the Depositor to the Trustee to execute,
authenticate, issue and deliver the Certificates has been duly authorized by the
Depositor, and assuming the Trustee has been duly authorized to do so, when
executed, authenticated, issued and delivered by the Trustee in accordance with
the Pooling and Servicing Agreement, the Certificates will be validly issued and
outstanding and will be entitled to the benefits provided by the Pooling and
Servicing Agreement.
(k) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the United
States is required for the issuance of the Certificates and the sale of the
Certificates to the Underwriters, or the consummation by the Depositor of the
other transactions contemplated by this Agreement, the Group 1 Underwriting
Agreement, the Pooling and Servicing Agreement and the Purchase Agreement,
except such consents, approvals, authorizations, registrations or qualifications
as may be required under the Securities Act or state securities or Blue Sky laws
in connection with the purchase and distribution of the Certificates by the
Underwriters or as have been completed or obtained.
(l) The Depositor possesses all material licenses, certificates,
authorities or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now conducted by
it and as described in the Prospectus, and the Depositor has not received notice
of any proceedings relating to the revocation or modification of any such
license, certificate, authority or permit which if decided adversely to the
Depositor would, singly or in the aggregate, materially and adversely affect the
conduct of its business, operations or financial condition.
(m) At the time of execution and delivery of the Pooling and Servicing
Agreement, the Depositor will: (i) have good title to the interest in the
Mortgage Loans conveyed by the Seller, free and clear of any lien, mortgage,
pledge, charge, encumbrance, adverse claim or other security interest
(collectively, "Liens"); (ii) not have assigned to any person (other than the
Trustee) any of its right, title or interest in the Mortgage Loans, the Purchase
Agreement or the Pooling and Servicing Agreement; and (iii) have the power and
authority to sell its interest in the Mortgage Loans to the Trustee and to sell
the Group 2 Offered Certificates to the Underwriters. Upon execution and
delivery of the Pooling and Servicing Agreement by the Trustee and any related
instruments of transfer or assignment by the Depositor (except as permitted in
the Pooling and Servicing Agreement), the Trustee will have acquired beneficial
ownership of all of the Depositor's right, title and interest in and to the
Mortgage Loans. Upon delivery to the Underwriters of the Group 2 Offered
Certificates, the Underwriters will have good title to the Group 2 Offered
Certificates free of any Liens.
(n) As of the Cut-Off Date, the Mortgage Loans will meet the
eligibility criteria described in the Prospectus and will conform to the
descriptions thereof contained in the Prospectus.
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<PAGE> 7
(o) Neither the Depositor nor the Trust Fund created by the Pooling and
Servicing Agreement is an "investment company" within the meaning of such term
under the Investment Company Act of 1940, as amended (the "1940 Act"), and the
rules and regulations of the Commission thereunder.
(p) At the Closing Date, the Certificates and the Pooling and Servicing
Agreement will conform in all material respects to the descriptions thereof
contained in the Prospectus.
(q) At the Closing Date, the Group 2 Offered Certificates so designated
in the Prospectus will be "mortgage related securities", as defined in Section
3(a)(41) of the Exchange Act.
(r) Any taxes, fees and other governmental charges in connection with
the execution, delivery and issuance of this Agreement, the Group 1 Underwriting
Agreement, the Pooling and Servicing Agreement, the Purchase Agreement and the
Certificates have been paid or will be paid at or prior to the Closing Date.
(s) At the Closing Date, each of the representations and warranties of
the Depositor set forth in the Pooling and Servicing Agreement will be true and
correct in all material respects.
(t) All Seller-Provided Information (defined below) was true and
correct in all material respects as of the date it was provided to the
Underwriters.
Any certificate signed by an officer of the Depositor and delivered to
the Underwriters or counsel for the Underwriters in connection with an offering
of the Certificates shall be deemed, and shall state that it is, a
representation and warranty as to the matters covered thereby to each person to
whom the representations and warranties in this Section 1 are made.
SECTION 2. PURCHASE AND SALE
The commitment of the Underwriters to purchase the Group 2 Offered
Certificates pursuant to this Agreement shall be deemed to have been made on the
basis of the representations and warranties herein contained and shall be
subject to the satisfaction of the terms and conditions set forth herein. The
Depositor agrees to instruct the Trustee to issue and agrees to sell to the
Underwriters, and the Underwriters agree (except as provided in Sections 10 and
11 hereof) to purchase from the Depositor the Group 2 Offered Certificates at
the purchase price set forth in Schedule A.
SECTION 3. DELIVERY AND PAYMENT
Delivery of and payment for the Group 2 Offered Certificates to be
purchased by the Underwriters shall be made at the offices of Kilpatrick
Stockton LLP, 3500 One First Union Center, 301 South College Street, Charlotte,
North Carolina 28202-6001, or at such other place as shall be agreed upon by the
Underwriters and the Depositor, at 10:00 a.m. Charlotte, North
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<PAGE> 8
Carolina time on July 30, 1998, or at such other time or date as shall be agreed
upon in writing by the Underwriters and the Depositor (such date being referred
to as the "Closing Date"). Payment shall be made to the Depositor by wire
transfer of same day funds payable to the account of the Depositor. Delivery of
the Certificates shall be made to the Underwriters for the account of the
Underwriters against payment of the purchase price thereof. The Group 2 Offered
Certificates (other than the Class A-R Certificates) shall be delivered in
book-entry form through The Depository Trust Company in such denominations and
registered in such names as the Underwriters may request in writing at least two
business days prior to the Closing Date. The Class A-R Certificates shall be
registered in such names and delivered to such persons as the Underwriters may
request in writing at least two Business Days prior to the Closing Date. The
Group 2 Offered Certificates will be made available for examination by the
Underwriters no later than 2:00 p.m. Charlotte, North Carolina time on the first
business day prior to the Closing Date.
SECTION 4. OFFERING BY THE UNDERWRITERS
It is understood that, subject to the terms and conditions hereof, the
Underwriters propose to offer the Group 2 Offered Certificates for sale to the
public as set forth in the Prospectus.
SECTION 5. COVENANTS OF THE DEPOSITOR
The Depositor agrees as follows:
(a) To prepare the Prospectus in a form approved by the Underwriters
and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not
later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement; to make no further
amendment or any supplement to the Registration Statement or to the Prospectus
prior to the Closing Date except as permitted herein; to advise the
Underwriters, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has been filed and to
furnish the Underwriters with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be filed by the
Depositor with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and, for so long as
the delivery of a prospectus is required in connection with the offering or sale
of the Group 2 Offered Certificates, to promptly advise the Underwriters of its
receipt of notice of the issuance by the Commission of any stop order or of: (i)
any order preventing or suspending the use of the Prospectus; (ii) the
suspension of the qualification of the Group 2 Offered Certificates for the
offering or sale in any jurisdiction; (iii) the initiation of or threat of any
proceeding for any such purpose; or (iv) any request by the Commission for the
amending or supplementing of the Registration Statement or the Prospectus or for
additional information. In the event of the issuance of any stop order or of any
order preventing or suspending the use of the Prospectus or suspending any such
qualification, the Depositor promptly shall use its best efforts to obtain the
withdrawal of such order by the Commission.
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<PAGE> 9
(b) To furnish promptly to the Underwriters and to counsel for the
Underwriters a signed copy of the Registration Statement as originally filed
with the Commission, including all consents and exhibits filed therewith.
(c) To deliver promptly to the Underwriters such number of the
following documents as the Underwriters shall reasonably request: (i) conformed
copies of the Registration Statement as originally filed with the Commission and
each amendment thereto (in each case including exhibits); (ii) the Prospectus
and any amended or supplemented Prospectus; and (iii) any document incorporated
by reference in the Prospectus (including exhibits thereto). If the delivery of
a prospectus is required at any time prior to the expiration of nine months
after the Effective Time in connection with the offering or sale of the Group 2
Offered Certificates, and if at such time any events shall have occurred as a
result of which the Prospectus as then amended or supplemented would include any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary during such same period to amend or
supplement the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with the
Securities Act or the Exchange Act, the Depositor shall notify the Underwriters
and, upon the Underwriters' request, shall file such document and prepare and
furnish without charge to the Underwriters and to any dealer in securities as
many copies as the Underwriters may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which corrects such
statement or omission or effects such compliance, and in case the Underwriters
are required to deliver a Prospectus in connection with sales of any of the
Group 2 Offered Certificates at any time nine months or more after the Effective
Time, upon the request of the Underwriters but at its expense, the Depositor
shall prepare and deliver to the Underwriters as many copies as the Underwriters
may reasonably request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Securities Act.
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Depositor or the Underwriters, be required by
the Securities Act or requested by the Commission.
(e) Prior to filing with the Commission any (i) supplement to the
Prospectus, or document incorporated by reference in the Prospectus, or (ii)
Prospectus pursuant to Rule 424 of the Rules and Regulations, to furnish a copy
thereof to the Underwriters and counsel for the Underwriters and obtain the
consent of the Underwriters to the filing.
(f) [RESERVED]
(g) So long as the Group 2 Offered Certificates shall be outstanding,
to deliver to the Underwriters as soon as such statements are furnished to the
Trustee: (i) the annual statement as to compliance delivered to the Trustee
pursuant to Section 3.10 of the Pooling and Servicing
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<PAGE> 10
Agreement, (ii) the annual statement of a firm of independent public accountants
furnished to the Trustee pursuant to Section 3.11 of the Pooling and Servicing
Agreement; and (iii) the Monthly Statement furnished to the Certificateholders
pursuant to Section 5.2 of the Pooling and Servicing Agreement.
(h) To apply the net proceeds from the sale of the Group 2 Offered
Certificates in the manner set forth in the Prospectus.
SECTION 6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS
The obligations of the Underwriters to purchase the Group 2 Offered
Certificates pursuant to this Agreement are subject to: (1) the accuracy on and
as of the Closing Date of the representations and warranties on the part of the
Depositor herein contained; (2) the performance by the Depositor of all of its
obligations hereunder; and (3) the following conditions as of the Closing Date:
(a) The Underwriter shall have received confirmation of the
effectiveness of the Registration Statement. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission. Any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus shall
have been complied with.
(b) Neither Underwriter shall have discovered and disclosed to the
Depositor on or prior to the Closing Date that the Registration Statement or the
Prospectus or any amendment or supplement thereto contains an untrue statement
of a fact or omits to state a fact which, in the opinion of Kennedy Covington
Lobdell & Hickman, L.L.P., counsel for the Underwriters, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading.
(c) All corporate proceedings and other legal matters relating to the
authorization, form and validity of this Agreement, the Pooling and Servicing
Agreement, the Purchase Agreement, the Group 2 Offered Certificates, the
Registration Statement and the Prospectus, and all other legal matters relating
to this Agreement and the transactions contemplated hereby shall be satisfactory
in all respects to counsel for the Underwriters, and the Depositor shall have
furnished to such counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.
(d) Kilpatrick Stockton LLP shall have furnished to the Underwriters
their written opinion, as counsel to the Depositor and FUNB, addressed to the
Underwriters and dated the Closing Date, in form and substance satisfactory to
Fitch IBCA, Inc. ("Fitch") Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("S&P"), and the Underwriters (all of whom shall be
entitled to rely on such opinion as if an addressee), to the effect that:
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(i) This Agreement, the Pooling and Servicing Agreement and
the Purchase Agreement, assuming the due authorization, execution and
delivery of such agreements by the other parties thereto, constitute
the legal, valid and binding agreements of the Depositor and FUNB, as
applicable, enforceable against the Depositor and FUNB, as applicable,
in accordance with their terms, subject as to enforceability to (A)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally, (B) the qualification that the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion, with respect to
such remedies, of the court before which any proceedings with respect
thereto may be brought, and (C) with respect to rights of indemnity
under this Agreement, the Pooling and Servicing Agreement and the
Purchase Agreement, limitations of public policy under applicable
securities laws.
(ii) The conditions to the use by the Depositor of a
registration statement on Form S-3 under the Securities Act, as set
forth in the General Instructions to Form S-3, have been satisfied with
respect to the Registration Statement and the Prospectus.
(iii) The Registration Statement and any amendments thereto
have become effective under the Securities Act; to the best of such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and not withdrawn and no
proceedings for that purpose have been instituted or threatened and not
terminated; and the Registration Statement, the Prospectus and each
amendment or supplement thereto, as of their respective effective or
issue dates (other than the financial and statistical information
contained therein, as to which such counsel need express no opinion),
complied as to form in all material respects with the applicable
requirements of the Securities Act and the Rules and Regulations.
(iv) To the best of such counsel's knowledge, there are no
material contracts, indentures or other documents of a character
required to be described or referred to in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration
Statement other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto.
(v) The statements in the base Prospectus under the headings
"Summary of Terms--Certain Federal Income Tax Consequences" and
"--ERISA Considerations" and "Certain Legal Aspects of the Mortgage
Loans," "ERISA Considerations" and "Certain Federal Income Tax
Consequences," and the statements in the Prospectus Supplement under
the headings "Summary of Terms of the Offered Certificates--Certain
Federal Income Tax Consequences" and "--ERISA Considerations," "Certain
Federal Income Tax Consequences" and "ERISA Considerations," to the
extent that they constitute matters of federal law or legal conclusions
with respect thereto, have been reviewed by such counsel and are
correct in all material respects with respects to those consequences or
aspects that are discussed.
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(vi) The Pooling and Servicing Agreement and the Group 2
Offered Certificates conform in all material respects to the
description thereof contained in the Prospectus and are not required to
be qualified under the Trust Indenture Act of 1939, as amended, and the
Trust Fund is not required to be registered under the 1940 Act.
(vii) Neither the Depositor nor the Trust Fund is an
"investment company" or under the control of an "investment company" as
such terms are defined in the 1940 Act.
(viii) The Trust Fund as described in the Prospectus
Supplement and the Pooling and Servicing Agreement will qualify as one
or more "real estate mortgage investment conduits" within the meaning
of Section 860D of the Internal Revenue Code of 1986, as amended (the
"Code"), assuming: (A) elections are made to treat the Trust Fund as
one or more REMICs, (B) compliance with the Pooling and Servicing
Agreement and (C) compliance with changes in the law, including any
amendments to the Code or applicable Treasury regulations thereunder.
(ix) The Group 2 Offered Certificates will, when issued,
conform to the description thereof contained in the Prospectus, and the
Classes so designated in the Prospectus will be "mortgage related
securities", as defined in Section 3(a)(41) of the Exchange Act.
(x) FUNB is existing in good standing as a national banking
association organized under the laws of the United States of America.
(xi) FUNB has full corporate power and authority to enter into
and fulfill its obligations under the Purchase Agreement and the
Pooling and Servicing Agreement and to transfer the Mortgage Loans to
the Depositor as contemplated in the Purchase Agreement.
(xii) The Pooling and Servicing Agreement and the Purchase
Agreement have been duly authorized, executed and delivered by the
FUNB.
(xiii) No consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body having jurisdiction over FUNB is required for the
consummation by FUNB of the transactions contemplated by the Pooling
and Servicing Agreement and the Purchase Agreement, except such
consents, approvals, authorizations, registrations and qualifications
as have been obtained.
(xiv) The Depositor has been incorporated and is existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, is qualified to do business and is in good standing in
North Carolina, and has all power and authority necessary to own or
hold its properties and to conduct the business in which it is engaged
and to enter into and perform its obligations under this Agreement, the
Pooling and
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Servicing Agreement and the Purchase Agreement, and to cause the
Certificates to be issued.
(xv) This Agreement, the Group 1 Underwriting Agreement, the
Pooling and Servicing Agreement, and the Purchase Agreement have been
duly authorized, executed and delivered by the Depositor.
(xvi) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body of
the United States is required for the issuance of the Certificates, and
the sale of the Certificates to the Underwriters, or the consummation
by the Depositor of the other transactions contemplated by this
Agreement, the Group 1 Underwriting Agreement, the Pooling and
Servicing Agreement and the Purchase Agreement, except such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Securities Act or state securities or Blue Sky laws
in connection with the purchase and distribution of the Certificates by
the Underwriters or as have been previously obtained.
(xvii) The direction by the Depositor to the Trustee to
execute, issue, authenticate and deliver the Certificates has been duly
authorized by the Depositor and, assuming that the Trustee has been
duly authorized to do so, when executed, authenticated and delivered by
the Trustee against payment of the agreed upon consideration therefor
in accordance with the Pooling and Servicing Agreement, the
Certificates will be validly issued and outstanding and will be
entitled to the benefits of the Pooling and Servicing Agreement.
Such counsel shall also have furnished to the Underwriters a written
statement addressed to the Underwriters and dated the Closing Date, in form and
substance satisfactory to the Underwriters to the effect that no facts have come
to the attention of such counsel which lead them to believe that: (A) the
Registration Statement (other than (1) the documents incorporated therein by
reference (including, without limitation, any Structural Term Sheets, Collateral
Term Sheets and Computational Materials) and (2) the financial and statistical
information contained therein, as to which no opinion shall be given at the time
it became effective, or at the date of such opinion) contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (B) the Prospectus (other than (1) the information incorporated
therein by reference (including, without, limitation, any Structural Term
Sheets, Collateral Term Sheets and Computational Materials) and (2) the
financial, statistical and numerical information contained therein, as to which
no opinion shall be expressed) contains an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(e) The Underwriters shall have received the favorable opinion, dated
the Closing Date, of Kilpatrick Stockton LLP, counsel to the Depositor,
addressed to the Depositor and satisfactory to Fitch, S&P and the Underwriters,
with respect to certain matters relating to the
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<PAGE> 14
transfer of the Mortgage Loans to the Trust Fund, and such counsel shall have
consented to reliance on such opinion by Fitch and S&P as though such opinion
had been addressed to each such party.
(f) The Underwriters shall have received the favorable opinion, dated
the Closing Date, of Kilpatrick Stockton LLP, counsel to FUNB, addressed to the
Depositor and satisfactory to Fitch, S&P and the Underwriters, with respect to
certain matters relating to the transfer of the Mortgage Loans to the Depositor,
and such counsel shall have consented to reliance on such, opinion by Fitch and
S&P as though such opinion had been addressed to each such party.
(g) FUNB shall have furnished to the Underwriters a written opinion of
counsel to FUNB (who may be an employee of FUNB or of an affiliate of FUNB),
addressed to the Underwriters and dated the Closing Date, in form and substance
satisfactory to the Underwriters, to the effect that:
(i) The execution, delivery and performance of the Pooling and
Servicing Agreement and the Purchase Agreement by FUNB and the
consummation of the transactions contemplated thereby do not and will
not conflict with or result in a material breach or violation of any of
the terms or provisions of, or constitute a default under, any material
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument known to such counsel and to which FUNB is a party or by
which FUNB is bound or to which any of the property or assets of FUNB
or any of its subsidiaries is subject. Nor will such actions result in
any violation of the provisions of the articles of incorporation or
bylaws of FUNB or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over FUNB or
any of its properties or assets.
(ii) There are no actions, proceedings or investigations
pending before or, to the best knowledge of such counsel, threatened by
any court, administrative agency or other tribunal to which FUNB is a
party or of which any of its properties is the subject: (A) which if
determined adversely to FUNB would have a material adverse effect on
the business, results of operations or financial condition of FUNB; (B)
asserting the invalidity of the Pooling and Servicing Agreement, the
Purchase Agreement or the Certificates; (C) seeking to prevent the
issuance of the Certificates or the consummation by FUNB of any of the
transactions contemplated by the Pooling and Servicing Agreement or the
Purchase Agreement; or (D) which might materially and adversely affect
the performance by FUNB of its obligations under, or the validity or
enforceability of, the Pooling and Servicing Agreement, the Purchase
Agreement or the Certificates.
(h) Counsel for the Depositor (who may be an employee of FUNB or an
affiliate of FUNB) shall have furnished to the Underwriters its written opinion,
addressed to the Underwriters and dated the Closing Date, in form and substance
satisfactory to the Underwriters, to the effect that:
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<PAGE> 15
(i) The execution, delivery and performance of this Agreement,
the Group 1 Underwriting Agreement, the Pooling and Servicing Agreement
and the Purchase Agreement by the Depositor, the consummation of the
transactions contemplated hereby and thereby, and the issuance and
delivery of the Certificates do not and will not conflict with or
result in a material breach or violation of any of the terms or
provisions of, or constitute a default under, any material indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Depositor is a party or by which the Depositor
is bound or to which any of the property or assets of the Depositor or
any of its subsidiaries is subject, nor will such actions result in any
violation of the provisions of the articles of incorporation or bylaws
of the Depositor or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Depositor or any of its properties or assets.
(ii) There are no actions, proceedings or investigations
pending before or, to the best knowledge of such counsel, threatened by
any court, administrative agency or other tribunal to which the
Depositor is a party or of which any of its properties is the subject:
(A) which if determined adversely to the Depositor would have a
material adverse effect on the business, results of operations or
financial condition of the Depositor; (B) asserting the invalidity of
the Pooling and Servicing Agreement, the Purchase Agreement or the
Certificates; (C) seeking to prevent the issuance of the Certificates
or the consummation by the Depositor of any of the transactions
contemplated by the Pooling and Servicing Agreement, the Purchase
Agreement, the Group 1 Underwriting Agreement or this Agreement, as the
case may be; or (D) which might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity
or enforceability of, the Pooling and Servicing Agreement, the Purchase
Agreement, the Group 1 Underwriting Agreement, this Agreement or the
Certificates.
(i) The Underwriters shall have received the favorable opinion of
counsel to the Trustee, dated the Closing Date, addressed to the Underwriters
and in form and scope satisfactory to counsel to the Underwriters, which may
include, among other items, opinions to the effect that:
(i) The Trustee has been duly incorporated and is validly
existing as a national banking association in good standing under the
laws of the United States of America.
(ii) The Trustee has duly authorized, executed and delivered
the Pooling and Servicing Agreement, which constitutes the legal, valid
and binding agreement of the Trustee, enforceable against the Trustee
in accordance with its terms, subject, as to enforcement of remedies,
to (A) applicable bankruptcy, insolvency, reorganization, and other
similar laws affecting the rights of creditors generally, and (B) to
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
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<PAGE> 16
(iii) Upon the execution, authentication and delivery of the
Certificates by the Trustee on the Closing Date, the Certificates will
have been duly issued on behalf of the Trust Fund.
(iv) The execution and delivery by the Trustee of the Pooling
and Servicing Agreement and the performance by the Trustee of its
obligations thereunder, including the execution and authentication of
the Certificates, do not conflict with or result in a violation of the
certificate of incorporation or bylaws of the Trustee or any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Trustee or any of its properties or
assets.
(v) The Trustee has full power and authority to execute and
deliver the Pooling and Servicing Agreement and to perform its
obligations thereunder.
(vi) There are no actions, proceedings or investigations
pending or threatened against or affecting the Trustee before or by any
court, arbitrator, administrative agency or other governmental
authority which, if decided adversely to the Trustee, would materially
and adversely affect the ability of the Trustee to carry out the
transactions contemplated in the Pooling and Servicing Agreement.
(vii) No consent, approval or authorization of, or
registration, declaration or filing with, any court or governmental
agency or body of the United States of America or any state thereof is
required for the execution, delivery or performance by the Trustee of
the Pooling and Servicing Agreement.
(j) The Underwriters shall have received the favorable opinion or
opinions, dated the date of the Closing Date, of Kennedy Covington Lobdell &
Hickman, L.L.P., counsel for the Underwriters, with respect to the issue and
sale of the Certificates, the Registration Statement, this Agreement, the
Prospectus and such other related matters as the Underwriters may reasonably
require.
(k) The Depositor shall have furnished to the Underwriters a
certificate, dated the Closing Date, of its Chairman of the Board, its President
or a Vice President stating that:
(i) The representations and warranties of the Depositor in
Section 1 of this Agreement are true and correct as of the Closing
Date; and the Depositor has complied with all its agreements contained
herein; and
(ii) Such person has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion (A) as of the
Effective Date, the Registration Statement and Prospectus did not
include an untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (B) since the Effective
Date no event has occurred
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<PAGE> 17
which should have been set forth in a supplement or amendment to the
Registration Statement or the Prospectus.
(l) The Trustee shall have furnished to the Underwriters a certificate
of the Trustee, signed by one or more duly authorized officers of the Trustee,
dated the Closing Date, as to the due authorization, execution and delivery of
the Pooling and Servicing Agreement by the Trustee and the acceptance by the
Trustee of the trusts created thereby and the due execution, authentication and
delivery of the Certificates by the Trustee thereunder and such other matters as
the Underwriters shall reasonably request.
(m) The Group 2 Offered Certificates shall have received the ratings
described in the Prospectus.
(n) The Underwriters shall have received at or before the Closing Date,
from Deloitte & Touche LLP, one or more letters, dated as of the date of this
Agreement, in form reasonably acceptable to the Underwriters (the "Initial
Letters"), and corresponding bring down letters dated as of the Closing Date,
(A) confirming that they are independent public accountants within the meaning
of the Securities Act, and are in compliance with, the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (B) stating the conclusions and findings of such firm with
respect to the financial information and other matters covered by its letter,
and (C) in the case of the bring-down letters, confirming in all material
respects the conclusions and finding set forth in the Initial Letters.
(o) Prior to the Closing Date, counsel for the Underwriters shall have
been furnished with such documents and opinions as they may reasonably require
for the purpose of enabling them to pass upon the issuance and sale of the
Certificates as herein contemplated and related proceedings or in order to
evidence the accuracy and completeness of any of the representations and
warranties, or the fulfillment of any of the conditions, herein contained, and
all proceedings taken by the Depositor in connection with the issuance and sale
of the Certificates as herein contemplated shall be satisfactory in form and
substance to the Underwriters and counsel for the Underwriters.
(p) Subsequent to the execution and delivery of this Agreement none of
the following shall have occurred: (i) trading in securities generally on the
New York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market
shall have been suspended or minimum prices shall have been established on
either of such exchanges or such market by the Commission, by such exchange or
by any other regulatory body or governmental authority having jurisdiction; (ii)
a banking moratorium shall have been declared by federal or state authorities;
(iii) the United States shall have become engaged in hostilities, there shall
have been an escalation of hostilities involving the United States or there
shall have been a declaration of a national emergency or war by the United
States; or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets of the United States shall be
such) as to make it, in the judgment of the Underwriters, impractical or
inadvisable to proceed with the public
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<PAGE> 18
offering or delivery of the Certificates on the terms and in the manner
contemplated in the Prospectus.
If any condition specified in this Section 6 shall not have been
fulfilled when and as required to be fulfilled this Agreement may be terminated
by the Underwriters by notice to the Depositor at any time at or prior to the
Closing Date, and such termination shall be without liability of any party to
any other party except as provided in Section 7.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
SECTION 7. PAYMENT OF EXPENSES
All expenses incurred by the Depositor or the Underwriters in
performance of their respective obligations hereunder, including the fees and
expenses of their respective counsel, shall be borne by the party incurring such
expense; provided that each of the Underwriters agrees to pay one-half of the
fees and expenses of Kennedy Covington Lobdell & Hickman, L.L.P., as
Underwriter's counsel.
If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 6, Section 10 or Section 11, the Depositor shall
reimburse the Underwriters for all reasonable out-of-pocket expenses, including
fees and disbursements of Kennedy Covington Lobdell & Hickman, L.L.P.
SECTION 8. INDEMNIFICATION AND CONTRIBUTION
(a) (i) The Depositor and FUNB agree to indemnify and hold harmless the
Underwriters, their directors and each person, if any, who controls the
Underwriters within the meaning of Section 15 of the Securities Act
from and against any and all loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited
to, any loss, claim damage, liability or action relating to purchases
and sales of the Group 2 Offered Certificates), to which the
Underwriters, their directors or any such controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (A)
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, (B) the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, (C) any
untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or (D) the omission or alleged omission to
state, in the Prospectus, a material fact required to be stated therein
or necessary to make the statements in the Prospectus, in the light of
the circumstances under which they were made, not misleading and shall
reimburse each Underwriter, each such director and each such
controlling person promptly upon demand for any legal or other expenses
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<PAGE> 19
reasonably incurred by such Underwriter, such director or such
controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or
action, as such expenses are incurred; provided, however, that the
Depositor and FUNB shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of,
or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in the Prospectus or the Registration
Statement in reliance upon and in conformity with written information
furnished to the Depositor by or on behalf of any of the Underwriters
specifically for inclusion therein (as specified in Section 8(h)
below). The foregoing indemnity agreement is in addition to any
liability which the Depositor and FUNB may otherwise have to the
Underwriters, its directors or any controlling person of the
Underwriters.
(ii) The Depositor and FUNB agree to indemnify and hold
harmless PaineWebber, its directors and each person, if any, who
controls PaineWebber within the meaning of Section 15 of the Securities
Act from and against any and all loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not
limited to, any loss, claim, damage, liability or action relating to
purchases and sales of the Group 2 Offered Certificates), to which
PaineWebber, its directors or any such controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (A)
any untrue statement or alleged untrue statement of a material fact
contained in any prospectus used after October 28, 1998 (a "Market
Making Prospectus"), or (B) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse PaineWebber,
each such director and each such controlling person promptly upon
demand for any legal or other expenses reasonably incurred by
PaineWebber, such director or such controlling person in connection
with investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action, as such expenses are
incurred; provided, however, the Depositor and FUNB shall not be liable
in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission
made in a Market Making Prospectus in reliance upon and in conformity
with written information furnished to the Depositor by PaineWebber
specifically for inclusion therein (as specified in Section 8(h)
below). The foregoing indemnity agreement is in addition to any
liability which the Depositor and FUNB may otherwise have to
PaineWebber, its directors or any controlling person of PaineWebber
under this Agreement.
(b) (i) Each Underwriter severally agrees to indemnify and hold
harmless the Depositor, each of its directors, each of its officers who
signed the Registration Statement, and each person, if any, who
controls the Depositor within the meaning of Section 15 of the
Securities Act against any and all loss, claim, damage or liability, or
any action in respect thereof, to which the Depositor or any such
director, officer or
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controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) an untrue, statement or alleged
untrue statement of a material fact contained in the Registration
Statement, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus
or (iv) the omission or alleged omission to state therein a material
fact required to be stated in the Prospectus or necessary to make the
statements in the Prospectus, in the light of the circumstances under
which they were made, not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Depositor by or on
behalf of the Underwriters specifically for inclusion therein (as
specified in Section 8(h) below), and shall reimburse the Depositor and
any such director, officer or controlling person for any legal or other
expenses reasonably incurred by the Depositor or any director, officer
or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or
action as such expenses are incurred. The foregoing indemnity agreement
is in addition to any liability which the Underwriters may otherwise
have to the Depositor or any such director, officer or controlling
person. Notwithstanding anything to the contrary contained in this
Section 8, PaineWebber shall have no obligation to indemnify any party
for any loss, claim, damage or liability or contribute to any such
loss, claim, damage or liability in respect of untrue Statements or
alleged untrue statements of material fact or omissions or alleged
omissions to state a material fact contained in any Market Making
Prospectus.
(ii) PaineWebber shall indemnify and hold harmless FUCM and
each person, if any, who controls FUCM within the meaning of Section 15
of the Securities Act from and against any loss, claim, damage or
liability, joint or several, and any action in respect thereof, to
which FUCM or any such controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in
any Computational Materials (defined below) furnished or made available
by PaineWebber to offerees of the Group 2 Offered Certificates.
FUCM shall indemnify and hold harmless PaineWebber and each
person, if any, who controls PaineWebber within the meaning of Section
15 of the Securities Act from and against any loss, claim, damage or
liability, joint or several, and any action in respect thereof, to
which PaineWebber or any such controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in
any Computational Materials furnished or made available by FUCM to
offerees of the Group 2 Offered Certificates.
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<PAGE> 21
(c) Promptly after receipt by any indemnified party under this Section
8 of notice of any claim or the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure; and, provided further, that the
failure to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Underwriters, if the indemnified
parties under this Section 8 consist of the Underwriters or any of their
directors and controlling persons, or by the Depositor, if the indemnified
parties under this Section 8 consist of the Depositor or any of the Depositor's
directors, officers or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section 8(a) and (b), shall use its best efforts to cooperate with
the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such
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action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected, without its
written consent if (A) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (B) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement.
(d) (i) Each Underwriter agrees to provide the Depositor no later than
two Business Days prior to the day on which the Prospectus Supplement
is required to be filed pursuant to Rule 424 with a copy of its
Structural Term Sheets and Computational Materials (each as defined
below), if any, for filing with the Commission an Form 8-K.
(ii) Each Underwriter agrees to provide the Depositor with its
Collateral Term Sheets no later than one Business Day prior to the day
on which such Collateral Term Sheets are distributed to potential
investors.
(e) Each Underwriter agrees, severally and not jointly, assuming all
Seller-Provided Information (defined below) is accurate and complete in all
material respects, to indemnify and hold harmless the Depositor, each of the
Depositor's officers who sign the Registration Statement and directors and each
person who controls the Depositor within the meaning of Section 15 of the
Securities Act against any and all losses, claims, damages or liabilities, joint
or several, to which they may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of a
material fact contained in the Derived Information (defined below) provided by
such Underwriter, or arise out of or are based upon the omission or alleged
omission, when read in conjunction with the Prospectus, to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and agrees to reimburse each such indemnified party for any legal or
other expenses reasonably incurred by him, her or it in connection with
investigating or defending or preparing to defend any such loss, claim, damage,
liability or action as such expenses are incurred. The obligations of an
Underwriter under this Section 8(e) shall be in addition to any liability which
such Underwriter may otherwise have.
The procedures set forth in Section 8(c) shall be equally applicable to
this Section 8(e).
(f) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a), (b) or (e) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to
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therein, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Depositor on the one hand and the Underwriters on the
other from the offering of the Certificates or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law or if the indemnified
party failed to give the notice required under Section 8(c), in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Depositor on the one hand
and the Underwriters on the other with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations.
The relative benefits of the Underwriters and the Depositor shall be
deemed to be in such proportions that the Underwriters are responsible for their
pro rata portion of such losses, liabilities, claims, damages and expenses
determined in accordance with the ratio that the difference between the purchase
price paid to the Depositor by the Underwriters and the aggregate resale price
received by the Underwriters bears to the purchase price paid to the Depositor
by the Underwriters, and the Depositor shall be responsible for the balance.
The relative fault of the Underwriters and the Depositor shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Depositor or by the Underwriters, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission and other equitable
considerations.
The Depositor and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(f) were to be determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 8(f),
shall be deemed to include, for purposes of this Section 8(f), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
In no case shall the Underwriters be responsible for any amount in
excess of the difference between the purchase price paid to the Depositor by the
Underwriters and the aggregate resale price received by the Underwriters. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(g) For purposes of this Section 8, the term "Derived Information"
means such portion, if any, of the information delivered to the Depositor
pursuant to Section 8(d) for filing with the Commission on Form 8-K as:
23
<PAGE> 24
(i) is not contained in the Prospectus without taking into
account information incorporated therein by reference;
(ii) does not constitute Seller-Provided Information; and
(iii) is of the type of information defined as Collateral Term
Sheets, Structural Term Sheets or Computational Materials (as such term
are interpreted in the No-Action Letters (defined below)).
"Seller-Provided Information" means the information contained on any computer
tape furnished to the Underwriters by FUNB concerning the assets comprising the
Trust Fund.
The terms "Collateral Term Sheet" and "Structural Term Sheet" shall
have the respective meanings assigned to them in the February 13, 1995, letter
(the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the Commission staff's response
thereto, were publicly available February 17, 1995). The term "Collateral Term
Sheet," as used herein, includes any subsequent Collateral Term Sheet that
reflects a substantive change in the information presented. The term
"Computational Materials" has the meaning assigned to it in the May 17, 1994,
letter (the "Kidder Letter" and, together with the PSA Letter, the "No-Action
Letters") of Brown & Wood an behalf of Kidder, Peabody & Co., Inc. (which
letter, and the SEC staffs response thereto, were publicly available May 20,
1994).
Each Underwriter shall cooperate with the Depositor and with Deloitte &
Touche LLP in obtaining a letter, in form and substance satisfactory to the
Depositor and such Underwriter, of Deloitte & Touche LLP regarding the
information in any Form 8-K consisting of Computational Materials and/or
Structural Term Sheets furnished by such Underwriter, in each case in EDGAR
format as formatted by the Depositor. Any such letter shall be obtained prior to
the filing of any such Form 8-K with the Commission at the applicable
Underwriter's sole expense.
Each Underwriter represents, warrants to, and covenants with, the
Depositor that the Derived Information prepared by such Underwriter is not
misleading and not inaccurate in any material respect and that any
Seller-Provided Information contained in any Form 8-K prepared by such
Underwriter which is not otherwise inaccurate in any material respect is not
presented in the Form 8-K in a way that is either misleading or inaccurate in
any material respect. Each Underwriter further covenants with the Depositor that
if any Computational Materials or Collateral Term Sheets contained in any Form
8-K prepared by such Underwriter are found to include any information that is
misleading or inaccurate in any material respect, such Underwriter promptly
shall inform the Depositor of such finding, provide the Depositor with revised
and/or corrected Computational Materials or Collateral Term Sheets, as the case
may be, and promptly prepare and deliver to the Depositor (in hard copy and
EDGAR format) for filing with the Commission in accordance herewith, revised
and/or corrected Computational Materials or Collateral Term Sheets, as the case
may be.
24
<PAGE> 25
Each Underwriter covenants that all Computational Materials and
Collateral Term Sheets used by it shall contain a legend substantially similar
to or including language substantially similar to the following:
THIS INFORMATION IS FURNISHED TO YOU SOLELY BY [NAME OF UNDERWRITER]
AND NOT BY THE ISSUER OR ANY OF ITS AFFILIATES. NEITHER THE ISSUER NOR
ANY OF ITS AFFILIATES MAKES ANY REPRESENTATION AS TO THE ACCURACY OR
COMPLETENESS OF THE INFORMATION HEREIN. THE INFORMATION HEREIN IS
PRELIMINARY, AND WILL BE SUPERSEDED BY THE APPLICABLE PROSPECTUS
SUPPLEMENT AND BY ANY OTHER INFORMATION SUBSEQUENTLY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Each Underwriter covenants that all Collateral Term Sheets used by it
shall contain an additional legend substantially similar to or including
language substantially similar to the following:
THIS INFORMATION CONTAINED HEREIN SUPERSEDED BY THE DESCRIPTION OF THE
MORTGAGE LOANS CONTAINED IN THE PROSPECTUS SUPPLEMENT.
Each Underwriter covenants that all Collateral Term Sheets (other than
the initial Collateral Term Sheet) shall contain an additional legend
substantially similar to or including language substantially similar to the
following:
THIS INFORMATION CONTAINED HEREIN SUPERSEDES THE INFORMATION IN ALL
PRIOR COLLATERAL TERM SHEETS, IF ANY.
If an Underwriter does not provide any Computation Materials or
Collateral Term Sheets to the Depositor pursuant to the preceding paragraphs,
such Underwriter shall be deemed to have represented, as of the Closing Date,
that it did not provide any prospective investors with any information in
written or electronic form in connection with the offering of the Certificates
that is required to be filed with the Commission in accordance with the
No-Action Letters, and such Underwriter shall provide the Depositor with a
certification to that effect on the Closing Date.
(h) The Underwriters confirm that the information set forth (i) in the
paragraph preceding the penultimate paragraph on the cover page, (ii) under the
caption "Summary of Terms of the Offered Certificates--Denominations" in the
Prospectus Supplement and (iii) in the second paragraph under the caption
"Underwriting" in the Prospectus Supplement is correct and, except for the
additional information noted in the following sentence, constitutes the only
information furnished in writing to the Depositor by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus. In addition, FUCM confirms that the information set forth (i) in the
penultimate paragraph on the cover page and (ii) in the first
25
<PAGE> 26
and third paragraphs under the caption "Underwriting" in the Prospectus
Supplement is correct and has been furnished in writing to the Depositor by FUCM
specifically for inclusion in the Registration Statement and the Prospectus.
SECTION 9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY
All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Depositor submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Underwriters or controlling
persons thereof, or by or an behalf of the Depositor and shall survive delivery
of any Certificates to the Underwriters.
SECTION 10. DEFAULT BY ONE OF THE UNDERWRITERS
If one of the Underwriters participating in the public offering of the
Group 2 Offered Certificates shall fail at the Closing Date to purchase the
Group 2 Offered Certificates which it is obligated to purchase hereunder (the
"Defaulted Certificates"), then the non-defaulting Underwriter shall have the
right, within 24 hours thereafter, to purchase all, but not less than all, of
the Defaulted Certificates in such amounts as may be agreed upon and upon the
terms herein set forth. If, however, the non-defaulting Underwriter has not
completed such arrangements within such 24-hour period, then:
(a) if the aggregate principal amount of Defaulted
Certificates does not exceed 10% of the aggregate principal amount of
the Group 2 Offered Certificates to be purchased pursuant to this
Agreement, the non-defaulting Underwriter shall be obligated to
purchase the full amount thereof, or
(b) if the aggregate principal amount of Defaulted
Certificates exceeds 10% of the aggregate principal amount of the Group
2 Offered Certificates to be purchased pursuant to this Agreement, this
Agreement shall terminate, without any liability on the part of the
non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve a defaulting
Underwriter from the liability with respect to any default of such Underwriter
under this Agreement.
In the event of a default by any Underwriter as set forth in this
Section 10, the non-defaulting Underwriter and the Depositor shall have the
right to postpone the Closing Date for a period not exceeding five Business Days
in order that any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements may be effected.
In no event shall either Underwriter have any liability for or
obligations arising from the failure of an underwriter under the Group 1
Underwriting Agreement to perform in accordance with the terms of such Group 1
Underwriting Agreement.
26
<PAGE> 27
SECTION 11. TERMINATION OF AGREEMENT
The Underwriters may terminate this Agreement immediately upon notice
to the Depositor, at any time at or prior to the Closing Date if any of the
events or conditions described in Section 6(p) of this Agreement shall occur and
be continuing. In the event of any such termination, the covenant set forth in
Section 5(g), the provisions of Section 7, the indemnity agreement set forth in
Section 8, and the provisions of Sections 9 and 13 shall remain in effect.
SECTION 12. NOTICES
All statements, requests, notices and agreements hereunder shall be in
writing, and:
(a) if to First Union Capital Markets, a division of Wheat First
Securities, Inc., shall be delivered or sent by mail, telex or facsimile
transmission to One First Union TW-8, Charlotte, North Carolina 28288,
Attention: Patrick J. Tadie (Fax: (704) 383-6382), and if to PaineWebber
Incorporated, to 1285 Avenue of the Americas, 11th Floor, New York, New York
10019 Attention: Reginald Fernandez (Fax: (212) 713-1482), with a copy to the
General Counsel's office; or
(b) if to the Depositor, shall be delivered or sent by mail, telex or
facsimile transmission to First Union Residential Securitization Transactions,
Inc., 301 South College Street, Charlotte, North Carolina 28288, Attention:
Patrick J. Tadie (Fax (704) 383-6382).
SECTION 13. PERSONS ENTITLED TO THE BENEFIT OF THIS AGREEMENT
This Agreement shall inure to the benefit of and be binding upon the
Underwriters and the Depositor, and their respective successors. This Agreement
and the terms and provisions hereof are for the sole benefit of only those
persons, except that the representations, warranties, indemnities and agreements
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control any of the Underwriters within the
meaning of Section 15 of the Securities Act, and for the benefit of directors of
the Depositor, officers of Depositor who have signed the Registration Statement
and any person controlling the Depositor within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section 13, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
SECTION 14. SURVIVAL
The respective indemnities, representations, warranties and agreements
of the Depositor and the Underwriters contained in this Agreement, or made by or
on behalf of them, respectively, pursuant to this Agreement, shall survive the
delivery of and payment for the Certificates and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any of them or
any person controlling any of them.
27
<PAGE> 28
SECTION 15. DEFINITION OF THE TERM "BUSINESS DAY"
For purposes of this Agreement, "Business Day" means any day other than
(a) a Saturday or Sunday, or (b) a legal holiday in the States of New York or
North Carolina or (c) a day on which banking or savings and loan institutions in
the States of New York or North Carolina or the state in which the Corporate
Trust Office is located are authorized or obligated by law or executive order to
be closed or (d) a day on which the New York Stock Exchange, Inc. is closed for
trading.
SECTION 16. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina, without giving effect to the conflicts
of laws provisions thereof.
SECTION 17. COUNTERPARTS
This Agreement may be executed in counterparts and, if executed in more
than one counterpart, the executed counterparts shall each be deemed to be an
original but all such counterparts shall together constitute one and the same
instrument.
SECTION 18. HEADINGS
The headings herein are inserted for convenience of reference only and
are not intended to be part of, or to affect the meaning or interpretation of,
this Agreement.
28
<PAGE> 29
If the foregoing Underwriting Agreement correctly sets forth the
agreement between the Depositor and the Underwriters, please indicate your
acceptance in the space provided for that Purpose below.
Very truly yours,
FIRST UNION RESIDENTIAL
SECURITIZATION TRANSACTIONS, INC.
By: /s/ Patrick J. Tadie
---------------------------------
Name: Patrick J. Tadie
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Patrick J. Tadie
---------------------------------
Name: Patrick J. Tadie
Title: Vice President
CONFIRMED AND ACCEPTED,
as of the date first above written:
FIRST UNION CAPITAL MARKETS,
a division of WHEAT FIRST SECURITIES, INC.
By: /s/ Curtis Y. Alridge
---------------------------
Name: Curtis Y. Alridge
Title: Managing Director
PAINEWEBBER INCORPORATED
By: /s/ Kenneth Zegar
---------------------------
Name: Kenneth Zegar
Title: First Vice President
29
<PAGE> 30
SCHEDULE A
TITLE AND DESCRIPTION OF THE GROUP 2 OFFERED CERTIFICATES
Mortgage Pass-Through Certificates, Series 1998-B, Class 2A, Class 2M,
Class 2B-1 and Class 2B-2
Underwriting Agreement, dated as of July 24, 1998
Cut-off Date: July 1, 1998
<TABLE>
<CAPTION>
Class Certificate Portion of Certificate Portion of Certificate Initial Pass Rating(3)
Designation Principal Balance Principal Balance or Principal Balance or Through Rate Purchase (Fitch/S&P)
- ----------- or Class Notional Notional Amount to be Notional Amount to be ------------ Price(2) -----------
Amount(1) Purchased by Purchased by --------
----------------- PaineWebber(1) FUCM(1)
--------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Class 2A-1 $64,361,000 $64,361,000 -0- (4) 100.5315 AAA/AAA
Class 2M 832,000 832,000 -0- (4) 88.7500 AA/AA
Class 2B-1 332,000 332,000 -0- (4) 88.7500 A/A
Class 2B-2 566,000 566,000 -0- (4) 88.7500 BBB/BBB
</TABLE>
- --------------------
(1) Subject to a variance of plus or minus 5.0%
(2) Expressed as a percentage of the Certificate Principal Balance or Class
Notional Amount of the relevant Class of Group 2 Offered Certificates
to be purchased. In addition, as to each Class of the Group 2 Offered
Certificates, the Underwriters will pay the Depositor accrued interest
at the initial Pass-Through Rate therefor from the Cut-Off Date to but
not including the Closing Date.
(3) By Fitch and S&P, as indicated.
(4) Interest will accrue on the designated class at a per annum rate equal
to the weighted average of the Net Mortgage Interest Rates (as defined
in the Prospectus Supplement) of the Pool 2 Mortgage Loans.
<PAGE> 1
EXHIBIT 4.1
===============================================================================
------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of July 1, 1998
------------------------------
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.,
as Depositor
FIRST UNION NATIONAL BANK,
as Seller, Master Servicer and Trust Administrator
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee and Document Custodian
===============================================================================
FURST MORTGAGE LOAN TRUST 1998-B
MORTGAGE PASS-THROUGH CERTIFICATES
Series 1998-B
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1. Definitions............................................................ 1
Section 1.2. Other Definitional Provisions.......................................... 73
Section 1.3. Calculations........................................................... 73
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.1. Conveyance of Mortgage Loans........................................... 74
Section 2.2. Acceptance by Trustee; Retransfer of Mortgage Loans.................... 78
Section 2.3. Representations and Warranties Regarding the Depositor................. 78
Section 2.4. Representations and Warranties Regarding the Master Servicer........... 80
Section 2.5. Representations and Warranties Regarding the Seller.................... 82
Section 2.6. Representations and Warranties of the Seller Regarding
this Agreement and the Mortgage Loans; Transfer of Certain
Mortgage Loans......................................................... 84
Section 2.7. Substitution of Mortgage Loans......................................... 92
Section 2.8. Execution and Authentication of Certificates........................... 93
Section 2.9. REMIC Provisions....................................................... 93
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.1. The Master Servicer.................................................... 95
Section 3.2. Collection of Certain Mortgage Loan Payments........................... 97
Section 3.3. Withdrawals from the Collection Account................................ 99
Section 3.4. Monthly Advances; Compensating Interest............................... 100
Section 3.5. Maintenance of Hazard Insurance; Property Protection Expenses......... 100
Section 3.6. Assumption and Modification Agreements................................ 101
Section 3.7. Realization Upon Defaulted Mortgage Loans............................. 102
Section 3.8. Trustee to Cooperate.................................................. 103
Section 3.9. Servicing Compensation; Payment of Certain Expenses by Master
Servicer.............................................................. 104
Section 3.10. Annual Statement as to Compliance.................................... 105
Section 3.11. Annual Servicing Report.............................................. 105
Section 3.12. Access to Certain Documentation and Information Regarding
the Mortgage Loans................................................... 105
Section 3.13. Maintenance of Certain Insurance Policies............................ 106
Section 3.14. Reports of Foreclosures and Abandonments of Mortgaged
Property, Returns Relating to Mortgage Interest Received
from Individuals and Returns Relating to Cancellation of
Indebtedness......................................................... 107
Section 3.15. Reports to the Securities and Exchange Commission.................... 107
Section 3.16. Custody of Mortgage Files............................................ 107
Section 3.17. Duties of Document Custodian; Authority; Indemnification............. 108
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 3.18. [RESERVED]........................................................... 109
Section 3.19. Payment of Taxes, Insurance and Other Charges........................ 109
Section 3.20. [RESERVED]........................................................... 109
ARTICLE IV
DISTRIBUTIONS IN RESPECT OF SERVICING CERTIFICATES;
Section 4.1 Distributions with Respect to Pool 1................................... 110
Section 4.2 Allocation of Realized Losses with Respect to Pool 1................... 115
Section 4.3 Distributions with Respect to Pool 2................................... 117
Section 4.4 Allocation of Realized Losses with Respect to Pool 2................... 120
Section 4.5 Servicing Certificate.................................................. 122
ARTICLE V
DISTRIBUTION; STATEMENTS TO CERTIFICATEHOLDERS; RIGHTS OF CERTIFICATEHOLDERS;
Section 5.1. Distributions......................................................... 123
Section 5.2. Statements............................................................ 125
Section 5.3. Distribution Account.................................................. 128
Section 5.4. Investment of Accounts................................................ 128
Section 5.05. Determination of Certificate Rates for LIBOR Certificates............ 129
ARTICLE VI
THE CERTIFICATES
Section 6.1. The Certificates...................................................... 130
Section 6.2. Registration of Transfer and Exchange of the Certificates............. 133
Section 6.3. Mutilated, Destroyed, Lost or Stolen Certificates..................... 139
Section 6.4. Persons Deemed Owners................................................. 139
Section 6.5. Appointment of Paying Agent........................................... 139
Section 6.6. Maintenance of Office or Agency....................................... 140
ARTICLE VII
THE DEPOSITOR, THE SELLER, THE MASTER SERVICER AND THE TRUST ADMINISTRATOR
Section 7.1. Liability of the Depositor, the Seller, the Master
Servicer and the Trust Administrator.................................. 140
Section 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Seller, the Master Servicer or the
Trust Administrator................................................... 140
Section 7.3. Limitation on Liability of the Master Servicer, the Trust
Administrator and Others.............................................. 140
Section 7.4. Master Servicer Not to Resign......................................... 141
Section 7.5. Delegation of Duties.................................................. 142
Section 7.6. Indemnification of the Trust by the Seller and Master Servicer........ 142
</TABLE>
ii
<PAGE> 4
ARTICLE VIII
DEFAULT
<TABLE>
<S> <C> <C>
Section 8.1. Events of Default..................................................... 143
Section 8.2. Trustee to Act; Appointment of Successor.............................. 145
Section 8.3. Waiver of Defaults.................................................... 146
Section 8.4. Notification to Certificateholders.................................... 146
ARTICLE IX
THE TRUSTEE
Section 9.1. Duties of Trustee..................................................... 146
Section 9.2. Certain Matters Affecting the Trustee................................. 148
Section 9.3. Trustee Not Liable for Certificates or Mortgage Loans................. 149
Section 9.4. Trustee May Own Certificates.......................................... 150
Section 9.5. Trustee's and Document Custodian's Expenses........................... 150
Section 9.6. Eligibility Requirements for Trustee.................................. 151
Section 9.7. Resignation or Removal of Trustee..................................... 151
Section 9.8. Successor Trustee..................................................... 152
Section 9.9. Merger or Consolidation of Trustee.................................... 153
Section 9.10. Appointment of Co-Trustee or Separate Trustee........................ 153
Section 9.11. Limitation of Liability.............................................. 154
Section 9.12. Trustee May Enforce Claims Without Possession of Certificates........ 154
Section 9.13. Suits for Enforcement................................................ 155
Section 9.14. Waiver of Bond Requirement........................................... 155
Section 9.15. Waiver of Inventory, Accounting and Appraisal Requirement............ 155
ARTICLE X
TERMINATION
Section 10.1. Termination.......................................................... 155
Section 10.2. Additional Termination Requirements.................................. 157
ARTICLE XI
REMIC ADMINISTRATION
Section 11.1. REMIC Administration................................................. 158
Section 11.2. Prohibited Transactions and Activities............................... 160
Section 11.3. Indemnification with Respect to Certain Taxes and Loss of
REMIC Status......................................................... 161
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1. Amendment............................................................ 162
Section 12.2. Recordation of Agreement............................................. 163
Section 12.3. Limitation on Rights of Certificateholders........................... 163
Section 12.4. Governing Law........................................................ 164
Section 12.5. Notices.............................................................. 164
Section 12.6. Severability of Provisions........................................... 165
Section 12.7. Certificates Nonassessable and Fully Paid............................ 165
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 12.8. Third-Party Beneficiaries............................................ 165
Section 12.9. Counterparts......................................................... 165
Section 12.10. Effect of Headings and Table of Contents............................ 165
Section 12.11. Provision of Information to Prospective Purchasers; Rule 144A....... 165
</TABLE>
iv
<PAGE> 6
<TABLE>
EXHIBITS
<S> <C> <C>
Exhibit A-1 Forms of Class 1A Certificates.....................................A-1-1
Exhibit A-2 Forms of Class 2A Certificates.....................................A-2-1
Exhibit A-3 Form of Class 1M Certificate.......................................A-3-1
Exhibit A-4 Form of Class 2M Certificates......................................A-4-1
Exhibit B-1 Forms of Class 1B Certificates.......................................B-1
Exhibit B-2 Forms of Class 2B Certificates.......................................B-2
Exhibit B-3 Forms of Class A-R Certificates......................................B-3
Exhibit C [Reserved]...........................................................C-1
Exhibit D Mortgage Loan Schedule...............................................D-1
Exhibit E Form of Assignment...................................................E-1
Exhibit F Form of Mortgage and Note............................................F-1
Exhibit G Form of Officer's Certificate of Master Servicer.....................G-1
Exhibit H Form of Servicing Certificate........................................H-1
Exhibit I Form of Trust Receipt................................................I-1
Exhibit J Form of Representation Letter........................................J-1
Exhibit K Form of Remittance Report............................................K-1
Exhibit L-1 Form of Transfer Certificate for Non-Registered Certificates.......L-1-1
Exhibit L-2A Form I of Transfer Certificate for Non-Registered Certificates....L-2A-1
Exhibit L-2B Form II of Transfer Certificate for Non-Registered Certificates...L-2B-1
Exhibit L-3 Form of Opinion of Counsel.........................................L-3-1
Exhibit M Form of Residual Certificateholder Affidavit.........................M-1
Exhibit N Schedule of Mortgage Loans as to which related Mortgage
Notes will be delivered after the Closing Date.......................N-1
Exhibit O Form of Liquidation Report...........................................O-1
Exhibit P [Reserved]...........................................................P-1
Exhibit Q Form of Estimated Net Liquidation Analysis...........................Q-1
Exhibit R [Reserved]...........................................................R-1
Schedule 1 Offices of the Document Custodian
</TABLE>
v
<PAGE> 7
POOLING AND SERVICING AGREEMENT
POOLING AND SERVICING AGREEMENT, dated as of July 1, 1998, among FIRST
UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC., as Depositor (the
"Depositor"), FIRST UNION NATIONAL BANK, as Seller (the "Seller"), as Master
Servicer (the "Master Servicer") and as Trust Administrator (the "Trust
Administrator") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
(the "Trustee") and as Document Custodian (the "Document Custodian").
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article.
Accounts: The Collection Account and the Distribution Account.
Affiliate: With respect to any Person, any other Person controlling, controlled
by or under common control with such Person. For purposes of this definition,
"control" means the power to direct the management and policies of a Person,
directly or indirectly, whether through ownership of voting securities, by
contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Aggregate Class 1A Interest Accrual Amount: As to any Distribution Date, the sum
of the Class 1A Interest Accrual Amounts with respect to such Distribution Date.
Aggregate Class 1A Principal Balance: As of any date, an amount equal to the sum
of the Class A Principal Balances for the Class 1A-1 Certificates, Class 1A-2
Certificates, Class 1A-3 Certificates, Class 1A-4 Certificates, Class 1A-5
Certificates, Class 1A-6 Certificates, Class 1A-7 Certificates, Class 1A-8
Certificates, Class 1A-9 Certificates, Class 1A-10 Certificates, Class 1A-11
Certificates, Class 1A-12 Certificates, Class 1A-PO Certificates and Class A-R
Certificate.
Aggregate Class 1A Unpaid Interest Shortfall: As to any Distribution Date, an
amount equal to the sum of the Class 1A Unpaid Interest Shortfalls for all the
Class 1A Certificates.
<PAGE> 8
Aggregate Class 1B Interest Accrual Amount: As to any Distribution Date, the sum
of the Class 1B Interest Accrual Amounts with respect to the Class 1B
Certificates.
Aggregate Class 1B Principal Balance: As of any date, an amount equal to the sum
of the Class 1B-1 Principal Balance, Class 1B-2 Principal Balance, Class 1B-3
Principal Balance, Class 1B-4 Principal Balance and Class 1B-5 Principal
Balance.
Aggregate Class 2B Interest Accrual Amount: As to any Distribution Date, the sum
of the Class 2B Interest Accrual Amounts with respect to the Class 2B
Certificates.
Aggregate Class 2B Principal Balance: As of any date, an amount equal to the sum
of the Class 2B-1 Principal Balance, Class 2B-2 Principal Balance, Class 2B-3
Principal Balance, Class 2B-4 Principal Balance and Class 2B-5 Principal
Balance.
Aggregate Class Principal Balance: As of any date of determination thereof, the
aggregate of the then outstanding Class Principal Balances of all Classes of
Certificates.
Aggregate Loan Balance: As of any date of determination, the sum of the Loan
Balances of all the Pool 1 Mortgage Loans and the Pool 2 Mortgage Loans.
Agreement: This Pooling and Servicing Agreement and all amendments hereof and
supplements hereto.
Anniversary: Each anniversary of the Cut-Off Date.
Assignment of Mortgage: With respect to any Mortgage, an assignment, notice of
transfer or equivalent instrument, in recordable form, sufficient under the laws
of the jurisdiction in which the related Mortgaged Property is located to
reflect the sale of the Mortgage to the Trustee, which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering the Mortgage Loans secured by Mortgaged Properties located
in the same jurisdiction.
Available Servicing Compensation: The Pool 1 Available Servicing Compensation or
the Pool 2 Available Servicing Compensation, as applicable.
Bankruptcy Code: The Bankruptcy Code of 1978, as amended.
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient Valuation or
Debt Service Reduction.
BIF: The Bank Insurance Fund, as from time to time constituted, created under
the Financial Institutions Reform, Recovery and Enforcement Act of 1989, or if
at any time after the execution of this instrument the Bank Insurance Fund is
not existing and performing duties now assigned to it, the body performing such
duties on such date.
2
<PAGE> 9
Book-Entry Certificates: The Class 1A Certificates (other than the Class A-R
Certificate), the Class 2A Certificates, the Class 1M Certificates, the Class 2M
Certificates, the Class 1B-1 Certificates, the Class 2B-1 Certificates, the
Class 1B-2 Certificates and the Class 2B-2 Certificates, beneficial ownership
and transfers of which shall be made through book entries as described in
Section 6.2(b)(i).
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day on
which banking institutions in the State of North Carolina, the State of Maryland
or the State of Minnesota are authorized or obligated by law or executive order
to remain closed.
Certificate: Any one of the Certificates issued pursuant to this Agreement,
executed by the Trustee and authenticated by or on behalf of the Trustee
hereunder in substantially one of the forms set forth in Exhibits A-1, A-2, A-3,
A-4, B-1, B-2 or B-3 hereto.
Certificate Group: The Group 1 Certificates or Group 2 Certificates, as
applicable.
Certificate Owner: The Person who is a beneficial owner of a Book-Entry
Certificate.
Certificate Principal Balance: For each Certificate of any Class, the portion of
the related Class Principal Balance, if any, represented by such Certificate.
Certificate Rate: The certificate rates set forth in Section 6.1(c).
Certificate Register and Certificate Registrar: The register maintained and the
registrar appointed pursuant to Section 6.2(a).
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent, direction, waiver or request pursuant to this Agreement, (x)
any Certificate registered in the name of the Depositor or any Person actually
known to a Responsible Officer of the Trustee to be an Affiliate of the
Depositor and (y) any Certificate for which the Depositor or any Person actually
known to a Responsible Officer of the Trustee to be an Affiliate of the
Depositor is the Certificate Owner shall be deemed not to be outstanding (unless
to the actual knowledge of a Responsible Officer of the Trustee (i) the
Depositor or such Affiliate is acting as trustee or nominee for a Person who is
not an Affiliate of the Depositor and who makes the voting decision with respect
to such Certificates or (ii) the Depositor or such Affiliate is the Certificate
Owner of all the Certificates) and the Percentage Interest evidenced thereby
shall not be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect any such consent, direction, waiver or
request has been obtained.
Class: With respect to each of Class 1A-1, Class 1A-2, Class 1A-3, Class 1A-4,
Class 1A-5, Class 1A-6, Class 1A-7, Class 1A-8, Class 1A-9, Class 1A-10, Class
1A-11, Class 1A-12, Class 1A-PO, Class 1A-WIO, Class A-R, Class 1M, Class 1B-1,
Class 1B-2, Class 1B-3, Class 1B-4, Class 1B-5, Class 2A, Class 2M, Class 2B-1,
Class 2B-2, Class 2B-3, Class 2B-4 and Class 2B-5, all of the Certificates of
such class.
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<PAGE> 10
Class 1A Certificate: Any of the Class 1A-1 Certificates, Class 1A-2
Certificates, Class 1A-3 Certificates, Class 1A-4 Certificates, Class 1A-5
Certificates, Class 1A-6 Certificates, Class 1A-7 Certificates, Class 1A-8
Certificates, Class 1A-9 Certificates, Class 1A-10 Certificates, Class 1A-11
Certificates, Class 1A-12 Certificates, Class 1A-WIO Certificates, Class 1A-PO
Certificates and Class A-R Certificates.
Class 1A Distribution Amount: As to any Distribution Date and any Class of Class
A Certificates, the amount distributable to such Class pursuant to Paragraphs
first, second, third and fourth of Section 4.1(a).
Class 1A Interest Accrual Amount: As to any Distribution Date and any Class 1A
Certificates (other than the Class A-WIO and Class A-PO Certificates), (i) the
product of (a) 1/12th of the Certificate Rate for such Class and (b) the Class
1A Principal Balance of such Class as of the Determination Date preceding such
Distribution Date minus (ii) the Class 1A Interest Percentage of such Class of
(x) any Pool 1 Non-Supported Interest Shortfall allocated to the Class 1A
Certificates with respect to such Distribution Date, (y) the interest portion of
any Pool 1 Excess Special Hazard Losses, Pool 1 Excess Fraud Losses and Pool 1
Excess Bankruptcy Losses allocated to the Class 1A Certificates with respect to
such Distribution Date pursuant to Section 4.2(e) and (z) the interest portion
of any Realized Losses (other than Pool 1 Excess Special Hazard Losses, Pool 1
Excess Fraud Losses and Pool 1 Excess Bankruptcy Losses) allocated to the Class
1A Certificates on or after the Group 1 Cross-Over Date pursuant to Section
4.2(e). As to any Distribution Date and the Class 1A-WIO Certificates, the Class
1A-WIO Interest Accrual Amount. The Class 1A-PO Certificates have no Class 1A
Interest Accrual Amount.
Class 1A Interest Percentage: As to any Distribution Date and any Class of Class
1A Certificates, the percentage calculated by dividing the Class 1A Interest
Accrual Amount of such Class (determined without regard to clause (ii) of the
definition thereof) by the Aggregate Class 1A Interest Accrual Amount
(determined without regard to clause (ii) of the definition of each Class 1A
Interest Accrual Amount).
Class 1A Interest Shortfall Amount: As to any Distribution Date and any Class of
Class 1A Certificates, any amount by which the Class 1A Interest Accrual Amount
of such Class 1A Certificates with respect to such Distribution Date exceeds the
amount distributed in respect of such Class on such Distribution Date pursuant
to Paragraph first of Section 4.1(a).
Class 1A Loss Percentage: As to any Determination Date and any Class of Class 1A
Certificates (other than the Class 1A-PO Certificates) then outstanding, the
percentage calculated by dividing the Class 1A Principal Balance of such Class
by the Class 1A Non-PO Principal Balance (determined without regard to the Class
1A Principal Balance of any Class of Class 1A Certificates not then
outstanding), in each case determined as of the preceding Determination Date.
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<PAGE> 11
Class 1A Non-PO Optimal Amount: As to any Distribution Date and Group 1, the sum
for such Distribution Date of (i) the Aggregate Class 1A Interest Accrual
Amount, (ii) the sum of the Class A Unpaid Interest Shortfalls for each Class of
Class 1A Certificates and (iii) the Class 1A Non-PO Optimal Principal Amount.
Class 1A Non-PO Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 1 Mortgage Loan, of the product of
(x) the Non-PO Fraction with respect to such Mortgage Loan, and (y) the sum of:
(i) the Class 1A Percentage of (A) the principal portion of the Monthly
Payment due on the Due Date occurring in the month of such Distribution Date on
such Mortgage Loan, less (B) if the Bankruptcy Loss Amount has been reduced to
zero, the principal portion of any Debt Service Reduction with respect to such
Mortgage Loan;
(ii) the Class 1A Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Pool 1
Mortgage Loan during the Collection Period relating to such Distribution Date
for each applicable type of Unscheduled Principal Receipt;
(iii) the Class 1A Prepayment Percentage of the Scheduled Principal
Balance of each such Pool 1 Mortgage Loan which, during the month preceding the
month of such Distribution Date, was repurchased by the Seller pursuant to
Section 2.6; and
(iv) the Class 1A Percentage of the excess of the unpaid principal
balance of such Pool 1 Mortgage Loan substituted for a defective Pool 1 Mortgage
Loan during the month preceding the month in which such Distribution Date occurs
over the unpaid principal balance of such defective Mortgage Loan, less the
amount allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan.
Class 1A Non-PO Principal Balance: As of any date, an amount equal to the
Aggregate Class A Principal Balance less the Class 1A Principal Balance of the
Class 1A-PO Certificates.
Class 1A Non-PO Principal Distribution Amount: As to any Distribution Date, the
aggregate amount distributed in respect of the Class 1A Certificates pursuant to
paragraph third clause (A) of Section 4.1(a).
Class 1A Percentage: As to any Distribution Date occurring on or prior to the
Group 1 Cross-Over Date, the lesser of (i) 100% and (ii) the percentage obtained
by dividing the Class 1A Non-PO Principal Balance (determined as of the
Determination Date preceding such Distribution Date) by the Pool Balance (Non-PO
Portion). As to any Distribution Date occurring subsequent to the Group 1
Cross-Over Date, 100% or such lesser percentage which will cause the Class 1A
Non-PO Principal Balance to decline to zero following the distribution made on
such Distribution Date.
Class 1A Prepayment Percentage: As to any Distribution Date to and including the
Distribution Date in July 2003, 100%. As to any Distribution Date subsequent to
July 2003 to and including
5
<PAGE> 12
the Distribution Date in July 2004, the Class 1A Percentage as of such
Distribution Date plus 70% of the Group 1 Subordinate Percentage as of such
Distribution Date. As to any Distribution Date subsequent to July 2004 to and
including the Distribution Date in July 2005, the Class 1A Percentage as of such
Distribution Date plus 60% of the Group 1 Subordinate Percentage as of such
Distribution Date. As to any Distribution Date subsequent to July 2005 to and
including the Distribution Date in July 2006, the Class 1A Percentage as of such
Distribution Date plus 40% of the Group 1 Subordinate Percentage as of such
Distribution Date. As to any Distribution Date subsequent to July 2006 to and
including the Distribution Date in July 2007, the Class 1A Percentage as of such
Distribution Date plus 20% of the Group 1 Subordinate Percentage as of such
Distribution Date. As to any Distribution Date subsequent to July 2007, the
Class 1A Percentage as of such Distribution Date. The foregoing is subject to
the following: (i) if the aggregate distribution to Holders of Class 1A
Certificates on any Distribution Date of the Class 1A Prepayment Percentage
provided above of Unscheduled Principal Receipts distributable on such
Distribution Date would reduce the Class 1A Non-PO Principal Balance below zero,
the Class 1A Prepayment Percentage for such Distribution Date shall be the
percentage necessary to bring the Class 1A Non-PO Principal Balance to zero and
thereafter the Class 1A Prepayment Percentage shall be zero, and (ii) if the
Class 1A Percentage as of any Distribution Date is greater than the Original
Class 1A Percentage, the Class 1A Prepayment Percentage for such Distribution
Date shall be 100%. Notwithstanding the foregoing, with respect to any
Distribution Date on which the following criteria are not met, the reduction of
the Class 1A Prepayment Percentage described in the second through sixth
sentences of this definition of Class 1A Prepayment Percentage shall not be
applicable with respect to such Distribution Date. In such event, the Class 1A
Prepayment Percentage for such Distribution Date will be determined in
accordance with the applicable provision, as set forth in the first through
fifth sentences above, which was actually used to determine the Class 1A
Prepayment Percentage for the Distribution Date occurring in the July preceding
such Distribution Date (it being understood that for the purposes of the
determination of the Class 1A Prepayment Percentage for the current Distribution
Date, the current Class 1A Percentage and Group 1 Subordinate Percentage shall
be utilized). In order for the reduction referred to in the second through sixth
sentences to be applicable, with respect to any Distribution Date (a) the
average outstanding principal balance on such Distribution Date and for the
preceding five Distribution Dates on the Pool 1 Mortgage Loans that were
delinquent 60 days or more (including for this purpose any payments due with
respect to Pool 1 Mortgage Loans in foreclosure and REO Mortgage Loans) must be
less than 50% of the current Class 1M Principal Balance and the current
Aggregate Class 1B Principal Balance and (b) cumulative Realized Losses shall
not exceed (1) 30% of the Original Group 1 Subordinate Principal Balance if such
Distribution Date occurs between and including August 2003 and July 2004 (2) 35%
of the Original Group 1 Subordinate Principal Balance if such Distribution Date
occurs between and including August 2004 and July 2005, (3) 40% of the Original
Group 1 Subordinate Principal Balance if such Distribution Date occurs between
and including August 2005 and July 2006, (4) 45% of the Original Group 1
Subordinate Principal Balance if such Distribution Date occurs between and
including August 2006 and July 2007, and (5) 50% of the Original Group 1
Subordinate Principal Balance if such Distribution Date occurs during or after
August 2007. With respect to any Distribution Date on which the Class 1A
Prepayment Percentage is reduced below the Class 1A Prepayment Percentage for
the prior
6
<PAGE> 13
Distribution Date, the Master Servicer shall certify to the Trustee that the
criteria set forth in the preceding sentence are met.
Class 1A Principal Balance: As of the first Determination Date and as to any
Class of Class 1A Certificates (other than the Class 1A-WIO Certificate), the
Original Class 1A Principal Balance of such Class of Class 1A Certificates. As
of any subsequent Determination Date prior to the Group 1 Cross-Over Date and as
to any Class of Class 1A Certificates (other than the Class 1A-WIO and Class
1A-PO Certificates), the Original Class 1A Principal Balance of such Class of
Class 1A Certificates less the sum of (a) all amounts previously distributed in
respect of such Class on prior Distribution Dates (A) pursuant to Paragraph
third clause (A) of Section 4.1(a) and (B) as a result of a Group 1 Principal
Adjustment and (b) the Realized Losses allocated through such Determination Date
to such Class pursuant to Section 4.2(b). After the Group 1 Cross-Over Date,
each such Class 1A Principal Balance will also be reduced on each Determination
Date by an amount equal to the product of the Class 1A Loss Percentage of such
Class and the excess, if any, of (i) the Class 1A Non-PO Principal Balance as of
such Determination Date without regard to this sentence over (ii) the difference
between (A) the Pool 1 Adjusted Pool Amount for the preceding Distribution Date
and (B) the Pool 1 Adjusted Pool Amount (PO Portion) for the preceding
Distribution Date. The Class 1A-WIO Certificates will have no Class 1A Principal
Balance.
As of any subsequent Determination Date prior to the Group 1 Cross-Over Date and
as to the Class 1A-PO Certificates, the Original Class 1A Principal Balance of
such Class less the sum of (a) all amounts previously distributed in respect of
the Class 1A-PO Certificates on prior Distribution Dates pursuant to Paragraphs
third clause (B) and fourth of Section 4.1(a) and (b) the Realized Losses
allocated through such Determination Date to the Class 1A-PO Certificates
pursuant to Section 4.2(b). After the Group 1 Cross-Over Date, such Class 1A
Principal Balance will also be reduced on each Determination Date by an amount
equal to the difference, if any, between such Class 1A Principal Balance for
such Class as of such Determination Date without regard to this sentence and the
Pool 1 Adjusted Pool Amount (PO Portion) for the preceding Distribution Date.
Class 1A Unpaid Interest Shortfall: As to any Distribution Date and Class of
Class 1A Certificates, the amount, if any, by which the aggregate of the Class
1A Interest Shortfall Amounts for such Class for prior Distribution Dates is in
excess of the amounts distributed in respect of such Class of Class 1A
Certificates on prior Distribution Dates pursuant to Paragraph second of Section
4.1(a).
Class 1A-1 Certificates: The Certificates designated as "Class 1A-1" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class 1A-1
Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-2 Certificates: The Certificates designated as "Class 1A-2" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class 1A-2
Certificates are related to the Pool 1 Mortgage Loans.
7
<PAGE> 14
Class 1A-3 Certificates: The Certificates designated as "Class 1A-3" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class 1A-3
Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-4 Certificates: The Certificates designated as "Class 1A-4" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class 1A-4
Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-5 Certificates: The Certificates designated as "Class 1A-5" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class 1A-5
Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-6 Certificates: The Certificates designated as "Class 1A-6" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class 1A-6
Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-7 Certificates: The Certificates designated as "Class 1A-7" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class 1A-7
Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-8 Certificates: The Certificates designated as "Class 1A-8" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class 1A-8
Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-9 Certificates: The Certificates designated as "Class 1A-9" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class 1A-9
Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-10 Certificates: The Certificates designated as "Class 1A-10" on the
face thereof in substantially the form attached hereto as Exhibit A-1. The Class
1A-10 Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-10 Percentage: The percentage calculated by dividing the Class 1A
Principal Balance of the Class 1A-10 Certificates by the Class 1A Non-PO
Principal Balance.
Class 1A-10 Priority Amount: For any Distribution Date, the lesser of (i) the
Class A Principal Balance of the Class 1A-10 Certificates and (ii) the product
of (A) the Class 1A-10 Percentage, (B) the Class 1A-10 Shift Percentage, and (C)
the Class 1A Non-PO Distribution Amount.
Class 1A-10 Shift Percentage: As to any Distribution Date, the percentage
indicated below:
8
<PAGE> 15
<TABLE>
<CAPTION>
Class 1A-10
Distribution Date Occurring In Shift Percentage
------------------------------ ----------------
<S> <C>
August 1998 through July 2003............................ 0%
August 2003 through July 2004............................ 30%
August 2004 through July 2005............................ 40%
August 2005 through July 2006............................ 60%
August 2006 through July 2007............................ 80%
August 2007 and thereafter............................... 100%
</TABLE>
Class 1A-11 Certificates: The Certificates designated as "Class 1A-11" on the
face thereof in substantially the form attached hereto as Exhibit A-1. The Class
1A-11 Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-12 Certificates: The Certificates designated as "Class 1A-12" on the
face thereof in substantially the form attached hereto as Exhibit A-1. The Class
1A-12 Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-PO Certificates: The Certificates designated as "Class 1A-PO" on the
face thereof in substantially the form attached hereto as Exhibit A-1. The Class
1A-PO Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-PO Deferred Amount: For any Distribution Date prior to the Group 1
Cross-Over Date, the difference between (A) the sum of (x) the amount by which
the sum of the Class 1A-PO Optimal Principal Amounts for all prior Distribution
Dates exceeded the amounts distributed on the Class 1A-PO Certificates on such
prior Distribution Dates pursuant to Paragraph third clause (B) of Section
4.1(a) and (y) the sum of the product for each Discount Pool 1 Mortgage Loan
which became a Liquidated Mortgage Loan at any time on or prior to the last day
of the applicable Collection Period for the current Distribution Date of (a) the
PO Fraction for such Discount Pool 1 Mortgage Loan and (b) an amount equal to
the principal portion of Realized Losses (other than Bankruptcy Losses due to
Debt Service Reductions) incurred with respect to such Mortgage Loan other than
Pool 1 Excess Special Hazard Losses, Pool 1 Excess Fraud Losses and Pool 1
Excess Bankruptcy Losses and (B) amounts distributed on the Class 1A-PO
Certificates on prior Distribution Dates pursuant to Paragraph fourth of Section
4.1(a). On and after the Group 1 Cross-Over Date, the Class 1A-PO Deferred
Amount will be zero. No interest will accrue on any Class 1A-PO Deferred Amount.
Class 1A-PO Distribution Amount: As to any Distribution Date, the aggregate
amount distributable to the Class 1A-PO Certificates pursuant to Paragraphs
third clause (B) and fourth of Section 4.1(a) on such Distribution Date.
Class 1A-PO Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 1 Mortgage Loan, of the product of
(x) the PO Fraction with respect to such Mortgage Loan and (y) the sum of
(i) the scheduled payment of principal due on such Pool 1 Mortgage
Loan on the first day of the month in which the Distribution Date occurs, less,
if the Pool 1 Bankruptcy Loss Amount is zero, the principal portion of Debt
Service Reductions with respect to such Mortgage Loan,
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<PAGE> 16
(ii) all Unscheduled Principal Receipts that were received by the
Master Servicer with respect to such Mortgage Loan during the Collection Period
relating to such Distribution Date for each applicable type of Unscheduled
Principal Receipt.
(iii) the Scheduled Principal Balance of each such Pool 1 Mortgage Loan
that was repurchased by the Seller during such preceding month pursuant to
Section 2.6;
(iv) the excess of the unpaid principal balance of any defective Pool
1 Mortgage Loan for which a Mortgage Loan was substituted during the month
preceding the month in which such Distribution Date occurs over the unpaid
principal balance of such substituted Pool 1 Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances in
respect of such defective Pool 1 Mortgage Loan.
Class 1A-WIO Certificates: The Certificates designated as "Class 1A-WIO" on the
face thereof in substantially the form attached hereto as Exhibit A-1. The Class
1A-WIO Certificates are related to the Pool 1 Mortgage Loans.
Class 1A-WIO Interest Accrual Amount: As to any Distribution Date, (i) the
product of (a) 1/12th of the Class 1A-WIO Certificate Rate and (b) the Class
1A-WIO Notional Amount as of the Determination Date preceding such Distribution
Date minus (ii) the Class 1A Interest Percentage of the Class 1A-WIO
Certificates of (x) any Non-Supported Interest Shortfall allocated to the Class
1A Certificates with respect to such Distribution Date, (y) the interest portion
of any Pool 1 Excess Special Hazard Losses, Pool 1 Excess Fraud Losses and Pool
1 Excess Bankruptcy Losses allocated to the Class 1A Certificates with respect
to such Distribution Date pursuant to Section 4.2(e) and (z) the interest
portion of any Realized Losses (other than Pool 1 Excess Special Hazard Losses,
Pool 1 Excess Fraud Losses and Pool 1 Excess Bankruptcy Losses) allocated to the
Class 1A Certificates on or after the Group 1 Cross-Over Date pursuant to
Section 4.2(e).
Class 1A-WIO Notional Amount: With respect to any Distribution Date, an amount
equal to the aggregate Scheduled Balance of the Premium Pool 1 Mortgage Loans as
of such Distribution Date.
Class 1B Certificate: Any of the Class 1B-1 Certificates, Class 1B-2
Certificates, Class 1B-3 Certificates, Class 1B-4 Certificates or Class 1B-5
Certificates.
Class 1B Distribution Amount: Any of the Class 1B-1, Class 1B-2, Class 1B-3,
Class 1B-4 or Class 1B-5 Distribution Amounts.
Class 1B Interest Accrual Amount: As to any Distribution Date and any Class of
Class 1B Certificates, an amount equal to (i) the product of 1/12th of the
Certificate Rate and the Class 1B Principal Balance of such Class 1B Certificate
as of the Determination Date preceding such Distribution Date minus (ii) the
Class 1B Interest Percentage of such Class of Class 1B Certificates of (x) any
Pool 1 Non-Supported Interest Shortfall allocated to the Class 1B
10
<PAGE> 17
Certificates with respect to such Distribution Date and (y) the interest portion
of any Pool 1 Excess Special Hazard Losses, Pool 1 Excess Fraud Losses and Pool
1 Excess Bankruptcy Losses allocated to the Class 1B Certificates with respect
to such Distribution Date pursuant to Section 4.2(e).
Class 1B Interest Percentage: As to any Distribution Date and any Class of Class
1B Certificates, the percentage calculated by dividing the Class 1B Interest
Accrual Amount of such Class (determined without regard to clause (ii) of the
definition thereof) by the Aggregate Class 1B Interest Accrual Amount
(determined for each Class without regard to clause (ii) of the definition of
Class 1B Interest Accrual Amount).
Class 1B Interest Shortfall Amount: Any of the Class 1B-1 Interest Shortfall
Amount, Class 1B-2 Interest Shortfall Amount, Class 1B-3 Interest Shortfall
Amount, Class 1B-4 Interest Shortfall Amount or Class 1B-5 Interest Shortfall
Amount.
Class 1B Loss Percentage: As to any Determination Date and any Class of Class 1B
Certificates then outstanding, the percentage calculated by dividing the Class
1B Principal Balance of such Class by the Aggregate Class 1B Principal Balance
(determined without regard to any Class 1B Principal Balance of any Class of
Class 1B Certificates not then outstanding), in each case determined as of the
preceding Determination Date.
Class 1B Percentage: Any one of the Class 1B-1 Percentage, Class 1B-2
Percentage, Class 1B-3 Percentage, Class 1B-4 Percentage or Class 1B-5
Percentage.
Class 1B Prepayment Percentage: Any of the Class 1B-1 Prepayment Percentage,
Class 1B-2 Prepayment Percentage, Class 1B-3 Prepayment Percentage, Class 1B-4
Prepayment Percentage or Class 1B-5 Prepayment Percentage.
Class 1B Principal Balance: Any of the Class 1B-1 Principal Balance, Class 1B-2
Principal Balance, Class 1B-3 Principal Balance, Class 1B-4 Principal Balance or
Class 1B-5 Principal Balance.
Class 1B Unpaid Interest Shortfall: Any of the Class 1B-1 Unpaid Interest
Shortfall, Class 1B-2 Unpaid Interest Shortfall, Class 1B-3 Unpaid Interest
Shortfall, Class 1B-4 Unpaid Interest Shortfall or Class 1B-5 Unpaid Interest
Shortfall.
Class 1B-1 Certificates: The Certificates designated as "Class 1B-1" on the face
thereof in substantially the form attached hereto as Exhibit B-1. The Class 1B-1
Certificates are related to the Pool 1 Mortgage Loans.
Class 1B-1 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 1B-1 Certificates pursuant to
Paragraphs eighth, ninth and tenth of Section 4.1(a).
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<PAGE> 18
Class 1B-1 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 1B Interest Accrual Amount of the Class 1B-1 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class 1B-1 Certificates on such Distribution Date pursuant to Paragraph
eighth of Section 4.1(a).
Class 1B-1 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 1 Mortgage Loan, of the product of
(x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class 1B-1 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such Distribution
Date on such Mortgage Loan, less (B) if the Pool 1 Bankruptcy Loss Amount has
been reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 1B-1 Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 1B-1 Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
(iv) the Class 1B-1 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 1 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 1B-1 Optimal
Principal Amount will equal the lesser of (A) the Class 1B-1 Optimal Principal
Amount calculated as described in the preceding provisions and (B) the Group 1
Adjusted Principal Balance for the Class 1B-1 Certificates.
Class 1B-1 Percentage: As to any Distribution Date, except as set forth in the
next sentence, the percentage calculated by multiplying (i) the Group 1
Subordinate Percentage by (ii) a fraction, the numerator of which is the Class
1B-1 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Class 1M
Principal Balance and the Class 1B Principal Balances of the Class 1B
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.1(d). Except as set forth in
Section 4.1(d)(ii), in the event that the Class 1B-1 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.1(d)(i), the Class 1B-1 Percentage for such Distribution Date will be zero.
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<PAGE> 19
Class 1B-1 Prepayment Percentage: As to any Distribution Date, except as set
forth in the next sentence, the percentage calculated by multiplying (i) the
Group 1 Subordinate Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class 1B-1 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Class 1M Principal Balance and the Class 1B Principal Balances of the
Class 1B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.1(d). Except as
set forth in Section 4.1(d)(ii), in the event that the Class 1B-1 Certificates
are not eligible to receive distributions of principal in accordance with
Section 4.1(d)(i), the Class 1B-1 Prepayment Percentage for such Distribution
Date will be zero.
Class 1B-1 Principal Balance: As to the first Determination Date, the Original
Class 1B-1 Principal Balance. As of any subsequent Determination Date, the
lesser of (i) the Original Class 1B-1 Principal Balance less the sum of (a) all
amounts previously distributed in respect of the Class 1B-1 Certificates on
prior Distribution Dates (A) pursuant to Paragraph tenth of Section 4.1(a) and
(B) as a result of a Group 1 Principal Adjustment and (b) the Realized Losses
allocated through such Determination Date to the Class 1B-1 Certificates
pursuant to Section 4.2(b) and (ii) the Pool 1 Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Class 1A Principal Balance and
the Class 1M Principal Balance as of such Determination Date.
Class 1B-1 Unpaid Interest Shortfall: As to any Distribution Date, the amount,
if any, by which the aggregate of the Class 1B-1 Interest Shortfall Amounts for
prior Distribution Dates exceeds the amounts distributed in respect of the Class
1B-1 Certificates on prior Distribution Dates pursuant to Paragraph ninth of
Section 4.1(a).
Class 1B-2 Certificates: The Certificates designated as "Class 1B-2" on the face
thereof in substantially the form attached hereto as Exhibit B-1. The Class 1B-2
Certificates are related to the Pool 1 Mortgage Loans.
Class 1B-2 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 1B-2 Certificates pursuant to
Paragraphs eleventh, twelfth and thirteenth of Section 4.1(a).
Class 1B-2 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 1B Interest Accrual Amount of the Class 1B-2 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class 1B-2 Certificates on such Distribution Date pursuant to Paragraph
eleventh of Section 4.1(a).
Class 1B-2 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 1 Mortgage Loan, of the product of
(x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
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<PAGE> 20
(i) the Class 1B-2 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such Distribution
Date on such Mortgage Loan, less (B) if the Pool 1 Bankruptcy Loss Amount has
been reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 1B-2 Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 1B-2 Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
(iv) the Class 1B-2 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 1 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 1B-2 Optimal
Principal Amount will equal the lesser of (A) the Class 1B-2 Optimal Principal
Amount calculated as described in the preceding provisions and (B) the Group 1
Adjusted Principal Balance for the Class 1B-2 Certificates.
Class 1B-2 Percentage: As to any Distribution Date, except as set forth in the
next sentence, the percentage calculated by multiplying (i) the Group 1
Subordinate Percentage by (ii) a fraction, the numerator of which is the Class
1B-2 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Class 1M
Principal Balance and the Class 1B Principal Balances of the Class 1B
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.1(d). Except as set forth in
Section 4.1(d)(ii), in the event that the Class 1B-2 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.1(d)(i), the Class 1B-2 Percentage for such Distribution Date will be zero.
Class 1B-2 Prepayment Percentage: As to any Distribution Date, except as set
forth in the next sentence, the percentage calculated by multiplying (i) the
Group 1 Subordinate Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class 1B-2 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Class 1M Principal Balance and the Class 1B Principal Balances of the
Class 1B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.1(d). Except as
set forth in Section 4.1(d)(ii), in the event that the Class 1B-2 Certificates
are not eligible to receive distributions of principal in accordance with
Section 4.1(d)(i), the Class 1B-2 Prepayment Percentage for such Distribution
Date will be zero.
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<PAGE> 21
Class 1B-2 Principal Balance: As to the first Determination Date, the Original
Class 1B-2 Principal Balance. As of any subsequent Determination Date, the
lesser of (i) the Original Class 1B-2 Principal Balance less the sum of (a) all
amounts previously distributed in respect of the Class 1B-2 Certificates on
prior Distribution Dates (A) pursuant to Paragraph thirteenth of Section 4.1(a)
and (B) as a result of a Group 1 Principal Adjustment and (b) the Realized
Losses allocated through such Determination Date to the Class 1B-2 Certificates
pursuant to Section 4.2(b) and (ii) the Pool 1 Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Class 1A Principal Balance, the
Class 1M Principal Balance and the Class 1B-1 Principal Balance as of such
Determination Date.
Class 1B-2 Unpaid Interest Shortfall: As to any Distribution Date, the amount,
if any, by which the aggregate of the Class 1B-2 Interest Shortfall Amounts for
prior Distribution Dates is in excess of the amounts distributed in respect of
the Class 1B-2 Certificates on prior Distribution Dates pursuant to Paragraph
twelfth of Section 4.1(a).
Class 1B-3 Certificates: The Certificates designated as "Class 1B-3" on the face
thereof in substantially the form attached hereto as Exhibit B-1. The Class 1B-3
Certificates are related to the Pool 1 Mortgage Loans.
Class 1B-3 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 1B-3 Certificates pursuant to
Paragraphs fourteenth, fifteenth and sixteenth of Section 4.1(a).
Class 1B-3 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 1B Interest Accrual Amount of the Class 1B-3 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class 1B-3 Certificates on such Distribution Date pursuant to Paragraph
fourteenth of Section 4.1(a).
Class 1B-3 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 1 Mortgage Loan, of the product of
(x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class 1B-3 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such Distribution
Date on such Mortgage Loan, less (B) if the Pool 1 Bankruptcy Loss Amount has
been reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 1B-3 Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 1B-3 Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
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<PAGE> 22
(iv) the Class 1B-3 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 1 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 1B-3 Optimal
Principal Amount will equal the lesser of (A) the Class 1B-3 Optimal Principal
Amount calculated as described in the preceding provisions and (B) the Group 1
Adjusted Principal Balance for the Class 1B-3 Certificates.
Class 1B-3 Percentage: As to any Distribution Date, except as set forth in the
next sentence, the percentage calculated by multiplying (i) the Group 1
Subordinate Percentage by (ii) a fraction, the numerator of which is the Class
1B-3 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Class 1M
Principal Balance and the Class 1B Principal Balances of the Class 1B
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.1(d). Except as set forth in
Section 4.1(d)(ii), in the event that the Class 1B-3 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.1(d)(i), the Class 1B-3 Percentage for such Distribution Date will be zero.
Class 1B-3 Prepayment Percentage: As to any Distribution Date, except as set
forth in the next sentence, the percentage calculated by multiplying (i) the
Group 1 Subordinate Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class 1B-3 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Class 1M Principal Balance and the Class 1B Principal Balances of the
Class 1B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.1(d). Except as
set forth in Section 4.1(d)(ii), in the event that the Class 1B-3 Certificates
are not eligible to receive distributions of principal in accordance with
Section 4.1(d)(i), the Class 1B-3 Prepayment Percentage for such Distribution
Date will be zero.
Class 1B-3 Principal Balance: As to the first Determination Date, the Original
Class 1B-3 Principal Balance. As of any subsequent Determination Date, the
lesser of (i) the Original Class 1B-3 Principal Balance less the sum of (a) all
amounts previously distributed in respect of the Class 1B-3 Certificates on
prior Distribution Dates (A) pursuant to Paragraph sixteenth of Section 4.1(a)
and (B) as a result of a Group 1 Principal Adjustment and (b) the Realized
Losses through such Determination Date allocated to the Class 1B-3 Certificates
pursuant to Section 4.2(b) and (ii) the Pool 1 Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Class 1A Principal Balance, the
Class 1M Principal Balance, the Class 1B-1 Principal Balance and the Class 1B-2
Principal Balance as of such Determination Date.
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<PAGE> 23
Class 1B-3 Unpaid Interest Shortfall: As to any Distribution Date, the amount,
if any, by which the aggregate of the Class 1B-3 Interest Shortfall Amounts for
prior Distribution Dates exceeds the amounts distributed in respect of the Class
1B-3 Certificates on prior Distribution Dates pursuant to Paragraph fifteenth of
Section 4.1(a).
Class 1B-4 Certificates: The Certificates designated as "Class 1B-4" on the face
thereof in substantially the form attached hereto as Exhibit B-1. The Class 1B-4
Certificates are related to the Pool 1 Mortgage Loans.
Class 1B-4 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 1B-4 Certificates pursuant to
Paragraphs seventeenth, eighteenth, and nineteenth of Section 4.1(a).
Class 1B-4 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 1B Interest Accrual Amount of the Class 1B-4 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class 1B-4 Certificates on such Distribution Date pursuant to Paragraph
seventeenth of Section 4.1(a).
Class 1B-4 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 1 Mortgage Loan, of the product of
(x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class 1B-4 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such Distribution
Date on such Mortgage Loan, less (B) if the Pool 1 Bankruptcy Loss Amount has
been reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 1B-4 Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 1B-4 Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
(iv) the Class 1B-4 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 1 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 1B-4 Optimal
Principal Amount will equal the lesser of (A) the Class 1B-4 Optimal Principal
Amount calculated as described in the preceding provisions and (B) the Group 1
Adjusted Principal Balance for the Class 1B-4 Certificates.
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<PAGE> 24
Class 1B-4 Percentage: As to any Distribution Date, except as set forth in the
next sentence, the percentage calculated by multiplying (i) the Group 1
Subordinate Percentage by (ii) a fraction, the numerator of which is the Class
1B-4 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Class 1M
Principal Balance and the Class 1B Principal Balances of the Class 1B
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.1(d). Except as set forth in
Section 4.1(d)(ii), in the event that the Class 1B-4 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.1(d)(i), the Class 1B-4 Percentage for such Distribution Date will be zero.
Class 1B-4 Prepayment Percentage: As to any Distribution Date, except as set
forth in the next sentence, the percentage calculated by multiplying (i) the
Group 1 Subordinate Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class 1B-4 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Class 1M Principal Balance and the Class 1B Principal Balances of the
Class 1B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.1(d). Except as
set forth in Section 4.1(d)(ii), in the event that the Class 1B-4 Certificates
are not eligible to receive distributions of principal in accordance with
Section 4.1(d)(i), the Class 1B-4 Prepayment Percentage for such Distribution
Date will be zero.
Class 1B-4 Principal Balance: As to the first Determination Date, the Original
Class 1B-4 Principal Balance. As of any subsequent Determination Date, the
lesser of (i) the Original Class 1B-4 Principal Balance less the sum of (a) all
amounts previously distributed in respect of the Class 1B-4 Certificates on
prior Distribution Dates (A) pursuant to Paragraph nineteenth of Section 4.1(a)
and (B) as a result of a Group 1 Principal Adjustment and (b) the Realized
Losses allocated through such Determination Date to the Class 1B-4 Certificates
pursuant to Section 4.2(b) and (ii) the Pool 1 Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Class 1A Principal Balance, the
Class 1M Principal Balance, the Class 1B-1 Principal Balance, the Class 1B-2
Principal Balance and the Class 1B-3 Principal Balance as of such Determination
Date.
Class 1B-4 Unpaid Interest Shortfall: As to any Distribution Date, the amount,
if any, by which the aggregate of the Class 1B-4 Interest Shortfall Amounts for
prior Distribution Dates exceeds the amounts distributed in respect of the Class
1B-4 Certificates on prior Distribution Dates pursuant to Paragraph eighteenth
of Section 4.1(a).
Class 1B-5 Certificates: The Certificates designated as "Class 1B-5" on the face
thereof in substantially the form attached hereto as Exhibit B-1. The Class 1B-5
Certificates are related to the Pool 1 Mortgage Loans.
Class 1B-5 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 1B-5 Certificates pursuant to
Paragraphs twentieth, twenty-first, and twenty-second of Section 4.1(a).
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<PAGE> 25
Class 1B-5 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 1B Interest Accrual Amount of the Class 1B-5 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class 1B-5 Certificates on such Distribution Date pursuant to Paragraph
twentieth of Section 4.1(a).
Class 1B-5 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 1 Mortgage Loan, of the product of
(x) the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class 1B-5 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such Distribution
Date on such Mortgage Loan, less (B) if the Pool 1 Bankruptcy Loss Amount has
been reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 1B-5 Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 1B-5 Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
(iv) the Class 1B-5 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 1 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 1B-5 Optimal
Principal Amount will equal the lesser of (A) the Class 1B-5 Optimal Principal
Amount calculated as described in the preceding provisions and (B) the Group 1
Adjusted Principal Balance for the Class 1B-5 Certificates.
Class 1B-5 Percentage: As to any Distribution Date, except as set forth in the
next sentence, the percentage calculated by multiplying (i) the Group 1
Subordinate Percentage by (ii) a fraction, the numerator of which is the Class
1B-5 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Class 1M
Principal Balance and the Class 1B Principal Balances of the Class 1B
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.1(d). Except as set forth in
Section 4.1(d)(ii), in the event that the Class 1B-5 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.1(d)(i), the Class 1B-5 Percentage for such Distribution Date will be zero.
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<PAGE> 26
Class 1B-5 Prepayment Percentage: As to any Distribution Date, except as set
forth in the next sentence, the percentage calculated by multiplying (i) the
Group 1 Subordinate Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class 1B-5 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Class 1M Principal Balance and the Class 1B Principal Balances of the
Class 1B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.1(d). Except as
set forth in Section 4.1(d)(ii), in the event that the Class 1B-5 Certificates
are not eligible to receive distributions of principal in accordance with
Section 4.1(d)(i), the Class 1B-5 Prepayment Percentage for such Distribution
Date will be zero.
Class 1B-5 Principal Balance: As to the first Determination Date, the Original
Class 1B-5 Principal Balance. As of any subsequent Determination Date, the
lesser of (i) the Original Class 1B-5 Principal Balance less the sum of (a) all
amounts previously distributed in respect of the Class 1B-5 Certificates on
prior Distribution Dates pursuant to Paragraph twenty-second of Section 4.1(a)
and (b) the Realized Losses allocated through such Determination Date to the
Class 1B-5 Certificates pursuant to Section 4.2(b) and (ii) the Pool 1 Adjusted
Pool Amount as of the preceding Distribution Date less the sum of the Class 1A
Principal Balance, the Class 1M Principal Balance, the Class 1B-1 Principal
Balance, the Class 1B-2 Principal Balance, the Class 1B-3 Principal Balance and
the Class 1B-4 Principal Balance as of such Determination Date.
Class 1B-5 Unpaid Interest Shortfall: As to any Distribution Date, the amount,
if any, by which the aggregate of the Class 1B-5 Interest Shortfall Amounts for
prior Distribution Dates exceeds the amounts distributed in respect of the Class
1B-5 Certificates on prior Distribution Dates pursuant to Paragraph twenty-first
of Section 4.1(a).
Class 1M Certificates: The Certificates designated as "Class 1M" on the face
thereof in substantially the form attached hereto as Exhibit A-3. The Class 1M
Certificates are related to the Pool 1 Mortgage Loans.
Class 1M Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 1M Certificates pursuant to Paragraphs
fifth, sixth and seventh of Section 4.1(a).
Class 1M Interest Accrual Amount: As to any Distribution Date, an amount equal
to (i) the product of 1/12th of the Class 1M Certificate Rate and the Class 1M
Principal Balance as of the Determination Date preceding such Distribution Date
minus (ii) the sum of (x) any Pool 1 Non-Supported Interest Shortfall allocated
to the Class 1M Certificates with respect to such Distribution Date and (y) the
interest portion of any Pool 1 Excess Special Hazard Losses, Pool 1 Excess Fraud
Losses and Pool 1 Excess Bankruptcy Losses allocated to the Class 1M
Certificates with respect to such Distribution Date pursuant to Section 4.2(e).
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<PAGE> 27
Class 1M Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 1M Interest Accrual Amount with respect to such Distribution
Date exceeds the amount distributed in respect of the Class 1M Certificates on
such Distribution Date pursuant to Paragraph fifth of Section 4.1(a).
Class 1M Optimal Principal Amount: As to any Distribution Date, an amount equal
to the sum, as to each outstanding Pool 1 Mortgage Loan, of the product of (x)
the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class 1M Percentage of (A) the principal portion of the Monthly
Payment due on the Due Date occurring in the month of such Distribution Date on
such Mortgage Loan, less (B) if the Pool 1 Bankruptcy Loss Amount has been
reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 1M Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 1M Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
(iv) the Class 1M Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 1 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 1M Optimal Principal
Amount will equal the lesser of (A) the Class 1M Optimal Principal Amount
calculated as described in the preceding provisions and (B) the Group 1 Adjusted
Principal Balance for the Class 1M Certificates.
Class 1M Percentage: As to any Distribution Date, the percentage calculated by
multiplying the Group 1 Subordinate Percentage by either (a) if any Class 1B
Certificates are eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.1(d), a
fraction, the numerator of which is the Class 1M Principal Balance (determined
as of the Determination Date preceding such Distribution Date) and the
denominator of which is the sum of the Class 1M Principal Balance and the Class
1B Principal Balances of the Class 1B Certificates eligible to receive principal
distributions for such Distribution Date in accordance with the provisions of
Section 4.1(d) or (b) except as set forth in Section 4.1(d)(ii), if the Class 1B
Certificates are not eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.1(d)(i), one.
Class 1M Prepayment Percentage: As to any Distribution Date, the percentage
calculated by multiplying the Group 1 Subordinate Prepayment Percentage by
either (a) if any Class 1B
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<PAGE> 28
Certificates are eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.1(d), a
fraction, the numerator of which is the Class 1M Principal Balance (determined
as of the Determination Date preceding such Distribution Date) and the
denominator of which is the sum of the Class 1M Principal Balance and the Class
1B Principal Balances of the Class 1B Certificates eligible to receive principal
distributions for such Distribution Date in accordance with the provisions of
Section 4.1(d) or (b) except as set forth in Section 4.1(d)(ii), if the Class 1B
Certificates are not eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.1(d)(i), one.
Class 1M Principal Balance: As to the first Determination Date, the Original
Class 1M Principal Balance. As of any subsequent Determination Date, the lesser
of (i) the Original Class 1M Principal Balance less the sum of (a) all amounts
previously distributed in respect of the Class 1M Certificates on prior
Distribution Dates (A) pursuant to Paragraph seventh of Section 4.1(a) and (B)
as a result of a Group 1 Principal Adjustment and (b) the Realized Losses
allocated through such Determination Date to the Class 1M Certificates pursuant
to Section 4.2(b) and (ii) the Pool 1 Adjusted Pool Amount as of the preceding
Distribution Date less the Class 1A Principal Balance as of such Determination
Date.
Class 1M Unpaid Interest Shortfall: As to any Distribution Date, the amount, if
any, by which the aggregate of the Class 1M Interest Shortfall Amounts for prior
Distribution Dates exceeds the amounts distributed in respect of the Class 1M
Certificates on prior Distribution Dates pursuant to Paragraph sixth of Section
4.1(a).
Class 2A Certificates: The Certificates designated as "Class 2A" on the face
thereof in substantially the form attached hereto as Exhibit A-2. The Class 2A
Certificates are related to the Pool 2 Mortgage Loans.
Class 2A Distribution Amount: As to any Distribution Date, the amount
distributable to such Class pursuant to Paragraphs first, second, third and
fourth of Section 4.3(a).
Class 2A Interest Accrual Amount: As to any Distribution Date, the excess of (i)
the product of (a) 1/12th of the Certificate Rate for such Class and (b) the
Class 2A Principal Balance as of the Determination Date preceding such
Distribution Date over (ii) the sum of (x) any Pool 2 Non-Supported Interest
Shortfall allocated to the Class 2A Certificates with respect to such
Distribution Date, (y) the interest portion of any Pool 2 Excess Special Hazard
Losses, Pool 2 Excess Fraud Losses and Pool 2 Excess Bankruptcy Losses allocated
to the Class 2A Certificates with respect to such Distribution Date pursuant to
Section 4.4(e) and (f) the interest portion of any Realized Losses (other than
Pool 2 Excess Special Hazard Losses, Pool 2 Excess Fraud Losses and Pool 2
Excess Bankruptcy Losses) allocated to the Class 2A Certificates on or after the
Group 2 Cross-Over Date pursuant to Section 4.4(e).
Class 2A Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 2A Interest Accrual Amount with respect to such Distribution
Date exceeds the amount distributed in respect of such Class on such
Distribution Date pursuant to Paragraph first of Section 4.3(a).
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Class 2A Optimal Amount: As to any Distribution Date and Group 2, the sum for
such Distribution Date of (i) the Class 2A Interest Accrual Amount and (ii) the
Class 2A Unpaid Interest Shortfalls.
Class 2A Optimal Principal Amount: As to any Distribution Date, an amount equal
to the sum, as to each outstanding Pool 2 Mortgage Loan, of the sum of:
(i) the Class 2A Percentage of (A) the principal portion of the Monthly
Payment due on the Due Date occurring in the month of such Distribution Date on
such Pool 2 Mortgage Loan, less (B) if the Bankruptcy Loss Amount has been
reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 2A Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Pool 2
Mortgage Loan during the Collection Period relating to such Distribution Date
for each applicable type of Unscheduled Principal Receipt;
(iii) the Class 2A Prepayment Percentage of the Scheduled Principal
Balance of each such Pool 2 Mortgage Loan which, during the month preceding the
month of such Distribution Date, was repurchased by the Seller pursuant to
Section 2.6; and
(iv) the Class 2A Percentage of the excess of the unpaid principal
balance of such Pool 2 Mortgage Loan substituted for a defective Pool 2 Mortgage
Loan during the month preceding the month in which such Distribution Date occurs
over the unpaid principal balance of such defective Mortgage Loan, less the
amount allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan.
Class 2A Percentage: As to any Distribution Date occurring on or prior to the
Group 2 Cross-Over Date, the lesser of (i) 100% and (ii) the percentage obtained
by dividing the Class 2A Principal Balance (determined as of the Determination
Date preceding such Distribution Date) by the Pool 2 Pool Balance. As to any
Distribution Date occurring subsequent to the Group 2 Cross-Over Date, 100% or
such lesser percentage which will cause the Class 2A Principal Balance to
decline to zero following the distribution made on such Distribution Date.
Class 2A Prepayment Percentage: As to any Distribution Date to and including the
Distribution Date in July 2003, 100%. As to any Distribution Date subsequent to
July 2003 to and including the Distribution Date in July 2004, the Class 2A
Percentage as of such Distribution Date plus 70% of the Group 2 Subordinate
Percentage as of such Distribution Date. As to any Distribution Date subsequent
to July 2004 to and including the Distribution Date in July 2005, the Class 2A
Percentage as of such Distribution Date plus 60% of the Group 2 Subordinate
Percentage as of such Distribution Date. As to any Distribution Date subsequent
to July 2005 to and including the Distribution Date in July 2006, the Class 2A
Percentage as of such Distribution Date plus 40% of the Group 2 Subordinate
Percentage as of such Distribution Date. As to any Distribution Date
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<PAGE> 30
subsequent to July 2006 to and including the Distribution Date in July 2007, the
Class 2A Percentage as of such Distribution Date plus 20% of the Group 2
Subordinate Percentage as of such Distribution Date. As to any Distribution Date
subsequent to July 2007, the Class 2A Percentage as of such Distribution Date.
The foregoing is subject to the following: (i) if the aggregate distribution to
Holders of Class 2A Certificates on any Distribution Date of the Class 2A
Prepayment Percentage provided above of Unscheduled Principal Receipts
distributable on such Distribution Date would reduce the Class 2A Principal
Balance below zero, the Class 2A Prepayment Percentage for such Distribution
Date shall be the percentage necessary to bring the Class 2A Principal Balance
to zero and thereafter the Class 2A Prepayment Percentage shall be zero, and
(ii) if the Class 2A Percentage as of any Distribution Date is greater than the
Original Class 2A Percentage, the Class 2A Prepayment Percentage for such
Distribution Date shall be 100%. Notwithstanding the foregoing, with respect to
any Distribution Date on which the following criteria are not met, the reduction
of the Class 2A Prepayment Percentage described in the second through sixth
sentences of this definition of Class 2A Prepayment Percentage shall not be
applicable with respect to such Distribution Date. In such event, the Class 2A
Prepayment Percentage for such Distribution Date will be determined in
accordance with the applicable provision, as set forth in the first through
fifth sentences above, which was actually used to determine the Class 2A
Prepayment Percentage for the Distribution Date occurring in the July preceding
such Distribution Date (it being understood that for the purposes of the
determination of the Class 2A Prepayment Percentage for the current Distribution
Date, the current Class 2A Percentage and Group 2 Subordinate Percentage shall
be utilized). In order for the reduction referred to in the second through sixth
sentences to be applicable, with respect to any Distribution Date (a) the
average outstanding principal balance on such Distribution Date and for the
preceding five Distribution Dates on the Pool 2 Mortgage Loans that were
delinquent 60 days or more (including for this purpose any payments due with
respect to Pool 2 Mortgage Loans in foreclosure and REO Mortgage Loans) must be
less than 50% of the current Class 2M Principal Balance and the current Class 2B
Principal Balance and (b) cumulative Aggregate Realized Losses shall not exceed
(1) 30% of the Original Group 2 Subordinate Principal Balance if such
Distribution Date occurs between and including August 2003 and July 2004 (2) 35%
of the Original Group 2 Subordinate Principal Balance if such Distribution Date
occurs between and including August 2004 and July 2005, (3) 40% of the Original
Group 2 Subordinate Principal Balance if such Distribution Date occurs between
and including August 2005 and July 2006, (4) 45% of the Original Group 2
Subordinate Principal Balance if such Distribution Date occurs between and
including August 2006 and July 2007, and (5) 50% of the Original Group 2
Subordinate Principal Balance if such Distribution Date occurs during or after
August 2007. With respect to any Distribution Date on which the Class 2A
Prepayment Percentage is reduced below the Class 2A Prepayment Percentage for
the prior Distribution Date, the Master Servicer shall certify to the Trustee
that the criteria set forth in the preceding sentence are met.
Class 2A Principal Balance: As of the first Determination Date, the Original
Class 2A Principal Balance of such Class of Class 2A Certificates. As of any
subsequent Determination Date prior to the Group 2 Cross-Over Date, the Original
Class 2A Principal Balance less the sum of (a) all amounts previously
distributed in respect of such Class on prior Distribution Dates (A) pursuant to
Paragraph third clause (A) of Section 4.3(a) and (B) as a result of a Group 2
Principal Adjustment and (b) the Realized Losses allocated through such
Determination Date to such Class
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<PAGE> 31
pursuant to Section 4.4(b). After the Group 2 Cross-Over Date, the Class 2A
Principal Balance will also be reduced on each Determination Date by an amount
equal to the excess, if any, of (i) the Class 2A Principal Balance as of such
Determination Date without regard to this sentence over (ii) the Pool 2 Adjusted
Pool Amount for the preceding Distribution Date.
Class 2A Principal Distribution Amount: As to any Distribution Date, the
aggregate amount distributed in respect of the Class 2A Certificates pursuant to
paragraph third of Section 4.3(a).
Class 2A Unpaid Interest Shortfall: As to any Distribution Date, the amount, if
any, by which the aggregate of the Class 2A Interest Shortfall Amounts for prior
Distribution Dates exceeds the amounts distributed in respect of such Class 2A
Certificates on prior Distribution Dates pursuant to Paragraph second of Section
4.3(a).
Class 2B Certificate: Any one of the Class 2B-1 Certificates, Class 2B-2
Certificates, Class 2B-3 Certificates, Class 2B-4 Certificates or Class 2B-5
Certificates.
Class 2B Distribution Amount: Any of the Class 2B-1, Class 2B-2, Class 2B-3,
Class 2B-4 or Class 2B-5 Distribution Amounts.
Class 2B Interest Accrual Amount: As to any Distribution Date and any Class of
Class 2B Certificates, an amount equal to (i) the product of 1/12th of the
Certificate Rate and the Class 2B Principal Balance of such Class 2B Certificate
as of the Determination Date preceding such Distribution Date minus (ii) the
Class 2B Interest Percentage of such Class of Class 2B Certificates of (x) any
Pool 2 Non-Supported Interest Shortfall allocated to the Class 2B Certificates
with respect to such Distribution Date and (y) the interest portion of any Pool
2 Excess Special Hazard Losses, Pool 2 Excess Fraud Losses and Pool 2 Excess
Bankruptcy Losses allocated to the Class 2B Certificates with respect to such
Distribution Date pursuant to Section 4.4(e).
Class 2B Interest Percentage: As to any Distribution Date and any Class of Class
2B Certificates, the percentage calculated by dividing the Class 2B Interest
Accrual Amount of such Class (determined without regard to clause (ii) of the
definition thereof) by the Aggregate Class 2B Interest Accrual Amount
(determined without regard to clause (ii) of the definition of each Class 2B
Interest Accrual Amount).
Class 2B Interest Shortfall Amount: Any of the Class 2B-1 Interest Shortfall
Amount, Class 2B-2 Interest Shortfall Amount, Class 2B-3 Interest Shortfall
Amount, Class 2B-4 Interest Shortfall Amount or Class 2B-5 Interest Shortfall
Amount.
Class 2B Loss Percentage: As to any Determination Date and any Class of Class 2B
Certificates then outstanding, the percentage calculated by dividing the Class
2B Principal Balance of such Class by the Aggregate Class 2B Principal Balance
(determined without regard to any Class 2B Principal Balance of any Class of
Class 2B Certificates not then outstanding), in each case determined as of the
preceding Determination Date.
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<PAGE> 32
Class 2B Percentage: Any one of the Class 2B-1 Percentage, Class 2B-2
Percentage, Class 2B-3 Percentage, Class 2B-4 Percentage or Class 2B-5
Percentage.
Class 2B Prepayment Percentage: Any of the Class 2B-1 Prepayment Percentage,
Class 2B-2 Prepayment Percentage, Class 2B-3 Prepayment Percentage, Class 2B-4
Prepayment Percentage or Class 2B-5 Prepayment Percentage.
Class 2B Principal Balance: Any of the Class 2B-1 Principal Balance, Class 2B-2
Principal Balance, Class 2B-3 Principal Balance, Class 2B-4 Principal Balance or
Class 2B-5 Principal Balance.
Class 2B Unpaid Interest Shortfall: Any of the Class 2B-1 Unpaid Interest
Shortfall, Class 2B-2 Unpaid Interest Shortfall, Class 2B-3 Unpaid Interest
Shortfall, Class 2B-4 Unpaid Interest Shortfall or Class 2B-5 Unpaid Interest
Shortfall.
Class 2B-1 Certificates: The Certificates designated as "Class 2B-1" on the face
thereof in substantially the form attached hereto as Exhibit B-2. The Class 2B-1
Certificates are related to the Pool 2 Mortgage Loans.
Class 2B-1 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 2B-1 Certificates pursuant to
Paragraphs seventh, eighth and ninth of Section 4.3(a).
Class 2B-1 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 2B Interest Accrual Amount of the Class 2B-1 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class 2B-1 Certificates on such Distribution Date pursuant to Paragraph
eighth of Section 4.4(a).
Class 2B-1 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 2 Mortgage Loan, of the sum of:
(i) the Class 2B-1 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such Distribution
Date on such Mortgage Loan, less (B) if the Pool 2 Bankruptcy Loss Amount has
been reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 2B-1 Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 2B-1 Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
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<PAGE> 33
(iv) the Class 2B-1 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 2 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 2B-1 Optimal
Principal Amount will equal the lesser of (A) the Class 2B-1 Optimal Principal
Amount calculated as described in the preceding provisions and (B) the Group 2
Adjusted Principal Balance for the Class 2B-1 Certificates.
Class 2B-1 Percentage: As to any Distribution Date, except as set forth in the
next sentence, the percentage calculated by multiplying (i) the Group 2
Subordinate Percentage by (ii) a fraction, the numerator of which is the Class
2B-1 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Class 2M
Principal Balance and the Class 2B Principal Balances of the Class 2B
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.3(d). Except as set forth in
Section 4.3(d)(ii), in the event that the Class 2B-1 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.3(d)(i), the Class 2B-1 Percentage for such Distribution Date will be zero.
Class 2B-1 Prepayment Percentage: As to any Distribution Date, except as set
forth in the next sentence, the percentage calculated by multiplying (i) the
Group 2 Subordinate Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class 2B-1 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Class 2M Principal Balance and the Class 2B Principal Balances of the
Class 2B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.3(d). Except as
set forth in Section 4.3(d)(ii), in the event that the Class 2B-1 Certificates
are not eligible to receive distributions of principal in accordance with
Section 4.3(d)(i), the Class 2B-1 Prepayment Percentage for such Distribution
Date will be zero.
Class 2B-1 Principal Balance: As to the first Determination Date, the Original
Class 2B-1 Principal Balance. As of any subsequent Determination Date, the
lesser of (i) the Original Class 2B-1 Principal Balance less the sum of (a) all
amounts previously distributed in respect of the Class 2B-1 Certificates on
prior Distribution Dates (A) pursuant to Paragraph ninth of Section 4.3(a) and
(B) as a result of a Group 2 Principal Adjustment and (b) the Realized Losses
allocated through such Determination Date to the Class 2B-1 Certificates
pursuant to Section 4.4(b) and (ii) the Pool 2 Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Class 2A Principal Balance and
the Class 2M Principal Balance as of such Determination Date.
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<PAGE> 34
Class 2B-1 Unpaid Interest Shortfall: As to any Distribution Date, the amount,
if any, by which the aggregate of the Class 2B-1 Interest Shortfall Amounts for
prior Distribution Dates exceeds the amounts distributed in respect of the Class
2B-1 Certificates on prior Distribution Dates pursuant to Paragraph eighth of
Section 4.3(a).
Class 2B-2 Certificates: The Certificates designated as "Class 2B-2" on the face
thereof in substantially the form attached hereto as Exhibit B-2. The Class 2B-2
Certificates are related to the Pool 2 Mortgage Loans.
Class 2B-2 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 2B-2 Certificates pursuant to
Paragraphs tenth, eleventh and twelfth of Section 4.3(a).
Class 2B-2 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 2B Interest Accrual Amount of the Class 2B-2 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class 2B-2 Certificates on such Distribution Date pursuant to Paragraph
tenth of Section 4.3(a).
Class 2B-2 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 2 Mortgage Loan, of the sum of:
(i) the Class 2B-2 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such Distribution
Date on such Mortgage Loan, less (B) if the Pool 2 Bankruptcy Loss Amount has
been reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 2B-2 Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 2B-2 Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
(iv) the Class 2B-2 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 2 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 2B-2 Optimal
Principal Amount will equal the lesser of (A) the Class 2B-2 Optimal Principal
Amount calculated as described in the preceding provisions and (B) the Group 2
Adjusted Principal Balance for the Class 2B-2 Certificates.
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<PAGE> 35
Class 2B-2 Percentage: As to any Distribution Date, except as set forth in the
next sentence, the percentage calculated by multiplying (i) the Group 2
Subordinate Percentage by (ii) a fraction, the numerator of which is the Class
2B-2 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Class 2M
Principal Balance and the Class 2B Principal Balances of the Class 2B
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.3(d). Except as set forth in
Section 4.3(d)(ii), in the event that the Class 2B-2 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.3(d)(i), the Class 2B-2 Percentage for such Distribution Date will be zero.
Class 2B-2 Prepayment Percentage: As to any Distribution Date, except as set
forth in the next sentence, the percentage calculated by multiplying (i) the
Group 2 Subordinate Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class 2B-2 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Class 2M Principal Balance and the Class 2B Principal Balances of the
Class 2B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.3(d). Except as
set forth in Section 4.3(d)(ii), in the event that the Class 2B-2 Certificates
are not eligible to receive distributions of principal in accordance with
Section 4.3(d)(i), the Class 2B-2 Prepayment Percentage for such Distribution
Date will be zero.
Class 2B-2 Principal Balance: As to the first Determination Date, the Original
Class 2B-2 Principal Balance. As of any subsequent Determination Date, the
lesser of (i) the Original Class 2B-2 Principal Balance less the sum of (a) all
amounts previously distributed in respect of the Class 2B-2 Certificates on
prior Distribution Dates (A) pursuant to Paragraph thirteenth of Section 4.3(a)
and (B) as a result of a Group 2 Principal Adjustment and (b) the Realized
Losses allocated through such Determination Date to the Class 2B-2 Certificates
pursuant to Section 4.4(b) and (ii) the Pool 2 Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Class 2A Principal Balance, the
Class 2M Principal Balance and the Class 2B-1 Principal Balance as of such
Determination Date.
Class 2B-2 Unpaid Interest Shortfall: As to any Distribution Date, the amount,
if any, by which the aggregate of the Class 2B-2 Interest Shortfall Amounts for
prior Distribution Dates exceeds the amounts distributed in respect of the Class
2B-2 Certificates on prior Distribution Dates pursuant to Paragraph eleventh of
Section 4.3(a).
Class 2B-3 Certificates: The Certificates designated as "Class 2B-3" on the face
thereof in substantially the form attached hereto as Exhibit B-2. The Class 2B-3
Certificates are related to the Pool 2 Mortgage Loans.
Class 2B-3 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 2B-3 Certificates pursuant to
Paragraphs thirteenth, fourteenth and fifteenth of Section 4.3(a).
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<PAGE> 36
Class 2B-3 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 2B Interest Accrual Amount of the Class 2B-3 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class 2B-3 Certificates on such Distribution Date pursuant to Paragraph
fourteenth of Section 4.3(a).
Class 2B-3 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 2 Mortgage Loan, of the sum of:
(i) the Class 2B-3 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such Distribution
Date on such Mortgage Loan, less (B) if the Pool 2 Bankruptcy Loss Amount has
been reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 2B-3 Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 2B-3 Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
(iv) the Class 2B-3 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 2 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 2B-3 Optimal
Principal Amount will equal the lesser of (A) the Class 2B-3 Optimal Principal
Amount calculated as described in the preceding provisions and (B) the Group 2
Adjusted Principal Balance for the Class 2B-3 Certificates.
Class 2B-3 Percentage: As to any Distribution Date, except as set forth in the
next sentence, the percentage calculated by multiplying (i) the Group 2
Subordinate Percentage by (ii) a fraction, the numerator of which is the Class
2B-3 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Class 2M
Principal Balance and the Class 2B Principal Balances of the Class 2B
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.3(d). Except as set forth in
Section 4.3(d)(ii), in the event that the Class 2B-3 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.3(d)(i), the Class 2B-3 Percentage for such Distribution Date will be zero.
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<PAGE> 37
Class 2B-3 Prepayment Percentage: As to any Distribution Date, except as set
forth in the next sentence, the percentage calculated by multiplying (i) the
Group 2 Subordinate Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class 2B-3 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Class 2M Principal Balance and the Class 2B Principal Balances of the
Class 2B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.3(d). Except as
set forth in Section 4.3(d)(ii), in the event that the Class 2B-3 Certificates
are not eligible to receive distributions of principal in accordance with
Section 4.3(d)(i), the Class 2B-3 Prepayment Percentage for such Distribution
Date will be zero.
Class 2B-3 Principal Balance: As to the first Determination Date, the Original
Class 2B-3 Principal Balance. As of any subsequent Determination Date, the
lesser of (i) the Original Class 2B-3 Principal Balance less the sum of (a) all
amounts previously distributed in respect of the Class 2B-3 Certificates on
prior Distribution Dates (A) pursuant to Paragraph sixteenth of Section 4.3(a)
and (B) as a result of a Group 2 Principal Adjustment and (b) the Realized
Losses through such Determination Date allocated to the Class 2B-3 Certificates
pursuant to Section 4.4(b) and (ii) the Pool 2 Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Class 2A Principal Balance, the
Class 2M Principal Balance, the Class 2B-1 Principal Balance and the Class 2B-2
Principal Balance as of such Determination Date.
Class 2B-3 Unpaid Interest Shortfall: As to any Distribution Date, the amount,
if any, by which the aggregate of the Class 2B-3 Interest Shortfall Amounts for
prior Distribution Dates exceeds the amounts distributed in respect of the Class
2B-3 Certificates on prior Distribution Dates pursuant to Paragraph fourteenth
of Section 4.3(a).
Class 2B-4 Certificates: The Certificates designated as "Class 2B-4" on the face
thereof in substantially the form attached hereto as Exhibit B-2. The Class 2B-4
Certificates are related to the Pool 2 Mortgage Loans.
Class 2B-4 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 2B-4 Certificates pursuant to
Paragraphs sixteenth, seventeenth and eighteenth of Section 4.3(a).
Class 2B-4 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 2B Interest Accrual Amount of the Class 2B-4 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class 2B-4 Certificates on such Distribution Date pursuant to Paragraph
seventeenth of Section 4.3(a).
Class 2B-4 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 2 Mortgage Loan, of the sum of:
(i) the Class 2B-4 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such Distribution
Date on such Mortgage Loan, less (B) if the Pool 2 Bankruptcy Loss Amount has
been reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
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(ii) the Class 2B-4 Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 2B-4 Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
(iv) the Class 2B-4 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 2 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 2B-4 Optimal
Principal Amount will equal the lesser of (A) the Class 2B-4 Optimal Principal
Amount calculated as described in the preceding provisions and (B) the Group 2
Adjusted Principal Balance for the Class 2B-4 Certificates.
Class 2B-4 Percentage: As to any Distribution Date, except as set forth in the
next sentence, the percentage calculated by multiplying (i) the Group 2
Subordinate Percentage by (ii) a fraction, the numerator of which is the Class
2B-4 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Class 2M
Principal Balance and the Class 2B Principal Balances of the Class 2B
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.3(d). Except as set forth in
Section 4.3(d)(ii), in the event that the Class 2B-4 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.3(d)(i), the Class 2B-4 Percentage for such Distribution Date will be zero.
Class 2B-4 Prepayment Percentage: As to any Distribution Date, except as set
forth in the next sentence, the percentage calculated by multiplying (i) the
Group 2 Subordinate Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class 2B-4 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Class 2M Principal Balance and the Class 2B Principal Balances of the
Class 2B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.3(d). Except as
set forth in Section 4.3(d)(ii), in the event that the Class 2B-4 Certificates
are not eligible to receive distributions of principal in accordance with
Section 4.3(d)(i), the Class 2B-4 Prepayment Percentage for such Distribution
Date will be zero.
Class 2B-4 Principal Balance: As to the first Determination Date, the Original
Class 2B-4 Principal Balance. As of any subsequent Determination Date, the
lesser of (i) the Original Class 2B-4 Principal Balance less the sum of (a) all
amounts previously distributed in respect of the Class 2B-4 Certificates on
prior Distribution Dates (A) pursuant to Paragraph nineteenth of
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Section 4.3(a) and (B) as a result of a Group 2 Principal Adjustment and (b) the
Realized Losses allocated through such Determination Date to the Class 2B-4
Certificates pursuant to Section 4.4(b) and (ii) the Pool 2 Adjusted Pool Amount
as of the preceding Distribution Date less the sum of the Class 2A Principal
Balance, the Class 2M Principal Balance, the Class 2B-1 Principal Balance, the
Class 2B-2 Principal Balance and the Class 2B-3 Principal Balance as of such
Determination Date.
Class 2B-4 Unpaid Interest Shortfall: As to any Distribution Date, the amount,
if any, by which the aggregate of the Class 2B-4 Interest Shortfall Amounts for
prior Distribution Dates exceeds the amounts distributed in respect of the Class
2B-4 Certificates on prior Distribution Dates pursuant to Paragraph seventeenth
of Section 4.3(a).
Class 2B-5 Certificates: The Certificates designated as "Class 2B-5" on the face
thereof in substantially the form attached hereto as Exhibit B-2. The Class 2B-5
Certificates are related to the Pool 2 Mortgage Loans.
Class 2B-5 Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 2B-5 Certificates pursuant to
Paragraphs nineteenth, twentieth and twenty-first of Section 4.3(a).
Class 2B-5 Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 2B Interest Accrual Amount of the Class 2B-5 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class 2B-5 Certificates on such Distribution Date pursuant to Paragraph
twentieth of Section 4.3(a).
Class 2B-5 Optimal Principal Amount: As to any Distribution Date, an amount
equal to the sum, as to each outstanding Pool 2 Mortgage Loan, of the sum of:
(i) the Class 2B-5 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such Distribution
Date on such Mortgage Loan, less (B) if the Pool 2 Bankruptcy Loss Amount has
been reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 2B-5 Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 2B-5 Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
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(iv) the Class 2B-5 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
provided, however, that if a Group 2 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 2B-5 Optimal
Principal Amount will equal the lesser of (A) the Class 2B-5 Optimal Principal
Amount calculated as described in the preceding provisions and (B) the Group 2
Adjusted Principal Balance for the Class 2B-5 Certificates.
Class 2B-5 Percentage: As to any Distribution Date, except as set forth in the
next sentence, the percentage calculated by multiplying (i) the Group 2
Subordinate Percentage by (ii) a fraction, the numerator of which is the Class
2B-5 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Class 2M
Principal Balance and the Class 2B Principal Balances of the Class 2B
Certificates eligible to receive principal distributions for such Distribution
Date in accordance with the provisions of Section 4.3(d). Except as set forth in
Section 4.3(d)(ii), in the event that the Class 2B-5 Certificates are not
eligible to receive distributions of principal in accordance with Section
4.3(d)(i), the Class 2B-5 Percentage for such Distribution Date will be zero.
Class 2B-5 Prepayment Percentage: As to any Distribution Date, except as set
forth in the next sentence, the percentage calculated by multiplying (i) the
Group 2 Subordinate Prepayment Percentage by (ii) a fraction, the numerator of
which is the Class 2B-5 Principal Balance (determined as of the Determination
Date preceding such Distribution Date) and the denominator of which is the sum
of the Class 2M Principal Balance and the Class 2B Principal Balances of the
Class 2B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.3(d). Except as
set forth in Section 4.3(d)(ii), in the event that the Class 2B-5 Certificates
are not eligible to receive distributions of principal in accordance with
Section 4.3(d)(i), the Class 2B-5 Prepayment Percentage for such Distribution
Date will be zero.
Class 2B-5 Principal Balance: As to the first Determination Date, the Original
Class 2B-5 Principal Balance. As of any subsequent Determination Date, the
lesser of (i) the Original Class 2B-5 Principal Balance less the sum of (a) all
amounts previously distributed in respect of the Class 2B-5 Certificates on
prior Distribution Dates pursuant to Paragraph twenty-second of Section 4.3(a)
and (b) the Realized Losses allocated through such Determination Date to the
Class 2B-5 Certificates pursuant to Section 4.4(b) and (ii) the Pool 2 Adjusted
Pool Amount as of the preceding Distribution Date less the sum of the Class 2A
Principal Balance, the Class 2M Principal Balance, the Class 2B-1 Principal
Balance, the Class 2B-2 Principal Balance, the Class 2B-3 Principal Balance and
the Class 2B-4 Principal Balance as of such Determination Date.
Class 2B-5 Unpaid Interest Shortfall: As to any Distribution Date, the amount,
if any, by which the aggregate of the Class 2B-5 Interest Shortfall Amounts for
prior Distribution Dates exceeds the amounts distributed in respect of the Class
2B-5 Certificates on prior Distribution Dates pursuant to Paragraph twentieth of
Section 4.3(a).
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Class 2M Certificates: The Certificates designated as "Class 2M" on the face
thereof in substantially the form attached hereto as Exhibit A-4. The Class 2M
Certificates are related to the Pool 2 Mortgage Loans.
Class 2M Distribution Amount: As to any Distribution Date, any amount
distributable to the Holders of the Class 2M Certificates pursuant to Paragraphs
fourth, fifth and sixth of Section 4.3(a).
Class 2M Interest Accrual Amount: As to any Distribution Date, an amount equal
to (i) the product of 1/12th of the Class 2M Certificate Rate and the Class 2M
Principal Balance as of the Determination Date preceding such Distribution Date
minus (ii) (x) any Pool 2 Non-Supported Interest Shortfall allocated to the
Class 2M Certificates with respect to such Distribution Date and (y) the
interest portion of any Pool 2 Excess Special Hazard Losses, Pool 2 Excess Fraud
Losses and Pool 2 Excess Bankruptcy Losses allocated to the Class 2M
Certificates with respect to such Distribution Date pursuant to Section 4.4(e).
Class 2M Interest Shortfall Amount: As to any Distribution Date, any amount by
which the Class 2M Interest Accrual Amount with respect to such Distribution
Date exceeds the amount distributed in respect of the Class 2M Certificates on
such Distribution Date pursuant to Paragraph fourth of Section 4.3(a).
Class 2M Optimal Principal Amount: As to any Distribution Date, an amount equal
to the sum, as to each outstanding Pool 2 Mortgage Loan, of the sum of:
(i) the Class 2M Percentage of (A) the principal portion of the Monthly
Payment due on the Due Date occurring in the month of such Distribution Date on
such Mortgage Loan, less (B) if the Pool 2 Bankruptcy Loss Amount has been
reduced to zero, the principal portion of any Debt Service Reduction with
respect to such Mortgage Loan;
(ii) the Class 2M Prepayment Percentage of all Unscheduled Principal
Receipts that were received by the Master Servicer with respect to such Mortgage
Loan during the Collection Period relating to such Distribution Date for each
applicable type of Unscheduled Principal Receipt;
(iii) the Class 2M Prepayment Percentage of the Scheduled Principal
Balance of each such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to Section
2.6; and
(iv) the Class 2M Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan during
the month preceding the month in which such Distribution Date occurs over the
unpaid principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Monthly Advances
previously made by the Master Servicer in respect of such defective Mortgage
Loan;
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provided, however, that if a Group 2 Optimal Adjustment Event occurs with
respect to such Class and such Distribution Date, the Class 2M Optimal Principal
Amount will equal the lesser of (A) the Class 2M Optimal Principal Amount
calculated as described in the preceding provisions and (B) the Group 2 Adjusted
Principal Balance for the Class 2M Certificates.
Class 2M Percentage: As to any Distribution Date, the percentage calculated by
multiplying the Group 2 Subordinate Percentage by either (a) if any Class 2B
Certificates are eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.3(d), a
fraction, the numerator of which is the Class 2M Principal Balance (determined
as of the Determination Date preceding such Distribution Date) and the
denominator of which is the sum of the Class 2M Principal Balance and the Class
2B Principal Balances of the Class 2B Certificates eligible to receive principal
distributions for such Distribution Date in accordance with the provisions of
Section 4.3(d) or (b) except as set forth in Section 4.3 (d)(ii), if the Class
2B Certificates are not eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.3(d)(i), one.
Class 2M Prepayment Percentage: As to any Distribution Date, the percentage
calculated by multiplying the Group 2 Subordinate Prepayment Percentage by
either (a) if any Class 2B Certificates are eligible to receive principal
distributions for such Distribution Date in accordance with the provisions of
Section 4.3(d), a fraction, the numerator of which is the Class 2M Principal
Balance (determined as of the Determination Date preceding such Distribution
Date) and the denominator of which is the sum of the Class 2M Principal Balance
and the Class 2B Principal Balances of the Class 2B Certificates eligible to
receive principal distributions for such Distribution Date in accordance with
the provisions of Section 4.3(d) or (b) except as set forth in Section
4.3(d)(ii), if the Class 2B Certificates are not eligible to receive principal
distributions for such Distribution Date in accordance with the provisions of
Section 4.3(d)(i), one.
Class 2M Principal Balance: As to the first Determination Date, the Original
Class 2M Principal Balance. As of any subsequent Determination Date, the lesser
of (i) the Original Class 2M Principal Balance less the sum of (a) all amounts
previously distributed in respect of the Class 2M Certificates on prior
Distribution Dates (A) pursuant to Paragraph seventh of Section 4.3(a) and (B)
as a result of a Group 2 Principal Adjustment and (b) the Realized Losses
allocated through such Determination Date to the Class 2M Certificates pursuant
to Section 4.4(b) and (ii) the Pool 2 Adjusted Pool Amount as of the preceding
Distribution Date less the Class 2A Principal Balance as of such Determination
Date.
Class 2M Unpaid Interest Shortfall: As to any Distribution Date, the amount, if
any, by which the aggregate of the Class 2M Interest Shortfall Amounts for prior
Distribution Dates exceeds the amounts distributed in respect of the Class 2M
Certificates on prior Distribution Dates pursuant to Paragraph fifth of Section
4.3(a).
Class A Certificates: The Class 1A Certificates or the Class 2A Certificates, as
applicable.
Class A Percentage: The Class 1A Percentage or the Class 2A Percentage, as
applicable.
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Class A Prepayment Percentage: The Class 1A Prepayment Percentage or the Class
2A Prepayment Percentage, as applicable.
Class A-R Certificates: The Certificates designated as "Class A-R" on the face
thereof in substantially the form attached hereto as Exhibit B-3.
Class B-3 Certificates: The Class 1B-3 Certificates or the Class 2B-3
Certificates, as applicable.
Class B-4 Certificates: The Class 1B-4 Certificates or the Class 2B-4
Certificates, as applicable.
Class B-5 Certificates: The Class 1B-5 Certificates or the Class 2B-5
Certificates, as applicable.
Class M Certificates: The Class 1M Certificates or Class 2M Certificates, as
applicable.
Closing Date: July 30, 1998.
Code: The Internal Revenue Code of 1986, as the same may be amended from time to
time (or any successor statute thereto).
Collection Account: The account created and maintained for the benefit of the
Holders of Certificates pursuant to Section 3.2(b).
Collection Period: With respect to any Distribution Date, the calendar month
immediately preceding the month in which such Distribution Date occurs.
Compensating Interest: As to any Distribution Date and a Pool, the lesser of (a)
the aggregate Prepayment Interest Shortfall on the Mortgage Loans in the related
Pool with respect to such Distribution Date and (b) the Available Servicing
Compensation for such Distribution Date and such Pool.
Corporate Trust Office: The principal office of the Trustee at which at any
particular time its corporate business shall be administered, which office on
the Closing Date is located at Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479.
Current Class 1A Interest Distribution Amount: As to any Distribution Date, the
amount distributed in respect of the Class 1A Certificates pursuant to Paragraph
first of Section 4.1(a) on such Distribution Date.
Current Class 1B Interest Distribution Amount: As to any Distribution Date, the
amount distributed in respect of the Class 1B Certificates pursuant to
Paragraphs eighth, eleventh, fourteenth, seventeenth and twentieth of Section
4.1(a) on such Distribution Date.
Current Class 1B-1 Fractional Interest: As to any Distribution Date subsequent
to the First Distribution Date, the percentage obtained by dividing the sum of
the Class 1B Principal Balances of the Class 1B-2, Class 1B-3, Class 1B-4 and
Class 1B-5 Certificates by the sum of the Class 1A Non-PO Principal Balance, the
Class 1M Principal Balance and the Class 1B Principal Balance. As to the first
Distribution Date, the Original Class 1B-1 Fractional Interest.
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Current Class 1B-2 Fractional Interest: As to any Distribution Date subsequent
to the first Distribution Date, the percentage obtained by dividing the sum of
the Class 1B Principal Balances of the Class 1B-3, Class 1B-4 and Class 1B-5
Certificates by the sum of the Class 1A Non-PO Principal Balance, the Class 1M
Principal Balance and the Class 1B Principal Balance. As to the first
Distribution Date, the Original Class 1B-2 Fractional Interest.
Current Class 1B-3 Fractional Interest: As to any Distribution Date subsequent
to the first Distribution Date, the percentage obtained by dividing the sum of
the Class 1B Principal Balances of the Class 1B-4 and Class 1B-5 Certificates by
the sum of the Class 1A Non-PO Principal Balance, the Class 1M Principal Balance
and the Class 1B Principal Balance. As to the first Distribution Date, the
Original Class 1B-3 Fractional Interest.
Current Class 1B-4 Fractional Interest: As to any Distribution Date subsequent
to the first Distribution Date, the percentage obtained by dividing the Class 1B
Principal Balance of the Class 1B-5 Certificates by the sum of the Class 1A
Non-PO Principal Balance, the Class 1M Principal Balance and the Class 1B
Principal Balance. As to the first Distribution Date, the Original Class 1B-4
Fractional Interest.
Current Class 1M Fractional Interest: As to any Distribution Date subsequent to
the first Distribution Date, the percentage obtained by dividing the Class 1B
Principal Balance by the sum of the Class 1A Non-PO Principal Balance, the Class
1M Principal Balance and the Class 1B Principal Balance. As to the first
Distribution Date, the Original Class 1M Fractional Interest.
Current Class 1M Interest Distribution Amount: As to any Distribution Date, the
amount distributed in respect of the Class 1M Certificates pursuant to Paragraph
fifth of Section 4.1(a) on such Distribution Date.
Current Class 2A Interest Distribution Amount: As to any Distribution Date, the
amount distributed in respect of the Class 2A Certificates pursuant to Paragraph
first of Section 4.3(a) on such Distribution Date.
Current Class 2B Interest Distribution Amount: As to any Distribution Date, the
amount distributed in respect of the Class 2B Certificates pursuant to
Paragraphs seventh, tenth, thirteenth, sixteenth and nineteenth of Section
4.3(a) on such Distribution Date.
Current Class 2B-1 Fractional Interest: As to any Distribution Date subsequent
to the first Distribution Date, the percentage obtained by dividing the sum of
the Class 2B Principal Balances of the Class 2B-2, Class 2B-3, Class 2B-4 and
Class 2B-5 Certificates by the sum of the Class 2A Principal Balance, the Class
2M Principal Balance and the Class 2B Principal Balance. As to the first
Distribution Date, the Original Class 2B-1 Fractional Interest.
Current Class 2B-2 Fractional Interest: As to any Distribution Date subsequent
to the first Distribution Date, the percentage obtained by dividing the sum of
the Class 2B Principal Balances of the Class 2B-3, Class 2B-4 and Class 2B-5
Certificates by the sum of the Class 2A
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Principal Balance, the Class 2M Principal Balance and the Class 2B Principal
Balance. As to the first Distribution Date, the Original Class 2B-2 Fractional
Interest.
Current Class 2B-3 Fractional Interest: As to any Distribution Date subsequent
to the first Distribution Date, the percentage obtained by dividing the sum of
the Class 2B Principal Balances of the Class 2B-4 and Class 2B-5 Certificates by
the sum of the Class 2A Principal Balance, the Class 2M Principal Balance and
the Class 2B Principal Balance. As to the first Distribution Date, the Original
Class 2B-3 Fractional Interest.
Current Class 2B-4 Fractional Interest: As to any Distribution Date subsequent
to the first Distribution Date, the percentage obtained by dividing the Class 2B
Principal Balance of the Class 2B-5 Certificates by the sum of the Class 2A
Principal Balance, the Class 2M Principal Balance and the Class 2B Principal
Balance. As to the first Distribution Date, the Original Class 2B-4 Fractional
Interest.
Current Class 2M Fractional Interest: As to any Distribution Date subsequent to
the first Distribution Date, the percentage obtained by dividing the Class 2B
Principal Balance by the sum of the Class 2A Principal Balance, the Class 2M
Principal Balance and the Class 2B Principal Balance. As to the first
Distribution Date, the Original Class 2M Fractional Interest.
Current Class 2M Interest Distribution Amount: As to any Distribution Date, the
amount distributed in respect of the Class 2M Certificates pursuant to Paragraph
fifth of Section 4.3(a) on such Distribution Date.
Curtailment: With respect to a Mortgage Loan, any payment of principal received
during a Collection Period as part of a payment that is in excess of the amount
of the Monthly Payment due for such Collection Period and which is not intended
to satisfy the Mortgage Loan in full, is not a Payahead, is not intended to cure
a delinquency or is not accompanied by an amount of interest representing the
full amount of scheduled interest due on any date or dates in any month or
months subsequent to the month such payment is received.
Cut-Off Date: July 1, 1998.
Cut-Off Date Aggregate Loan Balance: The sum of the Cut-Off Date Aggregate Pool
1 Loan Balance and the Cut-Off Date Aggregate Pool 2 Loan Balance equal to
$478,463,912.73.
Cut-Off Date Aggregate Pool 1 Loan Balance: The aggregate of the Cut-Off Date
Principal Balances of the Pool 1 Mortgage Loans equal to $411,940,261.82.
Cut-Off Date Aggregate Pool 2 Loan Balance: The aggregate of the Cut-Off Date
Principal Balances of the Pool 2 Mortgage Loans equal to $66,523,650.91.
Cut-Off Date Loan Balance: With respect to any Mortgage Loan, the principal
balance thereof as of the Cut-Off Date.
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Cut-Off Date Principal Balance: As to each Mortgage Loan, its unpaid principal
balance as of the close of business on the Cut-Off Date (but without giving
effect to any Unscheduled Principal Receipts received or applied on the Cut-Off
Date), reduced by all payments of scheduled principal due on or before the
Cut-Off Date and not paid, and increased by scheduled monthly payments of
principal due after the Cut-Off Date but received by the Master Servicer on or
before the Cut-Off Date.
Debt Service Reduction: With respect to any Mortgage Loan, a reduction in the
scheduled Monthly Payment for such Mortgage Loan by a court of competent
jurisdiction in a proceeding under the Bankruptcy Code, except such a reduction
constituting a Deficient Valuation.
Defective Mortgage Loan: Any Mortgage Loan subject to retransfer pursuant to
Section 2.2 or 2.6.
Deficient Valuation: With respect to any Mortgage Loan, a valuation by a court
of competent jurisdiction of the Mortgaged Property in an amount less than the
then-outstanding indebtedness under the Mortgage Loan, or any reduction in the
amount of principal to be paid in connection with any scheduled Monthly Payment
that results in a permanent forgiveness of principal, which valuation or
reduction results from a proceeding under the Bankruptcy Code.
Definitive Certificates: As defined in Section 6.2(b)(ii).
Depositary Agreement: The Letter of Representations, dated July 29, 1998 by and
among DTC, the Depositor and the Trustee.
Depositor: First Union Residential Securitization Transactions, Inc., a North
Carolina corporation, and any successor thereto.
Depository: The initial Depository shall be The Depository Trust Company
("DTC"), the nominee of which is Cede & Co. The Depository shall at all times be
a "clearing corporation" as defined in Section 8-102(3) of the UCC of the State
of New York.
Depository Participant or DTC Participant: A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
Determination Date: With respect to any Distribution Date, the eighteenth day of
the month in which such Distribution Date occurs (or if such day is not a
Business Day, the Business Day immediately succeeding such eighteenth day).
Discount Pool 1 Mortgage Loan: A Pool 1 Mortgage Loan with a Net Mortgage
Interest Rate of less than 6.75%.
Disqualified Organization: Either (i) the United States, (ii) any state or
political subdivision thereof, (iii) any foreign government, (iv) any
international organization, (v) any agency or
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instrumentality of any of the foregoing, (vi) any tax-exempt organization (other
than a cooperative described in Section 521 of the Code) which is exempt from
the tax imposed by Chapter 1 of the Code unless such organization is subject to
the tax imposed by Section 511 of the Code, (vii) any organization described in
Section 1381(a)(2)(C) of the Code, or (viii) any other entity designated as a
Disqualified Organization by relevant legislation or regulations amending the
REMIC Provisions and in effect at or proposed to be effective as of the time of
the determination. In addition, a corporation will not be treated as an
instrumentality of the United States or of any state or political subdivision
thereof if all of its activities are subject to tax and a majority of its board
of directors is not selected by such governmental unit. For purposes of this
definition, the terms "United States" and "international organization" shall
have the meanings set forth in Section 7701 of the Code.
Distribution Account: The Eligible Account established and maintained by the
Trustee pursuant to Section 5.3.
Distribution Date: The twenty-fifth day of each month, or if such day is not a
Business Day, then the next Business Day, beginning in August, 1998.
Document Custodian: The Person designated pursuant to Section 3.16, initially,
the Trustee.
DTC: The Depository Trust Company or its successor in interest.
Due Date: As to any Mortgage Loan, the day of the month on which the Monthly
Payment is due from the Mortgagor.
Electronic Ledger: The electronic master record of mortgage loans maintained by
the Master Servicer.
Eligible Account: An account that is either (i) maintained with a depository
institution whose debt obligations at the time of any deposit therein have the
highest short-term debt rating by S&P and are rated P-1 by Moody's, (ii) one or
more accounts with a depository institution which accounts are fully insured by
either the SAIF or the BIF with a minimum long-term unsecured debt rating of BBB
by S&P and A2 by Moody's, (iii) a segregated trust account maintained with the
corporate trust department of (A) the Trustee or an affiliate of the Trustee in
its fiduciary capacity or (B) an institution with capital and surplus of not
less than $50,000,000 and with a minimum long-term secured debt rating of BBB by
S&P, (iv) an account the deposits in which are fully FDIC insured or (v)
otherwise acceptable to each Rating Agency as evidenced by a letter from each
Rating Agency to the Trustee, without reduction or withdrawal of their then
current ratings of the Certificates.
Eligible Investments: One or more of the following (excluding any callable
investments purchased at a premium):
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(i) 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 such obligations are
backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in
clause (i) maturing not more than three months from the date of
acquisition thereof, provided that the short-term unsecured debt
obligations of the party agreeing to repurchase such obligations are at
the time rated by S&P and Moody's in its highest short-term rating
category (which is A-1+ by S&P and P-1 for Moody's);
(iii) certificates of deposit, time deposits and bankers'
acceptances of any U.S. depository institution or trust company
incorporated under the laws of the United States or any state thereof
and subject to supervision and examination by federal and/or state
banking authorities, provided that the unsecured short-term debt
obligations of such depository institution or trust company at the date
of acquisition thereof have been rated by each of S&P and Moody's in its
highest unsecured short-term debt rating category;
(iv) commercial paper (having original maturities of not
more than 90 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated by S&P and Moody's in their highest short-term rating
categories;
(v) interests in any money market fund, including any such
fund advised by the Trustee or an affiliate thereof, which at the date
of acquisition of the interests in such fund and throughout the time as
the interest is held in such fund has a rating of Aaa by Moody's and
either AAAm or AAAm G by S&P; and
(vi) other obligations or securities that are acceptable to
each Rating Agency as an Eligible Investment hereunder and will not
result in a reduction in the then current rating of the Certificates, as
evidenced by a letter to such effect from each Rating Agency and with
respect to which the Master Servicer has received confirmation that, for
tax purposes, the investment complies with the last clause of this
definition;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to its stated maturity.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for
a Defective Mortgage Loan which must, on the date of such substitution, (i) have
an outstanding Loan Balance (or in the case of a substitution of more than one
Mortgage Loan for a Defective Mortgage Loan, an aggregate outstanding Loan
Balance), equal to or not more than 10% less
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than the Loan Balance of such Defective Mortgage Loan; (ii) have a Loan Rate not
less than the current Loan Rate of the Defective Mortgage Loan and not more than
1% in excess of the Loan Rate of such Defective Mortgage Loan; (iii) have a
Mortgage of the same or higher level of lien priority as the Mortgage relating
to the Defective Mortgage Loan at the time such Mortgage was transferred to the
Trust; (iv) have a remaining term to maturity not more than six months earlier
and not later than the remaining term to maturity of the Defective Mortgage
Loan; provided, however, that a Mortgage Loan that meets all the other
requirements of this definition, but has a remaining term to maturity that is
(A) not more than one year longer than that of the Defective Mortgage Loan and
(B) not later than the maturity date of the latest maturing Mortgage Loan then
owned by the Trust, will not fail to qualify as an Eligible Substitute Mortgage
Loan if the Loan Balance of such Mortgage Loan on the date of such substitution,
when added to the Loan Balances (determined as of the date of the substitution
of such loan) that qualified as Eligible Substitute Mortgage Loans in reliance
upon the provisions of this proviso clause, does not exceed an amount equal to
$5,000,000; (v) comply with each representation and warranty set forth in
Section 2.6 (deemed to be made as of the date of substitution); (vi) have an
original Loan-to-Value Ratio not greater than that of the Defective Mortgage
Loan; and (vii) have an Original Loan Balance of not greater than $1,000,000.
More than one Eligible Substitute Mortgage Loan may be substituted for a
Defective Mortgage Loan if such Eligible Substitute Mortgage Loans meet the
foregoing attributes in the aggregate.
ERISA: As defined in Section 6.2(c).
Event of Default: As defined in Section 8.1.
Excess Liquidation Proceeds: With respect to any Distribution Date, the excess,
if any, of aggregate Liquidation Proceeds in the Collection Period over the
amount that would have been received if a Payoff had been made on the last day
of such Collection Period with respect to each Mortgage Loan which became a
Liquidated Mortgage Loan during such Collection Period.
Expenses: As defined in Section 11.3(b).
Fannie Mae: The Federal National Mortgage Association or any successor thereto.
FDIC: The Federal Deposit Insurance Corporation or any successor thereto.
FHA: The Federal Housing Administration, or any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation or any successor thereto.
Final Scheduled Distribution Date: For each Class of Certificates, as set out in
Section 2.9(d).
First Distribution Date: The Distribution Date occurring in August, 1998.
Fitch: Fitch IBCA, Inc., provided that at any time it is a Rating Agency.
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Foreclosure Proceedings: Proceedings or action for foreclosure, deed in lieu of
foreclosure or trustee's sale with respect to any Mortgage Loan and the related
Mortgaged Property.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the amount, if
any, by which (i) the aggregate of its Net Liquidation Proceeds exceeds (ii) the
related Loan Balance (plus accrued and unpaid interest thereon at the applicable
Loan Rate from the date interest was last paid through the date of receipt of
the final Liquidation Proceeds) of such Liquidated Mortgage Loan immediately
prior to the final recovery of its Liquidation Proceeds.
Fraud Loss: A Liquidated Loan Loss incurred with respect to Liquidated Mortgage
Loans as to which there was fraud in the origination of such Liquidated Mortgage
Loan.
Group 1 Adjusted Principal Balance: As to any Distribution Date and the Class 1M
Certificates or any Class 1B Certificates, the greater of (A) zero and (B) (i)
the principal balance of such Class with respect to such Distribution Date minus
(ii) the Group 1 Adjustment Amount for such Distribution Date less, with respect
to the Class 1M Certificates, the Aggregate Class 1B Principal Balance or, with
respect to any Class of Class 1B Certificates, the Class 1B Principal Balances
for any Class of Class 1B Certificates with a higher numerical designation.
Group 1 Adjustment Amount: For any Distribution Date, the difference between (A)
the sum of the Aggregate Class 1A Principal Balance, Class 1M Principal Balance
and Aggregate Class 1B Principal Balance as of the related Determination Date
and (B) the sum of (i) the sum of the Aggregate Class 1A Principal Balance,
Class 1M Principal Balance and Aggregate Class 1B Principal Balance as of the
Determination Date succeeding such Distribution Date, (ii) the principal portion
of Pool 1 Excess Special Hazard Losses, Pool 1 Excess Fraud Losses and Pool 1
Excess Bankruptcy Losses allocated to the Group 1 Certificates with respect to
such Distribution Date and (iii) the aggregate amount that would have been
distributed to all such Classes as principal in accordance with Section 4.1(a)
for such Distribution Date without regard to the provisos in the definitions of
Class 1M Optimal Principal Amount, Class 1B-1 Optimal Principal Amount, Class
1B-2 Optimal Principal Amount, Class 1B-3 Optimal Principal Amount, Class 1B-4
Optimal Principal Amount and Class 1B-5 Optimal Principal Amount.
Group 1 Certificates: The Class 1A, Class 1M and Class 1B Certificates,
collectively.
Group 1 Cross-Over Date: The Distribution Date preceding the first Distribution
Date on which the Class 1A Percentage (determined pursuant to clause (ii) of the
definition thereof) equals or exceeds 100%.
Group 1 Cross-Over Date Interest Shortfall: With respect to any Distribution
Date that occurs on or after the Group 1 Cross-Over Date as to which an
Unscheduled Principal Receipt (other than a Prepayment in Full) has been
received the amount of interest that would have accrued at the Net Mortgage Loan
Rate on the amount of such Unscheduled Principal Receipt from the day of its
receipt or, if earlier, its application by the Master Servicer through the last
day of the month in which such Unscheduled Principal Receipt is received.
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Group 1 Junior Subordinate Certificates: The Class 1B-3, Class 1B-4 and Class
1B-5 Certificates, collectively.
Group 1 Optimal Adjustment Event: With respect to the Class 1M Certificates or
any Class of Class 1B Certificates and any Distribution Date, a Group 1 Optimal
Adjustment Event will occur with respect to such Class if: (i) the principal
balance of such Class on the Determination Date succeeding such Distribution
Date would have been reduced to zero (regardless of whether such principal
balance was reduced to zero as a result of principal distribution or the
allocation of Realized Losses) and (ii) (a) any Class 1A Principal Balance would
be subject to further reduction as a result of the third or fifth sentences of
the definition of Class 1A Principal Balance or (b) with respect to any Class 1B
Certificate, the Class 1M Principal Balance or the Class 1B Principal Balance of
a Class 1B Certificate with a lower numerical designation would be reduced with
respect to such Distribution Date as a result of the application of clause (ii)
of the definition of Class 1M Principal Balance, Class 1B-1 Principal Balance,
Class 1B-2 Principal Balance, Class 1B-3 Principal Balance, Class 1B-4 Principal
Balance or Class 1B-5 Principal Balance.
Group 1 Principal Adjustment: In the event that the Class 1M Optimal Principal
Amount, Class 1B-1 Optimal Principal Amount, Class 1B-2 Optimal Principal
Amount, Class 1B-3 Optimal Principal Amount, Class 1B-4 Optimal Principal Amount
or Class 1B-5 Optimal Principal Amount is calculated in accordance with the
proviso in such definition with respect to any Distribution Date, the Group 1
Principal Adjustment for the Class 1M Certificates or such Class 1B Certificates
shall equal the difference between (i) the amount that would have been
distributed to such Class as principal in accordance with Section 4.1(a) for
such Distribution Date, calculated without regard to such proviso and assuming
there are no Group 1 Principal Adjustments for such Distribution Date and (ii)
the Group 1 Adjusted Principal Balance for such Class.
Group 1 Rating Agencies: Moody's and Fitch.
Group 1 Senior Certificates: The Class 1A Certificates, collectively.
Group 1 Subordinate Percentage: As to any Distribution Date, the percentage
which is the difference between 100% and the Class 1A Percentage for such date.
Group 1 Subordinate Prepayment Percentage: As to any Distribution Date, the
percentage which is the difference between 100% and the Class 1A Prepayment
Percentage for such date.
Group 2 Adjusted Principal Balance: As to any Distribution Date and the Class 2M
Certificates or any Class 2B Certificates, the greater of (A) zero and (B) (i)
the principal balance of such Class with respect to such Distribution Date minus
(ii) the Group 2 Adjustment Amount for such Distribution Date less, with respect
to the Class 2M Certificates, the Class 2B Principal Balance or, with respect to
any Class of Class 2B Certificates, the Class 2B Principal Balances for any
Class of Class 2B Certificates with higher numerical designations.
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Group 2 Adjustment Amount: For any Distribution Date, the difference between (A)
the sum of the Class 2A Principal Balance, Class 2M Principal Balance and
Aggregate Class 2B Principal Balance as of the related Determination Date and
(B) the sum of (i) the sum of the Class 2A Principal Balance, Class 2M Principal
Balance and Aggregate Class 2B Principal Balance as of the Determination Date
succeeding such Distribution Date, (ii) the principal portion of Pool 2 Excess
Special Hazard Losses, Pool 2 Excess Fraud Losses and Pool 2 Excess Bankruptcy
Losses allocated to the Group 2 Certificates with respect to such Distribution
Date and (iii) the aggregate amount that would have been distributed to all such
Classes as principal in accordance with Section 4.3(a) for such Distribution
Date without regard to the provisos in the definitions of Class 2M Optimal
Principal Amount, Class 2B-1 Optimal Principal Amount, Class 2B-2 Optimal
Principal Amount, Class 2B-3 Optimal Principal Amount, Class 2B-4 Optimal
Principal Amount and Class 2B-5 Optimal Principal Amount.
Group 2 Certificates: The Class 2A, Class 2M and Class 2B Certificates,
collectively.
Group 2 Cross-Over Date: The Distribution Date preceding the first Distribution
Date on which the Class 2A Percentage (determined pursuant to clause (ii) of the
definition thereof) equals or exceeds 100%.
Group 2 Cross-Over Date Interest Shortfall: With respect to any Distribution
Date that occurs on or after the Group 2 Cross-Over Date as to which an
Unscheduled Principal Receipt (other than a Prepayment in Full) has been
received the amount of interest that would have accrued at the Net Mortgage Loan
Rate on the amount of such Unscheduled Principal Receipt from the day of its
receipt or, if earlier, its application by the Master Servicer through the last
day of the month in which such Unscheduled Principal Receipt is received.
Group 2 Junior Subordinate Certificates: The Class 2B-3, Class 2B-4 and Class
2B-5 Certificates, collectively.
Group 2 Optimal Adjustment Event: With respect to the Class 2M Certificates or
any Class of Class 2B Certificates and any Distribution Date, a Group 2 Optimal
Adjustment Event will occur with respect to such Class if: (i) the principal
balance of such Class on the Determination Date succeeding such Distribution
Date would have been reduced to zero (regardless of whether such principal
balance was reduced to zero as a result of principal distribution or the
allocation of Realized Losses) and (ii) (a) any Class 2A Principal Balance would
be subject to further reduction as a result of the third or fifth sentences of
the definition of Class 2A Principal Balance or (b) with respect to any Class 2B
Certificate, the Class 2M Principal Balance or the Class 2B Principal Balance of
a Class 2B Certificate with a lower numerical designation would be reduced with
respect to such Distribution Date as a result of the application of clause (ii)
of the definition of Class 2M Principal Balance, Class 2B-1 Principal Balance,
Class 2B-2 Principal Balance, Class 2B-3 Principal Balance, Class 2B-4 Principal
Balance or Class 2B-5 Principal Balance.
Group 2 Principal Adjustment: In the event that the Class 2M Optimal Principal
Amount, Class 2B-1 Optimal Principal Amount, Class 2B-2 Optimal Principal
Amount, Class 2B-3 Optimal Principal Amount, Class 2B-4 Optimal Principal Amount
or Class 2B-5 Optimal Principal
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Amount is calculated in accordance with the proviso in such definition with
respect to any Distribution Date, the Group 2 Principal Adjustment for the Class
2M Certificates or such Class 2B Certificates shall equal the difference between
(i) the amount that would have been distributed to such Class as principal in
accordance with Section 4.3(a) for such Distribution Date, calculated without
regard to such proviso and assuming there are no Group 2 Principal Adjustments
for such Distribution Date and (ii) the Group 2 Adjusted Principal Balance for
such Class.
Group 2 Rating Agencies: S&P and Fitch.
Group 2 Subordinate Percentage: As to any Distribution Date, the percentage
which is the difference between 100% and the Class 2A Percentage for such date.
Group 2 Subordinate Prepayment Percentage: As to any Distribution Date, the
percentage which is the difference between 100% and the Class 2A Prepayment
Percentage for such date.
Holder: A Certificateholder.
Indirect DTC Participants: Entities such as banks, brokers, dealers or trust
companies, that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly.
Insolvency Event: With respect to a Mortgagor, any of the following events: (i)
A court having jurisdiction in the premises shall enter a decree or order for
relief in respect of the Mortgagor in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appoint a receiver, liquidator, assignee, custodian, sequestrator (or other
similar official) of the Mortgagor or for all or substantially all of its
property, or order the winding up or liquidation of its affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (ii) the Mortgagor shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or 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 or taking of possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Mortgagor or for any substantial part of its property,
or shall make any general assignment for the benefit of creditors.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any insurance
policy covering a Mortgage Loan, or amounts required to be paid by the Master
Servicer pursuant to Section 3.5 hereof, net of any component thereof (i)
covering any expenses incurred by or on behalf of the Master Servicer in
connection with obtaining such proceeds, (ii) that is applied to the restoration
or repair of the related Mortgaged Property or (iii) released to the Mortgagor
in accordance with the Master Servicer's normal servicing procedures.
Interest Accrual Period: As to any Distribution Date and each Class of
Certificates, the period from and including the first day of the calendar month
preceding the calendar month of such Distribution Date to but not including the
first day of the calendar month of such Distribution Date.
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Interested Person: The Depositor, the Master Servicer, any Holder of a
Certificate, or any Affiliate of any such Person.
Junior Subordinate Certificates: The Group 1 Junior Subordinate Certificates and
the Group 2 Junior Subordinate Certificates.
LIBOR: The London Interbank Offered Rate for one-month U.S. dollar deposits,
calculated as set forth in Section 5.5.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day
on which banking institutions in the State of North Carolina, the state where
the Corporate Trust Office is located or in the City of London, England are
required or authorized by law to be closed.
LIBOR Certificates: The Class 1A-11 and Class 1A-12 Certificates.
LIBOR Determination Date: As to any Distribution Date (other than the first
Distribution Date), the second LIBOR Business Day prior to the day on which the
related Interest Accrual Period commences.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, 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.
Liquidated Loan Loss: With respect to any Distribution Date and a Pool, the
aggregate of the amount of losses with respect to each Mortgage Loan in such
Pool which became a Liquidated Mortgage Loan during the related Collection
Period equal to the excess of (i) the unpaid principal balance of each such
Liquidated Mortgage Loan, plus accrued interest thereon in accordance with the
amortization schedule at the time applicable thereto at the applicable Net
Mortgage Interest Rate from the Due Date as to which interest was last paid with
respect thereto through the last day of the month preceding the month in which
such Distribution Date occurs, over (ii) Net Liquidation Proceeds with respect
to such Liquidated Mortgage Loan.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage Loan in
respect of which the Master Servicer has determined, in accordance with the
servicing procedures specified herein, as of the end of the related Collection
Period that all Liquidation Proceeds which it expects to recover with respect to
the disposition of the related Mortgage Loan have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead) which are
incurred by the Master Servicer in connection with the liquidation of any
Mortgage Loan and not recovered under any insurance policy, such expenses
including, without limitation, reasonable legal fees
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and expenses and any related and unreimbursed expenditures for real estate
property taxes or for property restoration, preservation or insurance against
casualty loss or damage.
Liquidation Principal: The principal portion of Liquidation Proceeds received
with respect to each Mortgage Loan which became a Liquidated Mortgage Loan (but
not in excess of the principal balance thereof) during the related Collection
Period.
Liquidation Proceeds: Proceeds (including Insurance Proceeds) received in
connection with the liquidation of any Mortgage Loan or related REO or any
condemnation or taking by eminent domain, whether through trustee's sale,
foreclosure sale or otherwise (including rental income).
Liquidation Report: As defined in Section 3.7.
Loan Balance: At the time of any determination, the principal balance of a
Mortgage Loan remaining to be paid at the close of business on the applicable
Cut-Off Date, after deduction of all principal payments due on or before such
Cut-Off Date whether or not paid, reduced by all amounts distributed or to be
distributed to Certificateholders through the Distribution Date in the month of
determination that are reported as allocable to principal of such Mortgage Loan.
In the case of a Substitute Mortgage Loan, "Loan Balance" shall mean, at
the time of any determination, the principal balance of such Substitute Mortgage
Loan transferred to the Trust on the date of substitution, reduced by all
amounts distributed or to be distributed to Certificateholders through the
Distribution Date in the month of determination that are reported as allocable
to principal of such Substitute Mortgage Loan.
The Loan Balance of a Mortgage Loan (including a Substitute Mortgage
Loan) shall not be adjusted solely by reason of any bankruptcy or similar
proceeding or any moratorium or similar waiver or grace period. Whenever a
Realized Loss has been incurred with respect to a Mortgage Loan during a
calendar month, the Loan Balance of such Mortgage Loan shall be reduced by the
amount of such Realized Loss as of the Distribution Date next following the end
of such calendar month after giving effect to the allocation of Realized Losses
and distributions of principal to the Certificates.
Loan Rate: With respect to any Mortgage Loan as of any day, the per annum rate
of interest applicable under the related Mortgage Note to the calculation of
interest for such day on the Loan Balance.
Loan-to-Value Ratio: With respect to any Mortgage Loan as of any date, the
percentage equivalent of the fraction, the numerator of which is the Original
Loan Balance and the denominator of which is the Valuation of the related
Mortgaged Property as of the date of the execution of the related original
Mortgage.
Losses: As defined in Section 11.3(a).
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Majority Holders: The Holder or Holders of each Class of Certificates evidencing
Percentage Interests in excess of 51% in the aggregate of such Class.
Master Servicer: First Union National Bank, in its capacity as servicer under
this Agreement, and its successors in interest or any successor servicer
appointed in accordance with this Agreement that has accepted such appointment
in accordance with this Agreement.
Master Servicer Removal Right Event: The occurrence of:
(i) on any Distribution Date, the Rolling Three Month Delinquency Rate
with respect to a Pool exceeds 10%; or
(ii) (A) on any Distribution Date on or prior to the Distribution Date
that is the fifth annual anniversary of the initial Distribution Date, the Total
Losses with respect to a Pool exceed 5% of the Cut-Off Date Aggregate Loan
Balance; or (B) on any Distribution Date on or prior to the Distribution Date
that is the tenth annual anniversary of the initial Distribution Date, Total
Losses with respect to a Pool exceed 6% of the Cut-Off Date Aggregate Loan
Balance.
Master Servicing Fee: The Pool 1 Master Servicing Fee or the Pool 2 Master
Servicing Fee, as applicable.
Merged Holder: As defined in Section 2.1(a).
Monthly Advance: As defined in Section 3.4.
Monthly Payment: For any Collection Period with respect to any Mortgage Loan,
the scheduled monthly payment of principal of and interest due on such Mortgage
Loan (after adjustment for any Curtailments and Deficient Valuations occurring
prior to such Due Date but before any adjustment to such amortization schedule,
other than for Deficient Valuations, by reason of any bankruptcy or similar
proceeding or any moratorium or similar waiver or grace period) that is payable
by the Mortgagor under the related Mortgage Note during such Collection Period
(without regard to any rescheduling pursuant to Section 3.2(a)(ii)).
Moody's: Moody's Investors Service, Inc., provided that at any time it is a
Rating Agency.
Mortgage: The mortgage, deed of trust or other instrument creating a first lien
on an estate in fee simple interest in real property securing a Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.1(a) pertaining to a
particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of Mortgage Loans
included in the Trust on such date. The Mortgage Loan Schedule as of the Cut-Off
Date is the schedule set forth herein as Exhibit D. The Mortgage Loan Schedule
shall set forth as to each Mortgage Loan (i) the Cut-Off Date Loan Balance, (ii)
the name of the Mortgagor, (iii) the account number, (iv)
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the State and Zip Code in which the Mortgaged Property is located, (v) the Loan
Rate, (vi) the stated maturity date of the Mortgage Note, (vii) the
Loan-to-Value Ratio, (viii) the Original Loan Balance, (ix) the Master Servicing
Fee Rate; (x) the Subservicing Fee Rate; (xi) the Due Date, (xii) the remaining
number of months to maturity as of the Cut-Off Date, (xiii) the first date on
which a Monthly Payment is due, (xiv) whether the Mortgaged Property is owner
occupied or non-owner occupied, (xv) whether the Mortgaged Property is a single
family residence, two-to-four family residence, a condominium or other property,
and (xvi) the applicable Pool and any other information set forth on Exhibit D.
The Mortgage Loan Schedule will be amended from time to time to reflect the
substitution of one or more Eligible Substitute Mortgage Loans for a Defective
Mortgage Loan from time to time hereunder.
Mortgage Loans: The mortgage loans that are transferred and assigned to the
Trustee pursuant to Sections 2.1 (including, without limitation, all Eligible
Substitute Mortgage Loans that are at any time substituted for any Defective
Mortgage Loans), together with the Related Documents, exclusive of Mortgage
Loans that are transferred to the Seller from time to time pursuant to Section
2.2 or 2.6, as from time to time are held as a part of the Trust, such mortgage
loans originally so held being identified in the Mortgage Loan Schedule
delivered at the Closing Date.
Mortgage Note: With respect to a Mortgage Loan, the note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
Mortgaged Property: The underlying property, including real property and
improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Mortgage Note.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses.
Net Mortgage Interest Rate: With respect to each Mortgage Loan, a rate equal to
(i) the Loan Rate on such Mortgage Loan minus (ii) the sum of (a) the applicable
Master Servicing Fee Rate and (b) the applicable Subservicing Fee Rate, (iii)
the Trustee Fee Rate and (iv) the Trust Administration Fee Rate.
Non-PO Fraction: With respect to any Pool 1 Mortgage Loan, the lesser of (i)
1.00 and (ii) the quotient obtained by dividing the Net Mortgage Interest Rate
for such Pool 1 Mortgage Loan by 6.75%.
Nondisqualification Opinion: An Opinion of Counsel that a contemplated action
will not cause the REMIC I to fail to qualify as a REMIC at any time that the
Certificates are outstanding or cause a "prohibited transaction" or "prohibited
contribution" tax (as defined in the REMIC Provisions) to be imposed on such
REMIC.
Nonrecoverable Advances: With respect to any Mortgage Loan, (i) any Monthly
Advance or Servicing Advance previously made and not reimbursed pursuant to
Section 3.3(ii), or (ii) a
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Monthly Advance or Servicing Advance proposed to be made in respect of a
Mortgage Loan which in the good faith business judgment of the Master Servicer,
as evidenced by an Officer's Certificate delivered to the Seller and the Trustee
no later than the Business Day following such determination, (A) would not be
ultimately recoverable based on the Master Servicer's determination of whether
the amount of such advance together with all previous advances exceeds the
recoverable value of the Mortgaged Property (without regard to the outstanding
principal balance of the related Mortgage Loan) net of any senior liens and
estimated foreclosure costs and estimated REO operation, management and
maintenance costs or (B) would not be ultimately reimbursed pursuant to Section
3.3(ii).
Notice of Default: As defined in Section 8.1.
Officer's Certificate: A certificate signed by the President, a Senior Vice
President, a Vice President, Assistant Vice President, the Treasurer, Assistant
Treasurer, Controller or Assistant Controller of the Depositor, the Seller or
the Master Servicer, as the case may be.
Opinion of Counsel: A written opinion of counsel acceptable to the Trustee, who
may be in-house counsel for the Depositor, the Seller or the Master Servicer
(except that any opinion relating to taxation must be an opinion of independent
outside counsel).
Original Aggregate Class 1B Principal Balance: The sum of the Original Class
1B-1 Principal Balance, Original Class 1B-2 Principal Balance, Original Class
1B-3 Principal Balance, Original Class 1B-4 Principal Balance and Original Class
1B-5 Principal Balance, which is equal to $12,358,643.44.
Original Aggregate Class 2B Principal Balance: The sum of the Original Class
2B-1 Principal Balance, Original Class 2B-2 Principal Balance, Original Class
2B-3 Principal Balance, Original Class 2B-4 Principal Balance and Original Class
2B-5 Principal Balance, which is equal to $1,350,650.91.
Original Class 1A Non-PO Principal Balance: The sum of the Original Class 1A
Principal Balances of the Class 1A-1, Class 1A-2, Class 1A-3, Class 1A-4, Class
1A-5, Class 1A-6, Class 1A-7, Class 1A-8, Class 1A-9, Class 1A-10, Class 1A-11,
Class 1A-12 and Class A-R Certificates, which is equal to $393,029,100.
Original Class 1A Percentage: The Class 1A Percentage as of the Cut-Off Date,
which is equal to 95.49560340%.
Original Class 1A Principal Balance: Any of the original principal balances of
any Class of Class 1A Certificates.
Original Class 1B-1 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the sum of the Original Class 1B-2 Principal
Balance, the Original Class 1B-3 Principal Balance, the Original Class 1B-4
Principal Balance and the Original Class 1B-5 Principal Balance by the sum of
the Original Class 1A Non-PO Principal Balance, the Original
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Class 1M Principal Balance and the Original Class 1B Principal Balance. The
Original Class 1B-1 Fractional Interest is 1.75175133%.
Original Class 1B-1 Percentage: The Class 1B-1 Percentage as of the Cut-Off
Date, which is 1.25106986%.
Original Class 1B-1 Principal Balance: The Class 1B-1 Principal Balance as of
the Cut-Off Date, which is $5,149,000.
Original Class 1B-2 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the sum of the Original Class 1B-3 Principal
Balance, the Original Class 1B-4 Principal Balance and the Original Class 1B-5
Principal Balance by the sum of the Original Class 1A Non-PO Principal Balance,
the Original Class 1M Principal Balance and the Original Class 1B Principal
Balance. The Original Class 1B-2 Fractional Interest is 1.25122620%.
Original Class 1B-2 Percentage: The Class 1B-2 Percentage as of the Cut-Off
Date, which is 0.50052513%.
Original Class 1B-2 Principal Balance: The Class 1B-2 Principal Balance as of
the Cut-Off Date, which is $2,060,000.
Original Class 1B-3 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the sum of the Original Class 1B-4 Principal
Balance and the Original Class 1B-5 Principal Balance by the sum of the Original
Class 1A Non-PO Principal Balance, the Original Class 1M Principal Balance and
the Original Class 1B Principal Balance. The Original Class 1B-3 Fractional
Interest is 0.45062896%.
Original Class 1B-3 Percentage: The Class 1B-3 Percentage as of the Cut-Off
Date, which is 0.80059724%.
Original Class 1B-3 Principal Balance: The Class 1B-3 Principal Balance as of
the Cut-Off Date, which is $3,295,000.
Original Class 1B-4 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the Original Class 1B-5 Principal Balance by the
sum of the Original Class 1A Non-PO Principal Balance, the Original Class 1M
Principal Balance and the Original Class 1B Principal Balance. The Original
Class 1B-4 Fractional Interest is 0.25041891%.
Original Class 1B-4 Percentage: The Class 1B-4 Percentage as of the Cut-Off
Date, which is 0.20021005%.
Original Class 1B-4 Principal Balance: The Class 1B-4 Principal Balance as of
the Cut-Off Date, which is $824,000.
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Original Class 1B-5 Percentage: The Class 1B-5 Percentage as of the Cut-Off
Date, which is 0.25041891.
Original Class 1B-5 Principal Balance: The Class 1B-5 Principal Balance as of
the Cut-Off Date, which is $1,030,643.44.
Original Class 1M Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the Original Class 1B Principal Balance by the
sum of the Original Class 1A Non-PO Principal Balance, the Original Class 1M
Principal Balance and the Original Class 1B Principal Balance. The Original
Class 1M Fractional Interest is 3.00282120%.
Original Class 1M Percentage: The Class 1M Percentage as of the Cut-Off Date,
which is 1.50157540%.
Original Class 1M Principal Balance: The Class 1M Principal Balance as of the
Cut-Off Date, which is $6,180,000.
Original Class 2A Percentage: The Class 2A Percentage as of the Cut-Off Date,
which is 96.75%.
Original Class 2A Principal Balance: The Class 2A Principal Balance as of the
Cut-Off Date, which is $64,361,000.
Original Class 2B-1 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the sum of the Original Class 2B-2 Principal
Balance, the Original Class 2B-3 Principal Balance, the Original Class 2B-4
Principal Balance and the Original Class 2B-5 Principal Balance by the sum of
the Original Class 2A Principal Balance, the Original Class 2M Principal Balance
and the Original Class 2B Principal Balance. The Original Class 2B-1 Fractional
Interest is 1.50119679%.
Original Class 2B-1 Percentage: The Class 2B-1 Percentage as of the Cut-Off
Date, which is 0.49907062%.
Original Class 2B-1 Principal Balance: The Class 2B-1 Principal Balance as of
the Cut-Off Date, which is $332,000.
Original Class 2B-2 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the sum of the Original Class 2B-3 Principal
Balance, the Original Class 2B-4 Principal Balance and the Original Class 2B-5
Principal Balance by the sum of the Original Class 2A Principal Balance, the
Original Class 2M Principal Balance and the Original Class 2B Principal Balance.
The Original Class 2B-2 Fractional Interest is 0.65037157%.
Original Class 2B-2 Percentage: The Class 2B-2 Percentage as of the Cut-Off
Date, which is 0.85082522%.
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Original Class 2B-2 Principal Balance: The Class 2B-2 Principal Balance as of
the Cut-Off Date, which is $566,000.
Original Class 2B-3 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the sum of the Original Class 2B-4 Principal
Balance and the Original Class 2B-5 Principal Balance by the sum of the Original
Class 2A Principal Balance, the Original Class 2M Principal Balance and the
Original Class 2B Principal Balance. The Original Class 2B-3 Fractional Interest
is 0.40083625%.
Original Class 2B-3 Percentage: The Class 2B-3 Percentage as of the Cut-Off
Date, which is 0.24953531%.
Original Class 2B-3 Principal Balance: The Class 2B-3 Principal Balance as of
the Cut-Off Date, which is $166,000.
Original Class 2B-4 Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the Original Class 2B-5 Principal Balance by the
sum of the Original Class 2A Principal Balance, the Original Class 2M Principal
Balance and the Original Class 2B Principal Balance. The Original Class 2B-4
Fractional Interest is 0.20090736%.
Original Class 2B-4 Percentage: The Class 2B-4 Percentage as of the Cut-Off
Date, which is 0.19992889%.
Original Class 2B-4 Principal Balance: The Class 2B-4 Principal Balance as of
the Cut-Off Date, which is $133,000.
Original Class 2B-5 Percentage: The Class 2B-5 Percentage as of the Cut-Off
Date, which is 0.20090736%.
Original Class 2B-5 Principal Balance: The Class 2B-5 Principal Balance as of
the Cut-Off Date, which is $133,650.91.
Original Class 2M Fractional Interest: As to the first Distribution Date, the
percentage obtained by dividing the Original Class 2B Principal Balance by the
sum of the Original Class 2A Principal Balance, the Original Class 2M Principal
Balance and the Original Class 2B Principal Balance. The Original Class 2M
Fractional Interest is 2.00026741%.
Original Class 2M Percentage: The Class 2M Percentage as of the Cut-Off Date,
which is 1.25068301%.
Original Class 2M Principal Balance: The Class 2M Principal Balance as of the
Cut-Off Date, which is $832,000.
Original Class Principal Balance: With respect to any Class, the original
aggregate principal balance of such Class.
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Original Group 1 Subordinate Percentage: The Group 1 Subordinate Percentage as
of the Cut-Off Date, which is 4.5%.
Original Group 1 Subordinate Principal Balance: The sum of the Original Class 1M
Principal Balance and the Original Aggregate Class 1B Principal Balance.
Original Group 2 Subordinate Percentage: The Group 2 Subordinate Percentage as
of the Cut-Off Date, which is 3.25%.
Original Group 2 Subordinate Principal Balance: The sum of the Original Class 2M
Principal Balance and the Original Aggregate Class 2B Principal Balance.
Original Loan Balance: As to any Mortgage Loan, the original principal amount of
such Mortgage Loan outstanding on the date such loan was made.
Owner: As defined in Section 6.4.
Ownership Interest: With respect to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
Payahead: With respect to any Due Date and Mortgage Loan, a Monthly Payment
received by the Master Servicer with the scheduled Monthly Payment for such Due
Date, intended by the related Mortgagor to be applied on a subsequent Due Date.
Paying Agent: Any paying agent appointed pursuant to Section 6.5.
Payoff: Any Mortgagor payment of principal on a Mortgage Loan equal to the
entire outstanding Principal Balance of such Mortgage Loan, if received in
advance of the last scheduled Due Date for such Mortgage Loan and accompanied by
an amount of interest equal to accrued unpaid interest on the Mortgage Loan to
the date of such payment-in-full.
Percentage Interest: With respect to any Certificate (other than a Class 1A-WIO
Certificate or Class A-R Certificate), the undivided percentage interest
obtained by dividing the original principal balance of such Certificate by the
aggregate original principal balance of all Certificates of such Class. With
respect to the Class 1A-WIO Certificate and the Class A-R Certificate, the
percentage interest specified on the face of such Certificate.
Permitted Transferee: Any Person other than (i) the United States, a State or
any political subdivision or possession thereof, or any agency or
instrumentality of any of the foregoing, (ii) a foreign government,
international organization or any agency or instrumentality of either of the
foregoing, (iii) an organization which is exempt from tax imposed by Chapter 1
of the Code (except certain farmers' cooperatives described in Code Section 521)
unless such organization is subject to the tax imposed by Code Section 511, (iv)
a rural electric and telephone cooperative
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described in Code Section 1381(a)(2)(C), (v) a Person that is not a citizen or
resident of the United States, a corporation, partnership, or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate whose income is subject to United States
federal income tax regardless of its source, 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 United States persons have the authority to control
all substantial decisions of the trust, other than any such Person that holds
its Residual Certificate in connection with the conduct of a trade or business
within the United States, and (vi) any Person so designated in an Officer's
Certificate delivered to the Trustee by the Master Servicer based on a
Nondisqualification Opinion delivered to the Master Servicer and the Trustee to
the effect that any Transfer to such Person may cause the REMIC I or any Holder
of a Class A-R Certificate to incur tax liability that would not be imposed
other than on account of such Transfer. The terms "United States", "State" and
"international organization" shall have the meanings set forth in Code Section
7701 or successor provisions. A corporation will not be treated as an
instrumentality of the United States or of any State or political subdivision
thereof if all of its activities are subject to tax, and, with the exception of
the FHMLC, a majority of its board of directors is not selected by such
governmental unit.
Person: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
PO Fraction: With respect to any Discount Pool 1 Mortgage Loan, the difference
between 1.0 and the Non-PO Fraction for such Mortgage Loan; with respect to any
other Pool 1 Mortgage Loan, zero.
Pool: The Pool 1 Mortgage Loans or the Pool 2 Mortgage Loans, as applicable.
Pool 1 Adjusted Pool Amount: With respect to any Distribution Date, the Cut-Off
Date Aggregate Pool 1 Loan Balance minus the sum of (i) all amounts in respect
of principal received in respect of the Pool 1 Mortgage Loans (including,
without limitation, amounts received as Monthly Advances, principal payments and
Liquidation Proceeds in respect of principal) and distributed to Holders of the
Group 1 Certificates on such Distribution Date and all prior Distribution Dates
and (ii) the principal portion of all Realized Losses (other than Debt Service
Reductions) incurred on the Pool 1 Mortgage Loans from the Cut-Off Date through
the end of the month preceding such Distribution Date.
Pool 1 Adjusted Pool Amount (PO Portion): With respect to any Distribution Date,
the sum of the following amounts, calculated as follows, with respect to all
Pool 1 Mortgage Loans: the product of (i) the PO Fraction for each such Mortgage
Loan and (ii) the remainder of (A) the Cut-Off Date Principal Balance of such
Mortgage Loan minus (B) the sum of (x) all amounts in respect of principal
received in respect of such Mortgage Loan (including, without limitation,
amounts received as Monthly Advances, principal payments and Liquidation
Proceeds in respect of principal) and distributed to Holders of the Group 1
Certificates on such Distribution Date and all prior Distribution Dates and (y)
the principal portion of any Realized Loss (other than a Debt
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Service Reduction) incurred on such Pool 1 Mortgage Loan from the Cut-Off Date
through the end of the month preceding such Distribution Date.
Pool 1 Aggregate Current Bankruptcy Losses: With respect to any Distribution
Date, the sum of all Bankruptcy Losses incurred on any of the Pool 1 Mortgage
Loans in the month preceding the month of such Distribution Date.
Pool 1 Aggregate Current Fraud Losses: With respect to any Distribution Date,
the sum of all Fraud Losses incurred on any of the Pool 1 Mortgage Loans in the
month preceding the month of such Distribution Date.
Pool 1 Aggregate Current Special Hazard Losses: With respect to any Distribution
Date, the sum of all Special Hazard Losses incurred on any of the Pool 1
Mortgage Loans in the month preceding the month of such Distribution Date.
Pool 1 Available Servicing Compensation: As to any Distribution Date, the
aggregate Pool 1 Subservicing Fee for such Distribution Date.
Pool 1 Bankruptcy Loss Amount: As of any Distribution Date prior to the first
anniversary of the Cut-Off Date, the Pool 1 Bankruptcy Loss Amount will equal
$150,000 minus the aggregate amount of Bankruptcy Losses allocated solely to the
Class 1B Certificates or, following the reduction of the Class 1B Principal
Balance to zero, solely to the Class 1M Certificates in accordance with Section
4.2(a) since the Cut-Off Date. As of any Distribution Date on or after the first
anniversary of the Cut-Off Date, an amount equal to (1) the lesser of (a) the
Pool 1 Bankruptcy Loss Amount calculated as of the close of business on the
Business Day immediately preceding the most recent anniversary of the Cut-Off
Date coinciding with or preceding such Distribution Date (the "Relevant
Anniversary") and (b) such lesser amount which, as determined on the Relevant
Anniversary will not cause any rated Certificates to be placed on credit review
status (other than for possible upgrading) by either Group 1 Rating Agency minus
(2) the aggregate amount of Bankruptcy Losses allocated solely to the Class 1B
Certificates or, following the reduction of the Class 1B Principal Balance to
zero, solely to the Class 1M Certificates in accordance with Section 4.2(a)
since the Relevant Anniversary. On and after the Group 1 Cross-Over Date the
Pool 1 Bankruptcy Loss Amount shall be zero.
Pool 1 Distribution Amount: As of any Distribution Date, the funds eligible for
distribution to the Holders of the Group 1 Certificates on such Distribution
Date, which shall be the sum of (i) all previously undistributed payments or
other receipts on account of principal and interest on or in respect of the Pool
1 Mortgage Loans (including, without limitation, the proceeds of any repurchase
of a Pool 1 Mortgage Loan by the Seller and any Substitution Adjustment Amount)
received by the Master Servicer with respect to the applicable Remittance Date
in the month of such Distribution Date and any Unscheduled Principal Receipts
received by the Master Servicer on or prior to the Business Day preceding such
Distribution Date, (ii) all Monthly Advances made by the Master Servicer and
(iii) all other amounts required to be placed in the Collection Account by the
Master Servicer or the Trustee on or prior to the Distribution Date, but
excluding the following:
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(a) all scheduled payments of principal and interest collected but due
on a date subsequent to the related Due Date;
(b) all Curtailments received after the Collection Period immediately
preceding such Determination Date (together with any interest payment received
with such prepayments to the extent that it represents the payment of interest
accrued on such Mortgage Loans for the period subsequent to the previous
calendar month);
(c) all Payoffs received after the Collection Period immediately
preceding such Determination Date (together with any interest payment received
with such a Payoff to the extent that it represents the payment of interest
accrued on the related Pool 1 Mortgage Loan for the period subsequent to the
previous calendar month);
(d) Liquidation Proceeds and Insurance Proceeds received on such Pool 1
Mortgage Loans after the previous calendar month;
(e) all amounts in the Collection Account which are due and reimbursable
to the Master Servicer pursuant to the terms of this Agreement;
(f) the Pool 1 Master Servicing Fees, the Pool 1 Subservicing Fees, the
Trustee Fee and the Trust Administration Fee for each such Mortgage Loan; and
(g) Excess Liquidation Proceeds.
Pool 1 Excess Bankruptcy Loss: With respect to any Distribution Date and any
Pool 1 Mortgage Loan as to which a Bankruptcy Loss is realized in the month
preceding the month of such Distribution Date, (i) if the Pool 1 Aggregate
Current Bankruptcy Losses with respect to such Distribution Date exceed the
then-applicable Pool 1 Bankruptcy Loss Amount, then the portion of such
Bankruptcy Loss represented by the ratio of (a) the excess of the Pool 1
Aggregate Current Bankruptcy Losses over the then-applicable Pool 1 Bankruptcy
Loss Amount, divided by (b) the Pool 1 Aggregate Current Bankruptcy Losses or
(ii) if the Pool 1 Aggregate Current Bankruptcy Losses with respect to such
Distribution Date are less than or equal to the then-applicable Pool 1
Bankruptcy Loss Amount, then zero. In addition, any Bankruptcy Loss occurring
with respect to a Pool 1 Mortgage Loan on or after the Group 1 Cross-Over Date
will be a Pool 1 Excess Bankruptcy Loss.
Pool 1 Excess Fraud Loss: With respect to any Distribution Date and any Pool 1
Mortgage Loan as to which a Fraud Loss is realized in the month preceding the
month of such Distribution Date, (i) if the Pool 1 Aggregate Current Fraud
Losses with respect to such Distribution Date exceed the then-applicable Pool 1
Fraud Loss Amount, then the portion of such Fraud Loss represented by the ratio
of (a) the excess of the Pool 1 Aggregate Current Fraud Losses over the
then-applicable Pool 1 Fraud Loss Amount, divided by (b) the Pool 1 Aggregate
Current Fraud Losses, or (ii) if the Pool 1 Aggregate Current Fraud Losses with
respect to such Distribution Date are less than or equal to the then-applicable
Pool 1 Fraud Loss Amount, then zero. In
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addition, any Fraud Loss occurring with respect to a Pool 1 Mortgage Loan on or
after the Group 1 Cross-Over Date will be a Pool 1 Excess Fraud Loss.
Pool 1 Excess Special Hazard Loss: With respect to any Distribution Date and any
Pool 1 Mortgage Loan as to which a Special Hazard Loss is realized in the month
preceding the month of such Distribution Date, (i) if the Pool 1 Aggregate
Current Special Hazard Losses with respect to such Distribution Date exceed the
then-applicable Pool 1 Special Hazard Loss Amount, then the portion of such
Special Hazard Loss represented by the ratio of (a) the excess of the Pool 1
Aggregate Current Special Hazard Losses over the then-applicable Pool 1 Special
Hazard Loss Amount, divided by (b) the Pool 1 Aggregate Current Special Hazard
Losses, or (ii) if the Pool 1 Aggregate Current Special Hazard Losses with
respect to such Distribution Date are less than or equal to the then-applicable
Pool 1 Special Hazard Loss Amount, then zero. In addition, any Special Hazard
Loss occurring with respect to a Pool 1 Mortgage Loan on or after the Group 1
Cross-Over Date will be a Pool 1 Excess Special Hazard Loss.
Pool 1 Fraud Loss Amount: As of any Distribution Date after the Cut-Off Date an
amount equal to: (X) prior to the first anniversary of the Cut-Off Date an
amount equal to $8,238,805 minus the aggregate amount of Fraud Losses allocated
to the Group 1 Certificates in accordance with Section 4.2(a) since the Cut-Off
Date, and (Y) from the first through fifth anniversary of the Cut-Off Date, an
amount equal to (1) the lesser of (a) the Fraud Loss Amount as of the most
recent anniversary of the Cut-Off Date and (b) 1.00% of the aggregate
outstanding principal balance of all of the Pool 1 Mortgage Loans as of the most
recent anniversary of the Cut-Off Date minus (2) the Fraud Losses allocated to
the Group 1 Certificates in accordance with Section 4.2(a) since the most recent
anniversary of the Cut-Off Date. On and after the Group 1 Cross-Over Date or
after the fifth anniversary of the Cut-Off Date the Pool 1 Fraud Loss Amount
shall be zero.
Pool 1 Master Servicing Fee: With respect to any Collection Period, the product
of (i) the Pool 1 Master Servicing Fee Rate divided by 12 and (ii) the Aggregate
Pool 1 Loan Balance as of the first day of such Collection Period.
Pool 1 Master Servicing Fee Rate: 0.02% per annum.
Pool 1 Mortgage Loan: Each Mortgage Loan designated on the Mortgage Loan
Schedule as a Pool 1 Mortgage Loan.
Pool 1 Mortgage Loans: Those Mortgage Loans listed on the Mortgage Loan Schedule
as being in Pool 1.
Pool 1 Non-Supported Interest Shortfall: With respect to any Distribution Date,
the excess, if any, of the aggregate Prepayment Interest Shortfall on the Pool 1
Mortgage Loans over the aggregate Compensating Interest with respect to such
Distribution Date. With respect to each Distribution Date occurring on or after
the Group 1 Cross-Over Date, the Pool 1 Non-Supported Interest Shortfall
determined pursuant to the preceding sentence will be increased by the amount of
any Group 1 Cross-Over Date Interest Shortfall for such Distribution Date. Any
Pool 1 Non-Supported Interest Shortfall will be allocated to (a) the Class 1A
Certificates according to the
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percentage obtained by dividing the Class 1A Non-PO Principal Balance by the sum
of the Class 1A Non-PO Principal Balance, the Class 1M Principal Balance and the
Class 1B Principal Balance, (b) the Class 1M Certificates according to the
percentage obtained by dividing the Class 1M Principal Balance by the sum of the
Class 1A Non-PO Principal Balance, the Class 1M Principal Balance and the
Aggregate Class 1B Principal Balance and (c) the Class 1B Certificates according
to the percentage obtained by dividing the Aggregate Class 1B Principal Balance
by the sum of the Class 1A Non-PO Principal Balance, the Class 1M Principal
Balance and the Aggregate Class 1B Principal Balance.
Pool 1 Pool Balance (Non-PO Portion): As of any Distribution Date, the sum of
the amounts for each Pool 1 Mortgage Loan that is an outstanding Mortgage Loan
of the product of (i) the Non-PO Fraction for such Mortgage Loan and (ii) the
Scheduled Principal Balance of such Mortgage Loan.
Pool 1 Pool Balance (PO Portion): As of any Distribution Date, the sum of the
amounts for each outstanding Pool 1 Mortgage Loan of the product of (i) the PO
Fraction for such Mortgage Loan and (ii) the Scheduled Principal Balance of such
Mortgage Loan.
Pool 1 Scheduled Principal Amount: The sum for each outstanding Pool 1 Mortgage
Loan (including each defaulted Mortgage Loan, other than a Liquidated Mortgage
Loan, with respect to which the related Mortgaged Property has been acquired by
the Trust) of the product of (A) the Non-PO Fraction for such Mortgage Loan and
(B) the sum of the amounts described in clauses y(i) and y(iv) of the definition
of Class 1A Non-PO Optimal Principal Amount, but without that amount being
multiplied by the Class 1A Percentage.
Pool 1 Scheduled Principal Balance: As to any Distribution Date, the aggregate
Scheduled Principal Balances of all Pool 1 Mortgage Loans that were outstanding
on the Due Date in the month preceding the month of such Distribution Date.
Pool 1 Senior Optimal Amount: As to any Distribution Date, the sum for such
Distribution Date of (a) the Class 1A Non-PO Optimal Amount and (b) the Class
1A-PO Optimal Principal Amount.
Pool 1 Special Hazard Loss Amount: As of any Distribution Date, the lesser of
(a) an amount equal to $4,119,403 minus the sum of the aggregate amount of
Special Hazard Losses incurred since the Closing Date, and (b) the greatest of
(i) 1% of the aggregate Loan Balances of the Pool 1 Mortgage Loans, (ii) twice
the Loan Balance of the largest Pool 1 Mortgage Loan and (iii) the aggregate
Loan Balance of the Pool 1 Mortgage Loans secured by Mortgaged Properties
located in the single California postal zip code having the highest aggregate
Loan Balances of any such zip code area. On and or after the Group 1 Cross-Over
Date, the Special Hazard Loss Amount shall be zero.
Pool 1 Special Hazard Percentage: As of each anniversary of the Cut-Off Date,
the greater of (i) 1.00% and (ii) the largest percentage obtained by dividing
the aggregate outstanding principal balance (as of the immediately preceding
Distribution Date) of the Mortgage Loans secured by
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Mortgaged Properties located in a single, five-digit zip code area in the State
of California by the outstanding principal balance of all the Mortgage Loans as
of the immediately preceding Distribution Date.
Pool 1 Subservicing Fee: With respect to any Collection Period, the product of
(i) the Pool 1 Subservicing Fee Rate divided by 12 and (ii) the Aggregate Pool 1
Loan Balance as of the first day of such Collection Period.
Pool 1 Subservicing Fee Rate: 0.25% per annum.
Pool 1 Unpaid Interest Shortfalls: Each of the Class 1A Unpaid Interest
Shortfalls, the Class 1M Unpaid Interest Shortfall, the Class 1B-1 Unpaid
Interest Shortfall, the Class 1B-2 Unpaid Interest Shortfall, the Class 1B-3
Unpaid Interest Shortfall, the Class 1B-4 Unpaid Interest Shortfall and the
Class 1B-5 Unpaid Interest Shortfall.
Pool 1 Weighted Average Net Mortgage Interest Rate: As to any Distribution Date,
a rate per annum equal to the average, expressed as a percentage of the Net
Mortgage Interest Rates of all outstanding Pool 1 Mortgage Loans as of the Due
Date in the month preceding the month of such Distribution Date, weighted on the
basis of the respective Scheduled Principal Balances of such Mortgage Loans.
Pool 2 Adjusted Pool Amount: With respect to any Distribution Date, the Cut-Off
Date Aggregate Pool 2 Loan Balance minus the sum of (i) all amounts in respect
of principal received in respect of the Pool 2 Mortgage Loans (including,
without limitation, amounts received as Monthly Advances, principal payments and
Liquidation Proceeds in respect of principal) and distributed to Holders of the
Group 2 Certificates on such Distribution Date and all prior Distribution Dates
and (ii) the principal portion of all Realized Losses (other than Debt Service
Reductions) incurred on the Pool 2 Mortgage Loans from the Cut-Off Date through
the end of the month preceding such Distribution Date.
Pool 2 Aggregate Current Bankruptcy Losses: With respect to any Distribution
Date, the sum of all Bankruptcy Losses incurred on any of the Pool 2 Mortgage
Loans in the month preceding the month of such Distribution Date.
Pool 2 Aggregate Current Fraud Losses: With respect to any Distribution Date,
the sum of all Fraud Losses incurred on any of the Pool 2 Mortgage Loans in the
month preceding the month of such Distribution Date.
Pool 2 Aggregate Current Special Hazard Losses: With respect to any Distribution
Date, the sum of all Special Hazard Losses incurred on any of the Pool 2
Mortgage Loans in the month preceding the month of such Distribution Date.
Pool 2 Available Servicing Compensation: As to any Distribution Date, the
aggregate Pool 2 Subservicing Fee for such Distribution Date.
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Pool 2 Bankruptcy Loss Amount: As of any Distribution Date prior to the first
anniversary of the Cut-Off Date, the Pool 2 Bankruptcy Loss Amount will equal
$100,000 minus the aggregate amount of Bankruptcy Losses allocated solely to the
Class 2B Certificates or, following the reduction of the Class 2B Principal
Balance to zero, solely to the Class 2M Certificates in accordance with Section
4.4(a) since the Cut-Off Date. As of any Distribution Date on or after the first
anniversary of the Cut-Off Date, an amount equal to (1) the lesser of (a) the
Pool 2 Bankruptcy Loss Amount calculated as of the close of business on the
Business Day immediately preceding the most recent anniversary of the Cut-Off
Date coinciding with or preceding such Distribution Date (the "Relevant
Anniversary") and (b) such lesser amount which, as determined on the Relevant
Anniversary will not cause any rated Certificates to be placed on credit review
status (other than for possible upgrading) by either Group 2 Rating Agency minus
(2) the aggregate amount of Bankruptcy Losses allocated solely to the Class 2B
Certificates or, following the reduction of the Class 2B Principal Balance to
zero, solely to the Class 2M Certificates in accordance with Section 4.4(a)
since the Relevant Anniversary. On and after the Group 2 Cross-Over Date the
Pool 2 Bankruptcy Loss Amount shall be zero.
Pool 2 Distribution Amount: As of any Distribution Date, the funds eligible for
distribution to the Holders of the Group 2 Certificates on such Distribution
Date, which shall be the sum of (i) all previously undistributed payments or
other receipts on account of principal and interest on or in respect of the Pool
2 Mortgage Loans (including, without limitation, the proceeds of any repurchase
of a Pool 2 Mortgage Loan by the Seller and any Substitution Adjustment Amount)
received by the Master Servicer with respect to the applicable Remittance Date
in the month of such Distribution Date and any Unscheduled Principal Receipts
received by the Master Servicer on or prior to the Business Day preceding such
Distribution Date, (ii) all Monthly Advances made by the Master Servicer and
(iii) all other amounts required to be placed in the Collection Account by the
Master Servicer or the Trustee on or prior to the Distribution Date, but
excluding the following:
(a) all scheduled payments of principal and interest collected but due
on a date subsequent to the related Due Date;
(b) all Curtailments received after the Collection Period immediately
preceding such Determination Date (together with any interest payment received
with such prepayments to the extent that it represents the payment of interest
accrued on such Mortgage Loans for the period subsequent to the previous
calendar month);
(c) all Payoffs received after the Collection Period immediately
preceding such Determination Date (together with any interest payment received
with such a Payoff to the extent that it represents the payment of interest
accrued on the related Pool 2 Mortgage Loan for the period subsequent to the
previous calendar month);
(d) Liquidation Proceeds and Insurance Proceeds received on such Pool 2
Mortgage Loans after the previous calendar month;
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(e) all amounts in the Collection Account which are due and reimbursable
to the Master Servicer pursuant to the terms of this Agreement;
(f) the Pool 2 Master Servicing Fees, the Pool 2 Subservicing Fees, the
Trustee Fee and the Trust Administration Fee for each such Mortgage Loan; and
(g) Excess Liquidation Proceeds.
Pool 2 Excess Bankruptcy Loss: With respect to any Distribution Date and any
Pool 2 Mortgage Loan as to which a Bankruptcy Loss is realized in the month
preceding the month of such Distribution Date, (i) if the Pool 2 Aggregate
Current Bankruptcy Losses with respect to such Distribution Date exceed the
then-applicable Pool 2 Bankruptcy Loss Amount, then the portion of such
Bankruptcy Loss represented by the ratio of (a) the excess of the Pool 2
Aggregate Current Bankruptcy Losses over the then-applicable Pool 2 Bankruptcy
Loss Amount, divided by (b) the Pool 2 Aggregate Current Bankruptcy Losses or
(ii) if the Pool 2 Aggregate Current Bankruptcy Losses with respect to such
Distribution Date are less than or equal to the then-applicable Pool 2
Bankruptcy Loss Amount, then zero. In addition, any Bankruptcy Loss occurring
with respect to a Pool 2 Mortgage Loan on or after the Group 2 Cross-Over Date
will be a Pool 2 Excess Bankruptcy Loss.
Pool 2 Excess Fraud Loss: With respect to any Distribution Date and any Pool 2
Mortgage Loan as to which a Fraud Loss is realized in the month preceding the
month of such Distribution Date, (i) if the Pool 2 Aggregate Current Fraud
Losses with respect to such Distribution Date exceed the then-applicable Pool 2
Fraud Loss Amount, then the portion of such Fraud Loss represented by the ratio
of (a) the excess of the Pool 2 Aggregate Current Fraud Losses over the
then-applicable Pool 2 Fraud Loss Amount, divided by (b) the Pool 2 Aggregate
Current Fraud Losses, or (ii) if the Pool 2 Aggregate Current Fraud Losses with
respect to such Distribution Date are less than or equal to the then-applicable
Pool 2 Fraud Loss Amount, then zero. In addition, any Fraud Loss occurring with
respect to a Pool 2 Mortgage Loan on or after the Group 2 Cross-Over Date will
be a Pool 2 Excess Fraud Loss.
Pool 2 Excess Special Hazard Loss: With respect to any Distribution Date and any
Pool 2 Mortgage Loan as to which a Special Hazard Loss is realized in the month
preceding the month of such Distribution Date, (i) if the Pool 2 Aggregate
Current Special Hazard Losses with respect to such Distribution Date exceed the
then-applicable Pool 2 Special Hazard Loss Amount, then the portion of such
Special Hazard Loss represented by the ratio of (a) the excess of the Pool 2
Aggregate Current Special Hazard Losses over the then-applicable Pool 2 Special
Hazard Loss Amount, divided by (b) the Pool 2 Aggregate Current Special Hazard
Losses, or (ii) if the Pool 2 Aggregate Current Special Hazard Losses with
respect to such Distribution Date are less than or equal to the then-applicable
Pool 2 Special Hazard Loss Amount, then zero. In addition, any Special Hazard
Loss occurring with respect to a Pool 2 Mortgage Loan on or after the Group 2
Cross-Over Date will be a Pool 2 Excess Special Hazard Loss.
Pool 2 Fraud Loss Amount: As of any Distribution Date after the Cut-Off Date an
amount equal to: (X) prior to the first anniversary of the Cut-Off Date an
amount equal to $665,237 minus the
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aggregate amount of Fraud Losses allocated solely to the Class 2B Certificates
in accordance with Section 4.4(a) since the Cut-Off Date, and (Y) from the first
through the third and from the third through the fifth anniversary of the
Cut-Off Date, an amount equal to (1) the lesser of (a) the Fraud Loss Amount as
of the most recent anniversary of the Cut-Off Date and (b) 1.00% through the
third anniversary, and 0.50% from the third to the fifth of the aggregate
outstanding principal balance of all of the Pool 2 Mortgage Loans as of the most
recent anniversary of the Cut-Off Date minus (2) the Fraud Losses allocated
solely to the Class 2B Certificates in accordance with Section 4.4(a) since the
most recent anniversary of the Cut-Off Date. On and after the Group 2 Cross-Over
Date or after the fifth anniversary of the Cut-Off Date the Pool 2 Fraud Loss
Amount shall be zero.
Pool 2 Master Servicing Fee: With respect to any Collection Period, the product
of (i) the Pool 2 Master Servicing Fee Rate divided by 12 and (ii) the Aggregate
Pool 2 Loan Balance as of the first day of such Collection Period.
Pool 2 Master Servicing Fee Rate: 0.04% per annum.
Pool 2 Mortgage Loan: The Mortgage Loans designated on the Mortgage Loan
Schedule as Pool 2 Mortgage Loans.
Pool 2 Non-Supported Interest Shortfall: With respect to any Distribution Date,
the excess, if any, of the aggregate Prepayment Interest Shortfall on the Pool 2
Mortgage Loans over the aggregate Compensating Interest with respect to such
Distribution Date. With respect to each Distribution Date occurring on or after
the Group 2 Cross-Over Date, the Pool 2 Non-Supported Interest Shortfall
determined pursuant to the preceding sentence will be increased by the amount of
any Group 2 Cross-Over Date Interest Shortfall for such Distribution Date. Any
Pool 2 Non-Supported Interest Shortfall will be allocated to (a) the Class 2A
Certificates according to the percentage obtained by dividing the Class 2A
Principal Balance by the sum of the Class 2A Principal Balance, the Class 2M
Principal Balance and the Class 2B Principal Balance, (b) the Class 2M
Certificates according to the percentage obtained by dividing the Class 2M
Principal Balance by the sum of the Class 2A Principal Balance, the Class 2M
Principal Balance and the Class 2B Principal Balance and (c) the Class 2B
Certificates according to the percentage obtained by dividing the Aggregate
Class 2B Principal Balance by the sum of the Class 2A Principal Balance, the
Class 2M Principal Balance and the Aggregate Class 2B Principal Balance.
Pool 2 Pool Balance: As of any Distribution Date, the sum of the Scheduled
Principal Balance of each Pool 2 Mortgage Loan.
Pool 2 Scheduled Principal Amount: The sum for each outstanding Pool 2 Mortgage
Loan (including each defaulted Mortgage Loan, other than a Liquidated Mortgage
Loan, with respect to which the related Mortgaged Property has been acquired by
the Trust) of the sum of the amounts described in clauses (i) and (iv) of the
definition of Class 2A Optimal Principal Amount, but without that amount being
multiplied by the Class 2A Percentage.
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Pool 2 Scheduled Principal Balance: As to any Distribution Date, the aggregate
Scheduled Principal Balances of all Pool 2 Mortgage Loans that were outstanding
on the Due Date in the month preceding the month of such Distribution Date.
Pool 2 Special Hazard Loss Amount: As of any Distribution Date, an amount equal
to $1,421,438 minus the sum of (i) the aggregate amount of Special Hazard Losses
allocated solely to the Class 2M or Class 2B Certificates in accordance with
Section 4.4(a) and (ii) the Special Hazard Adjustment Amount (as defined below)
as most recently calculated. For each anniversary of the Cut-Off Date, the
Special Hazard Adjustment Amount shall be calculated and shall be equal to the
amount, if any, by which the amount calculated in accordance with the preceding
sentence (without giving effect to the deduction of the Special Hazard
Adjustment Amount for such anniversary) exceeds the greater of (A) the product
of the Pool 2 Special Hazard Percentage for such anniversary multiplied by the
outstanding principal balance of all the Pool 2 Mortgage Loans on the
Distribution Date immediately preceding such anniversary, (B) twice the
outstanding principal balance of the Pool 2 Mortgage Loan in the Trust which has
the largest outstanding principal balance on the Distribution Date immediately
preceding such anniversary and (C) that which is necessary to maintain the
original ratings on the Group 2 Certificates as evidenced by letters to that
effect delivered by the Group 2 Rating Agencies to the Master Servicer and the
Trustee. On and or after the Group 2 Cross-Over Date, the Special Hazard Loss
Amount shall be zero.
Pool 2 Special Hazard Percentage: As of each anniversary of the Cut-Off Date,
1.00%.
Pool 2 Subservicing Fee: With respect to any Collection Period, the product of
(i) the Pool 2 Subservicing Fee Rate divided by 12 and (ii) the Aggregate Pool 2
Loan Balance as of the first day of such Collection Period.
Pool 2 Subservicing Fee Rate: 0.125% per annum.
Pool 2 Unpaid Interest Shortfalls: Each of the Class 2A Unpaid Interest
Shortfalls, the Class 2M Unpaid Interest Shortfall, the Class 2B-1 Unpaid
Interest Shortfall, the Class 2B-2 Unpaid Interest Shortfall, the Class 2B-3
Unpaid Interest Shortfall, the Class 2B-4 Unpaid Interest Shortfall and the
Class 2B-5 Unpaid Interest Shortfall.
Pool 2 Unscheduled Principal Amount: The sum for each outstanding Pool 2
Mortgage Loan (including each defaulted Mortgage Loan, other than a Liquidated
Mortgage Loan, with respect to which the related Mortgaged Property has been
acquired by the Trust) of the sum of the amounts described in clauses (ii) and
(iii) of the definition of Class 2A Optimal Principal Amount, but without that
amount being multiplied by the Class 2A Prepayment Percentage.
Pool 2 Weighted Average Net Mortgage Interest Rate: As to any Distribution Date,
a rate per annum equal to the average, expressed as a percentage of the Net
Mortgage Interest Rates of all outstanding Pool 2 Mortgage Loans as of the Due
Date in the month preceding the month of such Distribution Date, weighted on the
basis of the respective Scheduled Principal Balances of such Mortgage Loans.
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Pool Delinquency Rate: As to any Collection Period and a Pool, the fraction,
expressed as a percentage, the numerator of which is equal to the aggregate Loan
Balance of all Mortgage Loans in such Pool that are 90 or more days delinquent
(including Mortgage Loans in foreclosure and REO) as of the close of business on
the last day of such Collection Period and the denominator of which is equal to
the Aggregate Loan Balance of such Pool as of the close of business on the last
day of such Collection Period.
Premium Pool 1 Mortgage Loan: A Pool 1 Mortgage Loan with a Net Mortgage
Interest Rate of 6.75% or greater.
Prepayment Assumption: A conditional rate of prepayment equal to 0.2% per annum
in the first month of the life of the mortgage loans and an additional
approximate 0.2% (expressed as a percentage per annum) in each month thereafter
until the thirtieth month; beginning in the thirtieth month and in each month
thereafter during the life of the mortgage loans, a conditional prepayment rate
of 6% per annum each month is assumed.
Prepayment In Full: With respect to any Mortgage Loan, a Mortgagor payment
consisting of a Principal Prepayment in the amount of the outstanding principal
balance of such loan and resulting in the full satisfaction of such obligation.
Prepayment Interest Shortfall: On any Distribution Date, the amount of interest,
if any, that would have accrued on any Mortgage Loan which was the subject of a
Prepayment in Full at the Net Mortgage Interest Rate for such Mortgage Loan from
the date of its Prepayment in Full through the last day of the month prior to
the month of such Distribution Date.
Principal Balance: Each of the Class 1A Principal Balances, the Class 1M
Principal Balance, the Class 1B-1 Principal Balance, the Class 1B-2 Principal
Balance, the Class 1B-3 Principal Balance, the Class 1B-4 Principal Balance, the
Class 1B-5 Principal Balance, the Class 2A Principal Balance, the Class 2M
Principal Balance, the Class 2B-1 Principal Balance, the Class 2B-2 Principal
Balance, the Class 2B-3 Principal Balance, the Class 2B-4 Principal Balance and
the Class 2B-5 Principal Balance.
Principal Collections: As to any Distribution Date, all payments by or on behalf
of Mortgagors and any other amounts constituting principal (including without
limitation such portion of any payments of the Purchase Price for any Mortgage
Loan, Insurance Proceeds, Net Liquidation Proceeds and any Monthly Advance as is
allocable to principal of the applicable Mortgage Loan, all Principal
Prepayments received during the related Collection Period, any portion of
Payaheads constituting principal intended by the Mortgagor for application in
the related Collection Period and any Substitution Adjustment Amounts, but
excluding Foreclosure Profits and any portion of any Unreimbursed Advance as is
allocable to principal of the applicable Mortgage Loan and any portion of
Payaheads constituting principal intended by the Mortgagor for application in
any subsequent Collection Period) collected by the Master Servicer under the
Mortgage Loans during the related Collection Period.
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Principal Prepayment: Any payment of principal on a Mortgage Loan which
constitutes a Payoff or a Curtailment.
Prospectus: The base prospectus dated July 24, 1998.
Prospectus Supplement: The prospectus supplement dated July 24, 1998 relating to
the offering of the Class 1A Certificates, the Class 2A Certificates, the Class
1M Certificates, the Class 2M Certificates, the Class 1B-1 Certificates, the
Class 2B-1 Certificates, the Class 1B-2 Certificates and the Class 2B-2
Certificates.
Purchase Agreement: The Mortgage Loan Purchase Agreement, dated as of the
Cut-Off Date, between the Seller, as seller, and the Depositor, as purchaser,
with respect to the Mortgage Loans.
Purchase Obligation: An obligation of the Seller to repurchase Mortgage Loans
under the circumstances and in the manner provided in Section 2.2 or Section
2.6(b).
Purchase Price: With respect to any Mortgage Loan to be repurchased or purchased
pursuant to Sections 2.2 or 2.6 on any date pursuant to any provision of this
Agreement, an amount equal to the sum of (i) the Loan Balance of such Mortgage
Loan as of the last day of the Collection Period ended immediately preceding the
date of repurchase or purchase, (ii) accrued and unpaid interest through such
Collection Period computed at the applicable Loan Rate on the Loan Balance
calculated as set forth in clause (i) of this definition, (iii) any delinquent
interest on such Mortgage Loan as to which no Monthly Advance has been made, and
(iv) all Unreimbursed Advances relating to such Mortgage Loan.
Qualified Mortgage: Has the meaning from time to time given to that term in
Section 860G(a)(3) of the Code.
Rating Agency: Each of the Group 1 Rating Agencies and the Group 2 Rating
Agencies.
Ratings: As of any date of determination, the ratings, if any, of the
Certificates as assigned by the Rating Agency.
Realized Losses: With respect to any Distribution Date and a Pool, (i)
Liquidated Loan Losses (including Special Hazard Losses and Fraud Losses) with
respect to such Pool and (ii) Bankruptcy Losses with respect to such Pool
incurred in the month preceding the month of such Distribution Date.
Record Date: The close of business on the last day of the calendar month
preceding the month in which the related Distribution Date occurs.
Recovery: Any amount received on a Mortgage Loan subsequent to such Mortgage
Loan being determined to be a Liquidated Mortgage Loan.
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Reference Bank: As defined in Section 5.5 hereof.
Related Documents: As defined in Section 2.1(a).
Relevant Anniversary: As defined in the definition of "Bankruptcy Loss Amount."
REMIC: A "real estate mortgage investment conduit" within the meaning of Section
860D of the Code.
REMIC I: The pool of assets consisting of the Trust Assets specified in Section
2.1 but not including the Distribution Account.
REMIC I Regular Interests: The regular interests in REMIC I as described in
Section 2.7 of this Agreement.
REMIC Provisions: The provisions of the federal income tax law relating to real
estate mortgage investment conduits, which appear in Sections 860A through 860G
of Subchapter M of Chapter 1 of the Code, and related provisions, and Treasury
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.
Remittance Report: As defined in Section 5.2(a).
REO: A Mortgaged Property that is acquired by the Trustee in foreclosure or by
deed in lieu of foreclosure.
Reserve Interest Rate: As defined in Section 5.5(c).
Residual Certificateholder: The person in whose name a Residual Certificate is
registered on the Certificate Register.
Residual Certificates: The Class A-R Certificate, which is hereby designated the
sole Class of "residual interests" in REMIC I for purposes of Section 860G(a)(2)
of the Code.
Responsible Officer: When used with respect to any Person, any officer of such
Person with direct responsibility for the administration of this Agreement and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
Rolling Three Month Delinquency Rate: As to any Distribution Date, the average
of the Pool Delinquency Rates for each of the three (or one and two in the case
of the first and second Distribution Dates) immediately preceding Collection
Periods.
S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., provided that at any time it be a Rating Agency.
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SAIF: The Savings Association Insurance Fund, as from time to time constituted,
created under the Financial Institutions Reform, Recovery and Enhancement Act of
1989, or if at any time after the execution of this instrument the Savings
Association Insurance Fund is not existing and performing duties now assigned to
it, the body performing such duties on such date.
Scheduled Principal Balance: As to any Mortgage Loan and Distribution Date, the
principal balance of such Mortgage Loan as of the Due Date in the month
preceding the month of such Distribution Date as specified in the amortization
schedule at the time relating thereto (before any adjustment to such
amortization schedule by reason of any bankruptcy (other than Deficient
Valuations) or similar proceeding or any moratorium or similar waiver or grace
period) after giving effect to (A) Unscheduled Principal Receipts received or
applied by the related Servicer during the related Collection Period for each
applicable type of Unscheduled Principal Receipt related to the Distribution
Date occurring in the month preceding such Distribution Date, (B) Deficient
Valuations incurred prior to such Due Date and (C) the payment of principal due
on such Due Date and irrespective of any delinquency in payment by the related
Mortgagor. Accordingly, the Scheduled Principal Balance of a Mortgage Loan which
becomes a Liquidated Mortgage Loan at any time through the last day of such
related Collection Period shall be zero.
Securities Act: As defined in Section 12.11.
Seller: First Union National Bank, in its capacity as seller under this
Agreement, and its successors in interest.
Servicing Advances: All reasonable and customary unanticipated "out of pocket"
costs and expenses incurred in the performance by the Master Servicer or a
Subservicer of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of the Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
and (iii) compliance with the obligations under Sections 3.5, 3.7 and 3.19, all
of which reasonable and customary unanticipated out-of-pocket costs and expenses
are reimbursable to the extent provided in Sections 3.3(ii) and 3.3(vii) and
3.7.
Servicing Certificate: A certificate completed and executed by a Servicing
Officer on behalf of the Master Servicer in accordance with Section 4.1.
Servicing Compensation: The Master Servicing Fees, Subservicing Fees and other
amounts to which the Master Servicer is entitled pursuant to Section 3.9.
Servicing Officer: Any officer of the Master Servicer or a Subservicer involved
in, or responsible for, the administration and servicing of the Mortgage Loans
whose name and specimen signature appear on a list of servicing officers
furnished to the Trustee by the Master Servicer, as such list may be amended
from time to time.
Single-Family Residence: Has the meaning from time to time given to that term in
Section 25(e)(10) of the Code.
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Special Hazard Loss: (i) A Liquidated Loan Loss suffered by a Mortgaged Property
on account of direct physical loss, exclusive of (a) any loss covered by a
hazard policy or a flood insurance policy maintained in respect of such
Mortgaged Property pursuant to a subservicing agreement and (b) any loss caused
by or resulting from:
(1) normal wear and tear;
(2) infidelity, conversion or other dishonest act on the part of
the Trustee or the Servicer or any of their agents or employees; or
(3) errors in design, faulty workmanship or faulty materials,
unless the collapse of the property or a part thereof ensues; or (ii) any
Liquidated Loan Loss suffered by the Trust arising from or related to the
presence or suspected presence of hazardous wastes or hazardous substances on a
Mortgaged Property unless such loss to a Mortgaged Property is covered by a
hazard policy or a flood insurance policy maintained in respect of such
Mortgaged Property.
Startup Day: As specified in Section 2.9(i).
Subservicer: Any Person with whom the Master Servicer has entered into an
arrangement to subservice the Mortgage Loans.
Subservicing Fee: The Pool 1 Subservicing Fee or the Pool 2 Subservicing Fee, as
applicable.
Substitute Mortgage Loan: As defined in Section 2.2(b).
Substitution Adjustment Amount: As to any Collection Period related to the
Distribution Date with respect to which the Seller substitutes one or more
Eligible Substitute Mortgage Loans pursuant to any provision hereof, the amount,
if any, by which (i) the aggregate Loan Balances at the end of such Collection
Period of all such Eligible Substitute Mortgage Loans being added to the Trust
is less than (ii) the aggregate Loan Balances at the end of such Collection
Period of the related Mortgage Loans being removed from the Trust, such amount
to be deposited into the Collection Account as provided in Section 2.7(a).
Substitution Date: As defined in Section 2.7(b).
Supplemental Mortgage Loan Schedule: As defined in Section 2.7(b).
Tax Matters Person: The Person designated by Section 11.1(a) as the "tax matters
person" of REMIC I as required by and in conformity with Treasury Regulations
Section 1.860F-4(d).
Total Losses: On any Distribution Date, the sum of the aggregate of all
Liquidated Loan Losses through and including such Distribution Date.
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Transfer: Any direct or indirect transfer, sale, pledge, hypothecation or other
form of assignment of any Ownership Interest in a Certificate.
Transfer Affidavit: As defined in Section 6.2(c)(iii)(A).
Transfer Date: With respect to any Mortgage Loan transferred to or retransferred
from the Trust hereunder, the date on which such transfer or retransfer is made
under the terms hereof, which date shall be the Closing Date in the case of all
of the Mortgage Loans originally listed on the Mortgage Loan Schedule.
Trust: The trust created by this Agreement.
Trust Administration Fee: As to any Distribution Date, an amount equal to the
product of the Trust Administration Fee Rate divided by 12 and the Certificate
Principal Balance as of the first day of the preceding Collection Period.
Trust Administration Fee Rate: 0.0085% per annum.
Trust Administrator: First Union National Bank and its successors in interest.
Trust Assets: As specified in Section 2.1.
Trustee: Norwest Bank Minnesota, National Association and its successors in
interest or any successor Trustee appointed in accordance with this Agreement
that has accepted such appointment in accordance with this Agreement.
Trustee Fee: As to any Distribution Date, an amount equal to the product of the
Trustee Fee Rate divided by 12 and the Certificate Principal Balance as of the
first day of the preceding Collection Period.
Trustee Fee Rate: 0.0025% per annum.
United States Person: A citizen or resident of the United States, a corporation,
partnership or other entity created or organized in, or under the laws of, the
United States or any political subdivision thereof, or an estate whose income is
subject to United States federal income tax regardless of its source, 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 United States persons have the
authority to control all substantial decisions of the trust. The term "United
States" shall have the meaning set forth in Section 7701 of the Code.
Unpaid Interest Shortfall: With respect to each Class of Certificates, the
unpaid interest shortfall for each such Class.
Unreimbursed Advances: With respect to any Distribution Date, an amount equal to
the aggregate of all Monthly Advances made on prior Distribution Dates that have
not been reimbursed to the Master Servicer.
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Unscheduled Principal Receipt: Any Principal Prepayment or other recovery of
principal on a Mortgage Loan, including, without limitation, Liquidation
Proceeds and proceeds received from any condemnation award or proceeds in lieu
of condemnation other than that portion of such proceeds released to the
Mortgagor in accordance with the terms of the Mortgage, but excluding any
Foreclosure Profits and proceeds of a repurchase of a Mortgage Loan by the
Seller and any Substitution Adjustment Amounts. Except as set forth in the last
sentence of Section 4.2(d) or 4.4(d), a Recovery shall not be treated as an
Unscheduled Principal Receipt.
Valuation: With respect to any Mortgaged Property at any time referred to
herein, the appraised value of the Mortgaged Property based upon the most recent
appraisal made by or on behalf of the Master Servicer or the originator of the
related Mortgage Loan.
SECTION 1.2. OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1, and accounting terms partly defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles or regulatory accounting principles, as
applicable. To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under generally accepted accounting
principles or regulatory accounting principles, the definitions contained herein
shall control.
(c) 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; the word "including" when
used in this Agreement is intended to be illustrative and not exclusive;
Section, subsection, paragraph, clause and Exhibit references contained in this
Agreement are references to Sections, subsections, paragraphs, clauses and
Exhibits in or to this Agreement unless otherwise specified; and the definitions
of terms set forth herein are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as the feminine and neuter
genders of such terms.
SECTION 1.3. CALCULATIONS.
The calculation of interest on the Certificates and the calculation of
the Master Servicing Fees, Subservicing Fees, Trustee Fee and Trust
Administration Fee shall be made on the basis of a 360-day year consisting of
twelve 30-day months. All dollar amounts calculated hereunder shall be rounded
to the nearest penny with one-half of one penny being rounded down.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.1. CONVEYANCE OF MORTGAGE LOANS.
(a) The Depositor, concurrently with the execution and delivery of this
Agreement, does hereby sell, transfer, assign, set over and otherwise convey to
the Trust without recourse (subject to Sections 2.2 and 2.6), (1) all of its
right, title and interest in and to each Mortgage Loan (including all
substitutions therefor), including its Cut-Off Date Loan Balance, all interest
accruing thereon on and after the Cut-Off Date and all collections in respect of
interest and principal received on and after the Cut-Off Date (exclusive of
payments in respect of interest on the Mortgage Loans accrued prior to the
Cut-Off Date and received thereafter); (2) any Mortgaged Property converted to
ownership through Foreclosure Proceedings or otherwise; (3) any insurance
policies related to the Mortgage Loans; (4) all rights under any guaranty
executed in connection with a Mortgage Loan; (5) the related Mortgage Notes,
Mortgages and other documents related to the Mortgage Loans; (6) all other
assets included or to be included in the Trust for the benefit of the
Certificateholders; (7) the Collection Account and the Distribution Account and
all funds and other assets deposited therein and all instruments, securities
(including, without limitation, Eligible Investments) or other property in which
the Collection Account and the Distribution Account may be invested in whole or
in part from time to time, including all amounts from time to time on deposit
therein (other than investment income earned on such Eligible Investments); (8)
the Depositor's rights under the Purchase Agreement, including, without
limitation, the representations and warranties of the Seller thereunder together
with all rights of the Depositor to require the Seller to cure any breach
thereof or to repurchase or substitute for any affected Mortgage Loan in
accordance with the Purchase Agreement; and (9) the proceeds of all of the
foregoing (all of the foregoing being referred to as the "Trust Assets"). The
foregoing sale, transfer, assignment, set over and conveyance does not and is
not intended to result in a creation or an assumption by the Trustee of any
obligation of the Depositor, the Seller or any other Person in connection with
the Mortgage Loans or any agreement or instrument relating thereto except as
specifically set forth herein.
In connection with such transfer, assignment and conveyance by the
Depositor, the Seller shall deliver to, and deposit with the Trustee, as
Document Custodian, on or before the Closing Date and, subject to the provisions
of Sections 3.16 and 3.17, the Document Custodian shall retain, the following
documents or instruments with respect to each Mortgage Loan (the "Related
Documents"):
(i) the original Mortgage Note, endorsed "Pay to the order
of Norwest Bank Minnesota, National Association, as trustee for the
registered holders from time to time of FURST Mortgage Loan Trust
1998-B, Mortgage Pass-Through Certificates, Series 1998-B, without
recourse," signed in the name of the Seller by an authorized officer,
with all intervening endorsements showing a complete chain of title from
the originator of such Mortgage Loan to the Seller or to the Merged
Holder, if applicable;
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(ii) the original Mortgage, with evidence of recording
thereon, provided, that if the original Mortgage has been delivered for
recording to the appropriate public recording office of the jurisdiction
in which the Mortgaged Property is located but has not yet been returned
to the Seller by such recording office, the Seller shall cause to be
delivered to the Document Custodian a certified true copy of such
original Mortgage so certified by the Seller, together with a
certificate of the Depositor certifying that such original Mortgage has
been so delivered to such recording office;
(iii) the original assignment of Mortgage, from the Seller to
"Norwest Bank Minnesota, National Association, as trustee for the
registered holders from time to time of FURST Mortgage Loan Trust
1998-B, Mortgage Pass-Through Certificates, Series 1998-B," which
assignment shall be in form and substance acceptable for recording;
(iv) the original attorney's opinion of title or the
original policy of title insurance, provided, that if any such original
policy of title insurance has not yet been received by the Seller, the
Seller shall cause to be delivered to the Document Custodian a copy of
such policy or a title insurance binder or commitment for the issuance
of such policy;
(v) originals of all intervening assignments of Mortgage,
with evidence of recording thereon, showing a complete chain of title
from the originator to the Seller or to the Merged Holder, if
applicable, provided, that if any such original intervening assignment
of Mortgage has been delivered for recording to the appropriate public
recording office of the jurisdiction in which the Mortgaged Property is
located but has not yet been returned to the Seller by such recording
office, the Seller may have delivered to the Document Custodian a
certified true copy of such original assignment of Mortgage so certified
by the Seller, together with a certificate of the Seller certifying that
such original assignment of Mortgage has been so delivered to such
recording office;
(vi) originals of all assumption and modification
agreements, if any; and
provided, however, the Seller may deliver to the Document Custodian all Related
Documents other than those referred to in clause (i) above (except for those
Mortgage Notes relating to Mortgage Loans listed on Exhibit N which Mortgage
Notes may be delivered within 30 days after the Closing Date) within 180 days
after the Closing Date.
In all such instances, the Seller will deliver or cause to be delivered
the original recorded Mortgage and assignments thereof to the Document Custodian
promptly upon receipt of the original recorded Mortgage.
For all Mortgage Loans that were owned by the Seller on the Cut-Off Date
as successor by merger to the originator or previous holder, the Seller shall
deliver to the Trustee, as Document Custodian, on or before the Closing Date, an
officer's certificate identifying such
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Mortgage Loans and the identities of the Persons (each, a "Merged Holder") that
are reflected on the related Mortgage Notes and Mortgage or assignment of
Mortgage as the holder, certifying that the Seller is successor by merger to
each such Merged Holder and certifying as to the authority of the officer
signing the endorsement referred to in clause (i) above and the assignment of
Mortgage referred to in clause (iii) above to execute the same. Such officer's
certificate shall constitute part of the Mortgage File of each such Mortgage
Loan.
The Depositor and the Trustee intend that the assignment and transfer
herein contemplated constitute a sale of the Mortgages, the related Mortgage
Notes and the Related Documents, conveying good title thereto free and clear of
any liens and encumbrances, from the Depositor to the Trustee and that such
property not be part of the Depositor's estate or property of the Depositor in
the event of any insolvency by the Depositor. In the event that such conveyance
is deemed to be, or to be made as security for, a loan, the parties intend that
the Depositor shall be deemed to have granted and does hereby grant to the
Trustee a first priority perfected security interest in all of the Depositor's
right, title and interest in and to the Mortgages, the related Mortgage Notes
and the Related Documents, and that this Agreement shall constitute a security
agreement under applicable law.
In connection with such assignment, transfer, sale and conveyance, the
Seller shall file, on or prior to the Closing Date, in the appropriate office of
any applicable state, county or other relevant jurisdiction, a UCC-1 financing
statement executed by the Seller as debtor, naming the Depositor as secured
party (and indicating that the security interest in such loans has been assigned
to the Trustee) and listing as collateral the Mortgages, the Mortgage Notes, the
Related Documents and other property constituting the Trust. The
characterization of the Seller as "debtor" and the Depositor as "secured party"
in any such financing statement is solely for protective purposes and shall in
no way be construed as being contrary to the intent of the parties that the
transfer of the Mortgage Loans by the Seller to the Depositor and the transfer
of the Mortgage Loans by the Depositor to the Trust be treated as a sale to the
Depositor and the Trust, respectively, of the respective Seller's entire right,
title and interest in and to the property specified in the preceding sentence.
In connection with such filing, the Seller shall cause to be filed all necessary
continuation statements thereof and amendments thereto and take or cause to be
taken such actions and execute such documents as are necessary to continue the
perfection and protect the Certificateholders' interest in such property.
(b) The Seller shall use its best efforts, within 180 days of the
Closing Date with respect to the Mortgage Loans, at its own expense, to either
(i) record the assignment of each Mortgage in favor of the Trustee in the
appropriate real property office or other records office or (ii) deliver to the
Trustee the assignment of each Mortgage in favor of the Trustee in form for
recordation, together with an Opinion of Counsel to the effect that recording is
not required to protect the Trustee's right, title and interest in and to the
related Mortgage Loan or, in the event a court should recharacterize the
conveyance of the Mortgage Loans as a loan or a security for a loan, to perfect
a first priority security interest in favor of the Trustee in the related
Mortgage Loan. With respect to any Assignment of Mortgage as to which the
related recording information is unavailable within the applicable time period
set forth above, such Assignment of Mortgage shall be submitted for recording
within 30 days after receipt of such information but in
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no event later than one year after the date such Assignment of Mortgage is
otherwise required to be recorded pursuant to this Section. In the event that
any such Assignment of Mortgage is lost or returned unrecorded because of a
defect therein, the Seller shall promptly prepare a substitute Assignment of
Mortgage or cure such defect, as the case may be, and thereafter the Depositor
shall be required to submit each such Assignment of Mortgage for recording. Any
failure of the Seller to comply with this Section 2.1(b) shall result in the
obligation of the Seller to purchase or substitute for the related Mortgage
Loans pursuant to the provisions of Section 2.2.
(c) The Document Custodian agrees, for the benefit of Certificateholders
and the Trustee, within 180 days after delivery to it of the Mortgage Files and
the Related Documents hereunder to review the Mortgage Files (and deliver a
certificate to the Master Servicer and the Seller as to the findings of such
review) to ascertain that all required documents set forth in paragraphs (i) -
(vi) of Section 2.1(a) have been executed and received, and that the Mortgage
Notes have been endorsed without recourse as specified in Section 2.1(a)(i), and
that such documents relate to the Mortgage Loans identified on the Mortgage Loan
Schedule and in so doing the Document Custodian may rely on the purported due
execution and genuineness of any signature thereon. Within 90 days of the
Closing Date, the Document Custodian will deliver a certificate to the Master
Servicer and the Seller as to the status of such review. If within such 180-day
period the Document Custodian finds any document constituting a part of a
Mortgage File not to have been executed or received or to be unrelated to the
Mortgage Loans identified in said Mortgage Loan Schedule or, if in the course of
its review, the Document Custodian determines that such Mortgage File is
otherwise defective in any material respect, the Document Custodian shall
promptly upon the conclusion of its review of all of the Mortgage Files notify
the Trustee, the Depositor, the Master Servicer and the Seller, and the Seller
shall have a period of 60 days after such notice within which to correct or cure
any such defect; provided, however, that if such defect shall not have been
corrected or cured within such 60-day period due primarily to the failure of the
related office of real property or other records to return any document
constituting a part of a Mortgage File, the Seller shall so notify the Document
Custodian and the Trustee in writing and the period during which such defect may
be corrected or cured shall be extended until such time as any such documents
are returned from such related office (in no event, however, will such period
extend beyond one (1) year from the date of discovery of such defect); provided,
that prior to any such extension the Seller shall deliver to the Document
Custodian a true copy of such document with a certification by the Seller on the
face of such copy substantially as follows: "certified true and correct copy of
original which has been transmitted for recordation."
(d) The Document Custodian shall have no responsibility for reviewing
any Mortgage File except as expressly provided in subsection (c) of Section 2.1.
Without limiting the effect of the preceding sentence, in reviewing any Mortgage
File pursuant to such subsection, the Document Custodian and the Trustee shall
have no responsibility for determining whether any document is valid and
binding, whether the text of any assignment or endorsement is in proper or
recordable form (except, if applicable, to determine if the Trustee is the
assignee), whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, but shall only be required to
determine whether a document has been executed, that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded, but
shall not be required to determine whether any Person executing any document is
authorized to
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do so or whether any signature thereon is genuine. In addition, with respect to
documents referred to in clause (vi) of Section 2.1(a), the Document Custodian
shall only be obligated to identify whether any such documents are included in
the Mortgage File for each Mortgage Loan.
SECTION 2.2. ACCEPTANCE BY TRUSTEE; RETRANSFER OF MORTGAGE LOANS.
(a) The Trustee hereby acknowledges the sale and assignment of the
Mortgage Loans and the Related Documents pursuant to the terms of this Agreement
and declares that the Trustee holds and will hold such documents (to the extent
required to be held by the Trustee hereunder) and all amounts received by it
thereunder and hereunder in trust, upon the terms herein set forth, for the use
and benefit of all present and future Certificateholders. The parties hereto do
hereby create and establish, pursuant to the laws of the State of North Carolina
and this Agreement, the Trust, which, for convenience, shall be known as "FURST
Mortgage Loan Trust 1998-B."
(b) If the time to correct or cure any defect of which the Trustee or
the Document Custodian, as the case may be, has notified the Seller following
review of the Mortgage Files by the Trustee or the Document Custodian, as the
case may be, has expired without any correction or cure, the Seller shall, no
later than two Business Days immediately preceding the Distribution Date in the
month following the Collection Period in which the time to correct or cure such
defect expired, repurchase the related Mortgage Loan (including any property
acquired in respect thereof and any insurance policy or Insurance Proceeds with
respect thereto) from the Trust at a price equal to the Purchase Price, which
amount shall be deposited into the Collection Account pursuant to Section 3.2 on
such Business Day or substitute a Mortgage Loan (each, a "Substitute Mortgage
Loan") that is an Eligible Substitute Mortgage Loan for such Mortgage Loan in
accordance with Section 2.7. Promptly upon receipt by the Trustee of written
notification signed by a Servicing Officer to the effect that the Purchase Price
for any such Mortgage Loan has been so deposited into the Collection Account,
the Document Custodian shall release to the Seller the Mortgage File for the
repurchased Mortgage Loan and the Trustee shall execute and deliver to the
Seller an assignment substantially in the form of Exhibit E, without recourse,
in order to vest in the Seller legal and beneficial ownership of such
repurchased or removed Mortgage Loan (including any property acquired in respect
thereof and any insurance policy or Insurance Proceeds with respect thereto).
The form of assignment attached as Exhibit E may be modified from time to time
to the extent required by applicable law, as evidenced by an Opinion of Counsel
delivered to the Trustee, it being understood that the Trustee shall have no
responsibility for determining the sufficiency of such assignment for its
intended purpose. The obligation of the Seller to repurchase or substitute for
any Mortgage Loan shall constitute the sole remedy with respect to such defect
available to Certificateholders or the Trustee against the Seller on behalf of
Certificateholders. An Opinion of Counsel to the effect set forth in Section
2.7(d) shall be delivered to the Trustee in connection with any such repurchase.
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SECTION 2.3. REPRESENTATIONS AND WARRANTIES REGARDING THE DEPOSITOR.
The Depositor represents and warrants to the Trustee on behalf of the
Certificateholders that as of the Closing Date:
(i) It is a corporation, validly existing and in good
standing under the laws of North Carolina and has the requisite power
and authority to own its assets and to transact the business in which it
is currently engaged;
(ii) It has the power and authority to make, execute,
deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement.
When executed and delivered, this Agreement will constitute its legal,
valid and binding obligation enforceable in accordance with its 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;
(iii) It holds all necessary licenses, certificates and
permits from all government authorities necessary for conducting its
business as it is presently conducted. It is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except for such consents, licenses, approvals or
authorizations, or registrations or declarations, as shall have been
obtained or filed, as the case may be, prior to the Closing Date;
(iv) The execution, delivery and performance of this
Agreement by it will not conflict with or result in a breach of, or
constitute a default under, any provision of any existing law or
regulation or any order or decree of any court applicable to it or any
of its properties or any provision of its Articles of Incorporation or
Bylaws or constitute a material breach of, or result in the creation or
imposition of any lien, charge or encumbrance upon any of its properties
pursuant to, any mortgage, indenture, contract or other agreement to
which it is a party or by which it may be bound;
(v) Neither this Agreement, the Prospectus nor the
Prospectus Supplement nor any statement, report or other document
prepared by the Depositor and furnished or to be furnished pursuant to
this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state
a material fact necessary to make the statements contained herein or
therein not misleading;
(vi) The Depositor is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Depositor or its
properties or might have consequences that would adversely affect its
performance hereunder;
(vii) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to its
knowledge threatened,
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against it or any of its properties or with respect to this Agreement or
the Certificates which in its opinion has a reasonable likelihood of
resulting in a material adverse effect on the transactions contemplated
by this Agreement;
(viii) The transactions contemplated by this Agreement are in
the ordinary course of business of the Depositor.
(ix) Immediately prior to the sale and assignment by the
Depositor to the Trustee of each Mortgage Loan, the Depositor has good
and marketable title to each Mortgage Loan (insofar as such title was
conveyed to it by the Seller) subject to no prior lien, claim,
participation interest, mortgage, security interest, pledge, charge or
other encumbrance or other interest of any nature;
(x) As of the Closing Date, the Depositor has transferred
all right, title and interest in the Mortgage Loans to the Trustee; and
(xi) The Depositor has not transferred the Mortgage Loans to
the Trustee with any intent to hinder, delay or defraud any of its
creditors.
SECTION 2.4. REPRESENTATIONS AND WARRANTIES REGARDING THE MASTER
SERVICER.
The Master Servicer represents and warrants to the Trustee on behalf of
the Certificateholders that as of the Closing Date:
(i) It is a national banking association, validly existing
and in good standing under the laws of the United States of America and
has the requisite power and authority to own its assets and to transact
the business in which it is currently engaged. It 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 (a) its business, properties,
assets, or condition (financial or other), (b) its performance of its
obligations under this Agreement, (c) the value or marketability of the
Mortgage Loans and (d) the ability to foreclose on the related Mortgaged
Properties;
(ii) It has the power and authority to make, execute,
deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement.
When executed and delivered, this Agreement will constitute its legal,
valid and binding obligation enforceable in accordance with its 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;
(iii) It holds all necessary licenses, certificates and
permits from all government authorities necessary for conducting its
business as it is presently conducted. It is not required to obtain the
consent of any other party or any consent, license, approval
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or authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except for such consents, licenses, approvals or
authorizations, or registrations or declarations, as shall have been
obtained or filed, as the case may be, prior to the Closing Date;
(iv) The execution, delivery and performance of this
Agreement by it will not conflict with or result in a breach of, or
constitute a default under, any provision of any existing law or
regulation or any order or decree of any court applicable to it or any
of its properties or any provision of its Articles of Incorporation or
Bylaws, or constitute a material breach of, or result in the creation or
imposition of any lien, charge or encumbrance upon any of its properties
pursuant to, any mortgage, indenture, contract or other agreement to
which it is a party or by which it may be bound;
(v) Neither this Agreement nor the Prospectus nor the
Prospectus Supplement, to the extent each relates to the Master
Servicer, nor any statement, report or other document prepared by the
Master Servicer and furnished or to be furnished pursuant to this
Agreement or in connection with the transactions contemplated hereby
contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or
therein not misleading;
(vi) The Master Servicer is not in default with respect to
any order or decree of any court or any order, regulation or demand of
any federal, state, municipal or governmental agency, which default
might have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Master Servicer or
its properties or might have consequences that would adversely affect
its performance hereunder or under any subservicing agreement;
(vii) The collection practices used by the Master Servicer
with respect to each Mortgage Note and Mortgage have been in all
material respects legal, proper, prudent and customary in the mortgage
origination and servicing business and in compliance with the Master
Servicer's servicing procedures as described in the Prospectus and this
Agreement;
(viii) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to its
knowledge threatened, against it or any of its properties or with
respect to this Agreement or the Certificates which in its opinion has a
reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Agreement;
(ix) The transactions contemplated by this Agreement are in
the ordinary course of business of the Master Servicer; and
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(x) The Master Servicer's computer and other systems used
in servicing the Mortgage Loans will be modified and maintained to
operate in a manner such that at all times, including on and after
January 1, 2000, the Master Servicer can service the Mortgage Loans in
accordance with the terms of this Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section 2.4 shall survive delivery of the Mortgage Files to the
Document Custodian or the Trustee.
Upon discovery by the Seller, the Depositor, the Master Servicer, or the
Trustee, as the case may be, of a breach of any of the foregoing representations
and warranties which materially and adversely affects the interests of the
Certificateholders, the Person discovering such breach shall give prompt written
notice to the other parties. Within 60 days of its discovery or its receipt of
notice of breach, or, with the prior written consent of a Responsible Officer of
the Trustee, such longer period specified in such consent, the Master Servicer
shall cure such breach in all material respects.
SECTION 2.5. REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER.
The Seller represents and warrants to the Trustee on behalf of the
Certificateholders that as of the Closing Date:
(i) It is a national banking association, validly existing
and in good standing under the laws of the United States of America and
has the requisite power and authority to own its assets and to transact
the business in which it is currently engaged. It 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 (a) its business, properties,
assets, or condition (financial or other), (b) its performance of its
obligations under this Agreement, (c) the value or marketability of the
Mortgage Loans and (d) the ability to foreclose on the related Mortgaged
Properties;
(ii) It has the power and authority to make, execute,
deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement.
When executed and delivered, this Agreement will constitute its legal,
valid and binding obligation enforceable in accordance with its 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;
(iii) It holds all necessary licenses, certificates and
permits from all government authorities necessary for conducting its
business as it is presently conducted. It is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except for such consents, licenses, approvals or
authorizations, or registrations or declarations, as shall have been
obtained or filed, as the case may be, prior to the Closing Date;
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(iv) The execution, delivery and performance of this
Agreement by it will not conflict with or result in a breach of, or
constitute a default under, any provision of any existing law or
regulation or any order or decree of any court applicable to it or any
of its properties or any provision of its Articles of Association or
Bylaws, or constitute a material breach of, or result in the creation or
imposition of any lien, charge or encumbrance upon any of its properties
pursuant to, any mortgage, indenture, contract or other agreement to
which it is a party or by which it may be bound;
(v) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to its
knowledge threatened, against it or any of its properties or with
respect to this Agreement or the Certificates which in its opinion has a
reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Agreement;
(vi) Neither this Agreement nor the Prospectus nor the
Prospectus Supplement nor any statement, report or other document
prepared by the Seller and furnished or to be furnished pursuant to this
Agreement or in connection with the transactions contemplated hereby
contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or
therein not misleading;
(vii) The Seller is not in default with respect to any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Seller or its
properties or might have consequences that would adversely affect its
performance hereunder;
(viii) The transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Seller pursuant to this Agreement are not
subject to the bulk transfer laws or any similar statutory provisions in
effect in the State of North Carolina;
(ix) The transactions contemplated by this Agreement are in
the ordinary course of business of the Seller; and
(x) The Seller is not insolvent, nor will it be made
insolvent by the transfer of the Mortgage Loans, nor is the Seller aware
of any pending insolvency.
It is understood and agreed that the representations and warranties set
forth in this Section 2.5 shall survive delivery of the Mortgage Files to the
Document Custodian or the Trustee.
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Upon discovery by the Depositor, the Master Servicer, the Seller or the
Trustee, as the case may be, of a breach of any of the foregoing representations
and warranties which materially and adversely affects the interests of the
Certificateholders, the Person discovering such breach shall give prompt written
notice to the other parties. Within 60 days of its discovery or its receipt of
notice of breach, or, with the prior written consent of a Responsible Officer of
the Trustee, such longer period specified in such consent, the Seller shall cure
such breach in all material respects.
SECTION 2.6. REPRESENTATIONS AND WARRANTIES OF THE SELLER REGARDING THIS
AGREEMENT AND THE MORTGAGE LOANS; TRANSFER OF CERTAIN MORTGAGE LOANS.
(a) The Seller represents and warrants to the Trustee on behalf of the
Certificateholders as follows as of the Closing Date with respect to the
Mortgage Loans:
(i) The information with respect to each Mortgage Loan set
forth in the Mortgage Loan Schedule is true and correct in all material
respects as of the applicable Cut-Off Date;
(ii) All of the Related Documents set forth in Section 2.1
(including all material documents related thereto) will have been
delivered to the Document Custodian within the time periods set forth in
Section 2.1. Each Mortgage File contains each of the documents and
instruments specified to be included therein duly executed and in due
and proper form, and each such document or instrument is in a form
generally acceptable to prudent mortgage lenders that regularly
originate or purchase mortgage loans comparable to the Mortgage Loans
for sale to prudent investors in the secondary market that invest in
mortgage loans such as the Mortgage Loans;
(iii) (A) Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, including, without
limitation, condominiums, townhouses, planned unit developments,
manufactured homes and mobile homes. Each mobile home and manufactured
home constituting any portion of any Mortgaged Property constitutes real
property under applicable state law; and (B) each mobile home
constituting any portion of any Mortgaged Property is a Single-Family
Residence;
(iv) Each Mortgage Loan is being master serviced by the
Master Servicer;
(v) Each Mortgage Note has a fixed rate of interest and an
original term to maturity of not more than 30 years from the date on
which the first monthly payment was due. Each Mortgage Note with respect
to the Mortgage Loans will provide for a schedule of substantially level
and equal Monthly Payments which are sufficient to amortize fully the
principal balance of such Mortgage Loan over a period of time equal to
the amortization period of such Mortgage Note;
(vi) Each Mortgage is a valid and subsisting first lien of
record on the Mortgaged Property subject to the exceptions to title set
forth in the title insurance policy or attorney's opinion, as the case
may be, with respect to the related Mortgage Loan, which exceptions are
generally acceptable to mortgage lending companies, and such other
exceptions to which similar properties are commonly subject and which do
not
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individually, or in the aggregate, materially and adversely affect
the benefits of the security intended to be provided by such Mortgage.
Any security agreement, chattel mortgage or equivalent document related
to the Mortgage and delivered to the Document Custodian on behalf of the
Trustee establishes in the Seller a valid and subsisting first lien and
first priority security interest on the property described therein, and
the Seller has full right to assign the same to the Trustee;
(vii) Except with respect to liens released immediately prior
to the transfer herein contemplated, each Mortgage Note and related
Mortgage have not been assigned or pledged and immediately prior to the
transfer and assignment herein contemplated, the Seller held good,
marketable and indefeasible title to, and was the sole owner and holder
of, each Mortgage Loan subject to no Liens; the Seller has full right
and authority under all governmental and regulatory bodies having
jurisdiction over the Seller, subject to no interest or participation
of, or agreement with, any party, to sell and assign the same pursuant
to this Agreement; and immediately upon the transfer and assignment
herein contemplated, the Seller shall have transferred all of its right,
title and interest in and to each Mortgage Loan to the Depositor (or its
assignee) and the Depositor (or its assignee) will hold good, marketable
and indefeasible title, to, and be the sole owner of, each Mortgage Loan
subject to no Liens;
(viii) None of the Mortgage Loans were delinquent (i.e. not 30
or more days past due) as of the Cut-Off Date; none of the Mortgage
Loans has ever been delinquent in payment for 60 or more days nor more
than once during the twelve months preceding the Cut-Off Date been
delinquent in payment for 30 or more days;
(ix) To the best knowledge of the Seller, there is no
delinquent tax, fee or assessment lien on any Mortgaged Property;
(x) No Mortgage Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of any Mortgage Note or Mortgage,
or the exercise of any right thereunder, render either the Mortgage Note
or the Mortgage unenforceable in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the
defense of usury, and no such right of rescission, set-off, counterclaim
or defense has been asserted with respect thereto;
(xi) (A) There is no mechanics' lien or claim for work,
labor or material affecting the Mortgaged Property which is or may be a
lien prior to, or equal or coordinate with, the lien of the related
Mortgage except those liens which are fully insured against by the title
insurance policy referred to in clause (xiii) below; and (B) to the best
of its knowledge, each Mortgaged Property is free of material damage and
is in good repair;
(xii) Each Mortgage Loan at the time it was made complied in
all material respects with applicable state and federal laws and
regulations, including, without limitation, usury, equal credit
opportunity, real estate settlement procedures,
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consumer credit, truth-in-lending and disclosure laws and consummation
of the transactions contemplated hereby, including, without limitation,
the receipt of interest, will not involve the violation of any such
laws;
(xiii) Either an attorney's opinion of title has been obtained
or a lender's title insurance policy or binder issued in standard
American Land Title Association form by a title insurance company
authorized to transact business in the state in which the related
Mortgaged Property is situated in an amount at least equal to the
original principal balance thereof insuring the Seller, its successor
and assigns as to the first priority of the lien of the Mortgage,
subject only to the exceptions of the character referred to in (vi)
above, and the Seller is the sole insured of such lender's title
insurance policy, and each such policy or binder is valid and remains in
full force and effect, and a title search or other assurance of title
customary in the relevant jurisdiction was obtained with respect to each
Mortgage Loan as to which no title insurance policy or binder was
issued;
(xiv) The improvements upon each Mortgaged Property are
covered by a valid and existing hazard insurance policy with a generally
acceptable carrier that provides for fire and extended coverage
representing coverage described in Section 3.5;
(xv) A flood insurance policy is in effect with respect to
each Mortgaged Property with a generally acceptable carrier in an amount
representing coverage described in Section 3.5, if and to the extent
required by Section 3.5;
(xvi) Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the related Mortgagor and is enforceable by the
Trustee or any co-trustee appointed hereunder against the Mortgagor in
accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity (whether considered in a proceeding
or action in equity or at law), and all parties to each Mortgage Loan
and the Mortgagee had full legal capacity to execute all Mortgage Loan
documents and to convey the estate therein purported to be conveyed;
(xvii) All individual insurance policies contain a standard
mortgagee clause naming the Seller, its successors and assigns, as
mortgagee. All premiums thereon have been paid. Each Mortgage obligates
the Mortgagor thereunder to maintain all such insurance at the
Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such
insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor;
(xviii) The terms of the Mortgage Note and the Mortgage have
not been impaired, altered or modified in any material respect, except
by a written instrument which has been recorded or is in the process of
being recorded, if necessary, to protect the interests of the
Certificateholders and which has been or will be delivered to the
Document Custodian on behalf of the Trustee. Each original Mortgage was
recorded, and all subsequent assignments of the original Mortgage (other
than the assignment to the
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Trustee) have been recorded in the appropriate jurisdictions wherein
such recordation is necessary to perfect the lien thereof as against
creditors of the Seller, or is in the process of being recorded;
(xix) No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released,
in whole or in part;
(xx) No Mortgage Note permits or obligates the Seller to
make future advances to the related Mortgagor at the option of the
Mortgagor. There are no defaults in complying with the terms of the
Mortgage, and either (1) any taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges or ground rents which
previously became due and owing have been paid, or (2) an escrow of
funds has been established in an amount sufficient to pay for every such
item which remains unpaid and which has been assessed but is not yet due
and payable. Except for payments in the nature of escrow payments,
including without limitation, taxes and insurance payments, the Seller
has not advanced funds, or induced, solicited or knowingly received any
advance of funds by a party other than the Mortgagor, directly or
indirectly, for the payment of any amount required by the Mortgage Note,
except for interest accruing from the date of the Mortgage Note or date
of disbursement of the Mortgage proceeds, whichever is greater, to the
day which precedes by one month the Due Date of the first installment of
principal and interest;
(xxi) To the best knowledge of the Seller, there is no
proceeding pending or threatened for the total or partial condemnation
of any Mortgaged Property, nor is such a proceeding currently occurring,
and such property is undamaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises were intended;
(xxii) To the best of its knowledge, no improvement located on
or being part of any Mortgaged Property is in violation of any
applicable zoning law or regulation. All inspections, licenses and
certificates required to be made or issued with respect to all occupied
portions of each Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained
from the appropriate authorities and such Mortgaged Property is lawfully
occupied under the applicable law;
(xxiii) The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing or recording the
Mortgage Loans were paid;
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(xxiv) No Mortgage Loan was originated under a buydown plan or
under a limited documentation program or is in violation of the Home
Ownership and Equity Protection Act of 1994;
(xxv) There is no obligation on the part of the Seller or any
other party to make payments in addition to those made by the Mortgagor;
(xxvi) No Mortgage Loan has a shared appreciation feature, or
other contingent interest feature;
(xxvii) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security, including, (A) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (B) otherwise by
judicial or non-judicial foreclosure. To the Seller's best knowledge,
there is no homestead or other exemption available to the related
Mortgagor which would materially interfere with the right to sell the
Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage except as set forth in the Prospectus;
(xxviii) Except for Mortgage Loans that are delinquent for a
time period less than 30 days, there is no default, breach, violation or
event of acceleration existing under any Mortgage or the related
Mortgage Note and no event which, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration; and neither the
Seller, nor any other entity involved in originating or servicing a
Mortgage Loan, has waived any default, breach, violation or event of
acceleration;
(xxix) All amounts received after the Cut-Off Date with
respect to the Mortgage Loans to which the Seller is not entitled have
been deposited into the Collection Account and are as of the Closing
Date in the Collection Account;
(xxx) Each of the Mortgage Loans was originated substantially
in accordance with the credit underwriting guidelines set forth in the
Prospectus and the Prospectus Supplement;
(xxxi) Each Mortgage Loan conforms, and all Mortgage Loans in
the aggregate conform, in all material respects, to the description
thereof set forth in the Prospectus Supplement; each Mortgage Note and
Mortgage is in substantially the form of Exhibit F hereto;
(xxxii) The Mortgage Loans were not selected by the Seller for
inclusion in the Trust on any basis intended to adversely affect the
Trust;
(xxxiii) Each Mortgage Loan was originated based upon an
appraisal of the related Mortgaged Property; each such appraisal is on a
Fannie Mae-approved form signed prior to the approval of such Mortgage
Loan application by a qualified appraiser, appointed
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by the Seller or the originator of such Mortgage Loan, as appropriate,
who has no interest, direct or indirect, in the Mortgaged Property or in
any loan made on the security thereof, and whose compensation is not
affected by the approval or disapproval of such Mortgage Loan;
(xxxiv) Each Mortgage Loan was originated by the Seller or an
affiliate of the Seller or purchased by the Seller;
(xxxv) Each Mortgaged Property is located in the state
identified on the Mortgage Loan Schedule and consists of a single-family
residence (which may be detached, part of a two- to four-family
dwelling, a condominium unit, a mobile, manufactured or modular home, a
townhouse or a unit in a planned unit development). With respect to the
Cut-Off Date Aggregate Pool 1 Loan Balance and the Pool 1 Mortgage
Loans, (a) at least 74.66% of the Pool 1 Mortgage Loans (by Cut-Off Date
Aggregate Pool 1 Loan Balance) are secured by real property improved by
a one-family residence erected thereon, (b) no more than 0.39% of the
Pool 1 Mortgage Loans (by Cut-Off Date Aggregate Pool 1 Loan Balance)
are secured by real property improved by two- to four-family dwellings,
(c) no more than 24.54% of the Pool 1 Mortgage Loans (by Cut-Off Date
Aggregate Pool 1 Loan Balance) are secured by real property improved by
individual condominium units and units in a planned unit development and
(d) no more than 0.41% of the Pool 1 Mortgage Loans (by Cut-Off Date
Aggregate Pool 1 Loan Balance) are secured by real property improved by
a single-family residence of a type other than those enumerated in
clause (a), (b) or (c) above. With respect to the Cut-Off Date Aggregate
Pool 2 Loan Balance and the Pool 2 Mortgage Loans, (a) at least 92.53%
of the Pool 2 Mortgage Loans (by Cut-Off Date Aggregate Pool 2 Loan
Balance) are secured by real property improved by a one-family residence
erected thereon, (b) no more than 7.47% of the Pool 2 Mortgage Loans (by
Cut-Off Date Aggregate Pool 2 Loan Balance) are secured by real property
improved by two- to four-family dwellings; and (c) as of the Cut-Off
Date, no more than 8.65% of the Pool 2 Mortgage Loans (by Cut-Off Date
Aggregate Pool 2 Loan Balance) are secured by Mortgaged Properties
located in one United States postal zip code.
(xxxvi) All Mortgage Loans had Loan-to-Value Ratios of less
than or equal to 100%;
(xxxvii) With respect to the Cut-Off Date Aggregate Loan
Balance, 0.68% and 0.00% of the Pool 1 Mortgage Loans and Pool 2
Mortgage Loans, respectively, (by Cut-Off Date Loan Balance) are secured
by Mortgaged Properties that are non-owner occupied properties (i.e.,
investor-owned);
(xxxviii) The Mortgage Note is not and has not been secured by
any collateral, pledged account or other security except the lien of the
corresponding Mortgage and the security interest of any applicable
security agreement or chattel mortgage referred to in (vi) above;
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(xxxix) Each Pool 1 Mortgage Loan was originated on or
purchased after December, 1986 and each Pool 2 Mortgage Loan was
originated on or purchased after December, 1991;
(xl) The Seller has not transferred the Mortgage Loans to
the Depositor with any intent to hinder, delay or defraud any of its
creditors;
(xli) To the best knowledge of the Seller, all parties which
have had any interest in the Mortgage Loan, whether as originator,
mortgagee, assignee, pledgee or otherwise, are (or, during the period in
which they held and disposed of such interest, were): (1) in compliance
with any and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located, and (2)(A) organized
under the laws of such state, or (B) qualified to do business in such
state, or (C) federal savings and loan associations or national banks
having principal offices in such state, or (D) not doing business in
such state so as to require qualification or licensing, or (E) not
otherwise required to be qualified or licensed in such state;
(xlii) To the best knowledge of the Seller, all parties to the
Mortgage Note and the Mortgage had legal capacity to execute the
Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have
been duly and properly executed by such parties;
(xliii) None of the Pool 1 Mortgage Loans or Pool 2 Mortgage
Loans are mobile homes or manufactured housing;
(xliv) None of the Mortgage Loans are Cooperative Share
Mortgages;
(xlv) Each Mortgage Loan is directly secured by a mortgage on
real property and either (1) substantially all of the proceeds of such
Mortgage Loan were used to acquire or improve or protect an interest in
real property that, as of the origination date, was the only security
for the Mortgage Loan, provided, that the Mortgage Loan has not been
modified in a manner that constituted a deemed exchange under Section
1001 of the Code at a time when the Mortgage Loan was not in default or
default thereto was not reasonably foreseeable or (2) the fair market
value of such real property was at least equal to 80% of the adjusted
issue price of the Mortgage Loan (A) at origination (or, if the Mortgage
Loan has been modified in a manner that constituted a deemed exchange
under Section 1001 of the Code at a time when the Mortgage Loan was not
in default or default with respect thereto was not reasonably
foreseeable, the date of the last such modification) or (B) at the
Closing Date;
(xlvi) Each Mortgage Loan constitutes a qualified mortgage
under Section 860G(a)(3)(A) of the Code and Treasury Regulations Section
1.860G-2(a)(1) and (3);
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(xlvii) The Cut-Off Date Loan Balance for each Mortgage Loan is
the Loan Balance indicated on the Mortgage Loan Schedule for such
Mortgage Loan as of the Cut-Off Date;
(xlviii) No misrepresentation of a material fact or fraud in
respect of the origination, modification or amendment of any Mortgage
Loan has taken place on the part of any Person, including, without
limitation, the related Mortgagor, any appraiser, any builder or
developer or any party involved in the origination of such Mortgage
Loan;
(xlix) Each Mortgage contains a provision for the acceleration
of the payment of the unpaid principal balance of the related Mortgage
Loan in the event the related Mortgaged Property is sold without the
prior consent of the mortgagee thereunder; and
(l) With respect to each Mortgage Loan secured by a
mobile home or manufactured housing: (a) such mobile home or
manufactured housing is permanently affixed to a foundation which is
suitable for the soil conditions of the site; all foundations, both
perimeter and interior, having footings that are located below the frost
line; any wheels, axles and trailer hitches are removed from such mobile
home or manufactured housing and (b) the related Mortgage Loan is
covered under a standard real estate title insurance policy or
attorney's title opinion or certificate that identified such mobile home
or manufactured housing as part of the real property and insures or
indemnifies against any loss if such mobile home or manufactured housing
is determined not to be part of the real property.
With respect to the representations and warranties set forth in
this Section 2.6(a) that are made to the best of the Seller's knowledge or as to
which the Seller has no knowledge, if it is discovered by the Seller, the Master
Servicer, the Depositor, the Trustee or the Document Custodian that the
substance of such representation and warranty is inaccurate and such inaccuracy
materially and adversely affects the value of the related Mortgage Loan then,
notwithstanding the Seller's lack of knowledge with respect to the substance of
such representation and warranty being inaccurate at the time the representation
or warranty was made, such inaccuracy shall be deemed a breach of the applicable
representation or warranty.
(b) The representations and warranties set forth in Section 2.6(a) shall
survive the delivery of the Mortgage Files to the Document Custodian or the
Trustee. Upon discovery by the Seller, the Master Servicer, the Depositor or the
Trustee of a breach of any of the foregoing representations and warranties with
respect to any Mortgage Loan, the party discovering such breach shall give
written notice thereof to the other parties within five (5) days after such
discovery but only to the extent that such breach materially and adversely
affects the interests of Certificateholders. Promptly after its discovery or its
receipt of notice of any such breach, the Seller shall use all reasonable
efforts to cure such breach in all material respects. Unless at the expiration
of the 60-day period following receipt of such notice, such breach has been
cured in all material respects or otherwise does not exist or continue to exist,
the Seller shall, not later than two Business Days immediately preceding the
Distribution Date in the month following the related Collection Period in which
any such cure period expired (but in the case of a breach that
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if discovered before the Startup Day, would have prevented the obligation from
being a "qualified mortgage" as defined in the Code, within 90 days of discovery
of the breach), but only to the extent that such uncured breach materially and
adversely affects the interests of the Certificateholders, repurchase at the
Purchase Price such Defective Mortgage Loan (including any property acquired in
respect thereof and any insurance policy or Insurance Proceeds with respect
thereto) in the same manner and subject to the same conditions as set forth in
Section 2.2 or shall substitute an Eligible Substitute Mortgage Loan in
accordance with Section 2.7. Upon making any such repurchase, the Seller shall
be entitled to receive an assignment of the repurchased or removed Mortgage Loan
and a release of the related Mortgage File from the Document Custodian to the
extent set forth in Section 2.2. The obligation of the Seller to repurchase or
replace any Mortgage Loan as to which a breach has occurred and is continuing
shall constitute the sole remedy against the Seller with respect to such breach
available to Certificateholders or the Trustee on behalf of Certificateholders.
SECTION 2.7. SUBSTITUTION OF MORTGAGE LOANS.
(a) On a Determination Date within two years following the Closing Date
and which is on or before the date on which the Seller would otherwise be
required to repurchase a Mortgage Loan under this Article II, the Seller may
deliver to the Trustee one or more Eligible Substitute Mortgage Loans in
substitution for any one or more of the Defective Mortgage Loans which the
Seller would otherwise be required to repurchase pursuant to this Article II. In
connection with any such substitution, the Seller shall calculate the
Substitution Adjustment Amount, if any, and shall deposit such amount, along
with the Unreimbursed Advances, unreimbursed Servicing Advances, unpaid Master
Servicing Fees and Subservicing Fees with respect to the Defective Mortgage Loan
to the Collection Account on or before the second Business Day prior to the
Distribution Date in the month succeeding the calendar month during which the
related Mortgage Loan became required to be purchased or replaced hereunder.
(b) The Seller shall notify the Master Servicer and the Trustee in
writing not less than five Business Days before the related Determination Date
which is on or before the date on which the Seller would otherwise be required
to repurchase such Mortgage Loan pursuant to this Article II of its intention to
effect a substitution under this Section. On such Determination Date (the
"Substitution Date"), the Seller shall deliver to the Trustee, with a copy to
the Master Servicer (except as to (1) below), (1) the Eligible Substitute
Mortgage Loans to be substituted for the original Mortgage Loans, (2) a list of
the original Mortgage Loans to be substituted for by such Eligible Substitute
Mortgage Loans in the same format as required for the list provided on the
Closing Date, (3) an Officers' Certificate (A) stating that no default by the
Master Servicer described in Section 8.1 shall have occurred and be continuing,
(B) stating that the aggregate principal balance of all Eligible Substitute
Mortgage Loans (determined with respect to each Eligible Substitute Mortgage
Loan as of the Determination Date on which it was substituted) including the
principal balance of Eligible Substitute Mortgage Loans being substituted on
such Determination Date does not exceed an amount equal to 10% of the Aggregate
Loan Balance as of the Closing Date, (C) stating that all conditions precedent
to such substitution specified in subsection (a) have been satisfied and that
each such substituted Mortgage Loan constitutes an Eligible Substitute Mortgage
Loan and attaching as an exhibit a supplemental Mortgage Loan Schedule (the
"Supplemental Mortgage Loan Schedule") setting forth the same type of
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information as appears on the Mortgage Loan Schedule and representing as to the
accuracy thereof and (D) confirming that the representations and warranties
contained in Section 2.6 are true and correct in all material respects with
respect to the Eligible Substitute Mortgage Loans on and as of such
Determination Date, provided that remedies for the inaccuracy of such
representations are limited as set forth in Section 2.6 and this Section 2.7,
(4) a Nondisqualification Opinion to the effect set forth below and (5) a
certificate stating that cash in the amount of the related Substitution
Adjustment Amount, if any, has been deposited to the Collection Account. Upon
receipt of the foregoing, the Trustee shall release such original Mortgage Loans
to the Seller.
(c) Concurrently with the satisfaction of the conditions set forth in
Section 2.7(a) and (b) above and the transfer of such Eligible Substitute
Mortgage Loans to the Trustee pursuant to Section 2.7(a) above, Exhibit D to
this Agreement shall be deemed to be amended to exclude all Mortgage Loans being
replaced by such Eligible Substitute Mortgage Loans and to include the
information set forth on the Supplemental Mortgage Loan Schedule with respect to
such Eligible Substitute Mortgage Loans, and all references in this Agreement to
Mortgage Loans shall include such Eligible Substitute Mortgage Loans and be
deemed to be made on or after the related Substitution Date, as the case may be,
as to such Eligible Substitute Mortgage Loans.
(d) In connection with any Mortgage Loan that the Seller is required to
purchase or replace, the Seller shall deliver to the Trustee a
Nondisqualification Opinion to the effect that such purchase or substitution
will not cause (x) any federal tax to be imposed on the Trust, including without
limitation, any Federal tax imposed on "prohibited transactions" under Section
860F(a)(1) of the Code or on "contributions after the start-up day" under
Section 860G(d)(1) of the Code or (y) any portion of the Trust to fail to
qualify as a REMIC at any time that any Certificate is outstanding. In the event
that such opinion indicates that a repurchase or substitution will result in the
imposition of a prohibited transaction tax, give rise to net taxable income or
be deemed a contribution to the REMIC after the "start-up day," the Seller shall
not be required to repurchase or replace any such Mortgage Loan unless and until
the Master Servicer has determined there is an actual or reasonably foreseeable
default with respect thereto.
SECTION 2.8. EXECUTION AND AUTHENTICATION OF CERTIFICATES.
The Trustee on behalf of the Trust shall cause to be executed,
authenticated and delivered on the Closing Date to or upon the order of the
Depositor, in exchange for the Mortgage Loans, concurrently with the sale,
assignment and conveyance to the Trustee of the Mortgage Loans, each Class of
Certificates in authorized denominations.
SECTION 2.9. REMIC PROVISIONS.
(a) This Agreement shall be construed so as to carry out the intention
of the parties that the REMIC I be treated as a REMIC at all times prior to the
date on which the Trust is terminated. The "regular interests" (within the
meaning of Section 860G(a)(1) of the Code) in the REMIC I shall consist of the
Class 1A-1 Certificates, Class 1A-2 Certificates, Class 1A-3 Certificates, Class
1A-4 Certificates, Class 1A-5 Certificates, Class 1A-6 Certificates, Class 1A-
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7 Certificates, Class 1A-8 Certificates, Class 1A-9 Certificates, Class 1A-10
Certificates, Class 1A-11 Certificates, Class 1A-12 Certificates, Class 1A-PO
Certificates, Class 1A-WIO Certificates, Class 1M Certificates, Class 1B-1
Certificates, Class 1B-2 Certificates, Class 1B-3 Certificates, Class 1B-4
Certificates, Class 1B-5 Certificates, Class 2A Certificates, Class 2M
Certificates, Class 2B-1 Certificates, Class 2B-2 Certificates, Class 2B-3
Certificates, Class 2B-4 Certificates and Class 2B-5 Certificates. The "residual
interest" (within the meaning of Section 860(G)(a)(2) of the Code) of the REMIC
I shall consist of the Class A-R Certificate.
(b) The Trustee shall provide to the Internal Revenue Service and to the
Person described in Section 860E(e)(3) and (6) of the Code the information
described in Treasury Regulation Section 1.860D-1(b)(5)(ii), or any successor
regulation thereto with respect to each REMIC. Such information will be provided
in the manner described in Treasury Regulation Section 1.860E-2(a)(5), or any
successor regulation thereto.
(c) For federal income tax purposes, the Final Scheduled Distribution
Date for each Class of the Certificates is hereby set to be the Distribution
Date indicated below:
<TABLE>
<CAPTION>
Final Scheduled
Class Distribution Date
----- -----------------
<S> <C>
Class 1A-1 Certificates August 25, 2028
Class 1A-2 Certificates August 25, 2028
Class 1A-3 Certificates August 25, 2028
Class 1A-4 Certificates August 25, 2028
Class 1A-5 Certificates August 25, 2028
Class 1A-6 Certificates August 25, 2028
Class 1A-7 Certificates August 25, 2028
Class 1A-8 Certificates August 25, 2028
Class 1A-9 Certificates August 25, 2028
Class 1A-10 Certificates August 25, 2028
Class 1A-11 Certificates August 25, 2028
Class 1A-12 Certificates August 25, 2028
Class 1A-PO Certificates August 25, 2028
Class 1A-WIO Certificates August 25, 2028
Class 1M Certificates August 25, 2028
Class 1B-1 Certificates August 25, 2028
Class 1B-2 Certificates August 25, 2028
</TABLE>
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<TABLE>
<S> <C>
Class 1B-3 Certificates August 25, 2028
Class 1B-4 Certificates August 25, 2028
Class 1B-5 Certificates August 25, 2028
Class 2A Certificates September 25, 2026
Class 2M Certificates September 25, 2026
Class 2B-1 Certificates September 25, 2026
Class 2B-2 Certificates September 25, 2026
Class 2B-3 Certificates September 25, 2026
Class 2B-4 Certificates September 25, 2026
Class 2B-5 Certificates September 25, 2026
Class A-R Certificate September 25, 2026
</TABLE>
(d) The Closing Date is hereby designated as the "startup day" of the
REMIC I within the meaning of Section 860G(a) (9) of the Code.
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.1. THE MASTER SERVICER.
(a) It is intended that the Trust formed hereunder shall consist of the
REMIC I and that the affairs of the Trust shall be conducted so as to qualify
the REMIC I as a "real estate mortgage investment conduit" as defined in and in
accordance with the REMIC Provisions. In furtherance of such intentions, the
Master Servicer covenants and agrees that it shall not knowingly or
intentionally take any action or omit to take any action that would cause the
termination of the REMIC status of the REMIC I.
(b) The Master Servicer shall service and administer the Mortgage Loans
in a manner consistent with the terms of this Agreement and with general
industry practice and shall have full power and authority, acting alone or
through a Subservicer, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable, it being
understood, however, that the Master Servicer shall at all times remain
responsible to the Trustee and the Certificateholders for the performance of its
duties and obligations hereunder in accordance with the terms hereof and any
amounts in respect of the Mortgage Loans received by any such Subservicer shall
be deemed to have been received by the Master Servicer whether or not actually
received by it. Without limiting the generality of the foregoing, the Master
Servicer shall continue, and is hereby authorized and empowered by the Trustee,
to execute and deliver, in
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connection with the Trust taking possession of any Mortgaged Property or upon
receipt from the Mortgagor of the amounts owed under the related Mortgage Loan
and upon delivery of written notice to the Trustee, on behalf of itself, the
Certificateholders and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. The Trustee shall upon written request of a
Servicing Officer furnish the Master Servicer with any powers of attorney and
other documents necessary or appropriate to enable the Master Servicer to carry
out its servicing and administrative duties hereunder, which powers of attorney
or other documents shall be prepared by the Master Servicer.
The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer and any Subservicer under this Agreement) to the
Trustee under this Agreement is intended by the parties to be that of an
independent contractor and not that of a joint venturer, partner or agent.
(c) In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer shall
assume the terminated Master Servicer's rights under such subservicing
arrangements which termination or assumption will not violate the terms of such
arrangements.
(d) [RESERVED]
(e) The Master Servicer may agree to changes in the terms of a Mortgage
Loan that would not cause the REMIC I to fail to qualify as a REMIC, as
evidenced by a Nondisqualification Opinion delivered by the Master Servicer to
the Trustee prior to the effective date of any such change, provided, however,
that such changes (i) do not adversely affect the interests of
Certificateholders, (ii) are consistent with prudent business practice, as
evidenced by an Officer's Certificate, substantially in the form of Exhibit G,
delivered by the Master Servicer to the Trustee prior to such effective date,
(iii) do not extend the maturity date of such Mortgage Loan in excess of one
year, and (iv) do not result in any change of the Loan Rate of such Mortgage
Loan.
(f) [RESERVED]
(g) The Master Servicer may enter into subservicing agreements for any
servicing and administration of Mortgage Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such subservicing agreement and (1) has been designated as an
approved Seller/Servicer by FHLMC or Fannie Mae, or (2) is an Affiliate of the
Master Servicer. The Master Servicer shall give notice to the Trustee of the
appointment of any Subservicer. Any subservicing arrangement shall be consistent
with and not violate the provisions of this Agreement. The Master Servicer shall
not be relieved of its obligations under this Agreement notwithstanding any such
arrangement or any of the provisions of this Agreement relating to arrangements
between the Master Servicer and a Subservicer or otherwise, and the Master
Servicer shall be obligated to the same extent and under the same terms and
conditions as if the Master Servicer alone were servicing and administering the
Mortgage Loans. Any such arrangement shall be deemed to be between the
Subservicer and the
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Master Servicer alone and the Trustee and the Trust shall not be deemed a party
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to any Subservicer.
(h) The Master Servicer and all Subservicers shall be deemed a single
entity for the purpose of determining compliance with the terms of this
Agreement and the Master Servicer shall be deemed to have received Principal
Collections and Interest Collections on the Mortgage Loans when any Subservicer
has received such Principal Collections and Interest Collections.
SECTION 3.2. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS.
(a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures as it follows with respect to mortgage loans
in its servicing portfolio comparable to the Mortgage Loans. Consistent with the
foregoing, and without limiting the generality of the foregoing, the Master
Servicer may in its discretion (i) waive any late payment charge or any
assumption fees or other fees which may be collected in the ordinary course of
servicing such Mortgage Loan and (ii) arrange with a Mortgagor a schedule for
the payment of interest due and unpaid; provided, that such arrangement is
consistent with the Master Servicer's policies with respect to the mortgage
loans it owns or services; provided, further, that notwithstanding such
arrangement such Mortgage Loans will be included in the information regarding
delinquent Mortgage Loans set forth in the Servicing Certificate and monthly
statement to Certificateholders pursuant to Section 5.2.
(b) The Master Servicer shall establish and maintain a separate account
(the "Collection Account") which may, as provided in Section 3.2(d), be
maintained as a deposit account with the Seller, provided that, upon the
occurrence and continuance of the failure of any of the events described in
clauses (i) or (ii) of Section 3.2(d), the Collection Account shall be
established and maintained with an entity meeting the requirements of the
definition of "Eligible Account", as a separate trust account titled "Norwest
Bank Minnesota, National Association, as Trustee, in trust for the registered
holders of FURST Mortgage Pass-Through Certificates, Series 1998-B." Funds in
the Collection Account in respect of the Pool 1 Mortgage Loans and the Pool 2
Mortgage Loans and amounts withdrawn from the Collection Account attributable to
each of such Pools shall be accounted for separately. The Master Servicer shall
on the Closing Date deposit any amounts representing payments on and any
collections in respect of the Mortgage Loans received as of the Cut-Off Date and
prior to the Closing Date and due for periods after such Cut-Off Date and
thereafter deposit within two Business Days following receipt and identification
thereof by the Master Servicer the following payments and collections received
or made by it (without duplication):
(i) all Interest Collections and Principal Collections
(including any Payaheads received);
(ii) Net Liquidation Proceeds net of any related Foreclosure
Profit;
(iii) Insurance Proceeds;
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(iv) any amounts payable in connection with the repurchase of
any Mortgage Loan and the Substitution Adjustment Amount pursuant to
Article II hereof; and
(v) any amount required to be deposited in the Collection
Account pursuant to Sections 3.2(c), 3.4, 3.5, 3.7 or 3.13;
provided, however, with respect to each Collection Period, the Master Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Master Servicing Fee and the Subservicing Fee for such
Collection Period. The foregoing requirements respecting deposits to the
Collection Account are exclusive, it being understood that, without limiting the
generality of the foregoing, the Master Servicer need not deposit in the
Collection Account amounts representing Foreclosure Profits, fees (including
annual fees) or late charge penalties payable by Mortgagors, or amounts received
by the Master Servicer for the accounts of Mortgagors for application towards
the payment of taxes, insurance premiums, assessments and similar items. The
Master Servicer may retain, as additional servicing compensation, all
Foreclosure Profits and fees and late charge penalties collected from
Mortgagors.
The Seller shall deposit the amounts required to be deposited in respect
of Mortgage Loans purchased by the Seller pursuant to Sections 2.2 and 2.6 to
the Collection Account no later than the date specified therein.
(c) All funds in the Collection Account shall be held (i) uninvested or
(ii) invested at the direction of the Master Servicer in Eligible Investments.
Any investments of funds in the Collection Account shall mature or be
withdrawable at par on or prior to the second Business Day preceding the
immediately succeeding Distribution Date. Any investment earnings on funds held
in the Collection Account shall be for the account of the Master Servicer and
may be withdrawn from the Collection Account by the Master Servicer at any time.
Any investment losses on funds held in the Collection Account shall be for the
account of the Master Servicer and promptly upon the realization of such loss
shall be contributed by the Master Servicer to the Collection Account. Any
references herein to amounts on deposit in the Collection Account shall refer to
amounts net of such investment earnings.
(d) Notwithstanding anything in this Agreement to the contrary, (i) for
so long as (A) the Master Servicer remains an Affiliate of the Seller, (B) no
Event of Default shall have occurred and be continuing and (C) the Seller
maintains a short-term rating of at least A-1 by S&P and P-1 by Moody's, and for
five Business Days following any reduction, suspension, termination or
withdrawal in such rating, or (ii) if following the occurrence and continuation
of any event described in subclause (i) of this Section 3.2(d), an arrangement
is established that is satisfactory to the Rating Agencies and which does not in
itself result in any reduction of any rating issued in respect of the Senior
Certificates, the Master Servicer may establish and maintain the Collection
Account as a deposit account with the Seller.
(e) For all purposes of this Agreement, any amount received at any time
during the term hereof by any Subservicer shall be deemed to constitute receipt
of such amount by the
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Master Servicer (receipt by the Master Servicer shall also be deemed to occur on
the same day as the amount is actually received by the relevant Subservicer),
regardless of whether the Master Servicer actually receives such amount.
SECTION 3.3. WITHDRAWALS FROM THE COLLECTION ACCOUNT.
The Trustee or the Master Servicer, if the Master Servicer is then
maintaining the Collection Account pursuant to Section 3.2(d), shall withdraw or
cause to be withdrawn funds from the Collection Account for the following
purposes:
(i) one Business Day prior to each Distribution Date, to
deposit to the Distribution Account (a) the Pool 1 Distribution Amount
and the Pool 2 Distribution Amount for such Distribution Date and (b) an
amount equal to the Trustee Fee, in each case to the extent the
aggregate of such amounts is available from amounts received during the
Collection Period with respect to the related Collection Period, and not
used to reimburse the Master Servicer for a Monthly Advance;
(ii) to reimburse the Master Servicer for any accrued unpaid
Pool 1 Master Servicing Fees, Pool 1 Subservicing Fees, Pool 2 Master
Servicing Fees and Pool 2 Subservicing Fees and for unreimbursed Monthly
Advances and Servicing Advances. The Master Servicer's right to
reimbursement under this clause (ii) for unpaid Pool 1 Master Servicing
Fees, Pool 1 Subservicing Fees, Pool 2 Master Servicing Fees and Pool 2
Subservicing Fees and unreimbursed Servicing Advances shall be limited
to late collections on the related Mortgage Loan, including Liquidation
Proceeds, Insurance Proceeds and such other amounts as may be collected
by the Master Servicer from the related Mortgagor or otherwise relating
to the Mortgage Loan in respect of which such reimbursed amounts are
owed. The Master Servicer's right to reimbursement under this clause
(ii) for unreimbursed Monthly Advances shall be limited to collections,
Liquidation Proceeds and Insurance Proceeds on the related Mortgage
Loan;
(iii) to withdraw any amount received from a Mortgagor that
is recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having competent
jurisdiction;
(iv) to pay to the Master Servicer interest earned in
respect of Eligible Investments or on funds deposited in the Collection
Account;
(v) to withdraw any funds deposited in the Collection
Account that were not required to be deposited therein (such as
Servicing Compensation) or were deposited therein in error and to pay
such funds to the appropriate Person;
(vi) to pay the Servicing Compensation pursuant to Section
3.9 hereof to the extent not retained or paid pursuant to Section
3.2(b);
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(vii) to reimburse the Master Servicer for Nonrecoverable
Advances; and
(viii) (a) to pay the unpaid Class Principal Balance of the
Class A-R Certificate and (b) to clear and terminate the Collection
Account upon the termination of this Agreement and to pay any amounts
remaining therein to the Class A-R Certificateholders.
SECTION 3.4. MONTHLY ADVANCES; COMPENSATING INTEREST.
(a) No later than 12:00 noon New York City time on the first Business
Day immediately preceding each Distribution Date, the Master Servicer shall,
from its own funds, deposit in the Distribution Account in immediately available
funds by wire transfer an amount (a "Monthly Advance") equal to the aggregate of
the Monthly Payment of each Mortgage Loan due during the related Collection
Period, but not received by the Master Servicer on or before the related
Determination Date, such Monthly Advance to be in an amount net of the Master
Servicing Fee and Subservicing Fee payable with respect to such Mortgage Loans
on the related Distribution Date. Notwithstanding the foregoing, the Master
Servicer shall not be required to make a Monthly Advance if in the good faith
judgment and sole discretion of the Master Servicer, the Master Servicer
determines that such advance would constitute a Nonrecoverable Advance. The
determination by the Master Servicer that it has made, or would be making, a
Nonrecoverable Advance shall be evidenced by a certificate of a Responsible
Officer of the Master Servicer delivered to the Trustee and stating the basis
for such determination. The Master Servicer's obligation to make a Monthly
Advance with respect to any Mortgage Loan will continue until such Mortgage Loan
becomes a Liquidated Mortgage Loan. The Master Servicer may distribute Payaheads
paid to the Master Servicer not yet due in lieu of a required advance of
scheduled principal and interest, but must increase its advances in subsequent
months for which such Payaheads are due to cover scheduled payments represented
thereby.
(b) If a Principal Prepayment occurs on any Mortgage Loan during any
Collection Period, the Compensating Interest shall be deposited by the Master
Servicer to the Collection Account one Business Day prior to the next succeeding
Distribution Date and shall be included in the amount to be made available to
the Trustee on such day.
SECTION 3.5. MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION
EXPENSES.
The Master Servicer shall cause to be maintained for each Mortgage Loan
hazard insurance naming the Master Servicer as loss payee thereunder providing
extended coverage in an amount which is at least equal to the lesser of (A) the
maximum insurable value of the improvements securing such Mortgage Loan from
time to time, (B) the principal balance owing on such Mortgage Loan or (C) the
minimum amount required to compensate for damage or loss on a replacement cost
basis in each case in an amount not less than such amount as is necessary to
avoid the application of any co-insurance clause contained in the related hazard
insurance policy. The Master Servicer shall also maintain on property acquired
upon foreclosure, or by deed in lieu of foreclosure, hazard insurance with
extended coverage in an amount which is at
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least equal to the lesser of (i) the maximum insurable value from time to time
of the improvements which are a part of such property, (ii) the principal
balance owing on such Mortgage Loan or (iii) the minimum amount required to
compensate for damage or loss on a replacement cost basis at the time of such
foreclosure or deed in lieu of foreclosure plus accrued interest and the
good-faith estimate of the Master Servicer of related Liquidation Expenses to be
incurred in connection therewith. Amounts collected by the Master Servicer under
any such policies shall be deposited in the Collection Account to the extent
required by Section 3.2. If the Mortgage Property is in an area identified in
the Federal Register by the Flood Emergency Management Agency as having special
flood hazards and flood insurance has been made available, the Master Servicer
will cause to be maintained a flood insurance policy with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the outstanding principal balance of the Mortgage Loan, (ii) the maximum
insurable value of the improvements securing such Mortgage Loan or (iii) the
maximum amount of insurance which is available under the National Flood
Insurance Act of 1968, as amended, and the Flood Disaster Protection Act of
1973, as amended. The Master Servicer shall also maintain on REO for the benefit
of the Trust, (x) fire and hazard insurance with extended coverage in an amount
which is at least equal to the replacement cost of the improvements which are a
part of such property, (y) public liability insurance and, (z) to the extent
required and available under the National Flood Insurance Act of 1968, as
amended, and the Flood Disaster Protection Act of 1973, as amended, flood
insurance in an amount as provided above.
SECTION 3.6. ASSUMPTION AND MODIFICATION AGREEMENTS.
In any case in which a Mortgaged Property has been or is about to be
conveyed by the Mortgagor, the Master Servicer shall exercise or refrain from
exercising its right to accelerate the maturity of such Mortgage Loan consistent
with the then current practice of the Master Servicer and without regard to the
inclusion of such Mortgage Loan in the Trust unless prohibited by law from doing
so. If it elects not to enforce its right to accelerate or if it is prevented
from doing so by applicable law, the Master Servicer (so long as such action
conforms with the Seller's underwriting standards at the time for new
origination) is authorized to take or enter into an assumption and modification
agreement from or with the Person to whom such Mortgaged Property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Mortgage and, to the extent permitted by applicable law, the Mortgagor remains
liable thereon; provided, however, that the Master Servicer shall not enter into
any such assumption or modification agreement unless the Master Servicer has
determined that the Person to become liable under the Mortgage Loan has achieved
a credit grade under the Seller's then current credit scoring policy of at least
the same (or comparable) level achieved by the original Mortgagor at the time
the Mortgage Loan was originated and provided that the requirements of Section
3.1(e) are satisfied. The Master Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee an Officer's Certificate certifying that such agreement is in compliance
with this Section 3.6 and by forwarding to the Document Custodian the original
copy of such assumption and modification agreement. Any such assumption and
modification agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. No change in the terms of the related Mortgage Loan
may be made by the Master Servicer in connection with any such assumption to the
extent that such change would not be
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permitted to be made in respect of the original Mortgage Loan pursuant to
Section 3.1(e). Any fee collected by the Master Servicer for entering into any
such agreement will be retained by the Master Servicer as additional servicing
compensation.
SECTION 3.7. REALIZATION UPON DEFAULTED MORTGAGE LOANS.
The Master Servicer shall pursue the liquidation of such of the Mortgage
Loans as come into and continue in default when, in the determination of the
Master Servicer, no satisfactory arrangements can be made for collection of
delinquent payments pursuant to Section 3.2. Each such liquidation shall be
either by sale of such Mortgage Loan or by foreclosure (or other comparable
conversion to ownership of the Mortgaged Property securing such Mortgage Loan)
as determined by the Master Servicer, to result in the receipt by the Trust of
the maximum recovery on such Mortgage Loan on a net present value basis (the
relevant discounting of anticipated collections to be performed at the related
Loan Rate). The determination with respect to the maximum recovery on a Mortgage
Loan shall be in accordance with, and consider the factors, costs, fees and
expenses described on Exhibit Q and the Master Servicer shall have no liability
for such determination, or actions taken pursuant to such determination, made in
good faith and absent gross negligence or willful misfeasance. If the Master
Servicer has actual knowledge or reasonably believes that any Mortgaged Property
is affected by hazardous or toxic wastes or substances and that the acquisition
of such Mortgaged Property would not be commercially reasonable, then the Master
Servicer will not cause the Trust to acquire title to such Mortgaged Property in
a foreclosure or similar proceeding. In connection with any foreclosure or other
conversion, the Master Servicer shall follow such practices and procedures as it
shall deem necessary or advisable and as shall be normal and usual in its
general mortgage servicing activities. The foregoing is subject to the proviso
that the Master Servicer shall not be required to expend its own funds in
connection with any foreclosure or restoration of any property unless it shall
determine that such expenditure will increase Net Liquidation Proceeds. In
connection with any sale of any Mortgage Loan arranged by the Master Servicer,
the purchase price of such Mortgage Loan payable to the Trust will be equal to
the amount received from such purchaser net of costs and expenses related to
such sale (which fees shall include a disposition fee payable to the Master
Servicer as compensation for arranging such sale in an amount not more than $250
for each Mortgage Loan). Such purchase price shall be deposited into the
Collection Account pursuant to Section 3.2 on the day of such sale. Promptly
upon receipt by the Trustee and the Document Custodian of a written notification
signed by a Servicing Officer to the effect that such purchase price has been so
deposited into the Collection Account, the Document Custodian shall release to
the Master Servicer the Mortgage File for such sold Mortgage Loan and the
Trustee shall execute and deliver an assignment, prepared by the Master Servicer
and furnished by it to the Trustee, substantially in the form of Exhibit E.
The Master Servicer shall cause to be deposited, no later than each
Determination Date, in the Collection Account, all revenues received with
respect to the related REO for the preceding Collection Period and shall retain
funds necessary for the proper operation, management and maintenance of the REO
and the fees of any managing agent acting on behalf of the Master Servicer.
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The disposition of REO shall be carried out by the Master Servicer for
cash at such price, and upon such terms and conditions, as the Master Servicer
deems to be in the best interest of the Certificateholders and, as soon as
practicable thereafter, the expenses of such sale shall be paid. The cash
proceeds of sale of the REO shall be promptly deposited in the Collection
Account, net of Foreclosure Profits accrued and unpaid Master Servicing Fee and
Subservicing Fee and unreimbursed Servicing Advances and Monthly Advances
payable to the Master Servicer in accordance with Section 3.3, for distribution
to the Certificateholders in accordance with Section 5.1 hereof.
In the event that title to any Mortgage Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee (which may be the Master
Servicer) on behalf of Certificateholders.
In the event that the Trust acquires any Mortgaged Property as aforesaid
or otherwise in connection with a default or imminent default on a Mortgage
Loan, such Mortgaged Property shall be disposed of by or on behalf of the Trust
within three (3) years after its acquisition by the Trust unless the Trustee
shall have received a Nondisqualification Opinion to the effect that the holding
by the Trust of such Mortgaged Property subsequent to three (3) years after its
acquisition will not result in the imposition of taxes on "prohibited
transactions" of the Trust as defined in Section 860F of the Code or cause the
Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding. Notwithstanding any other provision of this Agreement, (i) no
Mortgaged Property acquired by the Master Servicer pursuant to this Section
shall be rented (or allowed to continue to be rented) unless otherwise required
by law or otherwise used for the production of income by or on behalf of the
Trust, and (ii) no construction shall take place on such Mortgaged Property in
such a manner or pursuant to any terms, in either case, that would cause such
Mortgaged Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code or result in the receipt by the Trust
of any "net income from foreclosure property" which is subject to taxation
within the meaning of Sections 860G(c) and 857(b)(4)(B) of the Code. If a period
greater than three (3) years is permitted under this Agreement and is necessary
to sell any REO, the Master Servicer shall give appropriate notice to the
Trustee and the Certificateholders and shall report monthly to the Trustee as to
the progress being made in selling such REO.
The Master Servicer will provide to the Trustee on each Distribution
Date a report in the form attached as Exhibit O (a "Liquidation Report") with
respect to each Liquidated Mortgage Loan during the related Collection Period.
SECTION 3.8. TRUSTEE TO COOPERATE.
On or before each Distribution Date, the Master Servicer will notify the
Trustee of the payment in full of the Loan Balance of any Mortgage Loan during
the preceding Collection Period. Upon any such payment in full, the Master
Servicer is authorized to execute, pursuant to the authorization contained in
Section 3.1, if the assignments of Mortgage have been recorded as required
hereunder, an instrument of satisfaction regarding the related Mortgage, which
instrument of satisfaction shall be recorded by the Master Servicer if required
by applicable law and be delivered to the Person entitled thereto. It is
understood and agreed that no expenses
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incurred in connection with such instrument of satisfaction or transfer shall be
reimbursed from amounts deposited in the Collection Account.
From time to time and as appropriate for the servicing or foreclosure of
any Mortgage Loan, the Document Custodian shall, or if the Trustee is holding
the Mortgage Files, the Trustee shall, upon request of the Master Servicer and
delivery to the Document Custodian or the Trustee, as applicable, of a trust
receipt, in the form annexed hereto as Exhibit I, signed by a Servicing Officer,
release the related Mortgage File to the Master Servicer and the Document
Custodian or the Trustee, as applicable, shall execute such documents, in the
forms provided by the Master Servicer, as shall be necessary to the prosecution
of any such proceedings or the taking of other servicing actions. Such trust
receipt shall obligate the Master Servicer to return the Mortgage File to the
Trustee or the Document Custodian appointed by it when the need therefor by the
Master Servicer no longer exists unless the Mortgage Loan shall be liquidated,
in which case, upon receipt of a certificate of a Servicing Officer similar to
that hereinabove specified, the trust receipt shall be released by the Document
Custodian or the Trustee, as applicable, to the Master Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the Assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Master Servicer, execute an appropriate assignment
in the form provided to the Trustee by the Master Servicer to assign such
Mortgage Loan for the purpose of collection to the Master Servicer (any such
assignment shall unambiguously indicate that the assignment is for the purpose
of collection only), and, upon such assignment, such assignee for collection
will thereupon bring all required actions in its own name and otherwise enforce
the terms of the Mortgage Loan and deposit or credit the Net Liquidation
Proceeds, exclusive of Foreclosure Profits, received with respect thereto in the
Collection Account, it being understood that the Trustee shall have no
responsibility for determining the sufficiency of such assignment for its
intended purpose. In the event that all delinquent payments due under any such
Mortgage Loan are paid by the Mortgagor and any other defaults are cured then
the assignee for collection shall promptly reassign such Mortgage Loan to the
Trustee and return it to the place where the related Mortgage File was being
maintained.
SECTION 3.9. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
MASTER SERVICER.
(a) The Master Servicer shall be entitled to receive the Master
Servicing Fee and the Subservicing Fee in accordance with the terms of this
Agreement as compensation for its services in connection with servicing the
Mortgage Loans. Moreover, additional servicing compensation in the form of late
payment charges, Foreclosure Profits or other receipts not required to be
deposited in the Collection Account shall be retained by the Master Servicer as
additional compensation. The Master Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder (including
payment of all other fees and expenses not expressly stated hereunder to be for
the account of the Certificateholders) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
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(b) The Master Servicer shall be required to pay all expenses incurred
by it in connection with its activities under this Agreement, including fees and
disbursements of the independent accountants referred to in Section 3.11, taxes
imposed on the Master Servicer, and all other fees and expenses not expressly
stated hereunder to be for the account of the Certificateholders (including,
without limitation, the cost of obtaining Opinions of Counsel required under
this Agreement, except as otherwise provided herein), and shall not be entitled
to reimbursement therefor except to the extent that such expenses constitute
Liquidation Expenses or as otherwise specifically provided herein.
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE.
The Master Servicer, at its expense, will deliver to the Trustee, on or
before the last day of the fifth calendar month of each year, beginning in 1999,
an Officer's Certificate stating that (i) a review of the activities of the
Master Servicer during the preceding calendar year (or such shorter period as is
applicable in the case of the first report) and of its performance under this
Agreement has been made under such officer's supervision and (ii) to the best of
such officer's knowledge, based on such review, the Master Servicer has
fulfilled all its material obligations under this Agreement throughout such
year, or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer, the nature and status
thereof and the steps being taken to remedy such default. In addition, the
Master Servicer, at its expense, will deliver to the Trustee, on or before June
30, 1999, an Officer's Certificate stating that it is in compliance with Section
2.4(x).
SECTION 3.11. ANNUAL SERVICING REPORT.
Not later than the last day of the fifth month following the end of the
Master Servicer's fiscal year (December 31), beginning in 1999, the Master
Servicer, at its expense, shall cause a firm of independent public accountants
reasonably acceptable to the Depositor to furnish a letter or letters to the
Depositor and the Trustee to the effect that such firm has with respect to the
Master Servicer's overall servicing operations examined such operations in
accordance with the requirements of the Uniform Single Attestation Program for
Mortgage Bankers, and stating such firm's conclusions relating thereto.
SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS.
(a) The Master Servicer and the Document Custodian shall provide to the
Trustee, and, to the extent that any Certificateholder is a federally insured
savings association, the Office of Thrift Supervision, successor to the Federal
Home Loan Bank Board, to the FDIC and the supervisory agents and examiners of
the Office of Thrift Supervision, reasonable access to the documentation
regarding the Mortgage Loans, and the right to inspect the Master Servicer's
servicing operations and discuss such operations, such access being afforded
without charge but only upon reasonable notice and reasonable in scope and
during normal business hours at their respective offices. Nothing in this
Section 3.12 shall derogate from the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Master Servicer to provide access as provided
in this Section 3.12 as a result of such obligation shall not constitute a
breach of this Section 3.12.
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(b) The Master Servicer shall supply information to the Trustee and the
Paying Agent in such form as the Trustee shall reasonably request, on or before
the start of the fifth Business Day preceding the related Distribution Date, as
is required in the Trustee's reasonable judgment to enable the Paying Agent or
the Trustee, as the case may be, to make required distributions and to furnish
the required reports to Certificateholders.
SECTION 3.13. MAINTENANCE OF CERTAIN INSURANCE POLICIES.
(a) The Master Servicer shall during the term of its service as servicer
maintain in force (i) a policy or policies of insurance covering errors and
omissions in the performance of its obligations as Master Servicer hereunder and
(ii) a fidelity bond in respect of its officers, employees or agents. Each such
policy or policies and bond shall, together, comply with the requirements from
time to time of Fannie Mae for persons performing servicing for mortgage loans
purchased by Fannie Mae. Any such fidelity bond and errors and omissions
insurance shall protect and insure the Master Servicer against losses, including
losses resulting from forgery, theft, embezzlement, fraud, errors and omissions
and negligent acts of Master Servicer employees. Such fidelity bond shall also
protect and insure the Master Servicer against losses in connection with the
release or satisfaction of a Mortgage Loan without having obtained payment in
full of the indebtedness secured thereby. No provision of this Section 3.13
requiring such fidelity bond and errors and omissions insurance shall diminish
or relieve the Master Servicer from its duties and obligations as set forth in
this Agreement. Upon the request of the Trustee or any Certificateholder, the
Master Servicer shall cause to be delivered to the Trustee or such
Certificateholder a certified true copy of such fidelity bond and insurance
policy.
(b) In the event that the Master Servicer shall obtain and maintain a
blanket policy consistent with prudent industry standards insuring against fire
and hazards of extended coverage on all of the Mortgage Loans, then, to the
extent such policy names the Master Servicer as loss payee and provides coverage
in an amount equal to the aggregate unpaid principal balance on the Mortgage
Loans without co-insurance, and otherwise complies with the requirements of
Section 3.5, the Master Servicer shall be deemed conclusively to have satisfied
its obligations with respect to fire and hazard (including flood) insurance
coverage under Section 3.5, it being understood and agreed that such blanket
policy may contain a deductible clause, in which case the Master Servicer shall,
in the event that there shall not have been maintained on the related Mortgaged
Property a policy complying with Section 3.5, and there shall have been a loss
which would have been covered by such policy, deposit in the Collection Account
the difference, if any, between the amount that would have been payable under a
policy complying with Section 3.5 and the amount paid under such blanket policy.
Upon the request of the Trustee or any Certificateholder, the Master Servicer
shall cause to be delivered to the Trustee or such Certificateholder, as the
case may be, a certified true copy of such policy. In connection with its
activities as administrator and servicer of the Mortgage Loans, the Master
Servicer agrees to prepare and present, on behalf of itself, the Trustee, and
Certificateholders, claims under any such policy in a timely fashion in
accordance with the terms of such policy.
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SECTION 3.14. REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED
PROPERTY, RETURNS RELATING TO MORTGAGE INTEREST RECEIVED FROM INDIVIDUALS AND
RETURNS RELATING TO CANCELLATION OF INDEBTEDNESS.
The Master Servicer shall make reports of foreclosures and abandonments
of any Mortgaged Property for each calendar year beginning in 1998. The Master
Servicer shall file reports relating to each instance occurring during the
previous calendar year in which the Master Servicer (i) on behalf of the Trustee
acquires an interest in any Mortgaged Property through foreclosure or other
comparable conversion in full or partial satisfaction of a Mortgage Loan, or
(ii) knows or has reason to know that any Mortgaged Property has been abandoned.
The reports from the Master Servicer shall be in form and substance sufficient
to meet the reporting requirements imposed by Sections 6050J, 6050H and 6050P of
the Code.
SECTION 3.15. REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION.
The Trustee shall, on behalf of the Trust, cause to be filed with the
Securities and Exchange Commission any periodic reports required to be filed
under the provisions of the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Securities and Exchange Commission thereunder. Upon
the request of the Trustee, each of the Seller, the Master Servicer and the
Depositor shall cooperate with the Trustee in the preparation of any such report
and shall provide to the Trustee in a timely manner all such information or
documentation as the Trustee may reasonably request in connection with the
performance of its duties and obligations under this Section.
SECTION 3.16. CUSTODY OF MORTGAGE FILES.
The Trustee hereby agrees to act as Document Custodian of the Related
Documents for each Mortgage Loan. From time to time following delivery of the
Mortgage Files and the Related Documents to the Trustee pursuant to Section
2.01(a) hereof, the Trustee may engage the services of another Person (other
than the Depositor or an Affiliate of the Depositor) who is acceptable to the
Depositor, the Seller and the Master Servicer with the consent of the Rating
Agencies, to act as Document Custodian. Upon execution of a custodial agreement
consistent with the terms hereof, such Document Custodian shall maintain
possession of the Mortgage Files, or such part of them as the Trustee shall
direct, as agent of the Trustee pursuant to the terms of such custodial
agreement. The Seller shall be required to pay the Trustee (or any other Person
designated by the Trustee to act as document custodian) reasonable fees based on
the reciprocal fees charged by the Trustee and the Seller for similar services.
The Document Custodian (if other than the Trustee) shall acknowledge that it is
bailee for the Trustee and is holding all of Related Documents delivered to it
in trust for the Trustee. The Trustee shall not be liable to any Person for
actions or failures to take action of the Document Custodian, unless, and only
to the extent, such actions or failures to act constitute willful misconduct or
negligence.
While the Mortgage Files and the Related Documents are required to be in
the possession of the Trustee or a Document Custodian appointed by it, the
Trustee shall keep the Master Servicer apprised at all times of the location of
the Mortgage Files.
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SECTION 3.17. DUTIES OF DOCUMENT CUSTODIAN; AUTHORITY; INDEMNIFICATION.
(a) Safekeeping. The Document Custodian shall hold the Mortgage Files
for the benefit of the Trustee and maintain such accurate and complete accounts,
records and computer systems pertaining to each Mortgage File as shall enable
the Depositor, the Seller, the Master Servicer and the Trustee to comply with
this Agreement. The Document Custodian shall act with reasonable care, using
that degree of skill and attention in the performance of its duties as it
exercises with respect to the mortgage files relating to all comparable mortgage
loans that it owns or services for itself or others. The Document Custodian
shall conduct, or cause to be conducted, periodic audits of the Mortgage Files
held by it under this Agreement and of the related accounts, records and
computer systems, in such a manner as shall enable the Trustee to verify the
accuracy of the Master Servicer's record keeping. The Document Custodian shall
promptly report to the Trustee and the Master Servicer any failure on its part
to hold the Mortgage 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 Document Custodian shall
maintain each Mortgage File at one of its offices specified in Schedule 1 or at
such other office as shall be specified to the Trustee by written notice
immediately upon any change in location. The Document Custodian (if other than
the Trustee) shall make available to the Trustee or its duly authorized
representatives, attorneys or auditors a list of locations of the Mortgage Files
and the related accounts, records and computer systems maintained by the
Document Custodian at such times during normal business hours as the Trustee
shall instruct.
(c) Release of Documents. Upon written instruction in the form of
Exhibit I from the Trustee (if other than the Document Custodian), the Master
Servicer or a Subservicer, the Document Custodian shall release any Mortgage
File to the Trustee, the Trustee's agent, the Trustee's designee, the Master
Servicer or a Subservicer requested in such written instruction, as the case may
be, at such place or places as requested in such written instruction, as soon as
practicable. The Document Custodian shall provide written notice to the Master
Servicer monthly of any such release to a Subservicer.
(d) Review of Documents. The Document Custodian shall perform the review
(described in Section 2.1(c)) of each Related Document in each Mortgage File
within 180 days from (i) the Closing Date (or the date of actual receipt of such
document if not received on the Closing Date), with respect to each Mortgage
Loan transferred to the Trust on the Closing Date and (ii) the Transfer Date,
with respect to each Eligible Substitute Mortgage Loan transferred to the Trust.
Upon completion of such 180-day period, the Document Custodian will notify the
Trustee (if the Trustee is not also the Document Custodian) and the Master
Servicer of any material defect discovered in such review and the Trustee shall
notify the Depositor of such material defect, as provided in Section 2.1(c) and
on each annual anniversary of the Closing Date shall provide the Trustee, the
Master Servicer and the Depositor a report updating the status of such defects.
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(e) Instructions; Authority To Act. The Document Custodian (if other
than the Trustee) shall be deemed to have received proper instructions with
respect to the Mortgage Files upon its receipt of written instructions signed by
a Responsible Officer of the Trustee.
(f) Document Custodian's Indemnification. The Document Custodian shall
indemnify the Seller, the Master Servicer, the Depositor, the Trust, and the
Trustee (if the Trustee is not also the Document Custodian), and each of their
officers, directors and agents for any and all liabilities, obligations, losses,
compensatory damages, payments, costs or expenses of any kind whatsoever that
may be imposed on, incurred by or asserted against any such person or any of
their officers, directors and agents as the result of any improper act or
omission in any way relating to the maintenance and custody by the Document
Custodian as custodian of the Mortgage Files; provided, however, that the
Document Custodian shall not be liable to any such Person for any amount and any
portion of any such amount resulting from the willful misfeasance, bad faith or
negligence of such Person. The provisions of this Section 3.17(f) shall survive
the termination of this Agreement.
(g) Location of Mortgage Loans. The Mortgage Loans and Related Documents
shall not be located outside the State of Minnesota unless the Document
Custodian shall deliver an Opinion of Counsel to the Trustee to the effect that
all actions have been taken, including the filing of UCC financing statements,
to perfect the rights of the Trustee in the Mortgage Loans and Related
Documents.
SECTION 3.18. [RESERVED]
SECTION 3.19. PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES.
With respect to each Mortgage Loan, the Master Servicer shall maintain
accurate records reflecting fire and hazard (including flood) insurance
coverage.
With respect to each Mortgage Loan as to which the Master Servicer
maintains escrow accounts, the Master Servicer shall maintain accurate records
reflecting the status of ground rents, taxes, assessments, water rates and other
charges which are or may become a lien upon the Mortgaged Property and the
status of primary mortgage guaranty insurance premiums, if any, and fire and
hazard insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date and at a time
appropriate for securing maximum discounts allowable, employing for such purpose
deposits of the Mortgagor in any escrow account which shall have been estimated
and accumulated by the Master Servicer in amounts sufficient for such purposes,
as allowed under the terms of the Mortgage. To the extent that a Mortgage does
not provide for escrow payments, the Master Servicer shall, if it has received
notice of a default or deficiency, monitor such payments to determine if they
are made by the Mortgagor.
SECTION 3.20. [RESERVED]
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ARTICLE IV
DISTRIBUTIONS IN RESPECT
OF CERTIFICATES; SERVICING CERTIFICATES
SECTION 4.1. DISTRIBUTIONS WITH RESPECT TO POOL 1.
(a) On each Distribution Date, the Pool 1 Distribution Amount will be
applied in the following amounts, to the extent the Pool 1 Distribution Amount
is sufficient therefor, in the manner and in the order of priority as follows:
first, to the Classes of Class 1A Certificates, pro rata based upon
their respective Class 1A Interest Accrual Amounts, in an aggregate amount up to
the sum of the Class 1A Interest Accrual Amounts with respect to such
Distribution Date;
second, to the Classes of Class 1A Certificates, pro rata based upon
their respective unpaid Class 1A Interest Shortfall Amounts, in an aggregate
amount up to the sum of the Aggregate Class 1A Unpaid Interest Shortfall
Amounts;
third, concurrently, to the Class 1A Certificates (other than the Class
1A-PO Certificates) and the Class 1A-PO Certificates, pro rata, based on their
respective Class 1A Non-PO Optimal Principal Amount and Class 1A-PO Optimal
Principal Amount, (A) to the Classes of Class 1A Certificates (other than the
Class 1A-PO Certificates), in an aggregate amount up to the Class 1A Non-PO
Optimal Principal Amount, such distribution to be allocated among such Classes
in accordance with Section 4.1(b) or Section 4.1(c), as applicable, and (B) to
the Class 1A-PO Certificates in an amount up to the Class 1A-PO Optimal
Principal Amount;
fourth, to the Class 1A-PO Certificates in an amount up to the Class
1A-PO Deferred Amount from amounts otherwise distributable (without regard to
this Paragraph fourth) first to the Class 1B-5 Certificates pursuant to
Paragraph twenty-second, below, second to the Class 1B-4 Certificates pursuant
to Paragraph nineteenth, below, third to the Class 1B-3 Certificates pursuant to
Paragraph sixteenth, below, fourth to the Class 1B-2 Certificates pursuant to
Paragraph thirteenth, below, fifth to the Class 1B-1 Certificates pursuant to
Paragraph tenth below, and sixth to the Class 1M Certificates pursuant to
Paragraph seventh below;
fifth, to the Class 1M Certificates in an amount up to the Class 1M
Interest Accrual Amount with respect to such Distribution Date;
sixth, to the Class 1M Certificates in an amount up to the Class 1M
Unpaid Interest Shortfall;
seventh, to the Class 1M Certificates in an amount up to the Class 1M
Optimal Principal Amount; provided, however, that the amount distributable to
the Class 1M Certificates pursuant to this Paragraph seventh will be reduced by
the amount, if any, that would have been
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distributable to the Class 1M Certificates hereunder used to pay the Class 1A-PO
Deferred Amount as provided in Paragraph fourth above;
eighth, to the Class 1B-1 Certificates in an amount up to the Class 1B
Interest Accrual Amount for the Class 1B-1 Certificates with respect to such
Distribution Date;
ninth, to the Class 1B-1 Certificates in an amount up to the Class 1B-1
Unpaid Interest Shortfall;
tenth, to the Class 1B-1 Certificates in an amount up to the Class 1B-1
Optimal Principal Amount; provided, however, that the amount distributable to
the Class 1B-1 Certificates pursuant to this Paragraph tenth will be reduced by
the amount, if any, that would have been distributable to the Class 1B-1
Certificates hereunder used to pay the Class 1A-PO Deferred Amount as provided
in Paragraph fourth above;
eleventh, to the Class 1B-2 Certificates in an amount up to the Class 1B
Interest Accrual Amount for the Class 1B-2 Certificates with respect to such
Distribution Date;
twelfth, to the Class 1B-2 Certificates in an amount up to the Class
1B-2 Unpaid Interest Shortfall;
thirteenth, to the Class 1B-2 Certificates in an amount up to the Class
1B-2 Optimal Principal Amount; provided, however, that the amount distributable
to the Class 1B-2 Certificates pursuant to this Paragraph thirteenth will be
reduced by the amount, if any, that would have been distributable to the Class
1B-2 Certificates hereunder which is instead used to pay the Class 1A-PO
Deferred Amount as provided in Paragraph fourth above;
fourteenth, to the Class 1B-3 Certificates in an amount up to the Class
1B Interest Accrual Amount for the Class 1B-3 Certificates with respect to such
Distribution Date;
fifteenth, to the Class 1B-3 Certificates in an amount up to the Class
1B-3 Unpaid Interest Shortfall;
sixteenth, to the Class 1B-3 Certificates in an amount up to the Class
1B-3 Optimal Principal Amount; provided, however, that the amount distributable
to the Class 1B-3 Certificates pursuant to this Paragraph sixteenth will be
reduced by the amount, if any, that would have been distributable to the Class
1B-3 Certificates hereunder which is instead used to pay the Class 1A-PO
Deferred Amount as provided in Paragraph fourth above;
seventeenth, to the Class 1B-4 Certificates in an amount up to the Class
1B Interest Accrual Amount for the Class 1B-4 Certificates with respect to such
Distribution Date;
eighteenth, to the Class 1B-4 Certificates in an amount up to the Class
1B-4 Unpaid Interest Shortfall;
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nineteenth, to the Class 1B-4 Certificates in an amount up to the Class
1B-4 Optimal Principal Amount; provided, however, that the amount distributable
to the Class 1B-4 Certificates pursuant to this Paragraph nineteenth will be
reduced by the amount, if any, that would have been distributable to the Class
1B-4 Certificates hereunder which is instead used to pay the Class 1A-PO
Deferred Amount as provided in Paragraph fourth above;
twentieth, to the Class 1B-5 Certificates in an amount up to the Class
1B Interest Accrual Amount for the Class 1B-5 Certificates with respect to such
Distribution Date;
twenty-first, to the Class 1B-5 Certificates in an amount up to the
Class 1B-5 Unpaid Interest Shortfall;
twenty-second, to the Class 1B-5 Certificates in an amount up to the
Class 1B-5 Optimal Principal Amount; provided, however, that the amount
distributable to the Class 1B-5 Certificates pursuant to this Paragraph
twenty-second will be reduced by the amount, if any, that would have been
distributable to the Class 1B-5 Certificates hereunder which is instead used to
pay the Class 1A-PO Deferred Amount as provided in Paragraph fourth above; and
twenty-third, to the Holder of the Class A-R Certificate.
Notwithstanding the foregoing, after the Principal Balance or notional
amount of any Class of Group 1 Certificates (other than the Class A-R
Certificate) has been reduced to zero, such Class will be entitled to no further
distributions of principal or interest (including, without limitation, any
Unpaid Interest Shortfalls).
With respect to any Distribution Date, the amount of the Group 1
Principal Adjustment, if any, attributable to any Class of Class 1B will be
allocated pro rata based on principal balance among the Class 1A Certificates
(other than the Class 1A-WIO and Class 1A-PO Certificates), the Class 1M
Certificates and any Class of Class 1B Certificates with a lower numerical
designation, and the amount of the Group 1 Principal Adjustment, if any,
attributable to the Class 1M Certificates will be allocated to the Classes of
Class 1A Certificates (other than the Class 1A-WIO and Class 1A-PO Certificates)
pro rata based on the Class 1A Principal Balances.
The Class 1A-WIO Certificates are interest-only Certificates and are not
entitled to distributions in respect of principal.
(b) On each Distribution Date occurring prior to the Group 1 Cross-Over
Date, the Class 1A Non-PO Principal Distribution Amount will be allocated among
and distributed in reduction of the Class 1A Principal Balances of the Classes
of Class 1A Certificates (other than the Class 1A Principal Balance of the Class
1A-PO Certificates) as follows:
first, to the Class 1A-10 Certificates, up to the Class 1A-10 Priority
Amount;
second, to the Class A-R Certificate until the Class 1A Principal
Balance thereof has been reduced to zero;
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third, concurrently, 24.0773441639% to the Class 1A-1 Certificates,
2.0399081759% to the Class 1A-2 Certificates, 43.8121137206% to the Class 1A-3
Certificates, 4.3754193890% to the Class 1A-5 Certificates and 25.6952145506% to
the Class 1A-6 Certificates until the Class A Principal Balance of the Class
1A-1 Certificates have been reduced to zero;
fourth, concurrently, 2.0399081759% to the Class 1A-2 Certificates,
43.8121137206% to the Class 1A-3 Certificates, 24.0773441639% to the Class 1A-4
Certificates, 4.3754193890% to the Class 1A-5 Certificates and 25.6952145506% to
the Class 1A-6 Certificates until the Class A Principal Balance of the Class
1A-2 Certificates have been reduced to zero;
fifth, concurrently, 43.8121137206% to the Class 1A-3 Certificates,
24.0773441639% to the Class 1A-4 Certificates, 4.3754193890% to the Class 1A-5
Certificates, 25.6952145506% to the Class 1A-6 Certificates and 2.0399081759% to
the Class 1A-7 Certificates until the Class A Principal Balance of the Class
1A-3, Class 1A-4 and Class 1A-7 Certificates have been reduced to zero;
sixth, concurrently, 7.5323184564% to the Class 1A-5 Certificates,
74.4595370193% to the Class 1A-6 Certificates and 18.0081445243% to the Class
1A-8 Certificates until the Class A Principal Balance of each such Class has
been reduced to zero;
seventh, concurrently, 56.2313060818% to the Class 1A-9 Certificates,
34.7574900299% to the Class 1A-11 Certificates and 9.0112038883% to the Class
1A-12 Certificates until the Class A Principal Balance of each such Class has
been reduced to zero; and
eighth, to the Class 1A-10 Certificates, without regard to the Class
1A-10 Priority Amount, until the Class A Principal Balance thereof has been
reduced to zero.
(c) Notwithstanding the foregoing, on each Distribution Date occurring
on or subsequent to the Group 1 Cross-Over Date, the Class 1A Non-PO Principal
Distribution Amount shall be distributed among the Classes of Class 1A
Certificates (other than the Class 1A-PO Certificates) pro rata in accordance
with their outstanding Class 1A Principal Balances without regard to either the
proportions or the priorities set forth in Section 4.1(b).
(d) (i) For purposes of determining whether the Classes of Class 1B
Certificates are eligible to receive distributions of principal with respect to
any Distribution Date, the following tests shall apply:
(A) if the Current Class 1M Fractional Interest is less than the
Original Class 1M Fractional Interest and the Class 1M Principal Balance
is greater than zero, the Class 1B-1, Class 1B-2, Class 1B-3, Class 1B-4
and Class 1B-5 Certificates shall not be eligible to receive
distributions of principal; or
(B) if the Current Class 1B-1 Fractional Interest is less than
the Original Class 1B-1 Fractional Interest and the Class 1B-1 Principal
Balance is greater than zero, the
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Class 1B-2, Class 1B-3, Class 1B-4 and Class 1B-5 Certificates shall not
be eligible to receive distributions of principal; or
(C) if the Current Class 1B-2 Fractional Interest is less than
the Original Class 1B-2 Fractional Interest and the Class 1B-2 Principal
Balance is greater than zero, the Class 1B-3, Class 1B-4 and Class 1B-5
Certificates shall not be eligible to receive distributions of
principal; or
(D) if the Current Class 1B-3 Fractional Interest is less than
the Original Class 1B-3 Fractional Interest and the Class 1B-3 Principal
Balance is greater than zero, the Class 1B-4 and Class 1B-5 Certificates
shall not be eligible to receive distributions of principal; or
(E) if the Current Class 1B-4 Fractional Interest is less than
the Original Class 1B-4 Fractional Interest and the Class 1B-4 Principal
Balance is greater than zero, the Class 1B-5 Certificates shall not be
eligible to receive distributions of principal.
(ii) Notwithstanding the foregoing, if on any Distribution Date the
aggregate distributions to Holders of the Class 1M Certificates and/or the
Classes of Class 1B Certificates entitled to receive distributions of principal
would reduce the Class 1M Principal Balance and/or the Class 1B Principal
Balances of the Class 1M Certificates and/or the Classes of Class 1B
Certificates entitled to receive distributions of principal below zero, first
the Class 1M Prepayment Percentage and/or the Class 1B Prepayment Percentage of
any affected Class of Class 1B Certificates for such Distribution Date beginning
with the affected Class with the lowest numerical Class designation and then, if
necessary, the Class 1M Percentage and/or the Class 1B Percentage of such Class
of the Class 1B Certificates for such Distribution Date shall be reduced to the
respective percentages necessary to bring the Class 1M Principal Balance and/or
the Class 1B Principal Balance of such Class 1B to zero. The Class 1B Prepayment
Percentages and the Class 1B Percentages of the remaining Class 1B Certificates
will be recomputed substituting for the Group 1 Subordinate Prepayment
Percentage and Subordinate Percentage in such computations the difference
between (A) the Group 1 Subordinate Prepayment Percentage or Group 1 Subordinate
Percentage, as the case may be, and (B) the percentages determined in accordance
with the preceding sentence necessary to bring the Class 1M Principal Balance
and/or the Class 1B Principal Balances of the affected Class 1B Certificates to
zero; provided, however, that if the Class 1B Principal Balances of all the
Class 1B Certificates eligible to receive distributions of principal shall be
reduced to zero on such Distribution Date, the Class 1B Prepayment Percentage
and the Class 1B Percentage of the Class 1B Certificates with the lowest
numerical Class designation which would otherwise be ineligible to receive
distributions of principal in accordance with this Section shall equal the
remainder of the Group 1 Subordinate Prepayment Percentage for such Distribution
Date minus the sum of the Class 1M Prepayment Percentage and the Class 1B
Prepayment Percentages of the Class 1B Classes having lower numerical Class
designations, if any, and the remainder of the Group 1 Subordinate Percentage
for such Distribution Date minus the sum of the Class 1M Percentage and the
Class 1B Percentages of the Class 1B Certificates having lower numerical Class
designations, if any, respectively. Any entitlement of any Class 1B Certificates
to principal
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payments solely pursuant to this clause (ii) shall not cause such Class to be
regarded as being eligible to receive principal distributions for the purpose of
applying the definition of its Class 1B Percentage or Class 1B Prepayment
Percentage.
SECTION 4.2. ALLOCATION OF REALIZED LOSSES WITH RESPECT TO POOL 1.
(a) With respect to any Distribution Date, the principal portion of
Realized Losses (other than Debt Service Reductions, Pool 1 Excess Special
Hazard Losses, Pool 1 Excess Fraud Losses and Pool 1 Excess Bankruptcy Losses)
with respect to Pool 1 will be allocated as follows:
first, to the Class 1B-5 Certificates until the Class 1B-5 Principal
Balance has been reduced to zero;
second, to the Class 1B-4 Certificates until the Class 1B-4 Principal
Balance has been reduced to zero;
third, to the Class 1B-3 Certificates until the Class 1B-3 Principal
Balance has been reduced to zero;
fourth, to the Class 1B-2 Certificates until the Class 1B-2 Principal
Balance has been reduced to zero;
fifth, to the Class 1B-1 Certificates until the Class 1B-1 Principal
Balance has been reduced to zero;
sixth, to the Class 1M Certificates until the Class 1M Principal Balance
has been reduced to zero; and
seventh, concurrently, to the Class 1A Certificates (other than the
Class 1A-PO Certificates) and Class 1A-PO Certificates, pro rata, based on the
Non-PO Fraction and the PO Fraction, respectively.
This allocation of Realized Losses will be effected through the
reduction of the applicable Class's Principal Balance.
(b) With respect to any Distribution Date, the principal portion of Pool
1 Excess Special Hazard Losses, Pool 1 Excess Fraud Losses and Pool 1 Excess
Bankruptcy Losses occurring with respect to any Pool 1 Mortgage Loan allocable
to the Class 1A-PO Certificates will equal the product of the amount of any such
principal loss and the PO Fraction for such Pool 1 Mortgage Loan. The principal
portion of any Pool 1 Excess Special Hazard Losses, Pool 1 Excess Fraud Losses
and Pool 1 Excess Bankruptcy Losses remaining after allocation to the Class
1A-PO Certificates in accordance with the preceding sentence shall be allocated
pro rata among the Class 1A Certificates (other than the Class 1A-PO
Certificates), Class 1M Certificates and Class 1B Certificates based on the
Class 1A Non-PO Principal Balance, Class 1M Principal Balance and the Class 1B
Principal Balance, respectively. Any such loss allocated to the Class
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1A Certificates shall be allocated on the subsequent Determination Date among
the outstanding Classes of Class 1A Certificates (other than the Class 1A-PO
Certificates) in accordance with the Class 1A Loss Percentages as of such
Determination Date. Any such loss allocated to the Class 1B Certificates shall
be allocated pro rata among the outstanding Classes of Class 1B Certificates
based on their Class 1B Principal Balances.
(c) Any Realized Losses allocated to a Class of Class 1A Certificates or
Class 1B Certificates or to the Class 1M Certificates pursuant to Section 4.2(a)
or Section 4.2(b) shall be allocated among the Certificates of such Class based
on their Percentage Interests.
(d) In the event that there is a Recovery of an amount in respect of
principal of a Pool 1 Mortgage Loan which had previously been allocated as a
Realized Loss to any Classes of Class 1A Certificates, the Class 1M Certificates
or any Classes of Class 1B Certificates, each outstanding Class to which such
Realized Loss had previously been allocated shall be entitled to its share (with
respect to the Class 1A-PO Certificates, based on the PO Fraction of such Pool 1
Mortgage Loan and, with respect to the Class 1A Certificates (other than the
Class 1A-PO Certificates), Class 1M Certificates and Class 1B Certificates,
based on their pro rata share of the Non-PO Fraction of such Mortgage Loan) of
such Recovery up to the amount of such Realized Loss previously allocated to
such Class on the Distribution Date in the month following the month in which
such recovery is received. When the Principal Balance of a Class of Certificates
has been reduced to zero, such Class shall not be entitled to any share of such
Recovery. In the event that the amount of such Recovery exceeds the amount of
such Recovery allocated to each outstanding Class in accordance with the
preceding provisions, each outstanding Class shall be entitled to its pro rata
share (determined as described above) of such excess up to the amount of any
unrecovered Realized Loss previously allocated to such Class. Notwithstanding
the foregoing provisions, but subject to the following proviso, if such Recovery
occurs within two years of the realization of such loss and (i) is the result of
an event that would have given rise to the repurchase of the related Pool 1
Mortgage Loan by the Seller pursuant to Section 2.6, or (ii) represents in whole
or part funds which the Master Servicer had received in respect of a Liquidated
Mortgage Loan but failed to remit to the Collection Account on or prior to the
Business Day preceding the Distribution Date following the Collection Period in
which the Pool 1 Mortgage Loan became a Liquidated Mortgage Loan, such Recovery
may, at the sole discretion of the Master Servicer, be treated as a repurchase
or an Unscheduled Principal Receipt with respect to such Mortgage Loan, as the
case may be, the Realized Loss previously recognized may be reversed and treated
for all subsequent purposes as if it had never occurred and the Master Servicer
may make such adjustments to interest or principal distributions on the Group 1
Certificates and to the principal balances of the Group 1 Certificates as the
Master Servicer in its good faith judgment and sole discretion deems necessary
or desirable to effectuate the reversal of the Realized Loss and the treatment
of such amount as a repurchase or as an Unscheduled Principal Receipt, as the
case may be; provided that such actions do not result in the aggregate
distributions made in respect of each Class of Certificates whose principal
balances were previously reduced as a result of such Realized Loss being less
than such Class would have received if such Recovery had been deposited in the
Collection Account on or prior to the Business Day preceding the Distribution
Date following the applicable Collection Period in which the Mortgage Loan
became a Liquidated Mortgage Loan.
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(e) The interest portion of Pool 1 Excess Special Hazard Losses, Pool 1
Excess Fraud Losses and Pool 1 Excess Bankruptcy Losses shall be allocated among
the Class 1A Certificates, Class 1M Certificates and Class 1B Certificates, pro
rata based on the Class 1A Interest Accrual Amount, the Class 1M Interest
Accrual Amount and the Class 1B Interest Accrual Amount for the related
Distribution Date, without regard to any reduction pursuant to this sentence.
Any such loss allocated to the Class 1A Certificates shall be allocated among
the outstanding Classes of Class 1A Certificates based on their Class 1A
Interest Percentages. Any such loss allocated to the Class 1B Certificates will
be allocated among the outstanding Classes of Class 1B Certificates based on
their Class 1B Interest Percentages. In addition, after the Class 1M Principal
Balance and the Class 1B Principal Balance have been reduced to zero, the
interest portion of Realized Losses (other than Pool 1 Excess Special Hazard
Losses, Pool 1 Excess Fraud Losses and Pool 1 Excess Bankruptcy Losses) will be
allocated among the outstanding Classes of Class 1A Certificates based on their
Class 1A Interest Percentages.
(f) Realized Losses allocated in accordance with this Section 4.2 will
be allocated on the Determination Date in the second month following the month
in which such loss was incurred with respect to the preceding Distribution Date.
SECTION 4.3. DISTRIBUTIONS WITH RESPECT TO POOL 2.
(a) On each Distribution Date, the Pool 2 Distribution Amount will be
applied in the following amounts, to the extent the Pool 2 Distribution Amount
is sufficient therefor, in the manner and in the order of priority as follows:
first, to the Class 2A Certificates in an aggregate amount up to the
Class 2A Interest Accrual Amounts with respect to such Distribution Date;
second, to the Class 2A Certificates in an aggregate amount up to the
sum of the previously unpaid Class 2A Interest Shortfall Amounts;
third, to the Class 2A Certificates in an aggregate amount up to the
Class 2A Optimal Principal Amount;
fourth, to the Class 2M Certificates in an amount up to the Class 2M
Interest Accrual Amount with respect to such Distribution Date;
fifth, to the Class 2M Certificates in an amount up to the Class 2M
Unpaid Interest Shortfall;
sixth, to the Class 2M Certificates in an amount up to the Class 2M
Optimal Principal Amount;
seventh, to the Class 2B-1 Certificates in an amount up to the Class 2B
Interest Accrual Amount for the Class 2B-1 Certificates with respect to such
Distribution Date;
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eighth, to the Class 2B-1 Certificates in an amount up to the Class 2B-1
Unpaid Interest Shortfall;
ninth, to the Class 2B-1 Certificates in an amount up to the Class 2B-1
Optimal Principal Amount;
tenth, to the Class 2B-2 Certificates in an amount up to the Class 2B
Interest Accrual Amount for the Class 2B-2 Certificates with respect to such
Distribution Date;
eleventh, to the Class 2B-2 Certificates in an amount up to the Class
2B-2 Unpaid Interest Shortfall;
twelfth, to the Class 2B-2 Certificates in an amount up to the Class
2B-2 Optimal Principal Amount;
thirteenth, to the Class 2B-3 Certificates in an amount up to the Class
2B Interest Accrual Amount for the Class 2B-3 Certificates with respect to such
Distribution Date;
fourteenth, to the Class 2B-3 Certificates in an amount up to the Class
2B-3 Unpaid Interest Shortfall;
fifteenth, to the Class 2B-3 Certificates in an amount up to the Class
2B-3 Optimal Principal Amount;
sixteenth, to the Class 2B-4 Certificates in an amount up to the Class
2B Interest Accrual Amount for the Class 2B-4 Certificates with respect to such
Distribution Date;
seventeenth, to the Class 2B-4 Certificates in an amount up to the Class
2B-4 Unpaid Interest Shortfall;
eighteenth, to the Class 2B-4 Certificates in an amount up to the Class
2B-4 Optimal Principal Amount;
nineteenth, to the Class 2B-5 Certificates in an amount up to the Class
2B Interest Accrual Amount for the Class 2B-5 Certificates with respect to such
Distribution Date;
twentieth, to the Class 2B-5 Certificates in an amount up to the Class
2B-5 Unpaid Interest Shortfall; and
twenty-first, to the Class 2B-5 Certificates in an amount up to the
Class 2B-5 Optimal Principal Amount.
Notwithstanding the foregoing, after the Principal Balance or notional
amount of any Class of Group 2 Certificates of Group 2 Certificates has been
reduced to zero, such Class will be
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entitled to no further distributions of principal or interest (including,
without limitation, any Unpaid Interest Shortfalls).
With respect to any Distribution Date, the amount of the Group 2
Principal Adjustment, if any, attributable to any Class of Class 2B will be
allocated pro rata based on principal balance among the Class 2A Certificates,
the Class 2M Certificates and any Class of Class 2B Certificates with a lower
numerical designation and the amount of the Group 2 Principal Adjustment, if
any, attributable to the Class 2M Certificates will be allocated to the Class 2A
Certificates.
(b) On each Distribution Date occurring prior to the Group 2 Cross-Over
Date, the Class 2A Principal Distribution Amount will be distributed in
reduction of the Class 2A Principal Balance of the Class 2A Certificates.
(c) [RESERVED]
(d) (i) For purposes of determining whether the Classes of Class 2B
Certificates are eligible to receive distributions of principal with respect to
any Distribution Date, the following tests shall apply:
(A) if the Current Class 2M Fractional Interest is less than the
Original Class 2M Fractional Interest and the Class 2M Principal Balance
is greater than zero, the Class 2B-1, Class 2B-2, Class 2B-3, Class 2B-4
and Class 2B-5 Certificates shall not be eligible to receive
distributions of principal; or
(B) if the Current Class 2B-1 Fractional Interest is less than
the Original Class 2B-1 Fractional Interest and the Class 2B-1 Principal
Balance is greater than zero, the Class 2B-2, Class 2B-3, Class 2B-4 and
Class 2B-5 Certificates shall not be eligible to receive distributions
of principal; or
(C) if the Current Class 2B-2 Fractional Interest is less than
the Original Class 2B-2 Fractional Interest and the Class 2B-2 Principal
Balance is greater than zero, the Class 2B-3, Class 2B-4 and Class 2B-5
Certificates shall not be eligible to receive distributions of
principal; or
(D) if the Current Class 2B-3 Fractional Interest is less than
the Original Class 2B-3 Fractional Interest and the Class 2B-3 Principal
Balance is greater than zero, the Class 2B-4 and Class 2B-5 Certificates
shall not be eligible to receive distributions of principal; or
(E) if the Current Class 2B-4 Fractional Interest is less than
the Original Class 2B-4 Fractional Interest and the Class 2B-4 Principal
Balance is greater than zero, the Class 2B-5 Certificates shall not be
eligible to receive distributions of principal.
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(ii) Notwithstanding the foregoing, if on any Distribution Date the
aggregate distributions to Holders of the Class 2M Certificates and/or the
Classes of Class 2B Certificates entitled to receive distributions of principal
would reduce the Class 2M Principal Balance and/or the Class 2B Principal
Balances of the Class 2M Certificates and/or the Classes of Class 2B
Certificates entitled to receive distributions of principal below zero, first
the Class 2M Prepayment Percentage and/or the Class 2B Prepayment Percentage of
any affected Class of Class 2B Certificates for such Distribution Date beginning
with the affected Class with the lowest numerical Class designation and then, if
necessary, the Class 2M Percentage and/or the Class 2B Percentage of such Class
of the Class 2B Certificates for such Distribution Date shall be reduced to the
respective percentages necessary to bring the Class 2M Principal Balance and/or
the Class 2B Principal Balance of such Class 2B to zero. The Class 2B Prepayment
Percentages and the Class 2B Percentages of the remaining Class 2B Certificates
will be recomputed substituting for the Group 2 Subordinate Prepayment
Percentage and Group 2 Subordinate Percentage in such computations the
difference between (A) the Group 2 Subordinate Prepayment Percentage or Group 2
Subordinate Percentage, as the case may be, and (B) the percentages determined
in accordance with the preceding sentence necessary to bring the Class 2M
Principal Balance and/or the Class 2B Principal Balances of the affected Class
2B Certificates to zero; provided, however, that if the Class 2B Principal
Balances of all the Class 2B Certificates eligible to receive distributions of
principal shall be reduced to zero on such Distribution Date, the Class 2B
Prepayment Percentage and the Class 2B Percentage of the Class 2B Certificates
with the lowest numerical Class designation which would otherwise be ineligible
to receive distributions of principal in accordance with this Section shall
equal the remainder of the Group 2 Subordinate Prepayment Percentage for such
Distribution Date minus the sum of the Class 2M Prepayment Percentage and the
Class 2B Prepayment Percentages of the Class 2B Classes having lower numerical
Class designations, if any, and the remainder of the Group 2 Subordinate
Percentage for such Distribution Date minus the sum of the Class 2M Percentage
and the Class 2B Percentages of the Class 2B Certificates having lower numerical
Class designations, if any, respectively. Any entitlement of any Class 2B
Certificates to principal payments solely pursuant to this clause (ii) shall not
cause such Class to be regarded as being eligible to receive principal
distributions for the purpose of applying the definition of its Class 2B
Percentage or Class 2B Prepayment Percentage.
SECTION 4.4. ALLOCATION OF REALIZED LOSSES WITH RESPECT TO POOL 2.
(a) With respect to any Distribution Date, the principal portion of
Realized Losses (other than Debt Service Reductions, Pool 2 Excess Special
Hazard Losses, Pool 2 Excess Fraud Losses and Pool 2 Excess Bankruptcy Losses)
with respect to Pool 2 will be allocated as follows:
first, to the Class 2B-5 Certificates until the Class 2B-5 Principal
Balance has been reduced to zero;
second, to the Class 2B-4 Certificates until the Class 2B-4 Principal
Balance has been reduced to zero;
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third, to the Class 2B-3 Certificates until the Class 2B-3 Principal
Balance has been reduced to zero;
fourth, to the Class 2B-2 Certificates until the Class 2B-2 Principal
Balance has been reduced to zero;
fifth, to the Class 2B-1 Certificates until the Class 2B-1 Principal
Balance has been reduced to zero;
sixth, to the Class 2M Certificates until the Class 2M Principal Balance
has been reduced to zero; and
seventh, to the Class 2A Certificates.
This allocation of Realized Losses will be effected through the
reduction of the applicable Class's Principal Balance.
(b) With respect to any Distribution Date, the principal portion of Pool
2 Excess Special Hazard Losses, Pool 2 Excess Fraud Losses and Pool 2 Excess
Bankruptcy Losses occurring with respect to any Pool 2 Mortgage Loan shall be
allocated pro rata among the Class 2A Certificates, Class 2M Certificates and
Class 2B Certificates based on the Class 2A Principal Balance, Class 2M
Principal Balance and the Aggregate Class 2B Principal Balance, respectively.
Any such loss allocated to the Class 2B Certificates shall be allocated pro rata
among the outstanding Classes of Class 2B Certificates based on their Class 2B
Principal Balances.
(c) Any Realized Losses allocated to the Class 2A Certificates or a
Class of Class 2B Certificates or to the Class 2M Certificates pursuant to
Section 4.4(a) or Section 4.4(b) shall be allocated among the Certificates of
such Class based on their Percentage Interests.
(d) In the event that there is a Recovery of an amount in respect of
principal of a Pool 2 Mortgage Loan which had previously been allocated as a
Realized Loss to the Class 2A Certificates, the Class 2M Certificates or any
Classes of Class 2B Certificates, each outstanding Class to which such Realized
Loss had previously been allocated shall be entitled to its share of such
Recovery up to the amount of such Realized Loss previously allocated to such
Class on the Distribution Date in the month following the month in which such
recovery is received. When the Principal Balance of a Class of Certificates has
been reduced to zero, such Class shall not be entitled to any share of such
Recovery. In the event that the amount of such Recovery exceeds the amount of
such Recovery allocated to each outstanding Class in accordance with the
preceding provisions, each outstanding Class shall be entitled to its pro rata
share (determined as described above) of such excess up to the amount of any
unrecovered Realized Loss previously allocated to such Class. Notwithstanding
the foregoing provisions, but subject to the following proviso, if such Recovery
occurs within two years of the realization of such loss and (i) is the result of
an event that would have given rise to the repurchase of the related Pool 2
Mortgage Loan by the Seller pursuant to Section 2.6, or (ii) represents in whole
or part funds which the
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Master Servicer had received in respect of a Liquidated Mortgage Loan but failed
to remit to the Collection Account on or prior to the Business Day preceding the
Distribution Date following the Collection Period in which the Pool 2 Mortgage
Loan became a Liquidated Mortgage Loan, such Recovery may, at the sole
discretion of the Master Servicer, be treated as a repurchase or an Unscheduled
Principal Receipt with respect to such Mortgage Loan, as the case may be, the
Realized Loss previously recognized may be reversed and treated for all
subsequent purposes as if it had never occurred and the Master Servicer may make
such adjustments to interest or principal distributions on the Group 2
Certificates and to the principal balances of the Group 2 Certificates as the
Master Servicer in its good faith judgment and sole discretion deems necessary
or desirable to effectuate the reversal of the Realized Loss and the treatment
of such amount as a repurchase or as an Unscheduled Principal Receipt, as the
case may be; provided that such actions do not result in the aggregate
distributions made in respect of each Class of Certificates whose principal
balances were previously reduced as a result of such Realized Loss being less
than such Class would have received if such Recovery had been deposited in the
Collection Account on or prior to the Business Day preceding the Distribution
Date following the applicable Collection Period in which the Mortgage Loan
became a Liquidated Mortgage Loan.
(e) The interest portion of Pool 2 Excess Special Hazard Losses, Pool 2
Excess Fraud Losses and Pool 2 Excess Bankruptcy Losses shall be allocated among
the Class 2A Certificates, Class 2M Certificates and Class 2B Certificates, pro
rata based on the Class 2A Interest Accrual Amount, the Class 2M Interest
Accrual Amount and the Class 2B Interest Accrual Amount for the related
Distribution Date, without regard to any reduction pursuant to this sentence.
Any such loss allocated to the Class 2B Certificates will be allocated among the
outstanding Classes of Class 2B Certificates based on their Class 2B Interest
Percentages. In addition, after the Class 2M Principal Balance and the Class 2B
Principal Balance have been reduced to zero, the interest portion of Realized
Losses (other than Pool 2 Excess Special Hazard Losses, Pool 2 Excess Fraud
Losses and Pool 2 Excess Bankruptcy Losses) will be allocated to the Class 2A
Certificates.
(f) Realized Losses allocated in accordance with this Section 4.4 will
be allocated on the Determination Date in the second month following the month
in which such loss was incurred with respect to the preceding Distribution Date.
SECTION 4.5. SERVICING CERTIFICATE.
Not later than the Determination Date each month, the Master Servicer
shall deliver to the Trust Administrator a Servicing Certificate (substantially
in the form of Exhibit H or the form of computer readable media or such other
electronic form as may be agreed to by the Trust Administrator and the Master
Servicer) (which Servicing Certificate shall be deemed to constitute a
certification that the information contained in such Servicing Certificate is
true and correct in all material respects), stating the related Collection
Period, Distribution Date, the series number of the Certificates, the date of
this Agreement, and:
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(i) the aggregate amount of collections received on the
Mortgage Loans on or prior to the Determination Date in respect of such
Collection Period, separately stating the amounts received in respect of
principal and interest;
(ii) the aggregate amount of (a) Interest Collections and
(b) Principal Collections for such Collection Period; and
(iii) any other information regarding the Mortgage Loans
necessary for the Trustee to make distributions and payments in
accordance with Section 5.1 and for the Trust Administrator to prepare
the reports required to be delivered to Certificateholders pursuant to
Section 5.2.
The Trust Administrator shall conclusively rely upon the information
contained in a Servicing Certificate for purposes of making distributions
pursuant to Section 5.1 and for all other purposes, shall have no duty to
inquire into such information and shall have no liability in so relying. The
format and content of the Servicing Certificate may be modified by the mutual
agreement of the Master Servicer and the Trust Administrator.
ARTICLE V
DISTRIBUTION; STATEMENTS TO
CERTIFICATEHOLDERS; RIGHTS OF CERTIFICATEHOLDERS;
SECTION 5.1. DISTRIBUTIONS.
(a) With respect to the Distribution Account, on each Distribution Date,
the Trustee shall make the following disbursements from amounts transferred
thereto pursuant to Section 3.3(i), in the following order of priority, and each
such disbursement shall be treated as having occurred only after all preceding
disbursements have occurred:
(i) First, to the Trustee, the Trustee Fee;
(ii) Second, to each Certificateholder, from the amount and to
the extent of the Pool 1 Distribution Amount and the Pool 2 Distribution Amount,
respectively, such Certificateholder's share (based on the aggregate Percentage
Interests represented by the Certificates of the applicable Class held by such
Certificateholder) of the amounts and in the order of priority as set forth in
Article IV, by wire transfer in immediately available funds for the account of
each Certificateholder, or by any other means of payment acceptable to each
Certificateholder of record on the immediately preceding Record Date (other than
as provided in Section 10.1 respecting the final distribution), as specified by
each such Certificateholder and at the address of such Holder appearing in the
Certificate Register.
(b) All reductions in the Certificate Principal Balance of a Certificate
effected by distributions of principal or allocations of Realized Losses with
respect to Mortgage Loans made
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on any Distribution Date shall be binding upon all Holders of such Certificate
and of any Certificate issued upon the registration of transfer or exchange
therefor or in lieu thereof, whether or not such distribution is noted on such
Certificate. The final distribution of principal of each Certificate (and the
final distribution with respect to the Class A-R Certificate upon termination of
the Trust) shall be payable in the manner provided above only upon presentation
and surrender thereof on or after the Distribution Date therefor at the office
or agency of the Trustee specified in the notice delivered pursuant to Section
5.1(c) or Section 10.1.
(c) Whenever, on the basis of Curtailments, Payoffs and Monthly Payments
on the Mortgage Loans and Insurance Proceeds and Liquidation Proceeds received
and expected to be received during the applicable Collection Period, the Trustee
believes, that the entire remaining unpaid Class Principal Balance of any Class
of Certificates will become distributable on the next Distribution Date, the
Trustee, shall, no later than the Determination Date of the month of such
Distribution Date, mail or cause to be mailed to each Person in whose name a
Certificate to be so retired is registered at the close of business on the
Record Date, to the Underwriters and to each Rating Agency a notice to the
effect that:
(i) it is expected that funds sufficient to make such final
distribution will be available in the Collection Account on such
Distribution Date, and
(ii) if such funds are available, (A) such final distribution
will be payable on such Distribution Date, but only upon presentation
and surrender of such Certificate at the office or agency of the
Certificate Registrar maintained for such purpose (the address of which
shall be set forth in such notice), and (B) no interest shall accrue on
such Certificate after such Distribution Date.
(d) Method of Distribution. The Trustee shall make distributions in
respect of a Distribution Date to each Certificateholder of record on the
related Record Date (other than as provided in Section 10.1 respecting the final
distribution) by check or money order mailed to such Certificateholder at the
address appearing in the Certificate Register, or upon written request by a
Certificateholder delivered to the Trustee at least five Business Days prior to
such Record Date, by wire transfer (but only if such Certificateholder is the
Depositor or such Certificateholder owns of record either (a) one or more
Certificates of a Class aggregating at least $1,000,000 Original Class
Certificate Principal Balance or (b) one or more Class Certificates of a Class
with Percentage Interests aggregating 30%). Distributions among
Certificateholders shall be made in proportion to the Percentage Interests
evidenced by the Certificates held by such Certificateholders.
(e) Distributions on Book-Entry Certificates. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. All such
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credits and disbursements with respect to a Book-Entry Certificate are to be
made by the Depository and the Depository Participants in accordance with the
provisions of the Certificates. None of the Trustee, the Paying Agent, the
Trustee, the Depositor, the Master Servicer or the Seller shall have any
responsibility therefor except as otherwise provided by applicable law.
SECTION 5.2. STATEMENTS.
(a) Not later than 12:00 a.m. New York time on the day that is two
Business Days before each Distribution Date, the Trust Administrator will
deliver to the Trustee (by hard copy) and the Master Servicer, the Depositor and
the Seller (by electronic transmission) in the format specified in Exhibit K
(unless otherwise agreed to by the parties hereto), with a hard copy thereof to
be delivered on such Distribution Date, a statement (the "Remittance Report")
(based solely on the computer or electronic Servicing Certificate for such
Distribution Date provided pursuant to Section 4.1) containing the information
set forth below with respect to such Distribution Date:
(i) the aggregate amount of the distribution to each Class of
Certificateholders on such Distribution Date in respect of the Group 1
Certificates or the Group 2 Certificates, as applicable;
(ii) the amount of distribution set forth in paragraph (i) above in
respect of interest in respect of the Group 1 Certificates or the Group 2
Certificates, as applicable;
(iii) the amount of distribution set forth in paragraph (i) above in
respect of principal in respect of the Group 1 Certificates or the Group 2
Certificates, as applicable;
(iv) the Pool Distribution Amount for such Distribution Date in respect
of the Group 1 Certificates or the Group 2 Certificates, as applicable;
(v) for the applicable Group of Certificates: any Class A Interest
Shortfall Amount or Class B Interest Shortfall Amount arising with respect to
each Class or any Class M Interest Shortfall Amount on such Distribution Date,
any remaining unpaid Class A Interest Shortfall Amount or Class B Interest
Shortfall Amount with respect to each Class, or any remaining unpaid Class M
Interest Shortfall Amount, after giving effect to such distribution and any
Non-Supported Interest Shortfall or the interest portion of Realized Losses
allocable to such Class with respect to such Distribution Date;
(vi) for the applicable Pool: the Adjusted Pool Amount, the Adjusted
Pool Amount (PO Portion), if applicable, and the Pool Scheduled Principal
Balance of the Mortgage Loans in such Pool and, for the Holders of Group 1
Certificates, the aggregate Scheduled Principal Balance of the Discount Pool 1
Mortgage Loans for such Distribution Date;
(vii) for the applicable Group of Certificates: the Class A Percentage,
Class M Percentage and Class B Percentage of each Class of Class B Certificates
for the following Distribution Date (without giving effect to Unscheduled
Principal Receipts for the related Pool
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received after the applicable Collection Period for the current Distribution
Date that are applied during such Collection Period);
(viii) for the Holders of Group 1 Certificates, the Class 1A-PO Deferred
Amount;
(ix) the aggregate Master Servicing Fee, Subservicing Fee, Trust
Administration Fee and Trustee Fee for the applicable Pool;
(x) the Aggregate Loan Balance, as of the close of business on the last
day of the preceding Collection Period in respect of the Pool 1 Mortgage Loans
or the Pool 2 Mortgage Loans, as applicable;
(xi) the Class Principal Balance for each Class after giving effect to
payments allocated to principal above in respect of the Group 1 Certificates or
the Group 2 Certificates, as applicable;
(xii) the number and aggregate Loan Balances of the Mortgage Loans as to
which the scheduled monthly payment is delinquent for 30-59 days, 60-89 days and
90 or more days, respectively, as of the end of the Collection Period in respect
of the Pool 1 Mortgage Loans or the Pool 2 Mortgage Loans, as applicable;
(xiii) the book value of any real estate which is acquired by the Trust
through foreclosure or grant of deed in lieu of foreclosure in respect of the
Pool 1 Mortgage Loans or the Pool 2 Mortgage Loans, as applicable;
(xiv) the aggregate amount of Prepayments received on the Mortgage Loans
during the previous Collection Period in respect of the Pool 1 Mortgage Loans or
the Pool 2 Mortgage Loans, as applicable;
(xv) the aggregate amount of scheduled principal payments received on
the Mortgage Loans during the previous Collection Period in respect of the Pool
1 Mortgage Loans or the Pool 2 Mortgage Loans, as applicable;
(xvi) the weighted average maturity of the Mortgage Loans as of the
first day of the month prior to the Distribution Date in respect of the Pool 1
Mortgage Loans or the Pool 2 Mortgage Loans, as applicable;
(xvii) the weighted average Loan Rate on the Mortgage Loans as of the
first day of the month prior to the Distribution Date in respect of the Pool 1
Mortgage Loans or the Pool 2 Mortgage Loans, as applicable;
(xviii)the aggregate amount of Realized Losses related to such
Collection Period in respect of the Pool 1 Mortgage Loans or the Pool 2 Mortgage
Loans, as applicable;
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(xix) the Aggregate Loan Balance and the Weighted Average Loan Rate, in
respect of the Pool 1 Mortgage Loans or the Pool 2 Mortgage Loans, as
applicable;
(xx) for Holders of Group 1 Certificates, the Notional Amount of the
Class 1A-WIO Certificates; and
(xxi) for the Holders of Group 1 Certificates, the Certificate Rate for
the Class 1A-11 and Class 1A-12 Certificates and the applicable LIBOR.
The Trustee shall forward such report to the Certificateholders on such
Distribution Date. The Trustee may fully rely upon the information contained in
each Remittance Report and shall have no liability with respect to information
provided by the Master Servicer or the Trust Administrator. The Trustee shall
not be obligated to verify, recompute, reconcile or recalculate any information
contained in any Remittance Report.
To the extent that there are inconsistencies between the telecopy of the
Remittance Report and the hard copy thereof, the Master Servicer may rely upon
the latter.
In the case of information furnished pursuant to subclause (i) above,
the amounts shall be expressed in a separate section of the report as a dollar
amount for each Class for each $1,000 original dollar amount as of the Cut-Off
Date.
(b) Within a reasonable period of time after the end of each calendar
year, the Trust Administrator shall furnish to each Person who at any time
during the calendar year was a Certificateholder, if requested in writing by
such Person, such information as is reasonably necessary to provide to such
Person a statement containing the information set forth in subclauses (ii) and
(iii) above, aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the Trust
Administrator shall be deemed to have been satisfied to the extent that
substantially comparable information shall be prepared and furnished by the
Trust Administrator to Certificateholders pursuant to any requirements of the
Code as are in force from time to time.
(c) On each Distribution Date, the Trustee shall forward to the Residual
Certificateholders a copy of the reports forwarded to any other
Certificateholders in respect of such Distribution Date and a statement setting
forth the amounts actually distributed to the Residual Certificateholders on
such Distribution Date together with such other information as the Trustee deems
necessary or appropriate.
(d) Within a reasonable period of time after the end of each calendar
year, the Trust Administrator shall deliver to each Person who at any time
during the calendar year was a Residual Certificateholder, if requested in
writing by such Person, such information as is reasonably necessary to provide
to such Person a statement containing the information provided pursuant to the
previous paragraph aggregated for such calendar year or applicable portion
thereof during which such Person was a Residual Certificateholder. Such
obligation of the Trust Administrator shall be deemed to have been satisfied to
the extent that substantially comparable
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information shall be prepared and furnished to Certificateholders by the Trust
Administrator pursuant to any requirements of the Code as from time to time in
force.
(e) The Master Servicer and the Trust Administrator shall furnish to
each Certificateholder (if requested in writing), 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 (if requested in
writing) as the Certificateholder may reasonably require; provided, that the
Master Servicer and the Trust Administrator shall be entitled to be reimbursed
by such Certificateholder for their respective fees and actual expenses
associated with providing such reports, if such reports are not generally
produced in the ordinary course of their respective businesses or readily
obtainable.
(f) Reports and computer tapes furnished by the Master Servicer pursuant
to this Agreement shall be deemed confidential and of a proprietary nature, and
shall not be copied or distributed except to the extent provided in this
Agreement and to the extent required by law, and to the extent the Seller
instructs the Trust Administrator in acting to furnish information regarding the
Trust or the Mortgage Loans to third-party information providers. No Person
entitled to receive copies of such reports or tapes or lists of
Certificateholders shall use the information therein for the purpose of
soliciting the customers of the Seller or for any other purpose except as set
forth in this Agreement.
SECTION 5.3. DISTRIBUTION ACCOUNT.
The Trustee shall establish at the Corporate Trust Office a separate
trust account (the "Distribution Account") titled "Norwest Bank Minnesota,
National Association as Trustee, in trust for the registered holders of FURST
Mortgage Pass-Through Certificates, Series 1998-B." The Distribution Account
shall be maintained as an Eligible Account. The Trustee shall deposit any
amounts representing payments on and any collections in respect of the Mortgage
Loans received by it immediately following receipt thereof, including, without
limitation, all amounts withdrawn by the Master Servicer from the Collection
Account pursuant to Section 3.3 for deposit to the Distribution Account.
SECTION 5.4. INVESTMENT OF ACCOUNTS.
(a) Consistent with any requirements of the Code, all or a portion of
the Distribution Account held by the Trustee shall be (i) uninvested or (ii)
invested and reinvested by the Trustee, in one or more Eligible Investments
bearing interest or sold at a discount. Any investment earnings on funds held in
the Distribution Account shall be for the account of the Trustee. No such
investment in such accounts shall mature later than the Business Day immediately
preceding the next Distribution Date (except that (i) if such Eligible
Investment is an obligation of or is advised or managed by the Trustee or an
affiliate of the Trustee, then such Eligible Investment shall mature not later
than such Distribution Date and (ii) any other date as may be approved by the
Rating Agencies).
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(b) If any amounts are needed for disbursement from any Account held by
the Trustee and sufficient uninvested funds are not available to make such
disbursements, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account.
(c) The Trustee shall deposit in the Distribution Account from its own
funds the amount of any loss incurred in respect of any Eligible Investment held
therein which is in excess of the income and gain thereon immediately upon
realization of such loss, without any right to reimbursement therefor.
SECTION 5.5. DETERMINATION OF CERTIFICATE RATES FOR LIBOR CERTIFICATES.
On each LIBOR Determination Date so long as the LIBOR Certificates are
outstanding, the Trust Administrator shall determine LIBOR and the Certificate
Rates for the Class 1A-11 and Class 1A-12 Certificates based on quotations
provided by the Reference Banks.
LIBOR for each Interest Accrual Period will be established by the Trust
Administrator on each LIBOR Determination Date as follows:
(a) On any LIBOR Determination Date, the Trust Administrator will
determine LIBOR based on LIBOR quotations provided by each of the Reference
Banks as of approximately 11:00 a.m. (London Time) on such LIBOR Determination
Date, as such quotations appear on the Telerate Page 3750 (as defined in the
International Swap Dealers Association Inc. Code of 1987 Interest Rate and
Currency Exchange Definitions).
(b) If on any LIBOR Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for the next Interest Accrual Period
shall be the arithmetic mean of such offered quotations (rounding such
arithmetic mean upwards if necessary to the nearest whole multiple of 1/32%).
(c) If on any LIBOR Determination Date only one or none of the Reference
Banks provides such offered quotations, LIBOR for the next Interest Accrual
Period shall be whichever is the higher of (i) LIBOR as determined on the
previous LIBOR Determination Date or (ii) the Reserve Interest Rate. The
"Reserve Interest Rate" shall be the rate per annum which the Trust
Administrator determines to be either (i) the arithmetic mean (rounded upwards
if necessary to the nearest whole multiple of 1/32%) of the one-month United
States dollar lending rates that New York City banks selected by the Trust
Administrator are quoting, on the relevant LIBOR Determination Date, to the
principal London offices of at least two of the Reference Banks to which such
quotations are, in the opinion of the Trust Administrator, being so made, or
(ii) in the event that the Trust Administrator can determine no such arithmetic
mean, the lowest one-month United States dollar lending rate which New York City
banks selected by the Trust Administrator are quoting on such LIBOR
Determination Date to leading European banks.
(d) If on any LIBOR Determination Date the Trust Administrator is
required but is unable to determine the Reserve Interest Rate in the manner
provided in paragraph (b) above,
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LIBOR shall be LIBOR as determined on the preceding LIBOR Determination Date,
or, in the case of the first LIBOR Determination Date, the initial LIBOR Rate
used to determine the Certificate Rate for the LIBOR Certificates for the July
1998 Interest Accrual Period.
Until all of the LIBOR Certificates are paid in full, the Trust
Administrator will at all times retain at least four Reference Banks for the
purpose of determining LIBOR with respect to each Interest Determination Date.
The Master Servicer initially shall designate the Reference Banks. Each
"Reference Bank" shall be a leading bank engaged in transactions in Eurodollar
deposits in the international Eurocurrency market, shall not control, be
controlled by, or be under common control with, the Seller and shall have an
established place of business in London. If any such Reference Bank should be
unwilling or unable to act as such or if the Master Servicer should terminate
its appointment as Reference Bank, the Trust Administrator shall promptly
appoint or cause to be appointed another Reference Bank. The Trust Administrator
shall have no liability or responsibility to any Person for (i) the selection of
any Reference Bank for purposes of determining LIBOR or (ii) any inability to
retain at least four Reference Banks which is caused by circumstances beyond its
reasonable control. The initial Reference Banks shall be selected by the Trust
Administrator.
In determining LIBOR, any Certificate Rate for the LIBOR Certificates or
any Reserve Interest Rate, the Trust Administrator may conclusively rely and
shall be protected in relying upon the offered quotations (whether written, oral
or on the Telerate Screen) from the Reference Banks or the New York City banks
as to LIBOR or the Reserve Interest Rate, as appropriate, in effect from time to
time. The Trust Administrator shall not have any liability or responsibility to
any Person for (i) the Trust Administrator's selection of New York City banks
for purposes of determining any Reserve Interest Rate or (ii) its inability,
following a good-faith reasonable effort, to obtain such quotations from the
Reference Banks or the New York City banks or to determine such arithmetic mean,
all as provided for in this Section 5.5.
The establishment of LIBOR and each Certificate Rate for the LIBOR
Certificates by the Trust Administrator shall (in the absence of manifest error)
be final, conclusive and binding upon each Holder of a Certificate and the Trust
Administrator.
ARTICLE VI
THE CERTIFICATES
SECTION 6.1. THE CERTIFICATES.
(a) The Class 1A Certificates, the Class 2A Certificates, the Class 1M
Certificates, the Class 2M Certificates, the Class 1B Certificates, the Class 2B
Certificates and the Class A-R Certificates shall be substantially in the forms
set forth in Exhibits A-1, A-2, A-3, A-4, B-1, B-2 and B-3, respectively, and
shall, on original issue, be executed, authenticated and delivered by the
Trustee to or upon the order of the Seller concurrently with the sale and
assignment to the Trustee of the Trust Assets.
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The Class 1A Certificates (other than the Class 1A-7 Certificates, the
Class 1A-WIO Certificates and the Class A-R Certificates), the Class 2A
Certificates, the Class 1M Certificates, the Class 2M Certificates, the Class 1B
Certificates and the Class 2B Certificates shall be initially evidenced by one
or more certificates representing the entire aggregate Original Class Principal
Balance for each Class and shall be held in minimum dollar denominations of
$25,000 and integral dollar multiples in excess thereof. The Class 1A-7
Certificates shall be initially evidenced by one or more certificates
representing the entire Original Class Principal Balance of such Class and shall
be held in minimum dollar denominations of $1,000 and integral dollar multiples
in excess thereof. The Class 1A-WIO Certificates shall be initially evidenced by
one or more certificates representing the entire Class 1A-WIO Notional Amount as
of the Cut-Off date and shall be held in minimum dollar denominations of
$38,000,000 and integral dollar multiples in excess thereof. The Class A-R
Certificate shall be initially evidenced by one certificate representing the
entire Original Class Principal Balance of such Class.
(b) The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized officer under its seal imprinted
thereon. Certificates bearing the manual or facsimile signatures of individuals
who were, at the time when such signatures were affixed, authorized to sign on
behalf of the Trustee shall bind the Trust, notwithstanding that such
individuals or any of them have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such offices at
the date of such Certificate. No Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless such Certificate shall
have been manually authenticated by the Trustee substantially in the form
provided for herein, and such authentication upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
Subject to Section 6.2(b), the Class 1A Certificates (other than the
Class A-R Certificates), the Class 2A Certificates, the Class 1M Certificates,
the Class 2M Certificates, the Class 1B-1 Certificates, the Class 2B-1
Certificates, the Class 1B-2 Certificates and the Class 2B-2 Certificates shall
be Book-Entry Certificates. The Class A-R Certificates, the Group 1 Junior
Subordinate Certificates and the Group 2 Junior Subordinate Certificates shall
not be Book-Entry Certificates.
(c) (i) As of any Distribution Date, with respect to the Class 1A-1,
Class 1A-2, Class 1A-3, Class 1A-4, Class 1A-5, Class 1A-6, Class 1A-7, Class
1A-8, Class 1A-9, Class 1A-10, Class A-R, Class 1M and Class 1B Certificates,
the Certificate Rate is 6.75% per annum.
(ii) As of the First Distribution Date, with respect to the Class
1A-11 Certificates, the Certificate Rate is 6.5063%. As of each Distribution
Date thereafter, with respect to the Class 1A-11 Certificates, the Certificate
Rate is equal to the lesser of (A) 8.50% per annum and (B) the greater of (I)
the sum of (x) LIBOR and (y) 0.85% per annum and (II) 0.85% per annum.
(iii) As of the First Distribution Date, with respect to the
Class 1A-12 Certificates, the Certificate Rate is 7.689985% per annum. As of
each Distribution Date
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<PAGE> 138
thereafter, with respect to the Class 1A-12 Certificates, the Certificate Rate
is equal to the lesser of (A) 29.507143% per annum and (B) the greater of (I)
the excess of (x) 29.507143% over (y) the product of (1) 3.857143 and (2) LIBOR,
per annum and (II) 0.00%.
(iv) The Class 1A-PO Certificates do not bear interest.
(v) As of the First Distribution Date, with respect to the Class
1A-WIO Certificates, the Certificate Rate is 0.467633% per annum. As of each
Distribution Date thereafter, with respect to the Class 1A-WIO Certificates, the
Certificate Rate is a per annum rate equal to the excess of (A) the weighted
average Net Mortgage Interest Rates of the Premium Pool 1 Mortgage Loans (based
on Scheduled Principal Balances of such Mortgage Loans as of such date) over (B)
6.75%.
(vi) As of the first Distribution Date, with respect to the Group
2 Certificates, the Certificate Rate is 7.065746% per annum. As of each
Distribution Date thereafter, with respect to the Group 2 Certificates, the
Certificate Rate is a per annum rate equal to the weighted average Net Mortgage
Interest Rates of the Pool 2 Mortgage Loans (based on Scheduled Principal
Balances of such Mortgage Loans as of such date).
(d) The principal balance (or with respect to the Class 1A-WIO
Certificates, the notorial amount) of each class of Certificates as of the
Cut-Off Date is:
<TABLE>
<CAPTION>
Class Principal Amount
----- ----------------
<S> <C>
Class 1A-1 Certificates $ 23,175,000
Class 1A-2 Certificates $ 5,000,000
Class 1A-3 Certificates $ 124,054,000
Class 1A-4 Certificates $ 45,000,000
Class 1A-5 Certificates $ 15,145,000
Class 1A-6 Certificates $ 100,000,000
Class 1A-7 Certificates $ 776,000
Class 1A-8 Certificates $ 6,589,000
Class 1A-9 Certificates $ 18,048,000
Class 1A-10 Certificates $ 41,194,000
Class 1A-11 Certificates $ 11,155,764
Class 1A-12 Certificates $ 2,892,236
Class 1A-PO Certificates $ 372,518
Class 1A-WIO Certificates $ 378,009,974 (1)
Class 1M Certificates $ 6,180,000
</TABLE>
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<TABLE>
<S> <C>
Class 1B-1 Certificates $ 5,149,000
Class 1B-2 Certificates $ 2,060,000
Class 1B-3 Certificates $ 3,295,000
Class 1B-4 Certificates $ 824,000
Class 1B-5 Certificates $1,030,643.44
Class 2A Certificates $ 64,361,000
Class 2M Certificates $ 832,000
Class 2B-1 Certificates $ 332,000
Class 2B-2 Certificates $ 566,000
Class 2B-3 Certificates $ 166,000
Class 2B-4 Certificates $ 133,000
Class 2B-5 Certificates $ 133,650.91
Class A-R Certificate $ 100
</TABLE>
(1) Notional amount
SECTION 6.2. REGISTRATION OF TRANSFER AND EXCHANGE OF THE CERTIFICATES.
(a) The Certificate Registrar shall maintain or cause to be maintained a
Certificate Register in its Corporate Trust Office in which, subject to such
reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of the Certificates and of Transfers of the
Certificates as herein provided. The Trustee shall initially serve as
Certificate Registrar for the purpose of registering the Certificates and
Transfers of the Certificates as herein provided. Neither the Trustee nor the
Certificate Registrar shall be required to monitor, determine or inquire as to
compliance with the transfer restrictions with respect to the Junior Subordinate
Certificates in the form of Book-Entry Certificates. Neither the Trustee nor the
Certificate Registrar shall have any liability for transfers of Book-Entry
Certificates made through the book-entry facilities of DTC or between or among
any Depository Participants or Certificate Owners, made in violation of
applicable restrictions.
Upon surrender for registration of Transfer of any Certificate (other
than Book-Entry Certificates which shall be subject to Section 6.2(b)(i) and
(ii) below) at any office or agency of the Certificate Registrar maintained for
such purpose pursuant to the foregoing paragraph and, in the case of the Class M
Certificates, the Class B Certificates and Residual Certificates upon the
satisfaction of those conditions applicable to such Certificates, as set forth
in Sections 6.2(b) and (c) hereof, the Trustee shall execute, authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Certificates of a like Class and of the same aggregate Percentage Interest.
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At the option of the Certificateholders, Certificates (other than
Book-Entry Certificates which shall be subject to Section 6.2(b)(i) and (ii)
below) may be exchanged for other Certificates in authorized denominations and
the same aggregate Percentage Interests, upon surrender of the Certificates to
be exchanged at any such office or agency. Whenever any Certificates are so
surrendered for exchange, the Trustee shall execute, authenticate and deliver
the Certificates of such Class which the Certificateholder making the exchange
is entitled to receive. Every Certificate presented or surrendered for
registration of Transfer or exchange shall (if so required by the Trustee or the
Certificate Registrar) be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder thereof or its attorney duly authorized
in writing.
No service charge shall be made for any registration of Transfer or
exchange of any Certificates, but 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.
All Certificates surrendered for registration of Transfer shall be
canceled by the Certificate Registrar and disposed of pursuant to its standard
procedures.
(b) (i) Except as provided in paragraph (b)(ii) below, the Book-Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of such Certificates may not
be transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Certificates; (iii) ownership
and transfers of registration of such Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal with the
Depository as representative of the Certificate Owners of the Certificates for
purposes of exercising the rights of Holders under this Agreement, and requests
and directions for and votes of such representative shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; (vi)
the Trustee may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its Depository Participants and
furnished by the Depository Participants with respect to indirect participating
firms and Persons shown on the books of such indirect participating firms as
direct or indirect Certificate Owners; (vii) the Depository shall be responsible
for crediting the amount of distributions to the accounts of the Certificate
Owners entitled thereto, in accordance with the Depository's normal procedures;
(viii) unless and until Definitive Certificates are issued pursuant to Section
6.2(b)(ii) below, the Depository will make book-entry transfers among the
Depository Participants and receive and transmit distributions of principal of
and interest on the Book-Entry Certificates to such Depository Participants; and
(ix) whenever notice or other communication to the Certificate Owners is
required under this Agreement, unless and until Definitive Certificates shall
have been issued to Certificate Owners pursuant to Section 6.2(b)(ii) below, the
Trustee shall give all such notices and communications specified herein to be
given to such Certificate Owners to the Depository.
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All transfers by Certificate Owners of Book-Entry Certificates
shall be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owners. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificate Owners that it represents or of brokerage firms for which its acts
as agent in accordance with the Depository's normal procedures. The parties
hereto are hereby authorized to execute a Depositary Agreement with the
Depository or take such other action as may be necessary or desirable to
register a Book-Entry Certificate to Depository. In the event of any conflict
between the terms of any such Depositary Agreement and this Agreement the terms
of this Agreement shall control.
(ii) If (i)(x) the Depository or the Depositor advises the
Trustee in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as Depository, and (y) the Trustee or the
Depositor is unable to locate a qualified successor, (ii) the Depositor, at its
sole option, with consent of the Trustee, elects to terminate the book-entry
system through the Depository or (iii) after the occurrence of an Event of
Default, the Certificate Owners of each Class of Book-Entry Certificates
representing Percentage Interests aggregating not less than 51% advises the
Trustee and Depository through the Depository Participants in writing that the
continuation of a book-entry system through the Depository to the exclusion of
definitive, fully registered certificates (the "Definitive Certificates") to
Certificate Owners is no longer in the best interests of the Certificate Owners.
Upon surrender to the Trustee of each Class of Book-Entry Certificates by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall, at the Depositor's expense, in the case of (i)
and (ii) above, or the Seller's expense, in the case of (iii) above, execute and
authenticate the 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 Definitive Certificates, the Trustee, the Master Servicer,
any Paying Agent and the Depositor shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.
(iii) No Transfer of a Class B-3 Certificate, Class B-4
Certificate, or Class B-5 Certificate shall be made or registered unless such
Transfer is exempt from the registration requirements of the Securities Act and
any applicable state securities laws or is made in accordance with the
Securities Act and laws. In the event that such a Transfer of a Class B-3
Certificate, Class B-4 Certificate, or Class B-5 Certificate is to be made, the
Trustee may require (A) a certificate from the Certificateholder desiring to
effect such transfer substantially in the form attached hereto as Exhibit L-1
and a certificate from such Certificateholder's prospective transferee
substantially in the form attached hereto either as Exhibit L-2A or as Exhibit
L-2B; or (B) a written Opinion of Counsel substantially in the form of Exhibit
L-3 or otherwise acceptable to the Trustee to the effect that such Transfer may
be made pursuant to an exemption, describing the applicable exemption and the
basis therefor, from the Securities Act and laws or is being made pursuant to
such Act and laws. The Holder of a Class B-3 Certificate, Class B-4 Certificate,
or Class B-5 Certificate desiring to effect such Transfer shall, and does hereby
agree to, indemnify the Trustee and the Master Servicer against any liability
that may result if the Transfer is not so exempt or is not made in accordance
with such federal and state laws.
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No Opinion of Counsel delivered pursuant to this subsection 6.2(b)(iii)
shall be an expense of the Trustee or the Master Servicer, but shall, in each
case, be paid either by the Holder of the Class B-3 Certificate, Class B-4
Certificate, or Class B-5 Certificate subject to the proposed Transfer or by the
proposed transferee.
(c) No Transfer of a Class M Certificate in the form of a Definitive
Certificate, a Class B Certificate in the form of a Definitive Certificate or
Residual Certificate shall be made or registered unless the Trustee shall have
received either (i) a representation letter in the form of Exhibit J from the
transferee of such Class M Certificate, Class B Certificate or Residual
Certificate, or (ii) in the case of any such Class M Certificate, Class B
Certificate or Residual Certificate presented for registration in the name of an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and to Section 4975 of the Code (or comparable
provisions of any subsequent enactments), or a trustee of any such plan, an
Opinion of Counsel in form and substance satisfactory to the Trustee to the
effect that the purchase or holding of such Class M Certificate, Class B
Certificate or Residual Certificate will not result in the assets of the Trust
being deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Trustee, the
Depositor, the Master Servicer or the Seller to any obligation in addition to
those undertaken in this Agreement. No representation letter or Opinion of
Counsel delivered pursuant to this subsection 6.2(c) shall be an expense of the
Trustee, the Depositor, the Master Servicer or the Seller, but shall, in each
case, be paid either by the Holder of the Class M Certificate, Class B
Certificate or Residual Certificate subject to the proposed Transfer or by the
proposed transferee.
By its acceptance of a Class M Certificate, a Class B Certificate or
Residual Certificate, whether upon original issuance or subsequent transfer,
each Holder of such Certificate acknowledges the restrictions on transfer of
such Certificate set forth thereon and in this Agreement and agrees that it will
transfer such a Certificate only as provided herein. In addition, each purchaser
of a Class M Certificate in the form of a Book-Entry Certificate or a Class B
Certificate in the form of a Book-Entry Certificate shall be deemed to have made
the representation contained in paragraph 3 on the fifth page of Exhibit J
hereto.
Each Person who has or who acquires any Ownership Interest in a Residual
Certificate shall be deemed by the acceptance or acquisition of such Ownership
Interest to have agreed to be bound by the following provisions and to have
irrevocably appointed the Depositor or its designee as its attorney-in-fact to
negotiate the terms of any mandatory sale under clause (vi) below and to execute
all instruments of Transfer and to do all other things necessary in connection
with any such sale, and the rights of each Person acquiring any Ownership
Interest in a Residual Certificate are expressly subject to the following
provisions:
(vii) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee, shall not be
holding or acquiring such Ownership Interest on behalf of any Person
that is not a Permitted Transferee and shall promptly notify the Trustee
of any change or impending change in its status or the status of any
beneficial owner as a Person who is not a Permitted Transferee.
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(viii) No Person shall acquire an Ownership Interest in a Residual
Certificate unless such Ownership Interest is a pro rata undivided
interest.
(ix) No Ownership Interest in a Residual Certificate may be
transferred without the express written consent of the Trustee. In
connection with any proposed registered Transfer of any Ownership
Interest in a Residual Certificate, the Trustee shall, as a condition to
such consent, require delivery to it of each of the following:
(A) an affidavit from the proposed transferee in the form
attached as Exhibit M (a "Transfer Affidavit") to the effect that
(a) such transferee is a Permitted Transferee and that it is not
acquiring its Ownership Interest in the Residual Certificate that
is the subject of the proposed Transfer as a nominee, trustee or
agent for any Person who is not a Permitted Transferee; (b) the
proposed transferee does not have the intention to impede the
assessment or collection of tax legally required to be paid with
respect to any Ownership Interest in a Residual Certificate; (c)
it has no present knowledge or expectation that it will become
insolvent or subject to a bankruptcy proceeding for so long as it
holds any Ownership Interest in a Residual Certificate; and (d)
it will abide by the provisions of clause (vii) below; and
(B) a covenant of the proposed transferee stating that the
proposed transferee agrees to be bound by and to abide by the
Transfer restrictions applicable to the Residual Certificates.
(x) Notwithstanding the delivery of a Transfer Affidavit by a
proposed transferee under clause (iii) above, if an officer of the
Trustee assigned to its Corporate Trust Administration Department has
actual knowledge that the proposed transferee is not a Permitted
Transferee, no Transfer of any Ownership Interest in a Residual
Certificate to such proposed transferee shall be effected.
(xi) Any attempted or purported registered Transfer of any
Ownership Interest in a Residual Certificate in violation of the
provisions of subsections 6.2(b) or (c) shall be absolutely null and
void and shall vest no rights in the purported Transferee, to the extent
permitted by applicable law. If any purported Transferee shall, in
violation of the provisions of subsections 6.2(b) or (c), become a
Holder of a Residual Certificate, the prior Holder of such Certificate
that is a Permitted Transferee shall, upon discovery that the
registration of Transfer of such Residual Certificate was not permitted
by subsections 6.2(b) or (c), be restored to all rights as Holder
thereof retroactive to the date of registration of Transfer of such
Residual Certificate. The Trustee shall be under no liability to any
Person for any registration of Transfer of a Residual Certificate that
is in fact not permitted by subsections 6.2(b) or (c) or for making any
distributions due on such Certificate to the Holder thereof or taking
any other action with respect to such Holder under the provisions of the
Agreement. The Trustee shall be entitled, but shall not be obligated, to
recover from any Holder of a Residual Certificate that was not a
Permitted Transferee at the time such distributions were made all
distributions made on such Residual Certificate. Any such distributions
so recovered by the Trustee shall be
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distributed and delivered by the Trustee to the prior Holder of such
Certificate that is a Permitted Transferee.
(xii) If any Person other than a Person who is a Permitted
Transferee acquires any Ownership Interest in a Residual Certificate in
violation of the restrictions in subsections 6.2(b) or (c), the Trustee
shall have the right, but shall not be obligated, without notice to the
Holder of such Residual Certificate or any other Person having an
Ownership Interest therein, to sell such Residual Certificate to a
purchaser selected by the Trustee on such terms as the Trustee may
choose. Such purchaser may be the Trustee itself or any affiliate of the
Trustee. The proceeds of such sale, net of commissions (which may
include commissions payable to the Trustee or its affiliates), expenses
and taxes due, if any, shall be remitted by the Trustee to the previous
Holder of such Residual Certificate that is a Permitted Transferee,
except that in the event that the Trustee determines that the Holder of
such Residual Certificate may be liable for any amount due under
subsection 6.2(b) or (c) or any other provisions of this Agreement, the
Trustee may withhold a corresponding amount from such remittance as
security for such claim. The terms and conditions of any sale under this
clause (vi) shall be determined in the sole discretion of the Trustee,
and the Trustee shall not be liable to any Person having an Ownership
Interest in a Residual Certificate as a result of its exercise of such
discretion.
(xiii) Each Person holding or acquiring any Ownership Interest in
a Residual Certificate shall provide the Trustee with its written
agreement (in form and substance satisfactory to the Trustee) (a) to
require a Transfer Affidavit in the form of Exhibit M hereto from any
other Person to whom such Person attempts to transfer any Ownership
Interest in a Residual Certificate and (b) not to transfer any Ownership
Interest in, or to cause the transfer of any Ownership Interest in, a
Residual Certificate if it has actual knowledge that such other Person
is not a Permitted Transferee or will be holding any Ownership Interest
in a Residual Certificate on behalf of a Person that is not a Permitted
Transferee.
Upon notice to the Trustee by any Person, or if an officer of the
Trustee assigned to its Corporate Trustee Administration Department otherwise
has actual knowledge, that any Ownership Interest in a Residual Certificate has
been transferred, either directly or indirectly, to any Person that is not a
Permitted Transferee or an agent thereof (including a broker, nominee or
middleman) in contravention of the foregoing restrictions, the Trustee agrees to
furnish to the Internal Revenue Service and to the Person described in Section
860E(e)(3) of the Code the information described in Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Treasury Regulation Section
1.860E-2(a)(5), or any successor regulation thereto. The Trustee shall be
permitted to be reimbursed by such Person for the cost of providing such
information, but the Trustee shall in all events be required to furnish such
information.
The foregoing provisions of the third and fourth paragraphs of
subsection 6.2(c) shall cease to apply to Transfers occurring on or after the
date on which there shall have been delivered to the Trustee, in form
satisfactory to the Trustee, a Nondisqualification Opinion.
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SECTION 6.3. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate, and (ii) there is delivered
to the Trustee, the Depositor and the Certificate Registrar such reasonable
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Trustee or the Certificate Registrar that
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and Percentage Interest. Upon the issuance of any new Certificate under
this Section 6.3, the Trustee or the Certificate Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee and the Certificate Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 6.3, 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.
SECTION 6.4. PERSONS DEEMED OWNERS.
Prior to due presentation of a Certificate for registration of Transfer,
the Seller, the Master Servicer, the Trustee, the Certificate Registrar, any
Paying Agent, and any agent of the Seller, the Master Servicer, the Trustee, any
Paying Agent or the Certificate Registrar may treat the Person, including a
Depository, in whose name any Certificate is registered as the owner (the
"Owner") of such Certificate for the purpose of receiving distributions pursuant
to Section 5.1 and for all other purposes whatsoever, and none of the Seller,
the Master Servicer, the Depositor, the Trustee, the Certificate Registrar, nor
any agent of any of them shall be affected by notice to the contrary.
SECTION 6.5. APPOINTMENT OF PAYING AGENT.
(a) The Paying Agent shall make distributions to the Holders of
Certificates from the Distribution Account pursuant to Section 5.1 and shall
report the amounts of such distributions to the Trustee. The duties of the
Paying Agent may include the obligation (i) to withdraw funds from the
Distribution Account for the purpose of making the distributions referred to
above and (ii) to distribute statements and provide information to
Certificateholders as required hereunder. The Paying Agent hereunder shall at
all times be a national banking association or a corporation duly incorporated
and validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal or state authorities. The
Paying Agent shall initially be the Trustee. The Trustee may appoint a successor
Paying Agent, which appointment shall be reasonably satisfactory to the
Depositor and the Seller.
(b) The Trustee shall cause the Paying Agent (if other than the Trustee)
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent shall hold all sums, if any,
held by it for payment to the Holders of Certificates in trust for the benefit
of the Holders of Certificates entitled thereto until such sums
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shall be paid to such Certificateholders and shall agree that it shall comply
with all requirements of the Code regarding the withholding of payments in
respect of federal income taxes due from Certificate Owners and otherwise comply
with the provisions of this Agreement applicable to it.
SECTION 6.6. MAINTENANCE OF OFFICE OR AGENCY.
The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in Minneapolis, Minnesota where
Certificates may be surrendered for registration of transfer or exchange. The
Trustee initially designates its Corporate Trust Office for such purposes. The
Trustee will give prompt written notice to the Certificateholders of any change
in such location of any such office or agency.
ARTICLE VII
THE DEPOSITOR, THE SELLER, THE MASTER SERVICER
AND THE TRUST ADMINISTRATOR
SECTION 7.1. LIABILITY OF THE DEPOSITOR, THE SELLER, THE MASTER SERVICER
AND THE TRUST ADMINISTRATOR.
The Seller, the Master Servicer and the Trust Administrator shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Seller, the Master Servicer and the Trust
Administrator, as the case may be, herein. The Depositor shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Depositor.
SECTION 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SELLER, THE MASTER SERVICER OR THE TRUST ADMINISTRATOR.
Any corporation into which the Depositor, the Seller, the Master
Servicer or the Trust Administrator may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Depositor, the Seller, the Master Servicer or the Trust Administrator shall be a
party, or any corporation succeeding to the business of the Depositor, the
Seller, the Master Servicer or the Trust Administrator shall be the successor of
the Depositor, the Seller, the Master Servicer or the Trust Administrator, as
the case may be, hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
SECTION 7.3. LIMITATION ON LIABILITY OF THE MASTER SERVICER, THE TRUST
ADMINISTRATOR AND OTHERS.
None of the Master Servicer, the Trust Administrator or any of the
directors or officers or employees or agents of the Master Servicer or the Trust
Administrator shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
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action by the Master Servicer or the Trust Administrator in good faith pursuant
to this Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Master Servicer, the Trust Administrator or any
such Person against any liability which would otherwise be imposed by reason of
its willful misfeasance, bad faith or gross negligence in the performance of
duties of the Master Servicer or the Trust Administrator, as applicable, or by
reason of its reckless disregard of its obligations and duties of the Master
Servicer or the Trust Administrator, as applicable, hereunder. The Master
Servicer, the Trust Administrator and any director or officer or employee or
agent of the Master Servicer or the Trust Administrator 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 Master Servicer, the Trust
Administrator and any director or officer or employee or agent of the Master
Servicer or the Trust Administrator shall be indemnified by the Trust and held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to this Agreement or the Certificates, other than any
loss, liability or expense related to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) or related to the Master Servicer's or
the Trust Administrator's, as applicable, failure to perform its obligations
under this Agreement or any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. Neither the Master Servicer nor the Trust Administrator shall be
under any obligation to appear in, prosecute or defend any legal action which is
not incidental to duties to service the Mortgage Loans in accordance with this
Agreement, and which in its opinion may involve it in any expense or liability;
provided, however, that the Master Servicer or the Trust Administrator may in
its sole discretion undertake any such action which it may deem necessary or
desirable in respect of this Agreement, and the rights and duties of the parties
hereto and the interests of the Certificateholders hereunder. In such event, the
reasonable legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust and the Master
Servicer or the Trust Administrator, as applicable, shall be entitled to be
reimbursed therefor. The Master Servicer's and the Trust Administrator's right
to indemnity or reimbursement pursuant to this Section 7.3 shall survive any
resignation or termination of the Master Servicer or the Trust Administrator, as
applicable, pursuant to Section 7.4 or 8.1 with respect to any losses, expenses,
costs or liabilities arising prior to such resignation or termination (or
arising from events that occurred prior to such resignation or termination).
SECTION 7.4. MASTER SERVICER NOT TO RESIGN.
Subject to the provisions of Section 7.2, the Master Servicer shall not
resign from the obligations and duties hereby imposed on it except (i) upon
determination that the performance of its obligations or duties hereunder 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 or its subsidiaries or
Affiliates, the other activities of the Master Servicer so causing such a
conflict being of a type and nature carried on by the Master Servicer or its
subsidiaries or Affiliates at the date of this Agreement or (ii) upon
satisfaction of the following conditions: (a) the Master Servicer has proposed a
successor Master Servicer to the Trustee in writing and such proposed successor
Master Servicer is reasonably acceptable to the Trustee; and (b) each Rating
Agency shall have delivered a letter to the Trustee prior to the appointment of
the successor Master
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Servicer stating that the proposed appointment of such successor Master Servicer
as Master Servicer hereunder will not result in the reduction or withdrawal of
the then current rating of any Class of Certificates; provided, however, that no
such resignation by the Master Servicer shall become effective until such
successor Master Servicer or, in the case of (i) above, the Trustee shall have
assumed the Master Servicer's responsibilities and obligations hereunder
(including, without limitation the obligations of the Master Servicer under
Section 3.4) or the Trustee shall have designated a successor Master Servicer in
accordance with Section 8.2. Any such resignation shall not relieve the Master
Servicer of responsibility for any of the obligations specified in Sections 8.1
and 8.2 as obligations that survive the resignation or termination of the Master
Servicer. Any such determination permitting the resignation of the Master
Servicer pursuant to clause (i) above shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee and the Certificateholders. The
Master Servicer shall have no claim (whether by subrogation or otherwise) or
other action against any Certificateholder for any amounts paid by the Master
Servicer pursuant to any provision of this Agreement. The Trustee shall provide
written notice to each Holder of a Certificate promptly after any resignation by
the Master Servicer hereunder.
SECTION 7.5. DELEGATION OF DUTIES.
In the ordinary course of business, the Master Servicer at any time may
delegate any of its duties hereunder to any Person, including any of its
Affiliates, who agrees to conduct such duties in accordance with standards
comparable to those with which the Master Servicer complies pursuant to Section
3.1. Such delegation shall not relieve the Master Servicer of its liabilities
and responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 7.4. The Master Servicer shall provide
the Trustee with written notice prior to the delegation of any of its duties to
any Person other than any of the Master Servicer's Affiliates or their
respective successors and assigns.
SECTION 7.6. INDEMNIFICATION OF THE TRUST BY THE SELLER AND MASTER
SERVICER.
(a) The Master Servicer shall indemnify and hold harmless the Trust and
the Trustee from and against any loss, liability, expense, damage or injury
suffered or sustained by reason of the Master Servicer's activities or omissions
in servicing or administering the Mortgage Loans that are not in accordance with
this 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 related
to the Master Servicer's failure to perform hereunder. Any such indemnification
shall not be payable from the assets of the Trust. The provisions of this
indemnity shall run directly to and be enforceable by an injured party subject
to the limitations hereof. The provisions of this Section shall survive the
termination of the Agreement.
(b) Notwithstanding anything to the contrary contained herein, the
Seller (i) agrees to be liable directly to the injured party for the entire
amount and (ii) shall indemnify and hold harmless the Trust and the Trustee from
and against any loss, liability, expense, damage, claim or injury (including,
without limitation, any prohibited transactions tax imposed on the Trust, but
excluding any loss, liability, expense, damage, claim or injury attributable to
a Holder of a
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Regular Certificate in its capacity as an investor in such Certificate as a
result of defaults on the Mortgage Loans) arising out of or based on this
Agreement by reason of any acts, omissions, or alleged acts or omissions arising
out of activities of the Trust or the Trustee, or the actions of the Master
Servicer or the Trust Administrator including, in either case, but not limited
to, amounts payable to the Master Servicer pursuant to Section 7.3, 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, that the Seller shall not indemnify the
Trustee (but shall indemnify any other injured party) if such loss, liability,
expense, damage or injury is due to the Trustee's willful malfeasance, bad faith
or negligence or by reason of the Trustee's reckless disregard of its
obligations hereunder. The provisions of this indemnity shall run directly to
and be enforceable by an injured party subject to the limitations hereof. The
provisions of this Section shall survive the termination of the Agreement.
ARTICLE VIII
DEFAULT
SECTION 8.1. EVENTS OF DEFAULT.
If any one of the following events (an "Event of Default") shall occur
and be continuing:
(i) (A) The failure by the Master Servicer to make any Monthly
Advance; or (B) any other failure by the Master Servicer to deposit in
any Account any deposit required to be made under the terms of this
Agreement which continues unremedied for a period of two Business Days
after the earlier of the (a) knowledge of the Master Servicer of such
failure and (b) the date upon which written notice of such failure,
requiring the same to be remedied, and stating that such notice is a
"Notice of Default" hereunder, shall have been given to the Master
Servicer by the Trustee or to the Master Servicer and the Trustee by any
Certificateholder; or
(ii) The failure by the Master Servicer to make any required
Servicing Advance which failure continues unremedied for a period of 30
days, or the failure on the part of the Master Servicer duly to observe
or perform in any material respect any other covenants or agreements of
the Master Servicer set forth in the Certificates or in this Agreement,
which failure, in each case, materially and adversely affects the
interests of Certificateholders and which continues unremedied for a
period of 60 days after the earlier of (a) knowledge of the Master
Servicer of such failure and (b) date on which written notice of such
failure, requiring the same to be remedied, and stating that such notice
is a "Notice of Default" hereunder, shall have been given to the Master
Servicer by the Trustee or to the Master Servicer and the Trustee by any
Certificateholder; or
(iii) The entry against the Master Servicer of a decree or order
by a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshalling of assets and liabilities or similar
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proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(iv) The consent by the Master Servicer to the appointment of a
trustee, conservator, receiver or liquidator in any insolvency,
conservatorship, receivership, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the
Master Servicer or of or relating to substantially all of its property;
or the Master Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of
any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of its
obligations;
(v) Any breach by the Master Servicer of a representation or
warranty made in Section 2.4, which breach continues unremedied for a
period of 60 days after the earlier of (a) knowledge of the Master
Servicer of such failure and (b) the date on which written notice of
such breach, requiring the same to be remedied, and stating that such
notice is a "Notice of Default" hereunder, shall have been given to the
Master Servicer by the Trustee or to the Master Servicer and the Trustee
by any Certificateholder; or
(vi) the occurrence of a Master Servicer Removal Right Event;
then, and in each and every such case, so long as an Event of Default shall not
have been remedied by the Master Servicer within the time periods provided for
above, (x) subject to the succeeding paragraph, with respect solely to clause
(i)(A) above, if such Monthly Advance is not made by 4:00 P.M. New York time on
the second Business Day following written notice to the Master Servicer of such
event, the Trustee shall terminate all of the rights and obligations of the
Master Servicer under this Agreement and the Trustee, or a successor Master
Servicer appointed in accordance with Section 8.2, shall immediately make such
Monthly Advance and assume, pursuant to Section 8.2 hereof, the duties of a
successor Master Servicer and (y) in the case of clause (i)(B), (ii), (iii),
(iv), (v), or (vi), the Trustee shall, at the direction of the Holders of each
Class Certificates evidencing Percentage Interests aggregating not less than 51%
by notice then given in writing to the Master Servicer, terminate all of the
rights and obligations of the Master Servicer as Master Servicer under this
Agreement. Upon the Trustee's obtaining actual knowledge that a required amount
described in clause (i) above has not been made by the Master Servicer, the
Trustee shall notify the Master Servicer in writing as soon as is reasonably
practical. Any such notice to the Master Servicer shall also be given to each
Rating Agency and each Certificateholder. On or after the receipt by the Master
Servicer of such written notice, all authority and power of the Master Servicer
under this Agreement, whether with respect to the Certificates or the Mortgage
Loans or otherwise, shall pass to and be vested in the Trustee pursuant to and
under this Section 8.1; and, without limitation, the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Master
Servicer as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of each Mortgage Loan and related
documents, or otherwise. The Master Servicer agrees to cooperate with the
Trustee in effecting the termination of the responsibilities and rights of the
Master Servicer hereunder, including, without limitation,
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the transfer to the Trustee for the administration by it of all cash amounts
that shall at the time be held by the Master Servicer and to be deposited by it
in the Collection Account, or that have been deposited by the Master Servicer in
the Collection Account or thereafter received by the Master Servicer with
respect to the Mortgage Loans. All costs and expenses (including attorneys'
fees) incurred in connection with transferring the Mortgage Files to the
successor Master Servicer and amending this Agreement to reflect such succession
as Master Servicer pursuant to this Section 8.1 shall be paid by the predecessor
Master Servicer (or if the predecessor Master Servicer is the Trustee, the
initial Master Servicer) upon presentation of reasonable documentation of such
costs and expenses.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 8.1(i) for a period of ten Business Days or under Section 8.1(ii)
for a period of 30 Business Days, shall not constitute an Event of Default if
such delay or failure could not be prevented by the existence of reasonable
diligence by the Master 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 Master Servicer from using its best efforts to perform its respective
obligations in a timely manner in accordance with the terms of this Agreement
and the Master Servicer shall provide the Trustee and the Certificateholders
with an Officers' Certificate giving prompt notice of such failure or delay by
it, together with a description of its efforts to so perform its obligations.
The Master Servicer shall immediately notify the Trustee in writing of any Event
of Default and such notice shall include references to this Agreement, the
Trust, and the Certificates. Furthermore, for purposes of this Section 8.1, the
Trustee shall not be deemed to have knowledge of an Event of Default unless a
Responsible Officer of the Trustee assigned to and working in the Corporate
Trust Office has actual knowledge thereof or unless written notice of any event
which is in fact such an Event of Default is received by the Trustee.
SECTION 8.2. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Master Servicer receives a notice of
termination pursuant to Section 8.1 or has resigned pursuant to Section 7.4, the
Trustee shall be the successor in all respects to the Master Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Master Servicer by the terms and
provisions hereof. As compensation therefor, the Trustee shall be entitled to
all such compensation and expenses as the Master Servicer would have been
entitled to hereunder if no such notice of termination had been given.
Notwithstanding the above, (i) if the Trustee is unwilling to act as successor
Master Servicer, or (ii) if the Trustee is legally unable so to act, the Trustee
may (in the situation described in clause (i) above) or shall (in the situation
described in clause (ii) above) appoint or petition a court of competent
jurisdiction to appoint, any established housing and home finance institution,
bank or other mortgage loan servicer having a net worth of not less than
$50,000,000 as the successor to the Master Servicer hereunder in the assumption
of all or any part of the responsibilities, duties or liabilities of the Master
Servicer hereunder. Pending appointment of a successor to the Master Servicer
hereunder, unless the Trustee is prohibited by law from so acting, the Trustee
shall act in such capacity as hereinabove provided. In connection with such
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appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensation and expenses which the Master Servicer would otherwise have
received pursuant to Section 3.9 (or such lesser compensation as the Trustee and
such successor shall agree). The appointment of a successor Master Servicer
shall not affect any liability of the predecessor Master Servicer which may have
arisen under this Agreement prior to its termination as Master Servicer
(including, without limitation, the obligation to pay any deductible under an
insurance policy pursuant to Section 3.5 or to indemnify the Trustee pursuant to
Section 7.6), nor shall any successor Master Servicer be liable for any acts or
omissions of the predecessor Master Servicer or for any breach by such Master
Servicer of any of its representations or warranties contained herein or in any
related document or agreement. The Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.
(b) Any successor, including the Trustee, to the Master Servicer as
Master Servicer shall during the term of its service as Master Servicer (i)
continue to service and administer the Mortgage Loans for the benefit of
Certificateholders and (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Master
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to
Section 3.13.
SECTION 8.3. WAIVER OF DEFAULTS.
The Trustee may, on behalf of all Certificateholders, waive any events
permitting removal of the Master Servicer as servicer pursuant to this Article
VIII, provided, however, that the Trustee may not waive a default in making a
required distribution on a Certificate without the consent of the Holder of such
Certificate. Upon any waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto except to the
extent expressly so waived.
SECTION 8.4. NOTIFICATION TO CERTIFICATEHOLDERS.
Upon any termination or appointment of a successor to the Master
Servicer pursuant to this Article VIII or Section 7.4, the Trustee shall give
prompt written notice thereof to the Certificateholders at their respective
addresses appearing in the Certificate Register and each Rating Agency.
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ARTICLE IX
THE TRUSTEE
SECTION 9.1. DUTIES OF TRUSTEE.
The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default has occurred (which has not been cured) of
which a Responsible Officer of the Trustee has actual knowledge, the Trustee
shall exercise such of the rights and powers vested in it by this Agreement, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
The Trustee represents and warrants to the Seller, the Master Servicer
and the Depositor that the Trustee's computer and other systems used in
performing its duties and obligations under this Agreement will be modified and
maintained to operate in a manner such that at all times, including on and after
January 1, 2000, (1) the Trustee can perform such duties and obligations in
accordance with the terms of this Agreement and (2) the Trustee can operate its
business in the same manner as it is operating on the date hereof.
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 are in
the form required by this Agreement; provided, however, that the Trustee will
not be responsible for the accuracy or content of any such resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties
and obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be
read into this Agreement against the Trustee and, in the absence of bad
faith on the part of the Trustee, the Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining
or investigating the facts related thereto;
(iii) the Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the consent or direction of the Certificateholders under
this Agreement; and
(iv) the Trustee shall not be charged with knowledge of any
failure by the Master Servicer to comply with the obligations of the
Master Servicer referred to in clauses (i) and (ii) of Section 8.1
unless a Responsible Officer of the Trustee at the
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Corporate Trust Office obtains actual knowledge of such failure or the
Trustee receives written notice of such failure from the Master
Servicer.
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, 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 Depositor, the Seller or the Master Servicer under
this Agreement, except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of,
the Master Servicer in accordance with the terms of this Agreement.
SECTION 9.2. CERTAIN MATTERS AFFECTING THE TRUSTEE.
Except as otherwise provided in Section 9.1:
(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, and the manner of obtaining consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee may prescribe;
(ii) the Trustee may consult with counsel and any written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered
or omitted by it hereunder in good faith and in accordance with such
advice or Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation hereunder or in relation hereto, at the
request, order or direction of any of the Certificateholders, pursuant
to the provisions of this Agreement, unless such Certificateholders
shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred
therein or thereby; the right of the Trustee to perform any
discretionary act enumerated in this Agreement shall not be construed as
a duty, and the Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of any such act;
nothing contained herein shall, however, relieve the Trustee of the
obligations, upon the occurrence of an Event of Default (which has not
been cured) of which a Responsible Officer of the Trustee has actual
knowledge, to exercise such of the rights and powers vested in it by
this Agreement, and to use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs;
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(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(v) prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper
or documents; provided, however, that if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of
the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such cost, expense or liability as a
condition to such proceeding. Nothing in this clause (v) shall derogate
from the obligation of the Master Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors;
(vi) the Trustee shall not be accountable, shall have no
liability and makes no representation as to any acts or omissions
hereunder of the Master Servicer until such time as the Trustee may be
required to act as Master Servicer pursuant to Section 8.2 and thereupon
only for the acts or omissions of the Trustee as successor Master
Servicer; and
(vii) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian.
SECTION 9.3. TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS.
The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Depositor, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates) or of any
Mortgage Loan or related document. The Trustee shall not be accountable for the
use or application by the Master Servicer of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Master Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Collection Account by the Master Servicer. The Trustee shall
at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage or any Mortgage Loan, or
the perfection and priority of any mortgage or the maintenance of any such
perfection and priority or for or with respect to the sufficiency of the Trust
or its ability to generate the payments to be distributed to Certificateholders
under this Agreement, including, without limitation: the existence, condition
and ownership of any Mortgaged Property; the existence and enforceability of any
hazard insurance thereon (other than if the Trustee shall assume the duties of
the Master Servicer pursuant to Section 8.2 and thereupon only for the acts or
omissions of the successor Master Servicer); the validity of the assignment of
any Mortgage Loan to the Trustee or of any intervening assignment; the
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completeness of any Mortgage Loan; the performance or enforcement of any
Mortgage Loan (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.2 and thereupon only for the acts or omissions of
the Trustee as successor Master Servicer); the compliance by the Depositor or
the Master Servicer with any warranty or representation made under this
Agreement or in any related document or the accuracy of any such warranty or
representation; any investment of monies by or at the direction of the Master
Servicer or any loss resulting therefrom, it being understood that the Trustee
shall remain responsible for any Trust property that it may hold in its
individual capacity; the acts or omissions of any of the Depositor, the Master
Servicer (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.2 and thereupon only for the acts or omissions of
the Trustee as successor Master Servicer), any subservicer or any Mortgagor; any
action of the Master Servicer (other than if the Trustee shall assume the duties
of the Master Servicer pursuant to Section 8.2 and thereupon only for the acts
or omissions of the Trustee as successor Master Servicer), or any Subservicer
taken in the name of the Trustee; the failure of the Master Servicer or any
Subservicer to act or perform any duties acquired of it as agent of the Trustee
hereunder; or any action by the Trustee taken at the instruction of the Master
Servicer (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.2 and thereupon only for the acts or omissions of
the Trustee as successor Master Servicer); provided, however, that the foregoing
shall not relieve the Trustee of its obligation to perform its duties under this
Agreement, including, without limitation, the Trustee's review of the Mortgage
Files pursuant to Section 2.1(c). The Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any time
or to otherwise perfect or maintain the perfection of any security interest or
lien granted to it hereunder (unless the Trustee shall have become the successor
Master Servicer).
SECTION 9.4. TRUSTEE MAY OWN CERTIFICATES.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates with the same rights as it would have if it were not
Trustee and may transact any banking and/or trust business with the Depositor,
the Seller, the Master Servicer or their Affiliates.
SECTION 9.5. TRUSTEE'S AND DOCUMENT CUSTODIAN'S EXPENSES.
The Trustee shall be entitled to receive the Trustee Fee pursuant to
Section 5.1(a)(i) and, unless payable by the Master Servicer pursuant to Section
7.6(a), the Seller 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 or any other
agreement related hereto (including the reasonable compensation and the expenses
and disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith or which is the responsibility of Certificateholders
hereunder. In addition, unless payable by the Master Servicer pursuant to
Section 7.6(a), the Seller covenants and agrees to indemnify the Trustee and any
directors, officers, employees and agents of the Trustee from, and hold it
harmless against, any and all losses, liabilities, damages, claims or expenses
other than those resulting from the Trustee's negligence or bad faith of the
Trustee. In the event the Seller fails to perform its
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obligations hereunder, then the Trustee shall be indemnified by the Trust for
the payment of the Trustee's monthly fee which right of the Trustee shall have
priority over all other distributions and payments from the Distribution
Account. This section shall survive termination of this Agreement or the
resignation or removal of any Trustee hereunder.
The Document Custodian shall be entitled to receive the fee agreed to
with the Seller. In addition, the Seller covenants and agrees to indemnify the
Document Custodian and any directors, officers, employees and agents of the
Document Custodian from, and hold it harmless against, any and all losses,
liabilities, damages, claims or expenses other than those resulting from the
Document Custodian's negligence or bad faith of the Document Custodian. This
section shall survive termination of this Agreement or the resignation or
removal of any Document Custodian hereunder.
SECTION 9.6. ELIGIBILITY REQUIREMENTS FOR TRUSTEE.
The Trustee hereunder shall at all times be a national banking
association or a corporation duly incorporated and validly existing 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, subject to supervision or examination by federal or
state authority and having (or in the case of a bank or corporation included in
a bank holding company system, the related bank holding company shall have) a
rating with respect to its long-term unsecured debt obligations of at least A-
by S&P and Baa3 by Moody's (or such lower rating as such Rating Agencies may
from time to time agree). If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 9.6,
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. The principal office of the Trustee (other than the initial
Trustee) shall be in a state with respect to which an Opinion of Counsel has
been delivered to such Trustee at the time such Trustee is appointed Trustee to
the effect that the Trust will not be a taxable entity under the laws of such
state. In case at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 9.6, the Trustee shall resign immediately in
the manner and with the effect specified in Section 9.7.
SECTION 9.7. RESIGNATION OR REMOVAL OF TRUSTEE.
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Depositor, the Seller,
the Master Servicer and each Rating Agency. Upon receiving such notice of
resignation, 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; provided, however, that
any such successor Trustee shall be subject to the prior written approval of the
Master Servicer. If no successor Trustee shall have been so appointed and having
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.
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If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.6 and shall fail to resign after written request
therefor by 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, or if a tax is imposed or
threatened with respect to the Trust by any state in which the Trustee is
located, then the Depositor may remove the Trustee. If the Depositor removes the
Trustee under the authority of the immediately preceding sentence, the Depositor
shall promptly appoint a successor Trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor trustee. Immediately upon its appointment and
qualification hereunder, the successor Trustee shall provide written notice to
each Holder of a Certificate of its appointment and qualification.
The Holders of Certificates evidencing Percentage Interests aggregating
at least 51% may at any time remove the Trustee by written instrument or
instruments delivered to the Depositor, the Master Servicer, the Seller and the
Trustee and shall thereupon use their best efforts to appoint a successor
trustee in accordance with this Section.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 9.7 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 9.8.
SECTION 9.8. SUCCESSOR TRUSTEE.
Any successor Trustee appointed as provided in Section 9.7 shall
execute, acknowledge and deliver to the Depositor and to its predecessor Trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as Trustee. The
Depositor, the Master Servicer and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor Trustee all such
rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section 9.8 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 9.6.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 9.8, the Master Servicer shall mail notice of the succession of
such Trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to each Rating Agency. If the Master
Servicer fails to mail such notice within 30 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Master Servicer.
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SECTION 9.9. 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 all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such Person
shall be eligible under the provisions of Section 9.6, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
SECTION 9.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust or any Mortgaged Property may at the time be located, the
Depositor and the Trustee shall each have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
to act as co-trustee or co-trustees, jointly with the Trustee, or separate
trustee or separate trustees, of all or any part of the Trust, 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 thereof, and, subject
to the other provisions of this Section 9.10, such powers, duties, obligations,
rights and trusts as the Master Servicer and the Trustee may consider necessary
or desirable. The parties hereto acknowledge that any such co-trustee or
separate trustee will act as co-trustee or separate trustee hereunder pursuant
to any co-trustee agreement between the Trustee and such co-trustee or separate
Trustee, and shall be entitled to the same rights and subject to the same
standards as the Trustee with respect to all rights and immunities of the
Trustee, including with respect to indemnification and the obligations and
duties of the Depositor, the Seller or the Master Servicer to the Trustee
pursuant to the terms hereof. Any such co-trustee or separate trustee shall be
subject to the written approval of the Master Servicer. If the Master Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in the case an Event of Default shall have occurred
and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 9.6 and no
notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 9.8. The Master Servicer shall be
responsible for the fees of any co-trustee or separate trustee appointed
hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act
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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 held personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Master Servicer and the Trustee may each at any time
accept the resignation of or remove any separate trustee or co-trustee
except that following the occurrence of an Event of Default, the Trustee
acting alone may accept the resignation or remove any separate trustee
or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. 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 Master Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
SECTION 9.11. LIMITATION OF LIABILITY.
The Certificates are executed by the Trustee, not in its individual
capacity but solely as Trustee of the Trust, in the exercise of the powers and
authority conferred and vested in it by this Agreement. Each of the undertakings
and agreements made on the part of the Trustee in the Certificates is made and
intended not as a personal undertaking or agreement by the Trustee but is made
and intended for the purpose of binding only the Trust.
SECTION 9.12. 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 such preceding instituted by the Trustee shall be brought in its own name or
in its capacity as Trustee. Any recovery of judgment shall, after provision for
the payment of the reasonable compensation, expenses, disbursement
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and advances of the Trustee, its agents and counsel, be for the ratable benefit
or the Certificateholders in respect of which such judgment has been recovered.
SECTION 9.13. SUITS FOR ENFORCEMENT.
In case an Event of Default or other default by the Master Servicer, the
Seller or the Depositor hereunder shall occur and be continuing, the Trustee, in
its discretion, may proceed to protect and enforce its rights and the rights of
the Holders of Certificates under this Agreement by a suit, action or proceeding
in equity or at law or otherwise, whether for the specific performance of any
covenant or 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 and the
Certificateholders.
SECTION 9.14. WAIVER OF BOND REQUIREMENT.
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee post a bond or other surety with any
court, agency or body whatsoever.
SECTION 9.15. WAIVER OF INVENTORY, ACCOUNTING AND APPRAISAL REQUIREMENT.
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee file any inventory, accounting or
appraisal of the Trust with any court, agency or body at any time or in any
manner whatsoever.
ARTICLE X
TERMINATION
SECTION 10.1. TERMINATION.
(a) The respective obligations and responsibilities of the Depositor,
the Seller, the Master Servicer, the Trust Administrator, the Document Custodian
and the Trustee created hereby (other than the obligation of the Trustee to make
certain payments to Certificateholders after the final Distribution Date and the
obligation of the Master Servicer to send certain notices as hereinafter set
forth) shall terminate upon notice to the Trustee of the earliest of (i) the
Distribution Date on which the Aggregate Class Principal Balance has been
reduced to zero, (ii) the final payment or other liquidation of the last
Mortgage Loan in the Trust, (iii) the optional purchase by the Master Servicer
of the Mortgage Loans pursuant to Section 10.1(b) and (iv) the Distribution Date
in August, 2028. Notwithstanding the foregoing, in no event shall the trust
created hereby continue beyond the expiration of 21 years from the death of the
last surviving descendants of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James's, living on the date hereof.
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(b) The Master Servicer shall have the right to exercise the option to
effect the transfer to it of each Mortgage Loan pursuant to Section 10.1(a)
above on any Distribution Date on or after the Distribution Date immediately
prior to which the Aggregate Loan Balance is less than five percent (5%) of the
Cut-Off Date Aggregate Loan Balance by purchasing, on the next succeeding
Distribution Date, all of the outstanding Mortgage Loans at a price equal to the
sum of the Aggregate Loan Balance and accrued and unpaid interest thereon at the
weighted average of the Loan Rates through the end of the Collection Period
preceding the final Distribution Date. The exercise of such purchase right shall
be conditioned upon receipt by the Trustee of a Nondisqualification Opinion. If
such right is exercised, the Master Servicer shall provide to the Trustee the
certification required by Section 3.8 and, promptly following payment of the
repurchase price, the Trustee shall execute proper instruments acknowledging
termination and discharge of this Agreement in the form provided by the Master
Servicer. Such certificate shall be delivered by the Master Servicer to the
Trustee in a timely manner so as to enable the Trustee to timely notify the
Holders of Certificates pursuant to Section 10.1(c).
(c) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Holders of Certificates may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee (upon receipt of written directions from the Master Servicer, if the
Master Servicer is exercising its right to retransfer the Mortgage Loans, given
not later than the first day of the month preceding the month of such final
distribution) by letter to the Holders of Certificates mailed not earlier than
the 15th day and not later than the 25th day of the month next preceding the
month of such final distribution specifying (i) the Distribution Date upon which
final distribution of the Certificates will be made, (ii) the amount of each
such final distribution and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable. In the event written directions are
delivered by the Master Servicer to the Trustee as described in the preceding
sentence, the Master Servicer shall deposit in the Distribution Account on or
before the Distribution Date for such final distribution in immediately
available funds an amount which, when added to the funds on deposit in the
Distribution Account that are payable to the Holders of Certificates, will be
equal to the retransfer amount for the Mortgage Loans computed as above
provided.
(d) Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to the Holders thereof on the Distribution Date
for such final distribution, in proportion to the Percentage Interests of their
respective Certificates and to the extent that funds are available for such
purpose, an amount equal to the amount required to be distributed to Holders of
such Certificates pursuant to Section 5.1 for such Distribution Date.
(e) In the event that all of the Certificateholders shall not surrender
their Certificates for final payment and cancellation on or before such final
Distribution Date, the Trustee shall promptly following such date cause all
funds in the Distribution Account not distributed in final distribution to
Certificateholders to be withdrawn therefrom and credited to the remaining
Certificateholders by depositing such funds in a separate escrow account for the
benefit of such
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Certificateholders and the Master Servicer (if the Master Servicer has exercised
its right to purchase the Mortgage Loans) or the Trustee (in any other case)
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 nine months after the second notice all the
Certificates shall not have been surrendered for cancellation, the Class A-R
Certificateholder shall be entitled to all unclaimed funds and other assets
which remain subject hereto and the Trustee upon transfer of such funds shall be
discharged of any responsibility for such funds and the Certificateholders shall
look to the Class A-R Certificateholder for payment.
SECTION 10.2. ADDITIONAL TERMINATION REQUIREMENTS.
(a) In the event that the Master Servicer exercises its purchase option
as provided in Section 10.1, the Trust shall be terminated in accordance with
the following additional requirements, unless the Trustee has received a
Nondisqualification Opinion to the effect that the failure of the Trust to
comply with the requirements of this subsection 10.2(a) will not (A) result in
the imposition of taxes on "prohibited transactions" of the Trust, as defined in
Section 860F of the Code, or contributions to REMIC I after the "startup day,"
as defined in Section 860G(d) of the Code, or (B) cause REMIC I to fail to
qualify as a REMIC at any time any Certificate is outstanding:
(i) within ninety (90) days prior to the final Distribution Date
set forth in the notice given by the Trustee under Section 10.1, the
Trustee, at the direction of the Depositor, shall adopt a plan of
complete liquidation of the Trust in the form prepared by the Depositor;
(ii) at or after the time of adoption of such a plan of complete
liquidation and at or prior to the Distribution Date for the final
distribution, the Trustee shall sell all of the assets of the Trust
either to the Depositor or other purchaser of the assets of the Trust,
as the case may be, for cash; provided, however, that in the event that
a calendar quarter ends after the time of adoption of such a plan of
complete liquidation but prior to the such final Distribution Date, the
Trustee shall not sell any of the assets of the Trust prior to the close
of that calendar quarter; and
(iii) the Trustee shall make the distributions specified in
subsection 10.1(d) and (e) on or before the final Distribution Date
referred to in clause (i) above.
(b) The Trustee hereby agrees to adopt a plan of complete liquidation as
specified in subsection 10.2(a) upon the written direction of the Depositor and
to take such other action in connection therewith as may be reasonably requested
by the Depositor.
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ARTICLE XI
REMIC ADMINISTRATION
SECTION 11.1. REMIC ADMINISTRATION.
(a) It is intended that the REMIC I shall constitute, and that the
affairs of the REMIC I shall be conducted so as to qualify REMIC I as a REMIC as
defined in and in accordance with the REMIC Provisions. In furtherance of such
intention, the Trust Administrator covenants and agrees that it shall act as
agent (and the Trust Administrator is hereby appointed to act as agent) and as
agent of the Tax Matters Person on behalf of the REMIC in the Trust, and that in
such capacities, it shall:
(i) prepare, sign and file, or cause to be prepared and filed, in
a timely manner, a U.S. Real Estate Mortgage Investment Conduit Income
Tax Return (Form 1066) and any other Tax Return required to be filed by
REMIC I, using a calendar year as the taxable year for the REMIC I;
(ii) make, or cause to be made, an election, on behalf of the
REMIC I, to be treated as a REMIC on the federal tax return of the REMIC
I for its first taxable year;
(iii) prepare and forward, or cause to be prepared and forwarded,
to the Trustee, the Certificateholders and to the Internal Revenue
Service and any other relevant governmental taxing authority all
information returns or reports as and when required to be provided to
them in accordance with the REMIC Provisions;
(iv) to the extent that the affairs of the Trust are within its
control, conduct such affairs of the Trust at all times that any
Certificates are outstanding so as to maintain the status of the REMIC I
as a REMIC under the REMIC Provisions and any other applicable federal,
state and local laws, including, without limitation, information reports
relating to "original issue discount," as defined in the Code, based
upon the Prepayment Assumption and calculated by using the issue price
of the Certificates;
(v) not knowingly or intentionally take any action or omit to
take any action that would cause the termination of the REMIC status of
the REMIC I;
(vi) pay or cause to be paid from the Trust the amount of any and
all federal, state, and local taxes, imposed upon the Trustee or the
Certificateholders in connection with the Trust or the Mortgage Loans,
prohibited transaction taxes as defined in Section 860F of the Code
imposed on the Trust when and as the same shall be due and payable (but
such obligation shall not prevent the Trust Administrator or any other
appropriate Person from contesting any such tax in appropriate
proceedings and shall not prevent the Trustee from withholding payment
of such tax, if permitted by law, pending the outcome of such
proceedings). The Master Servicer shall reimburse the Trust for any
taxes paid by it pursuant to this clause (vi) to the extent that such
taxes are imposed as a result of the
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bad faith, willful misfeasance or negligence of the Master Servicer in
the performance of its obligations hereunder;
(vii) ensure that any such returns or reports filed on behalf of
the REMIC I in the Trust by the Trust Administrator are properly
executed by the appropriate person;
(viii) represent the REMIC I in any administrative or judicial
proceedings relating to an examination or audit by any governmental
taxing authority, request an administrative adjustment as to any taxable
year of the REMIC I in the Trust, enter into settlement agreements with
any government taxing agency, extend any statute of limitations relating
to any item of the Trust and otherwise act on behalf of the REMIC I in
relation to any tax matter involving the Trust at the expense of the
Master Servicer;
(ix) as provided in Section 6.2 hereof, make available
information necessary for the computation of any tax imposed (1) on
transferors of Residual Certificates to transferees that are not
Permitted Transferees or (2) on pass-through entities, any interest in
which is held by an entity which is not a Permitted Transferee. The
Trustee covenants and agrees that it will cooperate with the Master
Servicer and the Trust Administrator in the foregoing matters and that
it will sign, as Trustee, any and all tax returns prepared by the Trust
Administrator required to be filed on behalf of the Trust.
Notwithstanding the foregoing, at such time as the Trustee becomes the
successor Master Servicer, the Holder of the largest Percentage Interest
of each Class of Residual Certificates shall serve as Tax Matters Person
for such Class until such time as an entity is appointed to succeed the
Trustee as servicer;
(x) make available to the Internal Revenue Service and those
Persons specified by the REMIC Provisions all information necessary to
compute any tax imposed (A) as a result of the Transfer of an Ownership
Interest in a Residual Certificate to any Person who is not a Permitted
Transferee, including the information described in Treasury regulations
sections 1.860D-1(b)(5) and 1.860E-2(a)(5) with respect to the "excess
inclusions" of such Residual Certificate and (B) as a result of any
regulated investment company, real estate investment trust, common trust
fund, partnership, trust, estate or organization described in Section
1381 of the Code that holds an Ownership Interest in a Residual
Certificate having as among its record holders at any time any Person
that is not a Permitted Transferee. Reasonable compensation for
providing such information may be accepted by the Trust Administrator;
and
(xi) Upon filing with the Internal Revenue Service, the Trust
Administrator shall furnish to the Holders of the Residual Certificates
the Form 1066 and each Form 1066Q and shall respond promptly to written
requests made not more frequently than quarterly by any Holder of
Residual Certificates with respect to the following matters but only to
the extent the Trustee has the information available with respect to
such matters:
(1) The original projected principal and interest cash
flows on the Closing Date on each class of regular and residual
interests created hereunder and on the Mortgage Loans, based on
the Prepayment Assumption;
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(2) The projected remaining principal and interest cash
flows as of the end of any calendar quarter with respect to each
class of regular and residual interests created hereunder and the
Mortgage Loans, based on the Prepayment Assumption;
(3) The Prepayment Assumption (and any multiple thereof
used to calculate the issue price of the Certificates) and any
interest rate assumptions used in determining the projected
principal and interest cash flows described above;
(4) The original issue discount (or, in the case of the
Mortgage Loans, market discount) or premium accrued or amortized
through the end of such calendar quarter with respect to each
class of regular or residual interests created hereunder and with
respect to the Mortgage Loans, together with each constant yield
to maturity used in computing the same;
(5) The treatment of losses realized with respect to the
Mortgage Loans or the regular interests created hereunder,
including the timing and amount of any cancellation of
indebtedness income of the REMIC I with respect to such regular
interests or bad debt deductions claims with respect to the
Mortgage Loans;
(6) The amount and timing of any non-interest expenses of
the REMIC I; and
(7) Any taxes (including penalties and interest) imposed
on the REMIC I, including, without limitation, taxes on
"prohibited transactions," "contribution" or "net income from
foreclosure property" or state or local income or franchise
taxes.
SECTION 11.2. PROHIBITED TRANSACTIONS AND ACTIVITIES.
Subject to the provisions of Article II, neither the Trustee nor the
Master Servicer shall permit the sale, disposition or substitution of a Mortgage
Note or the substitution of a property for a Mortgaged Property (except in a
disposition pursuant to (i) the bankruptcy or insolvency of the REMIC I or (ii)
the termination of the REMIC I in a "qualified liquidation" as defined in
Section 860F(a)(4) of the Code), nor acquire any assets for the REMIC I (other
than REO), nor sell or dispose of any investments in the Accounts for gain, nor
accept any contributions to the REMIC I (except as contemplated by Section 4.2),
unless it has received (x) a Nondisqualification Opinion (at the expense of the
Person requesting the Trustee or the Master Servicer to take such action) to the
effect that such disposition, acquisition, substitution, or acceptance will not
(a) affect adversely the status of regular interests therein; (b) result in the
encumbrance of the assets transferred or assigned to the REMIC I (except
pursuant to the provisions of this Agreement) or (c) cause the REMIC I to be
subject to a tax on "prohibited transactions" or "prohibited contributions"
pursuant to the REMIC Provisions and (y) (i) as to any sale or disposition of a
Mortgage Note, a statement in writing by the Master Servicer
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delivered to the Trustee setting forth the analysis described in Section 3.7
hereof and stating the Master Servicer's conclusion that the aggregate
distribution of interest and principal on the Certificates will not be reduced
by such sale or disposition or (ii) as to any other described transaction, a
statement delivered the Trustee by the party requesting such transaction that
the transaction will not reduce the aggregate disposition of interest or
principal on the Certificates.
SECTION 11.3. INDEMNIFICATION WITH RESPECT TO CERTAIN TAXES AND LOSS OF
REMIC STATUS.
(a) In the event that the REMIC I fails to qualify as a REMIC, loses its
status as a REMIC, or incurs state or local taxes, or a tax as a result of a
prohibited transaction or contribution or the receipt of "net income from
foreclosure property" subject to taxation under the REMIC Provisions due to the
willful misfeasance, bad faith or negligent performance by the Trust
Administrator of its duties and obligations specifically set forth herein, or by
reason of the Trust Administrator's reckless disregard of its obligations and
duties thereunder, the Trust Administrator shall indemnify the Trust against any
and all losses, claims, damages, liabilities or expenses ("Losses") resulting
therefrom; provided, however, that the Trust Administrator shall not be liable
for any Losses attributable to the action or inaction of the Depositor, the
Master Servicer, the Trustee, the Seller or a Holder of a Residual Certificates
nor for any Losses resulting from misinformation provided by the Depositor, the
Master Servicer, the Seller or the Holder of a Residual Certificates on which
the Trust Administrator has relied. The foregoing shall not be deemed to limit
or restrict the rights and remedies of successor Holders of the Residual
Certificates at law or in equity.
(b) In the event that REMIC I fails to qualify as a REMIC, loses its
status as a REMIC, or incurs state or local taxes, or a tax as a result of a
prohibited transaction or contribution or the receipt of "net income from
foreclosure property" subject to taxation under the REMIC Provisions due to the
willful misfeasance, bad faith or negligent performance of the Master Servicer
in the performance of its duties and obligations set forth herein, or by reason
of the Master Servicer's reckless disregard of its obligations and duties
hereunder, the Master Servicer shall indemnify the Trust against any and all tax
related liabilities and expenses, including interest and penalties ("Expenses")
resulting therefrom; provided, however, that the Master Servicer shall not be
liable for any such Expenses attributable to the action or inaction of the
Trustee, the Depositor the Seller, or the Holder of the Residual Certificates
nor for any such Expenses resulting from misinformation provided by the Trustee,
the Depositor, the Seller or a Holder of the Residual Certificates on which the
Master Servicer has reasonably relied.
The foregoing shall not be deemed to limit or restrict the rights and
remedies of any successor Holders of the Residual Certificates at law or in
equity.
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<PAGE> 168
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1. AMENDMENT.
This Agreement may be amended from time to time by the Depositor, the
Master Servicer, the Seller, the Trust Administrator, the Document Custodian and
the Trustee, in each case without the consent of any of the Certificateholders
(i) to cure any ambiguity, (ii) to correct any defective provisions or to
correct or supplement any provisions herein that may be inconsistent with any
other provisions herein or the Prospectus Supplement or the Prospectus, (iii) to
add to the duties of the Depositor, the Seller, the Trust Administrator, the
Trustee (subject to the penultimate paragraph of this Section 12.1) or the
Master Servicer, (iv) to add any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement, (v) to add or amend any provisions of this
Agreement as required by any Rating Agency or any other nationally recognized
statistical rating agency in order to maintain or improve any rating of the
Certificates (it being understood that, after obtaining the ratings in effect on
the Closing Date, none of the Trustee, the Trust Administrator, the Depositor or
the Master Servicer is obligated to obtain, maintain or improve any such
rating), or (vi) to add, delete or modify any provision to such extent as shall
be necessary or desirable to maintain the qualification of the REMIC I as a
REMIC; provided, however, that such action shall be accompanied by a
Nondisqualification Opinion.
This Agreement also may be amended from time to time by the Depositor,
the Master Servicer, the Seller, the Document Custodian and the Trustee; and the
Master Servicer may from time to time consent to the amendment of this Agreement
with the consent of the Majority Holders for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (A) reduce
in any manner the amount of, or delay the timing of, payments on the
Certificates without the consent of the Holder of such Certificate, or (B)
reduce the aforesaid percentage required to consent to any such amendment,
without the consent of the Holders of all Certificates then outstanding. Prior
to execution of any such amendment, the Depositor shall furnish the Trustee with
a Nondisqualification Opinion stating whether such amendment would cause the
REMIC I to fail to qualify as a REMIC. An amendment made with the consent of
Certificateholders and executed in accordance with this Section 12.1 shall be
permitted or authorized by this Agreement notwithstanding that such Opinion of
Counsel may conclude that such amendment would cause the REMIC I to fail to
qualify as a REMIC; provided, however, that the Trustee shall not be liable to
any Person for any amendment to this Agreement permitted under the terms hereof.
Prior to the execution of any such amendment, the Master Servicer shall
furnish written notification of the substance of such amendment to each Rating
Agency. In addition, promptly after the execution of any such amendment made
with the consent of the Holders of the Certificates, the Trustee shall furnish
fully executed original counterparts of the instruments effecting such amendment
to the each Holder of a Certificate.
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The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
In connection with any amendment pursuant to this Section 12.1, the
Trustee shall be entitled to receive an Opinion of Counsel to the effect that
such amendment is authorized or permitted by this Agreement.
SECTION 12.2. RECORDATION OF AGREEMENT.
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Master Servicer, but only upon direction
of Holders of a majority of the Certificates accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of Holders of Certificates. The Holders of Certificates requesting
such recordation shall bear all costs and expenses of such recordation. The
Master Servicer shall have no obligation to ascertain whether such recordation
so affects the interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
SECTION 12.3. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust, nor entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as provided in
Section 12.1) 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 Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
person by reason of any action taken by the parties to this Agreement pursuant
to any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a
163
<PAGE> 170
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of 25% or more of Percentage Interests in
any Class of 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, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section 12.3, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
SECTION 12.4. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NORTH CAROLINA AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 12.5. 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 certified mail, return receipt requested, to (a) in the case of the Seller,
First Union National Bank, One First Union Center, Charlotte, North Carolina
28288, Attention: Mortgage Finance, (b) in the case of the Master Servicer and
Trust Administrator, First Union National Bank, One First Union Center,
Charlotte, North Carolina 28288, Attention: Mortgage Finance, (c) in the case of
the Trustee, at Norwest Bank Minnesota, National Association, 11000 Broken Land
Parkway, Columbia, Maryland 21044, Attention: Todd Emerick, FURST 1998-B, or in
the case of the Document Custodian, at Norwest Bank Minnesota, National
Association, 1015 Tenth Avenue, S.E., Minneapolis, Minnesota 55479, Attention:
FURST 1998-B, (d) in the case of the Depositor, First Union Residential
Securitization Transactions, Inc., One First Union Center, Charlotte, North
Carolina 28288-0600, Attention: Patrick J. Tadie, (e) in case of S&P, 26
Broadway, New York, New York 10004, (f) in the case of Moody's, 99 Church
Street, New York, New York 10002, and (g) in the case of Fitch, One State Street
Plaza, New York, New York 10004 or, as to each party, at such other address as
shall be designated by such party in a written notice to each other party. 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. Any notice or other document
required to be delivered or mailed by the Trustee to
164
<PAGE> 171
any Rating Agency shall be given on a best efforts basis and only as a matter of
courtesy and accommodation and the Trustee shall have no liability for failure
to deliver such notice or document to any Rating Agency.
SECTION 12.6. 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 12.7. CERTIFICATES NONASSESSABLE AND FULLY PAID.
The parties agree that the Holders of Certificates shall not be
personally liable for obligations of the Trust, that the beneficial ownership
interests represented by the Certificates shall be nonassessable for any losses
or expenses of the Trust or for any reason whatsoever, and that the Certificates
upon execution, authentication and delivery thereof by the Trustee pursuant to
Section 6.1 are and shall be deemed fully paid.
SECTION 12.8. THIRD-PARTY BENEFICIARIES.
This Agreement will inure to the benefit of and be binding upon the
parties hereto, the Certificateholders, the Owners and their respective
successors and permitted assigns. Except as otherwise provided in this
Agreement, no other Person will have any right or obligation hereunder.
SECTION 12.9. COUNTERPARTS.
This instrument 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 12.10. 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 12.11. PROVISION OF INFORMATION TO PROSPECTIVE PURCHASERS; RULE
144A.
For so long as any Class 1B-3, Class 1B-4, Class 1B-5, Class 2B-3, Class
2B-4 or Class 2B-5 Certificate is a "restricted security" within the meaning of
Rule 144(a)(3) under the Securities Act of 1933, as amended (the "Securities
Act"), the Trust Administrator shall, upon the request of any Owner and any
prospective purchaser of such Class 1B-3, Class 1B-4, Class 1B-5, Class 2B-3,
Class 2B-4 or Class 2B-5 Certificate, make available to such Owner and any
prospective purchaser of such Class 1B-3, Class 1B-4, Class 1B-5, Class 2B-3,
Class 2B-4 or
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<PAGE> 172
Class 2B-5 Certificate designated by such Owner (a) a copy of a private resale
memorandum, to be prepared by the Seller for this purpose, (b) a copy of the
most recent report distributed to the Owners pursuant to Section 5.2 hereof,
together with (c) any additional information required pursuant to Rule 144A, as
from time to time amended, under the Securities Act in order for a sale of such
Class 1B-3, Class 1B-4, Class 1B-5, Class 2B-3, Class 2B-4 or Class 2B-5
Certificates by such Owner to such prospective purchaser to qualify for the
exemption under the Securities Act provided by Rule 144A; provided, however,
that the Trust Administrator shall have no obligation to deliver any information
or item described in clauses (a) or (c) unless and until the Seller shall
provide the same to the Trust Administrator and the Trust Administrator 's
obligation with respect to such delivery shall be limited to any such
information or item supplied to it by the Seller. The Seller shall promptly
furnish to the Trust Administrator, upon receipt of a request from the Trustee
or any Holder of a Class 1B-3, Class 1B-4, Class 1B-5, Class 2B-3, Class 2B-4 or
Class 2B-5 Certificate the items described in clauses (a) and (c) to the
Trustee.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 173
IN WITNESS WHEREOF, the Depositor, the Seller, the Master Servicer, the
Trust Administrator, the Trustee and the Document Custodian have caused this
Agreement to be duly executed by their respective officers all as of the day and
year first above written.
FIRST UNION RESIDENTIAL SECURITIZATION
TRANSACTIONS, INC., as Depositor
By /s/ Patrick J. Tadie
-----------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK, as Seller
By /s/ Patrick J. Tadie
-----------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK, as Master
Servicer
By /s/ Jeffrey B. Mandel
-----------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK, as Trust
Administrator
By /s/ Patrick J. Tadie
-----------------------------------------
Title: Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By /s/ Amy Wahl
-----------------------------------------
Title: Assistant Vice President
<PAGE> 174
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Document Custodian
By /s/ Amy Wahl
-----------------------------------------
Title: Assistant Vice President
-----------------------------------
<PAGE> 175
COMMONWEALTH OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public of the County and State of aforesaid, certify that
Patrick J. Tadie personally came before me this day and acknowledged that [s]he
is a Senior Vice President of First Union Residential Securitization
Transactions, Inc., and that by authority duly given and as the act of the
corporation, [s]he signed [his] [her] name thereto.
WITNESS my hand and official stamp or seal, this 30th day of July,
1998.
/s/ Angela Henson
-----------------------------
Notary Public
My Commission Expires:
8/29/2000
- ---------------------------
(Notary Seal)
<PAGE> 176
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public of the County and State of aforesaid, certify that
Amy Wahl personally came before me this day and acknowledged that she is an
Assistant Vice President of Norwest Bank Minnesota, National Association, and
that by authority duly given and as the act of the corporation, she signed her
name thereto.
WITNESS my hand and official stamp or seal, this 30th day of July,
1998.
/s/ Angela Henson
-----------------------------
Notary Public
My Commission Expires:
8/29/2000
- ---------------------------
(Notary Seal)
<PAGE> 177
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public of the County and State of aforesaid, certify that
Amy Wahl personally came before me this day and acknowledged that [s]he is a
Assistant Vice President of Norwest Bank Minnesota, National Association, and
that by authority duly given and as the act of the corporation, she signed her
name thereto.
WITNESS my hand and official stamp or seal, this 30th day of July, 1998.
/s/ Angela Henson
-----------------------------
Notary Public
My Commission Expires:
8/29/2000
- -------------------------
(Notary Seal)
<PAGE> 178
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public of the County and State of aforesaid, certify that
Patrick J. Tadie personally came before me this day and acknowledged that [s]he
is a Vice President of First Union National Bank, a national banking
association, and that by authority duly given and as the act of the corporation,
[s]he signed [his] [her] name thereto.
WITNESS my hand and official stamp or seal, this 30th day of July,
1998.
/s/ Angela Henson
-----------------------------
Notary Public
My Commission Expires:
8/29/2000
- -------------------------
(Notary Seal)
<PAGE> 179
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public of the County and State of aforesaid, certify that
Jeffrey B. Mandel personally came before me this day and acknowledged that
[s]he is a Vice President of First Union National Bank, and that by authority
duly given and as the act of the corporation, [s]he signed [his] [her] name
thereto.
WITNESS my hand and official stamp or seal, this 30th day of July,
1998.
/s/ Sonya D. Price
-----------------------------
Notary Public
My Commission Expires:
1-19-2003
- ---------------------------
(Notary Seal)
<PAGE> 1
EXHIBIT 4.2
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.,
as Purchaser,
and
FIRST UNION NATIONAL BANK,
as Seller,
MORTGAGE LOAN PURCHASE AGREEMENT
Dated as of July 1, 1998
FURST MORTGAGE LOAN TRUST 1998-A
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................1
Section 1.1 Definitions..................................................................................1
ARTICLE II SALE OF MORTGAGE LOANS; PAYMENT OF PURCHASE PRICE.....................................................2
Section 2.1 Sale of Mortgage Loans.......................................................................2
Section 2.2 Reserved.....................................................................................2
Section 2.3 Obligations of Seller Upon Sale..............................................................2
Section 2.3 Payment of Purchase Price for the Mortgage Loans.............................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH..................................................5
Section 3.1 Seller Representations and Warranties........................................................5
Section 3.2 Seller Representations and Warranties Relating to the Mortgage Loans.........................6
ARTICLE IV SELLER'S COVENANTS....................................................................................7
Section 4.1 Covenants of the Seller......................................................................7
ARTICLE V SERVICING...............................................................................................7
Section 5.1 Servicing....................................................................................7
ARTICLE VI INDEMNIFICATION WITH RESPECT TO THE MORTGAGE LOANS....................................................8
Section 6.1 Indemnification..............................................................................8
ARTICLE VII TERMINATION..........................................................................................11
Section 7.1 Termination.................................................................................11
ARTICLE VIII MISCELLANEOUS PROVISIONS...........................................................................11
Section 8.1 Amendment...................................................................................11
Section 8.2 Governing Law...............................................................................11
Section 8.3 Notices.....................................................................................11
Section 8.4 Severability of Provisions..................................................................12
Section 8.5 Counterparts................................................................................12
Section 8.6 Further Agreements..........................................................................12
Section 8.7 Intention of the Parties....................................................................13
Section 8.8 Successors and Assigns: Assignment of Purchase Agreement....................................13
Section 8.9 Survival....................................................................................13
SCHEDULE I MORTGAGE LOANS
</TABLE>
-i-
<PAGE> 3
MORTGAGE LOAN PURCHASE AGREEMENT (the "Purchase Agreement"), dated as
of July 1, 1998 between First Union National Bank (the "Seller") and First Union
Residential Securitization Transactions, Inc. (the "Purchaser").
W I T N E S S E T H
WHEREAS, the Seller is the owner of the notes or other evidence of
indebtedness (the "Mortgage Notes") so indicated on Schedule I hereto referred
to below, and Related Documents (as defined below) (collectively, the "Mortgage
Loans"); and
WHEREAS, the Seller, in the case of the Mortgage Loans owns, the
mortgages (the "Mortgages") on the properties (the "Mortgaged Properties")
securing such Mortgage Loans, including rights to (a) any property acquired by
foreclosure or deed in lieu of foreclosure or otherwise and (b) the proceeds of
any insurance policies covering the Mortgage Loans or the Mortgaged Properties
or the obligors on the Mortgage Loans;
WHEREAS, the parties hereto desire that the Seller sell the Mortgage
Loans to the Purchaser pursuant to the terms of this Purchase Agreement; and
WHEREAS, pursuant to the terms of a Pooling and Servicing Agreement
dated as of July 1, 1998 (the "Pooling and Servicing Agreement") among the
Purchaser, as depositor, the Seller, as seller Master Servicer and as Trust
Administrator, Norwest Bank Minnesota, National Association, as document
custodian, and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"), the Purchaser will convey the Mortgage Loans to FURST Mortgage Loan
Trust 1998-B (the "Trust Fund"); and
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS.
All capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement.
<PAGE> 4
ARTICLE II
SALE OF MORTGAGE LOANS; PAYMENT OF PURCHASE PRICE
SECTION 2.1 SALE OF MORTGAGE LOANS.
The Seller, concurrently with the execution and delivery of this
Purchase Agreement, does hereby sell, assign, set over, and otherwise convey to
the Purchaser, without recourse, all of its right, title and interest in, to and
under the following, whether now existing or hereafter acquired and wherever
located: the Mortgage Loans, including the related Cut-Off Date Loan Balances,
and all payments in respect of the Mortgage Loans received on and after the
Cut-Off Date (exclusive of payments in respect of interest on the Mortgage Loans
accrued prior to the Cut-Off Date and received thereafter); property which
secured an Mortgage Loan and which has been acquired by foreclosure or deed in
lieu of foreclosure; the interest of the Seller in any insurance policies in
respect of the Mortgage Loans; all rights under any guaranty executed in
connection with a Mortgage Loan; and all proceeds of the foregoing.
SECTION 2.2 RESERVED.
SECTION 2.3 OBLIGATIONS OF SELLER UPON SALE.
In connection with any transfer pursuant to Sections 2.1 or 2.2 hereof,
the Seller further agrees, at its own expense, on or prior to the Closing Date,
(a) to indicate in its books and records that the related Mortgage Loans have
been sold to the Purchaser or to the Trustee, as assignee of the Purchaser, as
applicable, pursuant to this Purchase Agreement and (b) to deliver to the
Purchaser a computer file containing a true and complete list of all such
Mortgage Loans specifying for each such Mortgage Loan, as of the applicable
Cut-Off Date (i) its account number and (ii) the related Cut-Off Date Loan
Balance. Such file, which forms a part of Exhibit D to the Pooling and Servicing
Agreement, shall also be marked as Schedule I to this Purchase Agreement and is
hereby incorporated into and made a part of this Purchase Agreement.
The Seller agrees to prepare, execute and file UCC-1 financing
statements with the Secretary of State in the State of North Carolina (which
shall have been filed on or before the Closing Date with respect to the Mortgage
Loans) describing the applicable Mortgage Loans and naming the Seller as debtor
and, with respect to the Mortgage Loans, the Purchaser (and indicating that such
loans have been assigned to the Trustee) as secured party and all necessary
continuation statements and any amendments to the UCC-1 financing statements
required to reflect a change in the name or corporate structure of the Seller or
the filing of any additional UCC-1 financing statements due to the change in the
principal office of the Seller, as are necessary to perfect and protect the
Trustee's interest in each Mortgage Loan, the payments thereon and the proceeds
thereof.
-2-
<PAGE> 5
In connection with any conveyance by the Seller, the Seller shall on
behalf, and at the direction, of the Purchaser deliver to, and deposit with, the
Trustee, as Document Custodian on or before the Closing Date, the following
documents or instruments with respect to each Mortgage Loan (the "Related
Documents"):
(i) the original Mortgage Note, endorsed "Pay to the order of
Norwest Bank Minnesota, National Association, as trustee for the
registered holders from time to time of FURST Mortgage Loan Trust
1998-B, Mortgage Pass-Through Certificates, Series 1998-B, without
recourse," signed in the name of the Seller by an authorized officer,
with all intervening endorsements showing a complete chain of title
from the originator of such Mortgage Loan to the Seller;
(ii) the original Mortgage, with evidence of recording
thereon, provided, that if the original Mortgage has been delivered for
recording to the appropriate public recording office of the
jurisdiction in which the Mortgaged Property is located but has not yet
been returned to the Seller by such recording office, the Seller shall
cause to be delivered to the Document Custodian a certified true copy
of such original Mortgage so certified by the Seller, together with a
certificate of the Seller certifying that such original Mortgage has
been so delivered to such recording office; in all such instances, the
Seller shall deliver or cause to be delivered the original recorded
Mortgage to the Document Custodian promptly upon receipt of the
original recorded Mortgage;
(iii) the original assignment of Mortgage, from the Seller to
"Norwest Bank Minnesota, National Association, as trustee for the
registered holders from time to time of FURST Mortgage Loan Trust
1998-B," which assignment shall be in form and substance acceptable for
recording;
(iv) the original attorney's opinion of title or the original
policy of title insurance, provided, that if any such original policy
of title insurance has not yet been received by the Seller, the Seller
shall cause to be delivered to the Document Custodian a copy of such
policy or a title insurance binder or commitment for the issuance of
such policy;
(v) originals of all intervening assignments of Mortgage, with
evidence of recording thereon, showing a complete chain of title from
the originator to the Seller, provided, that if any such original
intervening assignment of Mortgage has been delivered for recording to
the appropriate public recording office of the jurisdiction in which
the Mortgaged Property is located but has not yet been returned to the
Seller by such recording office, the Seller may have delivered to the
Document Custodian a certified true copy of such original assignment of
Mortgage so certified by the Seller, together with a certificate of the
Seller certifying that such original assignment of Mortgage has been so
delivered to such recording office; in all such instances, the Seller
shall deliver or cause to be delivered
-3-
<PAGE> 6
any such original assignments to the Document Custodian promptly upon
receipt thereof; and
(vi) originals of all assumption and modification agreements,
if any; provided, however, the Seller may deliver to the Document Custodian all
of the above documents other than those referred to in clause (i) above (which
shall be delivered on or before the Closing Date) within 60 days after the
Closing Date.
For all Mortgage Loans that were owned by the Seller on the Cut-Off
Date as successor by merger to the originator or previous holder, the Seller
shall deliver to the Trustee, as Document Custodian, on or before the Closing
Date, an officer's certificate identifying such Mortgage Loans and the
identities of the Persons (each, a "Merged Holder") that are reflected on the
related Mortgage Notes and Mortgage or assignment of Mortgage as the holder,
certifying that the Seller is successor by merger to each such Merged Holder and
certifying as to the authority of the officer signing the endorsement referred
to in clause (i) above and the assignment of Mortgage referred to in clause
(iii) above to execute the same. Such officer's certificate shall constitute
part of the Mortgage File of each such Mortgage Loan.
The Seller further hereby confirms to the Purchaser that, as of the
Closing Date, it has caused, the portions of the Electronic Ledger relating to
the Mortgage Loans maintained by the Master Servicer to be clearly and
unambiguously marked to indicate that the Mortgage Loans have been sold to the
Purchaser or the Trustee as assignee of the Purchaser, as applicable.
The Purchaser hereby acknowledges its acceptance of all right, title
and interest to the Mortgage Loans and other property, now existing and
hereafter created, conveyed to it pursuant to Section 2.1.
The parties hereto intend that (a) the transaction set forth herein
with respect to the Mortgage Loans be a sale by the Seller to the Purchaser of
all the Seller's right, title and interest in and to the Mortgage Loans and
other related property described above and (b) in the event the transaction set
forth herein with respect to the Mortgage Loans is deemed not to be a sale, the
Seller shall be deemed to have granted and does hereby grant to the Purchaser a
security interest in all of the Seller's right, title and interest in, to and
under the Mortgage Loans and other related property described above, whether now
existing or hereafter created, to secure all of the Seller's obligations
hereunder; and this Purchase Agreement shall constitute a security agreement
under applicable law.
SECTION 2.4 PAYMENT OF PURCHASE PRICE FOR THE MORTGAGE LOANS.
(a) In consideration of the sale of the Mortgage Loans from the Seller
to the Purchaser on the Closing Date as contemplated by Section 4.2 of the
Pooling and Servicing Agreement, the Purchaser agrees to pay to the Seller on
the Closing Date by transfer of immediately available funds, an amount equal to
$____________________ (the "Purchase Price").
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<PAGE> 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
SECTION 3.1 SELLER REPRESENTATIONS AND WARRANTIES.
The Seller represents and warrants to the Purchaser as of the Closing
Date and as of each Subsequent Transfer Date:
(i) It is a national banking association, validly existing and in
good standing under the laws of the United States of America and has
the requisite power and authority to own its assets and to transact the
business in which it is currently engaged. It 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 (a) its business,
properties, assets, or condition (financial or other), (b) its
performance of its obligations under this Purchase Agreement, (c) the
value or marketability of the Mortgage Loans and (d) the ability to
foreclose on the related Mortgaged Properties;
(ii) It has the power and authority to make, execute, deliver and
perform this Purchase Agreement and all of the transactions
contemplated under this Purchase Agreement, and has taken all necessary
action to authorize the execution, delivery and performance of this
Purchase Agreement. When executed and delivered, this Purchase
Agreement will constitute its legal, valid and binding obligation
enforceable in accordance with its 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;
(iii) It holds all necessary licenses, certificates and permits
from all government authorities necessary for conducting its business
as it is presently conducted. It is not required to obtain the consent
of any other party or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Purchase Agreement,
except for such consents, licenses, approvals or authorizations, or
registrations or declarations, as shall have been obtained or filed, as
the case may be, prior to the Closing Date;
(iv) The execution, delivery and performance of this Purchase
Agreement by it will not conflict with or result in a breach of, or
constitute a default under, any provision of
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<PAGE> 8
any existing law or regulation or any order or decree of any court
applicable to it or any of its properties or any provision of its
Articles of Association or Bylaws, or constitute a material breach of,
or result in the creation or imposition of any lien, charge or
encumbrance upon any of its properties pursuant to, any mortgage,
indenture, contract or other agreement to which it is a party or by
which it may be bound;
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to its
knowledge threatened, against it or any of its properties or with
respect to this Purchase Agreement or the Certificates which in its
opinion has a reasonable likelihood of resulting in a material adverse
effect on the transactions contemplated by this Purchase Agreement;
(vi) The transactions contemplated by this Purchase Agreement are
in the ordinary course of business of the Seller; and
(vii) The Seller is not insolvent, nor will it be made insolvent by
the transfer of the Mortgage Loans, nor is the Seller aware of any
pending insolvency.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1 shall survive delivery of the
Mortgage Files to the Document Custodian on behalf of the Purchaser.
SECTION 3.2 SELLER REPRESENTATIONS AND WARRANTIES RELATING TO THE
MORTGAGE LOANS.
The Seller represents and warrants to the Purchaser that, as of the
Closing Date with respect to the Mortgage Loans it has made the representations
and warranties set forth in Section 2.6(a) of the Pooling and Servicing
Agreement for the benefit of the Purchaser or the Trustee as applicable. Such
representations and warranties are incorporated by reference in this Section
3.2, and the Purchaser may rely thereon as if such representations and
warranties were fully set forth herein.
With respect to the representations and warranties set fort in this
Section 3.2 that are made to the best of the Seller's knowledge or as to which
the Seller has no knowledge, if it is discovered by the Purchaser, the Seller,
the Master Servicer, the Trust Administrator or a Responsible Officer of the
Trustee that the substance of any such representation and warranty is inaccurate
and such inaccuracy materially and adversely affects the value of the related
Mortgage Loan then notwithstanding the Seller's lack of knowledge with respect
to the substance of such representation and warranty being inaccurate at the
time the representation or warranty was made, such inaccuracy shall be deemed a
breach of the applicable representation or warranty and with respect to any
breach of such representation or warranty or of any other representation or
warranty, the Seller shall cure, repurchase or substitute in accordance with the
Pooling and Servicing Agreement.
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<PAGE> 9
It is understood and agreed that the representations and warranties set
forth in this Section 3.2 shall survive delivery of the respective Mortgage
Files to the Document Custodian on behalf of the Purchaser.
ARTICLE IV
SELLER'S COVENANTS
SECTION 4.1 COVENANTS OF THE SELLER.
(a) The Seller hereby covenants that except for the transfer hereunder,
the Seller will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Mortgage Loan,
or any interest therein; the Seller will notify the Trustee, as assignee of the
Purchaser, of the existence of any Lien on any Mortgage Loan immediately upon
discovery thereof; and the Seller will defend the right, title and interest of
the Trust Fund, as assignee of the Purchaser, in, to and under the Mortgage
Loans, against all claims of third parties claiming through or under the Seller;
provided, however, that nothing in this Section 4.1 shall prevent or be deemed
to prohibit the Seller from suffering to exist upon any of the Mortgage Loans
any Liens for municipal or other local taxes and other governmental charges if
such taxes or governmental charges shall not at the time be due and payable or
if the Seller 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.
(b) During the period commencing on the first day of the offering of
the Offered Senior Certificates of each Group of Certificates, the Class M
Certificates, the Class B-1 Certificates and the Class B-2 Certificates of each
Group of Certificates (collectively the "Offered Certificates") to the public
and ending on the Closing Date, the Seller shall not, without the prior written
consent of First Union Capital Markets, a division of Wheat First Securities,
Inc., sell or enter into agreements with other underwriters to sell mortgage
pass-through securities, collateralized mortgage obligations or similar
securities representing interests in or secured by residential mortgage loans
purchased or originated by the Seller.
ARTICLE V
MASTER SERVICING
SECTION 5.1 MASTER SERVICING.
First Union National Bank will be the Master Servicer of the Mortgage
Loans pursuant to the terms and conditions of the Pooling and Servicing
Agreement.
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<PAGE> 10
ARTICLE VI
INDEMNIFICATION WITH RESPECT TO THE MORTGAGE LOANS
SECTION 6.1 INDEMNIFICATION.
(a) The Seller agrees to indemnify and hold harmless the Purchaser,
each of its directors, each of its officers who have signed the registration
statement, and each of its directors and each person or entity who controls the
Purchaser or any such person, within the meaning of Section 15 of the Securities
Act of 1933, as amended (the "Securities Act"), against any and all losses,
claims, damages or liabilities, joint and several, to which the Purchaser, or
any such person or entity may become subject, under the Securities Act or
otherwise, and will reimburse the Purchaser and each such controlling person for
any legal or other expenses incurred by the Purchaser or such controlling person
in connection with investigating or defending any such loss, claims, damages or
liabilities 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 any material fact contained in the Prospectus
Supplement or any amendment or supplement to the Prospectus Supplement approved
in writing by the Seller or the omission or the alleged omission to state
therein a material fact necessary in order to make the statements in the
Prospectus Supplement or any amendment or supplement to the Prospectus
Supplement approved in writing by the Seller, in the light of the circumstances
under which they were made, not misleading, but only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission
relates to the information contained in the Prospectus Supplement under the
captions: "Summary of Terms of the Offered Certificates - The Mortgage Loans,"
"Risk Factors" (other than " - Book-Entry System; and " - Certificate Ratings"),
"The Seller and the Master Servicer" and "The Mortgage Loan Pool" and the
corresponding information in the "Summary of Terms of the Offered Certificates"
(such information, the "Seller Information"). This indemnity agreement will be
in addition to any liability which the Seller may otherwise have.
(b) The Purchaser agrees to indemnify and hold harmless the Seller
against any and all losses, claims, damages or liabilities, joint and several,
to which the Seller, or any such person or entity may become subject, under the
Securities Act or otherwise, and will reimburse the Seller for any legal or
other expenses incurred by the Seller or such controlling person in connection
with investigating or defending any such losses, claims, damages or liabilities
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 any material fact contained in the Prospectus Supplement or any
amendment or supplement to the Prospectus Supplement or the omission or the
alleged omission to state therein a material fact necessary in order to make the
statements in the Prospectus Supplement or any amendment or supplement to the
Prospectus Supplement, in the light
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<PAGE> 11
of the circumstances under which they were made, not misleading, but only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission relates to the information contained in the Prospectus
Supplement other than the Seller Information. This indemnity agreement will be
in addition to any liability which the Purchaser may otherwise have.
(c) Promptly after receipt by any indemnified party under this Article
VI of notice of any claim or the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Article VI, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Article VI except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Article VI.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Article VI for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Purchaser, if the indemnified parties
under this Article VI consist of the Purchaser, or by the Seller, if the
indemnified parties under this Article VI consist of the Seller.
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<PAGE> 12
Each indemnified party, as a condition of the indemnity agreements
contained in Section 6.1(a) and (b), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Article VI
is for any reason held to be unenforceable although applicable in accordance
with its terms, the Seller, on the one hand, and the Purchaser, on the other,
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity agreement incurred by the
Seller and the Purchaser in such proportions as shall be appropriate to reflect
the relative benefits received by the Seller, on the one hand, and the
Purchaser, on the other, from the sale of the Mortgage Loans such that the
Purchaser is responsible for that portion represented by the percentage that the
underwriting discount with respect to the Offered Certificates (the
"Underwriting Discount") bears to the sum of the Purchase Price and the
Underwriting Discount and the Seller shall be responsible for the balance;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, each person, if any, who
controls the Purchaser within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Purchaser and each director of
the Seller, each officer of the Seller, and each person, if any, who controls
the Seller within the meaning of Section 15 of the Securities Act shall have the
same rights to contribution as the Seller. Notwithstanding anything in this
paragraph (d) to the contrary, the Purchaser shall not be required to contribute
an amount in excess of the amount of the Underwriting Discount.
(e) The Seller agrees to indemnify and to hold each of the Purchaser,
the Trustee, each Certificateholder and the Master Servicer harmless against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Purchaser, the
Trustee and any Certificateholder may sustain in any way (i) related to the
failure of the Seller to perform its duties in compliance with the terms of this
Purchase Agreement or (ii) arising from a breach by the Seller of its
representations and warranties in Article III of this
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<PAGE> 13
Purchase Agreement. The Seller shall immediately notify the Purchaser, the
Trustee and each Certificateholder if a claim is made by a third party with
respect to this Purchase Agreement, the Seller shall assume the defense of any
such claim and pay all expenses in connection therewith, including reasonable
counsel fees, and promptly pay, discharge and satisfy any judgment or decree
which may be entered against the Purchaser, the Master Servicer, the Seller, the
Trustee and/or Certificateholder in respect of such claim.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION.
The respective obligations and responsibilities of the Seller and the
Purchaser created hereby shall terminate, except for the Seller's and the
Purchaser's indemnity obligations as provided herein, upon the termination of
the Trust Fund as provided in Article X of the Pooling and Servicing Agreement.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 AMENDMENT.
This Purchase Agreement may be amended from time to time by the Seller
and the Purchaser by written agreement signed by the Seller and the Purchaser.
SECTION 8.2 GOVERNING LAW.
THIS PURCHASE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
SECTION 8.3 NOTICES.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by registered mail, postage prepaid, addressed as follows:
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<PAGE> 14
if to the Seller:
First Union National Bank
One First Union Center
Charlotte, North Carolina 28288
Attention: Patrick J. Tadie
or, such other address as may hereafter be furnished to the Purchaser in writing
by the Seller.
if to the Purchaser:
First Union Residential Securitization Transactions, Inc.
One First Union Center
Charlotte, North Carolina 28288-0600
Attention: Patrick J. Tadie
or such other address as may hereafter be furnished to the Seller in writing by
the Purchaser.
SECTION 8.4 SEVERABILITY OF PROVISIONS.
If any one or more of the covenants, agreements, provisions of terms of
this Purchase Agreement shall be held invalid for any reason whatsoever, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Purchase
Agreement and shall in no way affect the validity of enforceability of the other
provisions of this Purchase Agreement.
SECTION 8.5 COUNTERPARTS.
This Purchase Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original and such counterparts, together,
shall constitute one and the same agreement.
SECTION 8.6 FURTHER AGREEMENTS.
The Purchaser and the Seller each agree to execute and deliver to the
other such additional documents, instruments or agreements as may be necessary
or reasonable and appropriate to effectuate the purposes of this Purchase
Agreement or in connection with the issuance of any series of Certificates
representing interests in the Mortgage Loans.
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<PAGE> 15
SECTION 8.7 INTENTION OF THE PARTIES.
It is the intention of the parties that the Purchaser is purchasing,
and the Seller is selling, the Mortgage Loans rather than pledging the Mortgage
Loans to secure a loan by the Purchaser to the Seller. Accordingly, the parties
hereto each intend to treat the transaction for Federal income tax purposes and
all other purposes as a sale by the Seller, and a purchase by the Purchaser, of
the Mortgage Loans. The Purchaser will have the right to review the Mortgage
Loans and the related Mortgage Files to determine the characteristics of the
Mortgage Loans which will affect the Federal income tax consequences of owning
the Mortgage Loans and the Seller will cooperate with all reasonable requests
made by the Purchaser in the course of such review.
SECTION 8.8 SUCCESSORS AND ASSIGNS: ASSIGNMENT OF PURCHASE AGREEMENT.
The Purchase Agreement shall bind and inure to the benefit of and be
enforceable by the Seller, the Purchaser and the Trustee. The obligations of the
Seller under this Purchase Agreement cannot be assigned or delegated to a third
party without the consent of the Purchaser, which consent shall be at the
Purchaser's sole discretion, except that the Purchaser acknowledges and agrees
that the Seller may assign its obligations hereunder to any Person into which
the Seller is merged or any corporation resulting from any merger, conversion or
consolidation to which the Seller is a party or any Person succeeding to the
business of the Seller. The parties hereto acknowledge that the Purchaser is
acquiring the Mortgage Loans for the purpose of contributing them to a trust
that will issue a series of Certificates representing undivided interests in
such Mortgage Loans. As an inducement to the Purchaser to purchase the Mortgage
Loans, the Seller acknowledges and consents to the assignment by the Purchaser
to the Trustee of all of the Purchaser's rights against the Seller pursuant to
this Purchase Agreement insofar as such rights relate to Mortgage Loans
transferred to such Trustee and to the enforcement or exercise of any right or
remedy against the Seller pursuant to this Purchase Agreement by the Trustee
under the Pooling and Servicing Agreement. Such enforcement of a right or remedy
by the Trustee shall have the same force and effect as if the right or remedy
had been enforced or exercised by the Purchaser directly. The parties
acknowledge and agree that the Trustee is an intended third party beneficiary of
this Purchase Agreement (including, specifically, the indemnification provisions
of Section 6.1(e)) and that the Trustee shall be entitled to enforce the
provisions of this Purchase Agreement against the parties hereto.
SECTION 8.9 SURVIVAL.
The representations and warranties set forth in Article III and the
provisions of Article VI shall survive the purchase of the Mortgage Loans
hereunder.
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<PAGE> 16
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their
names to be signed to this Purchase Agreement by their respective officers
thereunto duly authorized as of the day and year first above written.
FIRST UNION RESIDENTIAL
SECURITIZATION TRANSACTIONS, INC.,
as Purchaser
By: /s/ Patrick J. Tadie
-------------------------------------
Name: Patrick J. Tadie
Title: Vice President
FIRST UNION NATIONAL BANK,
as Seller
By: /s/ Patrick J. Tadie
-------------------------------------
Name: Patrick J. Tadie
Title: Vice President
<PAGE> 17
STATE OF NORTH CAROLINA )
)ss.:
MECKLENBURG COUNTY )
On the 30th day of July before me, a Notary Public in and for said
State, personally appeared Patrick Tadie, known to me to be a Vice President of
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC., the corporation that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Angela Henson
- -----------------------------
Notary Public
(NOTARIAL SEAL)
Commission Expires: 8/29/2000
---------
<PAGE> 18
STATE OF NORTH CAROLINA )
)ss.:
MECKLENBURG COUNTY )
On the 30th day of July before me, a Notary Public in and for said
State, personally appeared Patrick Tadie, known to me to be a Vice President of
FIRST UNION NATIONAL BANK, the national banking association that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such national banking
association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Angela Henson
- -------------------------------------
Notary Public
(NOTARIAL SEAL)
Commission Expires: 8/29/2000
------------------
<PAGE> 19
SCHEDULE I
MORTGAGE LOANS
<PAGE> 1
Attorneys at Law
3500 One First Union Center
KILPATRICK STOCKTON LLP 301 South College Street
Charlotte, North Carolina 28202-6001
Telephone: 704.338.5000
Facsimile: 704.338.5125
July 30, 1998
First Union Residential Securitization Transactions, Inc.
One First Union Center
Charlotte, North Carolina 28288-0600
Re: FURST Mortgage Loan Trust 1998-B, Mortgage Pass-Through
Certificates, Series 1998-B
Ladies and Gentlemen:
We have acted as special counsel for First Union Residential
Securitization Transactions, Inc. (the "Depositor"), a North Carolina
corporation, in connection with the purchase of certain first lien, fixed rate
mortgage loans (the "Mortgage Loans") pursuant to the Mortgage Loan Purchase
Agreement, dated as of July 1, 1998 (the "Purchase Agreement") between First
Union National Bank, as seller (the "Seller"), and the Depositor, and the sale
by the Depositor of the Mortgage Loans to FURST Mortgage Loan Trust 1998-B (the
"Trust") created by the Pooling and Servicing Agreement, dated as of July 1,
1998 (the "Pooling and Servicing Agreement") among the Seller, as master
servicer and as trust adminstrator, the Depositor, and Norwest Bank Minnesota,
National Association, as trustee and document custodian (the "Trustee" and the
"Custodian"). In exchange for the Mortgage Loans, the Trust has issued to the
Depositor two groups of Mortgage Pass-Through Certificates, Series 1998-B, with
the first consisting of Class 1A-1, Class 1A-2, Class 1A-3, Class 1A-4, Class
1A-5, Class 1A-6, Class 1A-7, Class 1A-8, Class 1A-9, Class 1A-10, Class 1A-11,
Class 1A-12, Class 1A-PO, Class 1A-WIO, Class A-R, Class 1M, Class 1B-1, Class
1B-2 (collectively, the "Group 1 Offered Certificates"), and Class 1B-3, Class
1B-4 and Class 1B-5 (collectively, the "Group 1 Private Certificates" and
together, with the Group 1 Offered Certificates, the "Group 1 Certificates") and
the second consisting of Class 2A, Class 2M, Class 2B-1 and Class 2B-2
(collectively, the "Group 2 Offered Certificates"), and Class 2B-3, Class 2B-4
and Class 2B-5 (collectively, the "Group 2 Private Certificates" and together,
with the Group 2 Offered Certificates, the "Group 2 Certificates") (together,
the Group 1 Certificates and the Group 2 Certificates, are sometimes
collectively referred to herein as the "Certificates").
The Depositor has sold the Group 1 Offered Certificates to First
Union Capital Markets, a division of Wheat First Securities, Inc. ("First Union
Capital Markets"), and Salomon Brothers, Inc. ("Salomon Brothers" and, together
with First Union Capital Markets, the "Group 1 Underwriters") pursuant to the
Underwriting Agreement, dated July 24, 1998
<PAGE> 2
July 30, 1998
Page 2
(the "Group 1 Underwriting Agreement") among the Depositor, the Seller and the
Group 1 Underwriters.
The Depositor has sold the Group 2 Offered Certificates to First
Union Capital Markets and PaineWebber Incorporated ("PaineWebber" and, together
with First Union Capital Markets, the "Group 2 Underwriters") pursuant to the
Underwriting Agreement, dated July 24, 1998 (the "Group 2 Underwriting
Agreement") among the Depositor, the Seller and the Group 2 Underwriters.
The Certificates represent the entire undivided beneficial interest
in the assets of the Trust. The assets of the Trust will consist primarily of
the Mortgage Loans. Terms not defined herein shall have the meanings set forth
in the Pooling and Servicing Agreement.
In arriving at the opinions expressed below, we have examined such
documents and records as we have deem appropriate, including the following:
1. Signed copies of the Group 1 and Group 2 Underwriting
Agreements.
2. The registration statement (No. 333-3574) of the Depositor
on form S-3 on file with the Securities and Exchange
Commission (the "Commission"). Such registration statement
on the date it was declared effective herein referred to
as the "Registration Statement".
3. The Prospectus, dated July 24, 1998 (the "Base
Prospectus"), as supplemented by the Prospectus Supplement
dated July 24, 1998, relating to the Offered Certificates
(the "Prospectus Supplement") (such Base Prospectus, as so
supplemented by the Prospectus Supplement, the
"Prospectus").
4. A signed copy of the Purchase Agreement.
5. A signed copy of the Pooling and Servicing Agreement.
6. Specimens of the Certificates.
As to any facts material to the following opinions which we did not
independently establish or verify, we have relied upon statements and
representations of the responsible officers and other representations of the
Depositor and of public officials and agencies.
Based upon the foregoing and consideration of such other matters as
we have deemed appropriate, we are of the opinion that the statements in the
Base Prospectus under the headings "SUMMARY OF TERMS--Certain Federal Income Tax
Consequences" and "--ERISA Considerations," "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS," "ERISA CONSIDERATIONS" and "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES," and
<PAGE> 3
July 30, 1998
Page 3
the statements in the Prospectus Supplement under the headings "SUMMARY OF TERMS
OF THE OFFERED CERTIFICATES--Certain Federal Income Tax Consequences" and
"--ERISA Considerations," "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS,"
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and "ERISA CONSIDERATIONS," to the
extent that they constitute matters of federal law or legal conclusions with
respect thereto, have been reviewed by us and are correct in all material
respects with respect to those consequences or aspects that are discussed.
In giving the foregoing opinions, we express no opinion as to the
laws of any jurisdiction other than the State of North Carolina and the federal
laws of the United States of America. We hereby consent to the filing of this
opinion as an exhibit to the Registration Statement and to the use of our name
wherever appearing in the Registration Statement and the Prospectus. In giving
such consent, we do not consider that we are "experts," within the meaning of
the term as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Commission issued thereunder, with respect to any part of the
Registration Statement, including this opinion as an exhibit or otherwise.
Sincerely yours,
KILPATRICK STOCKTON LLP
/s/ Kilpatrick Stockton LLP
