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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
APRIL 29, 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 April
1, 1998, which forms FURST Mortgage Loan Trust 1998-A, which issued
Mortgage Pass-Through Certificates, Series 1998-A).
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.
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(Exact Name of Registrant as Specified in its Charter)
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NORTH CAROLINA 333-3574 56-1967773
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(State or Other Jurisdiction of (Commission File Numbers) (I.R.S. Employer Identification No.)
Incorporation)
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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 April 29, 1998 (the "Closing Date"), a single series of certificates,
entitled First Union Residential Securitization Transactions, Inc., FURST
Mortgage Loan Trust 1998-A, Mortgage Pass-Through Certificates, Series 1998-A
(the "Certificates"), was issued pursuant to a Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement") dated as of April 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"), First Union Mortgage Corporation as servicer, and
Norwest Bank Minnesota, National Association as trustee (in such capacity, the
"Trustee") and document custodian. The Certificates consist of twenty-two
classes identified as the "Class A-1 Certificates," the Class A-2
Certificates," the "Class A-3 Certificates," the Class A-4 Certificates," the
"Class A-5 Certificates," the "Class A-6 Certificates," "the Class A-7
Certificates," the "Class A-X Certificates," the "Class SA-1 Certificates," the
"Class SA-2 Certificates," the "Class SA-3 Certificates," the "Class SA-4
Certificates," the Class SA-5 Certificates," the "Class SA-X Certificates," the
"Class M Certificates," the "Class B-1 Certificates," the "Class B-2
Certificates," the "Class B-3 Certificates," the "Class B-4 Certificates, the
"Class B-5 Certificates," the "Class R-I Certificates" and the "Class R-II
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 a pool 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 (the "Initial Mortgage Loans") as of April 1,
1998 (the "Initial Cut-Off Date") was $292,308,382.37. On the Closing Date, a
portion of the proceeds of the sale of the Certificates equal to $57,744,845
was deposited in a trust account in the name of the Trustee and may be used to
acquire additional fixed-rate mortgage loans (the "Subsequent Mortgage Loans,"
and together with the Initial Mortgage Loans, the "Mortgage Loans") from the
Seller from time to time on or before July 24, 1998.
The Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6,
Class A-7, Class A-X, Class SA-1, Class SA-2, Class SA-3, Class SA-4, Class
SA-5, Class SA-X, Class M, Class B-1, Class B-2, Class R-I and Class R-II
Certificates were publicly offered, as described in a Prospectus, dated April
24, 1998, and a Prospectus Supplement, dated April 24, 1998, as previously
filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits:
1.1 Underwriting Agreement, dated April 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 Donaldson, Lufkin &
Jenrette Securities Corporation.
4.1 Pooling and Servicing Agreement, dated as of April 1, 1998,
among First Union Residential Securitization Transactions,
Inc. as depositor, First Union National Bank as seller,
First
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Union Mortgage Corporation as servicer, 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.
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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/ Patrick J. Tadie
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Patrick J. Tadie, Vice President
Date: May 12, 1998
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EXHIBIT INDEX
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EXHIBIT NUMBER DESCRIPTION
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1.1 Underwriting Agreement, dated April 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 Donaldson, Lufkin & Jenrette Securities
Corporation.
4.1 Pooling and Servicing Agreement, dated as of April
1, 1998, among First Union Residential Securitization
Transactions, Inc. as servicer, 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.
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EXHIBIT 1.1
[EXECUTION COPY]
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$347,077,774
(Approximate)
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.
Mortgage Pass-Through Certificates, Series 1998-A
UNDERWRITING AGREEMENT
April 24, 1998
FIRST UNION CAPITAL MARKETS,
a division of WHEAT FIRST SECURITIES, INC.
One First Union Center DC-8
Charlotte, North Carolina 28288
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue, 9th Floor
New York, New York 10172
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 of North Carolina ("FUNB"), a national
banking association. The Depositor has authorized the issuance and sale of its
Mortgage Pass-Through Certificates, Series 1998-A, consisting of (i) Class SA-1,
Class SA-2, Class SA-3, Class SA-4, Class SA-5 and Class SA-X (the "Class SA
Certificates"), (ii) Class A-1, Class A-2, Class A-3, Class A-4, Class A-5,
Class A-6, Class A-7 and Class A-X (the "Class A Certificates"), (iii) Class M,
Class B-1 and Class B-2 (the "Senior Subordinate Certificates"), (iv) Class R-I
and R-II (the "Residual Certificates" and, together with the Class SA
Certificates, the Class A Certificates and the Senior Subordinate Certificates,
the "Offered Certificates"), and (v) Class B-3, Class B-4 and Class B-5 (the
"Junior Subordinate Certificates" and, together with the Offered Certificates,
the "Certificates"). Each Class of the Certificates evidences interests in a
pool (the "Trust Fund") of fixed-rate mortgage loans (the "Mortgage Loans"),
secured by first deeds of trust and mortgages on one- to four-family residential
properties.
Only the Offered Certificates are being purchased by First Union
Capital Markets, a division of Wheat First Securities, Inc. ("FUCM") and
Donaldson, Lufkin & Jenrette Securities
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Corporation ("DLJ" 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 Certificates will be issued under a pooling and servicing agreement
(the "Pooling and Servicing Agreement"), dated as of April 1, 1998, among the
Depositor, FUNB, as seller (the "Seller"), First Union Mortgage Corporation as
servicer (the "Servicer"), and Norwest Bank Minnesota, National Association, as
trustee and document custodian (the "Trustee"). The Certificates will evidence
fractional undivided interests in the Trust Fund. The assets of the Trust Fund
will include, among other things, the Mortgage Loans conveyed to the Trust Fund
on April 29, 1998, and such amounts as may be held by the Trustee in any
accounts held by the Trustee for Trust Fund including a pre-funding amount. The
aggregate undivided interest in the Trust Fund represented by the Offered
Certificates initially will be equal to $347,077,774 of principal, which
represents 99.15% of the actual principal balances of the Mortgage Loans as of
April 1, 1998 (thc "Cut-Off Date") and amounts in the pre-funding account. 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
R Certificates) will constitute "regular interests" in a REMIC, and each
component of the Class R Certificates will constitute "residual interests" in a
REMIC.
The 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.
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
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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 April 24, 1998, as
first supplemented by a prospectus supplement, dated April 24, 1998 (the
"Prospectus Supplement"), relating to the 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 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
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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.
(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 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 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 has been, and the Pooling and Servicing Agreement
and the Purchase Agreement when executed and delivered as contemplated hereby
and thereby will have
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been, duly authorized, executed and delivered by the Depositor, and this
Agreement constitutes, 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 and the
Purchase Agreement, limitations of public policy under applicable securities
laws.
(h) The execution, delivery and performance of this 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 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 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
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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 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 Offered Certificates, the Underwriters will
have good title to the 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.
(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 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 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,
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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 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 Offered Certificates at the purchase price set forth in
Schedule A.
SECTION 3. DELIVERY AND PAYMENT
Delivery of and payment for the 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 April 29,
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 Offered Certificates (other than the
Residual 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 Residual 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 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 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
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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 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 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.
(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 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
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.
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(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 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 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 Offered Certificates have been so qualified.
(g) So long as the 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 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 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.
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(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 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
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("S&P"), Duff & Phelps Credit Rating Co. ("DCR") 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
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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.
(vi) The Pooling and Servicing Agreement and the
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 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.
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<PAGE> 13
(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 Servicing Agreement and the Purchase Agreement, and to
cause the Certificates to be issued.
(xv) This 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 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
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<PAGE> 14
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 S&P, DCR 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 S&P and DCR 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 S&P, DCR 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 S&P and
DCR 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.
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(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:
(i) The execution, delivery and performance of this 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 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, this Agreement or the Certificates.
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(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).
(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 of 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,
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<PAGE> 17
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 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 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
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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 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 costs and expenses incident to the transactions contemplated by
this Agreement and the Pooling and Servicing Agreement, including all costs and
expenses incident to the performance of the obligations of the Depositor
(including costs and expenses of its counsel), shall be borne by the Depositor;
provided that (a) 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, and (b) DLJ agrees to pay all fees and expenses of qualifying the
Certificates under the securities laws of the several jurisdictions as provided
in Section 5(g) hereof and of preparing, printing and distributing a "Blue Sky
Memorandum" (including related fees and expenses of Blue Sky 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.
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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 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
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
DLJ, its directors and each person, if any, who controls DLJ 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
Offered Certificates), to which DLJ, 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 July 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 DLJ, each such director and each such controlling
person promptly upon demand for any legal or other expenses reasonably
incurred by DLJ, such director or such controlling person in connection
with investigating or defending or preparing to defend against any such
loss,
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<PAGE> 20
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 DLJ 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 DLJ, its directors or any controlling
person of DLJ 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 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, DLJ 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) DLJ 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
19
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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 DLJ to offerees of the
Offered Certificates.
FUCM shall indemnify and hold harmless DLJ and each person, if
any, who controls DLJ 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 DLJ 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
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
20
<PAGE> 22
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 parry 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
21
<PAGE> 23
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 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.
22
<PAGE> 24
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:
(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).
DLJ shall cooperate with the Depositor and with Deloitte & Touche LLP
in obtaining a letter, in form and substance satisfactory to the Depositor and
DLJ, of Deloitte & Touche LLP regarding the information in any Form 8-K
consisting of Computational Materials and/or Structural Term Sheets furnished by
DLJ, 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 DLJ's sole expense.
DLJ represents warrants to, and covenants with, the Depositor that the
Derived Information is not misleading and not inaccurate in any material respect
and that any Seller-Provided Information contained in any Form 8-K 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. DLJ
further covenants with the Depositor that if any Computational
23
<PAGE> 25
Materials or Collateral Term Sheets contained in any Form 8-K are found to
include any information that is misleading or inaccurate in any material
respect, DLJ 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.
DLJ covenants that all Computational Materials and Collateral Term
Sheets used by it shall contain the following legend:
"THIS INFORMATION IS FURNISHED TO YOU SOLELY BY DLJ 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.
DLJ covenants that all Collateral Term Sheets used by it shall contain
the following additional legend:
"THIS INFORMATION CONTAINED HEREIN SUPERSEDED BY THE DESCRIPTION OF THE
MORTGAGE LOANS CONTAINED IN THE PROSPECTUS SUPPLEMENT."
DLJ covenants that all Collateral Term Sheets (other than the initial
Collateral Term Sheet) shall contain the following additional legend:
"THIS INFORMATION CONTAINED HEREIN SUPERSEDES THE INFORMATION IN ALL
PRIOR COLLATERAL TERM SHEETS, IF ANY."
If the Underwriters do not provide any Computation Materials or
Collateral Term Sheets to the Depositor pursuant to the preceding paragraphs,
the Underwriters shall be deemed to have represented, as of the Closing Date,
that they 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 the Underwriters 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 and the first sentence of
the third paragraph under the caption "Underwriting" in the Prospectus
Supplement is correct and, except for the additional information noted in the
24
<PAGE> 26
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 in the penultimate paragraph on the cover page 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
Offered Certificates shall fail at the Closing Date to purchase the 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 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
Offered Certificates to be purchased pursuant to this Agreement, this
Agreement shall terminate, without any liability an 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.
25
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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 Donaldson, Lufkin &
Jenrette Securities Corporation, to 277 Park Avenue, 9th Floor, New York, New
York 10172 Attention: Paul J. Najarian (Fax: (212) 892-5434) with a copy to the
General Counsel's office on the 23rd floor; 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.
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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.
27
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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:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
FIRST UNION NATIONAL BANK
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
CONFIRMED AND ACCEPTED,
as of the date first above written:
FIRST UNION CAPITAL MARKETS,
a division of WHEAT FIRST SECURITIES, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
28
<PAGE> 1
EXHIBIT 4.1
================================================================================
------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of April 1, 1998
------------------------------
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.,
as Depositor
FIRST UNION NATIONAL BANK,
as Seller
FIRST UNION MORTGAGE CORPORATION,
as Servicer
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee and as Document Custodian
================================================================================
FURST MORTGAGE LOAN TRUST 1998-A
MORTGAGE PASS-THROUGH CERTIFICATES
Series 1998-A
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C> <C>
ARTICLE I DEFINITIONS
Section 1.1. Definitions.................................................................................1
Section 1.2. Other Definitional Provisions..............................................................43
Section 1.3. Calculations...............................................................................43
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.1. Conveyance of Mortgage Loans...............................................................44
Section 2.2. Acceptance by Trustee; Retransfer of Mortgage Loans........................................48
Section 2.3. Representations and Warranties Regarding the Depositor.....................................49
Section 2.4. Representations and Warranties Regarding the Servicer......................................50
Section 2.5. Representations and Warranties Regarding the Seller........................................52
Section 2.6. Representations and Warranties of the Seller Regarding this Agreement and
the Mortgage Loans; Transfer of Certain Mortgage Loans..................................................54
Section 2.7. Substitution of Mortgage Loans.............................................................62
Section 2.8. Execution and Authentication of Certificates...............................................63
Section 2.9. REMIC Provisions...........................................................................64
Section 2.10. Subsequent Transfers......................................................................65
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.1. The Servicer...............................................................................67
Section 3.2. Collection of Certain Mortgage Loan Payments...............................................69
Section 3.3. Withdrawals from the Collection Account....................................................71
Section 3.4. Monthly Advances; Compensating Interest....................................................72
Section 3.5. Maintenance of Hazard Insurance; Property Protection Expenses..............................73
Section 3.6. Assumption and Modification Agreements.....................................................73
Section 3.7. Realization Upon Defaulted Mortgage Loans..................................................74
Section 3.8. Trustee to Cooperate.......................................................................76
Section 3.9. Servicing Compensation; Payment of Certain Expenses by Servicer............................77
Section 3.10. Annual Statement as to Compliance.........................................................77
Section 3.11. Annual Servicing Report...................................................................77
Section 3.12. Access to Certain Documentation and Information Regarding the Mortgage Loans..............78
Section 3.13. Maintenance of Certain Insurance Policies.................................................78
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........79
Section 3.15. Reports to the Securities and Exchange Commission.........................................79
Section 3.16. Custody of Mortgage Files.................................................................79
Section 3.17. Duties of Document Custodian; Authority; Indemnification..................................80
Section 3.18. [RESERVED]................................................................................81
</TABLE>
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<TABLE>
<S> <C> <C>
Section 3.19. Payment of Taxes, Insurance and Other Charges.............................................81
Section 3.20. Allocation of Realized Losses.............................................................82
ARTICLE IV SERVICING PRE-FUNDING ACCOUNT AND
CAPITALIZED INTEREST CERTIFICATE;
Section 4.1. Servicing Certificate......................................................................83
Section 4.2. Pre-Funding Account and Capitalized Interest Account.......................................83
ARTICLE V DISTRIBUTION AMOUNTS; PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS; RIGHTS OF
CERTIFICATEHOLDERS;
Section 5.1. Distributions..............................................................................86
Section 5.2. Statements.................................................................................87
Section 5.3. Distribution Account.......................................................................91
Section 5.4. Investment of Accounts.....................................................................91
ARTICLE VI THE CERTIFICATES
Section 6.1. The Certificates...........................................................................92
Section 6.2. Registration of Transfer and Exchange of the Certificates..................................93
Section 6.3. Mutilated, Destroyed, Lost or Stolen Certificates..........................................98
Section 6.4. Persons Deemed Owners......................................................................99
Section 6.5. Appointment of Paying Agent................................................................99
Section 6.6. Maintenance of Office or Agency............................................................99
ARTICLE VII
THE DEPOSITOR, THE SELLER AND THE SERVICER
Section 7.1. Liability of the Depositor, the Seller and the Servicer...................................100
Section 7.2. Merger or Consolidation of, or Assumption of the Obligations of, the Seller
or the Servicer........................................................................................100
Section 7.3. Limitation on Liability of the Servicer and Others........................................100
Section 7.4. Servicer Not to Resign....................................................................101
Section 7.5. Delegation of Duties......................................................................101
Section 7.6. Indemnification of the Trust by the Seller and Servicer...................................102
ARTICLE VIII DEFAULT
Section 8.1. Events of Default.........................................................................102
Section 8.2. Trustee to Act; Appointment of Successor..................................................104
Section 8.3. Waiver of Defaults........................................................................105
Section 8.4. Notification to Certificateholders........................................................106
ARTICLE IX THE TRUSTEE
Section 9.1. Duties of Trustee.........................................................................106
Section 9.2. Certain Matters Affecting the Trustee.....................................................107
Section 9.3. Trustee Not Liable for Certificates or Mortgage Loans.....................................108
Section 9.4. Trustee May Own Certificates..............................................................109
Section 9.5. Trustee's Expenses........................................................................110
Section 9.6. Eligibility Requirements for Trustee......................................................110
Section 9.7. Resignation or Removal of Trustee.........................................................111
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 9.8. Successor Trustee.........................................................................111
Section 9.9. Merger or Consolidation of Trustee........................................................112
Section 9.10. Appointment of Co-Trustee or Separate Trustee............................................112
Section 9.11. Limitation of Liability..................................................................114
Section 9.12. Trustee May Enforce Claims Without Possession of Certificates............................114
Section 9.13. Suits for Enforcement....................................................................114
Section 9.14. Waiver of Bond Requirement...............................................................114
Section 9.15. Waiver of Inventory, Accounting and Appraisal Requirement................................114
ARTICLE X TERMINATION
Section 10.1. Termination..............................................................................115
Section 10.2. Additional Termination Requirements......................................................116
ARTICLE XI REMIC ADMINISTRATION
Section 11.1. REMIC Administration.....................................................................117
Section 11.2. Prohibited Transactions and Activities...................................................119
Section 11.3. Indemnification with Respect to Certain Taxes and Loss of REMIC Status...................120
ARTICLE XII MISCELLANEOUS PROVISIONS
Section 12.1. Amendment................................................................................121
Section 12.2. Recordation of Agreement.................................................................122
Section 12.3. Limitation on Rights of Certificateholders...............................................122
Section 12.4. Governing Law............................................................................123
Section 12.5. Notices..................................................................................123
Section 12.6. Severability of Provisions...............................................................124
Section 12.7. Certificates Nonassessable and Fully Paid................................................124
Section 12.8. Third-Party Beneficiaries................................................................124
Section 12.9. Counterparts.............................................................................124
Section 12.10. Effect of Headings and Table of Contents................................................124
Section 12.11. Provision of Information to Prospective Purchasers; Rule 144A...........................124
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
Exhibit A-1 Forms of Class SA Certificates.....................................................A-1-1
Exhibit A-2 Forms of Class A Certificates......................................................A-2-1
Exhibit A-3 Form of Class M Certificate........................................................A-3-1
Exhibit B-1 Forms of Class B Certificates........................................................B-1
Exhibit B-2 Forms of Class R Certificates........................................................B-2
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 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 Trustee 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 Form of Subsequent Transfer Agreement................................................R-1
Schedule 1 Offices of the Document Custodian
</TABLE>
iv
<PAGE> 6
POOLING AND SERVICING AGREEMENT
POOLING AND SERVICING AGREEMENT, dated as of April 1, 1998, among FIRST
UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC., as Depositor (the
"Depositor"), FIRST UNION NATIONAL BANK, as Seller (the "Seller"), FIRST UNION
MORTGAGE CORPORATION, as Servicer (the "Servicer") 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 Class A-7 Reserve Fund, Collection Account, the Distribution
Account, the Pre-Funding Account and the Capitalized Interest Account.
Addition Notice: The notice given pursuant to Section 2.10 with respect to the
transfer of Subsequent Mortgage Loans to the Trust pursuant to such Section.
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 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 Mortgage Loans.
Aggregate Subordinate Percentage: For any Distribution Date, the aggregate of
the Class Principal Balances of the Subordinate Certificates immediately prior
to such Distribution Date divided by the aggregate Scheduled Principal Balance
of all of the Mortgage Loans immediately prior to such Distribution Date.
<PAGE> 7
Aggregate Subordinate Principal Distribution Amount: The sum of the Group SA
Subordinate Principal Distribution Amount and the Group A Subordinate Principal
Distribution Amount.
Agreement: This Pooling and Servicing Agreement and all amendments hereof and
supplements hereto.
Anniversary: Each anniversary of the Initial 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 Distribution Amount: With respect to each Loan Group, as determined
separately for each Loan Group on any Distribution Date, the sum of the
following amounts with respect to the Mortgage Loans in such Loan Group:
(1) the total amount of all cash received by or on behalf of the
Servicer with respect to such Mortgage Loans by the Determination Date
for such Distribution Date and not previously distributed (including
Liquidation Proceeds), except:
(a) all Payaheads due for a subsequent Collection Period;
(b) all Curtailments received after the applicable Collection
Period (together with any interest payment received with such
prepayments to the extent that it represents the payment of
interest accrued on a related Mortgage Loan for a period
subsequent to the Collection Period);
(c) all Payoffs received after the applicable Collection
Period immediately preceding such Determination Date (together
with any interest payment received with such Payoffs to the extent
that it represents the payment of interest accrued on such
Mortgage Loan for the period subsequent to the Collection Period);
(d) Insurance Proceeds and Liquidation Proceeds on such
Mortgage Loans received after the applicable Collection Period;
(e) all amounts in the Collection Account which are due and
reimbursable to the Servicer pursuant to the terms of this
Agreement;
(f) the Servicing Fee for each such Mortgage Loan and the
Trustee Fee; and
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<PAGE> 8
(g) Excess Liquidation Proceeds;
(2) to the extent advanced by the Servicer and not previously
distributed, the amount of any Monthly Advance made by the Servicer to
the Trustee with respect to such Distribution Date relating to such
Mortgage Loans;
(3) to the extent advanced by the Servicer and not previously
distributed, any amount payable as Compensating Interest by the
Servicer on such Distribution Date relating to such Mortgage Loans;
(4) with respect to the amount to be distributed as interest
on the Class A-7 Certificates on each of the first twelve Distribution
Dates, the amount withdrawn from the Class A-7 Reserve Account for such
Distribution Date;
(5) with respect to the amount to be distributed as interest
on the Class A and Subordinate Certificates on each of the first three
Distribution Dates, the amount, if any, required to be withdrawn from
the Capitalized Interest Account and investment earnings on the
Pre-Funded Amount;
(6) with respect to the amount to be distributed as principal
on the Class A and Subordinate Certificates on each of the first three
Distribution Dates, the amount, if any, required to be withdrawn from
the Pre-Funding Account; and
(7) the total amount, to the extent not previously
distributed, of all cash received by the Distribution Date by the
Trustee or the Servicer, in respect of a Purchase Obligation under
Section 2.2 and Section 2.6(b) or any permitted repurchase of a
Mortgage Loan;
provided that, on any Distribution Date on or after the date on which the
aggregate Class Principal Balance of the Class SA Certificates or the aggregate
Class Principal Balance of the Class A Certificates has been reduced to zero,
the Available Distribution Amount, to the extent attributable to principal (in
excess of that needed to reduce such aggregate Class Principal Balance of the
Class SA Certificates or the aggregate Class Principal Balance of the Class A
Certificates to zero) for the Loan Group relating to such Class of Certificates
that have been paid in full shall be reduced by the Class Principal Balance of
the remaining Senior Certificates (other than the Class R Certificates) that
have not been paid in full and such amount shall be added to the Available
Distribution Amount for the Loan Group relating to such Certificates, provided
further that on such Distribution Date either (a) the Aggregate Subordinate
Percentage for such Distribution Date is less than 200% of the initial Aggregate
Subordinate Percentage, or (b) the average outstanding Principal Balance of the
Mortgage Loans in either Loan Group delinquent 60 days or more over the last six
months, as a percentage of the corresponding Group SA Subordinate Amount or
Group A Subordinate Amount, is greater than or equal to 50%.
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<PAGE> 9
Bankruptcy Coverage: With respect to all Mortgage Loans, the Bankruptcy Coverage
Initial Amount for such Mortgage Loans, less (a) any scheduled or permissible
reduction in the amount of Bankruptcy Coverage pursuant to this definition and
(b) Bankruptcy Losses allocated to the Certificates. Bankruptcy Coverage may be
reduced upon written confirmation from the Rating Agency that such reduction
will not adversely affect the then current ratings assigned to the Certificates
by the Rating Agency.
Bankruptcy Coverage Initial Amount: $100,000.
Bankruptcy Loss: A loss on a Mortgage Loan arising out of (i) a reduction in the
scheduled Monthly Payment for such Mortgage Loan by a court of competent
jurisdiction in a case under the United States Bankruptcy Code, other than any
such reduction that arises out of clause (ii) of this definition of "Bankruptcy
Loss," including, without limitation, any such reduction that results in a
permanent forgiveness of principal, or (ii) with respect to any Mortgage Loan, a
valuation, by a court of competent jurisdiction in a case under such Bankruptcy
Code, of the related Mortgaged Property in an amount less than the then
outstanding Principal Balance of such Mortgage Loan.
Beneficial Holder: A Person holding a beneficial interest in any Book-Entry
Certificate as or through a DTC Participant or an Indirect DTC Participant or a
Person holding a beneficial interest in any Definitive Certificate.
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.
Book-Entry Certificates: The Class SA Certificates, the Class A Certificates,
the Class M Certificates, the Class B-1 Certificates and the Class B-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.
Capitalized Interest Account: The Capitalized Interest Account established
pursuant to Section 4.2.
Capitalized Interest Requirement: With respect to each of the Distribution Dates
occurring in May 1998, June 1998 and July 1998 an amount equal to the excess of
(A) the product of (1) the balance of the Pre-Funding Account and (2) the sum of
(x) 1/12 of 7% plus (y) 1/12 of the Trustee Fee Rate over (B) the amount of any
reinvestment income earned on amounts in the Pre-Funding Account since the
previous Distribution Date.
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<PAGE> 10
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,
B-1 or B-2 hereto.
Certificate Distribution Amount: (I) For any Distribution Date prior to the
Credit Support Depletion Date, as applicable, the Available Distribution Amount
for the related Loan Group shall be distributed to the related Certificates in
the following amounts and priority:
(a) With respect to the Class SA Certificates and the Class R
Certificates, to the extent of the Available Distribution Amount for Loan Group
SA remaining following prior distributions, if any, on such Distribution Date:
(i) First, to the Class SA and Class R Certificates,
concurrently, the sum of the Interest Distribution Amounts for such
Classes of Certificates remaining unpaid from previous Distribution
Dates, pro rata according to their respective shares of such unpaid
amounts;
(ii) Second, to the Class SA and Class R Certificates,
concurrently, the sum of the Interest Distribution Amounts for such
Classes of Certificates for the current Distribution Date, pro rata
according to their respective Interest Distribution Amounts;
(iii) Third, to the Class SA and Class R Certificates, the Group SA
Senior Principal Distribution Amount as follows:
(A) first, to the Class SA-4 Certificates, an amount, up to
the amount of the Class SA-4 Lockout Principal Distribution Amount
for such Distribution Date, until the Class SA-4 Principal Balance
has been reduced to zero;
(B) second, to the Class R Certificate, the portion of the
Group SA Senior Principal Distribution Amount remaining after the
distributions in paragraph (I)(a)(iii)(a) above, until the Class R
Principal Balance, have been reduced to zero; and
(C) third, the portion of the Group SA Senior Principal
Distribution Amount remaining after the distributions in paragraph
(I)(a)(iii)(A) and (B) above, sequentially, as follows, until the
Class Principal Balances thereof have been reduced to zero:
(1) first, to the Class SA-1 and Class SA-2 Certificates,
pro rata, until the Class SA-1 Principal Balance and the
Class SA-2 Principal Balance have been reduced to zero;
(2) second, to the Class SA-3 Certificates until the
Class SA-3 Principal Balance has been reduced to zero;
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<PAGE> 11
(3) third, to the Class SA-4 Certificates until the
Class SA-4 Principal Balance has been reduced to zero; and
(iv) fourth, to the Class A Certificates, any amounts distributable
in respect of the Group A Undercollateralized Amount;
(b) With respect to the Class A Certificates, to the extent of the
Available Distribution Amount for Loan Group A remaining following prior
distributions, if any, on such Distribution Date:
(i) First, to the Class A Certificates, the sum of the Interest
Distribution Amounts for such Classes of Certificates remaining unpaid
from previous Distribution Dates, pro rata according to their
respective shares of such unpaid amounts;
(ii) Second, to the Class A Certificates, the sum of the Interest
Distribution Amounts for such Classes of Certificates for the current
Distribution Date, pro rata according to their respective Interest
Distribution Amounts;
(iii) Third, to the Class A Certificates, the Group A Senior
Principal Distribution Amount as follows:
(A) first, to the Class A-3 Certificates, an amount, up to
the amount of the Class A-3 Lockout Principal Distribution Amount
for such Distribution Date, until the Class A-3 Principal Balance
has been reduced to zero;
(B) second, the portion of the Group A Senior Distribution
Amount remaining after the distribution in paragraph (I)(b)(iii)(A)
above, sequentially, as follows, until the Class Principal Balances
thereof have been reduced to zero:
(1) first, to the Class A-1 Certificates, until the
Class A-1 Principal Balance has been reduced to zero;
(2) second, to the Class A-2 Certificates, until the
Class A-2 Principal Balance has been reduced to zero;
(3) third, to the Class A-4 and Class A-7
Certificates, pro rata, until the Class A-4 Principal Balance
and Class A-7 Principal Balance have been reduced to zero;
(4) fourth, to the Class A-5 Certificates, until the
Class A-5 Principal Balance has been reduced to zero; and
(5) fifth, to the Class A-3 Certificates, until the
Class A-3 Principal Balance has been reduced to zero;
6
<PAGE> 12
(iv) Fourth, to the Class SA Certificates, any amounts
distributable in respect of the Group SA Undercollateralized Amount;
(c) With respect to the Subordinate Certificates and the Class R-II
Certificates, to the extent of the Available Distribution Amount for each Loan
Group remaining following prior distributions on such Distribution Date:
(i) First, to the Class M Certificates, any portion of the
Interest Distribution Amount for such Class of Certificates remaining
unpaid from previous Distribution Dates;
(ii) Second, to the Class M Certificates, the Interest
Distribution Amount for such Class of Certificates for the current
Distribution Date;
(iii) Third, to the Class M Certificates, the portion of the
Group SA Subordinate Principal Distribution Amount and the Group A
Subordinate Principal Distribution Amount allocable to such Class of
Certificates pursuant to the definitions of "Group SA Subordinate
Principal Distribution Amount" and "Group A Subordinate Principal
Distribution Amount" herein, until the Class M Principal Balance has
been reduced to zero;
(iv) Fourth, to the Class B-1 Certificates, any portion of
the Interest Distribution Amount for such Class of Certificates
remaining unpaid from previous Distribution Dates;
(v) Fifth, to the Class B-1 Certificates, the Interest
Distribution Amount for such Class of Certificates for the current
Distribution Date;
(vi) Sixth, to the Class B-1 Certificates, the portion of
the Group SA Subordinate Principal Distribution Amount and the Group A
Subordinate Principal Distribution Amount allocable to such Class of
Certificates pursuant to the definitions of "Group SA Subordinate
Principal Distribution Amount" and "Group A Subordinate Principal
Distribution Amount" herein, until the Class B-1 Principal Balance has
been reduced to zero;
(vii) Seventh, to the Class B-2 Certificates, any portion of
the Interest Distribution Amount for such Class of Certificates
remaining unpaid from previous Distribution Dates;
(viii) Eighth, to the Class B-2 Certificates, the Interest
Distribution Amount for such Class of Certificates for the current
Distribution Date;
(ix) Ninth, to the Class B-2 Certificates, the portion of
the Group SA Subordinate Principal Distribution Amount and the Group A
Subordinate Principal Distribution Amount allocable to such Class of
Certificates pursuant to the definitions of
7
<PAGE> 13
"Group SA Subordinate Principal Distribution Amount" and "Group A
Subordinate Principal Distribution Amount" herein, until the Class B-2
Principal Balance has been reduced to zero;
(x) Tenth, to the Class B-3 Certificates, any portion of
the Interest Distribution Amount for such Class of Certificates
remaining unpaid from previous Distribution Dates;
(xi) Eleventh, to the Class B-3 Certificates, the Interest
Distribution Amount for such Class of Certificates for the current
Distribution Date;
(xii) Twelfth, to the Class B-3 Certificates, the portion of
the Group SA Subordinate Principal Distribution Amount and the Group A
Subordinate Principal Distribution Amount allocable to such Class of
Certificates pursuant to the definitions of "Group SA Subordinate
Principal Distribution Amount" and "Group A Subordinate Principal
Distribution Amount" herein, until the Class B-3 Principal Balance has
been reduced to zero;
(xiii) Thirteenth, to the Class B-4 Certificates, any portion
of the Interest Distribution Amount for such Class of Certificates
remaining unpaid from previous Distribution Dates;
(xiv) Fourteenth, to the Class B-4 Certificates, the
Interest Distribution Amount for such Class of Certificates for the
current Distribution Date;
(xv) Fifteenth, to the Class B-4 Certificates, the portion
of the Group SA Subordinate Principal Distribution Amount and the Group
A Subordinate Principal Distribution Amount allocable to such Class of
Certificates pursuant to the definitions of "Group SA Subordinate
Principal Distribution Amount" and "Group A Subordinate Principal
Distribution Amount" herein, until the Class B-4 Principal Balance has
been reduced to zero;
(xvi) Sixteenth, to the Class B-5 Certificates, any portion
of the Interest Distribution Amount for such Class of Certificates
remaining unpaid from previous Distribution Dates;
(xvii) Seventeenth, to the Class B-5 Certificates, the
Interest Distribution Amount for such Class of Certificates for the
current Distribution Date;
(xviii) Eighteenth, to the Class B-5 Certificates, the portion
of the Group SA Subordinate Principal Distribution Amount and the Group
A Subordinate Principal Distribution Amount allocable to such Class of
Certificates pursuant to the definitions of "Group SA Subordinate
Principal Distribution Amount" and "Group A Subordinate Principal
Distribution Amount" herein, until the Class B-5 Principal Balance has
been reduced to zero;
8
<PAGE> 14
(xix) Nineteenth, to each Class of Subordinate Certificates in the
order of seniority, the amount of unreimbursed Realized Losses
previously allocated to such Class, if any, provided that any amounts
distributed in respect of losses pursuant to this paragraph (I)(c)(xix)
of this definition of "Certificate Distribution Amount" shall not cause
a further reduction in the Class Principal Balances of the Subordinate
Certificates; and
(xx) Twentieth, to the Class R-II Certificates, the Residual
Distribution Amount for each Loan Group for such Distribution Date; and
(II) For any Distribution Date on or after the Credit Support Depletion
Date, the Available Distribution Amount for the related Loan Group shall be
distributed to the outstanding Classes of Certificates of the related
Certificate Group in the following amounts and priority:
(a) With respect to the Class SA Certificates and Class R Certificates,
to the extent of the Available Distribution Amount for Loan Group SA remaining
following prior distributions, if any, on such Distribution Date:
(i) First, to the Class SA Certificates and the Class R
Certificates, the amount payable to each such Class of Certificates on
prior Distribution Dates pursuant to clause (I)(a)(i) of this
definition of "Certificate Distribution Amount," and remaining unpaid,
pro rata according to such amount payable to the extent of amounts
available;
(ii) Second, to the Class SA Certificates and the Class R
Certificates, concurrently, the sum of the Interest Distribution
Amounts for such Classes for the current Distribution Date, pro rata
according to their respective Interest Distribution Amounts;
(iii) Third, to the Class SA Certificates, the Group SA Senior
Principal Distribution Amount pro rata until the Class SA Principal
Balances have been reduced to zero;
(iv) Fourth, to the extent the Group A Available Distribution
Amount for such Distribution Date was insufficient for such purpose, to
the Class A Certificates, the amount payable to each such Class of
Certificates on prior Distribution Dates pursuant to clause (I)(b)(i)
of this definition of "Certificate Distribution Amount," and remaining
unpaid, pro rata according to such amount payable to the extent of
amounts available;
(v) Fifth, to the extent the Group A Available Distribution
Amount for such Distribution Date was insufficient for such purpose, to
the Class A Certificates, concurrently, the sum of the Interest
Distribution Amounts for such Classes of Certificates for the current
Distribution Date, pro rata according to their respective Interest
Distribution Amounts;
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<PAGE> 15
(vi) Sixth, to the extent the Group A Available Distribution
Amount for such Distribution Date was insufficient for such purpose, to
the Class A Certificates, the Group A Senior Principal Distribution
Amount, pro rata, until such Class A Principal Balance has been reduced
to zero; and
(vii) Seventh, to the Class R-II Certificates, the Residual
Distribution Amount for Loan Group SA for such Distribution Date; and
(b) With respect to the Class A Certificates, to the extent of the
Available Distribution Amount for Loan Group A remaining following prior
distributions, if any, on such Distribution Date:
(i) First, to the Class A Certificates, the amount payable
to each such Class of Certificates on prior Distribution Dates pursuant
to clause (I)(b)(i) of this definition of "Certificate Distribution
Amount," and remaining unpaid, pro rata according to such amount
payable to the extent of amounts available;
(ii) Second, to the Class A Certificates, concurrently, the
sum of the Interest Distribution Amounts for such Classes of
Certificates for the current Distribution Date, pro rata according to
their respective Interest Distribution Amounts;
(iii) Third, to the Class A Certificates, the Group A Senior
Principal Distribution Amount, pro rata, until such Class A Principal
Balance has been reduced to zero;
(iv) Fourth, to the extent the Group SA Available
Distribution Amount for such Distribution Date was insufficient for
such purpose, to the Class SA Certificates, the amount payable to each
such Class of Certificates on prior Distribution Dates pursuant to
clause (I)(b)(i) of this definition of "Certificate Distribution
Amount," and remaining unpaid, pro rata according to such amount
payable to the extent of amounts available;
(v) Fifth, to the extent the Group SA Available Distribution
Amount for such Distribution Date was insufficient for such purpose, to
the Class SA Certificates, concurrently, the sum of the Interest
Distribution Amounts for such Classes of Certificates for the current
Distribution Date, pro rata according to their respective Interest
Distribution Amounts;
(vi) Sixth, to the extent the Group SA Available Distribution
Amount for such Distribution Date was insufficient for such purpose, to
the Class SA Certificates, the Group A Senior Principal Distribution
Amount, pro rata, until such Class SA Principal Balance has been
reduced to zero; and
(vii) Seventh, to the Class R-II Certificates, the Residual
Distribution Amount for Loan Group A for such Distribution Date.
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<PAGE> 16
Certificate Group: The Class SA Certificates or Class A 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: As of any Distribution Date, with respect to the Class SA-1
Certificates, 7.00% per annum. As of any Distribution Date, with respect to
Class SA-2 Certificates, 6.90% per annum. As of any Distribution Date, with
respect to the Class SA-3 Certificates, 7.00% per annum. As of any Distribution
Date, with respect to Class SA-4 Certificates, 7.00% per annum. As of any
Distribution Date, with respect to the Class SA-5 Certificates, 7.00% per annum.
As of any Distribution Date, with respect to Class SA-X Certificates, the
weighted average, by Loan Balance, of the Net Loan Rate of the Group SA Loans as
of the preceding Determination Date, or with respect to the initial Distribution
Date, as of the Initial Cut-Off Date, minus 7.00% per annum. As of any
Distribution Date, with respect to the Class A-1 Certificates, 6.87% per annum.
As of any Distribution Date, with respect to Class A-2 Certificates, 7.00% per
annum. As of any Distribution Date, with respect to the Class A-3 Certificates,
7.00% per annum. As of any Distribution Date, with respect to Class A-4
Certificates, 7.00% per annum. As of any Distribution Date, with respect to the
Class A-5 Certificates, 7.00% per annum. As of any Distribution Date, with
respect to Class A-6 Certificates, 7.00% per annum. As of any Distribution Date,
with respect to the Class A-7 Certificates, for each of the first twelve
Distribution Dates, 7.50% per annum, and for each Distribution Date thereafter,
7.00% per annum. As of any Distribution Date, with respect to Class A-X
Certificates, the weighted average, by Loan Balance, of the Net Loan Rate of the
Group A Loans as of the preceding Determination Date, or with respect to the
initial Distribution Date, as of the Initial Cut-Off Date, minus 7.00% per
annum. As of any Distribution Date, with respect to the Class M Certificates,
7.00% per annum. As of any Distribution Date, with respect to Class B-1
Certificates, 7.00% per annum. As of any Distribution Date, with respect to the
Class B-2 Certificates, 7.00% per annum. As of any Distribution Date, with
respect to Class B-3 Certificates, 7.00% per annum. As of any Distribution Date,
with respect to Class B-4 Certificates, 7.00% per annum. As of any Distribution
Date, with respect to the Class B-5 Certificates, 7.00% per annum. As of any
Distribution Date, with respect to Class R-I Certificates, 7.00% per annum. As
of any Distribution Date, with respect to Class R-II Certificates, 7.00% per
annum.
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
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<PAGE> 17
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 SA-1, Class SA-2, Class SA-3, Class SA-4,
Class SA-5, Class SA-X, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5,
Class A-6, Class A-7, Class A-X, Class M, Class B-1, Class B-2, Class B-3, Class
B-4, Class B-5, Class R-I and Class R-II, all of the Certificates of such Class.
Class A Certificates: The Class A-1, A-2, A-3, A-4, A-5, A-6, A-7 and A-X
Certificates, collectively.
Class A-1 Certificates: The Certificates designated as "Class A-1" on the face
thereof in substantially the form attached hereto as Exhibit A-2. The Class A-1
Certificates are related to the Mortgage Loans in Loan Group A.
Class A-2 Certificates: The Certificates designated as "Class A-2" on the face
thereof in substantially the form attached hereto as Exhibit A-2. The Class A-2
Certificates are related to the Mortgage Loans in Loan Group A.
Class A-3 Certificates: The Certificates designated as "Class A-3" on the face
thereof in substantially the form attached hereto as Exhibit A-2. The Class A-3
Certificates are related to the Mortgage Loans in Loan Group A.
Class A-3 Lockout Liquidation Amount: For any Distribution Date, an amount equal
to the aggregate, for each Group A Loan which became a Liquidated Mortgage Loan
during the Collection Period preceding such Distribution Date, of the lesser of
(i) the Class A-3 Lockout Percentage of the Loan Balance of such Mortgage Loan
and (ii) the Class A-3 Lockout Prepayment Percentage on any Distribution Date
occurring prior to the fifth anniversary of the first Distribution Date, and the
Class A-3 Lockout Prepayment Percentage on any Distribution Date thereafter, in
each case, of the Liquidation Principal with respect to such Mortgage Loan.
Class A-3 Lockout Percentage: For any Distribution Date, an amount equal to the
Class A-3 Principal Balance divided by (i) the sum of the aggregate Scheduled
Principal Balance of all Group A Loans immediately preceding such Distribution
Date and (ii) the balance of the Pre-Funding Account immediately preceding such
Distribution Date.
Class A-3 Lockout Prepayment Percentage: A percentage equal to the product of
(a) the Class A-3 Lockout Percentage and (b) the Class A-3 Step Down Percentage.
Class A-3 Lockout Principal Distribution Amount: For any Distribution Date, an
amount equal to the sum of (i) zero, on any Distribution Date occurring prior to
the fifth anniversary of the first
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<PAGE> 18
Distribution Date, and on any Distribution Date thereafter, the Class A-3
Lockout Percentage of the Principal Payment Amount for Group A Loans, (ii) the
Class A-3 Lockout Prepayment Percentage of the Principal Prepayment Amount for
the Group A Loans and (iii) the Class A-3 Lockout Liquidation Amount.
Class A-3 Step Down Percentage: For any Distribution Date, the percentage
indicated below:
<TABLE>
<CAPTION>
Class A-3
Step-Down
Distribution Date Occurring in Percentage
------------------------------ ---------
<S> <C>
May 1998 through April 2003................................................ 0%
May 2003 through April 2004................................................ 30%
May 2004 through April 2005................................................ 40%
May 2005 through April 2006................................................ 60%
May 2006 through April 2007................................................ 80%
May 2007 and thereafter.................................................... 100%
</TABLE>
Class A-4 Certificates: The Certificates designated as "Class A-4" on the face
thereof in substantially the form attached hereto as Exhibit A-2. The Class A-4
Certificates are related to the Mortgage Loans in Loan Group A.
Class A-5 Certificates: The Certificates designated as "Class A-5" on the face
thereof in substantially the form attached hereto as Exhibit A-2. The Class A-5
Certificates are related to the Mortgage Loans in Loan Group A.
Class A-6 Certificates: The Certificates designated as "Class A-6" on the face
thereof in substantially the form attached hereto as Exhibit A-2. The Class A-6
Certificates are related to the Mortgage Loans in Loan Group A.
Class A-6 Notional Amount: With respect to any Distribution Date, an amount will
equal to the product of (x) the Class Principal Balance of the Class A-1
Certificates immediately prior to such Distribution Date and (y) 13/700.
Class A-7 Certificates: The Certificates designated as "Class A-7" on the face
thereof in substantially the form attached hereto as Exhibit A-2. The Class A-7
Certificates are related to the Mortgage Loans in Loan Group A.
Class A-7 Interest Reserve Amount: For each of the first twelve Distribution
Dates, an amount equal to the product of (i) the Class Principal Balance of the
Class A-7 Certificates on the day immediately preceding each such Distribution
Date and (ii) one-twelfth of 0.50%.
Class A-7 Reserve Fund: The reserve fund established on the Closing Date by the
Depositor with the Trustee in the amount of $12,500 to fund interest
distributions on the Class A-7 Certificates equal to the Class A-7 Interest
Reserve Amount.
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<PAGE> 19
Class A-X Certificates: The Certificates designated as "Class A-X" on the face
thereof in substantially the form attached hereto as Exhibit A-2. The Class A-X
Certificates are related to the Mortgage Loans in Loan Group A.
Class A-X Notional Amount: With respect to any Distribution Date, an amount will
equal to the Group A Aggregate Loan Balance, as of the preceding Determination
Date, or with respect to the initial Distribution Date, as of the Initial
Cut-Off Date.
Class B-1 Certificates: The Certificates designated as "Class B-l" on the face
thereof in substantially the form attached hereto as Exhibit B-1.
Class B-2 Certificates: The Certificates designated as "Class B-2" on the face
thereof in substantially the form attached hereto as Exhibit B-1.
Class B-3 Certificates: The Certificates designated as "Class B-3" on the face
thereof in substantially the form attached hereto as Exhibit B-1.
Class B-4 Certificates: The Certificates designated as "Class B-4" on the face
thereof in substantially the form attached hereto as Exhibit B-1.
Class B-5 Certificates: The Certificates designated as "Class B-5" on the face
thereof in substantially the form attached hereto as Exhibit B-1.
Class M Certificates: The Certificates designated as "Class M" on the face
thereof in substantially the form attached hereto as Exhibit A-3.
Class Notional Amount: With respect to the Class SA-5 Certificates, the Class
SA-5 Notional Amount; with respect to the Class SA-X Certificates, the Class
SA-X Notional Amount; with respect to the Class A-6 Certificates, the Class A-6
Notional Amount; with respect to the Class A-X Certificates, the Class A-X
Notional Amount.
Class Principal Balance: For any Class of Certificates, the applicable Original
Class Certificate Principal Balance therefor, as reduced from time to time by
(x) distributions of principal to Certificateholders of such Class and (y) the
portion of Realized Losses allocated to the Class Principal Balance of such
Class pursuant to Section 3.20 with respect to a given Distribution Date. For
any Distribution Date, the reduction of the Class Principal Balance of any Class
of Certificates pursuant to Section 3.20 shall be deemed effective prior to the
determination and distribution of principal on such Class pursuant to the
definition of "Certificate Distribution Amount". Notwithstanding the foregoing,
the Class Principal Balance of the most subordinate Class of Certificates
outstanding at any time shall be equal to the aggregate Scheduled Principal
Balance of all of the Mortgage Loans less the Class Principal Balance of all
other Classes of Certificates. The Class Principal Balance for the Class SA-2
Certificates shall be referred to as the "Class SA-2 Principal Balance", the
Class Principal Balance for the Class SA-3 Certificates
14
<PAGE> 20
shall be referred to as the "Class SA-3 Principal Balance" and so on. The Class
SA-5, SA-X, A-6 and A-X Certificates will not have Class Principal Balances.
Class R Certificates: The Class R-I Certificates and the Class R-II
Certificates, collectively.
Class R-I Certificate: The Certificate designated as "Class R-I" on the face
thereof in substantially the form attached hereto as Exhibit B-2, which has been
designated as the single class of "residual interest" in the REMIC I.
Class R-I Certificateholder: The Holder of the Class R-I Certificate.
Class R-II Certificate: The Certificate designated as "Class R-II" on the face
thereof in substantially the form attached hereto as Exhibit B-2, which has been
designated as the single class of "residual interest" in the REMIC II.
Class R-II Certificateholder: The Holder of the Class R-II Certificate.
Class SA Certificates: The Class SA-1, SA-2, SA-3, SA-4, SA-5 and SA-X
Certificates, collectively.
Class SA-1 Certificates: The Certificates designated as "Class SA-1" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class SA-1
Certificates are related to the Mortgage Loans in Loan Group SA.
Class SA-2 Certificates: The Certificates designated as "Class SA-2" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class SA-2
Certificates are related to the Mortgage Loans in Loan Group SA.
Class SA-3 Certificates: The Certificates designated as "Class SA-3" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class SA-3
Certificates are related to the Mortgage Loans in Loan Group SA.
Class SA-4 Certificates: The Certificates designated as "Class SA-4" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class SA-4
Certificates are related to the Mortgage Loans in Loan Group SA.
Class SA-4 Lockout Liquidation Amount: For any Distribution Date, an amount
equal to the aggregate, for each Group SA Mortgage Loan which became a
Liquidated Mortgage Loan during the Collection Period preceding such
Distribution Date, of the lesser of (i) the Class SA-4 Lockout Percentage of the
Loan Balance of such Mortgage Loan and (ii) the Class SA-4 Lockout Percentage on
any Distribution Date occurring prior to the fifth anniversary of the first
Distribution Date, and the Class SA-4 Lockout Prepayment Percentage on any
Distribution Date thereafter, in each case, of the Liquidation Principal with
respect to such Mortgage Loan.
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<PAGE> 21
Class SA-4 Lockout Percentage: For any Distribution Date an amount equal to the
Class SA-4 Principal Balance divided by the aggregate Scheduled Principal
Balance of all Group SA Mortgage Loans immediately preceding such Distribution
Date.
Class SA-4 Lockout Prepayment Percentage: A percentage equal to the product of
(a) the Class SA-4 Lockout Percentage and (b) the Class SA-4 Stepdown
Percentage.
Class SA-4 Lockout Principal Distribution Amount: For any Distribution Date, an
amount equal to the sum of (i) the Class SA-4 Lockout Percentage of the
Principal Payment Amount for the Group SA Mortgage Loans, (ii) the Class SA-4
Lockout Prepayment Percentage of the Principal Prepayment Amount for Group SA
Mortgage Loans and (iii) the Class SA-4 Lockout Liquidation Amount.
Class SA-4 Step Down Percentage: For any Distribution Date, the percentage
indicated below:
<TABLE>
<CAPTION>
Class SA-4
Step-Down
Distribution Date Occurring in Percentage
------------------------------ ----------
<S> <C>
May 1998 through April 2003................................................ 0%
May 2003 through April 2004................................................ 30%
May 2004 through April 2005................................................ 40%
May 2005 through April 2006................................................ 60%
May 2006 through April 2007................................................ 80%
May 2007 and thereafter.................................................... 100%
</TABLE>
Class SA-5 Certificates: The Certificates designated as "Class SA-5" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class SA-5
Certificates are related to the Mortgage Loans in Loan Group SA.
Class SA-5 Notional Amount: With respect to any Distribution Date, amount equal
to the product of (x) the Class Principal Balance of the Class SA-2 Certificates
immediately prior to such Distribution Date and (y) 10/700.
Class SA-X Certificates: The Certificates designated as "Class SA-X" on the face
thereof in substantially the form attached hereto as Exhibit A-1. The Class SA-X
Certificates are related to the Mortgage Loans in Loan Group SA.
Class SA-X Notional Amount: With respect to any Distribution Date, an amount
will equal to the Group SA Aggregate Loan Balance, as of the preceding
Determination Date, or with respect to the initial Distribution Date, as of the
Initial Cut-Off Date.
Closing Date: April 29, 1998.
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<PAGE> 22
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: For any Distribution Date, with respect to each Loan
Group, the lesser of (i) the aggregate Servicing Fee payable to the Servicer
with respect to such Loan Group for the related Collection Period and (ii) the
aggregate Uncollected Interest with respect to Mortgage Loans in such Loan
Group.
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.
Credit Support Depletion Date: The first Distribution Date on which the
aggregate of the Class Principal Balances of the Subordinate Certificates has
been or will be reduced to zero as a result of principal distributions thereon
and the allocation of Realized Losses 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: With respect to any Initial Mortgage Loan, the Initial Cut-Off
Date, and with respect to any Subsequent Mortgage Loan, the applicable
Subsequent Cut-Off Date.
Cut-Off Date Loan Balance: With respect to any Mortgage Loan, the principal
balance thereof as of the applicable Cut-Off Date.
DCR: Duff & Phelps Credit Rating Co., provided that at any time it be a Rating
Agency.
Defective Mortgage Loan: Any Mortgage Loan subject to retransfer pursuant to
Section 2.2 or 2.6.
Definitive Certificates: As defined in Section 6.2(b)(ii).
Depositary Agreement: The Letter of Representations, dated April 29, 1998 by and
among DTC, the Depositor and the Trustee.
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<PAGE> 23
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 eighth 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 eighth day).
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 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 May, 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 Servicer.
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<PAGE> 24
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, (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, (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 or (iv) 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):
(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 each Rating Agency in its highest short-term rating
category (which is A-1+ by Standard & Poor'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 Standard & Poor'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 Standard & Poor'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 either AAAm or AAAm G
by Standard & Poor's; 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
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<PAGE> 25
Agency and with respect to which the 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 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).
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<PAGE> 26
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).
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 Coverage: As of any date of determination after the Initial Cut-Off Date,
the Fraud Coverage will be equal to (1) prior to the second Anniversary, an
amount equal to 1.00% of the Initial Collateral Balance minus the aggregate
amounts allocated to the Certificates with respect to Fraud Losses on such
Mortgage Loans up to such date of determination and (2) from the second to the
fifth Anniversary, an amount equal to (a) 0.50% of the aggregate principal
balance of all of the Mortgage Loans as of the most recent Anniversary minus (b)
the aggregate amounts allocated to the Certificates with respect to Fraud Losses
on the Mortgage Loans since the most recent Anniversary up to such date of
determination. On and after the fifth Anniversary, the Fraud Coverage will be
zero. Fraud Coverage may be reduced upon written confirmation from the Rating
Agency that such reduction will not adversely affect the then current ratings
assigned to the Certificates in the related Certificate Group by the Rating
Agency.
Fraud Coverage Initial Amount: $3,500,532.
Fraud Loss: The occurrence of a loss on a Mortgage Loan arising from any action,
event or state of facts with respect to such Mortgage Loan which, because it
involved or arose out of any dishonest, fraudulent, criminal, negligent or
knowingly wrongful act, error or omission by the Mortgagor, originator (or
assignee thereof) of such Mortgage Loan, lender, or the Servicer, would result
in an exclusion from, denial of, or defense to coverage which otherwise would be
provided by an insurance policy previously issued with respect to such Mortgage
Loan.
Funding Period: The period commencing on the Closing Date and ending on the
earlier of (i) the date on which the amount on deposit in the Pre-Funding
Account (exclusive of any investment earnings) is less than $100,000, and (ii)
July 24, 1998.
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<PAGE> 27
Group A Loan: Each Mortgage Loan designated on the Mortgage Loan Schedule as a
Group A Loan and any Subsequent Mortgage Loan.
Group A Net WAC: The weighted average of the Net Loan Rates of the Group A
Mortgage Loans.
Group A Senior Liquidation Amount: With respect to any Distribution Date, the
aggregate, for each Group A Loan which became a Liquidated Mortgage Loan during
the related Collection Period, of the lesser of: (i) the Group A Senior
Percentage of the Loan Balance of such Mortgage Loan, and (ii) the Group A
Senior Prepayment Percentage of the Liquidation Principal with respect to such
Mortgage Loan.
Group A Senior Percentage: With respect to any Distribution Date, (a) the
aggregate Class Principal Balances of the Group A Certificates divided by (b)
the sum of (i) the balance of the Pre-Funding Account and (ii) aggregate
Scheduled Principal Balance of all Group A Loans, in each case immediately prior
to such Distribution Date.
Group A Senior Prepayment Percentage: (i) On any Distribution Date occurring
before the Distribution Date in the month of the fifth Anniversary, 100%; (ii)
on any other Distribution Date on which the Group A Senior Percentage or the
Group SA Senior Percentage for such Distribution Date exceeds the initial Group
A Senior Percentage or the initial Group SA Senior Percentage, respectively, as
of the Initial Cut-Off Date, 100%; and (iii) on any other Distribution Date in
each of the months of the fifth Anniversary and thereafter, 100%, unless:
(a) as of such Distribution Date, the average aggregate Principal
Balance of Group A Loans which are 60 or more days delinquent (including loans
in foreclosure and property held by the Trust) for each of the immediately
preceding six calendar months is less than or equal to 50% of the Group A
Subordinate Amount as of such Distribution Date, and
(b) cumulative (from the Closing Date) Realized Losses on the Group A
Loans allocated to the Subordinate Certificates are less than or equal to (1)
for any Distribution Date before the month of the sixth Anniversary, 30% of the
sum of the Group A Subordinate Amount as of the Initial Cut-Off Date, (2) for
any Distribution Date in or after the month of the sixth Anniversary but before
the seventh Anniversary, 35% of the sum of the Group A Subordinate Amount as of
the Initial Cut-Off Date, (3) for any Distribution Date in or after the month of
the seventh Anniversary but before the eighth Anniversary, 40% of the sum of the
Group A Subordinate Amount as of the Initial Cut-Off Date, (4) for any
Distribution Date in or after the month of the eighth Anniversary but before the
ninth Anniversary, 45% of the sum of the Group A Subordinate Amount as of the
Initial Cut-Off Date, and (5) for any Distribution Date in or after the month of
the ninth Anniversary, 50% of the sum of the Group A Subordinate Amount as of
the Initial Cut-Off Date,
in which case, as follows: (1) for any such Distribution Date in or after the
month of the fifth Anniversary but before the sixth Anniversary, the Group A
Senior Percentage for such Distribution Date plus 70% of the Group A Subordinate
Percentage for such Distribution Date;
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<PAGE> 28
(2) for any such Distribution Date in or after the month of the sixth
Anniversary but before the seventh Anniversary, the Group A Senior Percentage
for such Distribution Date plus 60% of the Group A Subordinate Percentage for
such Distribution Date; (3) for any such Distribution Date in or after the month
of the seventh Anniversary but before the eighth Anniversary, the Group A Senior
Percentage for such Distribution Date plus 40% of the Group A Subordinate
Percentage for such Distribution Date; (4) for any such Distribution Date in or
after the month of the eighth Anniversary but before the ninth Anniversary, the
Group A Senior Percentage for such Distribution Date plus 20% of the Group A
Subordinate Percentage for such Distribution Date; and (5) for any such
Distribution Date thereafter, the Group A Senior Percentage for such
Distribution Date.
If on any Distribution Date the allocation to the Group A Senior
Certificates of Principal Prepayments in the percentage required would reduce
the sum of the Class Principal Balances of the Group A Senior Certificates below
zero, the Group A Senior Prepayment Percentage for such Distribution Date shall
be limited to the percentage necessary to reduce such sum to zero.
Group A Senior Principal Distribution Amount: For any Distribution Date, an
amount equal to the sum of (a) the Group A Senior Percentage of the Principal
Payment Amount for Loan Group A, (b) the Group A Senior Prepayment Percentage of
the Principal Prepayment Amount for Loan Group A and (c) the Group A Senior
Liquidation Amount.
Group A Subordinate Amount: For any Distribution Date, the excess of (a) the sum
of (i) the aggregate Scheduled Principal Balance of the Group A Loans and (ii)
the balance of the Pre-Funding Account over (b) the Class A Certificate
Principal Balance.
Group A Subordinate Liquidation Amount: For any Distribution Date, the excess,
if any, of the aggregate of Liquidation Principal for all Group A Loans which
became Liquidated Mortgage Loans during the Collection Period, over the related
Group A Senior Liquidation Amount for such Distribution Date.
Group A Subordinate Percentage: With respect to any Distribution Date, the
excess of 100% over the Group A Senior Percentage for such date.
Group A Subordinate Prepayment Percentage: On any Distribution Date for Loan
Group A, the excess of 100% over the Group A Senior Prepayment Percentage for
such Distribution Date; provided, however, that if the aggregate of the Class
Principal Balances of the Group A Certificates has been reduced to zero, then
the Group A Subordinate Prepayment Percentage shall equal 100%.
Group A Subordinate Principal Distribution Amount: On any Distribution Date, the
excess of (A) the sum of (i) the Group A Subordinate Percentage of the Principal
Payment Amount for Loan Group A, (ii) the Group A Subordinate Principal
Prepayments Distribution Amount and (iii) the Group A Subordinate Liquidation
Amount over (B) the amounts required to be distributed to the Class SA
Certificates pursuant to clause (I)(b)(iv) of the definition of "Certificate
Distribution Amount" on such Distribution Date. Any reduction in the Group A
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<PAGE> 29
Subordinate Principal Distribution Amount pursuant to clause (B) of this
definition shall: (i) first, be subtracted from the amount calculated pursuant
to clause (A)(i) of this definition, (ii) second, be subtracted from the amount
calculated pursuant to clause (A)(iii) of this definition and (iii) third, be
subtracted from the amount calculated pursuant to clause (A)(ii) of this
definition. On any Distribution Date, the Group A Subordinate Principal
Distribution Amount shall be allocated pro rata, by Class Principal Balance,
among the Classes of Subordinate Certificates and paid in the order of
distribution to such Classes pursuant to clause (I)(c) of the definition of
"Certificate Distribution Amount" herein, except as otherwise stated in such
definition. Notwithstanding the foregoing, on any Distribution Date prior to
distributions on such date, if the Subordination Level for any Class of
Subordinate Certificates is less than such percentage as of the Closing Date,
the pro rata portion of the Group A Subordinate Principal Prepayments
Distribution Amount otherwise allocable to the Class or Classes junior to such
Class will be distributed to the most senior Class of the Subordinate
Certificates for which the Subordination Level is less than such percentage as
of the Closing Date, and to the Classes of Subordinate Certificates senior
thereto, pro rata according to the Class Principal Balances of such Classes. For
purposes of this definition and the definition of "Subordination Level," the
relative seniority, from highest to lowest, of the Classes of Subordinate
Certificates shall be as follows: Class M, Class B-1, Class B-2, Class B-3,
Class B-4, Class B-5 and Class B-6.
Group A Subordinate Principal Prepayments Distribution Amount: On any
Distribution Date, the Group A Subordinate Prepayment Percentage of the
Principal Prepayment Amount for Loan Group A.
Group A Undercollateralized Amount: For any Distribution Date is equal to the
sum of (i) the sum of (A) the amount, if any, by which the aggregate Class
Principal Balance of the Class A Certificates exceeds the sum of (x) the
aggregate Scheduled Principal Balance of the Group A Loans, after giving effect
to distributions to be made on such Distribution Date and (y) the balance of the
Pre-Funding Account and (B) 1/12 of the amount calculated in clause (i)(A) above
multiplied by 7.00% and (ii) any amounts payable to the Class A Certificates
pursuant to clause (i) above of this definition of "Group A Undercollateralized
Amount" on any prior Distribution Dates, plus accrued interest thereon at 7.00%
per annum.
Group SA Loan: The Mortgage Loans designated on the Mortgage Loan Schedule as
Group SA Loans.
Group SA Net WAC: The weighted average of the Net Loan Rates of the Group SA
Mortgage Loans.
Group SA Senior Liquidation Amount: The aggregate, for each Group SA Loan which
became a Liquidated Mortgage Loan during the Collection Period, of the lesser
of: (i) the Group SA Senior Percentage of the Principal Balance of such Mortgage
Loan, and (ii) the Group SA Senior Prepayment Percentage of the Liquidation
Principal with respect to such Mortgage Loan.
Group SA Senior Percentage: With respect to any Distribution Date, the sum of
the Class Principal Balances of the Class SA and the Class R Certificates
divided by aggregate Scheduled
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Principal Balance of all Group SA Loans, in each case immediately prior to such
Distribution Date.
Group SA Senior Prepayment Percentage: (i) On any Distribution Date occurring
before the Distribution Date in the month of the fifth Anniversary, 100%; (ii)
on any other Distribution Date on which the Group SA Senior Percentage or the
Group A Senior Percentage for such Distribution Date exceeds the initial Group
SA Senior Percentage or the initial Group A Senior Percentage as of the Initial
Cut-Off Date, 100%; and (iii) on any other Distribution Date in each of the
months of the fifth Anniversary and thereafter, 100%, unless:
(a) as of such Distribution Date, the average aggregate Principal
Balance of Group SA Loans which are 60 or more days delinquent (including loans
in foreclosure and property held by the Trust) for each of the immediately
preceding six calendar months is less than or equal to 50% of the Group SA
Subordinate Amount as of such Distribution Date, and
(b) cumulative (from the Closing Date) Realized Losses on the Group SA
Loans allocated to the Subordinate Certificates are less than or equal to (1)
for any Distribution Date before the month of the sixth Anniversary, 30% of the
sum of the Group SA Subordinate Amount as of the Initial Cut-Off Date, (2) for
any Distribution Date in or after the month of the sixth Anniversary but before
the seventh Anniversary, 35% of the sum of the Group SA Subordinate Amount as of
the Initial Cut-Off Date, (3) for any Distribution Date in or after the month of
the seventh Anniversary but before the eighth Anniversary, 40% of the sum of the
Group SA Subordinate Amount as of the Initial Cut-Off Date, (4) for any
Distribution Date in or after the month of the eighth Anniversary but before the
ninth Anniversary, 45% of the sum of the Group SA Subordinate Amount as of the
Initial Cut-Off Date, and (5) for any Distribution Date in or after the month of
the ninth Anniversary, 50% of the sum of the Group SA Subordinate Amount as of
the Initial Cut-Off Date,
in which case, as follows: (1) for any such Distribution Date in or after the
month of the fifth Anniversary of but before the sixth Anniversary, the Group SA
Senior Percentage for such Distribution Date plus 70% of the Group SA
Subordinate Percentage for such Distribution Date; (2) for any such Distribution
Date in or after the month of the sixth Anniversary but before the seventh
Anniversary, the Group SA Senior Percentage for such Distribution Date plus 60%
of the Group SA Subordinate Percentage for such Distribution Date; (3) for any
such Distribution Date in or after the month of the seventh Anniversary but
before the eighth Anniversary, the Group SA Senior Percentage for such
Distribution Date plus 40% of the Group SA Subordinate Percentage for such
Distribution Date; (4) for any such Distribution Date in or after the month of
the eighth Anniversary but before the ninth Anniversary, the Group SA Senior
Percentage for such Distribution Date plus 20% of the Group SA Subordinate
Percentage for Loan Group SA for such Distribution Date; and (5) for any such
Distribution Date thereafter, the Group SA Senior Percentage for such
Distribution Date.
If on any Distribution Date the allocation to the Group SA Certificates
of Principal Prepayments in the percentage required would reduce the sum of the
Class Principal Balances of
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the Group SA Certificates below zero, the Group SA Senior Prepayment Percentage
for such Distribution Date shall be limited to the percentage necessary to
reduce such sum to zero.
Group SA Senior Principal Distribution Amount: For any Distribution Date, an
amount equal to the sum of (a) the Group SA Senior Percentage of the Principal
Payment Amount for Loan Group SA, (b) the Group SA Senior Prepayment Percentage
of the Principal Prepayment Amount for Loan Group SA and (c) the Group SA Senior
Liquidation Amount.
Group SA Subordinate Amount: For any Distribution Date, the excess of the
aggregate Scheduled Principal Balance of the Group SA Loans over the Class SA
Certificate Principal Balance.
Group SA Subordinate Liquidation Amount: For any Distribution Date, the excess,
if any, of the aggregate of Liquidation Principal for all Group SA Loans which
became Liquidated Mortgage Loans during the Collection Period, over the related
Group SA Senior Liquidation Amount for such Distribution Date.
Group SA Subordinate Percentage: With respect to any Distribution Date, the
excess of 100% over the Group SA Senior Percentage for such date.
Group SA Subordinate Prepayment Percentage: On any Distribution Date for Loan
Group SA, the excess of 100% over the Group SA Senior Prepayment Percentage for
such Distribution Date; provided, however, that if the aggregate of the Class
Principal Balances of the Class SA Certificates and the Class R Certificates
have been reduced to zero, then the Group SA Subordinate Prepayment Percentage
shall equal 100%.
Group SA Subordinate Principal Distribution Amount: On any Distribution Date,
the excess of (A) the sum of (i) the Group SA Subordinate Percentage of the
Principal Payment Amount for Loan Group SA, (ii) the Group SA Subordinate
Principal Prepayments Distribution Amount and (iii) the Group SA Subordinate
Liquidation Amount over (B) the amounts required to be distributed to the Class
A Certificates pursuant to clause (I)(a)(iv) of the definition of "Certificate
Distribution Amount" on such Distribution Date. Any reduction in the Group SA
Subordinate Principal Distribution Amount pursuant to clause (B) of this
definition shall: (i) first, be subtracted from the amount calculated pursuant
to clause (A)(i) of this definition, (ii) second, be subtracted from the amount
calculated pursuant to clause (A)(iii) of this definition and (iii) third, be
subtracted from the amount calculated pursuant to clause (A)(ii) of this
definition. On any Distribution Date, the Group SA Subordinate Principal
Distribution Amount shall be allocated pro rata, by Class Principal Balance,
among the Classes of Subordinate Certificates and paid in the order of
distribution to such Classes pursuant to clause (I)(c) of the definition of
"Certificate Distribution Amount" herein, except as otherwise stated in such
definition. Notwithstanding the foregoing, on any Distribution Date prior to
distributions on such date, if the Subordination Level for any Class of
Subordinate Certificates is less than such percentage as of the Closing Date,
the pro rata portion of the Group SA Subordinate Principal Prepayments
Distribution Amount otherwise allocable to the Class or Classes junior to such
Class will be distributed to the most senior Class of the Subordinate
Certificates for which the Subordination Level is less than
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such percentage as of the Closing Date, and to the Classes of Subordinate
Certificates senior thereto, pro rata according to the Class Principal Balances
of such Classes. For purposes of this definition and the definition of
"Subordination Level," the relative seniority, from highest to lowest, of the
Classes of Subordinate Certificates shall be as follows: Class M, Class B-1,
Class B-2, Class B-3, Class B-4 and Class B-5.
Group SA Subordinate Principal Prepayments Distribution Amount: On any
Distribution Date, the Group SA Subordinate Prepayment Percentage of the
Principal Prepayment Amount for Loan Group SA.
Group SA Undercollateralized Amount: For any Distribution Date is equal to the
sum of (i) the sum of (A) the amount, if any, by which the aggregate Class
Principal Balance of the Class SA Certificates exceeds the aggregate Scheduled
Principal Balance of the Group SA Loans, after giving effect to distributions to
be made on such Distribution Date and (B) 1/12 of the amount calculated in
clause (i)(A) above multiplied by 7.00% and (ii) any amounts payable to the
Class SA Certificates pursuant to clause (i) above of this definition of "Group
SA Undercollateralized Amount" on any prior Distribution Dates, plus accrued
interest thereon at 7.00% per annum.
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.
Initial Collateral Balance: As of the Closing Date, the sum of (a) the Initial
Cut-Off Date Aggregate Loan Balance and (b) the amount on deposit in the
Pre-Funding Account.
Initial Cut-Off Date: April 1, 1998.
Initial Cut-Off Date Aggregate Loan Balance: $292,308,382.37.
Initial Mortgage Loans: The Mortgage Loans transferred to the Trust on the
Closing Date, as set forth in Exhibit D hereto.
Initial Mortgage Loan Schedule: The schedule of Initial Mortgage Loans included
in the Trust as of the Initial Cut-Off Date, specifying with respect to each
such Initial Mortgage Loan the information described in the definition of
"Mortgage Loan Schedule".
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
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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 Servicer
pursuant to Section 3.5 hereof, net of any component thereof (i) covering any
expenses incurred by or on behalf of the 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
Servicer's normal servicing procedures.
Interest Collections: As to any Distribution Date, all payments by or on behalf
of Mortgagors and any other amounts constituting interest (including without
limitation such portion of any payments of the Purchase Price for a Mortgage
Loan, Insurance Proceeds, Net Liquidation Proceeds and any Monthly Advance made
with respect to such Distribution Date as is allocable to interest on the
applicable Mortgage Loan and any portion of Payaheads constituting interest
intended by the Mortgagor for application in the related Collection Period)
collected by the Servicer under the Mortgage Loans (excluding any portion of
Payaheads constituting interest intended by the Mortgagor for application in a
subsequent Collection Period, any fees, late charges or similar administrative
fees paid by Mortgagors) during the related Collection Period (net of the
Servicing Fee for such Collection Period and any portion of any Unreimbursed
Advance as is allocable to interest on the applicable Mortgage Loan).
Interest Distribution Amount: On any Distribution Date, for any Class of
Certificates, the amount of interest accrued on the respective Class Principal
Balance or Class Notional Amount, as applicable, at 1/12th of the related
Certificate Rate for such Class during the Collection Period, before giving
effect to allocations of Realized Losses for the Collection Period or
distributions to be made on such Distribution Date, reduced by the interest
portion of Realized Losses allocated to such Class.
Interested Person: The Depositor, the Servicer, any Holder of a Certificate, or
any Affiliate of any such Person.
Junior Subordinate Certificates: The Class B-3, B-4 and B-5 Certificates,
collectively.
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.
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Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage Loan in
respect of which the 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 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 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 Loss Amount: With respect to any Distribution Date and any Mortgage
Loan that becomes a Liquidated Mortgage Loan during the related Collection
Period, the excess, if any, of the Loan Balance thereof at the end of such
Collection Period over the Net Liquidation Proceeds applied in reduction of such
Loan Balance.
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.
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Loan Group: Loan Group SA and Loan Group A, as applicable.
Loan Group A: The group of Mortgage Loans comprised of the Group A Loans.
Loan Group SA: The group of Mortgage Loans comprised of the Group SA Loans.
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).
Majority Holders: The Holder or Holders of each Class of Certificates evidencing
Percentage Interests in excess of 51% in the aggregate of such Class.
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 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)).
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 which schedule shall consist of the Initial
Mortgage Loan Schedule together with any Subsequent Mortgage Loan Schedule
reflecting the Subsequent Mortgage Loans transferred to the Trust on a
Subsequent Transfer Date. The Initial Mortgage Loan Schedule of Initial Mortgage
Loans as of the Initial 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) the State and Zip Code in which the Mortgaged Property is located,
(v) the Loan Rate, (vi) the stated
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maturity date of the Mortgage Note, (vii) the Loan-to-Value Ratio, (viii) the
Original Loan Balance, (ix) the Servicing Fee Rate; (x) the Due Date, (xi) the
remaining number of months to maturity as of the applicable Cut-Off Date, (xii)
the first date on which a Monthly Payment is due, (xiii) whether the Mortgaged
Property is owner occupied or non-owner occupied, (xiv) whether the Mortgaged
Property is a single family residence, two-to-four family residence, a
condominium or other property, and (xv) the Loan Group 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 as well as the
addition of Subsequent Mortgage Loans.
Mortgage Loans: The mortgage loans that are transferred and assigned to the
Trustee pursuant to Sections 2.1 and 2.10 (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 Loan Rate: With respect to any Mortgage Loan, the Loan Rate of such Mortgage
Loan less the sum of the applicable Servicing Fee Rate and the Trustee Fee Rate.
Nondisqualification Opinion: An Opinion of Counsel that a contemplated action
will not cause either of the REMIC I or REMIC II 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 REMICs.
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 Monthly Advance or Servicing Advance proposed to be
made in respect of a Mortgage Loan which in the good faith business judgment of
the 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 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).
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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 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 Servicer (except
that any opinion relating to taxation must be an opinion of independent outside
counsel).
Original Class Certificate Principal Balance: With respect to the Class A-1
Certificates, $126,652,919, with respect to the Class A-2 Certificates,
$19,168,000, with respect to the Class A-3 Certificates, $18,130,000, with
respect to the Class A-4 Certificates, $9,500,000, with respect to the Class A-5
Certificates, $2,700,000, with respect to the Class A-7 Certificates,
$2,500,000, with respect to the Class SA-1 Certificates, $51,614,813, with
respect to the Class SA-2 Certificates, $79,081,309, with respect to the Class
SA-3 Certificates, $9,700,000, with respect to the Class SA-4 Certificates,
$15,253,691, with respect to the Class M Certificates, $7,701,171, with respect
to the Class B-1 Certificates, $2,975,452, with respect to the Class B-2
Certificates, $2,100,319, with respect to the Class B-3 Certificates,
$1,225,186, with respect to the Class B-4 Certificates, $700,106, with respect
to the Class B-5 Certificates, $1,050,161.64, with respect to the Class R-I
Certificates, $50, with respect to the Class R-II Certificates, $50.
Original Loan Balance: As to any Mortgage Loan, the original principal amount of
such Mortgage Loan outstanding on the date such loan was made.
Original Pre-Funded Amount: $57,744,845.
Overfunded Interest Amount: With respect to each Subsequent Transfer Date
occurring in May 1998, the excess of (A) the amount on deposit in the
Capitalized Interest Account on such date over (B) the sum of the Capitalized
Interest Requirements (assuming amounts on deposit in the Pre-Funding Account
are invested at 2% per annum) which will be required on the first, second and
third Distribution Dates (assuming that the amount required for the second and
third Distribution Dates will be the same as such Capitalized Interest
Requirement for the first Distribution Date). With respect to each Subsequent
Transfer Date occurring in June 1998, the excess of (A) the amount in the
Capitalized Interest Account on such date over (B) the Capitalized Interest
Requirements (assuming amounts on deposit in the Pre-Funding Account are
invested at 2% per annum) which will be required on the second and third
Distribution Dates (assuming that the amount required for the second and third
Distribution Dates will be the same as such Capitalized Interest Requirement for
the first Distribution Date). With respect to each Subsequent Transfer Date
occurring in July 1998, the excess of (A) the amount in the Capitalized Interest
Account on such date over (B) the Capitalized Interest Requirement (assuming
amounts on deposit in the Pre-Funding Account are invested at 2% per annum)
which will be required on
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<PAGE> 38
the third Distribution Date (assuming that the amount required for the third
Distribution Date will be the same as such Capitalized Interest Requirement for
the second Distribution Date).
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 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 the right of each Certificate of a
particular Class in the distributions allocated to such Class, "Percentage
Interest" shall mean the percentage undivided beneficial ownership interest
evidenced by such Certificate of such Class, which percentage shall equal:
(i) with respect to any Class SA or Class A Certificate
(other than the Class SA-5, Class S-X, Class A-6 and Class A-X
Certificates), its Certificate Principal Balance divided by the
applicable Class Principal Balance;
(ii) with respect to the Class SA-5, Class S-X, Class A-6 and
Class A-X Certificates, the portion of the respective Class Notional
Amount evidenced by such Certificate divided by the respective Class
Notional Amount; and
(iii) with respect to the Class R-I and Class R-II
Certificates, the percentage set forth 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 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
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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 Servicer based on a
Nondisqualification Opinion delivered to the Servicer and the Trustee to the
effect that any Transfer to such Person may cause the REMIC I or REMIC II or any
Holder of a Class R-I or R-II 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.
Pool Delinquency Rate: As to any Collection Period, the fraction, expressed as a
percentage, the numerator of which is equal to the aggregate Loan Balance of all
Mortgage Loans that are 90 or more days delinquent (including Mortgage Loans in
foreclosure and REO and any Mortgage Loan if the related Mortgagor is subject to
an Insolvency Event) 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 as of the close of business on the last day of such Collection Period.
Pre-Funded Amount: With respect to any date, the amount remaining on deposit in
the Pre-Funding Account, exclusive of Pre-Funding Account Earnings.
Pre-Funding Account: The Pre-Funding Account established in accordance with
Section 4.2 hereof and maintained by the Trustee as an Eligible Account.
Pre-Funding Account Earnings: With respect to the Distribution Date in May 1998,
the actual investment earnings earned during the period from the Closing Date
through the Determination Date related to the Distribution Date occurring in May
1998 (the "May Determination Date") (inclusive) as calculated by the Trustee
pursuant to Section 4.2 hereof; and with respect to the Distribution Date in
June 1998, the actual investment earnings earned during the period from the day
after the May Determination Date through the Determination Date related to the
Distribution Date occurring in June 1998 (the "June Determination Date")
(inclusive) as calculated by the Trustee pursuant to Section 4.2 hereof; and
with respect to the Distribution Date in July 1998, the actual investment
earnings earned during the period from the day after the June Determination Date
through the Determination Date related to the Distribution Date occurring in
July 1998 (inclusive) as calculated by the Trustee pursuant to Section 4.2
hereof.
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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.
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 Servicer under the Mortgage
Loans during the related Collection Period.
Principal Payment Amount: On any Distribution Date and for any Loan Group, the
sum with respect to the Mortgage Loans in such Loan Group of (i) the scheduled
principal payments on the Mortgage Loans due on the related Due Date, (ii) the
principal portion of repurchase proceeds received with respect to any Mortgage
Loan which was repurchased by the Seller pursuant to a Purchase Obligation or as
permitted by this Agreement during the Collection Period, and (iii) any other
unscheduled payments of principal which were received with respect to any
Mortgage Loan during the Collection Period, other than Payoffs, Curtailments and
Liquidation Principal.
Principal Prepayment: Any payment of principal on a Mortgage Loan which
constitutes a Payoff or a Curtailment.
Principal Prepayment Amount: On any Distribution Date and for any Loan Group,
the sum with respect to the Mortgage Loans in such Loan Group of (i)
Curtailments received during the Collection Period from such Mortgage Loans and
(ii) Payoffs received during the applicable Collection Period from the Mortgage
Loans.
Pro Rata Allocation: The allocation of the principal portion of losses relating
to a Mortgage Loan in a given Loan Group to all Classes of Certificates in the
related Certificate Group (other than Class SA-5, Class SA-X, Class A-6 and
Class A-X Certificates) and to the Subordinate Certificates (in the limited
circumstances described below) pro rata according to their respective Class
Principal Balances, and the allocation of the interest portion of such losses to
the Certificates related to such Mortgage Loan pro rata according to the amount
of interest accrued but unpaid on each such Class in reduction thereof and then
in reduction of their related Class Principal Balances. For purposes of any Pro
Rata Allocation in part to the Subordinate Certificates, each Class of
Subordinate Certificates will be deemed to have a Class Principal Balance (and
to accrue interest thereon) equal to the actual Class Principal Balance thereof
times a fraction, the numerator or which is the Group SA Subordinate Amount (for
a loss on a Group
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SA Mortgage Loan) or the Group A Subordinate Amount (for a loss on a Group A
Mortgage Loan), and the denominator of which is the aggregate of the Group SA
Subordinate Amount and the Group A Subordinate Amount.
Prospectus: The base prospectus dated April 24, 1998.
Prospectus Supplement: The prospectus supplement dated April 24, 1998 relating
to the offering of the Class SA Certificates, the Class A Certificates, the
Class R Certificates and the Senior Subordinate Certificates.
Purchase Agreement: The Mortgage Loan Purchase Agreement, dated as of the
Initial 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: Initially, each of S&P and DCR, thereafter, each nationally
recognized statistical rating organization that has rated the Certificates at
the request of the Depositor, or their respective successors in interest. If
such agency or a successor is no longer in existence, "Rating Agency" shall be
such statistical credit rating agency, or other comparable Person, designated by
the Depositor, notice of which designation shall be given to the Trustee.
Ratings: As of any date of determination, the ratings, if any, of the
Certificates as assigned by the Rating Agency.
Realized Loss: For any Distribution Date, with respect to any Mortgage Loan
which became a Liquidated Mortgage Loan during the related Collection Period,
the sum of (i) the principal balance of such Mortgage Loan remaining outstanding
and the principal portion of Nonrecoverable Advances actually reimbursed with
respect to such Mortgage Loan (the principal portion of such Realized Loss), and
(ii) the accrued interest on such Mortgage Loan remaining unpaid and the
interest portion of Nonrecoverable Advances actually reimbursed with respect to
such Mortgage Loan (the interest portion of such Realized Loss). For any
Distribution Date, with
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respect to any Mortgage Loan which is not a Liquidated Mortgage Loan, the amount
of the Bankruptcy Loss incurred with respect to such Mortgage Loan as of the
related Due 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.
Related Documents: As defined in Section 2.1(a).
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 Class A-7 Reserve Account, Distribution Account,
Capitalized Interest Account or the Pre-Funding Account.
REMIC I Regular Interests: The regular interests in REMIC I as described in
Section 2.7 of this Agreement.
REMIC II: The pool of assets consisting of the Class A-7 Reserve Fund, the REMIC
I Regular Interests and all payments of principal or interest on or with respect
to the REMIC I Regular Interests after the Initial Cut-Off Date.
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.
REO: A Mortgaged Property that is acquired by the Trustee in foreclosure or by
deed in lieu of foreclosure.
Residual Certificates: The Class R-I and Class R-II Certificates, which are
hereby each designated the sole Class of "residual interests" in REMIC I and
REMIC II, respectively, for purposes of Section 860G(a)(2) of the Code.
Residual Certificateholder: The person in whose name a Residual Certificate is
registered on the Certificate Register.
Residual Distribution Amount: On any Distribution Date, any portion of the
Available Distribution Amount for a Loan Group remaining after all distributions
to each Class of Certificates other than the Residual Certificates. Upon
termination of the obligations created by this Agreement and the Trust created
hereby, the amounts, if any, which remain on deposit in the Collection Account
after payment to the Certificateholders of the amounts set forth in Section 10.1
of this Agreement, and subject to the conditions set forth therein.
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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.
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: With respect to any Mortgage Loan as of any
Distribution Date, the unpaid principal balance of such Mortgage Loan as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such schedule by reason of bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period) as of the first day of the
Collection Period for such Distribution Date, after giving effect to any
previously applied Curtailments, the payment of principal due on such first day
of such Collection Period and any reduction of the principal balance of such
Mortgage Loan by a bankruptcy court, irrespective of any delinquency in payment
by the related Mortgagor.
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.
Senior Certificates: The Class SA, Class A and Class R Certificates,
collectively.
Servicer: First Union Mortgage Corporation, 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.
Servicer Removal Right Event: The occurrence of:
(i) on any Distribution Date, the Rolling Three Month Delinquency Rate
exceeds 6%; 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 exceed 3.5% of (I) the sum of (I) the Cut-Off Date Aggregate Loan Balance
and (II) the aggregate Cut-Off Date Loan
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Balance of all Subsequent Mortgage Loans; 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 exceed 4.5% of the sum of (I) the
Cut-Off Date Aggregate Loan Balance and (II) the aggregate Cut-Off Date Loan
Balance of all Subsequent Mortgage Loans.
Servicing Advances: All reasonable and customary unanticipated "out of pocket"
costs and expenses incurred in the performance by the 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 Servicer in accordance with Section 4.1.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 3.9.
Servicing Fee: With respect to any Collection Period, the product of (i) the
Servicing Fee Rate divided by 12 and (ii) the Aggregate Loan Balance as of the
first day of such Collection Period.
Servicing Fee Rate: With respect to each Mortgage Loan, the servicing fee rate
per annum for such Mortgage Loan as set forth on the Mortgage Loan Schedule,
which rate will be between 0.25% per annum and 0.44% per annum, inclusive for
the Initial Mortgage Loans and not greater than 0.44% for any Subsequent
Mortgage Loan.
Servicing Officer: Any officer of the 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 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.
Special Hazard Coverage: With respect to all Mortgage Loans, the Special Hazard
Coverage Initial Amount less Special Hazard Losses allocated to the Certificates
and the amount of any scheduled reduction in the amount of Special Hazard
Coverage as follows: on each Anniversary of the Initial Cut-Off Date, the
Special Hazard Coverage shall be reduced, but not increased, to an amount equal
to the lesser of (1) the greatest of (a) the aggregate principal balance of the
Mortgage Loans located in the single zip code area containing the largest
aggregate principal balance of the Mortgage Loans, (b) 1% of the aggregate
unpaid principal balance of the Mortgage Loans and (c) twice the unpaid
principal balance of the largest single Mortgage Loan, in each case calculated
as of the Due Date in the immediately preceding month, and (2) the Special
Hazard Coverage Initial Amount as reduced by the Special Hazard Losses allocated
to
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the Certificates since the Initial Cut-Off Date. Special Hazard Coverage may be
reduced upon written confirmation from the Rating Agency that such reduction
will not adversely affect the then current ratings assigned to the Certificates
by the Rating Agency.
Special Hazard Coverage Initial Amount: $2,941,436.
Special Hazard Loss: The occurrence of any direct physical loss or damage to a
Mortgaged Property not covered by a standard hazard maintenance policy with
extended coverage which is caused by or results from any cause except: (ii)
fire, lightning, windstorm, hail, explosion, riot, riot attending a strike,
civil commotion, vandalism, aircraft, vehicles, smoke, sprinkler leakage, except
to the extent of that portion of the loss which was uninsured because of the
application of a co-insurance clause of any insurance policy covering these
perils; (ii) normal wear and tear, gradual deterioration, inherent vice or
inadequate maintenance of all or part thereof, (iii) errors in design, faulty
workmanship or materials, unless the collapse of the property or a part thereof
ensues and then only for the ensuing loss; (iv) nuclear reaction or nuclear
radiation or radioactive contamination, all whether controlled or uncontrolled
and whether such loss be direct or indirect, proximate or remote or be in whole
or in part caused by, contributed to or aggravated by a peril covered by this
definition of Special Hazard Loss; (v) hostile or warlike action in time of
peace or war, including action in hindering, combating or defending against an
actual, impending or expected attack (a) by any government of sovereign power
(dejure or defacto), or by an authority maintaining or using military, naval or
air forces, (b) by military, naval or air forces, or (c) by an agent of any such
government, power, authority or forces; (vi) any weapon of war employing atomic
fission or radioactive force whether in time of peace or war; (vii)
insurrection, rebellion, revolution, civil war, usurped power or action taken by
governmental authority in hindering, combating or defending against such
occurrence; or (viii) seizure or destruction under quarantine or customs
regulations, or confiscation by order of any government or public authority.
Standard & Poor's: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or its successor in interest.
Startup Day: As specified in Section 2.9(i).
Subordinate Certificates: The Class M, Class B-1, Class B-2, Class B-3, Class
B-4 and Class B-5 Certificates.
Subordination Level: On any specified date, with respect to any Class of
Subordinate Certificates, the percentage obtained by dividing the sum of the
Class Principal Balances of all Classes of Certificates which are subordinate in
right of payment to such Class by the sum of the Class Principal Balances of all
Classes of Certificates as of such date prior to giving effect to distributions
or allocations of Realized Losses on the Mortgage Loans on such date.
Subsequent Cut-Off Date: With respect to any Subsequent Mortgage Loans, the date
so specified in the related Subsequent Transfer Agreement, which date shall
always be the close of business on the last day of the month preceding the
Subsequent Transfer Date.
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Subsequent Mortgage Loans: Each of the Mortgage Loans identified on a Subsequent
Mortgage Loan Schedule which Subsequent Mortgage Loan must, unless waived or
modified by the Rating Agencies (except for (ii) of this sentence) as of the
date of its transfer to the Trust: (i) not be 30 or more days contractually
delinquent as of the related Subsequent Cut-Off Date; (ii) have a fixed rate of
interest and an original term to stated maturity of 30 years; (iii) be secured
by a Mortgage in a first lien position on a one- to four-family property (which
may be attached, part of a two- to four-family dwelling, a condominium unit, a
townhouse or a unit in a planned unit development); (iv) not have a Loan Rate
less than 7.26% per annum; (v) be otherwise acceptable to the Rating Agencies,
(vi) have an origination date of not more than 36 months prior to the related
Subsequent Cut-Off Date and (vii) following the purchase of such Subsequent
Mortgage Loan by the Trust on a Subsequent Transfer Date, the Mortgage Loans
(including the Subsequent Mortgage Loans) as of the first day of the month
following such Subsequent Transfer Date: (a) will have a weighted average Loan
Rate (by Loan Balance as of such first day of the month) of at between 7.75% per
annum and 8.15% per annum, inclusive; (b) will have a weighted average remaining
term to stated maturity (by Loan Balance as of such first day of the month) of
between 300 and 315 months, inclusive; (c) will have a weighted average
Loan-to-Value Ratio (by Loan Balance as of such first day of the month) of
between 70% and 75%, inclusive; (d) will have a state concentration not in
excess of 28% (by Loan Balance as of such first day of the month) for any one
state; (e) will have no more than 10% (by Loan Balance as of such first day of
the month) relating to non-owner occupied properties; (f) will have no more than
2.00% (by Aggregate Loan Balance) of Mortgage Loans secured by three- to
four-family properties and; (g) will not have more than 25% (by Loan Balance as
of such first (1st) day of the month) of Subsequent Mortgage Loans.
Subsequent Mortgage Loan Schedule: As of any date of determination, each
schedule that is identified as a schedule of Subsequent Mortgage Loans,
specifying with respect to each such Subsequent Mortgage Loan the information
described in the definition of "Mortgage Loan Schedule" and is attached to a
Subsequent Transfer Agreement.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement entered into
between the Depositor and the Trustee substantially in the form attached as
Exhibit R hereto.
Subsequent Transfer Date: With respect to any Subsequent Mortgage Loans, the
date such Mortgage Loans are conveyed to the Trust pursuant to the related
Subsequent Transfer Agreement during the Funding Period; provided that no more
than two Subsequent Transfer Dates may occur in any one calendar month.
Subservicer: Any Person with whom the Servicer has entered into an arrangement
to subservice the Mortgage Loans.
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
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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 the REMIC I and REMIC II 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
Liquidation Loss Amounts through and including such Distribution Date.
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 Initial Mortgage Loans originally listed on the Mortgage Loan Schedule.
Trust: The trust created by this Agreement.
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: 0.01% per annum.
Trustee's Remittance Report: As defined in Section 5.2(a).
Uncollected Interest: With respect to any Distribution Date for any Mortgage
Loan on which a Payoff or Curtailment was made by a Mortgagor during the related
Collection Period, any shortfall in interest collections during such Collection
Period resulting from the timing of a Payoff made other than on the related Due
Date or resulting from a Curtailment.
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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.
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 Servicer.
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 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 Servicing Fee and Trustee 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 Initial Mortgage Loan (including all
substitutions therefor), including its Cut-Off Date Loan Balance, all interest
accruing thereon on and after the Initial Cut-Off Date and all collections in
respect of interest and principal received on and after the Initial Cut-Off Date
(exclusive of payments in respect of interest on the Initial Mortgage Loans
accrued prior to the Initial 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 Initial Mortgage Loans; (4)
all rights under any guaranty executed in connection with an Initial Mortgage
Loan; (5) the related Mortgage Notes, Mortgages and other documents related to
the Initial Mortgage Loans; (6) the fixed price contract to acquire Subsequent
Mortgage Loans contained in Section 2.10; (7) such amounts as may be deposited
into and held by the Trustee in the Pre-Funding Account and the Capitalized
Interest Account, together with all investment earnings on such amounts; (8) all
other assets included or to be included in the Trust for the benefit of the
Certificateholders; (9) 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); (10)
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 (11) 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") and the Seller, in connection with any Subsequent Transfer, shall
deliver to, and deposit with the Document Custodian, on or before the Subsequent
Transfer Date, the Related Documents with respect to each Subsequent Mortgage
Loan:
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(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-A, Mortgage Pass-Through Certificates, Series 1998-A, 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;
(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-A, Mortgage Pass-Through Certificates, Series 1998-A," 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 or the related Subsequent Transfer Date, as applicable.
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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 Initial Mortgage Loans that were owned by the Seller on the
Initial 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 Initial
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 Initial
Mortgage Loan.
The Depositor and the Trustee intend that the assignment and transfer
herein contemplated constitute a sale of the Initial 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 Initial 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 Initial Mortgage Loans and of the applicable
Subsequent Transfer Date with respect to Subsequent Mortgage Loans, at its own
expense, to either (i) record the assignment of
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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 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 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 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 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
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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 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-A."
(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
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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.
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 and as of each Subsequent
Transfer 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;
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(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, 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 SERVICER.
The Servicer represents and warrants to the Trustee on behalf of the
Certificateholders that as of the Closing Date and as of each Subsequent
Transfer Date:
(i) It is a corporation, validly existing and in good
standing under the laws of the State 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. 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
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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 nor the Prospectus nor the
Prospectus Supplement, to the extent each relates to the Servicer, nor
any statement, report or other document prepared by the 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 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 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 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
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
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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 Servicer; and
(x) The 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 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 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 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 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 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;
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(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 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.
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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.
Upon discovery by the Depositor, the 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 Initial
Mortgage Loans and as of each related Subsequent Transfer Date with respect to
the Subsequent Mortgage Loans transferred on such Subsequent Transfer Date:
(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 serviced by the 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
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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 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 Initial Mortgage Loans were delinquent
(i.e. not 30 or more days past due) as of the Initial Cut-Off Date and
none of the Subsequent Mortgage Loans were delinquent as of the
applicable Subsequent Transfer 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 applicable 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;
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(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, 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;
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(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 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
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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;
(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 applicable 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 or the Subsequent Transfer Date, as applicable, in the
Collection Account;
(xxx) Each of the Mortgage Loans was originated
substantially in accordance with the credit underwriting guidelines of
the Seller, which are at least as
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stringent as the underwriting criteria 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 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) (A) 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 Initial Cut-Off Date Aggregate Loan Balance, (a) at
least 93.13% of the Initial Mortgage Loans (by Initial Cut-Off Date
Aggregate Loan Balance) are secured by real property improved by a
one-family residence erected thereon, (b) no more than 0.08% of the
Initial Mortgage Loans (by Initial Cut-Off Date Aggregate Loan Balance)
are secured by real property improved by two- to four-family dwellings,
(c) no more than 5.72% of the Initial Mortgage Loans (by Initial
Cut-Off Date Aggregate Loan Balance) are secured by real property
improved by individual condominium units and units in a planned unit
development, (d) no more than 1.07% of the Initial Mortgage Loans (by
Initial Cut-Off Date Aggregate 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; and (B) as of the
Initial Cut-Off Date, no more than 1.3021% of the Initial Mortgage
Loans (by Initial Cut-Off Date Aggregate 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 Initial Cut-Off Date Aggregate
Loan Balance, 4.05% of the Initial Mortgage Loans (by Initial Cut-Off
Date Loan Balance) are secured
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by Mortgaged Properties that are non-owner occupied properties (i.e.,
investor-owned and vacation);
(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;
(xxxix) Each Initial Mortgage Loan was originated on or
purchased after June 2, 1986;
(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) No more than 0.5631% of the Initial Mortgage Loans
(by Initial Cut-Off Date Aggregate Loan Balance) 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;
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(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);
(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 applicable 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;
(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; and
(li) Each Subsequent Mortgage Loan meets the
characteristics contained in the definition of Subsequent Mortgage
Loan.
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
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 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
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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 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 and unpaid
Servicing Fee 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 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 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 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
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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 Initial Collateral 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 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 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.
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SECTION 2.9. REMIC PROVISIONS.
(a) This Agreement shall be construed so as to carry out the intention
of the parties that each of REMIC I and REMIC II 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 REMIC II
shall consist of the Class SA-1 Certificates, the Class SA-2 Certificates, the
Class SA-3 Certificates, the Class SA-4 Certificates, the Class SA-5
Certificates, the Class SA-X Certificates, the Class A-1 Certificates, the Class
A-2 Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the
Class A-5 Certificates, the Class A-6 Certificates, the Class A-7 Certificates,
the Class A-X Certificates, the Class M Certificates, the Class B-1
Certificates, the Class B-2 Certificates, the Class B-3 Certificates, the Class
B-4 Certificates and the Class B-5 Certificates. The "residual interest" (within
the meaning of Section 860(G)(a)(2) of the Code) in REMIC II shall consist of
the Class R-II Certificate. The "regular interests" (within the meaning of
Section 860(G)(a)(1) of the Code) of REMIC I shall consist of the Class SA-1
Regular Interest, the Class SA-2 Regular Interest, the Class SA-3 Regular
Interest, the Class SA-4 Regular Interest and the Class SA Subordinate Regular
Interest each of which will have an interest rate equal to the Group SA Net WAC
and the Class A-1 Regular Interest, the Class A-2 Regular Interest, the Class
A-3 Regular Interest, the Class A-4 Regular Interest, the Class A-5 Regular
Interest, the Class A-7 Regular Interest and the Class A Subordinate Regular
Interest each of which will have an interest rate equal to the Group A Net WAC.
The "residual interest" (within the meaning of Section 860(G)(a)(2) of the Code)
of REMIC I shall consist of the Class R-I Certificate.
(b) The original principal balance of the Class SA Subordinate Regular
Interest is equal to the original Group SA Subordinate Amount less $25.00. The
original principal balance of the Class A Subordinate Regular Interest is equal
to the original Group A Subordinate Amount less $25.00. The original principal
balance of each of the principal-bearing Class SA and Class A Regular Interests
other than the Class SA and Class A Subordinate Regular Interests is equal to
the original principal balance of the principal-bearing Certificate of REMIC II
which has the same designation.
(c) 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.
(d) 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:
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<TABLE>
<CAPTION>
Final Scheduled
Class Distribution Date
----- -----------------
<S> <C>
Class SA-1 Certificates April 25, 2025
Class SA-2 Certificates April 25, 2025
Class SA-3 Certificates April 25, 2025
Class SA-4 Certificates April 25, 2025
Class SA-5 Certificates April 25, 2025
Class SA-X Certificates April 25, 2025
Class A-1 Certificates August 25, 2028
Class A-2 Certificates August 25, 2028
Class A-3 Certificates August 25, 2028
Class A-4 Certificates August 25, 2028
Class A-5 Certificates August 25, 2028
Class A-6 Certificates August 25, 2028
Class A-7 Certificates August 25, 2028
Class A-X Certificates August 25, 2028
Class M Certificates August 25, 2028
Class B-1 Certificates August 25, 2028
Class B-2 Certificates August 25, 2028
Class B-3 Certificates August 25, 2028
Class B-4 Certificates August 25, 2028
Class B-5 Certificates August 25, 2028
Class R Certificates August 25, 2028
</TABLE>
(e) The Closing Date is hereby designated as the "startup day" of each
REMIC within the meaning of Section 860G(a) (9) of the Code.
SECTION 2.10. SUBSEQUENT TRANSFERS.
(a) Subject to the satisfaction of the conditions set forth in Section
2.1 and paragraph (b) below and pursuant to the terms of the related Subsequent
Transfer Agreement, in consideration of the Trustee's delivery on the relevant
Subsequent Transfer Dates, on behalf of the Depositor, to or upon the order of
the Seller of all or a portion of the balance of funds in the Pre-Funding
Account, the Depositor will use its best efforts to cause the Seller to, and the
Seller shall, on any Subsequent Transfer Date, on behalf of the Depositor, sell,
transfer, assign, set over and otherwise convey without recourse, to the
Trustee, all right, title and interest of the Seller in and to each Subsequent
Mortgage Loan listed on the Subsequent Mortgage Loan Schedule
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delivered by the Seller on such Subsequent Transfer Date, including without
limitation the related Cut-Off Date Loan Balance and (i) all interest accruing
thereon on and after the related Subsequent Cut-Off Date and all collections in
respect of interest and principal received on and after the Subsequent Cut-Off
Date (exclusive of payments in respect of interest on the Subsequent Mortgage
Loans accrued prior to the Subsequent Cut-Off Date and received thereafter);
(ii) property which secured such Subsequent Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest in
any insurance policies in respect of such Subsequent Mortgage Loan; and (iv) all
proceeds of the foregoing. The transfer by the Seller of the Subsequent Mortgage
Loans set forth on the Subsequent Mortgage Loan Schedule to the Trustee shall be
absolute and shall be intended by the Seller and all parties hereto to be
treated as a sale by the Seller to the Trust. If the assignment and transfer of
the Mortgage Loans and the other property specified in this Section 2.10 from
the Seller to the Trustee pursuant to this Agreement is held or deemed not to be
a sale or is held or deemed to be a pledge of security for a loan, the Seller
intends that the rights and obligations of the parties shall be established
pursuant to the terms of this Agreement and that, in such event, (1) the Seller
shall be deemed to have granted and does hereby grant to the Trustee as of the
related Subsequent Transfer Date a first priority security interest in the
entire right, title and interest of the Seller in and to the Subsequent Mortgage
Loans and all other property conveyed to the Trustee pursuant to this Section
2.10 and all proceeds thereof, and (2) this Agreement shall constitute a
security agreement under applicable law. Within 5 days of the Subsequent
Transfer Date, the Seller shall file 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 Trustee as secured party and
listing as collateral the Subsequent Mortgage Loans, the related Mortgage Notes
and other Related Documents. The amount paid by the Trustee on behalf of the
REMIC I from the Pre-Funding Account with respect to a Subsequent Mortgage Loan
shall be one-hundred percent (100%) of the related Cut-Off Date Loan Balance of
the Subsequent Mortgage Loan so transferred.
(b) The Seller shall transfer and deliver to the Trustee the Subsequent
Mortgage Loans, and the other property and rights related thereto described in
paragraph (a) above, only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) The Seller shall have provided the Trustee an Addition
Notice, which notice shall be given not less than three Business Days
prior to the related Subsequent Transfer Date and shall designate the
Subsequent Mortgage Loans to be sold to the Trust and the aggregate
Cut-Off Date Loan Balances of such Subsequent Mortgage Loans;
(ii) The Seller shall have delivered to the Trustee a duly
executed Subsequent Transfer Agreement;
(iii) The Seller shall have deposited in the Collection
Account all principal collected and all interest accrued and collected
in respect of such Subsequent Mortgage Loans on and after the related
Subsequent Cut-Off Date;
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(iv) The Seller shall have delivered an Officer's
Certificate to the Trustee confirming that as of each Subsequent
Transfer Date, the Seller was not insolvent, nor will it be made
insolvent by such transfer, nor is it aware of any pending insolvency;
(v) The Seller shall have delivered an Officer's
Certificate to the Trustee confirming that the Funding Period shall not
have ended;
(vi) The Seller shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and in the related Subsequent
Transfer Agreement and that each Subsequent Mortgage Loan meets the
eligibility requirements specified in the definition thereof for
transfer;
(vii) The Seller shall have delivered an Officer's
Certificate to the Trustee confirming that the representations and
warranties of the Seller pursuant to Section 2.5 and pursuant to
Section 2.6(a) are true and correct with respect to the Seller and the
Subsequent Mortgage Loans as of the Subsequent Transfer Date; and
(viii) The Seller shall have provided the Trustee with an
Opinion of Counsel, acceptable to the Trustee, relating to the sale of
the Subsequent Mortgage Loans to the Trustee.
(c) In connection with each Subsequent Transfer Date and on the first
and second Distribution Dates the Trustee shall determine (i) the amount and
correct dispositions of the Capitalized Interest Requirement, Overfunded
Interest Amount and Pre-Funding Account Earnings for such Distribution Date in
accordance with the provisions of Section 4.2 and (ii) any other necessary
matters in connection with the administration of the Pre-Funding Account and of
the Capitalized Interest Account. In the event that any amounts are released as
a result of calculation error by the Trustee, or any assumption on which any
calculation is based proves to be incorrect, from the Pre-Funding Account or
from the Capitalized Interest Account, the Trustee shall not be liable therefor,
and the Seller, on behalf of the Depositor, shall immediately repay such amounts
to the Trustee.
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.1. THE SERVICER.
(a) It is intended that the Trust formed hereunder shall consist of the
REMIC I and REMIC II and that the affairs of the Trust shall be conducted so as
to qualify each of the REMIC I and REMIC II as a "real estate mortgage
investment conduit" as defined in and in accordance with the REMIC Provisions.
In furtherance of such intentions, the Servicer covenants and agrees
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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 any REMIC in the
Trust.
(b) The 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 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 Servicer whether or not actually received by it. Without
limiting the generality of the foregoing, the Servicer shall continue, and is
hereby authorized and empowered by the Trustee, to execute and deliver, in
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 Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder, which powers of attorney or other
documents shall be prepared by the Servicer.
The relationship of the Servicer (and of any successor to the 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
Servicer are terminated hereunder, any successor to the Servicer in its sole
discretion may, to the extent permitted by applicable law, terminate the
existing subservicer arrangements with any subservicer or assume the terminated
Servicer's rights under such subservicing arrangements which termination or
assumption will not violate the terms of such arrangements.
(d) [RESERVED]
(e) The Servicer may agree to changes in the terms of a Mortgage Loan
that would not cause the REMIC I or REMIC II to fail to qualify as a REMIC, as
evidenced by a Nondisqualification Opinion delivered by the 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 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]
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(g) The 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
Servicer. The 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 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
Servicer and a Subservicer or otherwise, and the Servicer shall be obligated to
the same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Mortgage Loans. Any such arrangement shall
be deemed to be between the Subservicer and the 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 Servicer and all Subservicers shall be deemed a single entity
for the purpose of determining compliance with the terms of this Agreement and
the 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 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 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
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 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-A." Funds in the Collection Account in
respect of the Mortgage Loans in Loan Group SA and the Mortgage Loans in Loan
Group A and amounts withdrawn from the Collection Account attributable to each
of such Loan Groups shall be accounted for separately. The Servicer shall on the
Closing Date deposit any amounts representing payments on and any collections in
respect of
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the Initial Mortgage Loans received as of the Initial Cut-Off Date and prior to
the Closing Date and due for periods after such Initial Cut-Off Date and
thereafter deposit within two Business Days following receipt thereof by the
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;
(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 Servicer shall be
permitted to retain from payments in respect of interest on the Mortgage Loans,
the Servicing Fee for such Collection Period and the amount of any Unreimbursed
Advances. The foregoing requirements respecting deposits to the Collection
Account are exclusive, it being understood that, without limiting the generality
of the foregoing, the 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 Servicer for
the accounts of Mortgagors for application towards the payment of taxes,
insurance premiums, assessments and similar items. The 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 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 Servicer and may be withdrawn
from the Collection Account by the Servicer at any time. Any investment losses
on funds held in the Collection Account shall be for the account of the Servicer
and promptly upon the realization of such loss shall be contributed by the
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.
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(d) Notwithstanding anything in this Agreement to the contrary, (i) for
so long as (A) the 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 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 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 Servicer (receipt by the 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 Servicer actually receives such amount.
SECTION 3.3. WITHDRAWALS FROM THE COLLECTION ACCOUNT.
The Trustee or the Servicer, if the 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) two Business Days prior to each Distribution Date, to
deposit to the Distribution Account (a) the Available Distribution
Amount for each Loan Group for such Distribution Date (less, with
respect to the first Distribution Date, $50) 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 Servicer for a Monthly Advance;
(ii) to reimburse the Servicer for any accrued unpaid
Servicing Fees and for unreimbursed Monthly Advances and Servicing
Advances. The Servicer's right to reimbursement under this clause (ii)
for unpaid Servicing 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 Servicer from the related Mortgagor or otherwise
relating to the Mortgage Loan in respect of which such reimbursed
amounts are owed. The 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;
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(iv) to pay to the 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);
(vii) to reimburse the Servicer for Nonrecoverable Advances;
and
(viii) (a) to pay the unpaid Class Principal Balance of the
Class R-I 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 R Certificateholders.
SECTION 3.4. MONTHLY ADVANCES; COMPENSATING INTEREST.
(a) No later than 12:00 noon New York City time on the second Business
Day immediately preceding each Distribution Date, the 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 Servicer on or before the related Determination Date,
such Monthly Advance to be in an amount net of the Servicing Fee payable with
respect to such Mortgage Loans on the related Distribution Date. Notwithstanding
the foregoing, the Servicer shall not be required to make a Monthly Advance if
in the good faith judgment and sole discretion of the Servicer, the Servicer
determines that such advance would constitute a Nonrecoverable Advance. The
determination by the Servicer that it has made, or would be making, a
Nonrecoverable Advance shall be evidenced by a certificate of a Responsible
Officer of the Servicer delivered to the Trustee and stating the basis for such
determination. The 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 Servicer may distribute Payaheads paid to the 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 Servicer
to the Collection Account two Business Days prior to the next succeeding
Distribution Date and shall be included in the amount to be made available to
the Trustee on such day.
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SECTION 3.5. MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION
EXPENSES.
The Servicer shall cause to be maintained for each Mortgage Loan hazard
insurance naming the 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 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 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 Servicer of related Liquidation Expenses to
be incurred in connection therewith. Amounts collected by the 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 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 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 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 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 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 Servicer shall not enter into any such assumption or
modification agreement unless the Servicer has determined that the Person to
become liable under the Mortgage Loan has
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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 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 Servicer in connection with any such assumption to the extent
that such change would not be permitted to be made in respect of the original
Mortgage Loan pursuant to Section 3.1(e). Any fee collected by the Servicer for
entering into any such agreement will be retained by the Servicer as additional
servicing compensation.
SECTION 3.7. REALIZATION UPON DEFAULTED MORTGAGE LOANS.
The Servicer shall pursue the liquidation of such of the Mortgage Loans
as come into and continue in default when, in the determination of the 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
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 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 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 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 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 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 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 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 Servicer the Mortgage File for such sold Mortgage
Loan and the
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Trustee shall execute and deliver an assignment, prepared by the Servicer and
furnished by it to the Trustee, substantially in the form of Exhibit E.
The Servicer shall cause to be deposited, no later than five Business
Days after the receipt thereof, in the Collection Account, all revenues received
with respect to the related REO and shall retain, or cause the Trustee to
withdraw therefrom funds necessary for the proper operation, management and
maintenance of the REO and the fees of any managing agent acting on behalf of
the Servicer.
The disposition of REO shall be carried out by the Servicer for cash at
such price, and upon such terms and conditions, as the 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 Servicing Fees and unreimbursed Servicing
Advances and Monthly Advances payable to the 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 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 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 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 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.
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SECTION 3.8. TRUSTEE TO COOPERATE.
On or before each Distribution Date, the 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 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 Servicer if required by applicable law and
be delivered to the Person entitled thereto. It is understood and agreed that no
expenses 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 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 Servicer and the Document Custodian or the Trustee,
as applicable, shall execute such documents, in the forms provided by the
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
Servicer to return the Mortgage File to the Trustee or the Document Custodian
appointed by it when the need therefor by the 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 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 Servicer, execute an appropriate assignment in the
form provided to the Trustee by the Servicer to assign such Mortgage Loan for
the purpose of collection to the 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.
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SECTION 3.9. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
SERVICER.
(a) The Servicer shall be entitled to receive the Servicing 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 Servicer as additional compensation. The 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.
(b) The 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 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 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
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 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 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
Servicer's fiscal year (December 31), beginning in 1999, the 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 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.
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SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS.
(a) The 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 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 Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure
of the 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.
(b) The 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 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 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 Servicer against losses, including losses resulting from
forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of
Servicer employees. Such fidelity bond shall also protect and insure the
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 Servicer from
its duties and obligations as set forth in this Agreement. Upon the request of
the Trustee or any Certificateholder, the 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 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 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
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
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that such blanket policy may contain a deductible clause, in which case the
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 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 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.
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 Servicer shall make reports of foreclosures and abandonments of any
Mortgaged Property for each calendar year beginning in 1998. The Servicer shall
file reports relating to each instance occurring during the previous calendar
year in which the 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
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 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 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
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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 Servicer apprised at all times of the location of the
Mortgage Files.
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 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 Servicer's record keeping. The Document Custodian shall promptly report to
the Trustee and the 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 Servicer
or a Subservicer, the Document Custodian shall release any Mortgage File to the
Trustee, the Trustee's agent, the Trustee's designee, the 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 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
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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, (ii) the Subsequent Transfer Date, with respect
to each Subsequent Mortgage Loan transferred to the Trust on a Subsequent
Transfer Date and (iii) 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 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 Servicer and the Depositor a
report updating the status of such defects.
(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 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 Servicer shall maintain
accurate records reflecting fire and hazard (including flood) insurance
coverage.
With respect to each Mortgage Loan as to which the Servicer maintains
escrow accounts, the 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
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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 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 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. ALLOCATION OF REALIZED LOSSES.
Prior to each Distribution Date, the Servicer shall determine the
amount of Realized Losses, if any, with respect to each Mortgage Loan. The
amount of Realized Losses shall be evidenced by an Officer's Certificate signed
by a Responsible Officer of the Servicer. All Realized Losses, except for
Special Hazard Losses, Fraud Losses and Bankruptcy Losses in excess of the
designated amounts of the applicable Special Hazard Coverage, Fraud Coverage and
Bankruptcy Coverage (each, as defined herein), will be allocated by the Trustee
as follows: (i) for losses allocable to principal (a) first, to the Class B-5
Certificates, until the Class Principal Balance thereof has been reduced to
zero, (b) second, to the Class B-4 Certificates, until the Class Principal
Balance thereof has been reduced to zero, (c) third, to the Class B-3
Certificates, until the Class Principal Balance thereof has been reduced to
zero, (d) fourth, to the Class B-2 Certificates, until the Class Principal
Balance thereof has been reduced to zero, (e) fifth, to the Class B-1
Certificates, until the Class Principal Balance thereof has been reduced to
zero, (f) sixth, to the Class M Certificates, until the Class Principal Balance
thereof has been reduced to zero, and (g) seventh, to the Senior Certificates
related to such Mortgage Loan (other than the Class SA-5 Certificates, Class
SA-X Certificates, Class A-6 Certificates, the Class A-X Certificates), pro
rata, according to their Class Principal Balances in reduction of their
respective Class Principal Balances, as applicable; and (ii) for losses
allocable to interest (a) first, to the Class B-5 Certificates, in reduction of
accrued but unpaid interest thereon and then in reduction of the Class Principal
Balance of such Certificates, (b) second, to the Class B-4 Certificates, in
reduction of accrued but unpaid interest thereon and then in reduction of the
Class Principal Balance of such Certificates, (c) third, to the Class B-3
Certificates, in reduction of accrued but unpaid interest thereon and then in
reduction of the Class Principal Balance of such Certificates, (d) fourth, to
the Class B-2 Certificates, in reduction of accrued but unpaid interest thereon
and then in reduction of the Class Principal Balance of such Certificates, (e)
fifth, to the Class B-1 Certificates, in reduction of accrued but unpaid
interest thereon and then in reduction of the Class Principal Balance of such
Certificates, (f) sixth, to the Class M Certificates, in reduction of accrued
but unpaid interest thereon and then in reduction of the Class Principal Balance
of such Certificates, and (g) seventh, to the applicable Senior Certificates
related to such Mortgage Loan, pro rata according to accrued but unpaid interest
thereon and then pro rata according to their Class Principal Balances in
reduction of their respective Class Principal Balances, as applicable.
Special Hazard Losses in excess of the Special Hazard Coverage, Fraud
Losses in excess of the Fraud Coverage and Bankruptcy Losses in excess of the
Bankruptcy Coverage shall be allocated among the related Senior Certificates and
the Subordinate Certificates by Pro Rata Allocation.
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On each Distribution Date, after giving effect to the principal
distributions and allocations of losses as provided in this Agreement (without
regard to this paragraph), if the Aggregate Class Principal Balance of all
outstanding Classes of Certificates exceeds the Aggregate Loan Balance, then
such excess will be deemed a principal loss and will be allocated to the most
junior Class of Subordinate Certificates then outstanding, in reduction of the
Certificate Principal Balance thereof.
ARTICLE IV
SERVICING CERTIFICATE; PRE-FUNDING ACCOUNT AND
CAPITALIZED INTEREST ACCOUNT;
SECTION 4.1. SERVICING CERTIFICATE.
Not later than the fifth Business Day of each month, the Servicer shall
deliver to the Trustee 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 Trustee and the 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:
(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 to prepare the reports required to be
delivered to Certificateholders pursuant to Section 5.2 and the notice
to the Servicer pursuant to Section 3.4(b).
The Trustee 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
Servicer and the Trustee.
SECTION 4.2. PRE-FUNDING ACCOUNT AND CAPITALIZED INTEREST ACCOUNT.
(a) The Trustee has heretofore established or caused to be established
and shall hereafter maintain or cause to be maintained a separate account
denominated a Pre-Funding
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Account, which in each case is and shall continue to be an Eligible Account in
the name of the Trustee and shall be designated "Norwest Bank Minnesota,
National Association as Trustee, in trust for the registered holders of FURST
Mortgage Pass-Through Certificates, Series 1998-A Pre-Funding Account." The
Pre-Funding Account will not be an asset of any of the REMICs. Any investment
earnings on the Pre-Funding Account will be treated as owned by the Depositor
and will be taxable to the Depositor. The Trustee has heretofore established or
caused to be established and shall hereafter maintain or cause to be maintained
a separate account denominated a Capitalized Interest Account, which in each
case is and shall continue to be an Eligible Account in the name of the Trustee
and shall be designated "Norwest Bank Minnesota, National Association as
Trustee, in trust for the registered holders of FURST Mortgage Pass-Through
Certificates, Series 1998-A Capitalized Interest Account." The Capitalized
Interest Account shall be treated as an "outside reserve fund" under applicable
Treasury regulations and will not be an asset of any of the REMICs. Any
investment earnings on the Capitalized Interest Account will be treated as owned
by the Depositor and will be taxable to the Depositor. The amount on deposit in
the Pre-Funding Account and the Capitalized Interest Account shall be invested
in Eligible Investments in accordance with the provisions of Section 5.4. For
all Federal tax purposes, amounts, if any, transferred by any REMIC to the
Capitalized Interest Account will be treated as amounts distributed by such
REMIC to the Depositor.
(b) On the Closing Date, the Seller, on behalf of the Depositor, will
cause to be deposited in the Pre-Funding Account the Original Pre-Funded Amount
and shall deposit in the Capitalized Interest Account the amount of
$1,065,360.92.
(c) On any Subsequent Transfer Date, upon satisfaction of the
conditions set forth in Section 2.10(b), the Trustee shall contribute to the
REMIC I from the Pre-Funding Account an amount equal to 100% of the aggregate
Cut-Off Date Loan Balances of the Subsequent Mortgage Loans transferred to the
Trust on such Subsequent Transfer Date, as indicated on the related Addition
Notice furnished to the Trustee pursuant to Section 2.10(b)(i), and pay such
amount on behalf of the REMIC I and on behalf of the Depositor to or upon the
order of the Seller upon satisfaction of such conditions set forth in Section
2.10 hereof with respect to such transfer. The Trustee shall maintain an
accurate ledger that shall indicate at any time the amount on deposit in the
Pre-Funding Account, the amount of Pre-Funding Account Earnings and withdrawals
of such amounts.
(d) (i) If the Pre-Funded Amount has not been reduced to zero by July
24, 1998, the Trustee shall withdraw from the Pre-Funding Account such amount on
deposit in the Pre-Funding Account on the Business Day preceding the
Distribution Date in July, 1998 (after giving effect to all withdrawals from the
Pre-Funding Account on such date) and contribute such amount to the REMIC I as
part of the Available Distribution Amount for distribution to the Holders of the
Class or Classes of Class A and Subordinate Certificates entitled to receive
principal distributions on the Distribution Date in July, 1998;
(ii) if the Pre-Funded Amount is reduced to less than or equal to
$100,000 as of either of the first two Determination Dates, the Trustee
shall withdraw from the Pre-Funding Account the amount remaining on
deposit in the Pre-Funding Account on such
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Determination Date (after giving effect to all withdrawals from the
Pre-Funding Account on such date) and contribute such amount to REMIC I
for distribution to the Holders of the Class or Classes of Class A and
Subordinate Certificates entitled to receive principal distributions on
the next Distribution Date.
The amount contributed to the REMIC I pursuant to either paragraph (i)
or (ii) of this subsection shall be net of any Pre-Funding Account Earnings,
except in the case of clause (e) below.
(e) On the first, second and third Distribution Date during the Funding
Period the Trustee shall contribute to REMIC I from the Pre-Funding Account, the
Pre-Funding Account Earnings, if any, applicable to such Distribution Date.
Pre-Funding Account Earnings on each such Distribution Date shall be included in
the Available Distribution Amount for such Distribution Date for distribution
with respect to the Class A and Subordinate Certificates only.
(f) On the Business Day prior to each of the first, second and third
Distribution Dates the Trustee shall contribute to the REMIC I from the
Capitalized Interest Account, the Capitalized Interest Requirement, if any, for
such Distribution Date. The Capitalized Interest Requirement for each such
Distribution Date shall be included in the Available Distribution Amount on such
Distribution Date for distribution with respect to the Class A and Subordinate
Certificates only.
(g) On each Subsequent Transfer Date, the Trustee, on behalf of the
Depositor, shall distribute the Overfunded Interest Amount (calculated by the
Trustee on the Business Day prior to such Subsequent Transfer Date), if any, to
the Seller, and on the last day of the Funding Period or, if such date is not a
Distribution Date, the next succeeding Distribution Date, the Trustee, on behalf
of the Depositor, shall distribute to the Seller any amounts remaining in the
Capitalized Interest Account (including any earnings thereon) after taking into
account withdrawals from the Capitalized Interest Account on such Distribution
Date. The Capitalized Interest Account shall be closed after the third
Distribution Date. All amounts, if any, remaining in the Capitalized Interest
Account on such day shall be transferred, on behalf of the Depositor, to the
Seller.
(h) The Trustee has heretofore established or caused to be established
and shall hereafter maintain or cause to be maintained a separate account
denominated a Class A-7 Reserve Fund, which is and shall continue to be an
Eligible Account in the name of the Trustee and shall be designated "Norwest
Bank Minnesota, National Association as Trustee, in trust for the registered
holders of FURST Mortgage Pass-Through Certificates, Series 1998-A Class A-7
Reserve Fund". Amounts on deposit in the Class A-7 Reserve Fund will not be
invested. On the Business Day prior to each of the first twelve Distribution
Dates, the Trustee shall withdraw from the Class A-7 Reserve Fund and deposit
into the Distribution Account an amount equal to the Class A-7 Interest Reserve
Amount.
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ARTICLE V
DISTRIBUTION AMOUNTS;
PAYMENTS AND 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 Sections 3.3(ii), 4.2(e), 4.2(f) and 4.2(h), 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 Available Distribution Amount for each Loan Group, 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
the definition of "Certificate Distribution Amount", 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 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 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:
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(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 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 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 each Distribution Date,
the Trustee shall deliver to the 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 "Trustee's Remittance Report") (based
solely on the computer or electronic Servicing Certificate for such Distribution
Date provided pursuant to Section 4.1 other than the information contained in
subclause (xxv) hereof) containing the information set forth below with respect
to such Distribution Date:
(i) The principal balance of each Class and the Aggregate
Loan Balance as reported in the prior Trustee's Remittance Report, or,
in the case of the first
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Determination Date, the Original Class Certificate Principal Balance of
each Class, and the Initial Cut-Off Date Aggregate Loan Balance;
(ii) The aggregate amount of collections received on the
Mortgage Loans on or prior to the Determination Date in respect of the
preceding Collection Period, separately stating the amounts received in
respect of principal and interest and reporting separately, the amounts
received in respect of scheduled principal payments and the amounts
representing Principal Prepayments;
(iii) The amount repaid by the Seller pursuant to Sections
2.2, 2.6 or 2.7;
(iv) The amount of the Monthly Advances to be made with
respect to such Distribution Date and the amount of outstanding Monthly
Advances on such Distribution Date prior to any reimbursement to be
made on such Distribution Date; the amount by which the aggregate
Compensating Interest for such Distribution Date exceeds the available
Monthly Excess Cashflow Amount for such Distribution Date and the
amount by which such remaining Compensating Interest exceeds the
Servicing Fee for such Distribution Date;
(v) The amount of Special Hazard Coverage available to the
Senior Certificates remaining as of the close of business on the
applicable Determination Date.
(vi) The amount of Bankruptcy Coverage available to the
Certificateholders remaining as of the close of business on the
applicable Determination Date;
(vii) The amount of Fraud Coverage available to the
Certificateholders remaining as of the close of business on the
applicable Determination Date; and
(viii) The Class Principal Balance of each Class and the Class
Principal Balance after giving effect to the distribution to be made on
the Distribution Date;
(ix) The weighted average remaining term to maturity of the
Mortgage Loans and the weighted average Loan Rate;
(x) The Servicing Fee;
(xi) The amount of all payments or reimbursements to the
Servicer pursuant to Section 3.3;
(xii) The amount of Realized Losses incurred in respect of
each Loan Group allocable to the related Certificates on the related
Distribution Date and the cumulative amount of Realized Losses incurred
in respect of each Loan Group allocated to such Certificates since the
Initial Cut-Off Date.
(xiii) [RESERVED]
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(xiv) [RESERVED]
(xv) [RESERVED]
(xvi) The number of Mortgage Loans outstanding at the
beginning and at the end of the related Collection Period;
(xvii) The amount on deposit in the Pre-Funding Account and
the Capitalized Interest Account after such Distribution Date;
(xviii) The aggregate Liquidation Loss Amount and the related
number of Mortgage Loans (reporting separately, sales of Mortgage Loans
and foreclosures on Mortgage Loans), if any, for the preceding
Collection Period, the cumulative Total Losses and the Rolling Three
Month Delinquency Rate;
(xix) The Aggregate Loan Balance, as of the end of the
Collection Period related to such Distribution Date;
(xx) The number and aggregate Loan Balances of Mortgage
Loans (w) as to which the Monthly Payment is delinquent for 30-59
days, 60-89 days and 90 or more days, respectively (including Mortgage
Loans in foreclosure and REO and any Mortgage Loan if the related
Mortgagor is subject to an Insolvency Event), (x) that have become
REO, in each case as of the end of the preceding Collection Period,
(y) that are in foreclosure, and (z) the Mortgagor of which is the
subject of any bankruptcy or insolvency proceeding;
(xxi) The unpaid principal amount of all Mortgage Loans that
became Liquidated Mortgage Loans during such Collection Period;
(xxii) The loan number and principal balance as of the close
of business on the Distribution Date in such month and the date of
acquisition thereof of such Mortgage Loans that become REO during the
preceding Collection Period;
(xxiii) The Net Liquidation Proceeds received during such
Collection Period;
(xxiv) The Valuation of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure as of the close
of business on the last Business Day of the previous Collection Period;
and
(xxv) The remaining Pre-Funded Amount, if any, the Pre-
Funding Amount Earnings, the balance of the Capitalized Interest
Account, if any, and the Overfunded Interest Amount, if any.
The Trustee shall forward such report to the Certificateholders on such
Distribution Date. The Trustee may fully rely upon and shall have no liability
with respect to information provided by the Servicer.
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To the extent that there are inconsistencies between the telecopy of
the Trustee's Remittance Report and the hard copy thereof, the 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 Initial
Cut-Off Date or Subsequent Cut-Off Date, as applicable.
(b) Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a 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 subclause (v) above,
aggregated for such calendar year or applicable portion thereof during which
such Person was a Certificateholder. Such obligation of the Trustee shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be prepared and furnished by the Trustee 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 Trustee 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 Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be prepared and furnished to Certificateholders by
the Trustee pursuant to any requirements of the Code as from time to time in
force.
(e) The Servicer and the Trustee 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 Servicer and
the Trustee 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 Servicer pursuant to
this Agreement shall be deemed confidential and of a proprietary nature, and
shall not be copied or distributed
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except to the extent provided in this Agreement and to the extent required by
law, and to the extent the Seller instructs the Trustee 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-A." 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 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, the Pre-Funding Account and the Capitalized Interest
Account held by the Trustee shall be 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 Servicer. 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 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).
(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 Servicer 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.
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ARTICLE VI
THE CERTIFICATES
SECTION 6.1. THE CERTIFICATES.
The Class SA Certificates, the Class A Certificates, the Class M
Certificates, the Class B Certificates and the Residual Certificates shall be
substantially in the forms set forth in Exhibits A-1, A-2, A-3, B-1 and B-2,
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. The Class SA
Certificates, the Class A Certificates (other than the Class A-2 Certificates,
the Class A-4 Certificates, the Class A-5 Certificates and the Class A-7
Certificates), the Class M Certificates and the Class B Certificates shall be
initially evidenced by one or more certificates representing the entire
aggregate Original Class Certificate Principal Balance for each Class of
Certificates (or with respect to the Class SA-5 Certificates, the Class SA-X
Certificates, the Class A-6 Certificates and the Class A-X Certificates, the
Class Notional Amount for each such Class of Certificates as of the Initial
Cut-Off Date) and shall be held in minimum dollar denominations of $25,000 and
integral dollar multiples in excess thereof. The Class A-2 Certificates, the
Class A-4 Certificates, the Class A-5 Certificates, and the Class A-7
Certificates shall be initially evidenced by one or more certificates
representing the entire aggregate Original Class Certificate Principal Balance
for each such Class of Certificates and shall be held in minimum dollar
denominations of $1,000 and integral dollar multiples in excess thereof. The
Class R-II Certificates shall be issuable as one certificate representing the
entire interest in the assets of REMIC II other than that represented by the
Class SA Certificates, the Class A Certificates, the Class M Certificates and
the Class B Certificates. The Class R-I Certificates shall be issued as one
certificate representing the entire interest in the assets of REMIC I other than
that represented by the Class SA-1 Regular Interest, the Class SA-2 Regular
Interest, the Class SA-3 Regular Interest, the Class SA-4 Regular Interest, the
Class A-1 Regular Interest, the Class A-2 Regular Interest, the Class A-3
Regular Interest, the Class A-4 Regular Interest, the Class A-5 Regular
Interest, the Class A-7 Regular Interest, the Class SA Subordinate Regular
Interest and the Class A Subordinate Regular Interest.
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)(ii), the Class SA
Certificates the Class A Certificates, the Class M Certificates, the Class B-1
Certificates and the Class B-2 Certificates shall be Book-Entry Certificates.
The Class B-3
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Certificates, the Class B-4 Certificates, the Class B-5 Certificates and the
Residual Certificates shall not be Book-Entry Certificates.
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.
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.
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(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.
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
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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 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 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.
No Opinion of Counsel delivered pursuant to this subsection 6.2(b)(iii)
shall be an expense of the Trustee or the 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 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 Servicer or the Seller, but shall, in
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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:
(i) 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.
(ii) No Person shall acquire an Ownership Interest in a Residual
Certificate unless such Ownership Interest is a pro rata undivided
interest.
(iii) 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
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(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.
(iv) 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.
(v) 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 distributed and
delivered by the Trustee to the prior Holder of such Certificate that
is a Permitted Transferee.
(vi) 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.
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(vii) 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.
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.
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SECTION 6.4. PERSONS DEEMED OWNERS.
Prior to due presentation of a Certificate for registration of
Transfer, the Seller, the Servicer, the Trustee, the Certificate Registrar, any
Paying Agent, and any agent of the Seller, the 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 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
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.
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ARTICLE VII
THE DEPOSITOR, THE SELLER AND THE SERVICER
SECTION 7.1. LIABILITY OF THE DEPOSITOR, THE SELLER AND THE
SERVICER.
The Seller and the Servicer shall be liable in accordance herewith only
to the extent of the obligations specifically imposed upon and undertaken by the
Seller and the Servicer, 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 OR THE SERVICER.
Any corporation into which the Depositor, the Seller or the Servicer
may be merged or consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Depositor, the Seller or the Servicer
shall be a party, or any corporation succeeding to the business of the
Depositor, the Seller or the Servicer shall be the successor of the Depositor,
the Seller or the Servicer, 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 SERVICER AND OTHERS.
Neither the Servicer nor any of the directors or officers or employees
or agents of the Servicer shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
action by the Servicer in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
Servicer or any such Person against any liability which would otherwise be
imposed by reason of its willful misfeasance, bad faith or gross negligence in
the performance of duties of the Servicer or by reason of its reckless disregard
of its obligations and duties of the Servicer hereunder. The Servicer and any
director or officer or employee or agent of the Servicer may rely in good faith
on any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder. The Servicer and any director
or officer or employee or agent of the Servicer 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 Servicer's
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. The Servicer shall not 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 Servicer may in its sole discretion undertake
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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 Servicer shall be entitled
to be reimbursed therefor. The Servicer's right to indemnity or reimbursement
pursuant to this Section 7.3 shall survive any resignation or termination of the
Servicer 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. SERVICER NOT TO RESIGN.
Subject to the provisions of Section 7.2, the 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 Servicer so causing such a conflict
being of a type and nature carried on by the Servicer or its subsidiaries or
Affiliates at the date of this Agreement or (ii) upon satisfaction of the
following conditions: (a) the Servicer has proposed a successor Servicer to the
Trustee in writing and such proposed successor 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 Servicer stating that the
proposed appointment of such successor Servicer as 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 Servicer shall
become effective until such successor Servicer or, in the case of (i) above, the
Trustee shall have assumed the Servicer's responsibilities and obligations
hereunder (including, without limitation the obligations of the Servicer under
Section 3.4) or the Trustee shall have designated a successor Servicer in
accordance with Section 8.2. Any such resignation shall not relieve the 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 Servicer. Any
such determination permitting the resignation of the 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 Servicer shall have no claim
(whether by subrogation or otherwise) or other action against any
Certificateholder for any amounts paid by the 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 Servicer hereunder.
SECTION 7.5. DELEGATION OF DUTIES.
In the ordinary course of business, the 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 Servicer complies pursuant to Section 3.1.
Such delegation shall not relieve the 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 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 Servicer's Affiliates or their respective
successors and assigns.
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SECTION 7.6. INDEMNIFICATION OF THE TRUST BY THE SELLER AND
SERVICER.
(a) The 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 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
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.
(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 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 Servicer including, in either case, but not limited to, amounts payable
to the 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 Servicer to make any Monthly
Advance; or (B) any other failure by the 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 Servicer of such failure
and (b) the date upon which written notice of such failure, requiring
the same to be remedied, and
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stating that such notice is a "Notice of Default" hereunder, shall
have been given to the Servicer by the Trustee or to the Servicer and
the Trustee by any Certificateholder; or
(ii) The failure by the 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 Servicer duly to observe or
perform in any material respect any other covenants or agreements of
the 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 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 Servicer by the
Trustee or to the Servicer and the Trustee by any Certificateholder; or
(iii) The entry against the 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
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 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
Servicer or of or relating to substantially all of its property; or the
Servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations;
(v) Any breach by the 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 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 Servicer by the Trustee or to the Servicer and the Trustee by any
Certificateholder; or
(vi) the occurrence of a 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 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 Servicer of such event, the
Trustee shall terminate all of the rights and obligations of the Servicer under
this Agreement and the Trustee, or a successor 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 Servicer and (y) in
the case of clause (i)(B), (ii), (iii), (iv), (v), or
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(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 Servicer, terminate all of the rights and
obligations of the Servicer as 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 Servicer, the Trustee shall notify the Servicer in
writing as soon as is reasonably practical. Any such notice to the Servicer
shall also be given to each Rating Agency and each Certificateholder. On or
after the receipt by the Servicer of such written notice, all authority and
power of the Servicer under this Agreement, whether with respect to the
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 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 Servicer agrees to cooperate with the Trustee in
effecting the termination of the responsibilities and rights of the Servicer
hereunder, including, without limitation, the transfer to the Trustee for the
administration by it of all cash amounts that shall at the time be held by the
Servicer and to be deposited by it in the Collection Account, or that have been
deposited by the Servicer in the Collection Account or thereafter received by
the 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 Servicer and amending this Agreement to reflect
such succession as Servicer pursuant to this Section 8.1 shall be paid by the
predecessor Servicer (or if the predecessor Servicer is the Trustee, the initial
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 Servicer and such delay or failure was caused by an act of God
or the public enemy, acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The preceding sentence shall not relieve
the Servicer from using its best efforts to perform its respective obligations
in a timely manner in accordance with the terms of this Agreement and the
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 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 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
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respects to the 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
Servicer by the terms and provisions hereof. As compensation therefor, the
Trustee shall be entitled to all such compensation and expenses as the 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 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 Servicer hereunder in the assumption of
all or any part of the responsibilities, duties or liabilities of the Servicer
hereunder. Pending appointment of a successor to the 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 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 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 Servicer shall not affect any liability of the
predecessor Servicer which may have arisen under this Agreement prior to its
termination as 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 Servicer be liable
for any acts or omissions of the predecessor Servicer or for any breach by such
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 Servicer as Servicer
shall during the term of its service as 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 Servicer hereunder and a
fidelity bond in respect of its officers, employees and agents to the same
extent as the 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 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.
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SECTION 8.4. NOTIFICATION TO CERTIFICATEHOLDERS.
Upon any termination or appointment of a successor to the 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.
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 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
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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 Servicer to comply with the obligations of the Servicer
referred to in clauses (i) and (ii) of Section 8.1 unless a Responsible
Officer of the Trustee at the Corporate Trust Office obtains actual
knowledge of such failure or the Trustee receives written notice of
such failure from the 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 Servicer under this
Agreement, except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of,
the Servicer in accordance with the terms of this Agreement.
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;
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(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;
(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. The reasonable expense of
every such examination shall be paid by the Servicer or, if paid by the
Trustee, shall be reimbursed by the Servicer upon demand. Nothing in
this clause (v) shall derogate from the obligation of the 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 Servicer until such time as the Trustee may be
required to act as Servicer pursuant to Section 8.2 and thereupon only
for the acts or omissions of the Trustee as successor 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
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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 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 Servicer in respect of the Mortgage Loans
or deposited in or withdrawn from the Collection Account by the 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 Servicer pursuant to Section 8.2 and thereupon only for
the acts or omissions of the successor Servicer); the validity of the assignment
of any Mortgage Loan to the Trustee or of any intervening assignment; the
completeness of any Mortgage Loan; the performance or enforcement of any
Mortgage Loan (other than if the Trustee shall assume the duties of the Servicer
pursuant to Section 8.2 and thereupon only for the acts or omissions of the
Trustee as successor Servicer); the compliance by the Depositor or the 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 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 Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.2 and thereupon only for
the acts or omissions of the Trustee as successor Servicer), any subservicer or
any Mortgagor; any action of the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.2 and thereupon only for
the acts or omissions of the Trustee as successor Servicer), or any Subservicer
taken in the name of the Trustee; the failure of the 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 Servicer (other
than if the Trustee shall assume the duties of the Servicer pursuant to Section
8.2 and thereupon only for the acts or omissions of the Trustee as successor
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 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 Servicer or their Affiliates.
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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 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 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 Servicer fails to perform its 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 (or such lower rating as such Rating Agency 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.
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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 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
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.
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 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 Servicer and the predecessor Trustee shall execute and deliver
such instruments and do such other things as may
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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 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 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 Servicer.
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 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 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 Servicer. If the 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
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appointment of any co-trustee or separate trustee shall be required under
Section 9.8. The 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 Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust 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 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 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.
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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 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 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.
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ARTICLE X
TERMINATION
SECTION 10.1. TERMINATION.
(a) The respective obligations and responsibilities of the Depositor,
the Seller, the Servicer, 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
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 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.
(b) The 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 Initial
Collateral 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 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 Servicer. Such certificate shall
be delivered by the 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 Servicer, if the
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 Servicer to the Trustee as described in the preceding sentence,
the Servicer shall deposit in the Distribution Account on or before the
Distribution Date for such final distribution in immediately available funds an
amount which,
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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 Class SA, Class A and
Subordinate 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 Certificateholders and the Servicer (if the 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 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 R Certificateholder for payment.
SECTION 10.2. ADDITIONAL TERMINATION REQUIREMENTS.
(a) In the event that the 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 either of REMIC I or REMIC II
after the "startup day," as defined in Section 860G(d) of the Code, or (B) cause
either of REMIC I or REMIC II of the Trust 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
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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.
ARTICLE XI
REMIC ADMINISTRATION
SECTION 11.1. REMIC ADMINISTRATION.
(a) It is intended that the REMIC I and REMIC II shall each constitute,
and that the affairs of the REMIC I and REMIC II shall be conducted so as to
qualify REMIC I and REMIC II as, REMICs as defined in and in accordance with the
REMIC Provisions. In furtherance of such intention, the Trustee covenants and
agrees that it shall act as agent (and the Trustee is hereby appointed to act as
agent) and as agent of the Tax Matters Person on behalf of each 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 each REMIC in the Trust, using a calendar year as the
taxable year for each REMIC in the Trust;
(ii) make, or cause to be made, an election, on behalf of
each of the REMIC I and REMIC II, to be treated as a REMIC on the
federal tax return of each REMIC in the Trust 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 each REMIC
in the Trust 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;
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(v) not knowingly or intentionally take any action or omit
to take any action that would cause the termination of the REMIC status
of each REMIC in the Trust;
(vi) pay 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 Trustee 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
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 bad faith, willful misfeasance or negligence of the Servicer in
the performance of its obligations hereunder;
(vii) ensure that any such returns or reports filed on behalf
of each REMIC in the Trust by the Trustee are properly executed by the
appropriate person;
(viii) represent each REMIC in the Trust 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 each REMIC 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 each REMIC in the Trust in relation to any tax matter
involving the Trust at the expense of the 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 Servicer
in the foregoing matters and that it will sign, as Trustee, any and all
tax returns required to be filed by the Trust. Notwithstanding the
foregoing, at such time as the Trustee becomes the successor 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
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Person that is not a Permitted Transferee. Reasonable compensation for
providing such information may be accepted by the Trustee; and
(xi) Upon filing with the Internal Revenue Service, the
Trustee 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;
(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 each REMIC 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 each REMIC; and
(7) Any taxes (including penalties and interest)
imposed on each REMIC, 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
Servicer shall permit the sale, disposition or substitution of a Mortgage Note
or the substitution of a property for a
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Mortgaged Property (except in a disposition pursuant to (i) the bankruptcy or
insolvency of the REMIC I or REMIC II or (ii) the termination of the REMIC I or
REMIC II in a "qualified liquidation" as defined in Section 860F(a)(4) of the
Code), nor acquire any assets for the REMIC I or REMIC II (other than REO), nor
sell or dispose of any investments in the Accounts for gain, nor accept any
contributions to the REMIC I or REMIC II (except as contemplated by Section
4.2), unless it has received a Nondisqualification Opinion (at the expense of
the Person requesting the Trustee to take such action) to the effect that such
disposition, acquisition, substitution, or acceptance will not (a) affect
adversely the status of the REMIC I or REMIC II as a REMIC or of the
Certificates, other than the Residual Certificates, as the regular interests
therein, (b) affect the distribution of interest or principal on the
Certificates, (c) result in the encumbrance of the assets transferred or
assigned to the REMIC I or REMIC II (except pursuant to the provisions of this
Agreement) or (d) cause the REMIC I or REMIC II to be subject to a tax on
"prohibited transactions" or "prohibited contributions" pursuant to the REMIC
Provisions.
SECTION 11.3. INDEMNIFICATION WITH RESPECT TO CERTAIN TAXES AND
LOSS OF REMIC STATUS.
(a) In the event that the REMIC I or REMIC II 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
Trustee of its duties and obligations specifically set forth herein, or by
reason of the Trustee's reckless disregard of its obligations and duties
thereunder, the Trustee shall indemnify the Trust against any and all losses,
claims, damages, liabilities or expenses ("Losses") resulting therefrom;
provided, however, that the Trustee shall not be liable for any Losses
attributable to the action or inaction of the Depositor, the Servicer, the
Seller or a Holder of a Residual Certificates nor for any Losses resulting from
misinformation provided by the Depositor, the Servicer, the Seller or the Holder
of a Residual Certificates on which the Trustee 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 or REMIC II 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 Servicer in
the performance of its duties and obligations set forth herein, or by reason of
the Servicer's reckless disregard of its obligations and duties hereunder, the
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 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 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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ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1. AMENDMENT.
This Agreement may be amended from time to time by the Depositor, the
Servicer, the Seller, 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 Trustee (subject to the penultimate paragraph of this
Section 12.1) or the 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 Depositor or the
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 or REMIC II 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 Servicer, the Seller, the Document Custodian and the Trustee; and the
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 or REMIC II 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 or REMIC II 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 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 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
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
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with respect to this Agreement, unless such Holder previously shall have given
to the Trustee a written notice of default and of the continuance thereof, as
hereinbefore provided, and unless also the Holders of 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 Servicer, First Union
Mortgage Corporation, 1100 Corporate Center Drive, Raleigh, North Carolina
27607-5066, Attention: Investor Accounting Manager, (c) in the case of the
Trustee, at Norwest Bank Minnesota, National Association, 11000 Broken Land
Parkway, Columbia, Maryland 21044, Attention: FURST 1998-A, 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-A, (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 and (e) in case of Standard and Poor's,
26 Broadway, 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
any Rating Agency shall be given on a best efforts basis and only as a
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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 B-3 Certificate, Class B-4 Certificate or
Class B-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 Trustee shall, upon the request of any Owner and any prospective purchaser
of such Class B-3 Certificate, Class B-4 Certificate or Class B-5 Certificate,
make available to such Owner and any prospective purchaser of such Class B-3
Certificate, Class B-4 Certificate or Class B-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
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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 B-3 Certificate, Class B-4 Certificate or Class B-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 Trustee 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 Trustee and the
Trustee'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 Trustee, upon receipt of a request from the Trustee or any Holder
of a Class B-3 Certificate, Class B-4 Certificate or Class B-5 Certificate the
items described in clauses (a) and (c) to the Trustee.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Depositor, the Seller, the Servicer, 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
----------------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK, as Seller
By
----------------------------------------------
Title: Vice President
FIRST UNION MORTGAGE CORPORATION, as Servicer
By
----------------------------------------------
Title: Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By
----------------------------------------------
Title: Assistant Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Document Custodian
By
----------------------------------------------
Title:
<PAGE> 132
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 _____ day of April,
1998.
-------------------------
Notary Public
My Commission Expires:
- -----------------------
(Notary Seal)
<PAGE> 133
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 ______ day of April,
1998.
-------------------------
Notary Public
My Commission Expires:
- -----------------------
(Notary Seal)
<PAGE> 134
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 ____ day of April,
1998.
-------------------------
Notary Public
My Commission Expires:
- -----------------------
(Notary Seal)
<PAGE> 135
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 _____ day of April,
1998.
-------------------------
Notary Public
My Commission Expires:
- -----------------------
(Notary Seal)
<PAGE> 136
STATE OF NORTH CAROLINA
COUNTY OF
I, a Notary Public of the County and State of aforesaid, certify that
_________________ personally came before me this day and acknowledged that [s]he
is a Vice President of First Union Mortgage Corporation, 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 _____ day of April,
1998.
-------------------------
Notary Public
My Commission Expires:
- -----------------------
(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 April 1, 1998
FURST MORTGAGE LOAN TRUST 1998-A
- -------------------------------------------------------------------------------
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................2
Section 1.1 Definitions..................................................................................2
ARTICLE II SALE OF MORTGAGE LOANS; PAYMENT OF PURCHASE PRICE.....................................................2
Section 2.1 Sale of Initial Mortgage Loans...............................................................2
Section 2.2 Sale of Subsequent Mortgage Loans............................................................2
Section 2.3 Obligations of Seller Upon Sale..............................................................3
Section 2.3 Payment of Purchase Price for the Mortgage Loans.............................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH..................................................6
Section 3.1 Seller Representations and Warranties........................................................6
Section 3.2 Seller Representations and Warranties Relating to the Mortgage Loans.........................7
ARTICLE IV SELLER'S COVENANTS....................................................................................8
Section 4.1 Covenants of the Seller......................................................................8
ARTICLE V SERVICING...............................................................................................8
Section 5.1 Servicing....................................................................................8
ARTICLE VI INDEMNIFICATION WITH RESPECT TO THE MORTGAGE LOANS....................................................9
Section 6.1 Indemnification..............................................................................9
ARTICLE VII TERMINATION..........................................................................................12
Section 7.1 Termination.................................................................................12
ARTICLE VIII MISCELLANEOUS PROVISIONS...........................................................................12
Section 8.1 Amendment...................................................................................12
Section 8.2 Governing Law...............................................................................12
Section 8.3 Notices.....................................................................................12
Section 8.4 Severability of Provisions..................................................................13
Section 8.5 Counterparts................................................................................13
Section 8.6 Further Agreements..........................................................................13
Section 8.7 Intention of the Parties....................................................................14
Section 8.8 Successors and Assigns: Assignment of Purchase Agreement....................................14
Section 8.9 Survival....................................................................................14
SCHEDULE I MORTGAGE LOANS
</TABLE>
-i-
<PAGE> 3
MORTGAGE LOAN PURCHASE AGREEMENT (the "Purchase Agreement"), dated as
of April 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 "Initial Mortgage Notes") so indicated on Schedule I hereto
referred to below, and Related Documents (as defined below) (collectively, the
"Initial Mortgage Loans"); and
WHEREAS, following the Closing Date, the Seller will from time to time
own other notes or other evidence of indebtedness (the "Subsequent Mortgage
Notes') so indicated in a Subsequent Transfer Agreement (as defined below) and
the Related Documents (the Subsequent Mortgage Notes and Related Documents,
collectively the "Subsequent Mortgage Loans" and with the Initial Mortgage
Loans, the "Mortgage Loans"); and
WHEREAS, the Seller, in the case of the Initial Mortgage Loans owns,
and in the case of the Subsequent Mortgage Loans will own, 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 Initial
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 April 1, 1998 (the "Pooling and Servicing Agreement") among the
Purchaser, as depositor, the Seller, as seller First Union Mortgage Corporation,
as servicer, Norwest Bank Minnesota, National Association, as document
custodian, and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"), the Purchaser will convey the Initial Mortgage Loans to FURST
Mortgage Loan Trust 1998-A (the "Trust Fund"); and
WHEREAS, pursuant to the terms of each Subsequent Transfer Agreement,
the Seller, on behalf of the Purchaser, will transfer the Subsequent Mortgage
Loans, if any, to the Trustee, as assignee of the Purchaser under this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
<PAGE> 4
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.
ARTICLE II
SALE OF MORTGAGE LOANS; PAYMENT OF PURCHASE PRICE
SECTION 2.1 SALE OF INITIAL 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 Initial Mortgage Loans, including the related Cut-Off Date Loan
Balances, and all payments in respect of the Initial Mortgage Loans received on
and after the Initial Cut-Off Date (exclusive of payments in respect of interest
on the Initial Mortgage Loans accrued prior to the Initial Cut-Off Date and
received thereafter); property which secured an Initial 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 Initial Mortgage Loans;
all rights under any guaranty executed in connection with a Mortgage Loan; and
all proceeds of the foregoing.
SECTION 2.2 SALE OF SUBSEQUENT MORTGAGE LOANS.
The Seller covenants and agrees to use its best efforts following the
Closing Date to acquire and, on behalf of the Purchaser, sell to the Trustee as
assignee of the Purchaser, and the Trustee as assignee of the Purchaser will
agree in the Pooling and Servicing Agreement to purchase, subject to
satisfaction of the conditions set forth therein, an amount of Subsequent
Mortgage Loans sufficient to reduce the Pre-Funded Amount to less than $100,000
on or before July 24, 1998. On any Subsequent Transfer Date, concurrently with
the execution and delivery of a Subsequent Transfer Agreement and subject to the
terms thereof, the Seller will thereby sell, assign, set over, and otherwise
convey to the Trustee as assignee of 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 Subsequent Mortgage Loans,
including the related Cut-Off Date Loan Balances, and all payments in respect of
the Subsequent Mortgage Loans received on and after the related Subsequent
Cut-Off Date (exclusive of payments in respect of interest on the Subsequent
Mortgage Loans accrued prior to the Subsequent Cut-Off Date and
2
<PAGE> 5
received thereafter); property which secured a Subsequent 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 Subsequent
Mortgage Loans; all rights under any guaranty executed in connection with a
Subsequent Mortgage Loan; and all proceeds of the foregoing.
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
or, in the case of the Subsequent Mortgage Loans, the Subsequent Transfer 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 Initial
Mortgage Loans and within 5 days of the related Subsequent Transfer Date with
respect to the Subsequent Mortgage Loans) describing the applicable Mortgage
Loans and naming the Seller as debtor and, with respect to the Initial Mortgage
Loans, the Purchaser (and indicating that such loans have been assigned to the
Trustee) or, with respect to the Subsequent Mortgage Loans, 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.
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, or in the case of
the Subsequent Mortgage Loans, the related Subsequent Transfer 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-A, Mortgage Pass-Through Certificates, Series 1998-A, 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;
3
<PAGE> 6
(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-A," 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 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 Initial Mortgage Loans that were owned by the Seller on the
Initial 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 Initial
Mortgage Loans and the identities of the Persons (each, a "Merged Holder") that
are
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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 Initial
Mortgage Loan.
The Seller further hereby confirms to the Purchaser that, as of the
Closing Date, it has caused, or with respect to the Subsequent Mortgage Loans,
as of the related Subsequent Transfer Date, it will cause, the portions of the
Electronic Ledger relating to the Mortgage Loans maintained by the 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 Initial 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 Initial Mortgage Loans be a sale by the Seller to the
Purchaser of all the Seller's right, title and interest in and to the Initial
Mortgage Loans and other related property described above and (b) the
transaction contemplated herein with respect to the Subsequent Mortgage Loans be
a sale by the Seller, on behalf of the Purchaser, to the Trustee of all the
Seller's right, title and interest in and to the Subsequent Mortgage Loans and
other related property described above. In the event the transaction set forth
herein with respect to the Initial 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 Initial 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. In the event the transaction contemplated herein
with respect to the Subsequent Mortgage Loans is deemed not to be a sale, the
Seller, on behalf of the Purchaser, shall be deemed to have granted and does
hereby grant to the Trustee a security interest in all of the Seller's right,
title and interest in, to and under the Subsequent 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 Initial Mortgage Loans from the
Seller to the Purchaser on the Closing Date and the funding of the Pre-Funding
Account and Capitalized Interest Account 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 $354,577,683.40 (the "Purchase Price").
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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 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
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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 Initial Mortgage Loans and as of the related
Subsequent Transfer Date with respect to the Subsequent Mortgage Loans to be
transferred on such Subsequent Transfer Date, 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 Servicer 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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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, the Class M Certificates, the Class B-1
Certificates and the Class B-2 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
SERVICING
SECTION 5.1 SERVICING.
First Union Mortgage Corporation will be the Servicer of the Mortgage
Loans pursuant to the terms and conditions of the Pooling and Servicing
Agreement.
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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 Initial Mortgage
Loans," "Risk Factors" (other than " - Book-Entry System; and " - Certificate
Ratings"), "The Seller and the 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 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
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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.
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
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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 (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 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 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
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which may be entered against the Purchaser, the 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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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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SECTION 8.7 INTENTION OF THE PARTIES.
It is the intention of the parties that (a) the Purchaser is
purchasing, and the Seller is selling, the Initial Mortgage Loans rather than
pledging the Initial Mortgage Loans to secure a loan by the Purchaser to the
Seller and (b) the Trustee will be purchasing, and the Seller will be selling,
the Subsequent Mortgage Loans rather than pledging the Subsequent Mortgage Loans
to secure a loan by the Trustee to the Seller. Accordingly, the parties hereto
each intend to treat the transaction for Federal income tax purposes and all
other purposes (y) as a sale by the Seller, and a purchase by the Purchaser, of
the Initial Mortgage Loans and (z) as a sale by the Seller, and a purchase by
the Trustee, of the Subsequent 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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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:
--------------------------------------
Name: Patrick J. Tadie
Title: Vice President
FIRST UNION NATIONAL BANK,
as Seller
By:
--------------------------------------
Name: Patrick J. Tadie
Title: Vice President
<PAGE> 18
STATE OF NORTH CAROLINA)
)ss.:
MECKLENBURG COUNTY )
On the _______ day of __________________ before me, a Notary Public in
and for said State, personally appeared _________________________, known to me
to be a _____________________ 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.
- -----------------------------------
Notary Public
(NOTARIAL SEAL)
Commission Expires:
----------------
<PAGE> 19
STATE OF NORTH CAROLINA)
)ss.:
MECKLENBURG COUNTY )
On the _______ day of __________________ before me, a Notary Public in
and for said State, personally appeared _________________________, known to me
to be a _____________________ 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.
- ----------------------------------------
Notary Public
(NOTARIAL SEAL)
Commission Expires:
--------------------
<PAGE> 1
EXHIBIT 8.1
[KILPATRICK STOCKTON LLP LETTERHEAD]
April 29, 1998
First Union Residential Securitization Transactions, Inc.
One First Union Center
Charlotte, North Carolina 28288-0600
Re: FURST Mortgage Loan Trust 1998-A, Mortgage Pass-Through Certificates,
Series 1998-A
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 April 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-A (the
"Trust") created by the Pooling and Servicing Agreement, dated as of April 1,
1998 (the "Pooling and Servicing Agreement") among the Seller, the Depositor,
First Union Mortgage Corporation, as servicer, 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 Mortgage Pass-Through Certificates, Series 1998-A, Class SA-1, Class
SA-2, Class SA-3, Class SA-4, Class SA-5, Class SA-X, Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-X, Class M,
Class B-1, Class B-2, Class R-I and Class R-II (collectively, the "Offered
Certificates"), and Class B-3, Class B-4 and Class B-5 (collectively, the
"Private Certificates," and together with the Offered Certificates, the
"Certificates").
The Depositor has sold the Offered Certificates to First Union Capital Markets,
a division of Wheat First Securities, Inc. ("First Union Capital Markets"), and
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ" and, together with
First Union Capital Markets, the "Underwriters") pursuant to the Underwriting
Agreement, dated April 24, 1998 (the "Underwriting Agreement") among the
Depositor, the Seller and the 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.
<PAGE> 2
April 29, 1998
Page 2
In arriving at the opinions expressed below, we have examined such documents
and records as we have deem appropriate, including the following:
1. Signed copy of the Underwriting Agreement.
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 April 24, 1998 (the "Base Prospectus"), as
supplemented by the Prospectus Supplement dated April 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 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.
<PAGE> 3
April 29, 1998
Page 3
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
